How to Leverage Business Intelligence in Supply Chain Management: Find Real Meaning in Your Sea of Data
Can you drive if your car has problems with the engine, battery, brakes…? It’s unlikely and even if you do, there will be problems along the way. Moreover, ignoring signs of trouble might not only cost you a fortune but also put you at risk of an accident. Supply chain management, in some ways, is similar to this process, only instead of car parts, you are dealing with procurement, logistics, operations management, software, and you need to keep them running smoothly. But the reams of disparate data and the inability to process it in time is one of the reasons why your vehicle is not working in the way it’s supposed to.
As the supply chain is one of the core areas you should concentrate on during the digital transformation (DT), its intelligence can put your business on the fast track to success. Implementation of Business Intelligence in Supply Chain Management (SCM) is one of the ways to handle the mind-boggling amounts of data and turn it into meaningful information. With this technology at your fingertips, you can automatically track main KPIs such as cash to cycle time, fill rates, days of supply, inventory velocity, turnover, customer order cycle time, etc., and investigate this data in more detail to uncover some not-so-obvious details.
In this article, we dive deeper into the levels of supply chain management, uncover how BI solutions can improve your business outcomes, and provide you with a supply chain intelligence PDF checklist so that you can rate your company’s intelligence level by yourself.
Use Business Intelligence in supply chain management to identify weak points in time
Providing you with the visibility of all your data and turning it into valuable information that you can check at any moment is the key benefit of Business Intelligence solutions for SCM.
Imagine that you need to connect a plethora of indicators of freight traffic, rail transport, and the leading rail operators. Generating the graphical representations of them in Excel doesn’t sound too challenging, until you need to make changes to the data and, consequently, to the charts. In this case, business analysts have to correct the information in the spreadsheets manually. It gets even more puzzling if the organization doesn’t have a common data warehouse and the data that each employee works with can only be accessed by themselves.
— Maxim Hayan, Finance Business Partner
With Business Intelligence in the supply chain, such a situation doesn’t happen. Graphic representations of indicators of freight traffic, rail transport, and the leading rail operators are connected automatically and presented in easy-to-grasp real-time dashboards available in just one click.
Implementation of the technology can greatly impact the effectiveness and profits of your organization at all the levels of SCM — from strategic to tactical and operational.
Business Intelligence for supply chain management: strategic level
The strategic level is about keeping track of market trends and overall planning of how your supply chain will function according to your organization’s goals, customers’ needs, suppliers’ demands, etc. It’s the cornerstone of successful supply chain management. Changes at the lower levels without a common understanding of the company’s long-term strategy will be ineffective. It’s like trying to renovate a house after rain damage without realizing that the leaky roof needs to be repaired first. Here are strategic activities where BI solution implementation will be helpful:
1. Identifying priority areas of production
At the strategic level, using Business Intelligence in supply chain management helps you decide on your company’s global approach: will you focus on producing large volumes of low-margin goods solely or will it be more profitable for you to combine high- and low-margin goods? If you choose the latter option, what is the ideal ratio of production capacity for their production? BI helps you determine the optimal balance based on all the input data.
Selling items with low margins but high volumes that load your production line is like offering vanilla ice cream — it’s the most standard but sought-after product. And here’s the question to ask yourself: if your company can handle high-margin made-to-order products, how profitable is it for you to continue producing vanilla items?
— Maxim Hayan, Finance Business Partner
If you are planning to develop new products or modernize existing ones on a regular basis, BI technology can help you efficiently allocate the production workload. Take, for example, a manufacturer, who wants to reorient the company’s production based on trends for the new season. BI helps to identify low-margin items that should be dropped from production and the capacity needed to produce new items. In theory, it can all be done in Excel, but with BI it’s much faster and easier.
2. Allocating manufacturing facilities correctly
Where is it more beneficial to locate the factories? Countries such as Malaysia, Taiwan, China, and India may seem the best options at first sight. But if you consider other parameters, such as quality of labor, risks, infrastructure, etc., your choice won’t be as straightforward.
If you distribute goods for various markets, another question arises. Which option is more profitable for you: manufacturing in one of the countries and delivering to others, or having a factory in each country to save on logistics and speed it up? There’s no one-size-fits-all solution, and Business Intelligence for supply chain management can confirm what your business sense tells you or prove it wrong with up-to-date and accurate data.
Business Intelligence solutions for supply chain management: tactical level
When you’ve set the organization’s overall priorities, it’s time to dive deeper into your medium- and short-term activities in SCM. Which specific manufacturing processes should you identify to reach your big-picture goals? How do you minimize risks and control costs in practice? At this stage, you determine the means of achieving key deliverables — production efficiency at a balanced cost and high customer satisfaction. If your production facilities are located in different countries, tactical activities may differ, as you should take into account local resources, taxes, etc.
BI solutions help with:
1. Choosing the most beneficial transportation and warehousing solutions
Identifying if logistics should be managed in-house or by a third party is one of the top priorities on the tactical level of SCM that BI can help with.
