Optimisation of the production volume

Recommending production volumes by assessing the risk of demand signals in high volatile markets in the fashion industry.

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The total quantity for the production of items could be increased by 43 % without achieving a higher residual risk than before.

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The prototype combines the quality of heterogeneous demand signals from different markets

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The Level Loading prototype is embedded in a well-documented R package

Challenge

A German fashion manufacturer and retailer has to cope with the dynamic demand for its items in the highly volatile fashion industry. In the fashion industry, volatile demand is an even bigger problem due to comparably high production and transport lead times. The financial risk of overproduction is to be limited to 1%. Demand signals from different markets that differ in forecasting quality are to be integrated.

Solution

Low-risk items are identified that have a high probability of future actual orders and recommend an early production start. By bringing forward the production of safe items, the freed-up factory capacity could be used to produce risky items later, when demand signals are more reliable. Machine learning algorithms are applied using historical demand signals, production quantities and item attributes.

Result

A developed R-package is available that recommends specific items and corresponding quantities for all factories by assessing their individual risks and calculating a portion of the original demand signal that is covered with a high degree of certainty.

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