September 18, 2009
Column | techwatch

The case for business intelligence

Looking for another way to control your supply chain costs in tough economic times? The answer might be business intelligence software.

By James A. Cooke

Looking for another way to control your distribution and supply chain costs in tough economic times? The answer might be business intelligence (BI) software. Business intelligence systems, which extract information from different database applications and then analyze the data, can help companies manage their supply chains by determining which areas of an operation offer the greatest opportunities for improvement.

Business intelligence solutions are nothing new. In fact, they've been around for more than two decades. But in the past, they focused primarily on such corporate functions as sales, marketing, and financials. Only in the last couple of years have applications geared toward logistics and supply chain operations begun to emerge. Vendors offering BI software for the supply chain include IBM Cognos, Oco, and Equazion, among others.

What can these apps do for supply chain operations? "BI can provide tools for monitoring performance of suppliers, spending on commodities, and profitability of products and customers," says analyst Sarah Burnett of the Butler Group, an information technology advisory firm based in England. "Performance management analytics can provide 'what-if' planning scenarios in the supply chain. Solutions from operational BI vendors can help with logistics tracking of goods and services."

In the distribution area, for instance, BI applications can make managing carriers and third-party logistics service providers a snap. Want to know which carriers are living up to their delivery promises? A BI program can swiftly sort through the data and generate a report showing which have made good on their pledges and which have not. Going one step further, the software might also identify opportunities to cut costs and boost service by shifting more freight to carriers with the best on-time records and lowest costs.

In a similar vein, users can employ BI software to analyze a third-party logistics service provider's performance against various warehouse operations metrics: the percentage of orders delivered on time, the percentage of items damaged, invoice accuracy, and order fulfillment time. For companies that use more than one 3PL, the BI software could rate all of the 3PLs against a standard set of measures, making it easy to identify both star performers and those that are failing to make the grade.

Historically, companies have had to purchase licenses for BI solutions and install them on their company servers. But nowadays, more vendors are making their applications available via the software as a service (SaaS), or "on demand," model. "More BI on-demand solutions are appearing on the market and these reduce some of the pain points of implementing BI," says Burnett. It's likely that vendors offering BI software for supply chain operations will follow that trend.

Because business intelligence software crunches data drawn from other applications—for example, a warehouse management system or transportation management system—integration can be an issue. But new processing techniques promise to eliminate some of the hassles. In the past, companies had to take the preliminary step of storing the data in a repository, a process called data warehousing, before they could tackle the integration process; now it can be done through a technique known as data federation. "Data federation is a different approach to data integration that pulls data from source systems on demand," says Burnett. "It does away with the need to consolidate data from different source systems into another data store."

Integration issues aside, BI applications offer companies an efficient way to sift through reams of data and uncover cost-cutting opportunities. That's why it was surprising to read in a Butler Group brief earlier this year that the BI market was slowing—presumably a casualty of the global economic downturn.

Although she recognizes that IT groups are under pressure to conserve cash, Burnett thinks postponing a BI investment is false economy. "I know it goes against the spending freezes that always come about in a recession," she notes, "but a lot of expenditure can be saved if there is proper measurement and visibility of costs."

About the Author

James A. Cooke
James Cooke is a principal analyst with Nucleus Research in Boston, covering supply chain planning software. He was previously the editor of CSCMP’s Supply Chain Quarterly and a staff writer for DC Velocity.

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