Could Optimization Help Break Supply Chain Gridlocks?
These case studies prove the effectiveness of predictive analytics when it comes to challenges such as supply chain gridlocks
The pandemic prompted a number of short, sharp, shocks across the globe – including a notable impact on the supply chain. As whole sectors closed down to mitigate the spread of the virus, some supply chains strained and, in some cases, snapped.
One technology that has historically been powerful in solving supply chain problems is AI-powered optimization. We’re now seeing its increasing adoption as a tool to improve business operations and outcomes across all walks of life — from finance, healthcare and retail, to transportation, logistics management, among many, many others.
Here are a few examples, many of them winners of the FICO Decisions Awards:
Complex Supply Chain Management
The advanced business analytics team at global chemical giant BASF, opted for FICO® Xpress Optimization to simultaneously map all of its supply chains and weigh up the economic value of an investment. The sector's supply chain is highly complex. When making strategic investment decisions, multiple global production sites, interdependent plants, manifold products and various businesses, need to be considered.
Streamlining Production
German baker Harry-Brot also streamlined production - and subsequently reduced costs - thanks to optimization. It was able to ensure the smooth production of around 1,000 varieties of baked goods, distributed to 9,300 stores, via 73 different production lines across nine sites. Each line delivers a differing set of products, differing production speed and capacity. But the company wanted to continually meet its customers' changing needs. FICO® Xpress Optimization ensured the company was able to dramatically improve both the efficiency of its highly complex baking production and distribution operations.
Getting the Fleet There On Time
Elsewhere, optimization has helped Avis Europe, part of global car rental giant Avis Budget Group, further improve the efficiency of its vast fleet use, resulting in millions of dollars in revenue gains.
The car rental sector has, like most of the travel industry, undergone significant change largely driven by technology innovations and emerging consumer expectations.
As the industry has evolved, key players have made automation improvements and developed solutions geared towards forecasting, pricing, simplifying processes and enhancing customer experience. This has resulted in tighter margins amid higher expectations from customers. But thanks to FICO® Xpress Optimization, Avis Europe has been better placed to competitively offer the right car, at the right place and time, to the right customer.
Adapting to COVID Challenges
When the pandemic hit Sweden, Karolinska University Hospital in Stockholm, realised it needed to quickly adapt staff schedules to accommodate the big influx of new nurses and healthcare workers manning its intensive care unit.
It turned to Jeppesen, a division of Boeing behind the development of market-leading digital aviation software Jeppesen Crew Rostering. It’s underpinned by FICO® Xpress Optimization. Within a matter of days, the Boeing team created rosters for more than 300 Karolinska nurses and healthcare workers, resulting in more workable shifts for staff and better coverage for the hospital at the height of the pandemic.
Uncertain Times Call for Analytic Rigor
Elsewhere, many organisations have been obliged to undergo a steep learning curve and swift optimization investment to help meet their emerging supply chain demands. But the expenditure will always be worth it, as the opportunity to pre-emptively simulate the impact of any changes drives greater process efficiencies and performance visibility to businesses and ultimately bolsters revenue.
In simple supply chain terms, adopting optimization can help lower costs, reduce inventory and lower transportation and labour costs, while improving sales forecasting and spend up analysis. Real-time insight into which modifications, corrections and alternative responses will provide the best results is priceless during periods of economic uncertainty.
During uncertain times decision optimization delivers you and your customers what they need most - speed and control. At FICO, optimization is championed among our clients across the globe. It quickly becomes the decision-making cornerstone of an organization. To find out where the quick wins are, read the blog on the power of combing optimization with consulting.
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FICO® Score High Achievers: Is Age the Only Factor?
