Discover Opportunities, Drive Decisions

Within the walls of the enterprise, there are plenty of opportunities to save money by optimising business processes and focusing decisions. BI yields significant ROI when it sheds light on business bloopers, a la TruServ's gophers. Employees of the city of Albuquerque, New Mexico, for example, used Cognos to identify opportunities to cut mobile phone usage, overtime and other operating expenses, saving the city $US2 million during three years. Likewise, using Brio's BI software, Toyota realised it had been double-paying its shippers to the tune of $US812,000 in 2000.

Companies are also using BI to justify or disprove the wisdom of what would otherwise be gut business decisions. "Too often, evaluations of opportunities for growth are based on gut feelings, estimations and assumptions because it would be too expensive and time-consuming to get hard data," says Nucleus's Wettemann. "BI can let you run some quick numbers to justify that gut."

Jelly Belly Candy knows plenty about the subjective business of pleasing palates, but when sales dropped off after the September 11 attacks, the company wanted more to go on than gut feel to determine why. "Because we just had paper, we couldn't analyse efficiently what was going on," says Dan Rosman, director of IT. Using BI, Jelly Belly confirmed its suspicion that many Mum-and-Dad candy stores - which represented half of the company's business - were closing in the face of competition from the likes of Target and Wal-Mart. That justified Jelly Belly's decision to increase staff handling its national accounts from four to 10. While the specialty store business has dropped 11 per cent from 2001 to 2003, national business has increased 17 per cent.

BI analysis can inspire companies to launch new business ventures. After using BI to realise that its strategy of selling product in small quantities to many different customers didn't make sense, Quaker Chemical developed a value-added reseller (VAR) strategy for its small customers two years ago. In each region, the company sought a local partner with complementary, non-competitive products already working with smaller customers. "That enabled us to get into this segment of the market in a way more in tune with our ability to serve it from a cost-effective point of view," says CIO Tyler. Small customers now account for about 5 per cent of Quaker's business. Its goal is to bump that up to 25 per cent by leveraging the VAR strategy.

Track What's Hot and What's Not

To jump-start a campaign to reduce "red zone" inventory, TruServ used Business Objects to identify products that had been languishing in one of its 14 warehouses longer than 120 days. The company fed that information into supply chain software from JDA Software Group, which pulled the merchandise from the distribution centres and sold it to member stores at or below cost. That helped TruServ save $US50 million in inventory carrying costs in 2002. Marketing managers at TruServ also use BI to identify where promotions are doing well and quickly redirect merchandise to those distribution centres from areas where the promotion is faring poorly.

Jelly Belly's bean experts use Panorama's NovaView to access and analyse cost and sales volumes to identify unprofitable products. The company realised Carrot Cake jelly beans and the product mix known as Apple Orchard weren't selling well, so the decision to nix them from the line-up was a no-brainer. Rosman says product review meeting times have been reduced by 75 per cent because their data is accessible and easier to understand.

Retailers are also using BI tools to help identify home runs - and strikeouts - soon after they hit the stores. Belk, a chain of more than 200 department stores, first invested in Microstrategy's BI tool in 1996. "We realised we had a tremendous amount of data but didn't have the capability for exception reporting," says CIO Roddy Kerr. As the company moved from buying for single stores to buying for the entire chain, efficient access to chainwide data became critical. Today, Belk can drill down to see how different styles, sizes and colours are selling. The company sends more than 400 e-mails every week to its trading partners, giving them a complete view of their sales results. With vendors literally on the same page, it's easier for Belk to adjust orders according to actual demand. (To read more about demand forecasting, see "Future Results Not Guaranteed", CIO September.)

"We focus on the things that are selling both faster and slower - things that are doing extremely well to optimise those and things that are not moving as quickly as they should so we can get after them early and minimise the negative impact," he explains. He adds that BI has increased Belk's comfort with buying larger quantities. "It really helped us see what we can do with an item," he says. "If we get behind it, it's amazing how many pieces you can really sell."

Sometimes, as TruServ knows, an item can sell too well. One of its buyers got such a great deal on a teak and wrought-iron park bench from China that TruServ priced it at $US29.95. Stores said they wanted 17,000. The buyer upped the ante and ordered 40,000; then TruServ ended up selling 92,000. "It was a supply chain nightmare," says Hastie. "Through BI, we saw this thing was about to explode the third or fourth week into the promotion. We got our buyers and import department scrambling to meet all the rain cheques handed out to consumers." Although TruServ had to source a lot of the extra benches domestically and eat the extra cost, the company ended up breaking even. "BI tells you how well a promotion is going way ahead of schedule, so you have time to react in front of the supply chain to make the promotion a success," Hastie says. "If something's selling faster than the forecast, we can make adjustments and order more."