Enabling Process Metrics through Business Intelligence

Many companies have realized significant benefits from process improvement efforts. A prime area of focus for these process improvements has been supply chain activities because these activities often involve cross functional processes that span multiple departments, making them harder to manage and therefore prime candidates for process improvement efforts. Examples of cross functional processes include: sales and operations planning, order fulfillment, total cost to serve and total landed cost for imported products. The process improvements have provided significant efficiency improvements, but it has been difficult for companies to accurately measure their full impact over time and to drive continuous improvement. Most companies have not been able to establish on-going reporting for these process metrics because the data resides in many locations and departments, typically requiring extensive manual manipulation to assemble, analyze and format the data into meaningful reports. However, business intelligence applications are now providing powerful ways to measure and monitor critical processes and enable significantly improved supply chain performance.

The Power of Process Improvement

Over the past two decades, many companies have created substantial competitive advantage by focusing on process improvements. This was first done under the moniker of “process redesign” and then “process reengineering,” and more recently under the banner of “lean six sigma operations.” All of these approaches have had the common theme of a relentless focus on eliminating process steps, variation and non-value activities, and reducing process cycle times. These process improvement approaches have unlocked tremendous value for companies.

Process work has yielded spectacular benefits for companies in a wide variety of industries. For example, Air Products and Chemicals has incorporated its customer interactions in a process called Customer Engagement. By systematically rethinking its design, the company has simultaneously increased the productivity of its delivery vehicles while achieving a major reduction in customer out-of-stock situations. In consequence, the percentage of business lost to competitors has fallen 80%.

Another example includes managing service installations as a process, creating a precise and uniform design for it, and measuring its performance. Duke Power increased the percentage of situations in which it hooked up electrical service by the date promised to over 98%; in some company’s service territories, that figure had been as low as 30%.

Supply Chain Management is a Significant Leverage Point

Supply chain management has been a major focus for process improvement efforts, driven by several factors:

• First, supply chain management is an area of strategic importance as it often includes the major cost elements and assets for “product oriented” companies (including elements such as production and distribution facilities, inventory, purchased materials, manufactured goods, and the majority of employees).

• Second, supply chain management also has a major impact on several critical elements of customer satisfaction, such as on-time delivery, order completeness, total product costs, and ability to drive growth in new markets.

• And lastly and most importantly, supply chain management, by definition, focuses on cross functional processes.
  Examples include:
  • Order Fulfillment: How to receive, process, fulfill and deliver an order efficiently and in a way that meets customer requirements
  • Sourcing and Procurement: How to source, procure, and assure the timely and efficient delivery of materials and components
  • Sales and Operational Planning: How to plan and manage a sales and operational planning process so that operations and sales priorities and policies are in alignment

Business Intelligence to the Rescue

Traditionally, business intelligence has provided enterprise-wide reporting for large companies by undertaking large, complex projects to gather enterprise-wide data, build and map the data into a data warehouse, buy and implement a reporting tool, and create reports with the tool. This typically takes 9 to 18 months, costs upwards of a million (or many million) dollars, requires IT staff to build reports for users, and only includes data deemed “useful across the enterprise”. Important metrics like customer profitability, product profitability, channel profitability, process cycle times, the cost of quality, customer loyalty, and order fulfillment and vendor performance scorecards are rarely routinely measured because of the time and effort required to assemble the data. This leaves companies without key information needed to manage their business.

However, new technologies, often referred to as rapid deployment business intelligence solutions or on-demand business intelligence, that focus on a specific business problem (versus an enterprise or global solution), and are geared for speed, often delivering a solution in weeks, are providing powerful benefits to companies.

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