Entertainment UK, the distributor of
more than a quarter of the UK's CDs and DVDs, is saving £2.5m a
year after rolling out a sophisticated demand-forecasting
system.
Mike Quintana, Entertainment UK's business development manager,
said the system has allowed the company to reduce its stock levels,
and has led to 3% fewer returns and a 1.2% improvement in the
availability of CDs and DVDs.
"We have now been running the model 'in anger' for 15 months. We
have reduced the cost per unit for distribution even as volumes
have risen. In the first year alone we have saved more than £2.5m,"
Quintana said.
Entertainment UK developed the Oasis system with
TXT e-solutions, an Italian firm that specialises in demand and
supply-chain management. Oasis is based on
SAP, Oracle and
IBS software, and takes data from JDA, IMI and other
applications.
Quintana said the shift to downloading music meant physical
music and video titles now have a peak sales period of four weeks,
with up to 50% of sales crammed into the first week.
"As a result, instead of there being two primary promotion
periods at Christmas and Easter, there are now 50,000 promotions a
year," he said.
At the same time, the retail price of CDs and DVDs has halved in
10 years, cutting margins in the supply chain. It is now more
critical than ever to have the right product in the right store in
the right quantity with the right promotion in the first week, said
Quintana.
"The entire process is driven by the forecast for the first
week, and we update the model based on the first day's sales," he
said. Entertainment UK called in Imperial College to vet the
robustness of the Oasis algorithms.
Oasis gives Entertainment UK the capacity to make 1.5 million
store dispatches per day. Customers include Sony, Penguin, Disney,
Amazon, Asda, Woolworths, Play.com and Microsoft.
Quintana said Entertainment UK chose TXT because of its
experience in the Italian fashion industry. "There are similarities
between high fashion clothing and music and videos," he said.