The Emerging Adoption of Predictive Analytics Across Supply Chains

PresentedbyBobFerrari,ExecutiveEditoroftheSupplyChainMattersBlogandManaging DirectoroftheFerrariResearchandConsultingGroup

DeliveredattheProgressSoftwareRevolutionConference September2011

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Key Messages to Consider

In todays reality of globally stretched supply chains, the planning of global supply chain resources is moving toward the need for prediction of events and outcomes.

The Planets of Business Needs and IT Enablers Are Aligning and Moving Toward: Predictive Analytics plus Constraint Modeling Equating to Best Outcomes for the Business From Key Performance Indicators (KPIs) to Key Response Indicators (KRI) of measurements Enabling more responsive capabilities without having to rip and replace but rather supplement and build.

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What is a Supply Chain?

Asupplychainconsistsofallthevaluechainplanning,physical movements,informationandfinancialflowsrequiredtomove productsthroughdesign,production,distributionandultimately tocustomersandconsumers. Asupplychainconsistsofaseriesofbusinessprocessesanda

commondefinitionoftheseprocessesisreflectedbytheSupply ChainOperationsReferenceModelorSCOR.Theseincludethe broaddefinitionsofPlanSourceMakeDeliverReturn

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End-to-End Supply Chain

Therealityoftodaysglobalsupplychainsare thattheSCORModelbusinessprocessescross companybordersandinvolvemultipletrading partnerswhichhasaddedtothechallengeof timelyvisibilityanddecisionmaking.Consider howApplestotallyoutsourcedsupplychainis represented.

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The Current State of Global Supply Chains

Globally extended markets and sources of supply have led to new realities: Multiple geographic markets and sources of supply Increased complexities, variability and risk Faster, more pronounced market changes Shortened product lifecycles Lean supply chains with more vulnerabilities as witnessed by the recent devastating earthquake and tsunami that impacted northern Japan. Fragmented business processes and lack of end-to-end visibilitythousands of decisions are made every day, many without a context to profitability or required service level.

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Advanced Technology Offers Us Enhanced Tools

The ability to now move from a predominate historic to more predictive and near real-time planning and information analysis Cloud computing and composite apps alternatives to fill-in process gaps Sense and respond capabilities to orchestrate desired outcomesconsider how Dell and Amazon offer us recommended choices of buying options. Mobile and social enabled applications to accommodate virtual mobility and time-critical needs

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The Challenge for Supply Chains is Balancing Highly Interrelated Performance Objectives

Thethreedimensionsofsupplychainperformanceareeither enhancingtoplinerevenuegrowthviaenhancedcustomer serviceandresponsiveness,improvedendtoendefficiency,or betterassetutilizationbymeansofoutsourcing.Priortoand asaresultofthepastglobalrecession,mostsupplychainswere focusedonthebottomquadrants.Postrecessionandrecovery requiresanemphasisonthetopdimension,whilekeepingthe bottomdimensionsbalancedwithongoingbusinessneeds. Thesetendenciesarereflectedincurrentpollingdataofsenior supplychainexecutives.

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AccordingtoarecentAberdeenGroup surveyofseniorsupplychainmanagers,the predominantconcernoftheseexecutiveshas shiftedtothetopofourtriangle,escalating customerserviceneedsandincreased marketdemandvolatility.Theimplications ofmanaginganincreasinglyglobalnetwork, currentvolatilebusinesscycles,andrising supplychaincostsmakesdecisionmaking morechallenging,withtheneedtocontext andconsidertheimplicationsforeach dimensionofsupplychainperformance.

Current C-Level Views of Supply Chains

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Andindeed,whenAberdeenpolledforthe keyinitiativesthatseniorexecutivesatbest inclasssupplychainorganizationswere focusedupon,itincludes: Theabilitytoaccessandfindkey decisionmakingdata Welldefinedcrossfunctionalmetrics with Onlinevisibilityintoendtoendphysical, disruptiveorotherimportantevents.

Benchmarking Survey Data

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Supply Chain Business Process Evolution

Supplychainbusinessprocesses haveemergedfromtheClassic andTraditional,tothecurrent NetworkedEra,eachwith differentprocessorientationand ITenablers.

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Supply Chain Teams Tend to Lead in Advanced IT Adoption

Whetheritstheareaofphysical tracking,conductingcommerce andfulfillingorders,ordataand informationanalysis,supply chainteamshavebeenvery comfortablewithsuccessfully leveragingleadingedgeIT technology.

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Emerging Thinking Concerning Predictive Analytics

Our goal should be to transform multiple forms of available information into

more meaningful insights and key responsive indicators

Weigh and factor constraints and variability with supply chain planning and
execution information

Convert insights into actions and best plan Actions enable positive outcomes

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Predictive Analytics Defined

Analytics Defined- Tom Davenport

Optimization
Predictive Modeling Randomized Testing Degree of Intelligence Statistical Analysis Alerts Query / Drill Down Ad Hoc Reports Standard Reports

Whats the best that can happen?

What will happen next? What happens if we try this?

