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Driving Business Performance with Analytics

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Performance ManagementHave you investigated ways to improve your company’s operational performance on more than one occasion, but been challenged with having the right data and determining the right measurements?

You’re certainly not alone if you answered YES.

Creating the best analytics is a rigorous task that requires special study of the “hierarchy” of performance variables that are present throughout your business. While many variables affect performance, we have found over time that analytics created around performance- or profit-generating processes is a good way to begin. Then cascading these measurements down through the enterprise helps to ensure concentric goals and objectives.

I would nominate the following key processes to model your analytical measurements around:

  • Supply Management
  • Revenue Management
  • Customer Management
  • Asset Optimization

Individually, each is important; but collectively from the top to the bottom of the enterprise they are critical and tell a great deal of the performance story.

Supply management analytics range from the basic variance elimination in supplier management such as fill rates, PPV, and on-time delivery to reducing your company’s risk profile by measuring supplier variability and agility with a focus on increasing collaboration and synchronization after reducing lead times. From a forward-looking perspective, launching a project to identify and aggregate spend across a variety of sourcing functions can also produce a great deal of savings. Again, the first task at hand is analytical in nature to measure spend after grouping, reclassification and rationalization.

Revenue management is a variety of processes that include your company’s ability to generate (drive) and manage (match supply and demand) revenue. The sales and operations planning process is perhaps the most important area to center attention on, then cascading down into demand forecast accuracy and demand volatility reduction. Part of the revenue management challenge is to monitor processes that can shape or drive demand such as promotional activities and their effectiveness in lifting sales along with overall price management. Continuously doing margin analysis by looking at cost of goods sold by product and local discounting practices can provide an early warning signal as to how revenue will be flowing downstream. Of course, all the analytics surrounding sales management are a given and an absolute necessity, such as sales by source vs. plan.

Customer management is the other side of the equation opposite supplier management with many of the same measurement characteristics on the order fulfillment side, such as fill rates, on-time delivery and stock-outs. Additionally, you can look at service level achievement by measuring returns, reason codes and trends. While these are closely linked to order fulfillment, they can help you uncover and mitigate product issues early on as they emerge. Other key measurements surrounding customer profitability can enable you to assess customer value and potential, while also indicating potential downstream attrition. Complimenting this is the analysis of customer buying patterns to help identify cross-selling opportunities across product lines and customer segments.

Asset optimization is the most commonly measured process since it is largely financial in nature and well understood by stakeholders. The difference between Performance Management and conventional financial asset measurements is the dynamic nature of the performance management variables. Examples are at the SKU level, such as inventory planning and analysis, to continuously balance your organization’s mix of inventory investment. ABC product stratification or gross margin return on investment can be used to measure inventory financial leverage. Additional key financial measurements are cash-to-cash cycle time, which includes days sales outstanding (DSO) and days purchasing outstanding (DPO) to assess the velocity of generating margin. Finally, from a non-financial perspective, measuring capacity utilization from manufacturing to distribution provides warning signs of pending upstream failures. The challenge is to accurately measure at a detailed level, and even predict failure, in part by using some conventional software techniques.

Business performance analytics are not new, but what is new is the crosslinking of low-level dynamic performance variables to form an early warning picture of what could happen if corrective actions are not taken quickly. We’ve used these type of predictive analytics in the demand planning world for many years, and now it’s time to extend their use across other processes in the complex, global enterprise.

Are Retailer-Demanded Price Cuts Killing Your Bottom Line?

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Retailer Price Cuts - Killing the Bottom LineHere are some cost reduction tips to help offset the financial impact of lowered retailer purchase pricing

Organizations today are spending as much as 60 percent of their revenue acquiring the goods and services needed to support their business. It shouldn’t come as a surprise, then, that for businesses that sell through big box retailers with price squeezing power, reductions in the area of procurement spending would appear to have the largest effect in offsetting the financial impact of lowered retailer purchase pricing. But how can you pinpoint where to cut those purchasing-related costs? View Article…

CFOs: Taking Charge with Analytics

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CFO-and-AnalyticsSo much has been written about the promise of business analytics to analyze data for competitive advantage. But, who should own analytics? The CIO? CFO? Some other business unit executive? According to 23% of respondents in a recent Deloitte Touche study, the most frequent leader of analytics is the business unit or division head, followed closely by the CFO at 18%. Some 20% revealed there was no single overseer of their business analytics. However, when they looked at the area most often found to “invest” in analytics, finance lead the pack at 79%. View Article…

Good Visibility Drives Enterprise Performance

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VisibilityThere is an old cliché that says “If you can’t measure it, you can’t manage it.” While that is certainly true, the real issue is that if you can’t visualize it, you can’t manage it.

Visibility (and visualization) of opportunities and problems plays a key role in managing performance in all parts of the enterprise. View Article…

Are Customers Getting Ready to Stray From the Fold?

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Customer Fold6 Ways That Manufacturers Can Exploit Business Metrics To Maintain Customer Satisfaction

What a sinking feeling when you find out that your customer is getting ready to part ways and give their business to someone else. You knew something was up when they didn’t engage with you like they used to. You wondered why they took a pass on those special offers they used to jump on before.

Was it something you said? Did you miss the mark on getting product to them when promised? Has product quality been a consistent issue lately? Were you totally out of the loop on everything that was happening with the account and now it’s too late to save it? View Article…

The Problem with Spreadsheets for BI

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SpreadsheetsIf there is a more user-friendly software application that provides greater utility and flexibility than spreadsheets, I don’t know what it would be. For the past 40 years spreadsheet software packages have endured themselves to millions of business users in all industries and business segments as a means of simplifying their lives and providing a better understanding of various business problems. But with little or no control over the use cases, enduring users sometimes find themselves in trouble when it’s too late to correct errors within the spreadsheets; or even worse, to not identify errors before critical business decisions have been made based on the spreadsheet data. View Article…

Dashboard Design: 5 Pitfalls to Avoid

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Dashboard DesignAs the benefits of performance measurement become more broadly known, analysts are seeing a tremendous uptick in the number of organizations that are implementing data visualization frameworks like executive dashboards to showcase key measures of financial and operational performance. But effectively highlighting a lot of information within a small space can be daunting. View Article…

Supply Chain Agility: How Important Is It?

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Agile Supply ChainAgility (or the ability to move quickly and easily) is a desirable trait in almost any situation ― particularly as it relates to the supply chain.  As its name implies, the role of a supply chain is to not only insure that the enterprise has the proper raw material supplies to produce the final product, but in a broader sense to insure that the enterprise is nimble enough to meet customer demands in a profitable way. It is a philosophically simple concept, but difficult to execute on a consistent basis.   View Article…

5 Steps To a Successful BI Implementation

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Sucess FailureImplementing a business intelligence (BI) solution can be a game changer for your organization by providing integrated insight into data from all corners of the business. Despite all of its promises, though, an enterprise BI implementation is more often than not met with mixed results (and failures!). This can include horrendous delays, huge budget overruns, data problems, and disgruntled end users. View Article…

Why We Struggle To Optimize Inventory

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HeadwindsOptimization is defined as making the “best” of anything. The true meaning is in defining what is the “best.” In the case of inventory, in my opinion, it’s the balance between the improvements in return on assets (ROA) and the loss in sales and customer good will. That careful balance needs to be constantly evaluated in an analytical fashion from one operating period to another. View Article…