---
title: Visualisation - centralisation smoothens demand
date: "2006-09-18T12:00:00Z"
categories:
  - visualisation
wp_id: 212
---

Often, presentations and documents make complex points. It's useful to convey these as a simple visual. It's worthwhile to make the effort and **do a simple visual for **every** slide or paragraph**.

Once, a retail bank asked us if they should centralise their operations. They had operations distributed across branches, regional hubs, and a central hub. After 2 months of work, this was our story:

1. Centralising smoothens demand
2. Centralising improves productivity
3. Your activities are decentralised (so you should consolidate)
4. To do that effectively, you need a few more regional hubs

**Centralising smoothens demand**

The mathematics is simple. If you have operations in two hubs, A and B, the variance (in demand) for A and B, individually, will exceed the variance for a combined hub A+B. Therefore, you'll have a smoother demand for the combined hub.

> Var(A) + Var(B) >= Var(A+B)

But we couldn't just say that in a slide. So we collected data about the daily volumes at three hubs, and it clearly showed the result. Var(A) + Var(B) + Var(C) > Var(A+B+C).

[![Centralised Hub reduces total variance](/blog/assets/flickr-centralised-hub-reduces-total-variance_245258278_o-jpg.webp)](/blog/assets/flickr-centralised-hub-reduces-total-variance_245258278_o-jpg.webp)

But it's tough to get the message instantly from this. The main problem is, **it's not obvious how variance (a mathematical concept) relates to smoothening demand**. So we showed a graph of the load, with individual hubs on the left and the combined hub on the right.

[![Graphical view of how centralisation reduces variance](/blog/assets/flickr-graphical-view-of-how-centralisation-reduces-variance_245258280_o-png.webp)](/blog/assets/flickr-graphical-view-of-how-centralisation-reduces-variance_245258280_o-png.webp)

It's **very easy to see this from the graph**: demand at the individual hubs varies more than at the combined hub. People would take one look at it and go, "Oh, yeah... I get it. Move on." (Incidentally, that's the **best** possible outcome for a slide. People glance at it, say "Oh yeah, that's clear. **Move on**." It's what we dream of.)

---

## Comments

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- **Anonymous** _19 Sep 2006 6:28 pm_:
  Anand, Here, are the demands for each hub independent of each other. If not then would the above result be distorted ?
- **S Anand** _19 Sep 2006 6:53 pm_:
  Even if the demands are dependent, the variance will **never increase**. At worst, there'd be no improvement. In this case, we didn't know how correlated the demands were, so we took actual data. As it turns out, the demands were slightly correlated, but not much. So there was a fair bit of saving.

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