Abstract:
An improved method for forecasting and modeling product demand for a product. The forecasting methodology employs a causal methodology, based on multiple regression techniques, to model the effects of various factors on product demand, and hence better forecast future patterns and trends, improving the efficiency and reliability of the inventory management systems. The improved method identifies linear dependent causal factors and removes redundant causal factors from the regression analysis. A product demand forecast is generated by blending forecast or expected values of the non-redundant causal factors together with corresponding regression coefficients determined through the analysis of historical product demand and factor information.

Description:
CROSS REFERENCE TO RELATED APPLICATIONS 
       [0001]    This application claims priority under 35 U.S.C. § 119(e) to the following co-pending and commonly-assigned patent application, which is incorporated herein by reference: 
         [0002]    Provisional Patent Application Ser. No. 61/142,011, entitled “DATA QUALITY TESTS FOR USE IN A CAUSAL PRODUCT DEMAND FORECASTING SYSTEM” by Arash Bateni, Edward Kim, Philippe Dupuis Hamel, and Blazimir Radovic; filed on Dec. 31, 2008. 
         [0003]    This application is related to the following co-pending and commonly-assigned patent applications, which are incorporated by reference herein: 
         [0004]    Application Ser. No. 11/613,404, entitled “IMPROVED METHODS AND SYSTEMS FOR FORECASTING PRODUCT DEMAND USING A CAUSAL METHODOLOGY,” filed on Dec. 20, 2006, by Arash Bateni, Edward Kim, Philip Liew, and J. P. Vorsanger; 
         [0005]    Application Ser. No. 11/938,812, entitled “IMPROVED METHODS AND SYSTEMS FOR FORECASTING PRODUCT DEMAND DURING PROMOTIONAL EVENTS USING A CAUSAL METHODOLOGY,” filed on Nov. 13, 2007, by Arash Bateni, Edward Kim, Harmintar Atwal, and J. P. Vorsanger; and 
         [0006]    Application Ser. No. 11/967,645, entitled “TECHNIQUES FOR CAUSAL DEMAND FORECASTING,” filed on Dec. 31, 2007, by Arash Bateni, Edward Kim, J. P. Vorsanger, and Rong Zong. 
     
    
     FIELD OF THE INVENTION 
       [0007]    The present invention relates to a methods and systems for forecasting product demand using a causal methodology, based on multiple regression techniques, for modeling the effects of various factors on product demand to forecast future product demand patterns and trends, and in particular to the performance of data quality tests to ensure prior to performing regression analysis. 
       BACKGROUND OF THE INVENTION 
       [0008]    Accurate demand forecasts are crucial to a retailer&#39;s business activities, particularly inventory control and replenishment, and hence significantly contribute to the productivity and profit of retail organizations. 
         [0009]    Teradata Corporation has developed a suite of analytical applications for the retail business, referred to as Teradata Demand Chain Management (DCM), which provides retailers with the tools they need for product demand forecasting, planning and replenishment. Teradata Demand Chain Management assists retailers in accurately forecasting product sales at the store/SKU (Stock Keeping 
         [0010]    Unit) level to ensure high customer service levels are met, and inventory stock at the store level is optimized and automatically replenished. Teradata DCM helps retailers anticipate increased demand for products and plan for customer promotions by providing the tools to do effective product forecasting through a responsive supply chain. 
         [0011]    In application Ser. Nos. 11/613,404; 11/938,812; and 11/967,645, referred to above in the CROSS REFERENCE TO RELATED APPLICATIONS, Teradata Corporation has presented improvements to the DCM Application Suite for forecasting and modeling product demand during promotional and non-promotional periods. The forecasting methodologies described in these references seek to establish a cause-effect relationship between product demand and factors influencing product demand in a market environment. Such factors may include current product sales rates, seasonality of demand, product price changes, promotional activities, weather forecasts, competitive information, and other factors. A product demand forecast is generated by blending the various influencing causal factors in accordance with corresponding regression coefficients determined through the analysis of historical product demand and factor information. Described below is a method for identifying linear dependent causal variables within a data sample from which the regression coefficients are determined, and removing redundant causal variables from the regression analysis. 
     
