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''All things to all companies'' isn't always the way to go. Here's how Staples, Trimac, and Deltek applied business intelligence software exactly where it was needed.
Jennifer Caplan, CFO.com | US
July 22, 2003
After spending years rolling out complex and costly enterprise resource planning (ERP) systems, many companies today are sitting on massive storehouses full of raw, largely transactional data. To extract the most important information from those databases — and to make the calculations that can provide the basis for managerial decisions — is often the role of business intelligence (BI) software.
As business intelligence applications have become increasingly sophisticated, a number of vendors, including Cognos and Hyperion, have made them their bread and butter. Tools that began with basic reporting capabilities now offer at-a-glance "dashboards" of key operational and strategic metrics, often with E-mail alerts that can function much like a "warning light." When managers have been alerted — or any other time they need to — managers can drill down to ascertain whether particular business units are performing to goal, whether inventory turns have decreased, whether customer service levels have fallen, and more.
Suppose you're not ready for a full-fledged BI rollout? Take heart: Here's how Staples, Trimac, and Deltek put business intelligence software to work — exactly where it was needed.
Staples Redesigns the Showroom Floor
Finance executives at Staples, the $11.6 billion office-supply retailer headquartered in Framingham, Massachusetts, launched the company's business intelligence initiative in 1997. Having rolled out a budgeting and planning application from Hyperion, managers at the fast-growing enterprise felt they needed an analytics tool to help measure overall corporate performance and product profitability. That's when the company turned to Hyperion's business intelligence platform, Essbase XTD.
"Our goal was to achieve one version of the truth," says Marcie Lerner, vice president of finance at Staples, "and to track key performance indicators that were essential for running our business."
Using Hyperion's technology, Staples built product profitability models, which help managers determine the optimal mix of products and the best strategies for presenting them. The system provides graphical representations of high-level data — say, revenues and costs for a line of products from a particular vendor. But from their desktops, executives can also drill down to more-granular levels — for example, the costs of marketing, distribution, and rent attributed to a particular stock-keeping unit (SKU). Highlighting and click-and-drag capabilities allow executives to flag exceptional cases.
Staples is now able "to create a more fully allocated P&L," says Lerner. "Previously those allocations were crude and simplistic." A more nuanced view of profitability by product has helped Staples managers reduce inventory turns, negotiate with vendors on a stronger footing, and obtain more-optimal product mixes.
Take furniture, for example, a product category that at first blush seems to be a top performer, since it tends to produce generous gross margins. After Staples managers factored in the costs of storage, distribution, handling, damage, labor, and rent, the overall profitability of furniture turned out to be significantly lower than that for less-space-intensive categories like basic office supplies.
That realization led Staples managers to reduce the floor space devoted to furniture, says Lerner. Now the company devotes more room to "higher-inventory-turning categories such as chairs and filing cabinets."
Trimac Stays on the Straight and Narrow
Calgary-based Trimac, a provider of bulk transportation and logistic services, maintains a fleet of 3,000 trucks that carry chemicals, fertilizers, and other materials to 130 terminals across North America. In a business with low margins and with assets that are continually on the move, information analysis is key to the company's survival.
"The only way to stay afloat in this industry is to be exceedingly efficient," says Ted Barnicoat, CIO at Trimac. "That means you have to have data, be able to analyze it, and recognize when things are not going according to plan."
Trimac certainly had plenty of data after it rolled out applications to automate truck dispatches and billing, and integrated them with financial and HR databases. "The real challenge was analysis," says Barnicoat. "We needed to look at every haul to ensure that each one was meeting our contracted terms" and to seek out further efficiencies.
To compare the details of every trip against pre-defined standards, such as mileage or loading and unloading time, the company turned to Cognos Series 7 business intelligence applications. In 2000, the software provider's PowerPlay, Impromptu Web Reports, and UpFront Portal modules were deployed to 50 Trimac users, and then to 80 more.
From web-based desktop portals, Trimac managers can drill down into a specific haul to find out just where a particular driver might be facing problems. "There were a number of occasions when we were not doing something right," says Barnicoat. "We were either taking too long to load, or showing up with the wrong equipment, or not billing something right." Not only have BI tools "helped us increase the utilization of our fleet," but Barnicoat also maintains that these efficiencies are saving the company between $1 million and $2 million per year.
Although Trimac has been using business intelligence applications primarily to analyze orders, managers are planning to extend their analyses to other key metrics including accounts receivable, margins, equipment utility, and maintenance. In addition, Trimac will soon implement a reporting tool that will enable its customers to log on to a secure extranet and analyze their individual accounts.
Deltek Gets a Stronger Grip on Receivables
Deltek, a provider of enterprise software, turned to Cognos "to help us fix what was burning us the most," says CFO Lori Becker — "the high number of receivables over 90 days old." Adds Becker, "It's hard to keep track of over 8,000 customers."
One way to do that, says Forrester Research analyst Noha Tohmay, is through a system that automatically notifies company managers when something goes awry. If an event falls outside the parameters determined by the company, the system dispatches an E-mail alert to the appropriate people.
Deltek turned to Cognos NoticeCast to send alerts about customer relationships. The system sends detailed reports to account managers about each of their customers, including information on the status of receivables, whether a customer has placed a support call, and the degree of urgency of the call. When a customer's account slides beyond a threshold that Deltek specifies, the system sends an E-mail alert to the appropriate manager — even to handheld devices such as Blackberries and digital cell phones, if need be.
The account manager can view the exact invoice sent to the client and E-mail it to other parties for further discussion, if necessary. The system also allows Deltek's accounts receivable department to publish reports displaying outstanding invoices for specific account managers.
E-mail alerts alone are only "helpful in a very limited manner," contends Tohmay, "because the user still needs to resolve a problem." Strong monitoring tools should not only have the capacity to synthesize available data, they should also have the analytical intelligence to come up with solutions and recommendations.
Business Intelligence, One Step Beyond
Although a number of companies have recognized the benefits of devising and implementing a coherent BI strategy, analysts maintain that most have not yet laid the organizational groundwork to reap the benefits of available technologies.
For one thing, numerous business intelligence applications exist on top of the individual vertebrae of the ERP backbone: supply chain management, customer relationship management, budgeting and planning applications, and financial analysis, for example. True, these BI tools are proving useful for extracting and analyzing data at a departmental level — but this piece-by-piece implementation relegates enterprisewide analysis to little more than a distant possibility.
"There tends to be a wall between the enterprise applications and the decision maker," says Patrick Connolly, a worldwide product marketing manager at software provider J.D. Edwards. Part of the problem: Most corporations still expect the IT department to decide how data and business processes should be integrated, says research director Bill Hostmann at Gartner. "All they are doing is creating application spaghetti as a result," he adds.
According to Tom Hoblitzell, an analyst at consultancy Answerthink, one-third of his company's clients don't have the integrated, cross-functional strategy necessary for a successful BI implementation. Frequently, adds Hoblitzell, the will, leadership, cross-departmental collaboration, and skill level required to implement such a strategy is weak or lacking altogether.
As a good next step, analysts recommend that companies create a cross-functional business intelligence team — with the endorsement of top management — charged with the responsibility of devising and implementing strategy. According to Hostmann, a "BI competency group" can go a long way toward setting data standards; defining key performance indicators; and deciding how the numbers will be computed, where key data should be extracted, and who should have access.