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The Emerging Adoption of Predictive
Analytics Across Supply Chains Presented by Bob Ferrari, Executive Editor of the Supply Chain Matters Blog and Managing
Director of the Ferrari Research and Consulting Group
Delivered at the Progress Software Revolution Conference
September 2011
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Key Messages to Consider
In today’s 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 (KPI’s) 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?
A supply chain consists of all the value‐chain planning, physical
movements, information and financial flows required to move
products through design, production, distribution and ultimately
to customers and consumers.
A supply chain consists of a series of business processes and a
common definition of these processes is reflected by the Supply
Chain Operations Reference Model or SCOR. These include the
broad definitions of Plan‐Source‐Make‐Deliver‐Return
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End-to-End Supply Chain
The reality of today’s global supply chains are
that the SCOR Model business processes cross
company borders and involve multiple trading
partners which has added to the challenge of
timely visibility and decision‐making. Consider
how Apple’s totally outsourced supply chain is
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 visibility-
thousands 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 predictiveand 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 outcomes-
consider 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
The three dimensions of supply chain performance are either
enhancing top line revenue growth via enhanced customer
service and responsiveness, improved end‐to‐end efficiency, or
better asset utilization by means of outsourcing. Prior to and
as a result of the past global recession, most supply chains were
focused on the bottom quadrants. Post‐recession and recovery
requires an emphasis on the top dimension, while keeping the
bottom dimensions balanced with ongoing business needs.
These tendencies are reflected in current polling data of senior
supply chain executives.
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Current C-Level Views of
Supply Chains According to a recent Aberdeen Group
survey of senior supply chain managers, the
predominant concern of these executives has
shifted to the top of our triangle, escalating
customer service needs and increased
market demand volatility. The implications
of managing an increasingly global network,
current volatile business cycles, and rising
supply chain costs makes decision making
more challenging, with the need to context
and consider the implications for each
dimension of supply chain performance.
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Benchmarking Survey Data And indeed, when Aberdeen polled for the
key initiatives that senior executives at best‐
in‐class supply chain organizations were
focused upon, it includes:
• The ability to access and find key
decision‐making data
• Well defined cross‐functional metrics
with
• Online visibility into end‐to‐end physical,
disruptive or other important events.
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Supply Chain Business Process Evolution
Supply chain business processes
have emerged from the Classic
and Traditional, to the current
Networked Era, each with
different process orientation and
IT enablers.
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Supply Chain Teams Tend to Lead in Advanced IT Adoption
Whether it’s the area of physical
tracking, conducting commerce
and fulfilling orders, or data and
information analysis, supply
chain teams have been very
comfortable with successfully
leveraging leading‐edge IT
technology.
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Emerging Thinking Concerning Predictive Analytics
Our goal should be to transform multiple forms of available information intomore meaningful insights and key responsive indicators
Weigh and factor constraints and variability with supply chain planning andexecution information
Convert insights into actions and best plan
Actions enable positive outcomes
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Predictive Analytics Defined
Standard Reports
Ad Hoc Reports
Query / Drill Down
Alerts
Statistical Analysis
Randomized Testing
Predictive Modeling
Optimization “What’s the best that can happen?”
“What will happen next?”
“What happens if we try this?”
“Why is this happening?”
“What actions are needed?”
“What exactly is the problem?”
“How many, how often, where?”
“What happened?”
Predictive and
Prescriptive
Analytics
(the “so what”)
Descriptive
Analytics
(the “what”)
Degree of
Intelligence
Source: Analytics At Work , Thomas H. Davenport, Babson College
Analytics Defined- Tom Davenport
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One of the leading academics speaking
on this area is Professor Thomas H.
Davenport of Babson College. This chart
is a reproduction from his book,
Analytics At Work, and describes the key
degrees of intelligence that make‐up
business decisions, and the important
differences of more descriptive (the
what) vs. predictive and prescriptive
analytics (what happens next). They are
important observations as to where
technology tools are taking us.
Think of recent decisions involving your supply chain:
• In the narrowest sense, a recent truck breakdown or unplanned
order received from a key customer.
• In the broadest sense, the recent earthquake and tsunami that
impacted northern Japan.
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Consider Current Supply Process Convergence
More rapid and volatile business cycles are motivating many companies to re-look at sequential planning and execution processes because sequentialprocesses 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 informationutilizing multiple CPU’s.
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 andplan 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
• A single utility view for tracking
information related to supply chain
wide events and information flow.
• An information hub that supports two‐
way decision‐making, interaction and
collaboration.
• The ability to mine information from
multiple systems without having to re‐
architect the existing IT infrastructure.
• A forward‐looking, predictive lens that
provides context to both what is
occurring, and what needs to occur
across the supply chain.
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Real-Time Control of Events
Consider the analogy of the airport
control tower at any of the world’s busiest
airports:
• Data and information is in constant
motion
• Involves multiple activities all
occurring simultaneously
• Controllers are event‐driven and focus
particularly on the exceptions
• What needs to happen when an
exception event occurs such as bad
weather, an emergency or unplanned
occurrence such as a near‐miss.
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Control Towers According to Gartner
In November 2010, industry analyst firm
Gartner began to articulate supply chain
control tower concepts along with the
transformational steps required to move from
a “Reacting” stage, to a cross‐organizationally
aligned “Orchestrating” stage for the
managing of supply chain decisions and
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 andemerging 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 decision-
making needs- more centralized analytics function Will take time and revised thinking
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My Recommendations
Have a strategy for leveraging predictive analyticscapabilities across your supply chain.
Identify process pain points and opportunities Business and functional teams need to take ownership-
not the IT team.
Executive-level sponsorship/ownership- survey says thetime is right and the need is established.
Supply chain is a great place to start- willingness andtrack record for adoption and deployment of leading-edgeconcepts 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 assuremomentum.
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Key Takeaways
Globally extended markets and supporting supply chainsprovide: New Realities
Agility and business responsiveness to business volatility andsupply 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: [email protected]
Website: http://www.theferrarigroup.com
Social Media Profile
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