Predictive commerce is a strategy that helps companies enhance their planning processes by integrating demand sensing and supply chain execution into a single model, facilitating better decision-making and improved business outcomes. It addresses the challenges of disjointed planning environments by optimizing information flow and collaboration across functions, leading to significant benefits such as increased forecast accuracy and reduced costs. The document outlines various applications of predictive commerce and the typical benefits companies can achieve by adopting this approach.

1. Predictive Commerce
Helping companies return to growth
Pat Smith, General Manager, ToolsGroup North America
Bobby Miller, SVP, Global Consumer Goods Chief Strategist, ORTEC

2. 2ORTEC Predictive Commerce: Helping companies return to growth
Table of contents
1. Helping companies return to growth 3
2. An innovation accelerator 3
3. Improved processes and business results 5
4. Examples of predictive commerce applications 6
5. Benefits summary and typical first steps 10
6. About ToolsGroup 11

3. 3ORTEC Predictive Commerce: Helping companies return to growth
Helping companies return to growth
Today’s slow-growth global economy is placing greater pressure on companies to make more than small
incremental improvements in their planning processes. Firms now understand that connecting multiple
demand streams with planning and execution has moved to competitive necessity.
Predictive Commerce is a new strategy that helps these companies return to growth and accelerate their
business performance by connecting upstream demand sensing with downstream supply chain planning
and execution, all in a single model. It reinvents the way companies think about managing customer demand
and supply chain performance to deliver business value.
The core problem is that most current planning processes today are disconnected and disjointed, existing
in many organizations in technology and business process silos. A 2014 benchmarking study conducted
by Supply Chain Digest showed that 83 per cent of 400 responding planning executives characterized their
planning environment as poorly to moderately integrated at best.
For example, in their strategic network design process, many companies perform “product flow
optimization”, optimizing routes for product flow within the supply chain. But these policies are often not
communicated to the inventory optimization process, losing critical information that can be used to identify
a more optimized inventory mix.
This situation won’t endure. A shift in planning technologies is brewing and the traditional hierarchical supply
chain model is changing. Planning and execution processes are tightening. Instead of baked-in latency,
forward-thinking companies are fueling revenue and cost opportunities by leveraging analytics to move
closer to real-time execution with continuous re-planning, taking advantage of increased granular demand
visibility down to the SKU-Location level.
An innovation accelerator
Predictive Commerce is a strategy that enables this shift and revolutionizes the way companies think,
see and plan their end-to-end supply chain. It connects supply chain strategy, planning and execution into
an end-to-end planning process.
The key technology enabler is a single underlying model. Connecting functional processes in a single model
creates a flow of information to maximize individual supply chain processes. Unlike a loosely integrated
environment, a cohesive single model allows the entire process to be optimized.
A predictive forecasting and dynamic replenishment model forms the foundation of any Predictive
Commerce application. It takes advantage of new ways to capture the demand signal and its impact on
the supply chain. It leverages data that is readily available from a company’s ERP system (but may not be
being used to its greatest benefit) and demand signal repository (DSR) to foster end-to-end cross-functional
decision-making, unlocking meaningful and tangible business outcomes.
1.
2.

4. 4ORTEC Predictive Commerce: Helping companies return to growth
Predictive Commerce
leverages data that is
readily available from a
company’s ERP system
and DSR to foster end-
to-end decision-making
The added visibility between functions allows each to make better trade-offs. And they are especially in
a greater position to measure, manage and control the “total cost to serve,” a key metric of supply chain
performance.
■ Strategic functions can include network design, business scenario planning and product flow
optimization
■ Planning functions can include demand modelling, demand sensing, promotion optimization,
multi-echelon inventory optimization and predictive ordering
■ Execution functions can include order fulfilment load building, transportation route optimization and
warehouse execution
Trade Promotion
Media New Product
Demand
Modelling
Demand
Sensing
Product
Flow
Transportation
Forecasting
Perfect
Shipments
Strategic & Tactical PlanningMarket Data
Multi-Echelon Optimization
Predictive Planning & Execution
Network
Design
Inventory
Optimization
Predictive
Ordering
Single Model
POS Data
Master Data Planning Data
ERP

5. 5ORTEC Predictive Commerce: Helping companies return to growth
3. Improved processes and business results
1. Fosters collaborative decision making - Unlike organizational silos, collaborative decision-making
across functions creates a bidirectional flow of information and greater reliability of achieving desired
business outcomes.
2. Creates an “Outside-In” approach - Moving from a mind set of “what are we going to make today”
to “what are we going to sell today” is often called an “Outside-In” approach to demand management.
It takes advantage of demand streams, such as order lines, store-level POS data, web based transactions
or customer warehouse data to provide visibility into future demand.
3. Reduces latency in the planning process - Reducing the amount of planning time and increasing the
frequency of high quality decision-making helps improve customer satisfaction, asset utilization,
profitability and cost (i.e., transportation, inventory and trade marketing).
4. Converges planning and execution - Synchronizing upstream and downstream functions (technologies
and processes) allows planning and execution to converge. For example, providing an integrated demand
signal and propagating it across the value chain gives visibility to logistics, manufacturing and the
customer facing teams to deliver the best service at the most effective cost structure.
From
Waste
People PeopleProcess
Technology
Process
Technology
To

