Data Science for Managerial

Decisions

Debabrata Das
NITIE, Mumbai
 Managerial Decision Making

• Production scheduling, Fleet assignment, Crew scheduling, Demand

Operations forecasting, Quality Control

Finance • Portfolio selection, Financial planning

Marketing • Media selection, Advertisement budget

IT • Project scheduling, Data center location

• Recruitment planning, Resource allocation, Project assignment, Salary

HR
revisions

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 What is Analytics ?

Data Model Decisions Value

Creation

❖ Use data to create models which will lead to decisions that create value

Source: Mišić, V. V., & Perakis, G. (2020). Data analytics in operations management: A review. Manufacturing & Service Operations Management, 22(1), 158-169.
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Examples

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• What do you stock up before a big storm?
• Probably water, milk, bread, and eggs, right? The essentials.
• Can you guess what Walmart stored in huge quantity before
the Hurricane Frances (24 Aug – 10 Sep) hit the USA in
August-September 2004?
• When Hurricane Charley (9-15 Aug) struck the USA in
2004, Linda M. Dillman, Walmart’s chief information
officer, wanted to understand the purchasing behavior of
their customers.
• She analyzed the data and found that the demand for
strawberry pop-tarts went up over 7 times during the
hurricane compared to their normal sales rate.
• Sure, they're delicious, but why Pop-Tarts? Experts believe
that their pre- and post-storm popularity has a lot to do with
their long shelf-lives and the fact that you can eat them with
or without a toaster should the power go out during nasty
weather.

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 TYPES OF DATA ANALYTICS

What should we
do?
What is likely to
happen?
Why did it
happen?
What has
happened?

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 TYPES OF DATA ANALYTICS
DESCRIPTIVE ANALYTICS PREDICTIVE ANALYTICS PRESCRIPTIVE ANALYTICS

Example: Analyze the past Example: Forecast the demand

Example: Whom to select as
demand of various SKUs of these SKUs
suppliers & how much to
order from them?

SUPPLIER SELECTION
Real Life Applications of Analytics in
Logistics and SCM

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 UPS ORION: Optimizing Delivery Routes

➢ By reducing a driver's route by 1 mile per day for a year

UPS could save upto:

50 Million USD*

➢ By reducing 1 minute of travel time per day for a year

UPS could save upto: 14.6 Million USD*

Source: UPS 9
 UPS ORION: Optimizing Delivery Routes
Problem:
➢ To make sure that packages are delivered on time and with ease as UPS
delivers thousands of shipments each day

Model:
➢ UPS developed an optimized navigation system called On-Road Integrated Optimization and
Navigation (ORIAN) which uses highly advanced Machine Learning algorithms to gather and process
large amounts of data so that they can optimize routes for the drivers.

➢ Through Dynamic Optimization, it calculates individual package delivery routes throughout the day as
traffic conditions, pickup commitments and delivery orders change.

Solution:
➢ Finding the fastest, most fuel-efficient way to get every package to a customer's door and reducing
delivery miles and fuel, setting the stage for enhanced customer service

➢ It updates directions for drivers while they are on the road, based on changing conditions and
commitments. Source: UPS 10
 Predicting Shipping Time with Machine Learning
Problem:
➢ Unlike other mode of transport, shipping vessels have to deal with lot of uncertainties.
➢ Examples of uncertainties?
➢ Such delays lead to stock-out, change production plans, low service levels, unnecessary cost of booking
warehouse space, etc.

Source: Maersk 11
 Predicting Shipping Time with Machine Learning
Solution:
➢ A machine-learning based model is developed to predict expected time of arrival of vessels based on
historical information and GPS data.
➢ 45% to 60% more accurate time of arrival for vessels reaching their next destination.
➢ Interactive shipping route maps with details on ports, offices and container yards.
➢ Live geo-locations on maps which track ships with real-time information on the vessel's route and
destination

Source: Maersk 12
 Predicting Shipping Time with Machine Learning
Model:
➢ Random Forest for predicting shipping time.

Source: Maersk 13
 DHL Supply Watch: Machine Learning to Mitigate Supplier Risks
➢ DHL Resilience360 Supply Watch developed a model that detects
potential supplier failures before they happen.

➢ It allows the companies to focus on early risk mitigation and auditing

activities of their most relevant suppliers and third parties.

