“I am from a state that raises corn and cotton and cockleburs and Democrats, and frothy eloquence neither convinces nor satisfies me. I am from Missouri. You have got to show me.” – William Duncan Vandiver, US Congressman, speech at 1899 naval banquet
“How are you going to incorporate big data into your supply chain planning processes?”
It's a question we hear often (mostly from fellow consultants).
Our typical response is: “I'm not sure. What are you talking about?”
Them: “You know, accessing social media and weather data to detect demand trends and then incorporating the results into your sales forecasting process.”
Us: “Wow, that sounds pretty awesome. Can you put me in touch with a retailer who has actually done this successfully and is achieving benefit from it?”
I'm not trying to be cheeky here. On the face of it, this seems to make some sense. We know that changes in the weather can affect demand for certain items. But sales happen on specific items at specific stores.
It seems to me that for weather data to be of value, we must be able to accurately predict temperature and precipitation far enough out into the future to be able to respond. Not only that, but these accurate predictions need to also be very geographically specific – markets 10 miles from each other can experience very different weather on different days.
Seems a bit of a stretch, but let's suppose that's possible. Now, you need to be able to quantify the impact those weather predictions will have on each specific item sold in each specific store in order for the upstream supply chain to respond.
Is that even possible? Maybe. But I've never seen it, nor have I even seen a plausible explanation as to how it could be achieved.
With regard to social media and browsing data, I have to say that I'm even more skeptical. I get that clicks that result in purchases are clear signals of demand, but if a discussion about a product is trending on Twitter or getting a high number of page views on your e-commerce site (without a corresponding purchase), how exactly do you update your forecasts for specific items in specific locations once you have visibility to this information?
If you were somehow able to track how many customers in a brick and mortar store pick up a product, read the label, then place it back on the shelf, would that change your future sales expectation?
Clearly there's a lot about Big Data that I don't know.
But here's something I do know. A retailer who recently implemented flowcasting is currently achieving sustained daily in-stock levels between 97% and 98% (it was at 91% previously – right around the industry average). This is an ‘all in' number, meaning that it encompasses all actively replenished products across all stores, including seasonal items and items on promotion.
With some continuous improvement efforts and maybe some operational changes, I have no doubt that they can get to be sustainably above 98% in stock. They are not currently using any weather or social media Big Data.
This I have seen.