Northeastern University

DAmore-McKim School of Business

Supply Chain Forecasting

(MGSC 6224)
Session: Summer 2, 2016

Topic Brief:
Anticipatory Shipping using Predictive analytics

Submitted by

Sandeep Kumar Karumuru

Anticipatory shipping is a technique in which one or more products

are packaged to be shipped to the nearest geographic location from where
a firm order is anticipated. Shipping a package prior to receiving a firm
order is done by either specifying a destination geographical area or by
specifying only a partial address, completely specifying the address in
transit only when an order is received. This allows for efficient order
fulfilment in a very short amount of time by using slower modes of
transportation saving a lot of expedited shipping expenses for a company.
Predictive analytics is a branch of advanced analytics which combines
statistical and mathematical techniques used to predict the probability of
future events occurring. First used in the development of Kerrison
Predictor, an anti-aircraft weapon targeting system. In 1944 it was used
for the Manhattan project to predict the probable results of a nuclear chain
reaction.
In mid 1990s, Stanford professor Hau Lee who founded Non-stop
logistics implemented anticipatory shipping to forecast the inventory needs
of a metro market rather than individual stores which helps to improve the
accuracy of the forecast. Manufacturers would ship to forecast and Nonstop would fulfil order based on further insight into inventory and demand.
Unfortunately, this project never took off the ground.
Amazon realized that being an online-retailer has one huge
advantage i.e. customer data. Amazon was sitting on troves of customer
data that was only being utilized by its algorithms to provide a seamless
shopping experience to its customers. The opportunity for predictive
analytics algorithms was recognized and Amazon took anticipatory shipping
seriously and also filed a patent on it to avoid competition. In December
2014, Amazon was awarded the patent it filed a year ago on Method and
System for Anticipatory Package Shipping. It is not clear when
Amazon began using these techniques but it was prepared for the errors
from their algorithm. Offering their customers discounts and convert to gift
options in case of errors and gifting products to build good-will with
customers.