JDA Focuses on 'Slow and Erratic' Product Forecasting with E3

Published: February 26, 2008

by Alex Woodie

It's mid-March in Southern California during La Nina, which this year means you need snow chains. Walk into any major sporting goods store, and you'll be bombarded with swimming trunks and boogie boards, despite the fact that the ocean is 50 degrees and the mountains are still covered in snow. But with the upcoming release of a new i5/OS-based supply chain planning application from JDA Software Group, hopefully retailers will see better accuracy in their prediction for demand of "slow and erratic" items, like snow chains.

Forecasting demand in the consumer supply chain is a notoriously fickle business. While Mother Nature's seasons trail the calendar by about 90 days, decision makers in the supply chain must anticipate the seasons by at least an equal amount. As a result, predictions about what's going to be a hot seller during the summer are made while it's still snowing outside. Sometimes, you hit the nail on the head and strike the perfect balance between supply and demand, with a small emergency stock for contingencies. Other times, the jet stream or fashion trends conspire to throw a wrench into your carefully laid plans, which means it's next to impossible to find snow chains in San Diego in March.

With a new release of its E3 Replenishment and Allocation suite, JDA Software claims it has delivered a "breakthrough" in the forecasting of slow and erratic items. The Scottsdale, Arizona, company says the "cutting-edge algorithm" fills a critical need for retailers, wholesalers, and manufacturers that need to improve forecast accuracy of products with slow or intermittent demand patterns.

The algorithm was developed with input from Stephen Graves, a professor at MIT who joined JDA as its chief science advisor in 2005. Graves says: "The new algorithm combines the strengths of the adaptive exponential smoothing, Crostons, and Holt-Winters algorithms to deliver a more robust technique for managing slow, intermittent demand items that may also be subject to seasonality. One of the key benefits of the new technique will be the virtual elimination of a large number of insignificant exceptions generated by slow movers."

Other new features planned for the upcoming release of E3 Replenishment and Allocation include new advanced promotional forecasting and event planning capabilities, new forecasting functionality above the item-location level with top-down, bottom-up forecast reconciliation, and new advanced demand decomposition capabilities, JDA says. The new release of E3 is expected to ship by the end of March, indicating strong probability of improved snow chain availability by next year.

This month, JDA also formed a partnership with Sirius Computer Solutions, the largest System i reseller, perhaps signaling a renewed commitment to the IBM platform. As part of the partnership, JDA and Sirius will each recommend the other's products and services to their respective clients.

JDA Software, as you know, hasn't been the biggest fan of the System i server in recent years. Despite the early success the Scottsdale, Arizona, company had selling its OS/400-based merchandise management system to some of the country's largest retailers in the late 1980s and 1990s, the company is now putting lots of money into developing its next-generation JDA Enterprise Architecture using Microsoft .NET.

JDA isn't totally abandoning its System i past in the face of a .NET future, however. The company is committed to supporting Merchandise Management System-I (MMS-I) at least through 2015, and the E3 suite at least through 2012. In the meantime, it's trying to encourage users of these i5/OS applications to move to .NET versions of those applications through its "Investment Protection Program," which guarantees a "like for like" trade for customers current on maintenance. The company has also promised to ship connectors that will allow MMS-I and E3 customers to use their System i machines as database servers as they move to .NET applications, and recently launched an offering that allows E3 users to start using its .NET-based JDA Demand planning software, which it obtained with its acquisition of Manugistics.

While the Manugistics-based JDA Demand offering appears to be the strategic demand-planning offering for JDA, the company continues to sell the tried-and-tested E3 software, which runs exclusively on the System i platform. The company recently asserted that, over the last two years, it has sold 90 licenses for E3.

On average, customers implementing E3 (which includes JDA Allocation; Advanced Store Replenishment by E3; Vendor Managed Replenishment by E3; JDA Seasonal Profiling; Vendor Managed Replenishment by E3; Network Optimization by E3; and JDA Marketplace Replenish) can expect to lower their inventory by 25 to 40 percent, and increases in gross margins at a rate of 0.5 to 1 percent, according to David Johnston, senior vice president of manufacturing and wholesale distribution. "We are truly enabling our customers to drive out cost, increase sales, improve margins, and raise customer satisfaction, essential elements required to gain that competitive edge," he says.

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