The Benefits of Integrating Operational Reports with Strategic Analytics
Today’s business applications are capturing, processing, and storing unprecedented volumes of data. Systems like ERP are at the heart of this data deluge, tracking everything from sales and financials to manufacturing and supply chain operations. But this data abundance often complicates rather than clarifies, and the challenge goes far beyond just accessing data but in analyzing and interpreting it, too.
Unlocking actionable insights crucial for staying ahead of competitors typically involves intricate processes overseen by IT departments. Requests for custom reports or dashboards by business leaders are met with lengthy development times by IT or external analysts, resulting in single-use reports that are limited in scope.
Addressing More Complex Issues with Operational Reporting
As technology progresses in business intelligence (BI), it’s time to reconsider the traditional divide between operational reporting and strategic analytics. In general, operational reporting provides time-sensitive, relevant information to operations managers, business professionals, and front-line, customer-facing employees to support daily work processes.
Strategic analytics, on the other hand, is often associated with reporting from an analytical data source like a data hub. The analytics help to improve a business process by analyzing a predetermined set of metrics relevant to the process and providing historical context of the data.
While operational reporting provides immediate data on daily business functions, strategic BI focuses on longer-term trends and forecasting. Both are essential and should be integrated to offer real-time insights and deep analytical understanding.
Historically, operational reporting answered simple but vital questions about a business’s current status, like cash on hand or inventory levels. These reports are crucial for short-term decision-making, offering a snapshot of the business at any given moment. Some basic operational reports or KPIs (Key Performance Indicators) across various business areas include:
Sales and Distribution
- Sales Revenue – Measures the income generated from sales within a specific period.
- Customer Acquisition Cost (CAC) – The cost associated with acquiring a new customer.
- Conversion Rate – The percentage of leads or prospects that turn into customers.
Supply Chain
- Inventory Turnover – Measures how often inventory is sold and replaced over a period.
- Efficiency Rate – The ratio of the actual output to the standard output expected.
- Order Fulfillment Cycle Time – The time taken from receiving an order to delivering the product to the customer.
Procurement
- Purchase Order Cycle Time – The average time taken from the creation of a purchase order until its fulfillment.
- Supplier On-time Delivery Rate – Measures the percentage of orders delivered on time by suppliers.
- Supplier Lead Time – Measures the time between the placement of an order and its delivery by the supplier.
Finance
- Operating Cash Flow – The cash generated from the company’s regular business operations.
- Gross Profit Margin – The difference between revenue and cost of goods sold, divided by revenue, indicating the financial health of core operations.
- Debt-to-Equity Ratio – The ratio of total liabilities to shareholders’ equity, indicating the level of financial risk.
Shaping the Future with Strategic KPIs
Rather than focusing solely on addressing or improving day-to-day processes, the landscape of operational reporting must evolve to address more complex aspects of business operations. As a result, analysts are relying more heavily now on strategic KPIs like the ones highlighted below. These KPIs gauge efficiency, effectiveness, customer behavior and other factors in an effort to forecast future developments based on past performance and shape future strategies.
Sales & Distribution
KPIs
Inventory Turnover Ratio, On-Time Shipping Ratio, Profitability by Item, Bonus Ratio, Discount Rate, Sales Ratio, Assortment Depth, Units Per Purchase, Customer Churn Rate, Customer Value, Cross-Selling Revenue, Order Lead Time, Back Order Rate, Picking and Packing Cost
Some Questions Answered
- How much inventory is being held by vacated or blocked sales orders?
- What is the order backlog per customer and the predicted delivery date?
- Do I have enough warehouse capacity and resources?
- What is the volume and value of finished inventory that’s no longer in demand or saleable?
- What is the average amount of time taken for an order to reach a client?
- What is the percentage of orders that can be filled using current stock?
Supply Chain
KPIs
Spend by Vendor, Item, Buyer, Ship-to and Bill-to; PO Lead Times; On-Time Shipments vs. Needby Date; On-Time Shipments vs. Promise Date; Order Complete Percentage; Quantity Ordered, Billed, Received, Accepted and Rejected
Some Questions Answered
- What are the supply and demand quantities for a given plan and item category?
- What are the consumption details for a given planned forecast?
- What are the exceptions for which the action was not taken for a plan?
- What is the difference between planned and actual demand?
- Do we have any bottlenecks in our supply chain (and why)?
- What is the cost of an item across our suppliers?
- What are our vendor lead times?
- What is our quality performance of each of our vendors based on % of items rejected?
Procurement
KPIs
Compliance Rate, Supplier Defect Rate, PO and Invoice Accuracy, Supplier Lead Times, PO Cycle Time, Cost per Invoice and PO, Price Competitiveness, Vendor Availability, Procurement ROI
Some Questions Answered
- Which purchase orders are critical and which ones can we delay or cancel?
- Which invoices have been created without a purchase order?
- Who are our worst performing suppliers?
- What is the ratio of disputed invoices to total invoices?
- What is the ratio of products delivered outside the pre-defined target?
Finance
KPIs
Revenue, Gross Margin, Operating Expenses, Net Operating Income, Current and Long-Term Liabilities, Spend by Vendor, Discounts Taken, Receivables Balances and Aging, On-Time Payments, Revenue by Customer, Top Customers, Cost of Poor Quality, Customer Retention, Risks
Some Questions Answered
- What are the budgeted and actual amounts for a specified period?
- How much money have we lost due to misallocated discounts?
- Which active customers do not have a credit limit?
- How do my actuals compare to my budget?
- What customer invoices are past due and by how much?
- What is the margin by customer by product?
A Unified Approach to Reach Long-Term Business Goals
For a company to achieve lasting success, it’s crucial to find the right balance between operational and strategic Key Performance Indicators (KPIs). Operational KPIs help maintain effectiveness and efficiency in daily tasks, ensuring short-term targets are met with precision. On the other hand, strategic KPIs guide every action towards fulfilling the company’s long-term aspirations and future prosperity.
By integrating these two sets of KPIs into a unified approach, companies can make sure their immediate activities are in harmony with their overall goals. This integration fosters a seamless pursuit of both current and future objectives, enhancing operational efficiency while also promoting strategic growth.
Embracing this dual approach cultivates a strong and adaptable business environment, well-equipped to tackle the challenges of today’s complex market.
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