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Prescriptive Analytics Creates Healthier Supply Chain

The traditional supply chain and the supply chain management function are being morphed into an integrated value chain. This optimization makes up for a more efficient flow of supplies and products; and more importantly, an emphasis in customer and business value.

To achieve this transformation, supply chains need to build consistent and constant growth in the way the organization uses advanced analytics, shifting from one way of analyzing data to another according to projected and expected results.

The need for speed vs. the need for valuable analysis

Using advanced analytics in a smart way helps create a value chain through improved decision making. Prescriptive analytics supports optimization and planning in order to allow organizations to set better goals. “Previous analytic models have not been able to understand how different actions, in multiple scenarios, for example product development, supply chain optimization, pricing, marketing mix, sales strategies, fulfillment options, etc., would impact on consumer demand,” said Hansa Andersson, senior director and industry advisor for EMEA at Oracle and who spoke on value chain transformation at the Oracle Cloud Day Helsinki, Finland, part of the global Oracle Cloud Days Series last month. “Maybe we, as a brand, might be able to change preferences, not only understand customers' preferences,” he added.

Hanza Andersson explains supply chain performance and customer and product value.
Image: Susan Fourtané

Hanza Andersson explains supply chain performance and customer and product value. Image: Susan Fourtané

Dynamic pricing is a good example of how results can be influenced. “By shaping demand based on the most up-to-date information, companies can improve results,” explained Andersson.

The importance of prescriptive analytics in value chain transformation

Prescriptive analytics, a step beyond predictive analytics, helps supply chains make the best decisions according to their objectives in order to arrive at optimal solutions. By combining, in a balanced way, both predictive and prescriptive analytics, organizations can guarantee both efficiency and effectiveness in the supply chain.

Whereas predictive analytics gives understanding of what drives customers to buy certain products shedding light on what products they want, prescriptive analytics helps optimize scheduling, production, and inventory to better deliver what customers want in the best way. “I see prescriptive analytics as the customer voice finally finding its way into value chain operations,” said  Andersson. For Andersson, value chain activities have traditionally been managed based on forecasting models of what could be expected to happen in the future, and where the focus has been on selecting the most likely scenario from a variety of many possible scenarios.

Big data and advanced analytics transform and reinvent traditional supply chain

OEMs can no longer predict what their customers will buy this year based on their last year's purchases. Production manufacturing of electronics must be synchronized with actual demand by re-evaluating of the physical layout of the supply chain. By doing this, OEMs can reduce lead times from source to customer by treating the value chain as a whole, rather than as a sequence of silos.

“In the end of every line there is always a customer generating demand for a product or service,” said Andersson. In a world defined by endless consumer choices and demand for transparency, businesses need to understand not just what scenarios might happen in the future, but also what different actions are available and how each affects business performance, he said.

OEMs must focus on how to transform and change the future of their businesses based on the information they have today—by adding a prescriptive approach to their analytics.

Increase value from consumer marketing, brand equity, and trade management investments.
Image: Susan Fourtané

Increase value from consumer marketing, brand equity, and trade management investments. Image: Susan Fourtané

Collecting & analyzing data for multiple products and households where they are being sold in real-time  

For the electronics OEM, customer information provides a wealth of valuable data. It is essential to provide weekly insight based on individual interactions and behaviors collected from real-time data. “Customer experience is the new kid in town,” said Andersson, who emphasizes brand transparency as a builder of customer loyalty.

To illustrate how supply chains can benefit from prescriptive analysis of data, Andersson presented a case on predictive understanding of customer behavior: Amazon predictive shipping. “Amazon predicts customers' expectations and ships all that into its warehouses because they can foresee what's going on. They have the capability of prescriptive understanding,” he said.

By doing this, Amazon can ship their products the same or next day without delays. “To me, prescriptive analytics enables a better understanding of today's fickle customer and makes customer centricity the main competence and value in any business,” Andersson said.

Traditional supply chains are transforming into integrated value chains at a great speed. Today's information provides the wisdom for the future of the organization.

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