➢ It monitors some 140 different risk categories including financial,

environmental and social factors - labor breaches, quality defects,
shortages, capacity constraints and delays.

➢ Using advanced Machine Learning, the model analyzes data based on

the monitoring of up to 30 million posts from more than 300,000 DHL Supply Watch
online and social media sources to detect potential supply chain
disruptions.

Source: DHL 14
 DHL Supply Watch: Machine Learning to Mitigate Supplier Risks
➢ The global ‘WannaCry' ransomware attack - DHL Supply Watch
could help to identify which suppliers may have reportedly been
affected, and therefore allowing companies working with them to take
appropriate precautions in their supply chain.

➢ Bankruptcy of Hanjin Shipping in 2017 led to capacity shortages and

supply chain disruptions worldwide. DHL Supply Watch could flag
this risks at an early stage.

DHL Supply Watch

Source: DHL 15
 DoorDash: Managing Supply and Demand Balance through
Problem:
Machine Learning
➢ For Consumers, a lack of Dasher availability during peak demand is more likely to lead to order
lateness, longer delivery times, or inability to request a delivery and having to opt for pick up.
➢ For Dashers, a lack of orders leads to lower earnings, and longer and more frequent shifts in order to hit
personal goals.
➢ For Merchants, an undersupply of Dashers leads to delayed deliveries, which typically results in cold
food.

Source: DoorDash 16
 DoorDash: Managing Supply and Demand Balance through
Machine Learning
Model:
➢ Gradient Boosting Algorithm: Demand and supply forecasting

➢ Mixed Integer Linear Programming Model: Determine optimal amount of incentive to be offered to Dashers

Results:
➢ Reduce delivery time and cancellation

Source: DoorDash 17
 Machine Learning based tools developed by Delhivery
ML Tool:
➢ Addfix is Delhivery’s proprietary address disambiguation service that leverages machine learning
techniques to convert unstructured addresses into a more consumable form.

Source: Delhivery 18
From 2010 to 2020, the amount of data created, captured, copied, and consumed in the world increased from 1.2 trillion
gigabytes to 59 trillion gigabytes, an almost 5,000% growth.
 BIG DATA
Volume : Huge Amount of data (Inventory Count ,
Transportation Data)
VOLUME

VERACITY: Data Generated should be accurate VARIETY: Multiple Data Sources and
and come from reliable/trustworthy sources. forms (AGV, Forklifts, Cycle Count)
VERACITY VARIETY

BIG
DATA

VALUE VELOCITY
VELOCITY: Data Generated at High
VALUE: Data Generated should be Useful Speeds (Real-Time, GPS Tracking of
Vehicles)
VARIABILITY
VARIABILITY: Dynamic/Evolving Behavior of Data
(Random Sampling, Social Media Data)

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 TYPES OF DATA

STRUCTURED DATA UNSTRUCTURED DATA

✓ ~20% enterprise data ✓ ~80% enterprise data

✓ Requires less storage ✓ Requires mass storage
✓ Easier to manage ✓ Difficult to manage
✓ Can be displayed in rows and ✓ Cannot be displayed in rows and
columns columns

Example: Number, Dates, Strings Example: Image, Audio, Video

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 Data, Data Sets,
Elements, Variables, and Observations
◼ Data are the facts and figures that are collected, summarized, analyzed, and interpreted
◼ All the data collected in a particular study are referred to as the Data Set for the study
◼ Elements are the entities on which data are collected
◼ A variable is a characteristic of interest for the elements
◼ The set of measurements obtained for a particular element is called an observation
◼ A data set with n elements contains n observations
◼ The total number of data values in a complete data set is the number of elements multiplied by the
number of variables

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 Data, Data Sets,
Elements, Variables, and Observations
Variables
Element
Names WTO Per Capita Fitch
Nation Status GDP($) Rating

Armenia Member 5,400 BB-

Australia Member 40,800 AAA
Austria Member 41,700 AAA
Azerbaijan Observer 5,400 BBB-
Bahrain Member 27,300 BBB

Data Set
Table 1.1
Scale of Measurements

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 Scale of Measurements
◼ Data collection requires one of the following scales of measurement:
1) Nominal
2) Ordinal
3) Interval
4) Ratio
◼ The scale of measurement determines the amount of information contained in the data. It also indicates
the statistical analyses that are most appropriate.

