THE INTELLIGENT
SUPPLY CHAIN
Nada R. Sanders, Ph.D.
Distinguished Professor of Supply Chain Management
D’Amore-McKim School of Business
[email protected]
Author of Big Data Driven Supply Chain Management (Pearson 2014)
Center for
Supply Chain Innovation
The “Intelligent SC” Is Data Driven
• RFID, POS, Geo-Location
• Sensors for vibration, heat (e.g.
mounted on an engine), sound
• Social Media feeds (Twitter “retweets,” Facebook “likes”)
• Customer complaints
• Maintenance logs
• Almost anything can be turned
into data
Center for
Supply Chain Innovation
Data Versus Intelligence
• “Big Data” - Large pools of data that can be captured,
communicated, aggregated, stored, and analyzed.
• “Analytics” - Applying math and statistics to these large
quantities of data.
• “Business Intelligence” - When we apply math and
statistics to big data – called big data analytics – we gain
new insights.
• “Supply Chain Intelligence” - Needs to Sense,
Analyze, Predict & Respond in a coordinated way
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Supply Chain Innovation
The Supply Chain “System”
• Every SC is a system of four “levers”
• The entire “system” must be optimized.
• Marketing may customize product offerings – but if operations cannot produce them,
if logistics cannot deliver them, the system will not respond
• Information at any one lever – a shortage on the Buy side, delayed shipments on the
Move side, or production stoppage on the Make side – needs to be conveyed to
other levers informing them and coordinating action.
BUY
MAKE
MOVE
SELL
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Supply Chain Innovation
Wal-Mart
• Applications are used to link functions and coordinate its
entire global supply network
• Collects terabytes of sales and inventory data at all
stores
• Data integrated into a single technology platform
• Sophisticated analytics is applied to this massive
database and used across the supply chain.
• The data is then analyzed and used by managers to
support every type of supply chain decision.
Center for
Supply Chain Innovation
Wal-Mart
• Managers analyze data to optimize product assortments
and tailor store inventory to local community needs.
• Data analysis extends to suppliers, all using the
company’s platform Retail Link.
• Over 17,000 suppliers in 80 countries use Retail Link to
track daily sales, shipments, purchase orders, invoices,
claims, forecasts, Radio Frequency ID deployments.
• Suppliers can design modular layouts within the store,
based on sales data, store traits, and data on consumer
segments.
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Supply Chain Innovation
“Fast Fashion”
• Quick “churn” of fashion designs at affordable prices
• Requires rapid information access, exchange and quick
supply chain response
• Real-time information shared on item sales, stock levels,
and inventory movements - quickly used to modify
production, distribution, and procurement decisions.
• Information used to create dynamic assortment- frequent
assortment changes (e.g. monthly, weekly, or even daily).
• The result is low inventory & high responsiveness.
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Supply Chain Innovation
Tectonic Shift in Business Intelligence
• Change of Scale --> Change of State
• Granular Analysis of Subcategories and
Submarkets Inaccessible to Samples
• Establish Norms to Detect Outliers (e.g.,
Credit Card Fraud)
• Apply Math to Enough Data to Determine
Strong Correlations
• Use Correlations to Infer Probabilities
and Make Predictions
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Supply Chain Innovation
Big Data and Predictive Analytics
• Foresee events before they happen by
sensing small changes over time.
• Detect proxies for problems
(A signals B).
• Risk Management: Take precautionary
measures to maintain physical capital and
prevent catastrophic failures.
• Customer Service: Identify and address
product defects or consumer protection
issues in advance. (Vehicle maintenance and
service)
Center for
Supply Chain Innovation
Applications
BUY
● Supplier segmentation
● Supplier risk
● Sourcing channel options
● Supplier integration level
● Inventory
● Capacity Constraints
● Facility Location
● Facility Layout
● Workforce Analytics
MAKE
● Location Based Marketing
● Cross-selling
● In-store behavior analysis
● Customer microsegmentation
● Price optimization
MOVE
SELL
● Distribution & logistics
● Transportation alternatives
● Routing and Scheduling
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Supply Chain Innovation
Retailers Know A Lot About You
Center for
Supply Chain Innovation
Retailers Use “Smart” Technology
◦ Retailer Rebecca Mincoff Introducing “Smart Bag”
◦ By Summer 2017, Bags with “Smart Technology:”
◦ Unlock exclusive offers and experiences
◦ Discounts such as coffeehouses
◦ Qualify the customer for a loyalty program
• Benefits:
◦ Connect with shoppers after purchase
◦ Drive decisions through customer analytics
Center for
Supply Chain Innovation
Used to Improve Quality Control
• Honda develops its own
analytical software
• Provides “early warning” system
for mechanical problems based
on computation of data from
different sources
• Customer service lines,
dealerships and different
mediums (textual, categorical,
etc.)
