By using automated data collection software to feed information into its big data analytics program, British grocery and merchandise retailer Tesco has dramatically boosted profits and more proactively met consumer demands.
Since 2006, Tesco has used big data analytics to improve its supply chain, primarily targeting its inventory management systems. According to Information Age, Tesco's new supply chain optimization program helped the company save up to £16 million (approximately $24.5 million) annually because it is now better able to predict customer buying habits and track the effectiveness of special sales offers.
In particular, Tesco has developed an analytics model that uses weather patterns to properly stock store shelves. By looking at historical buying data and expected temperature trends, the business can accurately predict what consumers in a specific area will want to purchase and then supply locations accordingly. For example, if warm weather is expected to come to an area after a particularly brutal cold spell, Information Age reported that Tesco will ensure that surrounding stores are well stocked with more barbecue meats and less cat litter. The program is even powerful enough to detect local habits, as what's considered hot or cold varies by region.
"By adding this effect to model, we reduced out of stock for good weather products by a factor of four," Duncan Apthorp, Tesco's supply chain systems development program manager, told Information Age. "That means there is a 97 percent change of customers who come into the store finding what they want, whereas other supermarkets might not have it."
Additionally, the retailer uses big data analytics to track the effectiveness of each sale or special offer at its stores, the news source reported. That way, the company is able to determine which sales should be run again and how store shelves can be better stocked to accommodate increasing or decreasing demand of certain products.
"That [program] has revealed some interesting insights," the news source said. "For example, a 'buy one, get one free' offer works better than a 50 percent discount for non-perishable goods, such as a cooking sauces, but the reverse is true for fruit and vegetables."
In order for supply chain analytics to work effectively, companies need to have complete oversight over materials at every point in the supply chain. To do this, businesses should leverage automated data collection software. This way, an organization can quickly and accurately determine where any given item is and divert it to the right location in real time. In addition, such systems can collect large stores of data, which can then be effectively analyzed by solutions such as the ones used by Tesco.
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