 Good morning, good afternoon, and good evening. So welcome to this first live event. I'm Sekyo Caballero and coordinator of AC1x supply chain for diamonds along with IMA for a lot. So today we have Chris Kaplix. Dr. Chris Kaplix is the director of the M.A.D. Center for Transportation and Logistics and he's also the instructor of the course. Thank you, welcome Chris. So the agenda for today's live event is going to be the follow-up. I'm going to start giving some statistics about the course. Then Chris will give some overview of the topics that will be covered during the next few weeks. I'm also going to explain some of the trade-offs that will be covered along these weeks. Then Chris will explain us why it's important to become a very bad student and guys, if you have any questions about, in general, about the course, please write on the chat. Then we'll have a break-up session that will last around 10 to 15 minutes. Chris will introduce the topic for that session. Then we will come back here and we will discuss based on your answer. Okay, so let's get started. So let me give you some statistics about this run of AC1x. So so far we have more than 15,000 students enrolled in the class. So 29 years is the median age for the students. So we have a present of 26 percent of women and we have more than 170 countries represented in the course. So US, India and Brazil are the top three companies. So Chris, please give us some overview of this AC1x. Yeah, let me do it. But first, I think this is our highest percentage of women in a course. I'm trying to think of our other percentages. Have we been north of 25 percent before? That's awesome. That's great. So welcome, everyone. So let me welcome you to AC1x. And hopefully most of you have already taken AC0x because now all the courses are developed and you can start taking them as a waterfall, as they're intended. Because as we taught in AC0x, we gave you all the tools you're going to use in this course. So that means the optimization tools, some statistical or hypothesis testing tools, regression and simulation. You'll specifically be using a lot of the optimization and a lot of the regression a little bit in the first part of the course. And so you learned them kind of in general concepts and now we're going to apply them. So this course is all about exploring the fundamental trade-offs in logistics and supply chain management and mainly in logistics and we'll explain the difference for that in the first lecture. But essentially the logistics that we're going to focus mainly on the physical movement and storage of things. So we're going to be looking at three core functions. The forecasting or demand forecasting, inventory management, and then what I like to call physical logistics and let me explain each of those. So for forecasting, it's all it's a subset of demand planning. So anytime you have a supply chain, you're satisfying some demand. You have a supply and you're meeting that demand and you never know how to forecast that demand. How many shirts will I sell? What is my demand for the water for whatever products that I'm selling? And so what we do in the demand planning phase or the forecasting phase is show you different techniques you use to forecast that demand for your ultimate product. And what you'll see is that it's really a function of the type of product, the market, how much knowledge you need to know. So most of the tools that we'll give you are tools that you use for time series where you have history and you're applying it forward. Because that's the lion's share of forecasting in most business to business industries. However, we will cover certain things where that you have no history. And so those might be cases where you have a new product being delivered. So you don't have a history to rely upon or so what do you do in those cases? Also, you might have a case where you have an extension or something maybe you think the demand is driven by some events, such as promotions. So anyone in the CPG or consumer package good industry, a lot of their sales are driven by sales, promotions, coupons. And so if I know the impact of that, then I can forecast the demand. That's where you'll be using regression. So demand planning, demand forecasting, demand management, all of that kind of the start and we'll spend the first three weeks. Is that right? Three weeks on that, I believe. Yeah, I think really yes. Yeah. And then we'll go into the lion's share of the course, which is inventory planning and management. And what we do there is we answer the question, how much should I stop? We really focus on kind of the tactical side of things, what's known as a replenishment policy. And so the question it's answering is how much should I order and how much should I keep on hand? And you'll find just like how forecasting the method is a function of the demand and the history you have. Inventory planning is really a function of your planning horizon and the nature of the demand. If the demand is very stable or deterministic, then we'll introduce some certain tools, economic order quantity and some other simple models. If you have a lot of stochasticity or randomness or variability in your demand, we'll introduce some other models. Same thing if you have an infinite planning horizon or a very short period. And so what we'll do is give you a bunch of different types of inventory models that you can use depending on the situation. And you'll see that they all really tie together in the tradeoffs that they make because that's one of the core takeaways from SC1x is that you have these key functions and you're making tradeoffs between them. And you're using optimization to make those tradeoffs. So we talked about demand planning or demand forecasting, inventory management and planning. The last is physical logistics. And I lump two things in here, warehousing and transportation. Warehousing, I mainly give one lecture I think on what warehousing is, how to set up a DC, how the general flow is. And what's interesting, if you take SC2x, we'll do network design and essentially a warehouse or a DC and distribution center is essentially a network within four walls. And so you almost treat them the same. And so we'll talk about that, but we'll spend the most time on transportation. And the big focus there is making that tradeoff of time and cost and mode choice, because the challenges you typically have in transportation are which mode should I use to get my product from A to B? Should I use rail? Should I use truck? Should I use ocean? Should I use air? And it's really a function of the time, the value