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 Nominal Scale
◼ When the data for a variable consist of labels or names used to identify an attribute of the element, the
scale of measurement is considered as nominal scale.
◼ For example, referring to the data in Table 1.1, we see that the scale of measurement for the WTO Status
variable is nominal because “Member” and “Observer” are labels used to identify the status category for
the nation.
◼ In cases where the scale of measurement is nominal, a numeric code as well as nonnumeric labels may be
used. For example, to facilitate data collection and to prepare the data for entry into a computer database,
we might use a numeric code by letting 1 denote a Member nation in the WTO, and 2 denote an Observer
nation. In this case the numeric values 1 and 2 identify the status category for the nation.
◼ The scale of measurement is nominal even though the data appear as numeric values.

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 Ordinal Scale
◼ The scale of measurement for a variable is called an ordinal scale if the data exhibit the properties of
nominal data and the order or rank of the data is meaningful.
◼ For example, referring to the data in Table 1.1, the scale of measurement for the Fitch rating is ordinal
because the rating labels which range from AAA to D can be rank ordered from best credit rating AAA to
poorest credit rating D.
◼ The rating letters provide the labels similar to nominal data, but in addition, the data can also be ranked
or ordered based on the credit rating, which makes the measurement scale ordinal.

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Nominal or Ordinal Scale ?

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 Interval Scale
◼ The scale of measurement for a variable is an interval scale if the data have all the properties of ordinal
data and the interval between values is expressed in terms of a fixed unit of measure.
◼ Interval data are always numeric. Temperature is an example of interval-scaled data. For example, three
cities with temperature of 10o C, 20o C, and 30o C can be ranked or ordered in terms of climate condition.
◼ In addition, the differences of temperature between two cities are meaningful. For instance, temperature of
city 2 is 10o C more than city 1; temperature of city 3 is 10o C more than that of city 2.

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 Ratio Scale
◼ The scale of measurement for a variable is a ratio scale if the data have all the properties of interval data
and the ratio of two values is meaningful.
◼ Variables such as distance, height, weight, and time use the ratio scale of measurement.
◼ This scale requires that a zero value be included to indicate that nothing exists for the variable at the zero
point.
◼ For example, consider the cost of an automobile. A zero value for the cost would indicate that the
automobile has no cost and is free. In addition, if we compare the cost of $30,000 for one automobile to
the cost of $15,000 for a second automobile, the ratio property shows that the first automobile is
$30,000/$15,000 i.e. 2 times, or twice, the cost of the second automobile.

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 Interval vs Ratio Scale ?

Temperature in
centigrade 𝐶 𝐹 − 32
=
5 9
City 1 10
9𝐶
City 2 20 𝐹 = 32 +
5
City 3 30

Temperature in Temperature in
centigrade fahrenheit
City 1 10 50
City 2 20 68
City 3 30 86

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 Scale of Measurements
Scale of Meaningful Operations
Measurement
Nominal Classifying
Ordinal All the above + Ranking
Interval All of the above + Addition & Subtraction
Ratio All Operations, Existence of Absolute Zero

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 Data – Categorical vs Quantitative
◼ Data can be classified as either categorical or quantitative.
◼ Data that can be grouped by specific categories are referred to as categorical data.
 Categorical data use either the nominal or ordinal scale of measurement.

◼ Data that use numeric values to indicate how much or how many are referred to as quantitative data.
 Quantitative data are obtained using either the interval or ratio scale of measurement.

◼ A categorical variable is a variable with categorical data.

◼ Quantitative variable is a variable with quantitative data.
◼ The statistical analysis appropriate for a particular variable depends upon whether the variable is
categorical or quantitative. If the variable is categorical, the statistical analysis is limited.

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 Data – Categorical vs Quantitative
◼ A categorical variable is a variable with categorical data.
◼ Quantitative variable is a variable with quantitative data.
◼ The statistical analysis appropriate for a particular variable depends upon whether the variable is categorical
or quantitative. If the variable is categorical, the statistical analysis is limited.
◼ We can summarize categorical data by counting the number of observations in each category or by
computing the proportion of the observations in each category.
◼ However, even when the categorical data are identified by a numerical code, arithmetic operations such as
addition, subtraction, multiplication, and division do not provide meaningful results.

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THANK YOU

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