APICS CEO Abe Eshkenazi, CSCP, CPA, CAE -
January 31, 2014
Major news organizations spend a lot of time writing about Amazon—and they should. In 2012, the company made more than $60 billion in sales. Supply chain and operations management professionals also can learn from the innovations at this company. I’m not telling you to rush out and implement a 30-minute drone delivery system. Even Amazon doesn’t expect to have that until 2015. What it has right now, however, is a system that anticipates when and what a customer will want before he or she orders it.
Amazon calls this “anticipatory package shipping,” and last Saturday, the Toronto Star called it “crystal ball business.” According to the newspaper, the same computer and statistical models the company uses to recommend items that a customer may want can be taken a step further, enabling Amazon to presume that an order is imminent, starting the shipping process before the customer actually places the order.
In December, the company earned a US patent for the system. In its patent filing, Amazon indicates anticipatory package shipping will address its challenge with delayed gratification. “One substantial disadvantage to the virtual storefront model is that in many instances, customers cannot receive their merchandise immediately upon purchase.”
The delivery system would “address this disadvantage by getting goods as close to the customers as possible before their order is placed,” writes Joseph Hall for the Star.
Of course, the system is not without risk. There’s a familiar saying in the supply chain and operations management world—garbage in, garbage out. If the data is wrong, the predicted order also is wrong. That would add extra shipping and warehousing costs. Apparently, for Amazon, that risk is worth the potential reward. Amazon representatives offered no comment on the article, electing to keep their trade secrets secret.
Big data at work
The Amazon innovation isn’t necessarily all that new if you consider the following concepts from the APICS Dictionary, 14th edition: Big data is “a collection of data and technology that accesses, integrates, and reports all available data by filtering, correlating, and reporting insights not attainable with past data technologies.” Demand planning is “the process of combining statistical forecasting techniques and judgment to construct demand estimates for products or services (both high and low volume; lumpy and continuous) across the supply chain from the suppliers’ raw materials to the consumers’ needs.”
Are you getting the most from big data and demand planning? This year, these topics will be covered extensively by practitioners and other experts at a variety of different APICS events. Take, for example, two Best of the Best Sales and Operations Planning (S&OP) Conferences, which APICS co-presents with the Institute of Business Planning and Forecasting. The conferences will give attendees the tools to effectively use forecasting and demand planning in the S&OP process. Two locations make this an ideal conference for professionals all over the world. First, May 15–16, 2014, in Amsterdam, Netherlands. Then, right down the street from APICS corporate headquarters, June 12–13, 2014, in Chicago, Illinois. Visit apics.org/events for more information about these or any other APICS conferences.