JDA's E3 software offers an algorithm designed to help retailers keep track of items that sell slowly and erratically.
JDA Software Group is set to roll out this quarter a new forecasting
algorithm that will address slow and erratic items for its E3 replenishment
David Johnston, JDA's senior vice president of manufacturing and wholesale
distribution, said the algorithm, announced Feb. 13, will solve the challenges
many companies face in using traditional methods to try to forecast slow
"The algorithm takes into account that these items are erratic and you can't
forecast them in the same way you would forecast an item that sells at a good
pace," Johnston said.
He defined slow movers as products that sell less than one item per week at
retail level. He said they can represent 60 to 90 percent of a retailer's
assortment. The algorithm responds to detected changes in sales patterns and
considers influencing factors such as seasonality to perform dynamic
exponential smoothing of forecasting statistics, Johnston
"When a sale occurs, the algorithm considers how long it has been since the
item last sold and determines the fractional rate of sale normalized from the
last sale," he said. "Traditionally, you would only look at sales against
forecasted sales for that period."
Johnston said the algorithm will
also adjust forecasts based on recent changes in sales patterns and reduce
exception alerts by smoothing certain factors, such as a SKU that normally
sells one item in a given period suddenly selling two items, which is a minor
variation but gets recorded as a 100 percent forecasting error.
"E3 [will be able to] truly highlight exceptions that need action without
cluttering up exception lists," he said.
Rick Amari, president of Columbus Consulting, said that slow and erratic
movers represent a big forecasting problem for many retailers.
"If an item has an average sale of 0.1 per week, when do you fill it?" Amari
said. "It's a real hard nut to crack."
He said his firm has retail clients that end up spreading items all over
their chains rather than making a chainwide buy of them, which can cause
forecasting and replenishment issues if those items become slow movers.
"You get a proliferation of items that don't move because they're not in
many stores," Amari said. "The stuff lasts forever. Anything you can do to get
those items into the right places and out of the wrong places is beneficial."
According to Johnston, the addition of the new algorithm for slow-moving
items is one of a number of recent E3 enhancements, including added
functionalities for consolidated buying, multitier forecasting and
replenishment, multilevel demand management, and configurable rules for
top-down and bottom-up forecast reconciliation that allows lift predictions
based on characteristics of a specific event or promotion.