SUPPLY CHAIN ANALYTICS

Anupam Ghosh

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 In this module:

1. Introduction to supply chain management

2. Introduction to supply chain analytics

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 The Glorious Retreat

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 French Seaport
26th May – 4th June 1940
3,40,000 troops evacuated from the onslaught of Hitler’s
army (198,000 British and 140,000 French and Belgian)
700 civilian vessels (fishing boats, yacht, lifeboats, barges)
300 navy vessels
They took turns – dropping off solders to England and
again coming back to rescue others
Total casualties – 285 vessels

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 And Churchill came up with his famous tagline: “The
glorious retreat”

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 Bangladesh
April 1971 meeting with Mrs. Indira Gandhi, Prime
Minister
Order by Mrs. Gandhi and explanation by Gen.
Maneckshaw

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 Earthquake in Nepal

April 2015 – killed 9000, injured 20000+

Hundreds of thousands rendered homeless with
flattened houses
Landslides crippled and destroyed the transportation
and communication system.

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 Tribhuvan International Airport closed down for heavy
aircrafts for fear of runway damage and landslide

Nearby airport of Pokhra used

Who controls the schema of things?

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 Haiti earthquake 2010

Estimated death: 100000 – 150000

Relief operations controlled by USA

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 Fukushima Nuclear Disaster
Fukushima Daiichi Nuclear Power Plant in Okuma
 after the Tsunami, 12-15 March 2011
March 2016:: More than 171,000 evacuees were still
unable to return home

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 India:

Major challenge for the MNCs is to have their

products on the shelf, otherwise it is a lost sale.

Imagine the supply chain of coke/pepsi.........

The most networked supply chain that can reach every

household of the country????

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 AMRI Hospital Fire in kolkata
Kargil Conflict
Stopping the oil supply lines – Pakistan (Iran)
Networked hospitals

Post office
Public transport systems
Railways

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 Project supply chains

Rapid Response supply chains

Rural supply chains

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 Population

India will continue to live in

its villages

800 million people

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 Changing Structure Of Indian Economy

Figures in %

Rural India accounts for 50% of country’s income

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 Composition of Rural Income
2005

 In farming households one person will be employed in service

sector leading to
 Regularity of income
 Shift from cropping cycle to monthly cycle
 Ability to pay EMI
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 Rapidly Rising Rural Incomes >$10/day
$5 - 10/day

$2 - 5/day

$1 - 2/day

<$1/day

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 Agriculture Growth

%
3.1

2.4%

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 Mobility Revolution
500 Million mobile Rs 568 Billion

subscribers by 2011 of
which 150 million in

CAGR
rural.

9.5%
Greater possibility of
targeting…one to one Rs 93 Billion
interactions with big
farmers segment
possible. 2005 2025

Rural Communication Consumption

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 Community & Market Infrastructure
Inflow of private investment in agri-mills, cold
storages, warehouses
Connecting every village with 500+ pop by all weather
road
23 million HH with electricity

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 Rural Connectivity
Setting up of 100,000 Rural Business Hubs in the 11 th
Plan.
6,00,000 IT kiosks under the Mission 2007 program.

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 Rural Literacy
Universal literacy will
be achieved.

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 The Opportunity
Rural people earning $ 2+/day will grow seven times to 200
million by 2025
By 2017, Rural consumption levels will equal current Urban
levels
McKinsey & Co

Penetration 2005 Rural Urban

Toothpaste 38 75
Shampoo 32 52
Color Television 11 49
Motorcycle 8 26
Figures in %

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 The Challenge
Solution… Below the
line communication
40% Illiterates
Awareness
Awareness

16 Languages 432 dialects

• 50% live in Media dark areas

• 50 million tv sets, but 12 – 16 hour
power outages, erratic viewing
• Reach of newspapers
• National virtually nil, Regional < 6%.
• Mainly local newspaper circulation
25 figures not authenticated. 07/15/2021
 Consumer Touch Points

25,000 Fairs & Festivals

100,000 footfalls/day
900 stalls

7,000 Agricultural Markets

1,000 footfalls/day

42,000 Haats
5,000 Footfalls/day
300 stalls

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 The Challenge
Solution… Innovations
in reaching the product

600,000 Villages
Availability
Availability

50% not connected by motorable road

Only 5 shops in a village

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 The Challenge
Solution… Low unit packs
at low price points.

