Chief Sustainability Officer, Chief Information Officer, Business Services and Executive Vice President
Advanced analytics support a world of business decisions
Dow Chemical Company improved forecast accuracy to within 10%
Dow Chemical executives wanted to do more than supply raw materials for finished goods. They wanted to offer solution-based products, invest in green technology and expand their global presence. So they turned to Paula Tolliver and Dave Asiala to lead a team tasked with providing advanced analytics across the company.
Tolliver, Dow’s Corporate Vice President of Information Systems, Procurement and Business Services Operations, and Asiala, Global Business Director, Business Insight and Analytics, use SAS to study potential markets, forecast sales and identify ways to reduce costs. “What SAS does for us is take the statistical methods we know can solve a business problem, help with the math and serve up the results in an effective way to support decision making,” explains Asiala.
Here are some of the substantial returns they’ve achieved by using advanced analytics on complex business challenges:
- Sales forecasts are accurate to within 10 percent, versus an error rate that was sometimes as high as 40 percent previously.
- Business unit leaders know by Day 12 of each month how to adjust strategy to meet targets.
- Regional exchange-rate risk models show where to buy raw materials and how to price finished goods.
- Distribution optimization projects show how to move products from 188 manufacturing facilities to hundreds of thousands of destinations at the right time without excessive inventory holding costs.
- A human resources supply/demand model lets Dow hire the right talent at the right time.
The only difference and competitive advantage that companies have going forward is if they make better decisions than other companies. And with that, then how you collect data and how you make the decisions off that data are really what's going to differentiate you from your competition.
Better decisions from big data
Dow manufactures 5,000 products at facilities all over the world, which results in massive amounts of data. Competitive advantage comes from turning that data into smarter business decisions, says Tolliver.
“We source over $24 billion worth of products and services a year,” she says, “and so a small change in our ability to buy more strategically generates significant value and receives a lot of attention.”
The key to competitive advantage is the ability to make better decisions, says Dave Asiala, Global Business Director, Business Insight and Analytics. “Business leaders have to make decisions all the time, so direction, speed and precision are important,” he says. “An analytics culture can drive all of those dimensions.”
Eddie Kennedy, Director, Corporate Market Insights & Political Risk, does similar work with internal customers to help them understand their supply chains better. “We try to better align sales to production and inventory management between Dow functions so we’re actually helping Dow businesses with their revenue and their cost plans as well,” he says.
Dow uses advanced analytics to reduce its carbon footprint and to find more efficient ways to ship products or produced them closer to the end consumer. “In order to maintain our margins, you have to keep freight and logistics costs under control, thereby driving gains in sustainable practices as well,’’ says Asiala.
Develop a culture of analytics to solve challenging business problems and make better, faster business decisions.
- Significantly improved forecast accuracy to within 10%
- Smarter raw material procurement and more efficient logistics reduce costs and carbon footprint
- Reduced inventory holding costs through distribution and inventory optimization avoids excessive holding costs.