OM 337: Supply Chain Analytics

Fall 2015 Syllabus

Instructor:
Unique No.:
Schedule:
Room:
Office Hrs.:
Email:
TA:
Email:

I.

G. J. Gutirrez
04540
MW 12:30 2:00pm
UTC 1.102
Tu 3:30 5:00pm
genaro@austin.utexas.edu
Changseung Yoo
Changseung.Yoo@phd.mccombs.utexas.edu

Course Description

Can advanced business analytics help you to create value throughout the supply chain? What are
business analytics, and why has it become a buzzword? In short, analytics is the science of examining
data so as to draw better conclusions. In the past few years, the use of analytics has become increasingly
important in business in general as well as in supply chain management.
According to a recent article by Deloitte, historical algorithms and supply chain management models
based on past demand, supply and business cycles may prove partially insufficient in todays
environment and completely inadequate tomorrow. Instead, it argues that we should turn our
attention to synthesizing internal and external information at a much faster pace, and focus on modeling
and predicting the future.
To this end, in this course we address these concerns in three broad segments: First, we develop the
theoretical foundation to build forecasting models that incorporate both the power of predictive
analytics and the trends and autocorrelation patterns identified from historical data. Second, we will
learn to use these models on point-of-sale information to build demand forecasts as an aggregation of
models across the enterprise, and finally we will learn to use the developed predictive dynamic models
for aggregate supply chain planning and for local distribution decision making as well as to influence and
shape demand. Below we elaborate on these three segments.
Dynamic Demand Forecasting
As a manager, you must anticipate the twists and turns in the buying behavior of your target market
segments. The patterns embedded in historical demand data are important demand predictors and
they are very helpful in this regard, but in todays competitive dynamic environments you simply cannot
manage your business based on just historical data; this is analogous to driving your car by looking only
at the rearview mirror, you just do not do it. In this course we will integrate the knowledge extracted
from historical demand data through time-series-based forecasting techniques with the relationships
between business and environmental variables identified and quantified through data analytics to
provide better, more reliable, dynamic demand forecasts.
Local and Aggregate Demand Models
In supply chain planning we rely on demand forecasts for the aggregate volume of demand across all
market segments and geographical zones, and the conventional wisdom is that aggregate demand
forecasts are more accurate and hence more reliable than individual segment/zone forecasts as that
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data is often sparse and noisy. Armed with the power of business analytics, in this course we challenge
this notion. We start from a systematic examination of the business variables (cross-product
consumption patterns, price, promotion, competition, and assortment) and environmental variables
(income, economic growth, unemployment, demographics, as well as other socioeconomic variables).
This bottom-up approach is productive because these variables have predictive power at the point of
sale, but the effect of some of these local variables is blurred at the aggregate level. Thus rather than
forecasting demand by building models on aggregate data, in this course we approach the forecasting
problem by building predictive models based on point-of-sale data and then constructing aggregate
demand forecasts as the combination of point-of-sale dynamic forecasting models.
From Supply Chain to Demand Chain Management
We will then study the utilization of the relevant relationships identified and quantified by data
analytics, our predictive models, in supply chain management decision making. Excellence in execution
of supply chain management activities relies on adequate requirements planning of capacity, workforce
as well as components and raw materials. In this section of the course we focus on using dynamic
forecasts for the development of operating plans as well as on the optimization of the tradeoffs
involved. This entails not only trading the costs of workforce, inventories and capacity, but also
integrating broader business decisions such as pricing, promotion and advertising; the most effective
operating plans must manage both the supply and the demand throughout the value chain.

II.

Course Objectives

At the end of this course students should:

a) Understand the process and information required for preparing the different types of
demand forecasts required for operations and supply chain management.
b) Understand the tradeoffs involved in aggregate production planning and be able to use
linear programming to optimize them.
c) Be able to isolate business and economic variable with predictive value for the preparation
of demand forecasts.
d) Be able to use statistical techniques to incorporate historical data with other business and
environmental variables to prepare dynamic forecasts.
e) Be able prepare top-down, bottom-up and middle out demand forecasts.
f) Understand the costs and benefits of shaping demand and be able to combine advertising,
pricing and other interventions in the optimization production and distribution in supply
chains

III.

