Tesco's partnership with retail analytics provider Dunnhumby is held up as the textbook case study for customer data analysis.
But in the last five years, the retail giant has also been applying sophisticated analysis to its supply chain data. And by identifying opportunities to cut waste, to optimise promotions and to match stock to fluctuations in demand, Tesco's supply chain analytics function has saved the company many millions of pounds.
In 2006, an executive from Tesco Direct, the company's online retail division, moved over to the supply chain department. He spotted an opportunity to run a small sales forecasting project, and persuaded one of the company's directors to give him some budget.
The project saved the company £16 million in one year. "That project built the engagement with the business," says Duncan Apthorp, supply chain systems development programme manager at Tesco.
Since then, Tesco's supply chain analytics team has grown from five people to 50. It is staffed mainly by science and engineering graduates, who Tesco trains up in retail expertise and SQL programming skills and who mostly use mathematics application Matlab to conduct their analysis.
The team's biggest wins so far include a statistical model that predicts the impact of the weather on customer buying behaviour. By comparing historical weather data with sales records in its 3,000 plus stores, Tesco can now adjust its stock levels based on the weather forecast, so its stores do not run out of the goods people want."