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SSA Notebook | December 2013

More than a GPS: UPS Will Use Big Data to Save Fuel and Customize Deliveries

UPS previously made headlines when it updated its route-planning processes to save fuel by avoiding left turns and peak hours. Today, it pushes the boundaries of network planning and optimization by incorporating tribal qualitative data into its models. According to this Washington Post piece, “The number of route combinations a UPS driver with an average of 120 daily deliveries could make is greater than the number of nanoseconds the earth has existed.” Further, drivers often ignore the computer’s instructions in favor of experiential wisdom — how difficult it is to park on certain streets, for instance. UPS’ new software, ORION (On-Road Integrated Optimization and Navigation), incorporates drivers’ experience and data from past deliveries into a route-planning algorithm that will save UPS $50 million per year in fuel costs. ORION will also improve delivery time accuracy for UPS’ customizable delivery service, UPS MyChoice. Though still in its infancy, ORION paves the way for algorithmic process-improving software that integrates the human element.

GE and Quirky: Open Innovation and the ‘Internet of Things’

For the past year, GE has held a partnership with Quirky, a startup that mixes crowdsourcing and in-house design to bring new products to major retailers. Quirky invites anyone to submit and vote on product ideas, after which Quirky’s innovators control design and production and share revenue with the participants. As this Bloomberg BusinessWeek article highlights, GE recently extended $30 million to Quirky to fund a jointly developed line of connected products, controlled centrally with their free mobile app, Wink. Four are already available, including a motion, sound, light and humidity sensor that can be monitored from anywhere and an egg tray that sends a text before the eggs expire. GE chose the startup for its agility — as CMO Beth Comstock said, “We were intrigued by the community dynamic and the speed by which the team was able to get great products to market.” The GE+Quirky partnership could center GE in the emerging market for the Internet of things — the new world of consumer products (anything from thermostats to toothbrushes) that connect to the internet.

Best Buy Makes a Comeback (Maybe) Through Operational Excellence

After losing $1.2B in 2012, BestBuy, the world’s largest consumer electronics retailer, seemed to have become a showroom for online competitors. Now, under its new CEO, Huber Joly, Best Buy has tripled its stock value. Joly’s turnaround could be described in three steps: (1) cut, (2) focus and (3) grow. Best Buy sold its European stores, trimmed its staff and promised to revive sales through omnichannel retailing (synchronizing the customer experience across store, online and mobile channels). According to this Technology Review article, the company’s online division and stores previously operated separately, so it lost customers when the online distribution center was out of stock (even if a nearby store wasn’t). Understanding that its stores were once an advantage, Best Buy increased its inventory by turning its stores into distribution centers. It also improved its website and tied it more closely to its 1,400 locations. For example, after adding a “Store Pickup” option to its online shop, it discovered that “many shoppers like to browse and pay online but prefer to pick up that TV themselves.” The road is still tough, but it isn’t over yet for Best Buy.

When to Walk Away from Your Past and Build Your Future: Dow Chemical Co. Divestiture, Reminiscent of IBM?

Dow Chemical Co., the largest U.S. chemical maker by revenue, plans to sell or spin off almost 10% of its low-margin business, including the products that initiated its creation over 100 years ago. As noted in this Wall Street Journal article, if it succeeds, “Dow might consider dropping Chemical from the name it has used since 1897.” Like century-old IBM, which moved away from hardware to focus on software and services, many of Dow’s historical breakthrough products no longer provide a competitive advantage. For example, Dow innovatively used epoxy for Ziploc bags (test marketed in 1968). Now, worldwide competitors produce epoxy inexpensively, and it no longer pays Dow to sell it. The company aims to shed the business of such basic chemicals in favor of higher-value products like agricultural seeds and packaging materials. CEO Andrew Liveris remarks that a restructured Dow would be linked by “chemistry rather than chemicals.” Evolving beyond past success is daunting, but to stay alive, businesses cannot stick with irrelevant strategies. By reconfiguring capabilities, Dow may reinvent itself.

How Edible Arrangements Manages a Smooth Supply Chain on a Global Scale

When Tariq Farid opened his first Edible Arrangements franchise location with his brother, Kamran, in 2001, he didn’t think he would have over 1,100 locations in 2013. Today, Edible Arrangements maintains global consistency, despite selling perishable products, in part because its supply chain relies on local suppliers with skin in the game. “This is by far the biggest challenge,” says Farid in this Inc.com article. “It’s very important to have someone that can help further develop the brand. We say no to a lot of deals, but I’m okay with that. It’s about quality.” First, the company scouts local produce markets in search of the right sizing, pricing and yields. If the market doesn’t produce a desired fruit, it is shipped from elsewhere. (Pineapples don’t grow in Saudi Arabia, so they are flown in. Meanwhile, customers see dates, a local favorite, in Saudi Arabia arrangements.) The company’s highly structured process of identifying supply chain approaches provides flexibility to meet customer demands while simultaneously reacting to different product availabilities, resulting in a consistent end product.