How AI Integrates SOP and Trade Promotion via

How AI Integrates S&OP and Trade Promotion via a Unified Demand Signal

Agenda • Introductions • What is AI? • Using a Unified Demand Signal • Enhancing A Unified Demand Signal Approach with AI • Closing Thoughts / Q&A

What is Artificial Intelligence?

What is Artificial Intelligence (AI)?

Artificial Intelligence is… It’s machine learning It’s robots It’s big data It’s magic

AI is the ability of machines to perceive, learn, formulate and react independently to external stimulus in an effort to maximize successful outcomes – just like us!

Why is AI more relevant today? It’s the coming together of cloud technology and hardware, data availability(Big Data), talent availability, open source, connectivity and the democratization of knowledge.

Where is AI impacting business change? Direct to consumer models “Amazonization” Changing consumer expectations Better selection, convenience and price offerings Service level pressure from retailers Example of Walmart OTIF in the US Leveraging AI to PREDICT and SHAPE demand is imperative to SUCCESS

Top Areas of Analytics Focus Customer/Consumer Insights 36% Promotion Effectiveness 36% 25% Demand Forecasting 34% 28% Trade Promotion 27% 41% 6% Inventory Planning 23% Pricing 21% Assortment Planning 19% 25% Social Media Analytics 13% 25% Personalization 8% 28% Sahir Anand – Managing Vice President, Research & Strategy for Ensemble. IQ Research Solutions 31% Consumer Goods “Within machine learning, the best areas of investment are demand forecasting, replenishment, pricing and trade promotion, since [the technology] can help read patterns of information in a self-learning manner as well as provide predictive data and scenario-based modeling of outcomes. ” Retail

Using a Unified Demand Signal for Consumer Goods Companies

Business Challenges • Build a centralized solution for store ordering and trade management • Leverage a unified demand signal for production, distribution, route delivery and trade effectiveness • Connect sales and supply chain teams to integrated planning for store ordering and effective trade promotions

Business Successes • 30% improvement in forecast accuracy • 2 -3% Revenue Improvement from reducing lost sales due to stock outs • 8 -10% cost reductions from a decrease in returns and salvage from over-stocks • ~5% margin improvement identified via reinvesting trade promotions to more effective brand/channel/time delivery • Improvements to trade strategy through identification of top five drivers of promotional effectiveness (e. g. price was not the most significant lever)

AI Enables the Concept of a Unified Demand Signal External events data Store Fulfillment Demand Applications Designed for integrated planning and decisioning Machine Learning Input host data, generate forecast & event driver uplift POS Internal data Unified Demand Signal Trade Promotion Financial Forecasting Supply Chain Planning Assortment Planning

Integrated Planning Tears Down Traditional Silos between Supply Chain Planning and Sales/Revenue Managers Trade Management Plan, budget, and execute trade promotions that influence dispatch and route delivery Sales Measure the effectiveness of the promotion and inventory clearance (TPR) events Trade Analytics Store 1 Production Center Production Managers Planning of raw material purchases and production Store 2 Sales Centers Supervisors Planning of dispatch and logistics Route Service Professionals Deliveries, order entry, payments, inventory capture Store 4 Store 3 Sales & Rev. Managers Inform route delivery and promotion execution

Enhancing a Unified Demand Signal Approach with Artificial Intelligence

Predicting demand is only half the story we need a precise understanding of the drivers to shape demand Step 1: Predict demand Step 2: Shape demand

Step 3: Leverage an AI platform that connects the science, human decision, and technology for a powerful experience Technology Approachable and repeatable means of engaging with the analytics Science Improve forecast accuracy, leverage ML, and optimize best outcomes AI Driven Unified Demand Signal Human Promote right behaviour, empower decision making, align stakeholders

Step 1: Create a foundational forecasting framework Decompose demand history Forecast base demand Manage new products and customers Identify events and outliers Determine demand driver coefficients Create base demand history

Step 1: Arrive at optimal levels to forecast accurately Dynamic Data Aggregation 3 rd aggregation level (Product Category, Country) 2 nd aggregation level (Product Group, State) 1 st aggregation level (Product, City) Leverage base demand history § Automatically parse through the hierarchy to determine the right balance of information loss and noise reduction (dynamic data aggregation) § Perform dynamic data aggregation for every customer/location/SKU combination Benefits of AI Approach § Accurate base demand forecast Lowest level (SKU/ Store) § Minimal information loss § Outcome: right hierarchy levels to perform forecasting

Step 3: Evaluate the value of each demand driver separately to understand the impact Trend Seasonality Events Price Effects Promotions Lifecycle Understanding demand driver impacts § Product Lifecycle § Seasonality § Trends Total Demand § Market Entry § Holidays § Promotions § Price changes § Inventory Clearance * For Illustration only. Not based on real data

Step 3: ‘True’ lift is determined and confidently shared with supply chain, demand planning, and others to close the loop Demand Volume Lift from Holiday event Lift from Buy one, get one Cannibalization Wastage Wheat bread @ Walmart Base demand Out of stock Demand lag due to pantry loading Week 1 Week 2 Week 3 Week 4 Week 5 Time (White Bread @ Walmart Example) Halo Bagel @ Walmart

The result is better visibility to volume uplifts and ROI trade-offs across brands and channels that inform future investment strategy Volume Lift Across Brands/Channels Brand A Brand B Brand C Total Banner A 205% 211% 266% 237% Banner B 177% 156% 162% Banner C 185% 131% Banner D 256% Total 208% ROI Across Brands/Channels Brand A Brand B Brand C Total Banner A 0. 85 0. 63 0. 67 0. 75 218% Banner B 0. 63 0. 34 0. 36 0. 50 140% 234% Banner C 0. 34 0. 29 0. 10 300% 130% 330% Banner D 0. 25 0. 41 0. 15 0. 32 216% 295% Total 0. 61 0. 36 0. 37

The ability for the solution to surface key drivers of effective promotions in an unsupervised manner Brand Promotion Offer Banner Incremental Volume Uplift A 90% B 2 for 3 BOGO D C B 300% 130% 160% Machine Learning algorithms give order of importance of variables for promotional effectiveness by identifying the most important variable achieving the strategic goal

Future planning becomes easier as AI predicts the best outcome by brand, banner, attributes, and budgetary constraints 500% Uplift % 400% 300% Legend 200% Brand B Banner D 100% Banner C 0 1. 5 2. 0 ROI 2. 5 3. 0 The ability to conduct scenario analysis or what -if planning empowers users to not only make strategic decisions but plan with greater confidence as all outcomes are weighed simultaneously against goals and constraints.

Remember our bread example, this unified demand signal enabled greater forecast accuracy, less wastage, and better ROI Bread Type LY Forecast Error % TY Sales Forecast Error % % Change YOY LY wastage % TY wastage % % Change YOY White Bread 30% 17% 43% improvement 15% 3% 80% decline Wheat Bread 42% 13% 69% improvement 30% 7% 76% decline Bagel 22% 17% 22% improvement 11% 10% 9% decline

How are you leveraging AI in your organization? Allow this example of how traditional silos are broken by leveraging a unified demand signal to integrate plans that encourage how AI drives changes your organization

Thank you About Antuit Company Facts What we do • Founded in 2013 • Deliver IP-enabled solutions that unlock the value of people, process and • Operating globally with over 250+ professionals in 8 countries • Backed by Goldman Sachs & Zodius Capital technology investments • Leverage deep domain knowledge in CPG, retail, manufacturing and logistics, and other demand-driven industries • Create long-lasting value for more than 60 global brands