6. 6ORTEC Predictive Commerce: Helping companies return to growth
Application Explanation Sample Benefits
E-Commerce Order
Fulfillment
Multi-channel order fulfillment requires the ability
to promise the specific day and time an order will
be delivered. This delivery model requires that order
reservation slots be pre-determined and integrated
into the route delivery processes. Anticipating
daily demand requirements provides the ability to
create daily reservation capacity and delivery asset
requirements.
A number of grocery retailers have applied
integrated order slotting with continuous route
planning to be able to promise dates and times
to consumers ordering over a mobile device,
internet web application, or from in the store when
delivery is required to the home or another location
with click and collect shopping. This reduces the
miles driven to deliver to the consumers home or
pick-up point, provides customer loyalty services,
increases demand accuracy 10- 20% and reduces
transportation cost by 5 - 20%.
Demand sensing linked
to dynamic replenishment
Using real-time downstream data to drive better
inventory, replenishment, transportation and
warehousing decisions. Connects planning and
execution in a single model.
A large coffee shop brand uses machine telemetry
feeds from 3,000 coffee locations to achieve
demand-driven dynamic replenishment. Enabled
the firm to cut field stock by 20%, grow their
business through increased customer loyalty,
and scale operations by 200%, without adding
headcount.
Demand sensing linked
to dynamic replenishment
- Retailer
Real-time multi-channel order fulfillment and
product segmentation minimizes last mile delivery
cost by using channel inventory. Generates
replenishments for fulfillment stock locations
that are then synchronized to the route delivery
schedules for customer pick up points and home
deliveries.
Top 5 global retailer realized end-to-end supply
chain visibility, increasing capacity utilization
and automating replenishment, resulting in an
estimated annual savings of ~20%.
4. Examples of predictive commerce applications
Here are just a few examples of ways companies can connect upstream demand sensing with downstream
supply chain planning and execution, all in a single model, to deliver business value.

7. 7ORTEC Predictive Commerce: Helping companies return to growth
Application Explanation Sample Benefits
Augmenting SAP APO Leverages readily available detailed downstream
data from a company’s ERP system or demand
signal repository (DSR) to provide a better account-
level forecast and a more reliable deployment
strategy of where you need inventory to achieve
your target service levels. Takes advantage of new
demand streams, such as order-lines, store-level
POS data, or customer warehouse data to provide
visibility into future baseline demand and true
promotional lift.
Reduces latency in the planning process. Greatly
improves forecast accuracy (especially short-
term to medium-term). Optimizing operational
performance across multiple key financial criteria
including trade promotion.
Market-driven
transportation forecasting
and optimization
Connects demand sensing with truckload
optimization via predictive orders. Provides the
ability to shift from reacting to orders to proactively
managing capacity requirements. Predicting
transportation capacity in advance reduces
the reliance on spot markets, locks in carrier
commitments sooner, and improves time to adjust
to logistical issues in a tight carrier market. In
addition, it improves carrier collaboration, increases
intermodal shipment opportunities, and provides the
ability to smooth warehouse resources.
Reduces freight cost ~5 – 10% annually.

8. 8ORTEC Predictive Commerce: Helping companies return to growth
Application Explanation Sample Benefits
Market-driven Vendor
Managed Inventory (VMI)
VMI requires the ability to understand your
customers’ demand and inventory levels. Significant
labor cost is associated with managing the vendor’s
inventory requirements and maintaining agreed
upon service levels. Prioritizing items and building
advanced truckloads ensures that the right product
is delivered in the least amount of truck assets
possible. The ability to identify the “must go,” “should
go” and “can go” products ensures promotional
product demand is on the right truck before turn
business. Applying days of supply prioritization
when building the trucks guarantees high velocity
products are delivered on-time vs. low turn products
with high inventory levels at receiving location.
Enables Fortune 100 consumer good companies to
reduce freight cost ~5 – 10% annually.
Directed put away and
retrieval for the cold chain
Reducing the proliferation of expired and out-of-
code products is particularly important for highly
perishable foods such as poultry, meat, fresh fruits
and vegetables, and also short life pharmaceuticals,
such as biologics and diagnostics. For example,
what are the drivers that cause pharmaceuticals
to remain unsold before their expiration dates?
Demand and inventory related issues due to
improper warehouse stock rotation are mainly
driven by service level commitments. Connects
inventory service level with the sequencing of put
aways and retrieval. Selection criteria of outgoing
product, such as quantities of products and
expiration dates, and blocked status are directed
by sequencing logic to ensure the right product is
retrieved.
Improvement in warehouse stock rotation reduces
“unsalables.” Automated warehouse control
sequencing optimization provides the ability to
control ”First In, Last Out” using expiration data vs.
the traditional date of receipt. Expected savings in
reducing “unsalable” inventory is ~5% annually.

