Price-Demand Elasticity as Feature in Machine Learning Model for Demand Forecasting
A system and method are disclosed to identify one or more price-demand elasticity causal factors and to forecast demand using the one or more price-demand elasticity causal factors. Embodiments include a computer comprising a processor and memory. Embodiments train a machine learning model to identify one or more external causal factors that influence demand for one or more products. Embodiments train the machine learning model to generate one or more price-demand elasticity causal factors to predict a target outcome for a given product demand. Embodiments predict, with the machine learning model, a demand for the one or more products based, at least in part, on the identified one or more external causal factors and the generated one or more price-demand elasticity causal factors.
1 . A computer-implemented method for predicting a demand-shaping effect, comprising:
transferring, by a computer comprising a processor and a memory, historical supply chain data;
deconfounding, by the computer, the historical supply chain data;
training, using cyclic boosting by the computer, one or more price-demand elasticity models using training data and the deconfounded historical supply chain data, wherein the training identifies one or more causal factors;
forecasting, using the one or more trained price-demand elasticity models by the computer, demand for an item at a location over a defined time period;
predicting, using the one or more trained price-demand elasticity models, one or more individual causal effects of a demand-shaping action by:
predicting, by the computer, using the one or more trained price-demand elasticity models, a first demand for the item at the location over the defined time period based, at least in part, on a first price; and
predicting, by the computer, using the one or more trained price-demand elasticity models, a second demand for the item at the location over the defined time period based, at least in part, on a second price; and
setting, by the computer, a price for the item at the location over the defined time period to shape product demand.
2 . The computer-implemented method of claim 1 , wherein the historical supply chain data is deconfounded using independence weighting with inverse propensity scores.
3 . The computer-implemented method of claim 1 , wherein the demand-shaping action further comprises modifying one or more promotion variables to evaluate one or more promotional strategies.
4 . The computer-implemented method of claim 1 , wherein one or more of the one or more individual causal effects are horizon-independent.
5 . The computer-implemented method of claim 1 , wherein the one or more individual causal effects comprise parameters corresponding to one or more of: one or more multiplicative effects in one or more first feature bins and one or more different price elasticities in one or more second feature bins.
6 . The computer-implemented method of claim 1 , wherein the demand-shaping action comprises optimization of one or more of: gross profit, net revenue and maximum product sales.
7 . The computer-implemented method of claim 1 , further comprising:
controlling, by the computer, one or more product sales by setting one or more product prices at one or more specific values.
8 . A system for predicting a demand-shaping effect, comprising:
a computer, comprising a processor and memory, the computer configured to:
transfer historical supply chain data;
deconfound the historical supply chain data;
train, using cyclic boosting, one or more price-demand elasticity models using training data and the deconfounded historical supply chain data, wherein the training identifies one or more causal factors;
forecast, using the one or more trained price-demand elasticity models, demand for an item at a location over a defined time period;
predict, using the one or more trained price-demand elasticity models, one or more individual causal effects of a demand-shaping action by:
predicting, using the one or more trained price-demand elasticity models, a first demand for the item at the location over the defined time period based, at least in part, on a first price; and
predicting, using the one or more trained price-demand elasticity models, a second demand for the item at the location over the defined time period based, at least in part, on a second price; and
set a price for the item at the location over the defined time period to shape product demand.
9 . The system of claim 8 , wherein the historical supply chain data is deconfounded using independence weighting with inverse propensity scores.
10 . The system of claim 8 , wherein the demand-shaping action further comprises modifying one or more promotion variables to evaluate one or more promotional strategies.
11 . The system of claim 8 , wherein one or more of the one or more individual causal effects are horizon-independent.
12 . The system of claim 8 , wherein the one or more individual causal effects comprise parameters corresponding to one or more of: one or more multiplicative effects in one or more first feature bins and one or more different price elasticities in one or more second feature bins.
13 . The system of claim 8 , wherein the demand-shaping action comprises optimization of one or more of: gross profit, net revenue and maximum product sales.
14 . The system of claim 8 , wherein the computer is further configured to:
control one or more product sales by setting one or more product prices at one or more specific values.
15 . A non-transitory computer-readable storage medium embodied with software for predicting a demand-shaping effect, the software when executed configured to:
transfer historical supply chain data;
deconfound the historical supply chain data;
train, using cyclic boosting, one or more price-demand elasticity models using training data and the deconfounded historical supply chain data, wherein the training identifies one or more causal factors;
forecast, using the one or more trained price-demand elasticity models, demand for an item at a location over a defined time period;
predict, using the one or more trained price-demand elasticity models, one or more individual causal effects of a demand-shaping action by:
predicting, using the one or more trained price-demand elasticity models, a first demand for the item at the location over the defined time period based, at least in part, on a first price; and
predicting, using the one or more trained price-demand elasticity models, a second demand for the item at the location over the defined time period based, at least in part, on a second price; and
set a price for the item at the location over the defined time period to shape product demand.
16 . The non-transitory computer-readable storage medium of claim 15 , wherein the historical supply chain data is deconfounded using independence weighting with inverse propensity scores.
17 . The non-transitory computer-readable storage medium of claim 15 , wherein the demand-shaping action further comprises modifying one or more promotion variables to evaluate one or more promotional strategies.
18 . The non-transitory computer-readable storage medium of claim 15 , wherein one or more of the one or more individual causal effects are horizon-independent.
19 . The non-transitory computer-readable storage medium of claim 15 , wherein the one or more individual causal effects comprise parameters corresponding to one or more of: one or more multiplicative effects in one or more first feature bins and one or more different price elasticities in one or more second feature bins.
20 . The non-transitory computer-readable storage medium of claim 15 , wherein the demand-shaping action comprises optimization of one or more of: gross profit, net revenue and maximum product sales.