Making the Supply Chain Smarter

The concept of using software for business intelligence has been the realm of executives and senior-level managers who are usually found crunching numbers to analyze performance or predict the course of the company's future. And while Business Intelligence (BI) has delivered powerful results for companies, the majority of applications have focused primarily on financial, marketing and sales analysis. However, as supply chain management becomes a strategic and competitive factor (i.e. Wal-Mart), managers have recognized the advantage of using BI capabilities to monitor and enhance day-to-day operations and supply chain performance.

Companies have invested millions of dollars to improve their information systems. Yet, most of these systems are oriented to achieve transaction efficiency, timely information and standardization of processes across business units. The ability to achieve deeper and better analysis with these systems has been a challenge as it is difficult to easily combine information. BI emerged to fill this gap by providing reporting and analytical tools to help managers better understand their business. By definition, Supply Chain Management is "a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses and stores" (Simchi-Levi, Kaminsky and Shankar, 2008, p. 1). The underlying architecture upon which BI is built makes it an ideal tool for supply chain analysis as it consolidates data from multiple sources and provides insight to business processes that span multiple functions: customers, suppliers, manufacturing, financials, etc.

In the following sections, I will describe some of the current challenges faced by the supply chain management activities due to lack of information. I will then give a short overview of the Business Intelligence structure and tools, and will conclude with a brief analysis of how these BI tools can be utilized to leverage the difficulties presented.

WHAT MAKES SUPPLY CHAIN MANAGEMENT DIFFICULT?

Supply chains need to be designed for, and operated in, uncertain environments, thus creating risks to the organization. However, some uncertainty can be mitigated by having access to accurate information. Here are some cases where the lack of information can increase risks.

Matching supply and demand is a major challenge and much of this difficulty stems from the fact that manufacturers have to commit themselves to specific production levels, way before demand is realized. Having the ability to track and historically capture realized demand over extensive periods of time can improve the company's demand forecast for the future. We can still argue that the first principle of forecasting is that "forecasts are always wrong" but at a minimum, a greater set of data can improve the chances of the forecasting techniques to be closer to real.

In addition, demand is not the only source of uncertainty. As Simchi-Levi et al. (2008) stated: delivery lead times, manufacturing yields, transportation times and component availability also can have a significant impact in the supply chain. The ability to accurately estimate the inconsistency in the lead time is greatly influenced by the size of your data set. As we have learned throughout our course, variability in the lead time can significantly increase the safety stock needed to meet a specific service level and therefore increase your average inventory. Manufacturing yields can be widely affected by several independent factors like equipment failure, operator malfunction and inconsistent set-up times. If these anomalies are unknown, determining a root cause and finding a solution to the problem can be tough, if not impossible.

One of the major challenges of Supply Chain Management nowadays is having the ability to effectively monitor and manage suppliers. First of all, this is difficult given the increasing number of suppliers a single manufacturer may deal with. Also, being able to monitor the suppliers is a cumbersome task as the number of orders received increases exponentially with the number of suppliers. And finally, there are several factors which may influence a company to consider what a "good" supplier is, and more likely some of these factors will be more important than others. For instance, a manufacturer may value low cost and on-time delivery more than they value product variety. Without access to all this information, the process of selecting the right supplier may not be ideal and could hide potential risks.

Last but not least, Supply Chain Management experts have endlessly discussed and demonstrated the benefits of information sharing between all parties involved in the supply chain. Abundant information enables the coordination of manufacturing and distribution systems and strategies