How Berco uses AI-powered demand forecasts to better predict market developments in the aftermarket business

As a pioneer in its industry, Berco Aftermarket recognized the need to deploy advanced technologies to optimize operational efficiency and reduce costs. In collaboration with pacemaker.ai, the company launched a project to enhance its S&OP processes through significantly improved forecast accuracy.

At the centre of this initiative is the deployment of a custom-built AI tool tailored to Berco Aftermarket's specific forecasting requirements. By leveraging the power of machine learning algorithms, this innovative technology enables the company to achieve unprecedented accuracy in demand forecasting.

This transformative initiative not only increases operational efficiency but also drives cost reduction, positioning the company for sustainable growth and competitiveness in the dynamic aftermarket business.

The challenge

Berco Aftermarket faces forecasting challenges due to the complexity and diversity of its product portfolio, which includes approximately 4,000 product variants serving customers across 52 countries.

The greatest challenges in the aftermarket business:

1. Uncertain demand: Demand fluctuations in drivetrain components represent a significant challenge and lead to overstock or stockout situations, resulting in inefficient inventory management and elevated costs.
2. Complex supply chain: The diverse product range and Berco's global customer base contribute to supply chain complexity, making it difficult to accurately anticipate demand fluctuations.
3. Working capital optimization: Suboptimal inventory levels tie up valuable working capital and limit Berco's ability to invest in growth initiatives and innovation.

Despite continuous refinement in day-to-day operations, these forecasts occasionally diverge from actual market developments, impacting both production planning and inventory management. This divergence is particularly critical because Berco has strategically decided to expand its after-sales business. To execute this plan successfully, it is essential for Berco Aftermarket to avoid out-of-stock situations and reduce tied-up warehouse capital. To address this challenge, Berco Aftermarket, in collaboration with pacemaker.ai, launched a strategic initiative to leverage modern AI technologies.

By integrating AI-powered forecasting solutions, the company enhances the accuracy of its sales forecasts while maintaining the flexibility required for production and inventory planning. This initiative is a critical step toward optimizing operational efficiency and reducing costs by better aligning production and inventory with actual market demand.

Through the deployment of AI, Berco aims to advance strategic decision-making and maintain and expand its competitive advantage in the dynamic global market.

The impact

The application of machine learning algorithms in demand forecasting is essential for Berco Aftermarket to significantly reduce the deviation between forecast and actual sales at the tonnage level. This technological advancement makes a critical contribution to optimizing production planning and improving efficient capital allocation in inventory management.

Key benefits:

1. Improved demand forecast accuracy: By leveraging the power of machine learning algorithms, pacemaker.ai enables Berco to create highly accurate demand forecasts. Advanced statistical models analyze historical sales data, market trends and other relevant factors to predict future demand with the highest precision.
2. Optimized sales and operational processes: Improved demand forecasts facilitate optimized sales and operational processes. Berco can more effectively align production plans, inventory levels and sales strategies, ensuring the right products are available in the right quantity at the right time.
3. Inventory optimization: Machine learning-based demand planning enables Berco to dynamically optimize inventory levels. By accurately predicting demand fluctuations, Berco can maintain optimal inventory levels, minimizing excess stock while reducing the risk of stockouts. This optimization lowers storage costs and improves overall operational efficiency.
4. Working capital efficiency: Through better inventory management and reduced storage costs, Berco can unlock working capital previously tied up in inventory. These freed resources can be reinvested in strategic initiatives such as product development, expansion into new markets or customer service improvements, fostering long-term growth and competitiveness.
5. Customer satisfaction and loyalty: The reliable availability of drivetrain components enhances customer satisfaction and promotes long-term loyalty. Berco's customers can rely on on-time deliveries and consistent product quality, strengthening relationships and positioning Berco as a trusted partner in the aftermarket segment.

To further increase forecast accuracy, external industry data sources, such as mining and commodity price data, will be incorporated as input parameters. This maximizes forecast accuracy and enables Berco to make data-driven decisions with confidence and flexibility in a highly competitive market environment.

The forecasts are seamlessly integrated into a dedicated front-end that provides a user-friendly interface for internal users. On the interactive dashboard, different user groups can intuitively calculate forecasts according to their specific needs.

The project, which began in December 2023, aimed to create more accurate forecasts for 2024 and predict the total quantity of tonnes sold by Berco Aftermarket worldwide and across various market segments. The project is being executed in a three-phase process in collaboration between Berco Aftermarket and pacemaker.ai.

Key factors influencing these forecasts include historical sales data, market trends, customer behaviour patterns and product demand fluctuations. External factors such as economic conditions, geopolitical events and changes in industry regulations also impact supply volumes and are therefore incorporated to further enhance forecast accuracy.

Through rigorous data analysis and machine learning algorithms, Berco Aftermarket and pacemaker.ai have successfully navigated market complexity and provided insights into sales volumes for 2024 and beyond.