Of all the predictive analytics in the world, the one retailers could make the most everyday use of is better weather forecasts. They may be coming.
IBM (NYSE: IBM) has formed a data partnership with the Weather Company, parent of the Weather Channel, as part of its $3 billion investment in a new Internet of Things business group. The weather data will literally go into a cloud – the IBM Cloud.
The idea is to integrate real-time weather insights so that businesses can improve their operational performance and decision making, according to an IBM statement.
WSI, Weather Company's global business-to-business division, will move its huge weather data services platform to the IBM Cloud, and integrate that data with IBM analytics and cloud services.
IBM regards weather data as an indispensable asset, reported The New York Times. The weather initiative will use Watson, the artificial intelligence engine with almost celebrity status, as well as IBM's other analysis tools. The goal is to deliver a "new service for business, detailed weather information and insights for decision making," said Robert Picciano, senior VP for analytics.
WSI licenses forecast information to businesses, and retailers are high on IBM's list for using that data as a foundation for analytics services.
For retailers, this could mean a better ability to adjust store merchandising based on more accurate and timely weather forecasts, as well as being able to anticipate spikes in electricity demand by using temperature and humidity metrics weight against historical data, Fortune noted.
In the winter, retailers located in areas with heavy snowfalls see storm forecasts drive spikes in sales of groceries, shovels, sand, salt and cold-weather gear, IBM said. However, those weather events also hamper retail sales as consumers stay inside. For example, during the January 2014 polar vortex, areas with greater than 10°F temperature drops experienced decreased sales of 15.5 percent, while areas with a less than 10°F drop saw sales drop only 2.9 percent. The ability to better understand and predict the impact of such weather events allows retailers to adjust staffing and supply chain strategies as needed – regionally and nationwide.
Weather is arguably the biggest external factor in business performance, according to the University Corporation for Atmospheric Research. Weather conditions cost U.S. businesses an estimated half trillion dollars a year, said the American Meteorological Society, USA Today reported.
The IoT and cloud computing allow data collection from over 100,000 weather sensors and aircraft, millions of smartphones, buildings and moving vehicles. WSI's forecasting system processes data from thousands of sources, and results in about 2.2 billion unique forecast points worldwide, averaging more than 10 billion forecasts a day on active weather days, according to the IBM press statement.
"There's an opportunity to inform all business operations and decision-making with real-time actionable insight delivered securely via the cloud and extracted from all this data collected from sensors all over the planet," Picciano said. "The Weather Company and IBM partnership can be a catalyst to making critical business systems even smarter."
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