Operations Analytics/

Service Management in Key

LECTURE 39-40
Operations Analytics:
Tools and Techniques
Operations Analytics
Operations analytics involves using data and analytics to improve and optimize various
organizational operational processes.
It leverages advanced analytics, machine learning, and data visualization techniques to gain insights
into operational activities, identify patterns, and make data-driven decisions.

Operations Analytics Applications

Let’s look at some of the operations analytics applications
1. Data Collection and Integration:

§ Operations analytics begins with collecting relevant data from various sources within an
organization. This data can include information from production processes, supply chain
activities, customer interactions, and more.

§ Integrating data from disparate sources is crucial to creating a comprehensive view of the
operational landscape.

For example, Reliance Industries, a conglomerate interested in various

sectors, including petrochemicals, refining, and telecommunications,
uses operations analytics to integrate data from its diverse business
units for comprehensive insights into its operations.

2. Descriptive Analytics:

§ Descriptive analytics involves examining historical data to understand what has happened in
the past. It helps identify trends, patterns, and key performance indicators (KPIs) related to
operational activities.

§ For example, operations analysts might analyze production data to identify bottlenecks,
downtime patterns, or resource utilization trends.

For example, Tata Motors utilizes descriptive analytics to analyze

historical production data, identifying trends and key performance
indicators to optimize its manufacturing processes and improve overall
operational efficiency.

3. Predictive Analytics:

§ Predictive analytics uses statistical algorithms and machine learning models to forecast future
trends and outcomes. In operations, this can be applied to predict equipment failures, demand
fluctuations, or process deviations.

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§ For instance, predictive maintenance can anticipate equipment failures and proactively
schedule maintenance activities, minimizing downtime.

For example, Wipro employs predictive analytics to forecast demand for its
services, anticipate project timelines, and proactively address potential
challenges in project delivery.

4. Prescriptive Analytics:

§ Prescriptive analytics goes beyond predicting outcomes to recommend optimizing processes or

mitigating potential issues. It involves using optimization and simulation techniques.

§ Prescriptive analytics can suggest optimal production schedules, inventory levels, or supply
chain routes to maximize efficiency and minimize costs.

For example, Mahindra & Mahindra applies prescriptive analytics to

optimize production schedules, inventory levels, and supply chain
processes, ensuring efficient operations and cost savings.

5. Real-time Monitoring and Analytics:

§ Operations analytics is increasingly focused on real-time monitoring of processes. This involves

continuous data streaming and immediate analysis to detect anomalies or issues as they occur.

§ Real-time analytics is essential in dynamic environments, such as manufacturing plants or

financial transactions, where timely interventions are critical.

For example, HDFC Bank leverages real-time analytics to monitor financial

transactions, detect anomalies, and enhance fraud detection and prevention
mechanisms, ensuring the security and integrity of its banking operations.

6. Supply Chain Optimization:

§ Operations analytics is widely applied in supply chain management to optimize inventory levels,
logistics, and distribution. It helps minimize stock outs, reduce excess inventory, and improve
overall supply chain efficiency.

§ Advanced analytics can also assist in predicting demand fluctuations and adjusting supply
chain strategies accordingly.

For example, ITC Limited, a diversified conglomerate with businesses in FMCG,

agribusiness, and more, uses operations analytics to optimize its supply chain,
ensuring timely and cost-effective distribution of its products.

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7. Quality Control and Process Optimization:

§ Operations analytics plays a crucial role in quality control by analyzing data from production
processes to identify defects, deviations, or inefficiencies.

§ Organizations can improve product quality and reduce waste by optimizing manufacturing
processes based on analytics insights.

For example, Sun Pharmaceuticals employs operations analytics to enhance quality

control in its manufacturing processes, ensuring compliance with regulatory
standards and minimizing production errors.

8. Customer Experience and Service Optimization:

§ Operations analytics can be applied to enhance customer experience by analyzing customer

interactions and feedback. It helps identify improvement areas in customer service, order
fulfillment, and delivery processes.

§ Understanding customer behavior through analytics can inform decision-making to tailor

products and services more effectively.

For example, Amazon utilizes operations analytics to analyze customer behavior,

optimize order fulfillment processes, and enhance the overall online shopping
experience through personalized recommendations and efficient delivery services.

