PART I: BIG DATA DRIVEN

SUPPLY CHAINS

CHAPTER 2
Transforming Supply Chains

Supply Chain Analytics:

Understanding the Business Context
©2019 Prospect Press
 CONTENTS

1. ACROSS THE ENTIRE SUPPLY CHAIN

2. THE SUPPLY CHAIN SYSTEM
3. FROM SOURCE TO SELL
4. THE INTELLIGENT SUPPLY CHAIN
 WALMART – A case study
• Wal-Mart is a leader among supply chain
analytics competitors.
• Collects massive amounts of sales and inventory
data inputted into a single integrated technology
platform – “Retail Link”
• The company then applies numerous analytics on
this massive database.
• All suppliers are required to track the movement
of products and make decisions (demand
information)
 Walmart Retail-Link System
• Where does Walmart’s supply chain start?
• What triggers the Retail Link System to ship
goods?
• Why is a detailed knowledge of consumer
purchases at each store important to
Walmart's success?
• Why can't other large retailers easily duplicate
Walmart's Retail Link?
 1. ACROSS THE ENTIRE SUPPLY CHAIN
Supply Chain Levers:

BUY MAKE MOVE SELL

• The Sell side captures and tracks demand through

Point Of Sale data. This information moves
efficiently through the supply chain to inform all
the other levers.
• Information at any one lever is conveyed to other
levers informing them and coordinating action.
 Linking the Levers
• Data analytical tools enable companies to develop
close relationships with customers based on a deep
understanding of their behaviors and needs.

• Companies can deliver targeted advertising, determine

the best use of marketing investments, determine the
optimal locations for their stores and distribution
centers.

• Companies can balance inventory with demand so they

never out of stock or carry excess inventory.
 CVS Pharmacy: Data Analysis
• Find the best customers (that visit most
frequently)
– What do they buy?
– What else they can buy?
• Based on where they live
– How the store needs to be arranged?
• Oral care products
– How to get customers to adhere to their prescriptions
– Personalized offers
• CVS send offers or coupons to try to change buying habits.

https://bits.blogs.nytimes.com/2013/06/19/using-data-to-stage-manage-paths-to-the-prescription-
counter/?_%20php=true&_type=b.%20Also%20see%20http://investors.cvshealth.com/~/%20media/Files/C/CVS-IR-v3/reports/annual-report-
2017.pdf
 2. THE SUPPLY CHAIN SYSTEM
Do Not Sub-optimize the System:

• Supply chain is a system and analytics must be

applied to all the supply chain levers - buy, make,
move, and sell - for optimization.
• Sub-optimizing the system in only one lever leads
to imbalance in another.
• Manage processes across the entire supply chain
– e.g. ASICS Americas surging demand
https://supplychainquarterly.com/topics/strategy/scq201002asics/
 THE SUPPLY CHAIN SYSTEM
Let Strategy Drive:

• Supply chain Strategy needs to determine what

and how much the company needs.

• Two key elements that support supply chain

strategy:
o Supply chain network design – Physical structure and
business processes.
o Information Technology – Enables data sharing,
communication, and process synchronization.
Network and IT Design Support Supply
Chain Strategy
Long-range plan for
the design and
management of the
supply chain.

Supply chain Supply

network
structure and
Chain Technology and
business Strategy systems for data
processes within sharing,
and across firms. communication,
and
synchronization.

IT Design –
SC Network
Big Data
Design
Analytics
 THE SUPPLY CHAIN SYSTEM
Network Design:
• Companies collaborate with multiple partners -
suppliers, channel partners, distributors, external
software and hardware providers - in a symbiotic
network often called the “analytical ecosystem”.
• Third-party analytics providers provide expertise
on data sources, platforms, & analytical techniques
• Accenture, for example, provides consulting and
outsourcing services to companies such as Best
Buy.
 3. FROM SOURCE TO SELL
Big Data Enables Supply Chain Levers:
● Technological capability
● Capacity constraints
● Facility location
● Inventory
● Facility Layout
● Knowledge & skills
● Location based marketing
● In-store behavior analysis
● Customer segmentation
● Sentiment analysis
● Multichannel marketing
● Assortment optimization
● Price optimization

BUY MAKE MOVE SELL

● Distribution & logistics

● Supplier characteristics
● Transportation alternatives
● Product characteristics
● Routing
● Sourcing channel options
● Scheduling
● Supplier integration level
● Direct and indirect delivery
● Supplier negotiation
● Vehicle maintenance
 Intel and Data Analytics
• Data visualization gives the organization supply chain
visibility.
• Supply chain network decisions are easier to
understand
– determining promised order fulfillment lead times,
inventory needs, and transportation and storage costs.
• Data analytics beyond tactical decisions
– supply chain compliance, social responsibility, and
sustainability
– from identifying supplier problems to managing its carbon
footprint.
 FROM SOURCE TO SELL
Sell (Marketing):
• Big data analytics can capture customer demand,
enable micro-segmentation, and predict
consumer behavior.
• The coupling of big data with analytic tools has
allowed micro-segmentation of markets at
increasingly granular levels.
• A variety of data sources can be used to evaluate
and inform pricing decisions in near real time,
thus driving price optimization.
 FROM SOURCE TO SELL

