How Lytica became a unique analytics company: Part 8

Part 8: Suprising Insights

Last week I purchased the book Drawdown, edited by Paul Hawken. It purports to contain the most comprehensive plan ever proposed to reverse global warming. It lists the top 100 things that mankind can do to significantly impact the problem. This compilation by world renowned experts is surprising in that none of the things that were, in my mind, the most critical actions, appear anywhere near the top of the list. LED lighting is 44th, cars rank 49th and composting is 60th. Topping the list at #1 is refrigeration, followed by onshore wind turbines and reducing food waste. Educating girls ranks 6th, family planning 7th and silvopasture is 9th. Silvopasture is a farming method where animals, such as cows, are raised amongst trees rather than in pastures. It was surprising to realize that when I drive through the country, the cows that I see in the fields are a bigger problem than I am with my pickup truck! We are both using gas but theirs is doing more harm.

In the area of climate change, I have been victim to a lack of data and subject to the popular rather than the facts. Climate change is a critical issue facing all of us and having our actions prioritized to have the most impact matters. I am not saying that the steps which have been taken so far to address climate change don’t matter or have not had an impact; rather, more effort needs to be focused on the critical elements that appear to be under supported today. Now that we know the impact of key contributors, we need to modify our behaviours to support them.

With a complex subject such as this the first step, data analysis, is essential. This is clearly a big data problem and tools adequate to address this type of analysis may not have existed when the popular issues were tabled. Recent breakthroughs in Artificial Intelligence have enabled massive amounts of data to be correlated, bringing to the forefront new insights that may not have been explored in the past. These new insights often conflict with traditional wisdom and practices, making their acceptance painfully slow in an environment that is running out of time. New knowledge must be accompanied by behaviour change to yield success.

While a failure in supply chain is not as catastrophic as a failure in the environment – it might be to your company but the world will probably survive your misfortune – I do see a parallel in its reluctance to alter traditional behaviour and beliefs.

One example of purchasing wisdom vs. reality that I have mentioned in previous blogs and presentations is the relationship between volume and the price of commercial components. Most people believe there is one when there isn’t. Sellers of components want you to believe that this correlation exists. As it does exist with cost, they benefit by transposing this belief to price. The price-volume relationship exists on custom components but not commercial ones. Since we started Freebenchmarking.com, we have been looking for correlations to price and have never found one with volume (the correlation coefficient from our last analysis was 0.1%). We have found a weak correlation with commodity spending and a stronger – but still weak – one to total supplier spending (r2 < 40%). As with the environment, analysis techniques applied to our immense customer dataset let us separate the truly important from the folklore.

Behaviour is driven by many commonly held beliefs which may or may not stand up to critical, data driven analysis. Another that should be assessed pertains to sourcing strategy. How active should your second or third source be to assure security of supply if there is a cost penalty associated with the use of that source? I am sure you can think of others.

As with climate change, I see a silent killer approaching the unprepared. How will your organization measure up to competitors who have aligned their strategies and actions to an AI enabled environment? Are you reading paper maps at the side of the road while your competitors are being driven to the destination in autonomous vehicles?

My wakeup call came in late 2015 and I spent 2016 figuring out what we needed to do.  I saw many changes happening in how information and answers are delivered, how components could be selected and how prices might be set. I foresaw things that take years – like merger integrations – happening in weeks or days, maybe hours. I don’t have to be accurate in my vision to know that the path I was on and the current paths of many of my customers are inadequate. I may not be on the optimal path but it is a much improved, enhanced one.

2017 has been focused on action and implementation. Lytica’s Advanced Technology Centre (ATC), incubation capability and technology arsenal utilizing AI and other techniques have all been delivered this year. Our project and technology success now needs to translate to business impact as we bring an array of new capabilities and products to market.

The ATC has introduced us to new technologies and methods for accessing, organizing and analysing data. It has shown us how we can solve chronic problems not with band aids, overlay solutions or more resources, but with complete approaches that yield better results while reducing our clients’ time and effort.

2017 progress highlights of our ATC include:

  • Moved our developers into the new ATC facility
  • ATC Open House (Fall 2017) and Grand Opening (Spring 2018)
  • Planning a one day AI for the Supply Chain conference to be held in Ottawa (Spring 2018)
  • Established a licensable AI technology platform for supply chain applications
  • Created unique IP in artificial intelligence leading to 3 patent applications
  • Enabling the release of our smartphone CCE Mobile App
  • Defined three new products for release in 2018 relating to part cleansing, price trend reporting and risk management, and
  • Instituting the technology for match rate enhancements, better price prediction and faster results reporting.

The next step is delivering their power into your hands.

Ken Bradley is the Chairman/CTO & founder of Lytica Inc., a provider of supply chain analytics tools and Silecta Inc., a SCM Operations consultancy.

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