of the product and the uncertainty of the transit time. And we'll go into all the equations for that. But the other thing that will hopefully you'll get out of this is to understand, yes, every company's supply chain, you have demand planning, you have inventory management, you have transportation and warehousing, but they're not always the same. And in fact, many companies will have multiple supply chains. Every company will have multiple supply chains. And to understand this, we're going to introduce you to the concept of segmentation. It's a core supply chain functionality. And we do it in the, it's in the first lecture, right? Yeah, so what we really do is help you understand how to segment your customers or your suppliers or your products, because you'll have a certain supply chain that fits for each one of those. So that's why for demand planning, we taught you different techniques for inventory management, different models. And for transportation, different ways of doing tradeoffs, because they will fit in different areas of your company and your product line. The way you treat your fast movers are different from your really slow movers. And we'll help you understand that and show you quantitatively how to figure that out. The other big thing we want to make sure you get is how to handle uncertainty. Now, if you took SC0X, you should be comfortable with the probability distributions and you'll become more comfortable with that, I hope. We mainly stick with the Poisson and the normal distribution. But any kind of probability distribution you should be comfortable with, because we're going to start looking at how uncertainty impacts your inventory, your forecasting and your transportation. And so we'll see how that all fits together. Now, the way it fits together, I brought a prop. And so use a total cost equation. So I'm going to say, is this okay? Is that readable? All right. All right, so what this is doing is, there we go. So we're doing this live on the fly. Okay, so this is the total cost equation. Chances are if you're in the supply chain career, you're going to do some kind of total landed cost equation. This is the simplest, simplest, simplest function. Remember, a function is simply you have a dependent variable that's function of some independent variables. In this case, we're going to spend all our time in this course, working with this function. It's the total cost equation and it's a function of four components, the purchasing cost, the ordering cost, the inventory holding cost, and then the stock out cost. And what I put on the right for the, let's see if I can do this in real time. The purchasing cost is we'll talk about these variables. It's not that important that you know what they mean right now. But it's essentially the cost of all the things that you procure. Because one of the things that we'll cover in SC2X, right, is procurement. And so that's something that's in many companies, it's included in the supply chain function. But in any case, it needs to be considered by the supply chain function. And then you've got the ordering cost. And this is simply the cost for placing an order. And this gives you the concept of a cycle. Because essentially you're going to order two units every period of time. And so that means you're going to have D, D is the total demand over the course of the year. D over Q is the number of cycles. So this whole idea of a replenishment cycle is something you should get comfortable with. Because there's always replenishment cycles within a supply chain. And so this simply tells me how many cycles I have and how much that's going to cost me. Then the big one we're going to spend a lot of time on is the holding cost. And so this is inventory. And we'll spend a lot of time on this. But essentially, you have to think about inventory as having different characteristics. And it's not the characters that you can see. They're more functional. And so you can think of cycle stock, the amount of inventory you expect to go through during one of these replenishment cycles. Safety stock, that's in case you don't run out during the lead time. Safety stock or buffer stock. And then the last one is alternatives to pipeline inventory. All that inventory that's stuck in transit. So think about if I'm shipping something from, say, Rotterdam to New York, then I have the option of spending two to three days if I ship it by air. It doesn't take that long to fly, but it takes that long to clear customs on both ends. Versus say 26 to 27 days if I go by ocean. So now you start seeing the trade-offs. So you can think I would probably do air if the items are very expensive or have a high value. I'd probably do ocean if they were less expensive because it'll take longer. And so you can start seeing the trade-offs here. The last one is stock out. And that's just the cost of a stock out times the probability of stocking out during the cycle times the number of cycles you expect to see in a year. And I only show this, I don't expect you to know these right away. We'll spend a lot of time, but the framework is pretty common. You come up with an analytical equation that captures my total cost. And in practice you call this total landed cost. Sometimes I'd put some more terms in, but it's all the same. We have to think about what's driving the cost. And then you isolate each of them. And then you can capture it. And then once you have these relationships you can determine trade-offs, which is the best mode of transit for this product. Which is the best way of forecasting for this product. So it all kind of ties together. So hopefully that makes sense. Does that make a little bit of sense? Yes. Because each of the things we do with the forecasting and transportation impacts different parts of that equation. Okay. Thank you. Thank you, Grace. So this is the fifth time that we are running this this course. So you run the first time. I did. And you follow the subsequent runs. Which topics do you think are the most challenging for students? All of these topics are covenecy 1x. And any advice that you would like to share with the students about that? Yeah. So my opinion is that when we get into inventory and we start doing the single-period inventory models when you introduce probabilistic demand, people will get a little confused. And so that's my guess where the hardest stuff is. Amad, what do you think? You've done this. It's like, yeah. So we have people who've done all the courses in the room behind the camera. I think that's the hardest thing. I think forecasting is pretty easy. You guys there is bookkeeping after