“Knowledge and information [represent] the central resources of modern society …”.

Peter F. Drucker, Economist

Additional value through data transparency

Data and information are the heart of almost every company. Therefore they are essential for understanding and improving business processes. Peter F. Drucker, the founder of the management theory, already knew in 1969: “Knowledge and information [represent] the central resources of modern society …”. However, in today’s increasingly digitalized business world, managing these large data sets is a challenge for many companies. Data volumes and structures are often too large and complex for traditional data processing and management applications.

However, this challenge can also be seen as an opportunity for optimisation in terms of a competitive advantage over direct competitors. Smart analysis tools can provide a solution. Personalized dashboards and reports can be created if the available information is used and linked to each other. These reports increase business productivity and efficiency by showing relevant information that would otherwise have been manually captured in a time-consuming process. For example, processes with automation or elimination potential could be identified and appropriate measures could be taken based on the available data.

While sales and finance deparments can often build on years of experience in this field, the topic is also becoming increasingly important in procurement and  supply chain management.

What is BI?

Business Intelligence (BI) describes procedures and processes for the systematic and operative analysis of a company. It allows to extract action-relevant information from already existing data from a wide variety of systems.

The transparency gained from these informations enables effective control of the entire value chain from planning, through purchasing and production, to distribution. By identifying hidden interdependencies, recommendations for action can be derived and thus valuable conclusions for the business can be drawn. Ultimately, optimization potential can be identified and – once it has been realized – added value is created for the company.

What are the benefits of BI for your company?

In the business world of today, success depends more and more on the ability to understand the past and draw the right conclusions for the future. Especially in times of COVID-19, the topic of data analytics is becoming more and more important. According to a recent survey by the business magazine “Forbes”, companies have been investing heavily in analytics and BI since the outbreak of the corona crisis. The majority of companies are pursuing a data-driven approach to navigate through this crisis and in order to identify potential new processes, strategies or even business models.

Especially in purchasing and SCM, BI can generate significant added value for companies. They are usually responsible for cost volumes of more than half of the turnover and central fulfilment processes are included in their responsibilities.  An essential prerequisite for this is transparency in the sense of increased recordability of large and complex data sets through intelligent aggregation and visualization. Key figures or methods that are used for such an analysis could be:

  • Purchased material categories and their quantities and spend
  • Supplier performance
  • Price developments
  • Inventory trends
  • Transport strategies
  • Purchasing channels

These KPIs can be monitored regularly or analysed ad-hoc in greater depth if needed. The transparency gained opens up new – usually more objective – perspectives and thus additional options for action.

Anyone who thinks that BI is only relevant or implementable for larger companies is wrong. As an instrument to increase their competitiveness, even medium-sized companies without massive IT and consulting budgets can use BI to improve their performance, save resources and create addtional value. SMEs, in particular, still do not use the full potential of BI often enough, as media and scientific publications prove. The problem is often not a lack of ressources, but rather the awareness of the importance of BI. Furthermore, the access to high-quality yet affordable tools, as recent trends, vendors and the overall market dynamics are overlooked.

Is BI a worthwhile investment?

Decisive for the implementation is a cost-efficient execution and the calculation (at least as an estimate) of the value that will be generated in terms of a “return on investment” (ROI).

The challenge in creating a “business case” is to derive what measurable added value is realistically achievable through the BI solution – both qualitatively and quantitatively. Both, the qualitative added value (internal: related to processes, external: access to procurement markets) and the quantitative added value in monetary units, time or quantities are already provided by good providers of BI solutions with templates or benchmarks.

Nucleus Research, an investigative IT research company, found out a few years ago that when you invest in BI, the return on investment is on average more than ten times the amount invested. Therefore it can be concluded that a worthwhile ROI can be expected.

„BI will remain on the agenda of companies and their supply chain managers for the next 5-10 years“

Boris Blazej, Supply Chain Partners

The pressure for companies to act is increasing

The fact that both consulting and software companies are investing heavily in the area of BI shows how “hot” this trend actually is. The agile development in the logic of analysis (e.g. machine learning), the automated visualization as well as the improving usability (less programming, increasing usage as a normal office tool) let us expect that BI will remain on the agenda of companies and their supply chain managers for the next 5-10 years. The variety of data and the speed it is collected is constantly increasing. BI technology, data competence and organizational models are therefore more relevant for implementing an intelligent procurement and an intelligent supply chain department than ever before. If you do not benefit from your data today, now is the time to start!

The next article of this series gives more insights in how to optimally implement BI and what pitfalls could occur.