Few things dramatically change society. Before the automobile, most people lived their entire life within 20 kilometers of their birth. The tractor, not the option of industrial labor jobs, made it possible for people to leave the heavy labor of farming. And the internet has also changed many facets of life, including allowing people to work from home. Now, AI and computing processing advancements have made the thought-intensive exercise of a single, demand-driven forecast (a Unified Demand Signal) a reality.
"The analytic technology today is mature enough to allow a single SKU, weekly forecast to be decomposed into its basic components. This is done by explicitly modeling the data as a combination of key variables (competitors' behavior and so on) and estimating the contribution of each one to the forecast."
- David Simchi-Levi, Head of MIT Data Science Lab & Kris Timmermans, Sr. Managing Director, Accenture
These advancements enable retailers to see the effects of various factors, including cannibalization, trends, price elasticities, weather, and local events. But at its heart, it allows retailers to predict customer demand and sense demand shifts with unprecedented accuracy. Yet, the real power of the unified demand signal comes from its ability to be consumed across merchandising, planning, and supply chain processes. That empowers retailers to drive consistent actions, anticipate customer demand, and respond in a manner that maximizes the revenue, margins, and customer experience.
Planners can identify lost sales opportunities and assortment holes. Accurate promotional forecasts can be fed into the supply chain. And, markdown liabilities, along with potential lost sales, can be included in allocation and fulfillment decisions to optimize inventory distribution across the enterprise.
Yet most importantly, this approach has immensely lower costs, timeframes, and risks. Messrs. Simchi-Levi and Timmermans have shown that by starting with a Unified Demand Signal, companies, including fashion retailers, can reap substantial benefits in months versus the conventional 3-5 years needed for many digital modernization efforts.
While its impact on society most likely won't rise to the level of the automobile, a Unified Demand Signal can transform a retailer. With a singular, detailed view of customer demand leveraged across the enterprise, retailers can optimize their operations and break down the silos that have plagued retailing since its inception.