The Importance of Business Intelligence

I previously focused on one aspect of the most important business intelligence for every business, no matter the business or the industry, your financial data. The business's financial information is critical to not only your survival but the success of your business. Financial data helps keep the pulse on your business and allows you to ask better questions to make better decisions. In my experience, this is the area that many business owners struggle the most with. Without good financial data, storage, and analysis you are essentially flying blind in your business, just like I would have been while flying the airplane if I had not been paying attention to the instruments on the dashboard.

What are some other areas of business intelligence that you could collect that would have a positive impact on your business? We hear all the time about big data and the importance of gathering data. Data is great if you know why you are collecting it, what you will use it for and how can you interpret it. If you as a business owner are not able to understand and interpret the information collected to better manage the business and improve performance then it is just a collection of information. As a business owner, you not only need good data, but you also need to know what the data means to make improvements. I remember early in my career we were gathering lots of information on the product we were manufacturing. We had an outside consultant producing reams of information, but we did not have a software system that would allow us to analyze the information to ask better questions and thereby make better decisions. It was just too much information for us to analyze. We ended up abandoning this project because no one in the organization had the time to analyze it.

Here is another area, out of many, that would prove extremely beneficial to collect and analyze information with the goal of improving performance.

Supply Chain Management Data: The pandemic and the backup of cargo ships off the coast of California brought to light the importance of managing the supply chain. Many businesses experienced shortages of supplies at their businesses including the grocery store and manufacturing.? The war in Ukraine has also brought to light the need for efficient supply chain management. Even with what we assume were well thought out strategies and maneuvers on how to invade Ukraine, the efforts stalled due to the logistics of supplying this army on a day-to-day basis. The demands of providing fuel, spare parts, food, and other supplies were more important than the strategy and predesigned maneuvers of invading another country.

A supply chain consists of all the steps necessary to supply an end user or customer from the time the request comes into the manufacture or supplier through the entire process until the end user or customer receives the product or service. In the case of the Russian army, it was fuel, parts, food, and ammunition being supplied from the home country. ?Effective supply chain management requires the coordination, collaboration, and cooperation of all the major steps within the supply chain to ensure the customer receives what they want in the time frame they want it and in the condition they expect to receive it. This requires good information, data, and business intelligence. Typically, this type of information requires an information system composed of the right technology for that business that will not only collect data, store the data, but also has the capacity to analyze the data into a useful form that will help the management team make better informed decisions. This is where Enterprise Resource Planning (ERP) systems come into play to enable the business to gather information data from across multiple areas of the business. ERP systems allow the business to monitor raw goods purchasing, inventory management, production scheduling, work-in-progress, finished goods, order management and fulfillment. A good ERP system can follow the entire order process from the purchase of raw goods to the delivery of a finished product.

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I worked with a plastics manufacturer that didn’t make their own product, but had it produced in another state and shipped to them They had no ERP system in place to track the production of the materials, order entry, timing or ordering the finished product and then tracking it once it was received within the warehouse. Everything was done on a spreadsheet and subject to the memory of the shop personnel. Because they did not have a good system, they continually ran into problems with running out of product, being able to receive product in a timely manner and delivering the finished product to the customer on time. Whenever they encountered a problem they would apply a fix for that current problem not realizing that the fix often had an upstream and downstream effect requiring them to apply another fix. The entire process was a series of band aids applied at so many different junctures that they were getting less and less efficient at delivering product adding additional unnecessary cost and reducing bottom-line profits, not to mention annoying their customers. ?It wasn’t until we stepped back and took a 30,000’ view of the process and procedures, mapping them out using value stream and process mapping tools were they able to see how inefficient they had become over time. We had to redesign their entire supply chain process to eliminate unnecessary steps and streamline the throughput of material. Without a good system in place, it is difficult to track all the steps within a supply chain that will allow you to deliver your product or service in a timely manner. They did not want to invest in an ERP system, so continued to operate with spreadsheets. While not the best solution, with a streamlined process, it was much more efficient

I often see businesses that started off small and grew but they did not grow their systems and processes as the business grew and they continue to try and operate with outdated systems and processes and the inefficiencies grow along with them. Business process management is a tool that can help companies examine their current way of conducting business and work to improve their operational performance. The process starts by using a tool such as value stream mapping and process mapping to map out the current state and then ask the hard questions as to which steps add value and which steps do not. Often there have been so many additional steps added that don’t add value to the product or service that they have diluted their bottom-line profit. ERP software or business process mapping software can help you to see the constraints within the value stream. Effectively using technology can be key to your company’s success. What businesses are trying to accomplish is to bring continuous flow to their operations to run more smoothly and deliver to the customer what they need and want, in the condition they envisioned it and the time frame they need it, and at a reasonable cost. This requires a great deal of information and coordination. If we don’t look at the supply chain from end to end we tend to end up with conflicting needs between the various aspects of the chain impeding continuous flow. Using business intelligence can help you to see where the constraints are within your process and procedure. This requires knowing what data to collect and analyze.