Course Materials

The course is based on the following textbook and reference books:

Textbook:
(FPP)

Hyndman, R. J., & Athanasopoulos, G. (2014). Forecasting: principles and practice, Online OpenAccess Textbooks, https://www.otexts.org/fpp

Reference Books (Requested) on Reserve at PCL:

(ISLR) James, G., Witten, D., Hastie, T., & Tibshirani, R. (2013). An introduction to statistical learning:
with application in R, New York: Springer, http://www-bcf.usc.edu/~gareth/ISL/
(FMA) Makridakis, S., Wheelwright, S. C., & Hyndman, R. J. (1997). Forecasting methods and
applications. John Wiley & Sons. Third Edition
(SCM) Chopra, S., & Meindl, P. (2012). Supply Chain Management Strategy, Planning and Operation,
Prentice Hall, Fifth Edition.
(POA) Nahmias, S. (2008). Production and operations analysis, McGraw-Hill/Irwin, Sixth Edition.
(MSC) Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2004). Managing the supply chain: the definitive
guide for the business professional. McGraw-Hill.
Additional materials will be posted or linked on the course page on Canvas.

IV.

Performance Evaluation

The different course items will be weighted as follows:

Item:
Individual Assignments
Midterm Exam
Team Project
Class Participation
Total

Weight:
40%
30%
25%
5%
100%

Homework assignment and tests grades will be posted on Canvas. Please check your grades repeatedly
throughout the semester and report any discrepancies immediately.
Midterm Exam: The midterm test will require both quantitative and qualitative responses. The split will,
however, be weighed more to the quantitative reflecting the emphasis in class lectures and on the
homework assignments. For the test, you will be allowed to bring in one (1) sheet of 8 x11 paper
(double sided) with your formulas and notes and your calculator. Any probability distribution tables will
be provided with the exam.
Individual Assignments: Homework assignments are individual and will be downloadable from Canvas.
Each homework assignment will be posted on the web at least one week in advance of the due date. All
assignments are to be submitted electronically before their corresponding due dates. No late
assignments will be accepted.
Homework assignments are designed to promote class preparedness, provide learning reinforcement,
and extend the knowledge you have gained in class and from your readings. You will find that the
assignments also provide excellent learning feedback and are a confidence-building tool. The
assignments will also help with your preparation for the tests and exams.

Group Project: There is a substantial project based on a real dataset for retail sales of multiple
categories of consumer packaged goods on over forty markets in the US. Teamwork on this project is
not only beneficial but essential. This activity will give you hands-on experience on a project of realistic
scale and complexity.
Class Participation: It is important that everyone come to class prepared and willing to contribute to
discussion. Class participation also includes asking clarifying questions.
Regrade Requests: If you would like to request any homework assignment or the midterm to be
regarded, please appeal it within two weeks of the date the grade is posted in Canvas. After this appeal
period I will consider all grades final. Please realize that there are standard policies for point deductions
for each problem according to each assignment rubric, so unless the teaching assistant has misread your
work, any partial credit is unlikely to change.

V.

Important Notifications
Students with Disabilities

Students with disabilities may request appropriate academic accommodations from the Division of
Diversity and Community Engagement, Services for Students with Disabilities, 512-471-6259,
http://www.utexas.edu/diversity/ddce/ssd/.

Religious Holydays
By UT Austin policy, you must notify me of your pending absence at least fourteen days prior to the date
of observance of a religious holy day. If you must miss a class, an examination, a work assignment, or a
project in order to observe a religious holy day, you will be given an opportunity to complete the missed
work within a reasonable time after the absence.
Policy on Scholastic Dishonesty
The McCombs School of Business has no tolerance for acts of scholastic dishonesty. The
responsibilities of both students and faculty with regard to scholastic dishonesty are described in detail
in the BBA Programs Statement on Scholastic Dishonesty at
http://www.mccombs.utexas.edu/BBA/Code-of-Ethics.aspx. By teaching this course, I have agreed to
observe all faculty responsibilities described in that document. By enrolling in this class, you have
agreed to observe all student responsibilities described in that document. If the application of the
Statement on Scholastic Dishonesty to this class or its assignments is unclear in any way, it is your
responsibility to ask me for clarification. Students who violate University rules on scholastic dishonesty
are subject to disciplinary penalties, including the possibility of failure in the course and/or dismissal
from the University. Since dishonesty harms the individual, all students, the integrity of the University,
and the value of our academic brand, policies on scholastic dishonesty will be strictly enforced. You
should refer to the Student Judicial Services website at http://deanofstudents.utexas.edu/sjs/ to
access the official University policies and procedures on scholastic dishonesty as well as further
elaboration on what constitutes scholastic dishonesty.