a while. At the other end, the transportation trade-offs, not that hard. I think it's the inventory management when it gets to, especially when we get to non-normal distributions, which we don't do too much of, but people get confused with that. So I think keeping the probability stuff in your mind and really doing all those practice problems might help a lot. I believe that's week five, seven. Right after the midterm. Right after the midterm. Yeah. That's the hardest one. Okay, excellent. Thank you, please. So this life event is open to all students, all of them are very hard students. So in this case, subsequent life event will be open to only to very hard students. What would you like to say to all these students that are taking SE1X? Yeah. So I highly, highly encourage you, if it's financially possible for you, to go as a verified student and pay the $150. And it's for a couple reasons. One is you have access to other things, the supplemental materials that includes thesis projects, other supplemental readings that we have. Also you'll be able to participate in these future events. Also for another reason, we find that the percentage of students that are verified a much higher pass rate than those that are audit. And there's a couple reasons for it. It means you're a little more serious. It's called the skin in the game. And so as soon as you put a little money in, then you're putting some skin in the game. You tend to spend more time, do better on the greatest assignments, because you've invested, as opposed to if you just signed up and, you know, it's no big deal if I don't do this great assignment. And pretty soon we can see that there's the drop-off rate for the audit students increases as the weeks go on. Being verified, putting that just $150, makes it so that you tend to stick a little longer and do a little better. Also if you're thinking of applying and trying to get the entire MicroMasters credential, only verified courses count. So you have to take them as verified to apply to the MicroMasters credential. And if you want to apply to the blended supply chain management program, you need the MicroMasters credential. So it kind of all ties together. If you can only do his audit, that's awesome. I'm glad to have you here. Everything is free. All the greatest assignments will be there for you. All the videos will be there for you. Practice problems. We just add a little more for the people that are verified. Also, I should say that the midterm and the finals are different. We always introduce new problems for the verified students. The audit ones, we can do older ones. And we have to do that because we have to be very strict about the assessment for the verified students. So you'll see a slightly, you might think they're a little harder actually for the verified students, but that's done there on a purpose because we really have to assess you. So again, I would highly encourage you to become a verified student for a bunch of different reasons. Excellent. Yes, so we don't have any questions from the students, from the chat. So let's introduce the case. Yeah, sure. So depending on where you are in the world, you might have heard there's some big news on Friday, coming called Amazon, which everyone should have heard of by now. There's the largest online retailer in the world and probably one of the largest web service provider. The massive company. You've probably heard of Jeff Bezos and Amazon. They're into everything at this point, from drones to blimps to automating your house, but they started with selling books online. So Amazon just bought a company called Whole Foods on Friday. Whole Foods, you've probably never heard of them if you're not in the U.S., and if you're in the world part of the U.S., you've probably never heard of them because they have 100 stores and they're a high-end grocery store. Started in Austin, Texas in 1978. They catered to the relatively high-end consumer and they were the first organic store. And so they really pride themselves on organic fruits, vegetables, produce, specialty foods. They tend to be higher cost than most other grocery stores. And so they have 100 stores roughly throughout the U.S., mainly in upscale urban areas. So if you talk to someone from, say, Virginia, they probably have two in Virginia. Something in Richmond and Charlottesville, but they wouldn't have them in the rural areas. And so Amazon, who's been very large, they have $136 billion in revenue a year, they're trying to get into the grocery business. And so Whole Foods is in the grocery business. And so it's an interesting acquisition because Amazon doesn't really have any retail storefront, they're all online, and Whole Foods didn't have much of an online presence. They had something called Instacart. And Instacart was where you could go and have food delivered from Whole Foods and they would do that last mile delivery. So just to give you a scale of things, revenues for Whole Foods, the grocery store they acquired, was about $15 billion, $16 billion last year. Amazon paid $13 billion for them. Now I'm no mathematician, but that multiplier rate is less than one. So they paid less than one times the annual revenue to acquire them. And if you think of other tech, you know, what multipliers are out there, generally sub one is not that good. You've got to think what the grocery business is like. The margins are really thin. Whole Foods tends to have higher margins because they sell to a higher end market, but they're still pretty thin. If you look at the total market share, Whole Foods plus Amazon for the grocery market share in the United States, less than 2% of the market. The number one company is Walmart. They have about 15% and then Kroger is right behind them with about 12% to 13%. So my question to you is what's going to happen? And so to recap, the world's largest internet retailer acquired a niche grocery store, Whole Foods, that's only in 100 stores compared to about 3,000 for Walmart. If I'm not mistaken, about 2,000 of which sell groceries acquired them and they now have a retail footprint for delivering of groceries. And the question is, I want you to break off in your discussion groups and talk to each other and come up with what are some of the impacts that are going to be here. Okay, excellent. So do you have some specific questions? Yeah. Yeah, so discuss the recent Amazon acquisition of Whole Foods and come up with three potential impacts to the industry and the market. So please join the breakout rooms and discuss with your piece and we'll be back in 15 minutes. All right, see you in a few minutes.