Valid Statistical Analysis at John

Deere and Use of the R

Programming Language
Derek Hoffman
Nov-8-2012
A bit about your speaker

BS in Statistics and
Material Science
@ Winona State
University
Masters in Statistics
@ Iowa State
University
5 Years @ John Deere
Forecasting Group in 2012

Improvements due to the science of forecasting

Explosion in value and statistician hiring
Increase in problem solving flexibility due to use of R
Huge company saving with dropping flop forecasting software
 Revenue of roughly 35
billion, 8.7% profit
Has been a Fortune 500
company for the last 56
years, roughly 94th in
rank.
Employs about 50,000
people world wide
roughly 5,000 of them in
the Moline headquarters.
Deere & Company 3 parts

Agriculture ~70%

Turf~15%

Construction
~15%
Why does Deere hire forecasters?

Availability needs to match demand OR you

lose market share
Inventory needs to stay low OR you pay lots
in taxes and storage costs
New factories need to be built at the right
size and time OR you made a multi million
dollar mistake.
Work force needs to be hired/cut depending
on production plans OR you lose tons
training and severance.
My groups reach at John Deere

CEO, Flexibility of
Presidents, Inventory
Financials Next Month

Forecasts

Factory Shifts
New Markets,
and
10 Years Out
Production
My groups reach at John Deere

CEO, Flexibility of
Presidents, Inventory
Financials Next Month

Forecasts

Factory Shifts
New Markets,
and
10 Years Out
Production
Why do statisticians love R?

Common statistical methods are available as

packages (advantage over C++)
Large support group of users worldwide
Credibility due to submission standards and
university usage.
Often the program of choice during education
Easy to send results to another person (even
if just text files for data and code)
Why does Deere love R?

The cost is right

Open source no black box mysteries, no
propriety lock downs
Easy to share across the business
Relatively easy to learn
Often works better or faster than microsoft
products for data and analysis
Infinitely customizable to your problem and
your products vertical integration
Case Studies at John Deere

Short Term Demand Forecasting

Crop Forecasting
Long Term Demand Forecasting
Parts Decision Tree (APO)
Order Line Up
Data Coordinator
Short Term Demand Forecasting

Marketing Potential Good:

Forecast
Factory Multiple view points
Forecast
Buy-in from all players
Disciplined in forecast creation
Estimate
Group
Forecast Potential Bad:
Group-think
Pressures other than accuracy
Poor information digestion

Composite Forecast
Bad Forecasting Philosophies
Executive Override Gut Feel / Art Blackbox Forecasts
News,
News,
Experience, Last History
Experience YRs #s

Experience + Math Comparisons,

Feelings on that Finical Forecasting,
Day + Outside Experience, ?
pressures Outside forecasts

Forecasts (NO
Forecasts and
estimates of
directives and Forecasts
accuracy, NO
goals
interpretation)
Forecasting Philosophies
Statistical Models Assumption Models Economic Models
Historical Data Assumptions Data, Assumptions,
(user generated News, ???,
(known because is in the
assumptions about the
past or current)
future)
Outside Forecasts

Data + Data + Data + Economics

Math/Statistics Math/Statistics + ???
as calculated by a as calculated by a as created by a
trained statistician trained statistician trained economist

Forecasts and Forecasts and Forecasts,

MEANINGFUL Analysis of Outside
plus/minus Forecast Error Forecasts,
intervals Contributions by Current Economic
(flexibility and bad
forecast detection)
Assumptions News
Use of Data-Driven Analysis

Analysis done in
my group using R
and company data.
Case Studies at John Deere

Short Term Demand Forecasting

Crop Forecasting
Long Term Demand Forecasting
Parts Decision Tree (APO)
Order Line Up
Data Coordinator
Crop Yields Forecasting
Relative Land Area and Use

Circle = Total Land

Acres in Major World Crops
Circle = Total Crop Land
Crop Yields Forecasting
Crop Yields Forecasting

History 2nd Year OUT

1 Year OUT 3rd Year OUT

The whole time, calculating the valid forecast error and influences.