9. 9ORTEC Predictive Commerce: Helping companies return to growth
Application Explanation Sample Benefits
Market-driven Direct Store
Delivery (DSD) - For static
and dynamic routing
Focuses on shelf inventory visibility to drive
accurate replenishments, reduce last mile delivery,
and increase tracking of inventory. Driven by the
use of Point of Sale data to forecast store demand,
the DSD supplier can sense what is moving through
the store to plan the people and assets required to
execute to the demand. Synchronizing when the
merchandiser resource is at the store coupled with
when and what
time the truck driver will deliver is accomplished
using dynamic route optimization.
Ensures the ability to execute to the predicted
demand. Increases in-stock forecasting accuracy
by ~20% annually.
Retail last mile home
delivery - Market-driven,
dynamic routing
Redirects routes based on realtime inputs. A short
horizon, high frequency trigger demand visibility
signal (demand sensing) translates demand across
multiple systems to drive the pick-ups. Retailers
are looking at how to best deploy a multi-channel
delivery strategy and be profitable at delivering to
the last mile. The two main ingredients of a last mile
delivery model are inventory and transportation.
Demand-driven inventory and route planning
identifies where the inventory needs to be to fulfill
the end consumer order and secondarily determines
how best to route the order at the least cost.
Replenishing to fulfillment centers and delivering to
multiple customers goes hand-in hand and requires
real-time decision-making.
Predictive demand-driven last mile routing
improves order fulfillment, customer experience
and increases in-stock availability. Miles-driven
savings is ~15% annually.
Rules-based load
optimization for
pharmaceutical
In the pharmaceutical industry, creating deliverables
pallets requires expert knowledge of the drugs,
compatibility and proximity of what drugs can reside
on the same pallets and containers. It requires
updated information regarding FDA rules and other
complexities to create a delivery strategy. This
mandate ensures there is no cross-contamination
or potential hazards in mixing drugs on a pallet and
container.
Using rules-based load building that considers the
FDA and International restrictions provides the
ability to reduce freight cost by building optimal
pallets and containers without the required man
hours used to create deliveries. Expected labor
savings is 30 – 50% annually.

10. 10ORTEC Predictive Commerce: Helping companies return to growth
Benefits summary and typical first steps
Typical sustainable business benefits from adopting a Predictive Commerce approach include:
■ ~ 30%+ improvement in forecast accuracy
■ ~ 20%+ efficiency with inventory investment
■ ~10%+ reduction in transportation delivery cost
■ ~ 1% + increase in revenue
■ ~ 1% point in margin growth
Predictive Commerce is not a single solution, but a sustainable strategy for business growth and success.
Most companies use a “crawl, walk, run” strategy, starting with high value-added points of entry. Some
immediate opportunities include:
1. Focusing on improving Demand Management by fully leveraging demand signals to maximize the
accuracy of forecasts and improve the representation of the volatility of demand
2. Enhancing Transportation/Load Build Optimization with time-phased demand streams to address
demand volatility and the last mile to maximize the customer experience.
3. Implementing Multi-Echelon Inventory Optimization (MEIO), possibly by outsourcing
for quick time-to-benefit
4. Updating Supply Chain Design to include product flow path optimization
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11. 11ORTEC Predictive Commerce: Helping companies return to growth
About ToolsGroup
ToolsGroup is a global provider of “Powerfully Simple” market-driven
demand analytics and supply chain optimization software. Reliable
behind-the-screen technology and scalable statistical models supported with machine learning technology,
enables highly intelligent data-driven decision making, combined with ease of use. Our customers overcome
volatile demand and challenging supply chains through a proprietary demand model that generates accurate
forecasts and outstanding customer service levels with less global inventory. ToolsGroup’s capabilities span
key supply chain planning areas such as Demand Forecasting and Collaboration, S&OP, Demand Sensing,
Promotion Forecasting and Multi-Echelon Inventory Optimization.
6.

12. About ORTEC
ORTEC is one of the largest providers of advanced planning and optimization solutions and services.
Our products and services fully optimize fleet routing and dispatch, vehicle and pallet loading, workforce
scheduling, delivery forecasting, logistics network planning, and warehouse control. We offer stand-alone,
custom-made and SAP®
certified and embedded solutions that are supported by strategic partnerships.
Our 750 employees support over 1,800 customers worldwide from offices in Europe, North America,
South America, and Asia Pacific.
ORTEC world wide
info@ortec.com
www.ortec.com
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