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Supply Chain Innovation
Used to Improve Operational Safety
• BP’s Cherry Point Oil
Refinery in Blaine,
Washington uses multiple
sensors across the plant
to generate vast amounts
of information
• Data enables detection of
trends in oil
corrosiveness.
Center for
Supply Chain Innovation
UPS Uses Analytics to Nip Breakdowns
• UPS operates 60,000
vehicles in the United
States
• Vehicle breakdown
disrupts service, throwing
off the time windows for
deliveries and pick-ups.
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Supply Chain Innovation
Barriers to Implementation
▪IT Not Integrated
▪”Siloed” Decision
Making
▪ Lack of Incentives
▪Lack of Leadership
▪No Analytical Talent
▪Unsupportive Culture
PEOPLE
PROCESSE
S
TECHNOLOG
Y
▪Need to Upgrade System
▪Legacy Systems
▪Access to Data
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Supply Chain Innovation
Analytical “Ruts”
•A Needle In A Haystack – Using analytics randomly in
search for causation and relationships with the hope that
something will eventually turn up.
•Islands of Excellence – Using analytics to optimize
subprocesses; these function efficiently but have little bearing
on optimizing the system.
Center for
Supply Chain Innovation
Analytical “Ruts”
•Measurement Minutiae - The hallmark is trying to measure
everything; most of companies don’t know which ones to
focus on.
•Analysis Paralysis – Overwhelmed with the rapid change
of technological capability; they understand they must do
something but are in a state of paralysis.
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Supply Chain Innovation
Implementation Framework
• Segment Supply Chains
• Define Competitive
Priorities for Each
Segment
• Align Functions to
Support Competitive
Priorities
• Integrate to Match Supply
and Demand
• Measure
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Supply Chain Innovation
Maturity Map of Big Data
Implementation




STAGE 1
STAGE 2
STAGE 3
STAGE 4
Data
Structuring
Data
Basic
Advanced
Availability
Analytics
Analytics
Stage 1: Digitizing and structuring data; includes “scrubbing,” placing data into
standard forms, and adding descriptions.
Stage 2: Making data available to all.
Stage 3: Standard quantitative analysis (e.g. descriptive statistics)
Stage 4: Predictive analytics, automated algorithms, real-time data analysis.
Center for
Supply Chain Innovation
Implementation: Focused and Coordinated
BIGGER
SMALL SCALE
SCALE
▪Select Pilot or
Targeted
Project
▪Use metrics
& continuous
improvement
▪Across
Entire
Function
▪Simple
Process
BIG SCALE
▪Large
Business
Processes
▪S&OP great
start
Center for
Supply Chain Innovation
Coca-Cola Intelligent Supply Chain
• Analytics applications across all supply chain functions “talk” to one
another.
• An algorithm is used to engineer the taste of its orange juice.
• The algorithm is tied to satellite images of fruit groves to ensure the
fruit is picked at the optimal time for Coca-Cola’s bottling plants.
• A computer model directs everything from picking schedules of
oranges to the blending of ingredients needed to maintain a consistent
taste.
Center for
Supply Chain Innovation
Center for
Supply Chain Innovation
CONCLUDING THOUGHTS
 An intelligent SC is data driven
 Analytics applications exist along every SC lever – they must be
integrated and “talk” to one another
 Strategy drives technology selection and design
 An intelligent SC must: Sense, Analyze, Predict & Respond seamlessly, end-to-end.
Center for
Supply Chain Innovation