October 5, 2016
Quantifying and Managing the Impact of Weather
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Weather affects everyone, every day.
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Weather has a significant influence on retail sales
• Retailers monitor and manage numerous external factors such as competitive activity and foreign currency • Yet most retailers don’t manage a variable that affects customer behaviour and customer demand every day…….the weather. Why? © 2015 Planalytics, Inc. All Rights Reserved. Proprietary and Confidential.
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Weather data is difficult to use…… • Subjective & Emotional • Requires Experts to “Translate” • Does Not Quantify Weather’s Impact or Enable Sensible Business Comparisons • Inefficient & Difficult to Scale
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……and it appears to be random Year-to-Year Variations: London 2013 v 2012 Cooler Early Spring Warmer Autumn
2014 v 2013 Rainer First Half of Year Warmer Spring
2015 v 2014 Consistently Cooler until… Warmer Nov. & Dec.
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…...yet it has a big effect on sales and profits
So what’s the solution?
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What if you had a
FACT-BASED METHOD for quantifying & managing
WEATHER’S FINANCIAL IMPACT to
INCREASE YOUR BOTTOM LINE © 2015 Planalytics, Inc. All Rights Reserved. Proprietary and Confidential.
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Sampling of Planalytics’ Clients
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Weatherisation: the solution from Planalytics
Weatherisation “the process of identifying, analysing and applying weather's impact to provide measurable and quantitative returns across an organisation”
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Quantifying weather’s impact……on your business
WEATHER DATA
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WEATHER ANALYTICS
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Quantifying weather’s impact……on your business what seems straightforward
is more complex than you think
REGIONAL & TEMPORAL DIFFERENCES
WEIGHTING & AGGREGATING DATA
BUYING
TRENDS & TRAITS © 2015 Planalytics, Inc. All Rights Reserved. Proprietary and Confidential.
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Quantifying weather’s impact……on your business Multi-year analyses.
Isolates weather’s influence on sales. Identifies Weather Drivers. Calculates Weather Sensitivity. A measure of how much changes in the weather increase or decrease demand. © 2015 Planalytics, Inc. All Rights Reserved. Proprietary and Confidential.
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Weather data now becomes ……
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…... Business Weather Intelligence • Fact-based & Objective
N Brown Category
Weather Sensitivity
Outerwear
11%
Knitwear
14%
Sandals
15%
Boots
9%
Garden Furniture
20%
Jersey tops
4%
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• Provides Easily Understood Answers • Puts Weather’s Impact in a Business Context for Effective Analysis & Planning • Efficient & Scalable Sandals
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……all accessible from the BWI web portal
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.…..which provides WDDs for Analysis and Reporting PAST
TODAY
WDDs for ANALYSIS
WDDs for
ANALYSIS
Weather Input Actualised Weather (for all days in the past)
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• Weather Input : Actualised Weather (for all days in the past) • Business Uses: Evaluate performance, track sales, etc. as the business moves through the week, month or season with WDDs that are updated to reflect the weather that actually occurred. 16
.…..and WDDs for In-Season Optimisation TODAY
2 WEEKS
WDDs for IN-SEASON OPTIMISATION
WDDs for
IN-SEASON OPTIMIZATION
Weather Input Forecasted Weather (up to 14 days into the future)
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• Weather Input: Forecasted Weather (up to 14 days into the future) • Business Uses: Enhance marketing/ advertising, inventory management, pricing/ promotions, and other near-term decisions with WDDs that are based on expected weather conditions. 17
.…..and WDDs for Planning 2 WEEKS
11 MONTHS
WDDs for PLANNING
WDDs for
PLANNING
Weather Input Statistical Probability Models (11 months into the future)
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• Weather Input: Statistical Probability Models (11 months into the future) • Business Uses: Remove weather’s impact from last year’s sales to improve budgeting, sales planning and buying/merchandising decisions.
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.…..based on statistical probability models Weather only repeats itself across your business about
15% of the time.
BRIGHTON BEACH · 6 APRIL
HAMBURG · 6 JANUARY
CHICAGO · 2 FEBRUARY
ROME · 5 FEBRUARY
ONE YEAR LATER
ONE YEAR LATER
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ONE YEAR LATER
ONE YEAR LATER
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.…..that “Deweatherises” your sales history
80-85% 15-20%
Weather only repeats itself across your of the time business about weather will trend away from extremes andof back the towards time. normal.
REVERSE THE ODDS with Deweatherisation
Deweatherisation removes weather-driven volatility from sales history © 2015 Planalytics, Inc. All Rights Reserved. Proprietary and Confidential.
