Data Duets

Image courtesy of Andertoons 5-min podcast-style summary by NotebookLM Solo post: Director's cut The title, "Democratizing Optimization with Generative AI," reflects the approach of a recent paper that investigates why businesses fail to adopt advanced optimization models and assesses whether Generative AI (GenAI) can help bridge that gap. 1  This is interesting. The authors argue that Generative AI (GenAI) can: Offer an intuitive layer to provide visibility into the inputs (Insight), Make the model logic and constraints transparent (Interpretability), and Rapidly respond to change and create what-if scenarios (Interactivity and Improvisation). This is called 4I Framework, and the paper provides a proof of concept from Microsoft’s Cloud Supply Chain team. Most of the insights shared in the paper resonated with my own experience building and deploying optimization models. Optimization has always been too opaque for the teams who would benefit from it the most. Why?...

Image courtesy of Entertainment Weekly Introduction to the business case This was going to be a solo post, but I bring the Director into the conversation by asking her a question at the end. The inspiration for the article comes from the WSJ piece "Meet the United Airlines Executive Who Gets to Pick Its Hot New Routes" here . Alison Sider, a fellow Longhorn from my alma mater, UT Austin, interviews Patrick Quayle, the senior vice president of global network planning and alliances at United Airlines. She asks interesting questions on a topic of interest. 1   How does United Airlines decide where to fly, and where not to fly?  If a route is a proven cash cow, flying it is an easy decision, but of course, all the competitors are already flying it too. Everyone knows the answer; the only thing left is optimization. Finding a successful route no other competitor has yet flown is a more difficult problem because there's no data, and this challenge is no different in other doma...

Image courtesy of Tom Fishburne Introduction to the business case This time, we are inspired by two articles that focus on how the recent wave of U.S. tariffs has created significant uncertainty for global supply chains and how AI can help address these challenges. One of the articles is from The Wall Street Journal (WSJ) and the other is from CNBC. You can read the WSJ article "AI Can’t Predict the Impact of Tariffs — but It Will Try"  here  and the CNBC article "Companies turn to AI to navigate Trump tariff turbulence" here . Sudden tariff increases on imports from China, Canada, and Mexico have forced companies to quickly reevaluate their sourcing strategies, inventory levels, and supplier relationships. Although machine learning methods and AI-powered tools can help companies analyze risk, model tariff scenarios, and optimize logistics, these tools often struggle to predict the impact of abrupt and rare changes in the environment. This is because such changes ...

Image courtesy of Cai et al. (2023) Solo post: Director's cut When measuring the outcomes of an intervention, organizations usually observe and quantify immediate or short-term results. For example, marketing could drive additional traffic, a discounted shipping rate could increase conversion rates, a price promotion or a loyalty program could drive sales. In most cases, however, these interventions would have effects that materialize over a longer period of time. After being exposed to a promotion, customers may become more price sensitive and start buying cheaper products or strategically time their purchases to take advantage of the next promotion. In general, companies will not conduct multi-month (or even multi-year) experiments to compare alternatives and find the option that optimizes long-term return on investment (ROI). Decisions must be made in the absence of long-term results. To address this shortcoming, in 2019, Susan Athey et al. published a paper on combining short...

Image courtesy of  Imago / Pubity Illustration -  pubity.com Introduction to the business case The Wall Street Journal article reveals how Chick-fil-A is using innovative data collection and analysis methods to optimize its drive-through operations. The company has developed a "Film Studies" unit that combines drone footage with security camera data to create comprehensive "game films" of its restaurant operations. This multimodal data collection approach, inspired by NFL game analysis, allows the company to model traffic patterns, identify operational bottlenecks, and analyze service efficiency in drive-through operations. Read the article here . The data-centric insights have led to significant operational improvements, including the development of new restaurant designs with elevated kitchens and multiple drive-through lanes capable of serving 700 cars per hour . The analysis also helped optimize staffing patterns, identify gaps in Wi-Fi coverage, and improve o...

Image courtesy of Eleanor Murray - epiellie.com Solo post: Academic's take Causal modeling is becoming more popular after some notorious failures of overly optimistic reliance on black-box predictive models to solve business problems (e.g., Zillow's iBuying). This is great. We are also increasingly seeing the introduction of a new method that "solves" causal inference. This is not so good because it misdirects attention. Causal inference has more to do with data and assumptions than it does with methods. No method can "solve" the causal inference problem (although it can help by reducing bias). If anything, regression is one of the most common methods for causal inference, so regression is an effective causal inference method when all else is in order . This is different from predictive modeling, where brute force bias reduction using the most complex method may succeed. Price elasticity of demand problem Simply put, we want to know how demand will change ...

Image courtesy of  Rob Klas -  bloomberg.com Introduction to the business case The business case discussed in this post was reported by Bloomberg with the title "Walgreens Replaced Fridge Doors With Smart Screens. It’s Now a $200 Million Fiasco". You can find the article here . In summary, a startup promised Walgreens that its high-tech fridges would track shoppers and spark an in-store advertising revolution. Then the project failed miserably for a number of reasons. Most importantly, Walgreens faced a backlash when customers ended up seeing their reflections in dark mirrors instead of the drinks in the fridges through the glass doors. Store associates rushed to put signs on the coolers to explain which drinks were in which cooler. The project went so badly that it ended in a lawsuit between the startup and Walgreens, and not only did it fail to deliver business value, it resulted in losses in customer satisfaction, employee morale, and revenue. But why was this allowe...