How important is understanding statistics in Supply Chain Management?

Statistics use methodologies to gather, review, interpret, evaluating, and draw conclusions from data. Its application is found in various disciplines, such as psychology, business, physical and social sciences, humanities, government, and manufacturing.

What is Supply Chain Management (SCM)?

Before examining the role of statistics and mathematics in SCM, it’s necessary to understand what the term means in the business world. SCM encompasses the birth of a product or service and follows it until it reaches the customer or client. The process may extend beyond the sale, such as incidents when complaints, problems, or inquiries arise. All of which need attention in the name of customer service.

Therefore, purchasing raw materials, quantifying the amounts, forecasting sales, calculating inventory, distributing and transporting the goods, arranging storage, and planning customer demands is incumbent on the supply chain manager(s). In facilities with a large employee population, there could be an entire department or division involved in supply chain management.

Typical College Programs

The functions mentioned above seem to incorporate numerical calculations. How essential, then, is mathematics and related subjects as statistics. If these disciplines are not required, then college programs in SCM should omit them from their respective curricula. By sampling, some of the schools offering a Bachelor’s degree in SCM may provide the answer.

In addition to the specific courses, what do SCM programs attest to regarding the learning outcomes? Here are a few random statements from undergraduate degrees in the major:

Be able to analyze data and use quantitative methods to make sound business decisions.
Analyze macroeconomic policies
Interpret financial data and employ accounting principles
Ability to solve problems through data-driven capabilities
Understand the concepts of logistics, inventory management, and business statistics

You could look at a hundred programs in SCM and find those with less emphasis on statistics; however, it is improbable that you find one that avoids the subject entirely. It may only amount to three hours out of 120, but it is an unavoidable requirement.

The Raj Soin College of Business at Wright State University offers a Bachelor of Science in Business with an SCM major. By glancing over the Core hours (39), you will see a choice of Business Calculus or Mathematical Economics and Business Models. Not statistics, but students have an immersion into math-related topics with courses in Accounting Principles, Economics (Macro & Micro), and Financial Management. Not to be disappointed, there is a Business Core Requirement titled: Introduction to Business Statistics (3 hours).

The University of Arkansas has a 100% online B.S. in Business Administration in SCM, which has several pre-business requirements. These include accounting, calculus, economics, data analysis, and a course called Finite Math. The three hours of credit examines probability, statistics, algebraic matrices, and graphical analysis in business. There is a prerequisite for taking Finite Math, which is College Algebra. The topics cover quadratics functions, graphs, the theory of equations, and basic properties of matrices.

One reason for the spotlight on statistics is that supply chain management involves the analysis of data from raw materials to shipments. Accurate forecasting is vital to the business, but it is often the weak spot of the supply chain. Despite the abundant information about product movement, the average forecast error remains close to 50% for consumer products companies. Supply managers strive to reduce mistakes by forecasting weather conditions, supplies, retailers’ demands, inventory management, and more.

The supply chain manager requires skills in mathematics and statistics, as well as computer science, to handle terabytes of data. The prediction and capture of daily demands come from using this data to respond quickly and efficiently to changes in production requirements. Companies and organizations monetize accurate forecasting based on statistical analysis to reduce inventory while maintaining or improving service levels. This analysis assures that the product is in the right place at the right time at the right price, which avoids the creation of annoyed customers whose business relies on your goods or services.

The paragraph above touches on logistics, which, simply stated, involves the flow of goods from its point of origin or manufacture to the final destination, usually the customer. A complex process includes raw material procurement, production, inventory, transport, and warehousing. Configuring and managing these components of logistics requires statistical analysis. Statistics are essential to the successful operation of any business, particularly those in the business of production and manufacturing.