The goal should be to improve operational efficiency while at the same time improving customer satisfaction. Often when things do not go well, the production department will blame the sales department and the sales department will blame the production department. This is never a good situation and working together through cooperation, collaboration, and communication the two departments can learn to work together for the success of the team. One can’t survive without the other, so it’s best to work together to identify, discuss and resolve the issues that often plague organizations. Here again good data such as a CRM system can help the sales department collect good information that can be beneficial to the production department. A good ERP system can also help the sales department. Making a sincere focus on communication, collaboration and cooperation can build mutually beneficial relationships within an organization that will foster improved business outcomes for everyone.

When you start examining the various steps within a supply chain you begin to see how they not only tie together but they also have their own unique set of issues that need to be addressed to smooth out the flow. Without addressing each step as an organization grows, often the current state is not sufficient to handle the increased demand of a growing company, you will not be able to improve the entire supply chain. ?

Many companies have implemented lean manufacturing strategies to increase continuous flow within their systems and processes. Lean can help to eliminate waste that occurs within organizations that have not examined the entire supply chain from the beginning to the end user and when they have encountered problems or issues, they have placed a band aid on the problem, never drilling down to the root cause like the plastics company I worked with. Lean strategy can also reduce cycle time, improve throughput, and improve customer satisfaction. The basis of lean is also the collection of good data and business intelligence to bring to light the constraints within a supply chain.

When I am working with manufacturing companies, I often ask them to step back from operations and try to see it from a 30,000’ view to see it from a different perspective. When we are immersed in the day-to-day of operations, it is difficult to see what is really causing you grief. The goal is to work towards continuous flow or uninterrupted movement of your product or service through the value stream. When we establish the state of continuous flow, the entire value stream becomes more efficient, increasing capacity, which can translate to bottom-line profit improvement. Knowing which information to collect is critical to making sounds judgements on how to make improvements within systems and processes. But sound judgement is dependent on the quality of the information collected and analyzed. This requires management to understand what information important, and what information is unimportant.

I was working with a manufacturer of autoclaves. They were struggling with getting the finished product to their customers in the time frame they promised. The making of an autoclave is a fascinating process, and we examined the flow of material from raw goods to the finished product and the shipping of that product to the final customers. When examining the business data that they had accumulated over time, all handwritten notes, and spreadsheets, it became obvious that they had no real system in place to gather data, store the data and analyze it and the business had grown beyond their capacity to collect information by hand.? As the business had grown, they were no longer able to keep track of all the information necessary to manage and run this larger business. The owners had investigated an ERP system but felt it was too expensive to purchase and implement not realizing that the lack of effective information and the capacity to analyze this information was costing them a substantial amount of loss revenue. It was like starting over on every project and this was impeding their ability to create continuous flow and increase capacity. Looking into purchasing an ERP system can be overwhelming and expensive. Many business owners view it as an expense rather than an investment, not taking into consideration the real cost of operating an inefficient system is costing them and will not make the investment. However, if you look at any expense and ask yourself two questions.

1.??? Will this save me money?

2.??? Will this make me money?

If we ask these questions on any major investment and the answer is yes, then we should rethink our no decision and consider how the investment has the potential to add to bottom-line profitability.

I have discovered that if you really want to know what is going on within a company, go talk to the people that are doing the work. They know what is going well and what is not going well and often have suggestions on how to make things better, but no one is asking them for their input. When talking with the people on the shop floor of the autoclave manufacturer, spending some time value stream and process mapping their production department they were able to articulate exactly where the bottleneck in their production line was located. Had they had an ERP system in place they may have been able to determine where the other constraints were in the system, but even without this kind of software, the people doing the work, knew where it was. Once we focused on relieving the constraint, it was important to look upstream and downstream for the effect of addressing the problem, because there is always an upstream and downstream affect.

The only real way to make improvements within a business system is to analyze the system. If we don’t possess a very good understanding of how the business is operating we are at a tremendous disadvantage to our competition. Using tools such a value stream mapping, process mapping and gathering good business data though an ERP system will help us to measure and manage performance and make improvements to the entire process.

While there are many more opportunities to collect business intelligence, the business owner needs to decide which data and information will have the greatest impact on the business. It is impossible in small to mid-size companies to collect and analyze everything at once. My suggestion is to start with gaining a through understanding of the financials, then work on improving your supply chain efficiency. These two areas will have a significant impact on your bottom-line profits and all business owners want positive bottom-line profitability.

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