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How John Deere used stochastic analysis to achieve a $1 billion reduction in inventory
WANT TO HEAR WHAT COULD BE ONE OF THE BEST supply-chain success stories ever? Take the $4 billion commercial and consumer equipment division of a $20 billion company, reduce inventory by $500 million, and as sales grow, keep inventory constant - thus avoiding an additional $500 million in inventory. This is what John Deere did starting in 2002, with the help of supply-chain optimization software vendor SmartOps.
When I spoke with SmartOps CEO Sridhar Tayur, he told me that the key concept behind Deere's success is the use of stochastic theory when building forecasts. According to Tayur, stochastic theory dictates that what you know today is quite likely to change tomorrow. How likely it is to be different is what you capture in the model.
Whereas most BI tools take a deterministic view of...