Belmont, MA, June 2023 – Smart Software, Inc., provider of industry-leading demand forecasting, planning, and inventory optimization solutions, today announced the award of US Patent 11,656,887, “SYSTEM AND METHOD TO SIMULATE DEMAND AND OPTIMIZE CONTROL PARAMETERS FOR A TECHNOLOGY PLATFORM.”

The patent directs “technical solutions for analyzing historical demand data of resources in a technology platform to facilitate management of an automated process in the platform.” One important application is optimization of parts inventories.

Aspects of the invention include: an advanced bootstrap process that converts a single observed time series of item demand into an unlimited number of realistic demand scenarios; a performance prediction process that executes Monte Carlo simulations of a proposed inventory control policy to assess its performance; and a performance improvement process that uses the performance prediction process to automatically explore the space of alternative system designs to identify optimal control parameter values, selecting ones that minimize operating cost while guaranteeing a target level of item availability.

The new analytic technology described in the patent will form the basis for the upcoming release of the next generation (“Gen2”) of Smart Demand Planner™ and Smart IP&O™. Current customers and resellers can preview Gen2 by contacting their Smart Software sales representative.

Research underlying the patent was self-funded by Smart, supplemented by competitive Small Business Innovation Research grants from the US National Science Foundation.

About Smart Software, Inc.
Founded in 1981, Smart Software, Inc. is a leader in providing businesses with enterprise-wide demand forecasting, planning, and inventory optimization solutions.  Smart Software’s demand forecasting and inventory optimization solutions have helped thousands of users worldwide, including customers such as Disney, Arizona Public Service, Ameren, and The American Red Cross.  Smart’s Inventory Planning & Optimization Platform, Smart IP&O gives demand planners the tools to handle sales seasonality, promotions, new and aging products, multi-dimensional hierarchies, and intermittently demanded service parts and capital goods items.  It also provides inventory managers with accurate estimates of the optimal inventory and safety stock required to meet future orders and achieve desired service levels.  Smart Software is headquartered in Belmont, Massachusetts, and our website is www.smartcorp.com.

 What is the wiggle effect? 

It’s when your statistical forecast incorrectly predicts the ups and downs observed in your demand history when there really isn’t a pattern.  It’s important to make sure your forecasts don’t wiggle unless there is a real pattern.

Here is a transcript from a recent customer where this issue was discussed:

Customer: “The forecast isn’t picking up on the patterns I see in the history.  Why not?” 

Smart:  “If you look closely, the ups and downs you see aren’t patterns.  It’s really noise.”  

Customer:  “But if we don’t predict the highs, we’ll stock out.”

Smart: “If the forecast were to ‘wiggle’ it would be much less accurate.  The system will forecast whatever pattern is evident, in this case a very slight uptrend.  We’ll buffer against the noise with safety stocks. The wiggles are used to set the safety stocks.”

Customer: “Ok. Makes sense now.” 

The wiggle looks reassuring but, in this case, it is resulting in an incorrect demand forecast. The ups and downs aren’t really occurring at the same times each month.  A better statistical forecast is shown in light green.

A statistical forecast of zero can cause lots of confusion for forecasters, especially when the historical demand is non-zero.  Sure, it’s obvious that demand is trending downward, but should it trend to zero?  When the older demand is much greater than the more recent demand and the more recent demand is very low volume (i.e., 1,2,3 units demanded), the answer is, statistically speaking, yes.  However, this might not jive with the planner’s business knowledge and expected minimum level of demand.  So, what should a forecaster do to correct this? Here are three suggestions:

1. Limit the historical data fed to the model. In a down trending situation, the older data is often much greater than the recent data.   When the older much higher volume demand is ignored, the down trend won’t be nearly as significant.  You’ll still forecast a down trend, but results are more likely to be line with business expectations.

2. Try trend dampening. Smart Demand Planner has a feature called “trend hedging” that enables users to define how a trend should phase out over time. The higher the percentage trend hedge (0-100%), the more pronounced the trend dampening.  This means that a forecasted trend will not continue through the whole forecast horizon.  This means the demand forecast will start to flatten before it hits zero on a downtrend.

3. Change the forecast model. Switch from a trending method like Double Exponential Smoothing or Linear Moving Average to a non-trending method such as Single Exponential Smoothing or Simple Moving Average. You won’t forecast a downtrend, but at least your forecast won’t be zero and thus more likely to be accepted by the business.

Belmont, Mass., December 2022 –  Smart Software is pleased to announce that Co-Founder Dr. Thomas R. Willemain’s article “Managing Inventory amid Regime Change” has won 1st place in the Forecasting category of the 2022 Supply Chain Brief MVP Awards.

“Regime change” is a statistical term meaning a major change in the character of the demand for an inventory item. An item’s demand history is the fuel that powers demand planners’ forecasting machines. In general, the more fuel the better, giving us a better fix on the average level,  the shape of any seasonality pattern, and the size and direction of any trend. But there is one big exception to the rule that “more data is better data.” If there is a major shift in your business and new demand doesn’t look like old demand, then old data become dangerous.

Read the MVP Award winner article here  https://smartcorp.com/inventory-optimization/managing-inventory-amid-regime-change/

Supply Chain Brief brings together the best content from hundreds of industry thought leaders. This MVP Award recognizes the Most Valuable Post as judged by Supply Chain Brief’s audience, award committee, and social media. Smart Software has been recognized to provide the highest value to industry professionals and useful information that is strategic in nature. https://www.supplychainbrief.com/mvp-awards/2022-SCB-MVP-AWARDS/forecasting

Dr. Thomas R. Willemain is Co-Founder and Senior VP for Research at Smart Software.  He has been a professor at MIT and the Harvard Kennedy School of Government and is now Professor Emeritus of Industrial and Systems Engineering at Rensselaer Polytechnic Institute.  Tom was a Distinguished Visiting Professor at the FAA and supported the Intelligence Community as Expert Statistical Consultant (GS15) in NSA’s Mathematics Research Group and later at IDA’s Center for Computing Sciences.  He holds degrees from Princeton University (BSE, summa cum laude) and Massachusetts Institute of Technology (MS and PhD), all in Electrical Engineering.

About Smart Software, Inc.
Founded in 1981, Smart Software, Inc. is a leader in providing businesses with enterprise-wide demand forecasting, planning and inventory optimization solutions. Smart Software’s demand forecasting and inventory optimization solutions have helped thousands of users worldwide, including customers at mid-market enterprises and Fortune 500 companies, such as Disney, Arizona Public Service, and Ameren. Smart Inventory Planning & Optimization gives demand planners the tools to handle sales seasonality, promotions, new and aging products, multi-dimensional hierarchies, and intermittently demanded service parts and capital goods items. It also provides inventory managers with accurate estimates of the optimal inventory and safety stock required to meet future orders and achieve desired service levels. Smart Software is headquartered in Belmont, Massachusetts, and can be found online at www.smartcorp.com.