    
     
       BRIEF DESCRIPTION OF THE DRAWINGS 
         [0012]      FIG. 1  is a flow diagram illustrating a method for determining product demand forecasts utilizing a causal methodology. 
           [0013]      FIG. 2  is a diagram illustrating a method for identifying linear dependent causal variables within a data sample, and removing redundant causal variables from regression analysis in accordance with the preset invention. 
       
    
    
     DETAILED DESCRIPTION OF THE INVENTION 
       [0014]    In the following description, reference is made to the accompanying drawings that form a part hereof, and in which is shown by way of illustration specific embodiments in which the invention may be practiced. These embodiments are described in sufficient detail to enable one of ordinary skill in the art to practice the invention, and it is to be understood that other embodiments may be utilized and that structural, logical, optical, and electrical changes may be made without departing from the scope of the present invention. The following description is, therefore, not to be taken in a limited sense, and the scope of the present invention is defined by the appended claims. 
         [0015]    As stated above, the causal demand forecasting methodology seeks to establish a cause-effect relationship between product demand and factors influencing product demand in a market environment. A product demand forecast is generated by blending the various influencing factors in accordance with corresponding regression coefficients determined through the analysis of historical product demand and factor information. The multivariable regression equation can be expressed as: 
         [0000]        y=b   0   +b   1   x   1   +b   2   x   2   + . . . +b   k   x   k    (EQN 1); 
         [0000]    where y represents demand; x 1  through x k  represent causal variables, such as current product sales rate, seasonality of demand, product price, promotional activities, and other factors; and b 0  through b k  represent regression coefficients determined through regression analysis using historical sales, price, promotion, and other causal data. 
         [0016]      FIG. 1  is a flow chart illustrating a casual method for estimating product demand at weekly intervals. As part of the DCM demand forecasting process, historical demand data  101  is saved for each product or service offered by a retailer. The DCM system also determines and saves previous weekly Average Rate of Sale (ARS) and 52-week ARS data,  103  and  104 , respectively; and price, promotional and other causal factor history  102 . 
         [0017]    In step  112 , regression coefficients (b 0  through b k ) are calculated using historical sales data  101  and causal factor historical information  102 . Results are saved as data  106 . This calculation may be run weekly to update the coefficients as new sales data becomes available. 
         [0018]    In step  121  of  FIG. 1 , the current weekly ARS for a product is calculated from historical demand data  101 . In step  122 , the product demand forecast is determined by blending the Average Rate of Sale (ARS) from step  121  with the previous and 52 nd  lags of the weekly demand from data stores  103  and  104 , respectively, and other causal factor data  105 . The current ARS (x 1 ), previous weekly ARS (x 2 ), 52-week ARS (x 3 ), and other causal factors (x 4  through x k ) are blended in accordance with EQN1, with the regression coefficients (b 0  through b k ) calculated in step  311 . Although separate data stores are indicated by reference numerals  101  through  106 , the stored data may be saved in a single storage device or database. 
         [0019]    At step  123 , the DCM forecasting process continues to generate and provide demand forecasts, product order suggestions, and other information of interest to a retailer. 
         [0020]    Regression coefficients calculation (step  112 ) is performed using an aggregate user-defined function (UDF), and creation of the output table  106 , is done through a tabular UDF. The role of the aggregate UDF is to calculate regression coefficients using, as input, a table containing the historical variations of demand  101  and that of various other causal variables  102 . During regression analysis temporary matrices are created and used in the calculation of regression coefficients. Performing data quality tests on the data samples used in regression calculations are essential to ensure the quality of the regression equation and performance of the aggregate UDF. It is important that any data that leads to matrix singularity be detected and disregarded before the regression calculations take place. Such data cannot be analyzed by regression. Specifically, data quality tests involve the detection of:
       Test1: Variables that remain unchanged throughout the history   Test2: Variables that are dependent or redundant with respect to each other   Test3: Insufficient history (as a rule of thumb, the number of rows of history must be more than 10 times the number of regression variables).       
 