A large computational task, heavily using programs written in R.

Changes in Crop Splits
Corn Yields
Case Studies at John Deere

Short Term Demand Forecasting

Crop Forecasting
Long Term Demand Forecasting
Parts Decision Tree (APO)
Order Line Up
Data Coordinator
The Wrong way Growth f(t)

The problem really is that we are looking at a

correlation with time, not a causation. Also
we will always be extrapolating (because the
future value of time is outside the our
historical data set).
What are Likely Causes?

Crop Yields
Planted Acres
Crop Prices
Population
Gross Domestic Product
Farm Size
Government
Mechanization Level of Farming
Crop Choices (Corn damages combines faster than
wheat.)
Example of Calculations

The whole time, calculating the valid forecast error and influences.

A large computational task, heavily using programs written in R.

Case Studies at John Deere

Short Term Demand Forecasting

Crop Forecasting
Long Term Demand Forecasting
Parts Decision Tree (APO)
Order Line Up
Data Coordinator
Parts Forecasting

Tons of parts, need direction

how to best forecast with
SAP.
Parts Forecasting Trilingual?
Case Studies at John Deere

Short Term Demand Forecasting

Crop Forecasting
Long Term Demand Forecasting
Parts Decision Tree (APO)
Order Line Up
Data Coordinator
Order Scheduling
Order Scheduling

Restraint on
Feature A:
At most 2
per 4 in a
row.

Were OK!
Order Scheduling

Restraint on
Feature A:
At most 2
per 4 in a
row.

Were OK!
Order Scheduling

Restraint on
Feature B:
At most 1
per 3 in a
row.

Were OK!
Order Scheduling

Restraint on
Feature A:
At most 1
per 3 in a
row.

Were got a
problem!

Have to
move Matt
or Shawns
tractor to
another spot
and recheck
it all!
Harvester Lineup Random Guess
Harvester Lineup Program Results
Order Scheduling Time
Order Scheduling = $$$
Old Process Dereks Process
Done manually by
hand
Weekly
Duration: 8 Hours
Not necessarily perfect
Automates the process
Duration: 1.5-2 hours
Human time:15 mins
Saves about 8 hours
per week
Saves ~$12K per year,
per product
implementation
Case Studies at John Deere

Short Term Demand Forecasting

Crop Forecasting
Long Term Demand Forecasting
Parts Decision Tree (APO)
Order Line Up
Data Coordinator
Data Coordinator Uses
Scheduled
Tasks
Multiples
Data Multiple
sources and ODBC DB2
Batch
Data types Connections File
execution
DB2
Single R Export
source Code Channels
SQL

DB2

Oracle
A forecast of Analytics

A short history of cool topics

The future of forecasters

The coming data flood and analytics boom

increase in scalpels increase in surgeons

The cool word of the year Dot-com
The cool word of the year - Radiation
The cool word of the year Big Data

How can we grow responsibly as data

scientists and statisticians?
Signs you are in the hype

Everyone claims it will change the world

Its taught in business schools
Features on covers of general magazines
TONS of snake-oil salesmen
Legitimate ease in access to the new thing
Cautionary tale:

Thousands spent on a
weather forecast
Ridiculous accuracy
measures
Business users dont
know the short falls till
its too late
Growing Need of Forecasting Professionals

A need for educated gate keepers to weed

bad analysis from good.
More people are needed to practice
forecasting as a profession or the whole
industry will suffer.
More data, more ease, more computing
needed, with greater need for responsible
use.
Statistics and R at John Deere

John Deere is among the best in large

manufactures in implementing good
forecasting methods to demand planning
There are still huge areas to grow no
where near the data usage of companies like
Amazon or Wal-Mart
The challenge is to increase usage and
access while maintaining a good internal and
external reputation