+1 617 489 2743
Every Forecasting Model is Good for What it is Designed for

​When you should use traditional extrapolative forecasting techniques.

With so much hype around new Machine Learning (ML) and probabilistic forecasting methods, the traditional “extrapolative” or “time series” statistical forecasting methods seem to be getting the cold shoulder.  However, it is worth remembering that these traditional techniques (such as single and double exponential smoothing, linear and simple moving averaging, and Winters models for seasonal items) often work quite well for higher volume data. Every method is good for what it was designed to do.  Just apply each appropriately, as in don’t bring a knife to a gunfight and don’t use a jackhammer when a simple hand hammer will do. 

Extrapolative methods perform well when demand has high volume and is not too granular (i.e., demand is bucketed monthly or quarterly). They are also very fast and do not use as many computing resources as probabilistic and ML methods. This makes them very accessible.

Are the traditional methods as accurate as newer forecasting methods?  Smart has found that extrapolative methods do very poorly when demand is intermittent. However, when demand is higher volume, they only do slightly worse than our new probabilistic methods when demand is bucketed monthly.  Given their accessibility, speed, and the fact you are going to apply forecast overrides based on business knowledge, the baseline accuracy difference here will not be material.

The advantage of more advanced models like Smart’s GEN2 probabilistic methods is when you need to predict patterns using more granular buckets like daily (or even weekly) data.  This is because probabilistic models can simulate day of the week, week of the month, and month of the year patterns that are going to be lost with simpler techniques.  Have you ever tried to predict daily seasonality with a Winter’s model? Here is a hint: It’s not going to work and requires lots of engineering.

Probabilistic methods also provide value beyond the baseline forecast because they generate scenarios to use in stress-testing inventory control models. This makes them more appropriate for assessing, say, how a change in reorder point will impact stockout probabilities, fill rates, and other KPIs. By simulating thousands of possible demands over many lead times (which are themselves presented in scenario form), you’ll have a much better idea of how your current and proposed stocking policies will perform. You can make better decisions on where to make targeted stock increases and decreases.

So, don’t throw out the old for the new just yet. Just know when you need a hammer and when you need a jackhammer.

 

 

 

 

Smart Software VP Research to present at the MORS Symposium and at the Emerging Techniques Forum

Smart Software announced today that its co-founder and Senior VP of Research, Dr. Thomas Willemain, has been selected to present at the prestigious Emerging Techniques Forum on December 7-9, 2021, and also at the 89th MORS Symposium on June 21 – 25, 2021. MORS is the Military Operations Research Society, funded by the Navy, Army, Air Force, Marine Corps, Office of the Secretary of the Defense, and the Department of Homeland Security. Its mission is to enhance the quality of analysis that informs national and homeland security decisions.

1) MORS Virtual Symposium provides the defense analytic community with extensive content on emerging analytics topics and techniques. The focus for 89th MORS Symposium will be “Analytics to Enhance Decision Making.”  Willemain will present four sessions this year:

High-Dimensional Data Reconnaissance using Snakes

The Snake is a new analysis tool that can detect the presence of clusters and estimate their number. Snakes provide a unique and readily interpreted visual depiction of the structure of high-dimensional data.

Coincidences: Signal or Noise?

We want to know whether the simultaneous occurrence of two events, i.e., a coincidence, is merely a chance event. If not, there may be some exploitable link between the events. We propose more comprehensive tests based on models of events that account for autocorrelation, trend, and seasonality. 

Generation of Visual Scenarios for Use in Operator Training

Operator training is enhanced by exposure to scenarios depicting real-world data streams. Properly tuned time series bootstraps can create univariate and multivariate scenarios that meet quantity, cost, fidelity, and variety standards. 

Testing for Equality of Several Distributions in High Dimensions

A fundamental Testing and Evaluation analysis task is looking for differences among alternative systems or processes.  Several new tree-based statistics work well for effects that have multiple impacts in both MVN and non-MVN data.

 

2) The Emerging Techniques Forum provides the defense analytic community with extensive content on emerging analytic topics and techniques. Willemain will be one of a small number of experts speaking in the Augmented Decision Making track. 

Dr. Willemain’s topic will be “Coping with Regime Change in Logistics Operations.”

Military Operations Research Society (MORS) Emerging Techniques Forum

 

Dr. Thomas Willemain’s research at Smart Software and Rensselaer Polytechnic Institute helps constantly innovate Smart IP&O, the company’s multi-tenant web-based platform for forecasting, inventory planning, and optimization.

 

 

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  Disneyland Resorts, Metro-North Railroad, and American Red Cross.  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 on the World Wide Web at www.smartcorp.com.

 

SmartForecasts and Smart IP&O are registered trademarks of Smart Software, Inc.  All other trademarks are the property of their respective owners.

For more information, please contact Smart Software, Inc., Four Hill Road, Belmont, MA 02478.
Phone: 1-800-SMART-99 (800-762-7899); FAX: 1-617-489-2748; E-mail: info@smartcorp.com

 

 

Smart Software Senior VP/Research to present at Military Operations Research Society (MORS) Emerging Techniques Forum

Smart Software announced today that its co-founder and Senior VP of Research, Dr. Thomas Willemain, has been selected to present at the prestigious MORS Emerging Techniques Forum December 4 – 5, 2019 in Alexandria, VA.

MORS is the Military Operations Research Society, funded by the Navy, Army, Air Force, Marine Corps, Office of the Secretary of the Defense and the Department of Homeland Security. Its mission is to enhance the quality of analysis that informs national and homeland security decisions.

The Emerging Techniques Forum provides the defense analytic community with extensive content on emerging analytic topics and techniques. Willemain will be one of a small number of experts speaking in the Computational Advances in Analytics track. This track addresses new tools and techniques that leverage increased computing power and data availability.

Willemain’s topic will be “Validating Demand Scenario Generators for Inventory Optimization.” This research is part of Smart Software’s continuing work to push the state of the art in managing fleets of spare parts and hard to forecast items.  These advancements will be incorporated into Smart IP&O, the company’s multi-tenant web based platform for forecasting, inventory planning and optimization.  The research began with Dr. Willemain’s doctoral students at Rensselaer Polytechnic Institute, where he remains active as Professor Emeritus of Industrial and Systems 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 Mitsubishi, Siemens, Disney, FedEx, MARS, and The Home Depot.  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 on the World Wide Web at www.smartcorp.com.

SmartForecasts and Smart IP&O are registered trademarks of Smart Software, Inc.  All other trademarks are the property of their respective owners.

For more information, please contact Smart Software, Inc., Four Hill Road, Belmont, MA 02478.
Phone: 1-800-SMART-99 (800-762-7899); FAX: 1-617-489-2748; E-mail: info@smartcorp.com