Features
Feature
Build a better, faster value chain
Improve operations—and the bottom line—with an active data warehouse.
by Dave Schrader
Loading more information into your data warehouse more quickly, analyzing it faster and then taking action throughout the enterprise can pay surprising dividends.
Better customer management, for instance, drives the revenue top line in the profit wedge. (See figure.) But that’s only part of the story. An active data warehouse (ADW) can also be used to reduce costs, thereby improving profit margins.
Improved operational efficiency is enabled by the ADW through a combination of strategic and operational insights in six areas:
1. Precision forecasting and fulfillment
Under normal operating conditions, companies are part of a well-functioning value chain. Whether it’s for products or for services depends on the business. A manufacturer of microprocessors or refrigerators, for example, is part of a product chain that uses an ADW to capture demand signals, drive internal forecasts and production, and provide demand inputs to upstream component or raw goods suppliers. A travel company runs its business as a services chain, in which an ADW captures and matches supply with the demand for travel products like airline seats, cruise cabins and rental cars. In addition to the normal “forward” forecasting and fulfillment function, companies must also conduct “reverse logistics,” including returns, product repairs and trip cancellations. The value of a data warehouse in precision fulfillment at the operational level is threefold. It’s a single place to:
- Capture and analyze demand
- Develop and refine forecasts
- Monitor operations
REACT TO DEMAND:
Ping, a global producer of custom golf clubs, has a supply chain lead time of three to 12 weeks. When Ping introduced its Rapture club line, it used the ADW to detect a surge in demand that rippled through the supply chain. Because of this spike, Ping risked losing sales if it were unable to fulfill its customers’ orders in a timely fashion. But because it quickly assessed the impact of the potential sales, Ping decided to pay its suppliers extra to expedite the parts needed to capture most of the demand.
Click to enlarge
2. Abnormal operations recovery
Events do not always go as planned. In the manufacturing industry, for instance, commonplace operational problems, like hiccups in upstream deliveries of parts, might slow down a factory production line. But sometimes, truly catastrophic disasters—hurricanes, earthquakes, terrorist attacks—can unexpectedly create havoc, and the usual processes won’t work. In such cases, ensuring that up-to-date information and insights from the back office are at the fingertips of operations planners at the front line can accelerate the process of getting back to normal.
PLAN FOR CRISIS:
During Hurricane Katrina, home improvement retailer Lowe’s relied on its ADW to accurately predict what products customers would need to survive the effects of the storm, based on previous seasons’ post-hurricane purchases. These insights drove the right mix of supplies from the distribution centers to the stores on the Gulf Coast.
3. Process improvement analytics
An ADW can improve operational efficiency by providing a platform for strategically analyzing business practices. All companies need to constantly squeeze cost and time out of their processes to increase profit margins. Outlining the steps of each process—when did it start? when did it finish? how much did the step cost?—allows process engineers to suggest improvements that have the most sizable cost or time takeout impacts. Even banks are taking tips from manufacturing supply chain experts, re-engineering their back-office processes using best practices from logistics and hard-goods manufacturing.
Beyond time and cost improvements, the ADW can analyze product or service defects and home in on root causes of product recalls. Employing a methodology like Six Sigma based on data in the ADW can help quality engineers quickly identify the source of any product or service problem. Backtracking defects to the precise upstream step that caused the problem can dramatically improve product quality.
OPERATE EFFICIENTLY:
Norfolk Southern (NS) has more than 3,000 locomotives and 100,000 freight cars in its fleet. To keep them running on time, management accesses near real-time data in an ADW. Using dashboards, employees can pinpoint where delays are occurring in the rail system and proactively take steps to ensure that service level agreements are met. By more efficiently utilizing online and offline locomotives, NS has saved millions of dollars.
4. Risk scenario analytics
The ability to predict business risk resulting from changes in expectations about the variables in the value chain is another strategic use of data to anticipate and react to future scenarios.
For example, severe weather and world politics have a huge impact on the price of oil. The resulting volatility affects hedging decisions in many industries. A $20-per-barrel increase in fuel prices will alter an airline’s bottom line and may influence an executive’s decision to order or take delivery of new aircraft.
MEDIATE RISK:
A major airline used its ADW during times of unusual surges or decreases in demand for passenger seats. Examples include the rate of booking changes stemming from the SARS crisis, the Olympics and the recent financial crisis. Having an early, detailed and daily evolving view of future bookings allows the organization’s planners to consider a much broader range of options than its less nimble competitors, like reducing seat capacity, changing mix of prices, or making available more seats at lower cost.
5. Asset optimization
Many businesses make the Web and mobile phones their primary customer interface and use active customer management to do a better job of offering the right products or services at the most opportune time in self-service mode. But behind this trend is another use of the ADW to do better intra-day operational asset management. Advanced users monitor and fluidly adjust contact center or front-line staffing. Based on demand, they can dynamically schedule the right mix of skills and personnel.
OPTIMIZE RESOURCES:
DirecTV, a leading satellite TV provider, collects and monitors real-time data and reports on call types and dispositions. With only a 15-minute latency, this drives hourly call-type predictions so the National Command Center can react to spikes in calls relating to outages, technical problems, weather-related problems, billing issues, etc.
6. Global visibility
Companies can use the ADW to become much more disciplined about linking strategy to objectives, business processes and key performance indicators (KPIs). An ADW helps foster a culture of managing by the metrics through the use of internal and external operational dashboards and scoreboards. These tools not only help keep everyone focused on what’s important to the business, but they can also align and accelerate activities enterprise-wide, as well as across companies. Many cross-company information interactions happen automatically—e.g., perpetual inventory replenishment—but when things go wrong, dashboard warning lights go off and people quickly intervene.
IMPROVE VISION:
The largest retailers in the world use inter-company “Link” programs to make sales and inventory information available to their category managers as well as external suppliers. Likewise, the US Air Force uses its ADW to provide global visibility through dashboards on the real-time mission-readiness and availability of all of its equipment, including aircraft, fuel trucks and parts.
Manage by metrics
Using the ADW more broadly to drive operational efficiency increases the value of an organization’s data warehouse investment. Many companies increase their bottom line by using data and analytics to achieve operational precision fulfillment under normal operating conditions and by improving recovery time for abnormal operations. Other strategic uses involve outlining and improving their processes, conducting risk and scenario analysis, and driving real-time asset management, based on the data captured and stored in the ADW.
In all cases, an ADW fosters global visibility so everyone in the organization, as well as in the extended value chain, can manage better by the metrics.
Dave Schrader is director of Strategy and Marketing, Active Enterprise Intelligence for Teradata.
