Module 5:Logistics and Supply Chain Analytics:

Supply chain analytics is the analysis of information companies draw from a number of
applications tied to their supply chain, including supply chain execution systems for
procurement, inventory management, order management, warehouse management and
fulfillment, and transportation management .

Supply chains involve many different activities, people and organizations, which produces
an immense amount of information.

Logistics:Logistics analytics is a term used to describe analytical procedures conducted

by organizations to analyze and coordinate the logistical function and supply chain to
ensure smooth running of operations in a timely, and cost-effective manner.
• What Is the Role of Supply Chain Analytics?

• Supply chain analytics make it possible for companies to gather, assess and act
upon the data generated by their supply chains.
• It allows them to make not only quick adjustments, but long-term strategic
changes that will give the business a competitive advantage.
• Because supply chains often span the globe and can include hundreds of different
entities, managing this information manually or via spreadsheets is almost
impossible.
• What Are the Types of Supply Chain Analytics?

• There are four primary types of supply chain analytics that companies should
consider right now to build more efficient operations that could save time and
money. Here’s a brief description of each:
• Descriptive Analytics
• Descriptive analytics looks at what happened in the past. They can identify
patterns in historical data. This information could come from both internal supply
chain execution software and external systems that offer visibility across suppliers,
distributors, various sales channels and customers. Analytics can compare the
same type of data from different periods to identify patterns and hypothesize
potential causes of changes.
• Predictive Analytics
• predictive analytics help companies predict what could happen and
the business impact of different scenarios, including potential supply
chain disruptions and other outcomes. By forcing leaders to consider
these possible scenarios before they happen, they can be proactive
rather than reactive. They have time to prepare a strategy for an
expected spike or fall in demand, for instance, and can react
accordingly.
• Prescriptive Analytics
• Prescriptive analytics combine the results of descriptive and predictive analytics to
suggest what actions a busines should take now to reach its desired goals. This type of
analytics could help companies tackle problems and fend off major supply chain
disruptions, potentially by evaluating both their own information and that of partners.
Since prescriptive analytics are more complex, they require more robust software that
cans swiftly process and interpret a lot of data.
• Cognitive Analytics
• Cognitive analytics try to replicate human thinking and behavior, and they can help organizations
answer difficult, complicated questions. These analytics are capable of understanding things like
context when interpreting results.

• Benefits of Supply Chain Analytics

• The benefits of accurate supply chain analytics are profound and lasting. They can help at every
link in the supply chain by finding patterns and revealing other valuable insights. They can uncover
opportunities for process improvements and call attention to problems operations leaders may not
have seen coming. This ability to pinpoint existing supply chain risks and foresee future ones
coming may be the most valuable benefit of analytics, as these disruptions can have a big impact
on the bottom line.

• Access to real-time analytics also helps firms gain a better grasp on their profitability, avoid
stockouts, reduce late shipments and adapt to shifting customer preferences.
• Challenges of Supply Chain Analytics

• One of the foremost challenges of supply chain analytics is a relatively high barrier to entry. For those that
currently lack the systems to gather these insights, purchasing the technology could be a significant—though
worthwhile—investment.
• Applications of predictive analytics in supply chain:

• Supply Chain Predictive Analytics: What Is It and Who's Doing It?

• supply chain leaders can address supply chain challenges, reduce costs and at the same time improve service
levels. Predictive analytics techniques allow organizations to identify patterns and trends hidden in their data
to understand market trends, identify demand and establish appropriate pricing strategies.

• What Is Predictive Analytics?

• As its name implies, predictive analytics is about predicting future trends such as sales demand, exchange
rates and other important supply chain metrics. The technique relies on the application of statistical modelling
and regression analysis to historical data to determine and understand trends and formulate future trends.
• How Are Supply Chain Managers Using Supply Chain Predictive Analytics?
• Numerous examples exist of where supply chain professionals are winning with predictive analytics. These
include demand forecasting, predictive pricing strategies, inventory management, logistics and predictive
maintenance.

• Demand forecasting
• Understanding and forecasting demand accurately remains a key challenge for organizations. Demand is
never linear and is affected by numerous variables, some of which are outside the organization's control.
Predictive analytics allows organizations to improve demand forecasting through analyzing past and current
trends, and together with market intelligence and economic forecasts, to forecast demand.
• Predictive pricing strategies
• Predictive pricing strategies can overcome the limitations of historical cost-plus pricing strategies or those
that use a predetermined margin. Instead, by forecasting demand for the product, it's possible to adjust prices
dynamically to what the market can bear, A good example of predictive pricing is the pricing strategy used by
Uber and other ride-hailing companies, as well as those used by some airlines.

• Inventory management
• Predictive analytics allows organizations to determine optimal inventory levels to satisfy demand while
minimizing stock. Using sophisticated models, predictive analytics allows supply chain managers to
determine detailed inventory requirements by region, location and usage. In this way, safety stock levels can
be reduced and inventory placed where required. This ability is particularly useful when organizations have
multiple distribution points, as it helps supply chain managers determine whether stock should be held
centrally or at regional facilities.
• Shipping and logistics
• Shipping and transport costs often account for a significant percentage of the final product price. Using
predictive analytics, it's possible to determine optimal shipping frequency and quantity to meet demand while
minimizing costs. Predictive-route-planning can determine the fastest routes taking into account traffic
congestion, distance, weather and delivery points. Additionally, smart sensors can monitor fuel consumption,
tire pressure, driving style and vehicle condition.

