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Chapter 1 • An Overview of Business Intelligence, Analytics, and Decision Support 55

a decision or a recommendation for a specific action. These recommendations can be in
the forms of a specific yes/no decision for a problem, a specific amount (say, price for a
specific item or airfare to charge), or a complete set of production plans. The decisions
may be presented to a decision maker in a report or may directly be used in an automated
decision rules system (e.g., in airline pricing systems). Thus, these types of analytics can
also be termed decision or normative analytics. Application Case 1.6 gives an example
of such prescriptive analytic applications. We will learn about some of these techniques
and several additional applications in Chapters 10 through 12.

Application Case 1.6
Industrial and Commercial Bank of China (ICBC) Employs Models
to Reconfigure Its Branch Network
The Industrial and Commercial Bank of China These three inputs helped generate accurate cus-
(ICBC) has more than 16,000 branches and serves tomer distribution for each area and, hence, helped
over 230 million individual customers and 3.6 mil- the bank optimize its branch network. The BR system
lion corporate clients. Its daily financial transactions consisted of a market potential calculation model, a
total about $180 million. It is also the largest pub- branch network optimization model, and a branch
licly traded bank in the world in terms of market site evaluation model. In the market potential model,
capitalization, deposit volume, and profitability. To the customer volume and value is measured based
stay competitive and increase profitability, ICBC was on input data and expert knowledge. For instance,
faced with the challenge to quickly adapt to the fast- expert knowledge would help determine if per-
paced economic growth, urbanization, and increase sonal income should be weighted more than gross
in personal wealth of the Chinese. Changes had to be domestic product (GDP). The geographic areas are
implemented in over 300 cities with high variability also demarcated into cells, and the preference of one
in customer behavior and financial status. Obviously, cell over the other is determined. In the branch net-
the nature of the challenges in such a huge economy work optimization model, mixed integer program-
meant that a large-scale optimization solution had to ming is used to locate branches in candidate cells
be developed to locate branches in the right places, so that they cover the largest market potential areas.
with right services, to serve the right customers. In the branch site evaluation model, the value for
With their existing method, ICBC used to decide establishing bank branches at specific locations is
where to open new branches through a scoring model determined.
in which different variables with varying weight were Since 2006, the development of the BR has
used as inputs. Some of the variables were customer been improved through an iterative process. ICBC’s
flow, number of residential households, and number branch reconfiguration tool has increased deposits
of competitors in the intended geographic region. This by $21.2 billion since its inception. This increase
method was deficient in determining the customer dis- in deposit is because the bank can now reach
tribution of a geographic area. The existing method more customers with the right services by use of
was also unable to optimize the distribution of bank its optimization tool. In a specific example, when
branches in the branch network. With support from BR was implemented in Suzhou in 2010, deposits
IBM, a branch reconfiguration (BR) tool was devel- increased to $13.67 billion from an initial level of
oped. Inputs for the BR system are in three parts: $7.56 billion in 2007. Hence, the BR tool assisted
in an increase of deposits to the tune of $6.11
a. Geographic data with 83 different categories billion between 2007 and 2010. This project was
b. Demographic and economic data with 22 dif- selected as a finalist in the Edelman Competition
ferent categories
c. Branch transactions and performance data that 2011, which is run by INFORMS to promote actual
applications of management science/operations
consisted of more than 60 million transaction research models.
records each day
(Continued )

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