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.…..removing weather volatility from your plans
IMPROVE PLAN ACCURACY
REMOVE WEATHER VOLATILITY Weathers impacts are
But… the weather only repeats from one year to the next about 15% of the time
embedded in LY sales
WEEK 21
WEEK 22
WEEK 23
LY Sales Deweatherised Plan Adjustments © 2015 Planalytics, Inc. All Rights Reserved. Proprietary and Confidential.
WEEK 24
WDD
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…... improving plan accuracy
N Brown Category
Accuracy Improvement
Outerwear
2%
Knitwear
4%
Sandals
2%
Boots
7%
Garden Furniture
2%
Jersey tops
2%
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……as illustrated in this example
Accuracy Improvement Actual Sales De-weatherized Plan Plan Variation of Demand Due to Weather Base Sales
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Analysis Results
Quantifying weather’s impact……on your business
• The analytical process starts with a time series analysis which decomposes the sales curve into seasonality, trend, and residual components. Once the sales curve is decomposed, the residuals are run into a multiple regression analysis that results in a measure of the type of weather that affects the sales for each product category at each location in each week. • The output of this process produces a Weather Driven Demand index (WDD), which is a percentage measure of the effect weather has on demand for each week, each product, at each store location.
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Analysis Overview Data Received • 6.7 years of weekly aggregate sales data • units and price / by store, by week
• 11 Merch FMBs, 125 Departments, 1366 Merch Ranges • 3500 UK Postal Code Regions • Merchandise hierarchy
Deliverables • Quantified weather’s impact and the value it returns to the business in improved planning accuracy on several key metrics: • Reduction in lost sales • Decreased inventory carrying costs • Increase in working capital
• Weather sensitivity values across your merchandise hierarchy
Assumptions • margin: 40%; turn rate: 3; service level: 92%
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Analysis Summary
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Analysis Summary
£450m in revenue is associated with top 100 analysed merchandise ranges
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Analysis Summary
Planalytics’ plan accuracy improvement on the top 100 merchandise ranges results in a reduction in inventory carrying costs and an increase in profit from a reduction in lost sales of
£1.2m+ each year. You also get a one time increase in working capital of
~ £1.1m © 2015 Planalytics, Inc. All Rights Reserved. Proprietary and Confidential.
Weather Volatile Merchandise Ranges
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Weather Analysis Findings - Time Brand Dresses (Plan-MRange-01-R9-HB) Weather S ensitivity Through Time 3500
Weather Sensitivity = 5.83%
3000 2500
Units
2000 1500 1000 500
0 1
3
5
7
9
11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 W eeks
Seasonality
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High W eather Sensitivity
Low W eather Sensitivity
Weather Analysis Findings - Time Boots Low/Mid (Plan-MRange-04-FO-EZ) Weather S ensitivity Through Time 10000
Weather Sensitivity = 9.68%
9000 8000 7000
Units
6000
5000 4000 3000 2000 1000
0 1
3
5
7
9
11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 W eeks
Seasonality
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High W eather Sensitivity
Low W eather Sensitivity
Weather Analysis Findings - Time Own Label Jeans (Plan-MRange-01-EZ-FO) Weather S ensitivity Through Time 12000
Weather Sensitivity = 3.68%
10000
Units
8000
6000
4000
2000
0 1
3
5
7
9
11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 W eeks
Seasonality
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High W eather Sensitivity
Low W eather Sensitivity
Weather Analysis Findings - Time Garden Furniture (Plan-MRange-09-XK-AA) Weather S ensitivity Through Time 1000
Weather Sensitivity = 20.15% 800
Units
600
400
200
0 1
3
5
7
9
11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
-‐200
W eeks Seasonality
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High W eather Sensitivity
Low W eather Sensitivity
……all accessible from the BWI web portal
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…...providing simple actionable data
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…...simple actionable data
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…...simple actionable data
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….implemented in phases FINANCIAL MODULE Department-Level Weather Analytics
COMPANY
DIVISION
DEPARTMENT Product-Level Weather Analytics MERCHANDISING MODULE
CLASS SUBCLASS
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..….typical start 1. Implement the Financial Module to optimise in-season trading performance with enhanced Financial Reporting and Financial Planning and Forecasting 2. Prepare Strategic Weatherisation Plan to create a project plan to implement the Merchandise Module to improve demand forecast accuracy via integration into business functions such as merchandise planning, buying, staffing and marketing,
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..….with the following implementation activities Activities
Time
Module Implementation
Data Call Kickoff / Share Data Analyse Data Complete Analysis / Review Results
Future State Definition
Assessment
Onsite Training / Implementation
Finance Module rollout
Prepare for Assessment Meetings Assessment Meetings onsite at Client Prepare Strategic Weatherisation Plan Present Strategic Weatherisation Plan
Formal Touchpoints with Client and Planalytics. © 2015 Planalytics, Inc. All Rights Reserved. Proprietary and Confidential.
We are here. 42
GET WEATHERISED The weather never stops. Let’s get started.
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