• Supply chain predictive maintenance techniques

• Predictive equipment monitoring can identify when servicing is necessary as well as provide an early warning
of component failure. This information may be used to order parts when required, allowing organizations to
reduce spare inventory holdings and avoid unplanned equipment outages. A good example is the use of the
Airbus Skywise platform that predictively tracks aircraft from Delta Air Lines and monitors component
condition. This allows the airline to anticipate aircraft maintenance and avoid unplanned downtime.

•
• Moving Average Formula

• A moving average is a technique that calculates the overall trend in a data set. In operations management, the
data set is sales volume from historical data of the company. This technique is very useful for forecasting
short-term trends. It is simply the average of a select set of time periods.
• It's called 'moving' because as a new demand number is calculated for an upcoming time period; the oldest
number in the set falls off, keeping the time period locked. Let's look at an example of how the sales manager
at ABC Inc. will forecast demand using the moving average formula.
The formula is illustrated as follows:
Where n = the number of time periods in the data set. The sum of the first time period and all
additional time periods chosen is divided by the number of time periods.
Bob decides to create his demand forecast based on a 5-year moving average.
This means that he will use the sales volume data from the past 5 years as the data for the calculation.

Moving Average = (n1 + n2 + n3 + ...) / n

Exponential smoothing
Exponential smoothing is a sophisticated approach to supply chain forecasting. It uses weighted averages with the
assumption that past trends and events will mirror the future.
When compared to other quantitative methods, it makes it easier to come up with data-driven predictions without the
need to analyze multiple data sets.
With the right tools, the exponential smoothing method can be easy to use and is ideal for short-term forecasting.
• Types of Exponential Smoothing

• There are three main types of exponential smoothing time series forecasting methods.

• A simple method that assumes no systematic structure, an extension that explicitly handles trends, and the
most advanced approach that add support for seasonality.

• Single Exponential Smoothing

• Single Exponential Smoothing, SES for short, also called Simple Exponential Smoothing, is a time series
forecasting method for univariate data without a trend or seasonality.

• It requires a single parameter, called alpha (a), also called the smoothing factor or smoothing coefficient.
• This parameter controls the rate at which the influence of the observations at prior time steps decay
exponentially.
• Double Exponential Smoothing

• Double Exponential Smoothing is an extension to Exponential Smoothing that explicitly adds support for
trends in the univariate time series.

• In addition to the alpha parameter for controlling smoothing factor for the level, an additional smoothing
factor is added to control the decay of the influence of the change in trend called beta (b).
• Triple Exponential Smoothing

• Triple Exponential Smoothing is an extension of Exponential Smoothing that explicitly adds support for
seasonality to the univariate time series.

• This method is sometimes called Holt-Winters Exponential Smoothing, named for two contributors to the
method: Charles Holt and Peter Winters.

• In addition to the alpha and beta smoothing factors, a new parameter is added called gamma (g) that controls
the influence on the seasonal component.
• As with the trend, the seasonality may be modeled as either an additive or multiplicative process for a linear
or exponential change in the seasonality.
• Logistics Function:
• 6 Logistics activities or 6 Functions of logistics in an organization

• Logistics is also known as Physical Distribution management. Logistics is an activity carried out by many
different companies for the physical distribution of goods. FMCG, consumer durables, and many other
industries regularly manufacture goods. These goods have to be transported to the distributors and dealers and
lastly to the end consumer. Logistics is the means to transport the goods from the company to the middlemen
or the end consumer.
Logistics activities or Functions of Logistics
1) Order processing
The Logistics activities start from the order processing which might be the work of the commercial department in an
organization. The commercial department is the one who ensures that the payment terms and the delivery terms have
been met and then processes the order from within the company.
) Materials handling
Material handling is the movement of goods within the warehouse. It involves handling the material in such a way
that the warehouse is able to process orders efficiently. Although it may sound a mundane task, it is an important one
and an ongoing activity in any warehouse.
• 3) Warehousing

• If we take the example of LG or Samsung, these are consumer durable companies which are present in
multiple countries. Their manufacturing might be at one point, but the distribution is all across the world.
Thus, warehousing plays a huge role and is one of the important Logistics activities.

4) Inventory control

If a firm has 100 units of a product in stock, but the demand is only of 10 units, then the company has uselessly
invested in 90 units. This is money which can be used as a working capital and it is money on which banks are
applying interest.

• 5) Transportation

• Now we come to one of the major logistics activities which is one of the most resources heavy and revenue
heavy segment of logistics. There is a single reason that transportation is costly – Fuel. Be it petrol, Diesel or
gas, fuel is costly, and it is mostly consumed in transportation activities. This is why companies spend lakhs to
control the transportation expenses because it is one of the highest variable expense to any company.
• 6) Packaging

• There are two types of packaging – One which the customer sees on the shelf of supermarkets or
hypermarkets where the package appears attractive and makes the customer buy the packages. The other is
transport packaging where the products are packed in bulk so as to avoid any breakage or spillage and yet
allow them to transfer huge volumes of the product safely from one place to another.
• Estimation of profitability using logistic regression

• The selection of classifiers which are profitable is becoming more and more important in real-life situations such
as customer churn management campaigns in the telecommunication sector. In previous works, the expected
maximum profit (EMP) metric has been proposed, which explicitly takes the cost of offer and the customer
lifetime value (CLV) of retained customers into account.
• It thus permits the selection of the most profitable classifier, which better aligns with business requirements of
end-users and stake holders.
• However, modelers are currently limited to applying this metric in the evaluation step. Hence, we expand on the
previous body of work and introduce a classifier that incorporates the EMP metric in the construction of a
classification model.