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Ziad Nejmeldeen Principal Scientist
Analytical Insights Optimized History Size Profiles Prepacks
Preliminaries Optimized History Size Profiles Prepacks Agenda
Preliminaries ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Preliminaries ,[object Object],[object Object],[object Object]
Preliminaries ,[object Object],[object Object],[object Object],[object Object],[object Object]
Preliminaries ,[object Object],[object Object],[object Object],User inputs a style/color id. User seeks to purchase 100 units Store 1 25 units Store 2 50 units Store 3 25 units 1  2  3 0.75 0.75 1.5 Store  Weights
Preliminaries ,[object Object],[object Object],S  M  L S  M  L S  M  L Store 1 10 Small, 10 Medium, 5 Large Store 2 12 Small, 26 Medium, 12 Large Store 3 5 Small, 10 Medium, 10 Large Size Profiles .4 .2 .4 .25 .25 .5 .2 .4 .4 Store 1 25 units Store 2 50 units Store 3 25 units
Preliminaries ,[object Object],[object Object],Pre Packs Store 1 10 Small, 10 Medium, 5 Large Store 2 12 Small, 26 Medium, 12 Large Store 3 5 Small, 10 Medium, 10 Large S  M  L 2 1 2 S  M  L 1 2 2 Store 1 5 Prepack A Store 2 4 Prepack A, 4 Prepack B, 10 Medium Store 3 5 Prepack B A B
Preliminaries Optimized History Size Profiles Prepacks Agenda
Optimized History Key Steps Solve for the Demand Parameters Adjust for store/size stock-outs Optimize the Price & Buy Compare Actual/Optimal Histories Order of Steps 1. 2. 3. 4. Price Elasticity will be used to remove pricing effects from history. Seasonality will be used to understand what sales could have been in places and times where sales did not exist. How much more sales could we have had during store/size level stock-outs from flow and size issues? The correction accounts for substitution effects. What is the optimal sales plan, pricing scheme &  total receipt level? What are the differences compared to history?
Step 1: Demand Parameters ,[object Object]
Step 1: Demand Parameters 40% OFF ,[object Object]
Step 2: Adjusting for Stock-outs 96% of inventory is sold through at $29.99 or higher ,[object Object],[object Object]
Step 2: Adjusting for Stock-outs ,[object Object],[object Object],Increase in sales after adjusting for stock-outs
Step 3: Optimize the Price and Buy ,[object Object],[object Object],Sales Adjusted Up Based on Stock-Outs Sales Adjusted up Based on Stock-Outs and More Aggressive Markdowns
Step 4: Actual vs. Optimized ,[object Object],[object Object]
Preliminaries Optimized History Size Profiles Prepacks Agenda
Uses Too Much Data, Small is Punished Uses Too Little Data, Large is Rewarded Size Profiles ,[object Object],[object Object],[object Object],= = x x
Size Profiles Example Example: Children Division 6 - 9 9 - 11 ,[object Object],[object Object]
Size Profiles Example Example: Women’s Division S M L XL ,[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Size Profiles Escalation Logic Direction of Escalation
Preliminaries Store Weights Size Profiles Prepacks Agenda
Optimized Prepacks ,[object Object],[object Object],[object Object],[object Object],[object Object]
Optimized Prepacks + Store Weights = Historic Buys + Store Size Profiles Item A: 1200 units Item B: 1800 units Item C: XX units Search eligible prepacks for best fit 1 Prepack 2 Prepacks Computing Optimized Prepacks: Overview Store/Size Need
[object Object],[object Object],[object Object],Optimized Prepacks
[object Object],[object Object],[object Object],Optimized Prepacks
[object Object],[object Object],[object Object],Optimized Prepacks
[object Object],[object Object],[object Object],Optimized Prepacks Among all prepacks that contain 4 and 5 units, this prepack best suits the allocation across all stores for all items in the category.
[object Object],[object Object],Optimized Prepacks ,[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],Optimized Prepacks ,[object Object],[object Object],[object Object]
A Q & Q U E S T I O N S A N S W E R S
Full Price:  An item’s full price is defined as the initial price at which the item is  intended  to sell before the first mark-down. A $40 item that drops to $24.99 after 2 weeks in only a handful of stores has a $24.99 full price. Fully Stocked:  A color is fully stocked if it is  available  in  all intended sizes  at  all intended stores .   A style is fully stocked if it is  available  in  all intended sizes  in  all intended colors  in  all intended stores .  Natural Demand:  The weekly sales if the item is fully stocked and is being sold at full price. Natural Demand accounts for the substitution affects of increasing availability for all items. Profitability Restriction : Optimized History requires a definition of profitability which is obtains through the GM% of Full Price Sell-Through % restriction. Optimized History :  The sales and pricing history we would have had using Natural Demand, Inventory Effects, and Optimal Pricing subject to Profitable Sales. Definitions
 

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4 Analytical Insights

  • 1.  
  • 2.  
  • 4. Analytical Insights Optimized History Size Profiles Prepacks
  • 5. Preliminaries Optimized History Size Profiles Prepacks Agenda
  • 6.
  • 7.
  • 8.
  • 9.
  • 10.
  • 11.
  • 12. Preliminaries Optimized History Size Profiles Prepacks Agenda
  • 13. Optimized History Key Steps Solve for the Demand Parameters Adjust for store/size stock-outs Optimize the Price & Buy Compare Actual/Optimal Histories Order of Steps 1. 2. 3. 4. Price Elasticity will be used to remove pricing effects from history. Seasonality will be used to understand what sales could have been in places and times where sales did not exist. How much more sales could we have had during store/size level stock-outs from flow and size issues? The correction accounts for substitution effects. What is the optimal sales plan, pricing scheme & total receipt level? What are the differences compared to history?
  • 14.
  • 15.
  • 16.
  • 17.
  • 18.
  • 19.
  • 20. Preliminaries Optimized History Size Profiles Prepacks Agenda
  • 21.
  • 22.
  • 23.
  • 24.
  • 25. Preliminaries Store Weights Size Profiles Prepacks Agenda
  • 26.
  • 27. Optimized Prepacks + Store Weights = Historic Buys + Store Size Profiles Item A: 1200 units Item B: 1800 units Item C: XX units Search eligible prepacks for best fit 1 Prepack 2 Prepacks Computing Optimized Prepacks: Overview Store/Size Need
  • 28.
  • 29.
  • 30.
  • 31.
  • 32.
  • 33.
  • 34. A Q & Q U E S T I O N S A N S W E R S
  • 35. Full Price: An item’s full price is defined as the initial price at which the item is intended to sell before the first mark-down. A $40 item that drops to $24.99 after 2 weeks in only a handful of stores has a $24.99 full price. Fully Stocked: A color is fully stocked if it is available in all intended sizes at all intended stores . A style is fully stocked if it is available in all intended sizes in all intended colors in all intended stores . Natural Demand: The weekly sales if the item is fully stocked and is being sold at full price. Natural Demand accounts for the substitution affects of increasing availability for all items. Profitability Restriction : Optimized History requires a definition of profitability which is obtains through the GM% of Full Price Sell-Through % restriction. Optimized History : The sales and pricing history we would have had using Natural Demand, Inventory Effects, and Optimal Pricing subject to Profitable Sales. Definitions
  • 36.