Use this document to understand why you might want to use a BigQuery ML solution that can help you with demand forecasting. The solution provides a notebook that walks you through building a time series model that you can use to forecast retail demand for multiple products.
For instructions to implement the solution, see the solution readme in the bqml-demand-forecasting GitHub repo.
The solution is intended for data engineers, data scientists, and data analysts who build ML datasets and models to support business decisions. It assumes that you have basic knowledge of the following:
- Machine learning concepts
- Standard SQL
The solution uses the public Iowa Liquor Sales dataset that is hosted on BigQuery. This dataset contains the spirits purchase information of Iowa Class "E" liquor licensees from January 1, 2012 until the present. For more information, see the official documentation by the State of Iowa.
Using forecasting for inventory management
In the retail business, it is important to find a balance when it comes to inventory: don't stock too much, but don't stock too little. For a large business, this can mean making decisions about inventory levels for potentially millions of products.
To inform inventory level decisions, you can take advantage of historical data about items purchased by consumers over time. You can use this data about past customer behavior to make predictions about likely future purchases, which you can then use to make decisions about how much inventory to stock. In this scenario, time series forecasting is the right tool to use.
Time series forecasting depends on the creation of nachine learning (ML) models. If you are a member of a data science team that supports inventory decisions, this can mean not only producing large numbers of forecasts, but also procuring and managing the infrastructure to handle model training and prediction. To save time and effort, you can use BigQuery ML SQL statements to train, evaluate and deploy models in BigQuery instead of configuring a separate ML infrastructure.
How time series modeling works in BigQuery ML
When you train a time series model with BigQuery ML, multiple components are involved, including an Autoregressive integrated moving average (ARIMA) model. The BigQuery ML model creation pipeline uses the following components, listed in the order that they are run:
- Pre-processing: Automatic cleaning adjustments to the input time series, which addresses issues like missing values, duplicated timestamps, spike anomalies, and accounting for abrupt level changes in the time series history.
- Holiday effects: Time series modeling in BigQuery ML can also account
for holiday effects. By default, holiday effects modeling is disabled. But
since this data is from the United States, and the data includes a minimum
one year of daily data, you can also specify an optional
HOLIDAY_REGION. With holiday effects enabled, spike and dip anomalies that appear during holidays will no longer be treated as anomalies. For more information, see HOLIDAY_REGION.
- Seasonal and trend decomposition using the Seasonal and Trend decomposition using Loess (STL) algorithm. Seasonality extrapolation using the double exponential smoothing (ETS) algorithm.
- Trend modeling using the ARIMA model and the auto.ARIMA algorithm for automatic hyper-parameter tuning. In auto.ARIMA, dozens of candidate models are trained and evaluated in parallel. The best model comes with the lowest Akaike information criterion (AIC).
You can use a single SQL statement to train the model to forecast a single product or to forecast multiple products at the same time. For more information, see The CREATE MODEL statement for time series models.
- Implement the solution
- Learn about other predictive forecasting solutions.
- Learn more about BigQuery ML.