<p>FICO’s latest research on <a href="http://www.fico.com/en/blogs/risk-compliance/us-credit-quality-rising-the-beat-goes-on/" target="_blank">national FICO® Score distribution</a> shows that US credit quality continues to trend upwards, with an increasing number of consumers scoring in the highest scores ranges. Given that, we decided it was time to refresh our study on “<a href="http://www.fico.com/en/blogs/risk-compliance/infographic-what-does-a-high-credit-scorer-look-like/" target="_blank">FICO® Score high achievers</a>,” where we examine the credit behavioural profiles of consumers with higher credit scores.</p> <p>As expected, our latest study showed that older people generally have higher scores, as has been the case in our <a href="http://www.fico.com/en/blogs/risk-compliance/age-before-beauty-credit-worthiness-before-youth/" target="_blank">past research</a>. This is largely because they have trade lines that have been open longer, which leads to higher scores (assuming the trade lines are in good standing and all other things equal). The most credit savvy among you will remember that length of credit history accounts for roughly 15% of the overall <a href="http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx" target="_blank">FICO® Score calculation</a>.</p> <p>But for younger consumers, it isn’t too helpful to say, “just wait until you are 50 years old, and that will fix things!” Thus, I decided to dive deeper with our analysis, including looking at the credit behavioural characteristics of younger consumers with high FICO® Scores.</p> <p>In this analysis, I looked at credit characteristics for the two highest score bands, 750-799 and 800-850, which have about 16% and 23% of the population, respectively. I further broke this down by looking at the characteristics of the youngest 15% in each group, which occurs at age 29 for the 750-799 group and 43 for the 800-850. We used FICO<strong>®</strong> Score 9 for our analysis, and examined typical variables of the categories that go into the make-up of the score.</p> <p><a href="http://www.fico.com/en/blogs/wp-content/uploads/2016/10/FICO-Score-High-Achiever-table.png"><img class="alignnone size-full wp-image-29367" src="http://www.fico.com/en/blogs/wp-content/uploads/2016/10/FICO-Score-High-Achiever-table.png" alt="fico-score-high-achiever-table" width="715" height="747" /></a></p> <p>Since there’s a lot to dissect in this chart, I’ll highlight a few findings that struck me: <ul> <li><strong>Credit history.</strong> Higher scores are undoubtedly associated with a longer time on file. What’s striking is the higher average time on file for the 800+ group, both overall and for revolving accounts (the most common trade line). Clearly, it helps to start credit use early in life – but that’s not the sole determining factor for high scoring. The younger cohorts in both the 800+ and 750-799 groups have time on file medians significantly less than their older counterparts.</li> <li><strong>New credit.</strong> High credit scorers do, in fact, pursue new credit. We see little variation in months since last trade line opening and last inquiry among all groups observed.</li> <li><strong>Pay on time.</strong> As you might expect, the further in the past the delinquency, the higher the score – and that’s <u>if</u> a delinquency ever happened. 95% of the 800+ people and 72% of the 750-799 group have never been delinquent, which is a striking contrast to the 57% for the total population. The percentages for the younger groups are even higher, especially so for the 750-799ers. Collection items are also scarce for these high scorers. While 23% of the national population have collection items greater than $99, the figures are only 0.5% for the 800+ group and 3% for the 750-799 group. It is clear that, in conjunction with starting a credit file early, paying on time is a key trait of the FICO® Score high achiever.</li> <li><strong>Balance and utilization.</strong> Finally, we look at how credit is being used, focusing on revolving product use. (Since most people only have one mortgage or one auto loan, variation in instalment product figures is minimal and driven by payment history, which is near perfect for high scorers, as we’ve seen.) FICO® Score high achievers tend to have more open revolving accounts. While the % active trades and utilization are generally lower, by no means do high scorers avoid the use of credit products. What drives the difference here is the amount of <u>available</u> revolving credit utilized. The 800+ group is roughly 1/4 of the national median, both in total and on their highest utilized card; they also have lower balances and more cards<em>. </em>The 750-799 group is more active and higher utilized, but still only at 2/3 of the national figures. The young 750-799 group compensate with lower revolving balances and, as a result, lower utilization, which is in line with what we see for the 800+ group.</li> <li><strong>Benchmarks.</strong> I’d like to point out that while this study provides good benchmarks of the typical credit traits of the FICO® Score high achiever, individual credit profiles will vary widely. And keep in mind that when we sort groups of consumers as a whole by different behaviours, some results may look superficially odd. For example, the 800+ band has a longer median average open account time (128 months) than average revolving months on file (140 months).</li> </ul> So, what do we conclude? A huge takeaway is that high scorers don’t have too much in the way of serious delinquencies and negative public record data.</p> <p>In most respects, the young 800+ people are like their peer group. They really only differ markedly in their shorter credit history and higher non-mortgage balance, both of which are a function of life stage. Our results show that you don’t have to be a credit product hermit; these high scorers have more credit cards. The takeaway is to start credit activity early and maintain well-managed and moderate usage.</p> <p>In many ways, the young 750-799 people are more interesting because their age profile is much younger. Their credit characteristics differ more from their peer group, particularly in terms of length of credit history. They compensate by having almost pristine credit records and lower balances.</p> <p>Ultimately, 39% of US consumers are FICO® Score high achievers, which they accomplish by following common-sense credit practices. It ain’t rocket science!</p>
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