Data-Driven Logistics: The Growing Use of Predictive Analytics in Supply Chain Management

by: Smith and Howard

July 9, 2018

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Logistics companies depend on accuracy, timeliness and the efficient transportation of parts to meet distribution and customer requirements. The challenge is in the constant balancing act between managing inventory levels and meeting customer demand. What if there was a way to make predictions about future events; to know more precisely what the demand is at any given moment? That’s where predictive analytics within the supply chain come into play.

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Predictive analytics is changing the game for distributors and logistics operators. Especially for those using historical and real-time patterns to make such predictions and, as a result, decrease costs, create greater reliability and improve customer satisfaction. 

Connecting the Dots

Tapping big data, predictive analytics uses algorithms to track historical data to anticipate demand, avoid risks and adjust schedules; all of which better enable logistics managers to create proactive solutions. Through predictive analytics, logistics managers can anticipate future behavior by finding patterns, spotting trends and zeroing in on customer preferences.

For example, the logistics industry is already producing data streams through the use of sensors on delivery trucks; beacons, which are devices built on the latest Bluetooth® standards to broadcast their presence to other nearby devices, such as computers and smartphones; the “internet of things” and radar devices. If a shipment is running behind, a carrier can make immediate adjustments to prevent bottlenecks further down the supply chain.

Some logistics companies are using advanced predictive analytics to determine the likelihood of a shipment’s status changing from on time to arriving late. They do this by using simulation models. By examining the probability of a status change, they can determine the date and time for shipments in specific locations.

The Future is Now

According to the 2018 22nd Annual Third-Party Logistics (3PL) Study, which examines leading trends for shippers and 3PLs in the logistics industry, there is a much higher expectation among shippers that seek enhanced analytics to drive more effective supply chain decisions. 70% of the study respondents chose “improving logistics optimization” as the most important use of data for the logistics industry.

If you are not currently employing predictive analytics in your logistics or supply chain management strategy, consider the following advantages:

  • Customer Insight: You can gain market insights about your customers, suppliers and partners that can help you make more intelligent decisions.
  • Last-Mile Efficiencies: Inefficiencies in the last mile of a supply chain can cost up to 28% of the overall delivery cost. Using GPS sensors on transport vehicles and smartphones could allow you to optimize your delivery strategy.
  • Route Optimization: Logistic companies constantly balance risks associated with “over” and “under” supplying resources. Regardless of which form of transport you use, predictive analytics can help you mitigate such risks by understanding exact conditions that enable real-time adjustments, deliver cost efficiencies and satisfy customers.
  • Supply Chain Transparency: Using embedded sensors, all parties can be immediately notified about a delay, including your customers. You can also obtain market insights about your customers’ preferences and buying patterns.
  • B2B Personalization: Through predictive analytics, you can ensure the right seasonal products are delivered to your customers based on geographical regions, and use real-time information to immediately make adjustments based on particular market abnormalities.

Predictive analytics will continue to grow in importance as more advanced tools become available to drive strategic planning. Logistics companies can achieve greater efficiencies and gain a competitive edge by using these tools. Additionally, they can prevent financial losses associated with inaccurate stocking and the mismanagement of deliveries and schedules.

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