Average per capita

income <$1 a day
Affordability
Affordability

Irregular Income
mostly wage labor

Limited Access to institutional

finance
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 The Challenge
Solution… Global Products…but
local customization
Acceptability

More than 50% households

Acceptability

without electricity

Limited understanding of
needs of rural consumer
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 Exercise 1: How lengthy is your supply chain?

Pick up a FMCG product of your choice and decide on

the length of the supply chain (finished product supply
chain)

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Product Date Date Interval Number Number of Average Total length
Name of Mfg when the in of units units sold time a of the
customer Months on shelf per month product downstream
visits the spends at supply chain
store the retailer
shelf
X OCT JAN 1, 2.5 20 80 (20/80)/2 2.5 + 0.125 =
2020 2021 = 0.125 2.625 months
---
(average
inventory)

Instead of months, you can also have days

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Product Name Date of Date when Interval in Number Number Average Total
Mfg the customer Months of units of units time a length of
visits the on shelf sold per product the
store month spends at downstrea
the retailer m supply
shelf chain

Fast moving consumer

good
A, B, C
Slow moving consumer
good
D, E, F
Product of a large
company
G, H, I
Product of a small
company
J, K, L
Product purchase from
departmental store
M, N, O
Same product purchased
from retail store
P, Q, R
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 What are the issues emanating from this
table?
What is the logical conclusion to having little gap between
length of supply chain and product expiry date?
What are the imperatives to that conclusion?
Where lies the bottleneck of your chain?
Will you have separate supply chains for different products?
How will you reduce the time (length) of supply chain?
What are the cost imperatives?
How to make the supply chain work like an automated
system (machine)?
Will mathematical models be necessary?

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 LET US TAKE SOME EXAMPLES FROM THE
INDUSTRY

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 TYPICAL EXAMPLES OF SUPPLY CHAIN

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 Dell
Zara
7-Eleven
Warner-Lambert (Pfizer)
Wal Mart
Hewlett Packard
Tobaccco
GM Spare Parts
Crude OilSemi Conductor
Automobile
Toy Manufacturing
LPG

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 DELL

- direct order through website

- customers can order, pay, and track their
consignments
- first among the proactives -- status of orders mailed
to purchaser (precursor to “Track your Package" of
Amazon)

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 Dell Computers

Monitors by SONY (Mexico)

Keyboards by Acer (Taiwan) Dell

Customers order
Assembly
computers on-line
CPU by Intel (USA) Plant

Other components

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 Dell is following the Direct Sales Model. What are the
benefits of such a model from supply chain point of
view?

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 Supply Chain Lessons from Dell
Since direct sale to customers, control over its entire
supply chain
Direct information about customers
Take educated decision about the supply chain that
will improve the supply chain
Develop better forecasts
And thus keep lower inventory
And thus, lesser working capital
Ability to move faster into the market

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 Look at how the concept of inventory is
changing!

Demand with Planned Shortages

EOQ with planned shortages

Though shortage is not desirable, sometimes, when the value

of inventory is high, or product technology changes rapidly,
and hence holding cost is also high, one may go for
backorder
Thus, a shortage called backorder develops
However, the shortage is for a very short time

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 ZARA
Spain
20% growth in the recession years (2001 to 2006)
Fashion industry
Hence, high demand uncertainty
Hence, high cost of mistakes
This requires a fast-response supply chain that enables
to:
Design and produce within a fashion season instead of
well-in-advance season

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 Supply Chain Lessons from Zara:

Fashion industry requires a fast-response (deliberately

not using ‘rapid-response’) supply chain that enables
to:
Design and produce within a fashion season instead of
well-in-advance season

The case of movie dress supply chain in India

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 7-ELEVEN
Posted record profits even during economic crisis
Collected hourly sales data and made it available early
next morning
Thus, product replenishment was easy with high level
of stock availability by determining the right quantity
of the right product

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 Supply Chain Lessons from 7-Eleven

low inventories
short cycle time
high customer value
Accurate forecasting
Vehicle planning and optimisation
Cost optimisation

