Most corporations have now purchased a new generation of MMIS or MRP systems or will do so within the next three to five years. Does this mean that these organizations are now making smarter business decisions based on better business intelligence? The overwhelming conclusion to this question, based on our extensive research, is no.

Business intelligence or the search for hidden patterns, trends, and vital information about your internal customers’ purchases, inventory practices, and logistics is the missing link in value analysis performance today. It involves digging and drilling down into data warehouses and then data mining to understand what our internal customers are purchasing, how they are purchasing, and what they are doing with these purchases once they have received them. This search to find, verify, and identify patterns in your data, then formulate action plans to improve your supply/value chain performance with the techniques of value analysis is the core concept behind achieving higher levels of savings and quality improvements through better data management.

Regrettably, the link between better managing purchasing and utilization data and achieving higher savings performance with value analysis is very weak at most corporations worldwide. There are three critical steps that are required to move you to the next level of savings and quality improvements utilizing your data as business intelligence:

1. Improve Data Quality

Over the last two decades, we have looked at millions of SKUs (storekeeping units) and hundreds of data files that were generated by corporations’ MMIS and MRP systems only to find 1% of these files to be in a normalized format that is required for data mining. This fact necessitated my staff to spend thousands of hours organizing, categorizing, normalizing, stratifying, and cleansing this data in preparation for data mining.

Based on this experience, we found the four major causes for poor quality data are: (i) Weak or limited training on how to use the organization’s MMIS or MRP system, (ii) no standardized protocols established for categorization and classification of data, (iii) carelessness in entering data, and (iv) poor discipline in adhering to the protocols that were established for data management.

2. Expand Data Warehouses

A data warehouse, from a supply chain management perspective, is a centralized repository of ALL customer transactions in a format that is understandable, easily retrievable, and in a user-friendly environment. However, this information should only be your starting point in building your world class data warehouse.

To be truly effective, your data warehouse will also need to maintain: (i) Comparative pricing for all your purchases, (ii) alternate products, services, and technologies for what you are buying now, (iii) utilization benchmarks on all of your high usage commodities and, (iv) global benchmarks to target departmental savings opportunities that are hidden from your view.

3. Conduct Data Mining Exercises

Data mining is the process of finding, verifying, and identifying unusual or hidden purchasing, utilization, or behavior patterns in your products, services, or technologies by systematically searching your data warehouse for answers to the questions that arise from the data you uncover.

The following is an illustration of how data mining works: One of our members uncovered, through a data mining exercise, that their hospital corporation was consuming $22,000 more in test strips annually than was recorded as being utilized in the laboratory. This information then triggered a value analysis study by the corporation to determine who, what, when, where, and why this was happening. This unpredictable information would have never been uncovered without this client’s dedication to data mining.

Business intelligence is not just another “buzz” word that will be forgotten soon, but is both an art and a science directed at uncovering hidden data that resides in your data warehouses. Business intelligence, if practiced artfully, can save millions of dollars annually for your corporation if you utilize these three critical steps to move you to the next level of savings performance – beyond price.

You have thousands of pieces of data at your disposal to improve your supply chain performance through value analysis; however, if your data quality is poor, doesn’t reside in a data warehouse for easy retrieval, or is not data mined and analyzed, then you are missing a BIG opportunity to enhance your decision making. Improved supply chain performance management only happens when your data is better managed, understood, and developed into actionable plans.