Move (Logistics):
• Big data applications are used for optimizing
inventory, replenishment, identifying optimal
distribution center locations, and minimizing
transportation costs.
• Transport analytics can improve productivity by
optimizing fuel efficiency, preventive
maintenance, driver behavior, and vehicle
routing.
 Inventory Management
Inventory Management
• Inventory management is an issue at all locations—from
stores, to warehouses, to manufacturing facilities
– It is especially problematic in transit.
• RFID technology has been especially useful in tracking
inventory in motion, identifying location and quantities,
and preventing security breaches.
• The technology can also monitor temperature en-route,
ensuring food safety, monitoring transit duration—which
is an especially important issue for perishable items—
and informing decision makers if there is a problem.
 FROM SOURCE TO SELL
Make (Operations):
• Uses big data analytics for inventory
management, optimization of stock levels,
maintenance optimization and workforce
productivity evaluation.
• Data Analytics can enable cost reduction while
maintaining service levels by optimizing labor,
automating and tracking attendance, and
improving labor scheduling.
 FROM SOURCE TO SELL
Buy (Purchasing):
• Applying big data analytics along this lever can
yield great savings since companies spend large
sums of money on sourcing goods form their
suppliers.
• A number of leading companies report using big
data to optimize sourcing channel options and
integrate suppliers into data systems.
• Amazon, for example, uses analytics to determine
the optimal sourcing strategy, the right mix of
joint replenishment - coordinated replenishment
and single sourcing.
 FROM SOURCE TO SELL
Coordinated and Integrated:

• To achieve a competitive advantage data analytic efforts need to be part

of a coordinated and integrated overarching strategy championed by top
leadership and pushed down to decision makers at all levels of the
organization and across the supply chain.

• Data and analytics optimize decisions; technology automates the process;

decisions are communicated and coordinated from Buy to Sell. This
creates the Intelligent Supply Chain.

• Coca-Cola uses a methodology called Black Box. It is an algorithm that

includes detailed data on consumer perceptions of “taste”, and matches
them to a profile detailing acidity, sweetness, and other attributes of each
batch of raw juice. The algorithm also includes external factor such as crop
yield, current prices, and weather patterns.
 4. THE INTELLIGENT SUPPLY CHAIN
Not Just For Marketing:
• Companies are leveraging big data across all supply
chain functions in order to enhance operational
efficiencies and reduce costs. This is the intelligent
supply chain.
• Amazon has built a new “non-stationary stochastic”
supply chain model that is used to determine
fulfillment, sourcing, capacity, and inventory decisions.
It makes forecasts for each fulfillment center, inventory
planning, procurement cycles, and purchase orders. In
essence the model connects the supply chain.
 THE INTELLIGENT SUPPLY CHAIN
Game Changing Technologies:

• POS (Point-of-Sale) Data: Real-time data

captured from stores holds information on
quantity, price, discounts, coupons being used
and location data.
• Coupling these data with loyalty cards can enable
high levels of segmentation creating an endless
array of customer profiles. This can be used in
preventing stock-outs, optimally deploying
inventory and help manage seasonal ramp-
downs.
 THE INTELLIGENT SUPPLY CHAIN
Game Changing Technologies:
• RFID(Radio-frequency identification): RFID
tags are used to identify and track items. They
can be used to track the progress of a product
through the assembly line, distribution and
warehousing.
• With the use of RFID, inventory management
can be performed in a highly efficient manner
since line-of-sight is not required.
 THE INTELLIGENT SUPPLY CHAIN
Dual Power of the technologies:
• Coupling POS data with RFID tags can respond to real-
time consumption in a store to ensure almost zero
stock-outs.
• Companies can continuously monitor stocks of
inventory, send replenishment order requests as
needed and track the inventory-in-transit in real-time.
• Companies can jointly engage in efforts such as
Collaborative Planning, Forecasting, and
Replenishment (CPFR) to establish key supply chain
metrics and engage in iterative planning and
forecasting supported by analytics applications.
 Intelligent Supply Chain
• https://www.youtube.com/watch?v=I0t2_5o8
DXw
 THE INTELLIGENT SUPPLY CHAIN
Moving Forward:
• Most companies use big data analytics on the demand
side of the supply chain. However, many are moving to
using it along the supply side to better coordinate
supply with demand.
• Companies face the following challenges while
immersing themselves into Big Data Analytics:
– Use technology to meet their own competitive priorities in
a cost-effective manner and not just follow the trend.
– Develop organizational processes to turn the huge
amounts of data into business intelligence.
– Overcome common barriers associated with moving
forward.
 Watch this Video at Home
• https://www.youtube.com/watch?v=RFwUhzc
VLCc
• Before the next class