9. Energy Management:
Energy consumption is a significant operational cost in sectors such as manufacturing.
Operations analytics can be used to monitor and optimize energy usage, identifying
opportunities for energy efficiency and cost savings.

For example, Tata Power applies operations analytics to monitor and optimize
energy consumption, identifying opportunities for energy efficiency and
sustainable practices in its power generation and distribution processes.

10. Compliance and Risk Management:

Operations analytics aids in monitoring and ensuring compliance with regulations and industry
standards. It also helps identify and mitigate operational risks by analyzing historical data and
predicting potential risks.

For example, Infosys employs operations analytics to ensure compliance with

regulatory requirements, manage operational risks, and enhance the security
and reliability of its IT infrastructure.

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Forecasting Techniques for Demand Planning and Inventory
Management
Forecasting techniques for demand planning and inventory management are crucial in helping
businesses predict future demand, optimize inventory levels, and improve overall supply chain
efficiency.

For example, Starbucks uses predictive analytics to anticipate the demand for
different coffee blends in each store, ensuring it always has the right amount of
coffee beans without excess inventory.

Various methods are employed, ranging from simple time-series analysis to more advanced
machine-learning algorithms.

Now, let's delve into some key forecasting techniques:

1. Time Series Analysis: Time series analysis involves studying past data points to identify
patterns and trends that can be used to predict future values.

§ Moving Averages: This technique involves calculating the average of a set of data points
within a moving time window. It helps smooth out fluctuations and highlight trends.

§ Exponential Smoothing: Assigns exponentially decreasing weights to older data points,

giving more importance to recent observations. It adapts to changes in the data over time.

2. Quantitative Forecasting: Quantitative forecasting relies on historical data and statistical

modeling to predict future demand.

§ Regression Analysis: Examines the relationship between the dependent variable (demand)
and one or more independent variables (factors influencing demand). Helpful in
understanding the impact of different factors on demand.

§ Time Series Decomposition: Decomposes time series data into components such as trend,
seasonality, and random variation. It helps understand and predict patterns within the data.

3. Qualitative Forecasting: Qualitative forecasting relies on expert judgment and subjective

opinions to predict future demand.

§ Delphi Method: Involves a group of experts providing iterative, anonymous opinions on

future demand. The process continues until a consensus is reached.

§ Market Research and Surveys: Gathering customer opinions, preferences, and market
insights to predict future demand.

4. Causal Models: Causal models examine the cause-and-effect relationships between variables to
predict future demand.

§ Econometric Models: Apply economic theories and statistical techniques to predict

demand based on income, price, and other financial indicators.

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 § Input-Output Models: Analyze the interdependencies between different sectors of the
economy to understand how changes in one industry can affect demand in another.

5. Machine Learning (ML) Techniques: ML algorithms use historical data to learn patterns and
make predictions without explicit programming.

§ Regression Algorithms: Linear regression, decision trees, and random forests can be used
for demand forecasting. They learn relationships between input features and demand.

§ Neural Networks: Deep learning techniques, such as neural networks, can capture complex
data patterns and be applied to demand forecasting tasks.

6. Seasonal Adjustments: Seasonal adjustments account for regular, recurring patterns in demand
associated with specific times of the year.

§ Seasonal Decomposition of Time Series (STL): Decomposes time series data into trend,
seasonal, and residual components, enabling more accurate forecasting by considering
seasonality.

7. Demand Sensing: Demand sensing uses real-time data, such as point-of-sale information, to
adjust forecasts dynamically.

§ Sensor Data and IoT: Incorporating data from sensors and the Internet of Things (IoT)
devices to capture real-time information about customer behavior, helping in adjusting
forecasts on the fly.

8. Forecast Collaboration: Collaboration involves integrating inputs from various stakeholders in

the supply chain to improve forecast accuracy.

§ Collaborative Planning, Forecasting, and Replenishment (CPFR): Involves sharing

forecast data and collaborating with suppliers, distributors, and retailers to create a more
accurate and synchronized demand plan.

References:
§ Kutay, J. (2022, June 13). A comprehensive guide to Operational Analytics. Striim.
https://www.striim.com/blog/comprehensive-guide-operational-analytics/