Inventory management: With supply chain analytics, you can plan, forecast, and fully optimize your inventory so you don’t waste space or waste money with stock that may or may not be working the way it should. You can look across networks to consider consumption rates, inventory levels, and other aspects of your supply chain. You can create the right balance of inventory to keep the supply chain properly stocked while releasing cash for other activities.
» Replenishment planning: With supply chain analytics, you can keep a close eye on inventory levels, noting where more stock will be needed and on what schedule. Further, you can see across your network of trading partners to discover who has the stock that you need and how you can avoid over- stocking when it’s not required.
16 Supply Chain Analytics For Dummies, OpenText Special Edition
These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited.
» Improved partner performance: Supply chain analytics gives you much greater visibility into your trading partners’ activities and performance. You can see quickly which ones are delivering the most profitable business for you. You can determine which suppliers are good to work with and are reliable when an order is placed. Armed with this informa- tion, you’re well positioned for contract and price negotiations.
» Improved cash management: By helping to focus on elements like delivering perfect orders and controlling inventory levels, supply chain analytics helps with cash management. As you’re able to deliver more orders on time and in full, you can reduce the errors and exceptions that drain profitability and damage customer relationships. You shorten the order-to-cash and cash-to-cash cycles and grow revenue by reducing waste.
The cash-to-cash cycle is the time taken to turn your resource inputs (the cost of everything it takes for you to deliver your prod- uct or service) into cash. The shorter the cycle, the more money you have available.
Why B2B Integration? More and more companies are beginning to take a holistic, end-to-end approach to supply chain analytics, and with great results. Strategically using data to transform traditional process- driven organizations can help them become more competitive, increase revenues and profits, reduce risk, and guide them to new initiatives.
A recent Forbes Insights article, discussing the problems that keep enterprises from seeing long-term value from their data initia- tives, talks about the benefits of analytics maturity, how “laggard” organizations are process-based, and how the data generated is often seen as a secondary product. Too often, these organizations are unable to either share information or analyze data effectively within internal departments. While laggards struggle, 75 percent of top performers have a full range of enterprise, departmen- tal, and line-of-business analytics groups that operate within a
CHAPTER 2 The Importance of Supply Chain Analytics 17
These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited.
well-aligned framework. The result is that top performers enjoy growth in revenues and operating margins of 15 percent, or more.
Another factor that distinguishes leaders is their implementa- tion of business-to-business (B2B) integration technologies. B2B integration means the integration, automation, and optimization of key business processes that extend outside the four walls of a company. B2B provides a platform for the digital supply chain. It enables companies to conduct business with trading partners through the digital exchange of key business documents. Using B2B integration ensures that organizations have a single source for all their supply chain data. It enables them to embed an intel- ligent analytics engine within their B2B integration platforms.
According to the OpenText sponsored study with IDC, “How B2B Integration Drives Superior Supply Chain Performance,” compa- nies that use B2B integration can expect some significant ben- efits, especially in supply chain processes. Figure 2-1 shows you these benefits.
Beyond providing a single source of supply chain information, embedding analytics within the B2B integration platform enables you to pull in data from a comprehensive range of other back-end and middle-end systems such as ERP, CRM, Warehouse Manage- ment, and Transport Management Systems. The analytics engine can pull all this disparate data together through data-blending, process it into meaningful information, and present it visually so that the results are easily digestible. This approach allows organi- zations to maximize their investment in analytics.
FIGURE 2-1: The benefits of B2B integration.
18 Supply Chain Analytics For Dummies, OpenText Special Edition
These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited.
A Strategic Differentiator Taking an enterprise-wide approach to supply chain analytics becomes a strategic differentiator. The holistic, near real-time access to actionable information gives advantage over competitors that are still involved in a siloed, ad-hoc approach to analytics.
In fact, according to research from Forbes Insights, which looked at the problems that keep enterprises from seeing long-term value from their data initiatives, only 7 percent of companies can be considered top performers in supply chain analytics. Among such organizations, 45 percent said their analytics strategy is well- established and viewed as a key strategy to support their business operations, while 38 percent had analytics capabilities within line-of-business but not cross-business. The research indicated that 10 percent of companies are laggards that have yet to start using analytics effectively.
Those numbers may be a little optimistic, however. Supply chain expert Thomas Davenport, says that 80 percent of companies are what he calls analytics amateurs — namely they can use spread- sheets and understand analytical transactions. Whatever the actual case, Forbes presents some compelling reasons for a com- pany to become a top performer. Companies that lead in this area experience 15 percent or more increase in revenue growth and operating margin compared to other organizations.
CHAPTER 3 Understanding the Basics of Metrics and KPIs 19
These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited.
Understanding the Basics of Metrics and KPIs
Supply chain analytics serves two main purposes: First, it allows a business to identify, diagnose, and correct ineffi- ciencies and waste in its supply chain. Secondly, it enables a
business to use supply chain data to identify, prioritize, and address business opportunities. Ensuring that you’re measuring and reporting on the correct metrics is key to improving business performance. This chapter provides guidance on how and what to potentially measure across your business.
Strategic Goals A company’s growth and overall well-being depends heavily on its corporate strategy — in other words, the master plan that its top leaders have in mind. Will the company focus on building cash or opening new locations? Will manufacturing be top priority or R&D? This section gives you five areas of corporate strategy that can benefit from supply chain analytics.
Chapter 3
IN THIS CHAPTER
» Learning the key strategic drivers for supply chain analytics
» Discovering why balance is important within analytics initiatives
» Learning how to align key performance indicators (KPIs) with metrics
20 Supply Chain Analytics For Dummies, OpenText Special Edition
These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited.
Increase profitability If a company wants to increase profitability, there are two ways to go about it: Make more sales to increase absolute revenue and/or reduce your costs to increase profit margin. Revenue analytics are designed to evaluate both factors.
To help grow the business, analytics can identify opportunities for supply chain initiatives. Detecting supply chain inefficiencies causing missed sales due to out of stock (OOS) is a key benefit of analytics. For example, if a particular supplier is continually late in its delivery and causes orders to go unfulfilled to your custom- ers, this is an opportunity for improvement. Conversely, analytics can help companies aggregate their volumes to negotiate better rates, which will result in lower costs and greater profit margins. These simple examples are just the tip of the iceberg but clearly demonstrate that greater insight can drive profitability.
Forecast accuracy For most businesses, the more accurate the forecasts — whether financial reporting, demand planning, or inventory management — the more effectively the business serves its customers and shareholders. Many factors affect forecast accuracy, such as supply chain cost controls, order fulfillment, and inventory optimization efforts. A number of small improvements can significantly improve forecasting accuracy. Modern forecast analytics use existing data to predict the volatility of a particular product line or stock item. The best results come from a large data pool with a number of data sources that cover at least a 12- to 18-month timeframe.