Campus Safety
Please note the following recommendations regarding emergency evacuation, provided by the Office
of Campus Safety and Security, 512-471-5767, http://www.utexas.edu/safety:
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Occupants of buildings on The University of Texas at Austin campus are required to evacuate
buildings when a fire alarm is activated. Alarm activation or announcement requires exiting
and assembling outside.
Familiarize yourself with all exit doors of each classroom and building you may occupy.
Remember that the nearest exit door may not be the one you used when entering the building.
Students requiring assistance in evacuation should inform the instructor in writing during the
first week of class.
In the event of an evacuation, follow the instruction of faculty or class instructors.
Do not re-enter a building unless given instructions by the following: Austin Fire Department,
The University of Texas at Austin Police Department, or Fire Prevention Services office.
Behavior Concerns Advice Line (BCAL): 512-232-5050
Further information regarding emergency evacuation routes and emergency procedures can be found
at: http://www.utexas.edu/emergency

VI.

Course Outline

The following is a tentative course outline. For detailed class preparation information, additional
reference materials and detailed assignments please refer to the Home page of the course in Canvas.

Course Outline
Textbook
Chapters

Date

Contents

Aug. 26 (W)

Course Introduction

Aug. 31 (M)

Forecasting for Supply Chain Planning and Management

Sep. 2 (W)

Review of Statistical Foundations: Linear Regression,

Confidence Intervals and Hypothesis Testing.

Sep. 7 (M)

Labor Day (No Class)

Sep. 9 (W)

Introduction to Multiple Regression and

Stepwise Selection of Predictive Variables

Sep. 14 (M)

Model Overfitting, the Parsimony Principle and Model

Cross-Validation

ISLR 5.1

Sep. 16 (W)

Selection of Variates in Linear Regression: Forward,

Backward and Best Subset Selection

FPP 5
ISLR 6.1

Sep. 21 (M)

Model Shrinkage Methods and Selection of Variates in

Linear Regression: The Lasso.

ISLR 6.2.2

Sep. 23 (W)

Using Cross-Validation for Model Selection in The Lasso

ISLR 6.2.3

Sep. 28 (M)

Introduction to Demand Forecasting

Simple Exponential Smoothing Model

FPP 7.1 7.2

Sep. 30 (W)

Holts Model and Holt-Winters Model

FPP 7.2 7.5

Oct. 5 (M)

State-Space Approach to Exponential Smoothing

FPP 7.6 7.7

Oct. 7 (W)

Introduction to ARIMA Models

Differencing and Rescaling Time Series

FPP 8.1 8.2

Oct. 12 (M)

Backshift Notation and Non-seasonal ARIMA Models

FPP 8.2 8.6

Oct. 14 (W)

Seasonal ARIMA Models

FPP 8.7 8.10

Oct. 19 (M)

Dynamic Regression Models

FPP 9.1

Oct. 21 (W)

Hierarchical Forecasting Models

Top-Down, Bottom-Up, and Middle-Out Approaches to
Forecasting

FPP 9.4

Due

FPP 1,2
Hw#0

FPP 4
ISLR 3.1 3.3

Hw#1

Hw#2

Hw#3

Hw#4

Hw#5

Hw#6

Oct. 26 (M)

Modeling Interventions: Model Selection and Calibration

FMA 8.3

HW#7

Oct. 28 (W)

Modeling Interventions: Forecasting

FMA 8.3

Nov. 2 (M)

INFORMS Conference: No Class Scheduled

Nov. 4 (W)

Midterm Exam

Nov. 9 (M)

Forecasting Demand for Consumer Packaged Goods

Group Project Scope Definition

Nov. 11 (W)

Supply Chain Management and Demand Forecasting

Nov. 16 (M)

Aggregate Production Planning: Tradeoffs and Decision

Levers

Nov. 18 (W)

Aggregate Production Planning: Linear Programming

Nov. 23 (M)

Aggregate Production Planning:

Demand Shaping, Pricing and Advertising

Nov. 25 (W)

Forecasting for Distribution and Inventory Management

Nov. 30 (M)

Project Presentations

HW#10

Dec. 2 (W)

Project Presentations

GP

HW#8

POA 3.1 - 3.4

HW#9

POA 3.5