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Eugen Tarnow


      Predictive Analytics World Chicago 2015 - savings from predictive analytics

      Eugen G Tarnow  July 1 2015 12:04:40 PM
      By Eugen Tarnow, Ph.D.
      Avalon Business Systems, Inc.

      Predictive Analytics World in Chicago this year was a very interesting event.  The keynote speakers highlighted two ways to gain from predictive analytics.

      Jack Levis, Sr. Director of Process Management at UPS, showed how using predictive analytics to control the packing of the UPS trucks and the delivery paths saved them $300 million per year.  Their yearly revenue is $58 billion yielding a savings from their computer system of 0.5% and their profit is $3 billion meaning that the computer system increased the profit by 10%.  There are 500 employees working on the computer system.  It was not clear whether these salaries were included in the savings.

      The other keynote speaker, Rajeeve Kaul, former Senior Vice President of  OfficeMax, did a complex pricing experiment and came up with a better pricing model which saved $20-30 million that year.  Their yearly revenue was $4 billion yielding a savings from their analytics experiment of about 0.5%, just like UPS, and out of a profit of $400 million the analytics experiment was about 5%.

      The conclusion seems to be that if given authority over the core business, predictive analytics can save about 0.5% of the revenue and add 5-10% to the profit.

      Not bad.