What about warehousing? Poor SCM can lead to a lack of materials and products and, in turn, failure to fulfill orders on time. On the other hand, every piece of inventory you store costs you money. The price will be exceptionally high if the storage space is located in a country with high cost of industrial rent, like the United Kingdom, Norway, or Ireland.
2. Finding a balance between the discounts that different suppliers offer and their level of service
For example, you buy many components for products from different suppliers at the best prices. This may seem the most profitable solution as the cost of the final product is minimal. On the flip side, you need to coordinate your deliveries so that the production doesn’t stand idle while one of the components is being delivered. How important is the speed of production over the price? Can you sacrifice greater productivity and faster outcomes to save on costs or risk losing customers? That’s where the role of Business Intelligence in Supply Chain Management comes into play– the software enables quick visualization and comparisons of proposals from various suppliers.
3. Creating schedules for suppliers and employees
How many urgent and non-urgent orders do you have? Such information is usually kept in mind of people, on paper, or in Outlook at best. But if you produce various types of one product, you should track the production run for each type as you first have to produce one type of goods, stop the line, reconfigure it to make another type of goods, and restart the line. It’s challenging to manage such a complex process efficiently without real-time data visibility. It’s one of the points where you can benefit most from the Supply chain management and business intelligence duo. Schedules for all employees who can track their actual status are the key to the timely execution of tasks.
4. Building an integrated and scalable KPI tracking system
Without a proper analysis of your supply chain performance, it is impossible to understand whether you’re moving toward your goals and at what speed. And BI helps you conduct this task. Take advantage of creating a custom dashboard that contains both common KPIs, such as days of supply, fill rates, inventory velocity, turnover, etc., and your specific KPIs based on your organization’s areas of focus.
For example, what if you’re concerned about data on the number of negative product reviews and returns? In this case, you can add the information on the number of defect cases to this data and create a unique KPI to track product quality. Moreover, the BI solution allows you to collect the information from different sources, both external (outside research, customers’ feedback, social media, etc.) and internal (ERP, IoT devices, logistics and transportation management systems, etc.) to get results.
Business Intelligence support for supply chain management: operational level
This level of SCM includes your daily routine tasks such as monitoring logistics, production scheduling, ensuring enough materials are available for production, etc. In the supply chain, you need to correlate the sales and procurement plan with production capabilities and maintenance service. You can plan everything… in theory. But what if there’s a shutdown at the factory? What is your plan B? How do you correctly relocate capacity to meet obligations to the customer on time?
Consider implementing Business Intelligence in supply chain management for:
1. Monitoring logistics activity
There’s no company with a 100% on-time delivery rate. At the same time, this indicator is of major importance for buyers — 73% of them are ready to cut off relations with suppliers if delivery problems take place. That’s why it’s no wonder that all organizations want to improve their service. In this case, Business Intelligence logistics can make it possible to determine the routes on which delays occur more often and uncover their possible causes. The technology helps to identify bottlenecks and minimize unnecessary delays and holdups.
2. Managing incoming and outgoing materials and products
You should be ready to deal with unexpected issues that require a quick reaction at an operational level. For example, if you receive raw materials of poor quality, you have to settle the loss with the supplier and find another partner who can deliver you the materials of the desired quality. With BI, you have a dispatch console — a part of your real-time dashboard that shows available suppliers. The technology also provides you with other actionable information that helps answer a bunch of questions such as: Do you have enough raw materials? How many loads are supposed to be picked up tomorrow but haven’t been assigned yet? If you don’t have a tool to track this information, you can face the risks such as raw material shortages, cargo theft, failure to deliver products on time, etc. Leverage Business Intelligence for improving supply chain risk management.
3. Checking whether your supply chain meets the actual legal requirements
New legal requirements for the supply chain were introduced in 2022 in the EU. According to them, companies are obliged to check their suppliers for human rights violations, trade of conflict minerals, etc. Without a BI solution, the fulfillment of these conditions is time-consuming and almost impossible. Business Intelligence technology forms a digital twin of the chain, so you can easily check any supplier at any moment.
Following strict compliance requirements is especially important when dealing with dual-used substances. For example, precursors that can be used for producing paints as well as explosives. Registration of such substances is a prerequisite for their production.
Where and for which product you’ve requested approvals, what stage you are at, and what documents still need to be prepared? You can spend tremendously long time running a table in Excel for such data, and naively believe that you’ll never make a mistake. Or you can create a database and leverage the BI system that provides access to the portals where there is information about the release of new precursors, and automatically sends you notifications about new or updated requirements for the paints you produce.
Fuel your supply chain management with embedded BI to get through the digital transformation journey easier
The implementation of BI in supply chain management is an integral part of the DT, without which the normal functioning of a modern enterprise is not possible.
— Maxim Hayan, Finance Business Partner
One of the great things about BI solutions for supply chain management is that they are integrated into your everyday applications. Your employees can gain insights within their well-known app without changing their workflow. BI implementation in the SCM allows you to manage risks by raising transparency.
Get in touch with our BI experts to leverage your business data in supply chain management and get a robust Business Intelligence foundation.
Originally published on instinctools.com