After spending years rolling out complex and costly enterprise resource planning (ERP) systems, many companies today are sitting on massive storehouses full of raw, largely transactional data. To extract the most important information from those databases — and to make the calculations that can provide the basis for managerial decisions — is often the role of business intelligence (BI) software.
As business intelligence applications have become increasingly sophisticated, a number of vendors, including Cognos and Hyperion, have made them their bread and butter. Tools that began with basic reporting capabilities now offer at-a-glance “dashboards” of key operational and strategic metrics, often with E-mail alerts that can function much like a “warning light.” When managers have been alerted — or any other time they need to — managers can drill down to ascertain whether particular business units are performing to goal, whether inventory turns have decreased, whether customer service levels have fallen, and more.
Suppose you’re not ready for a full-fledged BI rollout? Take heart: Here’s how Staples, Trimac, and Deltek put business intelligence software to work — exactly where it was needed.
Staples Redesigns the Showroom Floor
Finance executives at Staples, the $11.6 billion office-supply retailer headquartered in Framingham, Massachusetts, launched the company’s business intelligence initiative in 1997. Having rolled out a budgeting and planning application from Hyperion, managers at the fast-growing enterprise felt they needed an analytics tool to help measure overall corporate performance and product profitability. That’s when the company turned to Hyperion’s business intelligence platform, Essbase XTD.
“Our goal was to achieve one version of the truth,” says Marcie Lerner, vice president of finance at Staples, “and to track key performance indicators that were essential for running our business.”
Using Hyperion’s technology, Staples built product profitability models, which help managers determine the optimal mix of products and the best strategies for presenting them. The system provides graphical representations of high-level data — say, revenues and costs for a line of products from a particular vendor. But from their desktops, executives can also drill down to more-granular levels — for example, the costs of marketing, distribution, and rent attributed to a particular stock-keeping unit (SKU). Highlighting and click-and-drag capabilities allow executives to flag exceptional cases.
Staples is now able “to create a more fully allocated P&L,” says Lerner. “Previously those allocations were crude and simplistic.” A more nuanced view of profitability by product has helped Staples managers reduce inventory turns, negotiate with vendors on a stronger footing, and obtain more-optimal product mixes.
Take furniture, for example, a product category that at first blush seems to be a top performer, since it tends to produce generous gross margins. After Staples managers factored in the costs of storage, distribution, handling, damage, labor, and rent, the overall profitability of furniture turned out to be significantly lower than that for less-space-intensive categories like basic office supplies.
That realization led Staples managers to reduce the floor space devoted to furniture, says Lerner. Now the company devotes more room to “higher-inventory-turning categories such as chairs and filing cabinets.”