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THE ANALYTICS DILEMMA: WORKING IN THE SUPPLY CHAIN

BOB DAVIS, PRINCIPAL INDUSTRY CONSULTANT

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SHAMELESS PLUG: BOB DAVIS / PRINCIPAL INDUSTRY CONSULTANT AT SAS

• Authored “Demand Driven Inventory Optimization and Replenishment

• Written for the executive wanting to know about inventory optimization

• Provides a case study approach to explain the benefits

• Going beyond the technology in a business environment

• How does it fill the gaps found in ERP/SCM systems?

• 16 years with SAS as a Product Manager and Industry Consultant

• 20 years with Nestle and ConAgra Foods

• LinkedIn: www.linkedin.com/pub/bob-davis/0/5ab/a16

• Twitter: @Bobdavis2188

• BeetFusion.com: Featured Blogger

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AGENDA

• The Analytics Dilemma

• Structured Analytics in the Supply Chain

• Five Case Studies Using A Structured Analytics Approach

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THE ANALYTICS DILEMMA

CHANGING A CULTURE

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ANALYTICS IN THE

SUPPLY CHAIN?“I WANT IT, BUT I DON’T WANT TO CHANGE!”

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SUPPLY CHAIN

ANALYTICSWHERE ARE YOU ON THE JOURNEY?

Reactive or Proactive?

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ANALYTICS INTELLIGENCE AND COMPETITIVE ADVANTAGE

Source: Competing on AnalyticsThomas Davenport and Jeanne Harris

Proactive

Reactive

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THE ANALYTICS-

SUPPLY CHAIN

DILEMMA

USING REACTIVE METHODS TO PREDICT THE FUTURE

Industry Week 2016

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25 YEARS OF

ANALYTIC

INNOVATION LATER…

Why is it that excel spreadsheets are still the

“analytics of choice” in supply chains?

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CHANGE IS HARD IT LOOKS EASY NOW, BUT AT THE TIME IT WAS HARD TO LET GO

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REACTIVE ANALYTICS

Reactive analytics leads to gaps in knowledge

“The blind man and the elephant…”

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Is there anything else

you should know?

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C op yr i g h t © 2012 , SAS Ins t i t u te Inc . A l l r i g h ts r eser v ed .

BUSINESS INSIGHT FROM YOUR INFORMATION IS KEY TO FINANCIAL PERFORMANCE

Copyright © 2015, SAS Inst i tute Inc. Al l r ights reserved.

15 percent of organizations will modernize their strategy

for information management capability and exhibit a

20% higher financial performance than their peers

according to Gartner

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ANALYTICS ARE FAR MORE THAN TECHNOLOGY

C op yr i g h t © 2012 , SAS Ins t i t u te Inc . A l l r i g h ts r eser v ed .

TRANSFORMATION JOURNEY TO A HIGHER MATURITY LEVEL

Why a structured approach to transformation is important?

Before you can go forward, you must first:

• Know where your are

• Identify landmarks

• Understand how organization

dimensions work together

• Chart your course

Copyright © 2015, SAS Inst i tute Inc. Al l r ights reserved.

C op yr i g h t © 2012 , SAS Ins t i t u te Inc . A l l r i g h ts r eser v ed .

A STRUCTURED ANALYTICS APPROACH

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GARTNER WHAT’S STOPPING THE SUPPLY CHAIN ACHIEVING GOALS…

C op yr i g h t © 2012 , SAS Ins t i t u te Inc . A l l r i g h ts r eser v ed .

THE “ANALYTICAL” SUPPLY CHAIN

Inventory

Optimization

Demand Sensing

Demand Shaping

Demand Shifting

Outside-In

Focused

Proactive

Process

Collaborative

Planning

Market Supplier

Demand

Driven

Outside-In

Focused

Proactive

Process

Synchronized

Replenishment

Supply Shaping

Sales Marketing & Operations Planning

Market

Driven

Selling through the channel (pull)

Supply

Driven

15-30%5-7%Sales OrdersPOS

Lean

Forecasting

FVA

Demand

Driven

Lean

Manufacturing

C op yr i g h t © 2012 , SAS Ins t i t u te Inc . A l l r i g h ts r eser v ed .

THE “ANALYTICAL” SUPPLY CHAIN

Inventory

Optimization

Demand Sensing

Demand Shaping

Demand Shifting

Outside-In

Focused

Proactive

Process

Consensus

Forecasting

FVA

Market Supplier

Demand

Driven

Outside-In

Focused

Proactive

Process

Synchronized

Replenishment

Supply Shaping

Sales Marketing & Operations Planning

Market

Driven

Selling through the channel (pull) Selling into the channel (push)

Supply

Driven

15-30%5-7%Sales OrdersPOS

Lean

Manufacturing

Lean

Forecasting

FVA

C op yr i g h t © 2012 , SAS Ins t i t u te Inc . A l l r i g h ts r eser v ed .

SAS®

DEMAND-DRIVEN PLANNING AND OPTIMIZATION

Get a holistic view of all demand & planning related data• Track Merchandising activities,

competitors information, new product launches and social media feedback from consumers to drive decision making for the supply chain

Improve forecast accuracy of new product launches & have product available for sell• Use structured judgment

process to define the best “as like” products for new launch forecasting

Optimize planning and be more efficient in the collaborative planning process• Unite statistical forecast with domain

expertise in order to come up with the most accurate consensus plan

Demand

intelligence

Higher Availability & Service Levels to lower capital costs • Combine statistical forecasting &

Inventory Optimization across a multi echelon distribution network

• Create what if scenarios to lower inventories while increasing service levels

Improve Forecast Accuracy; Lower inventory & scrap costs• Use historical data & causal

factors data to generate highly-accurate forecasts of future demand

• Sense demand signals• Shape future demand• Reduce touch points with the

forecast / manual planning and become analytic driven

• Forecast Valued Added

Fo

recasti

ng

Collaboration

Dem

an

d R

ep

osito

ry

C op yr i g h t © 2012 , SAS Ins t i t u te Inc . A l l r i g h ts r eser v ed .

