I’ve changed the course of focus for a central business intelligence technology report this month, “Business Intelligence and Supply Chain Management: Sales Organization Costs.” This report is about improving your supply chain management, and it requires a systematic approach and command of the data to do it.
For example, when I was appointed CIO, the theft and waste were so wrong on the business side of the house that it had never crossed my desk as a CIO before. I immediately ordered an automated system to store this information, move it somewhere where it would not get mixed up with purchases, and then, track the trends.
Keep in mind that this is not a government setting, pure business. There are two levels of metrics. There is employee data, there are supplier data. And, if you are a leader, what has to be done on a strategic level is to pull this data into a number that measures what your business objectives are.
At that point, the information is sent to a software agent to print out patterns in it. At that point, the business has the ‘red hot finger’ from the webshop (who, incidentally, is a partner of mine in strategic consulting and business intelligence work). They also define the next steps for the business.
There are more costs associated with having this system installed, as I said, it is not pure business. Once we have this system, we can talk about what the rules of engagement are in this area. Does the executive want a centralized shipping system? Or, does the customer want to be invoiced for shipping? Or, does the supplier want to have to be paid for shipment? The rules of engagement will be different in each of these categories.
I give some of my business colleagues (though not in my own firm) the example of putting a database into their accounting system. They had always had separate accounting software anyway. They just didn’t get or keep everything they needed to run their business efficiently.
I give this example in the context of supply chain management. In any organization, there are products that need to be delivered to customers. There are vendors that need to be paid. And there are suppliers who want to have their invoices paid.
In my firm, our most primitive examples of this are two or three ‘cans’ of cans of product that are distributed through the channel. Assuming we have agreed that each of the cans needs to be classified as one of two (stock-in-trade or stock-out-trade) it is that simple for the inventory system. There are two key pieces of data: the quantity of product ordered and the quantity delivered to customers. In the case of barter, we can track the total volume of the trade volume for two cans in the region is.
In the most sophisticated supply chain management programs, the barter volumes and trade volumes are tracked by a carload or car band, depending on the technology. Then, there are systems that track other supplier consignment volumes, by source, by region. Then, it is a matter of sorting through the information that was accumulated over time.
So when I was reviewing this year’s report, I was struck by one comment made by the CEO of a company in the plastic (yep, plastic) industry on one of the columns in the report. After stating that rising prices were denting their plastic costs, he went on to say that they were moving from a per-unit model to an average cost model.
Why? The main reason was that by making a slight change in his cost calculations, the cost per unit came down, potentially offsetting the rise in prices the company was now facing.
The adage that goes, “Those that can, do; those that can’t, teach” rings true, especially in the world of supply chain technology where the good techs out there are considered more valuable than ever.
**Disclosure: After speaking with this author a number of times, he has platinum and gold shares in one of the companies mentioned.