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 Warner-Lambert (Pfizer)
CPFR with Wal-Mart
Forecasting correctly
Shelf fill-rate increased from 87% to 98% leading to
$8ml in sales a year

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 Wal-Mart

Procter & Gamble Wal-Mart

Customers Request:
or third-party Wal-Mart
Da-Fa Clothing, Inc. (China) Buying detergent,
distribution Stores clothes, TV, …...
centers
SONY Factory (Malaysia)

Fabric Producer Electronics Components Producer

Plastic Producer
Zipper Producer Plastic Producer
Chemical Producer
Thread Producer

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 Supply Chain Lessons from Warner-Lambert
(Pfizer)

Collaboration
Data sharing
Data secrecy
Contract management
Trust
Bargaining power

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 OTHER SUPPLY CHAIN EXAMPLES

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 Hewlett & Packard (HP)
Suppliers IC Mfg US DCs Retailer Consumers

Europe
Suppliers PC Board FAT Retailer
DCs Consumers

Suppliers Subassembly Far East

DCs Retailer Consumers

Suppliers

FAT = Final assembly & test

IC Mfg = Integrated circuit manufacturing
PC Board = Printed circuit board
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 Tobacco supply chain

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 http://www.soc.duke.edu/~s142tm12/supply_chain_diagram.htm
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 The Wal-Mart – P&G delivery

Chemical
Plastic Mfr.
manufacturer
(Film Fabricator
Inc.)

Wal-Mart or 3rd Party Wal-Mart Customer

P&G or any
Other manufacturer Dtbn. Centre store
other Mfr.

3M tape
Mfr.

Timber Company Paper Mfr.

Exercise: Map the Material Flow,

Information Flow, and Finance Flow

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 GM spare parts distribution
GM
service
centres
Parts plant, produces some
spares and not all
supplier

Distribu C
supplier tion U
Centre
S
supplier
T
O
M
E
R
S
Map the material flow, information flow and finance flow in this diagram

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 GM spare parts distribution chain
GM spare parts have to be available in the GM service
centres
Customers take their cars to the service centres
These service centres get spares from GM distribution
centres
The distribution centres get the spares from GM plants
or suppliers of spare parts

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 Crude oil supply chain

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 Semiconductor supply chain

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 Automobile supply chain

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 Automobile Industry
Example of Automobile Industry:

Requires 10000 components

Parts procured across the globe
Automobile has to be sent to around the country
Care for service centres
Product recall

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 FMCG
Example of P&G

Has to reach 6,00,000 villages with an average of 5

shops per village
Yet keep the distribution costs to a minimum, or face
competition from local players with almost zero
distribution costs

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 HR Johnson (Johnson Tiles)
Example of HR Johnson (Johnson Tiles)

Mud for tiles from Ukraine

Fresh water from industrial supply
Risk of product imitation – so no product design is
continued for more than one week
As a result, unsold stock piles in warehouses
Nearness to customers
Breakages

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 Toy supply chain

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 LPG supply chain in India

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 From these diagrams:

What are the drivers that will lead to success of this

supply chain?

Can you change some of these?

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 KEEP IN MIND THE ONE-THIRD (1/3)
PRINCIPLE OF JAPAN

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 1/3 PRINCIPLE

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 What are the advantages of this 1/3 system?
What are the problems/issues with this 1/3 rule?
How does it impact the supply chain?
What if there are too much quantity on the shelf?
How do you ensure a smooth production system?

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 WHAT ARE THE CHALLENGES?

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 Recent Challenges
‘Return on Time Invested in Shopping’/ ‘Return on
Marketing Effort’ is very less

Flipkart
Amazon
Snapdeal
Time to market – dresses in movies

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 Forecasting
Demand variability
Supplier selection
Warehouse location
Humanitarian logistics

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 What are the key elements and issues that you have
noticed

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 Supplier Selection and Purchasing
Factory location
Warehousing
Determining Storage Space in warehouse
Deciding on how much materials to store and how much to
order - EOQ
Deciding on whether to have a secondary warehouse
How to manage warehouses
Determining the mode(s) of transport; cross-dock stations
Where to locate a store
Designing the network

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 Coordination issues
Information sharing
Trust
Bargaining power
Contract
Responsiveness
Rapid response (natural calamities etc.)