5 CASE STUDIES USING STRUCTURED ANALYTICS

C op yr i g h t © 2012 , SAS Ins t i t u te Inc . A l l r i g h ts r eser v ed .

AMWAY CHINA DISTRIBUTION

BUSINESS ISSUE

• Lacked a forward-looking view and accuracy in its inventory,

distribution and replenishment planning process.

•

SOLUTION

• SAS Forecasting and Inventory Optimization

RESULTS

• Reduced stock levels, balanced product distribution, and boosted

customer satisfaction.

• Increase customer satisfaction to 97%

• Improve replenishment times by 20%

• Reduce stock levels by 10%

• The system enormously improves Amway China’s operational efficiency

and shortens replenishment time from the logistics center to the retail

outlets

HTTP://WWW.SAS.COM/SUCCESS/AMWAY

CHINA.HTML

“With SAS predictive analysis and

inventory optimization, we can keep

inventory at the right level at the

right time. When business or

customer demands change, we can

quickly adjust via the flexible

inventory optimization system. With

the IOS, Amway China cannot only

reduce logistics costs, but also

enhance customer satisfaction and

improve its competitive edge.”

Raymond Hui

Distribution Vice President

Demand Driven Supply

C op yr i g h t © 2012 , SAS Ins t i t u te Inc . A l l r i g h ts r eser v ed .

ELECTROLUX APPLIANCES

MANUFACTURING

• BUSINESS ISSUE

• Electrolux has worked hard to put in place a cross-functional S&OP

process but forecast is only 50-60% accurate.

• Customer service levels are around 80%, inventory levels are too high

• Electrolux’s greatest challenge is forecasting the correct product mix

SOLUTION

• SAS® Demand-Driven Planning & Optimization: FAW, CFW, IOW

RESULTS

• SAS conducted a SVA/POC built business case with Electrolux data and

this conservatively increased customer service levels >95%,

• Reduced inventory 15%

• Improved forecast accuracy >90%

• NPV in excess of $20m and payback within 1 year

DEMAND DRIVEN SUPPLY

Title

C op yr i g h t © 2015 , SAS Ins t i t u te Inc . A l l r i g h ts r eser v ed .

MATAS - DENMARKDEMAND DRIVEN

SUPPLY

BUSINESS ISSUE

• Excessive inventory in both the warehouse and stores

• Manual replenishment process that took a long time to

complete and contributed to high out of stocks

• Disjointed forecasting with difficulty in projecting

promotional inventory

SOLUTION

• SAS Forecasting and Inventory Optimization

RESULTS

• 30+% reduction of inventory

• 4% increase in revenue from reduced out of stocks

• Inventory turns increased by 28%

• 30% reduction in time spent on replenishment

“We told the board of management that we could reduce the inventory by 10%, but we hoped that the actual figure would be 20%. So far, the results show that we are close to 50%”

Jesper Amsinck

Logistics Manager

C op yr i g h t © 2012 , SAS Ins t i t u te Inc . A l l r i g h ts r eser v ed .

A BLUE JEAN

MANUFACTURER

BUSINESS ISSUE• Existing VMI vendor dropping support, must bring the capability in-house

• Trying grow their VMI (Vendor-Managed Inventory) customer base.

SOLUTION• SAS Analytics, SAS Retail Forecasting and SAS® DDPO/IOW Workbench

RESULTS• Increased sales at accounts (sales uplift).

• Higher in-stocks

• Estimated 3% more shipments across all accounts.

“THIS SOLVES THE BUSINESS

CHALLENGE OF SUCCESSFULLY

AUTOMATING THE PROCESS OF

RECOMMENDING THE RIGHT QUANTITY

OF A STYLE IN THE RIGHT SIZE AT THE

RIGHT LOCATION FOR THE CUSTOMER

TO EXECUTE IN THEIR PURCHASE

ORDER ENVIRONMENT. THIS IS A

CHALLENGE ALL SOFT LINE RETAILERS

AND WHOLESALERS HAVE. THE

SUCCESS OF THIS DIRECTLY

CONTRIBUTES TO THE BOTTOM LINE OF

THE COMPANY.”

Demand Driven

Supply

Customer Validation Slide – For One-to-One Customer Use Only

Sr Director - Planning Development

C op yr i g h t © 2015 , SAS Ins t i t u te Inc . A l l r i g h ts r eser v ed .

BIG GROCERY RETAILER GROUP IN...FRANCE

BUSINESS ISSUES

• Problems with forecast accuracy on promotions

• 90,000 “promotions” per week

• Inability to calculate demand forecast and inventory levels

• Too much perishable inventory…huge issue with waste

SOLUTION

• SAS DDPO (Forecasting)

RESULTS

• More accurate demand forecasts for whole assortment

• Structured process to handle promotional items

• Dramatic reduction in perishable waste

• Increased margins by avoiding stockouts and overstocks

C op yr i g h t © 2012 , SAS Ins t i t u te Inc . A l l r i g h ts r eser v ed .

THANK YOU