Accenture Analytics

accenture

Accenture Analytics

Accenture Analytics

How Predictive Analytics Helps

Supply Chains Compete and

Win in Today’s Volatile Business

Environment


Hello, I’m Dick Syatt, and I’m the

host of the Accenture Management

Consulting podcast series. We’re

talking today with Frode Gjendem,

and he’s the Senior Director for Supply

Chain Analytics at Accenture. Our

topic today is about how analytics,

and specifically predictive analytics,

is the key to high performance

supply chain that helps organizations

compete and win in today’s

volatile business environment.

Frode, nice to have you with us, of

course, and analytics is a term that

we hear all the time, so let’s start by

having you discuss how Accenture

defines analytics, please.

Of course, happy to be here. Accenture

looks at analytics across a continuum,

this starts with descriptive analytics

which covers the typical standard

reporting, queries, alerts, which are

familiar to many of the listeners.

Descriptive analytics looks in the back

mirror, at historical data, and helps

companies answer basic questions such

as what happened, why did it happen,

and how much did it hurt us or

benefit us? On the other side, we have

predictive analytics which combines

historical descriptive analytics

with more sophisticated statistical

modeling, forecasting, optimization,

etc., to anticipate the impact on

business outcome. Basically, predictive

analytics helps companies answer

questions like why is this happening,

and what’s the best that could happen

given the decision support that the

analytical analysis has provided?

There are many areas of the supply

chain that are affected by analytics.

Can you tell us how companies today

are using analytics to improve their

business operation?

So, in our experience, obviously many

organizations are already focusing on

one or more of six analytics enabled

objectives. The first one is supply

chain visibility and cost to serve. This

is achieving a descriptive view of the

most important supply chain processes

through key performance indicators,

reports and balance scorecards, as well

as understanding how much it cost

them to serve each customer segment.

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The second one is demand forecasting

optimization. This is using analytical

capabilities and tools to segment

and assign the best forecasting

profile to improve predictions of

future sales, and to incorporate

critical business intelligence to

adjust a baseline forecast.

The third one is network optimization.

This is periodically performing a total

cost of ownership assessment of a

company’s supply chain network.

The fourth is inventory optimization.

Using analytical capabilities to

provide dynamic safety stock and

replenishment order sizes that ensure

the lowest possible inventory level,

while still providing the right service

level for each customer segment.

The fifth is predictive asset

maintenance. This is improving up

times, performance and availability of

manufacturing assets by predicting

when maintenance or when a new part

is required in order to avoid unplanned

down time.

The sixth and final one is spend

analytics. This is understanding how

much a company is spending on

different procurement categories, with

which suppliers, and how a company

can optimize their spend across all

those categories.

There’s clearly a lot of interest

and investment in analytics. Does

Accenture have any evidence that

strong analytic capabilities improve

supply chain performance and lead to

better business outcome?

Yes, it does. So, recently, Accenture

completed comprehensive research

into supply chain challenges and the

characteristics of those businesses,

that have achieved high performance

in this field. Overwhelmingly, we

found that the masters in our survey

are deploying predictive analytic

technologies. As an example, as well

as being four times as likely to achieve

minimum accuracy levels of 80% in

their demand forecasting, they’re twice

as likely to rate their ability to shape

demand as good or excellent, resulting

in up to 50% less finished goods

inventory than their competitor.

Looking to the future, Frode, why

will Accenture’s focus on predictive

analytics be a game changer for supply

change management? What business

issues will it help our clients solve?

So, the priority objectives for

companies must be to drive toward

developing cross-departmental

supply chain analytics capabilities

that enable rapid reaction, as well

as the ability to predict what comes

next in their respective businesses.

These capabilities will not only help

minimize cost across the business,

but can also mitigate risk, improve

customer satisfaction, and even

support top line growth. I would

like to address three examples.

The first one is dynamic cost to serve

optimization. In a volatile uncertain

world, companies need to be able

to adapt rapidly by, for instance,

switching suppliers or manufacturing

capacity, basically this means giving

decision makers the right information

they need to understand, and optimize

the total cost to serve in any given

business scenario.

The second one is after sales profit

optimization, and this covers the

whole after sales life cycle of a

product or a service. It means using

predictive analytics to understand

after sales cost, so, for example,

spare parts allocation, service and

maintenance requirements, and

warranty management. And by doing

this, managers will be able to optimize

customer satisfaction and repurchase

behaviors, as well as fine tune

after sales marketing requirements.

And, overall, an improved customer

’stickiness’ should be a direct benefit

of managing this after sales profit

optimization process.

The third area I would like to mention

is supply chain risk assessment and

simulation. Predictive analytics will

enable managers to identify where

problems are likely to arise along the

supply chain, highlighting critical

areas for risk mitigation. As hyper

competition is driving down prices,

leading many to choose offshoring

as a way to reduce cost and manage

pricing, superior planning analytics

is emerging as a capability that will

separate masters and laggards.


Frode, how would you suggest

that supply chain executives move

forward with improving their

analytic capabilities? How would an

organization know where to focus their

efforts first?

So, I would start with a clear

value based return on investment

orientation. That means they have to

understand what are the strategic

levers for their company, and identify

where analytics will likely make a

difference. Then they will have to

prioritize opportunities according

to business impact and ease of

implementation, and finally make

sure they create a successful project,

or that they have a proof of concept

early in the program. Analytics is

an important change effort, and by

having a successful proof of concept,

the project can show the results, prove

it’s working, and create value which

will help the change effort.

Well, as we come to the end of our

podcast today, Frode, how would you

sum up the opportunity for embedding

analytics into the supply chain?

So in a volatile and competitive

business environment, companies

must bring their products to the

market quicker, more smartly and

more cost effectively than ever before.

This requires a dynamic supply chain

capability that allows companies to

be nimble, responsive, and adaptive.

Predictable analytic capabilities are

at the heart of such a dynamic supply

chain, it provides real time data

driven insight that speeds decision

making and improves business

outcomes. The companies that

succeed in embedding this particular

analytic capability into their supply

chain operations will see improved

business outcomes and competitive

advantage. But it’s important to

remember that every company can

benefit from improving its analytic

capabilities over time and not trying

to eat the whole apple at once.

Well, Frode, thank you for taking the

time to speak with us today, and to our

listeners, thank you for joining us.

For more information related to the

topics discussed in this podcast, or

to learn how Accenture can help you

achieve high performance through

analytics, visit us on the web at

Accenture.com/analytics, or email us

at consultingpodcasts@accenture.com

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About Accenture

Accenture is a global management

consulting, technology services and

outsourcing company, with

approximately 204,000 people serving

clients in more than 120 countries.

Combining unparalleled experience,

comprehensive capabilities across all

industries and business functions,

and extensive research on the world’s

most successful companies, Accenture

collaborates with clients to help them

become high-performance businesses

and governments. The company

generated net revenues of US$21.6

billion for the fiscal year ended

Aug. 31, 2010. Its home page is

www.accenture.com.

Copyright © 2010 Accenture

All rights reserved.

Accenture, its logo, and

High Performance Delivered

are trademarks of Accenture.

ACC10-2902

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