Business Intelligence Benefits - Part 1 : Lowering Costs

Today i will share about the benefits of business intelligence. Because of the wide applicability  of BI in both enterprises and extranet deployments, the business benefits are numerous. These benefits can be grouped into three main categories :

• Lowering Cost
• Increasing Revenue
• Improving Customer Satisfaction

Next, this post will explain about one of the benefits : "Lowering Cost"

1.Improve operational efficiency

By giving internal or external customers access to real-time data over the web, customers can track their own accounts and answer their own questions. As a result, customer satisfaction is improved while reducing support costs. A significant, added benefit to real-time data access is that data becomes much cleaner. By reviewing the data themselves, customers can spot errors, and help improve the quality of the information in the data warehouse.

A leading risk insurance company: Today, the organization's customer care extranet allows customers to access their account information over the internet; however, it used to be that the company would send paper reports and diskettes to all of its customers. Any errors in the reports would take one to two months to correct because customers would first have to receive the report, catch the mistake, and then notify the company of the error. Now customers spot the errors themselves in real time and notify the insurance company directly through the extranet, usually within a couple of days or less.

2. Eliminate report backlog and delay

Business intelligence allows business users to design their own queries and reports, allowing organizations to redeploy the programmers who formerly performed this task. This can generate significant cost savings in human resources, since sought-after staff can be reallocated to projects that add more value to the organization.

Handspring, Inc.: "The company receives data from such partners in multiple formats and a variety of systems, so it needed to consolidate and analyse data to give employees better information for decision-making. [With BI, Handspring] can now generate reports on items such as web orders, bookings, billings, backlog, and shipping activities in less than one day, versus weeks before."

3. Negotiate better contracts with suppliers and customers

A solid grasp of facts and figures is invaluable when it comes to negotiating contracts with suppliers and customers. For instance, by analysing supplier performance-on-time delivery trends, percentage of rejects, and price changes-you are in an excellent position to discuss all aspects of the contract as well as possibly negotiate volume discounts. And identifying a customer's spending patterns could qualify him or her for a particular packaged deal.

Shell Services International: With its BI solution, Shell was able to access information about revenues between fuel and non-fuel business. Seeing that 20% of their products were delivering 80% of their sales, Shell made significant improvements in margin and turnover. They also negotiated better deals with suppliers and improved product master file management, which helped them reduce working capital.

4. Find root causes and take action

If one division is doing better or worse than others, identify the root cause and either implement a best practice or fix the problem. Was the problem caused by better/ worse management? A regional market trend? A new sales strategy?

With BI, you can find root causes both to problems and to best practices by simply asking "Why?" The process is initiated by analyzing a global report, say of sales per quarter. Every answer is followed by a new question, and users can drill deep down into a report to get to fundamental causes. Once they have a clear understanding of root causes, they can take highly effective action.

5.Identify wasted resources and reduce inventory costs

You can use BI to apply activity-based costing methods to identify hidden costs or missed opportunities. From these findings, resources can be allocated to highly profitable products, customers, and projects, thereby increasing the bottom line. Also, having a clearer understanding of success of promotions can help to effectively monitor inventory levels.

TruServ: The parent company of True Value Hardware "has used BI software to improve efficiency of its distribution operations and reap a $50 million reduction in inventory costs." "The marketing department uses [BI] to track sales promotion results such as which promotions were most popular by store or by region. Now that TruServ is building promotion histories in its databases, it can ensure all stores are fully stocked with adequate inventory during an event." TruServ "was able to achieve a return on investment in about five to six months."4

6.Leverage your investment in your ERP or data warehouse

While the bulk of the investment in your BI system is probably in enterprise resource planning (ERP) applications or your data warehouse, it is very difficult for non-technical users to take advantage of available data without a good reporting and analysis tool. BI helps unlock the data in your company's data warehouse(s).

BOC Gases: One of the world's leading suppliers of industrial gases uses BI to make ad hoc queries against its SAP system. Thanks to BOC's BI system, sales people can access reports that are tailored to their needs and that hold a lot of detailed information. Working offline on their laptops, sales people can drill down to the required level of detail on product or customer information.

Next : Part 2 - Increasing Revenue