Big Data Analytics: Helping Inventory Management but Under Attack

Big Data and Analytics already play a large role in successful inventory management and is sure to play an even larger role in the future. However, trouble is on the horizon. A growing number of proposed data localization requirements in numerous countries threaten to limit companies’ access to customer data under the guise of protecting their citizens’ privacy.

Data localization requirements come in a variety of forms, but, essentially, it’s mandating that private data belonging to citizens of a certain country or group of countries stay within that country or group of countries. These laws force companies to store private data on servers physically located in the country and prohibit the transference of that data.[i] This is one issue that I worked on over the summer while at the U.S. Chamber of Commerce, and it’s an issue that intensely worries many U.S. firms.

Analyzing big data, that is, large numbers of individual customer transactions collected over long periods of time, has been key to the success of numerous businesses. Tesco, a British supermarket and merchandise store, for example, developed an analytics model that incorporates weather patterns, the effectiveness of sales campaigns, and other factors to help save the company $16 million a year through better inventory management.[ii] Borders, my favorite bookstore, went out of business in 2011 simply because it failed to make the transition into the information age like its rival, Barnes & Noble.[iii]

Data localization requirements essentially prevent companies from collecting data on its overseas customers; this makes analysis much more difficult. In order to do any data analysis at all, they must build local data centers, physically transfer analysts to a certain country and perform a rather limited analysis that will not have as much value as a wider regional/global analysis.[iv] While agreements between countries may still permit cross-border exchange of information, these agreements can come under attack for a variety of reasons.

One such framework already under attack is the U.S.-E.U. Safe Harbor agreement. The E.U. has stringent privacy protection laws and does not normally permit data of its citizens to be transferred outside of its borders. Due to this agreement, U.S. companies that self-certify can bypass the E.U. laws by adhering to a certain set of standards. Following the revelation of NSA spying, however, numerous European lawmakers have called for the suspension of Safe Harbor, which would hurt over 3,000 American companies currently operating under the agreement.[v]

Given the importance of data to accurate forecasting and better inventory management, it is crucial that U.S. policymakers keep in mind this issue of data localization when conducting trade agreements with other countries. While authoritarian countries like China and Russia seek greater control over the internet, even Western countries like Canada, Australia and the E.U. are passing more data localization laws which negatively impact global commerce.[vi] As more and more countries seek to protect privacy in the information age by passing laws that stem the flow of information, will the promise of big data analytics remain a pipe dream, or will more forward-looking legislators prevail and give companies the tools they need to create a more efficient inventory management system and with it a more profitable global economy?

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References

[i] Chander, A. & Ueyn, P. L. (2014). “Breaking the Web: Data Localization vs. the Global Internet.” Emory Law Journal. UC Davis Legal Studies Research Paper No. 378. April 2014. Retreived from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2407858.

[ii] Master, N. “Tesco Improves Supply Chain with Big Data, Automated Data Collection.” RFgen. April 17, 2013. Retrieved from: http://www.rfgen.com/blog/bid/285148/Tesco-Improves-Supply-Chain-with-Big-Data-Automated-Data-Collection.

[iii] Sanders, N. “Big Data Driven Supply Chain Management: A Game Changer.” Financial Times. June 9, 2014. Retreived from: http://www.ftpress.com/articles/article.aspx?p=2218298.

[iv] Ibid. i.

[v] Beerman, N. “A Broadened Crackdown on EU/U.S. Safe Harbor Violations.” The National Law Review. September 9, 2014. Retrieved from: http://www.natlawreview.com/article/broadened-crackdown-euus-safe-harbor-violations.

[vi] Ibid. i.