Tim Eisenmann, Chief Analytics Officer & SVP of Advanced Analytics, American Tire Distributors
With thousands of moving parts, supply chains are complicated and, thus, vulnerable to every strategic and operational decision made by a business. The replacement tire supply chain, in particular, sees millions of SKUs on any given day, hundreds of distribution centers, and tens of thousands of stores across the U.S.
Despite this complexity, the replacement tire industry today continues to run on a mid-20th century business model that is no longer sufficient for today’s digital environment. Distribution centers, for example, suffer from challenges such as low forecast accuracy, longer-than-expected order cycle times and low fill-rates that technology can potentially improve. With eCommerce demand and customer expectations growing, that type of inefficiency is no longer acceptable.
Keeping up with fast-paced change is tough. Keeping up with fast-paced change and implementing new technologies that could potentially disrupt your business’ entire supply chain? Even tougher.
The importance of IT infrastructure
To radically transform an intricate supply chain and successfully navigate a complex ecosystem of customers, vendors, manufacturers, consumers and competitors, businesses must rely on robust IT infrastructure. Accomplishing the simplest infrastructure tasks often requires multiple departments to collaborate and configure processes. This type of collaboration enables businesses to create new kinds of interactions for stakeholders with more efficiency and speed.
In today’s complex IT world where diverse systems must be able to communicate effectively, companies that can work across departments to continuously improve their technology stack will be better positioned to keep up with evolving business needs, achieve scale and boost their strategic business intelligence (BI).
Evolution of business intelligence
Per the IT History Society, the roots of BI date back to 1865; yet BI as we know it today originated in 1958 when computer scientist Hans Peter Luhn suggested using technology to simplify the process of gathering data. Today, many industries are using terabytes of data, analyzing and translating it into useful information to make better business decisions.
In the replacement tire supply chain, we sit on mountains of untapped data collected over many years. Now, with better technology, we are able to extract even more useful data, creating an opportunity to truly revolutionize business operations.
Yet, knowing what to do with all of that data and how to get started present some of the biggest challenges and opportunities for creating sustainable competitive advantages. After 80 years of being in business, American Tire Distributors (ATD), for example, sat on nearly a century’s worth of information in various platforms. Without a robust IT system to integrate the platforms and the right roadmap to aggregate and decipher all of the data, the company understood the risk of being left behind.
As the industry shifts to being more digital and data-driven, there is the opportunity to revolutionize our business, saving time and money while maximizing new opportunities
Using data for effective solutions
But coming back to the complex supply chain – how can (formerly untapped) data, a more sophisticated technology stack and more sophisticated analysts of such data help ATD navigate the ever-increasing complexities of its supply chain? At the heart of every decision of how ATD tweaks its operations and supply chain practices lies a hypothesis: Should we open or close a distribution center? Should we align our vendor deliveries? Should we cross-dock certain products? Now, with over 140 distribution centers, thousands of trucks, dozens of suppliers and 80,000 customers testing those hypotheses is not easy. Historically, most businesses resorted back to high-level models or pilots in order to arrive at the right answer. However, it is oftentimes difficult to disaggregate cause and effect, unintended consequences might occur that seem to not be related to hypotheses and pilots take time.
To shorten time to act upon, ATD needed to create a customized simulation that allowed us to manipulate the most minute, internal details. Today, many out-of-box supply chain simulators prioritize speed but not customization that yields better results. ATD’s analytics and IT teams went to work to create a customized simulation tool that would revolutionize the way we operate, tweak and optimize our supply chain.
Building this solution, however, wasn’t an easy feat as it had the potential to impact every link in the supply chain -- from warehouses, vendors and customers to transportation vehicles and manufacturing facilities. To make this work, the integrated team needed accurate and consistent data, requiring significant investments in time up front to identify data gaps, fill in those gaps and specifying the correct initial conditions.
From there, building out the unique algorithms specific to an individual supply chain requires thorough knowledge of various coding languages -- often built in-house. At ATD, our robust algorithm and “digital twin” network gives us the ability to model everything from network-wide connections to the movement of individual products within a warehouse. The system requires large, in-depth algorithmic calculations that allow us to see results in real-time, while simultaneously translating data from hundreds of different channels.
The benefits of customized algorithms
Having a solution that provides realistic, agent-based simulations can help companies more accurately plan for deliveries, transit times, picking/put-away, and other tasks in a time-aware manner including variability and unexpected delays. Another big benefit is the ability to understand the implications of opening and closing distribution centers and preparing for alternate delivery times, weekend hours and even weather disruptions.
The key to these breakthrough solutions has been the close collaboration between our IT and analytics teams. Previously, tire businesses -- mostly mom and pop shops -- could not afford the type of solutions that are often found at larger companies. With limited resources in an already prosaic industry, the replacement tire supply chain has been slow to adapt to today’s tech-forward expectations… until now.
As the industry shifts to being more digital and data-driven, there is the opportunity to revolutionize our business, saving time and money while maximizing new opportunities for sales and success – one supply chain at a time.