         [0024]    Tests that detect the first and last cases are easily implemented. However, the development of a test to detect dependent and redundant variables is more complex. This is because aggregate UDFs are limited to read only one row of an input matrix at a time, and existing methods to detect linear dependencies in a matrix require the manipulation the entire matrix. 
         [0025]    Presented herein is a novel method to detect linear dependency between causal variables, when only one row of data is available at a time. Such linear relationship can be described as a.v 1 +b=v 2 , where a and b are parameters, and v 1  and v 2  are two vectors (causal variables). If this relation—with the same parameters a and b—satisfies all of the rows of variables v 1  and v 2 , then variables v 1  and v 2  are dependent and one of the variables should be removed from the regression analysis. 
         [0026]    The flow diagram shown in  FIG. 2  illustrates a method for identifying linear dependent causal variables within a data sample, and removing redundant causal variables from regression analysis in accordance with the preset invention. The data sample is represented by table  201  of  FIG. 2 , where each column of table  201  represents a causal variable, v 1  through v 5 , and each row represents measured values for the causal variables v i  over different weeks of history. 
         [0027]    The dependency test is performed on each pair of causal variables. For example, the dependency of (v 1 , v 2 ), (v 1 , v 3 ), (v 2 , v 3 ), etc. should be tested. The following describes the method for testing the dependency of (v 1 , v 2 ). The same algorithm is applied to all pairs of variables. 
         [0028]    After the pair of variables is selected, e.g., v 1  and v 2 , the following steps are performed: 
         [0029]    Step  211 : A first pair  203  of available data points is selected and stored. Pair  203  consists of the values (2.000, 5.000) contained in the first row of table  201 . 
         [0030]    Step  212 : The next “different” pair  205  is identified. In the example provided in  FIG. 2 , pair  205  consists of the values (3.000, 9.000) contained in the third row of table  201 . Note that the second row of table  201  does not have data different from the first row, so it is skipped. 
         [0031]    Step  213 : Two liner equations a.v 1 +b =v 2  are formed from the two pairs (pairs  203  and  205 ) of data selected in steps  211  and  212 . This system of equations is then solved for parameters a and b. In the example illustrated, it would be found that a=4 and b=−3. 
         [0032]    Step  214 : The remaining rows  207  of table  201  are checked to determine if parameter values a and b, calculated in step  213 , hold for the rest of the variable pairs (v 1 , v 2 ). If the relationship holds for all remaining rows, or pairs, then v 1  and v 2  are determined to be linearly dependent. Conversely, it will be concluded that there is no linear relationship as soon as a causal variable pair is found that does not satisfy the equation. 
         [0033]    The remaining rows of table  201  are checked by substituting the values of each subsequent “different” pair of values in the equation a.v 1 +b=v 2  to verify if this relationship holds true for all pairs. In this example, the next pair to substitute in would be (5.000, 17.000) in row 11. As all pairs (v 1 , v 2 ) satisfy the linear equation a.v 1 +b=v 2 , where a=4 and b=−3, v 1  and v 2  are found to be linearly dependent and one should be removed from the regression calculation. 
         [0034]    As mentioned above, the method performs the dependency tests on all pair-wise combination of variables. These tests are done simultaneously since only one row of data is read and is available at a time. 
         [0035]    Dependent causal variables are removed from the regression analysis in step  215 , and regression coefficients are calculated in step  216 . 
         [0036]    As some variation in the values of causal variables is to be expected even with dependent variables, such as from round-off errors, a certain tolerance (TOL) is required when checking the validity of the linear relationship with different causal variable pairs. For the relationship a.v 1 +b=v 2 , a tolerance calculation can be performed by first calculating the value v 2 ′ of the left hand side, a.v 1 +b, of the relationship, and comparing v 2 ′ with the actual value of v 2 . If v 2 ′=v 2  then the relationship holds. However, when the values are not exact, the percentage difference of the two values v 2 ′ and v 2  is determined and if the values v 2 ′ and v 2  are close enough, e.g., the difference is less than an acceptable tolerance, it is assumed that the relationship still holds. This test of tolerance can be expressed by the equation (v 2 ′−v 2 )/v 2 ≦TOL. 
       Conclusion 
       [0037]    The Figures and description of the invention provided above reveal a method for identifying linear dependent causal variables within a data sample from which the regression coefficients are determined, and removing redundant causal variables from the regression analysis. 
         [0038]    Although the invention as described above is utilized within a demand forecasting system, other data analysis applications may benefit from inclusion or use of the methodology described herein. 
         [0039]    The foregoing description of various embodiments of the invention has been presented for purposes of illustration and description. It is not intended to be exhaustive or to limit the invention to the precise form disclosed. Many alternatives, modifications, and variations will be apparent to those skilled in the art in light of the above teaching.