Krasnodar, Russia (October 9, 2024): Magnit, one of Russia’s leading retailers, has begun developing its own demand forecasting and order planning system known as F&R (Forecasting & Replenishment). This new solution aims to enhance the efficiency of the Company’s product distribution management system as part of a broader transformation effort by improving the flexibility and speed of logistics while ensuring an optimal balance between on-shelf availability and stock levels.

This initiative represents the largest supply chain digital transformation project and marks the first time in Russia that a fully domestic F&R software solution is being created and implemented for a business of this scale.

Magnit’s own F&R system will manage every stage of the product distribution process, from planning orders to be sent to suppliers to delivering products to stores, while accurately calculating the required volumes for each item. To ensure accurate inventory planning and demand forecasting, the system will analyze vast amounts of the Company’s data and consider numerous parameters, leveraging artificial intelligence and machine learning algorithms. The inventory forecasting horizon for the entire supply chain will extend to 90 days.

The development and rollout of the F&R solution will take place in several phases. The MVP[1] is set to launch in April 2025, with full geographic and functional scaling expected to be completed by 2027. During the pilot phase, the solution will be tested at one distribution center and a select group of 700 Magnit Convenience stores, covering around 5,000 SKUs. After this initial testing, the project will expand to include 3,000 stores and a broader assortment of 10,000 SKUs. Following this, the Company will evaluate whether to implement the system across all distribution centers and various store formats, including drogeries, supermarkets, and discounters.

Magnit’s F&R solution offers several advantages, including complete ownership of the source code, a unified interface, and the ability to operate in a “one-stop-shop” mode. It features flexible parameter settings that allow the system to quickly adapt to changing external conditions and maximizes the automation of business processes. The architecture of the F&R solution is designed for speed, fault tolerance, and the capability to adjust to new formats and changes in business processes, all while accommodating the organic expansion of the Magnit chain over the next 10 to 15 years. The cloud infrastructure of the F&R platform will provide scalability and reliability. On top of that, the system will provide the Company with a more advanced toolset for demand analysis.

The project team consists of over 200 of Magnit’s internal specialists, including analysts, developers, testers, planning and forecasting experts, UX designers, DevOps engineers, and big data and machine learning specialists.

At the initial stage of the project, Magnit is collaborating with Reksoft Consulting, which is helping to identify areas for transforming product distribution, and Napoleon IT, which is focusing on developing the functionality of the new solution and technology testing.

With the implementation of the F&R project, Magnit expects to see a positive economic impact amounting to tens of billions of rubles over the coming years. Key drivers of these outcomes will include reduced inventory levels in stores and distribution centers, along with improved on-shelf availability.

Fedor Pavlovsky, Magnit’s Deputy Chief Executive Officer and Supply Chain and Logistics Director:

“Transforming our product distribution and implementing targeted processes using our own F&R solution will elevate our supply flow management to a whole new level. For instance, we will be able to significantly accelerate supplier onboarding to the CPFR process (collaborative planning, forecasting, and replenishment). The time required to integrate new formats into our end-to-end planning will be reduced by more than half. Moreover, the system will allow us to quickly implement new functionality in the system based on the needs of the business.”

Yuri Misnik, Magnit’s Chief Digital Officer:

“Initially, we began implementing the F&R system using software provided by Relex Solutions. However, after the company left Russia, we had to explore alternative avenues. We found that there wasn’t a ready-to-use solution available that could meet all of Magnit’s requirements. After analyzing the market and examining other systems, we realized we could develop our own F&R system. This is a large-scale project never before seen in Russian retail, and in the future, we will be eager to share our expertise and this product with the market.”

[1] MVP – Minimum Viable Product

Magnit initiates development of its own F&R system