Product age based demand forecast model for fashion retail
Fashion retailers require accurate demand forecasts for the next season, almost a year in advance, for demand management and supply chain planning purposes. Accurate forecasts are important to ensure retailers' profitability and to reduce environmental damage caused by disposal of unsold inventory. It is challenging because most products are new in a season and have short life cycles, huge sales variations and long lead-times. In this paper, we present a novel product age based forecast model, where product age refers to the number of weeks since its launch, and show that it outperforms existing models. We demonstrate the robust performance of the approach through real world use case of a multinational fashion retailer having over 300 stores, 35k items and around 40 categories. The main contributions of this work include unique and significant feature engineering for product attribute values, accurate demand forecast 6-12 months in advance and extending our approach to recommend product launch time for the next season. We use our fashion assortment optimization model to produce list and quantity of items to be listed in a store for the next season that maximizes total revenue and satisfies business constraints. We found a revenue uplift of 41% from our framework in comparison to the retailer's plan. We also compare our forecast results with the current methods and show that it outperforms existing models. Our framework leads to better ordering, inventory planning, assortment planning and overall increase in profit for the retailer's supply chain.