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Supply Chain Business Intelligence

Ventana Research released results from a study on "Supply Chain Business Intelligence" in April 2007. The survey explores the adoption and use of BI technology, assessing how executives in the various functions of manufacturing and supply chain operations view it and the role it is playing, or should play, in their organizations. Ventana Research undertook this study to evaluate the market, to determine organizations' maturity and to identify trends and priorities in their adoption.

The survey defined supply chain BI analytics and applications as specific combinations of BI technology created to support business processes such as inventory visibility, commodity spend and customer profitability. BI technology includes dashboards, scorecards, reports, predictive analytics and ad-hoc query tools, online analytical processing (OLAP) cubes, metadata, database schemas, extraction, transformation and loading (ETL) scripts and data warehouses.

This excerpt from the executive summary reveals that most companies are looking to use supply chain BI to gain inventory visibility, manage demand and improve customer service. Yet there are other benefits that many are not taking advantage of. Typically that's because there are some missing pieces - and they involve more than software. There are also people, process and information management issues that companies must address to improve their supply chains and gain competitive advantage such as:

Assess your maturity and take steps to improve it. Many organizations adopt technology without understanding all the associated requirements that will enable their people and processes to use it effectively. Companies rated as innovative avoid this mistake. They have moved beyond merely using supply chain BI for reporting basic data such as inventory turns or supplier costs. Instead, innovative companies have deployed supply chain BI to address customer-facing issues and revenue-driving activities. Midsize and large businesses in any industry can adopt this technology combination to improve decision-making and provide a superior interface of supply chain or trading partner information. Determine the ability of your BI technology providers to add supply chain BI and look for areas where you can leverage supply chain BI to extend the value of your investments.

Expand deployments beyond direct supply chain users. Ventana research concludes that only 10 percent of companies can be considered innovative in the way they share supply chain BI information across the organization. Most report minimal cross-functional use. Supply chain BI at a basic level is used solely for supply chain departmental business. This deployment is too narrow to allow a full return on investment. We recommend that companies expand the scope of their supply chain BI to include members of executive management and finance, sales, marketing, engineering and product development.

Identify the strategic importance of supply chain BI. One way is to create a cross-functional team responsible for defining the common supply chain measures and metrics that will be used across the organization. Executives and front-line employees, not just middle managers, should use those metrics to measure supply chain performance.

Driving the cultural change that is necessary to support a formal, integrated use of supply chain business intelligence requires a sponsor who has broad and deep influence across the organization. Companies should engage the COO, general manager or CFO as the primary sponsor of their supply chain BI initiative. The success rate of those that involve these executives is nearly double that of those that do not.

Measure the performance of your processes. R esearch shows that use of supply chain BI in a mature manner improves the likelihood of customer satisfaction. Ventana recommends that you stop looking to the supply chain only for improved data visibility or cost containment purposes and start considering supply chain BI in more strategic and innovative ways, specifically that you expand use of supply chain BI to measure the effectiveness of the core supply chain processes. Your company can apply supply chain BI to transform itself into a demand-driven enterprise by making decisions about how the supply chain processes can make the company more effective (not just more efficient). Some ways to do that are to use supply chain BI to understand decision trade-offs, to improve new product introductions and product innovation activities and to better understand the drivers of customer demand and manage promotions trade spend. Truly innovative companies understand that supply chain BI will enable them to improve business efficiency and customer relationships. They expect that the business result will be greater flexibility to meet demand changes.

Use supply chain BI to improve your Balanced Scorecard. The best way to measure process effectiveness is to organize your supply chain BI measures according to a standard performance measurement reference model. Reference models integrate the well-known concepts of benchmarking and process measurement. The best-known reference model for managing supply chain performance is the Supply Chain Operations Reference model (SCOR), created by the Supply Chain Council (http://www.supply-chain.org). This model contains standard descriptions of management processes and characterizes management practices and standard metrics that benchmark "best-in-class" performance.

Ventana Research asserts that an integrated, strategic approach is needed to propel supply chain operations to greater effectiveness and to provide the basis for consistent financial results. All supply chain BI initiatives should start with Balanced Scorecard measurements and SCOR results should be displayed in the Balanced Scorecard business process perspective. By doing this, executives will be able to evaluate supply chain BI results within the company's performance management framework and manage within a proven reference model that provides linkages to strategic goals.

Integrate plans, schedules and forecast data. This survey finds that many users are dissatisfied with their supply chain BI information. Most users have access to only one or two types of static metrics such as cost or variance. Missing are the critical metrics that measure the accuracy of demand and supply plans and financial forecasts. Ventana Research recommends that you seek to improve your understanding of plan performance by using supply chain BI and analytic applications. We believe you will find business benefit in having access to forecasts and financial data integrated with supply chain data, in particular improving sales and meeting new customer demands.

Use advanced BI technologies to improve decision-making. This survey finds that most companies use only the basic BI components, which include reporting, dashboards and extraction, transformation and loading (ETL) as well as more advanced BI technologies including ad hoc search, multidimensional cubes, business rules engines, workflow, business activity monitoring and alert notifications. These capabilities support multifactor analysis such as balancing bookings, billings, backlog or line-balancing. They also help automate the exchange of supply chain information with trading partners. In some cases, event processing, guided or predictive analytics, visualization or geospatial technologies can improve insight. Applied in the right way, these technologies help to improve decision-making by automating the time-consuming task of analysis.

To learn more about Ventana Research services, please contact clientservices@ventanaresearch.com. The full research report is available for purchase through Ventana Research at (650) 931-0880 or by contacting sales@ventanaresearch.com. For a list of research available visit www.ventanaresearch.com/research.


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