The Power of Bloomberg in Creating Supply Chain Intelligence and Risk Alerts

Supply chains are difficult to study.  People do not want analysts knowing about their supply chains.  So creating market intelligence around supply chains is extremely challenging.  Yet analysts rely on supply chain information.  They study market reports, and they react to announcements.  Research by Hendricks and Singhal shows that stocks can drop by as much as 20% based on the announcement of a “Supply Chain Glitch”.

NC State University is on the cutting edge of creating supply market intelligence in our supply management classes at NC State University.  The SCRC invested in a Bloomberg terminal, and we are piloting the initial roll out of the Supply Chain function on the terminals.  A team from Bloomberg presented in our MBA class today, illustrating some of the capabilities of the new Bloomberg terminal.  A big piece of research capability is available in the BI function, which provides information on industry data.

But the big piece of intelligence that is available is the capability of being able to show the connections.  For example, there is a law in the US that if a company like Intel gets more than 10% of revenues from a customer, they have to share that information, and investors need to know that information.  That type of information is often buried in the annual report.  The Bloomberg terminal allows users to be able to determine for instance that HP makes up 19% of Intel’s revenue, and Dell makes up 15% of revenues.  Bloomberg tracks over 28,000 public companies – quarterlies, annuals, and semi-annuals.  In addition, the company leverages analyst information to be able to create “supply chain maps” that show major customers, and major suppliers.

On the supply side, Intel has major customers including Applied Material, Tokyo Electron, and others.  This information is built on news reports, analyst reports, and others.  Bloomberg looks at key phrases, and assembles the supply chain maps.

In each box, there is a revenue number, and a cost number.  Looking at the customer side – you can see the revenue number which belongs to Intel, the cost number reflects the payout from the customer to Intel.  This is flipped for suppliers – revenue represents their sales to Intel – and the cost number corresponds to what Intel pays for it.

Bloomberg has a team of 15 analysts from the sales side – and they can see some of the relationships that might exist, but which for no values exist.  For example, AT&T has a relationship with Intel but the relationship is unsure – it isn’t clear what they have – so Bloomberg can track an “implied relationship” that is an analyst.  Implied means that the information came from AT&T and named Intel as a supplier.  No one knows if this is correct, except for Intel.  But it is enough to be able to drive some thinking about what might be happening in terms of this relationship.

There are also colors shown on the supply chain maps:  Red, black, and green.  An “analyze” drop down box looks at projected sales growth.  Red boxes generally indicate – you guessed it – bad news in terms of quarterly sales forecasts.  RIM is bright red, and is projected to lose 12% in sales.  But if you sort results differently, and on some of their suppliers like Interdigital which gets a big percentage of sales from RIM – but they have 327$ sales growth – so is there a disconnect?  Something is not priced correctly.  Where does Interdigital get their revenue from – and their major customer is Samsung – but this was probably before today’s Apple news!  And so on…

Speaking of Apple – they have a lot of their baskets in Hon Hai Precision – 41% to be precise!  And they are located in China, where they have had labor issues coming up….and who are they exposed to on the customer side – AT&T makes up 7.5%, followed by Vodaphone.  And if Samsung is going to be hurt – most of the companies that are exposed from Samsung will be Korean suppliers such as Sung Woo – who get 90% of their revenue (part of the Asian Kyoryoku-kai network….)

Our students are using these capabilities through the Bloomberg terminal in our SCRC building to conduct supply chain research to create supply chain intelligence.  This is information that didn’t exist 12 months ago.  I believe this is truly a unique capability that is being integrated into future generations of supply chain managers coming out of our program.  And intelligence is power in today’s uncertain supply chain environment.