How Arkieva Calculates ROI?
Arkieva ROI is calculated based on company size, annual revenue, and forecast accuracy using machine learning algorithms.
Incremental improvements can make a remarkable difference in business performance. A 1% forecast accuracy improvement can represent approximately $60,000 in savings. How do we arrive at these numbers?
A 1% forecast accuracy improvement can represent approximately $60,000 in savings. How do we arrive at these numbers?
The forecast for a future period is either under-called or over-called, which leads to forecast error (opposite of accuracy). The industry average for under is 15%, and the average for over is 35%.
When a product is under-called it results in lost sales due to product unavailability. When a product is over-called it results in carrying inventory, selling at a discount, incurring additional transport, and disposal cost.
The lost opportunity or margin (profit) erosion is modeled in the ROI calculator using conservative industry averages for the various costs, and the baseline savings are modeled for a 1% improvement in accuracy between the under and over-called categories. The system tracks the weighted mean absolute percent error (WMAPE) for every product in the past periods, then the cumulative savings from an industry baseline forecast accuracy of 50% is calculated.
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