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 Other dimensions:

Theft
Strategic sourcing – compulsions also – single source
globally (or a very few sources), reciprocal
arrangement

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 THEFT IN SUPPLY CHAIN
Products put up on trucks and then sold by the drivers
during the run/ journey
Intangible costs associated with product
disappearance:
risk of tampering;
price integrity that is compromised by product being
sold for less through other channels
legal & investigative costs
replenishment costs
loss of customer confidence

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 Types of thefts
Simple cargo theft – material lying unattended – stolen
- roadside drop points, roadside cross-docks, roadside
break-bulk sorting
Strategic cargo theft – prey on information –
applicable for urgent delivery, late delivery, and Friday
deliveries for USA
Technology related
Pilferage

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 what doesn’t work, are alarms, uniformed guards, and
most video systems
Regular Audit
“Anonymity programs” – call at a number – you may
decide not to tell your name
For frauds involving information that can be accessed,
protect the integrity of one’s data and network:
encrypt sensitive e-mail, require password standards,
safeguard server rooms with card access, alarm and
video technology, and have the system penetration
tested
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 NOW LET US LOOK INTO THE DESIGNING PART
OF IT

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 QUESTIONS TO PONDER

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 Who are the players involved?
What are the issues involved?
What are the complexities?
What are the risks?
What is the role of IT?
How can analytics help?

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 Who are the players involved?

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 Supplier selection
Warehousing
Transportation
Secondary transportation
Foreign currency fluctuations
Route planning
Designing the network

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 ISSUES:
MISMATCH BETWEEN DEMAND AND SUPPLY
CAPACITY UTILISATION
BOTTLENECK
- supply constrained
- demand constrained
OPTIMISATION
 Resources
 - cost
 - time

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 WAITING TIME
- sources of waiting time
- limited number of resources
- unpredictable nature of different activity times

CRITICAL PATH
- All those activities that, if delayed, the entire system will
run into a delay

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 SUPPLY CHAIN ANALYTICS

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 Was business running without information for all these
200 years?

What has changed now?

How is it changing the business landscape?

What is the role of data and its analysis in the changed

business landscape?

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 USE OF DESCRIPTIVE ANALYTICS
Use simple descriptive statistics, data visualisation
techniques and business related queries to understand
past data

Objective: innovative ways of summarising existing

data for decision making

E.g. Use data of Oct, Nov, and Dec of 2016, 17, 18 to

understand the sales orders of Amazon
.... And deduce that sales will increase in the month of
December
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 E.g. Most shoppers turn to the right side while
shopping
- have the less/slow moving products on the right to
clear away the stock

People keep on checking the movement status of

products (tracking) purchased from online sites
(collate through number of times the tracking/logistics
site is being checked)
 Update tracking
 Have faster transport

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 PREDICTIVE ANALYTICS
Predicts the probability of a future event
- demand forecasting
- chances of late delivery
- probability of early delivery
- probability of Rupee becoming weak - warehouse
rent increases

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 PRESCRIPTIVE ANALYTICS

Give a prescription on what to do, what decisions to

take – based on description and prediction

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 Descriptiv Predictive Prescriptiv
e analytics analytics e analytics
What What will What is the
happened happen in best course
in the the of action?
past? future?

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 Predictive and Prescriptive Analytics
Techniques
Regression
Logistic and Multinomial Regression
Decision Trees
Markov Chains
Random Forest
Linear Programming
Integer Programming
MCDM
Combinatorial Optimization
Non-Linear Programming
Six Sigma
Social Media Analytics Tools

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 LET’S COME BACK TO THE CORE OBJECTIVE(S)
OF SUPPLY CHAIN

Optimisation of resource use

Minimisation of cost and/or time

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 Optimisation against time, resources, capacity
constraints etc.
So optimise given the constraints - is what we are
looking for

This calls for optimisation techniques

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 THIS MODULE GIVES YOU A HOLISTIC VIEW
OF SUPPLY CHAIN AND MAPS/ CHARTS THE
ROAD AHEAD ON WHAT SUPPLY CHAIN
ANALYTICS IS ALL ABOUT

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 END OF MODULE 1

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