Predictive and Prescriptive Analytics (the so what)

Why is this happening?

What actions are needed? What exactly is the problem? How many, how often, where? What happened? Descriptive Analytics (the what)

Source: Analytics At Work, Thomas H. Davenport, Babson College

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Oneoftheleadingacademicsspeaking onthisareaisProfessorThomasH. DavenportofBabsonCollege.Thischart isareproductionfromhisbook, AnalyticsAtWork,anddescribesthekey degreesofintelligencethatmakeup businessdecisions,andtheimportant

Thinkofrecentdecisionsinvolvingyoursupplychain: Inthenarrowestsense,arecenttruckbreakdownorunplanned orderreceivedfromakeycustomer. Inthebroadestsense,therecentearthquakeandtsunamithat impactednorthernJapan.

differencesofmoredescriptive(the what)vs.predictiveandprescriptive analytics(whathappensnext).Theyare importantobservationsastowhere technologytoolsaretakingus.

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Consider Current Supply Process Convergence

More rapid and volatile business cycles are motivating many companies to relook at sequential planning and execution processes because sequential processes do not align with the current pace of business.

Actions being evaluated:

Converge planning with sensing of orders, changed events, disruptions,

market opportunities. Augment planning with analytics, and shift emphasis toward more predictive process controls. True decision support fueled by embedded analytics.
In my many years of observations of supply chains, this is the Holy Grail for supply chain decision support.

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Also Consider Current IT Convergence Forces

From OLTP to in-memory database technology opportunities. Sequential processing to Multiple Parallel Processing (MPP) of information
utilizing multiple CPUs.

Data attached to the application to de-coupled streaming databases of

information flow.

Data aligned to business constraints, insights and decision-making support. Data warehouse to bundled analytical appliances. Centralized to distributed data management, ownership and control of data,
that can reside outside of IT.

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Key Takeaway

Every organization needs to have a cohesive roadmap and plan to leverage needs of the business with current business realities and convergence trends.

Consider the Possibilities and Emerging Areas of Interest

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Supply Chain Control Tower

Asingleutilityviewfortracking informationrelatedtosupplychain wideeventsandinformationflow. Aninformationhubthatsupportstwo waydecisionmaking,interactionand collaboration. Theabilitytomineinformationfrom multiplesystemswithouthavingtore architecttheexistingITinfrastructure. Aforwardlooking,predictivelensthat

providescontexttobothwhatis occurring,andwhatneedstooccur acrossthesupplychain.

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Real-Time Control of Events

Considertheanalogyoftheairport controltoweratanyoftheworldsbusiest airports: Dataandinformationisinconstant motion Involvesmultipleactivitiesall occurringsimultaneously Controllersareeventdrivenandfocus particularlyontheexceptions

Whatneedstohappenwhenan exceptioneventoccurssuchasbad weather,anemergencyorunplanned occurrencesuchasanearmiss.

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Control Towers According to Gartner

InNovember2010,industryanalystfirm Gartnerbegantoarticulatesupplychain controltowerconceptsalongwiththe transformationalstepsrequiredtomovefrom aReactingstage,toacrossorganizationally alignedOrchestratingstageforthe managingofsupplychaindecisionsand capabilities.

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Control Tower Deployments Will Require New Thinking and Need to Overcome Current Organizational and Cultural Challenges

The end-goal is empowered end-users vs. deployment of cool and

emerging technology Emphasis should be on clearly understood cross-organizational and cross-business metrics Fostering of enhanced collaboration and joint decision-making processes across functional and inter-company processes. Balancing of operational management, IT and analytical skills Clean, common and integrated data Centralization of expertise to support key planning and decisionmaking needs- more centralized analytics function Will take time and revised thinking

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My Recommendations

Have a strategy for leveraging predictive analytics capabilities across your supply chain. Identify process pain points and opportunities Business and functional teams need to take ownershipnot the IT team. Executive-level sponsorship/ownership- survey says the time is right and the need is established. Supply chain is a great place to start- willingness and track record for adoption and deployment of leading-edge concepts of decision-making. Start with a meaningful pilot with clearly defined goals Build with flexibility in-mind- business and supply chains are in constant motion and agility is the context to assure momentum.
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Key Takeaways

Globally extended markets and supporting supply chains provide: New Realities

Agility and business responsiveness to business volatility and supply chain complexity Needs for quicker and more timely decision-making

New Opportunities

Shape demand to supply Sense and respond to market opportunities/operational risk better than competitors Orchestrate desired your business outcomes

Investigate the power of predictive analytics and demonstration of Supply Chain Control Tower concepts from Progress Software.

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My Contact Information

Email: bob.ferrari@theferrarigroup.com
Website:http://www.theferrarigroup.com

SocialMediaProfile
Blog- Supply Chain Matters: http://www.theferrarigroup.com/supply-chain-matters Linked-In Profile: http://www.linkedin.com/pub/bob-ferrari/0/78/362 Twitter: @Bob_Ferrari

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For More Information Related to Supply Chain Control Towers and Progress Software

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