VideoHe turned to BI vendor SAS Institute. "I'm able now to look at performance drivers by business unit or division, to make assumptions about forecasting and managing costs, and to manage inventory levels," says Klementz. Financial and other data from those multiple systems are consolidated in a data warehouse, on top of which sits the BI solution. "I have my forecast and actual financials in one place, which ultimately tie into my scorecard of performance indicators and provide a directional view of where we're headed," he adds.
But more important, Klementz now has a grip on the company's inventory levels relative to the forecast. "If the economy teeters or there are other changes in the business environment, I can adjust the inventory strategies," he explains. "Instead of making intuitive business decisions with my inventory or other financial indicators, I make fact-based decisions. If I have what now appears to be too much inventory, I can increase the sales focus or strategy in that area to push it harder, knowing that otherwise, it may carry inventory longer than desired."
The BI tool was implemented last fall, and additional phase-ins remain, so Klementz does not yet have actual metrics indicating how well it has performed. But he's confident it will significantly improve business performance, and, in particular, inventory turns.
He hopes someday to integrate BI across the enterprise to create competition among the company's suppliers. "I need more visibility to tell what we're buying from whom, in what quantity, and at what price," he says. "Right now, I can't easily tell if I'm buying similar functioning items with slightly different specifications from 10 different suppliers, and if I bought it from just 1 whether or not I could save money."
All these companies would love a one-size-fits-all BI solution that integrates all the links in their supply chains with other IT systems and finance, a process that in large part consists of watching the universe of software makers to see which offers what when. "I would think the supply-chain vendors [i2, Manugistics, and others], given their domain knowledge, will define the standards for full integration," says Meta Group's Folger. "Then again, the ERP vendors are so much bigger and so financially healthy, and the BI vendors are the early movers with analytics capabilities. I imagine they will all continue to play a role."
IDC's Morris also finds it difficult to pick a winner. "The ERP vendors as presently constituted understand business processes and offer BI tools, but they don't address all the links in the supply chain," he says. "The supply-chain vendors are behind the curve as far as analytics, as they are weak in the areas of forecasting and trend analysis. Meanwhile, the BI vendors, which have the lead as far as turning data into informative reports, historically have offered technology that is not well integrated to business processes. What is needed are solutions that integrate ERP, supply-chain management, and business intelligence that is event- and business-process-aware."
Folger warns against waiting for a technology cure-all. "Many companies want a system where the forecast feeds into the execution side with little or no human involvement," he explains. "This way, when the forecast suffers, supplies and inventory automatically reduce, and when they rise, supplies and inventory increase. But if you're the guy running procurement and things are booming, and some BI tool indicates a bust is around the next corner and you should cut procurement dramatically, you'd be an idiot to accept it at face value. Imagine going to the CEO and saying we're cutting production even though we're making more money than ever."
The moral? "The human element will always be necessary," says Folger. "You can't completely automate everything." But companies that have brought BI to bear on supply-chain challenges say that even less-than-perfect approaches have paid off, and t hey expect things to only get better.
Sidebar: Where the Rubber Meets the Code
Goodyear Tire & Rubber also wanted better forecasts so that its supply chain was in synch with sales expectations in North America and Europe. A data warehousing tool from Teradata and a BI tool from Cognos measure forecasts against actual sales to pinpoint the gaps. "We wanted to know where our strengths and weaknesses were vis-à-vis the forecast," says Eric Berg, CIO of the Akron, Ohio-based company. "We also wanted to compare the forecast to our fill-rate measures — whether or not we were filling orders on time. If we were not hitting the 100 percent fill rate, then we'd swing back to the forecast to see if it was accurate. If it wasn't, we would find out why — for example, a customer could have ordered a different quantity or mix of products than originally anticipated — and then design corrective measures."
The overarching goal, he says, has been to gain greater visibility into the supply chain to make better business decisions, anticipating and meeting customer demand at the lowest possible cost.
Key performance indicators pertaining to the supply chain are linked to Goodyear's financial-performance indicators — for example, a fill-rate issue with a customer that may have an impact on revenues. Says Rich Kramer, Goodyear's vice president of finance for its North American tire business, "By linking daily financial performance to the related key performance indicators across the business and in the supply chain, we can take corrective action immediately, versus waiting for month-end results."
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