The problem is the data

Richard Sharpe Analytics & Big Data

 

“Harnessing the true power of data driven insight is the holy grail of future business.  A wealth of this data comes from the supply chain.  But, while the information is there, companies are not yet capitalizing on its real value as a source of insight capable of shaping the future of the enterprise.”

—DHL Supply Chain, Lisa Harrington, Senior Research Fellow – University of Maryland,
“The Predictive Enterprise: Where Data Science Meets Supply Chain”  (January 2016)

With all of the talk about analytics and big data, why are so many companies still struggling with the adoption of new technologies and methodologies that harness the true power of data-driven insights?

The reasons can vary, but the common complaint that I hear centers on data:

Our data still sits in silos and it is difficult to integrate.   

We have pulled all our data together, but people still don’t trust it.  

As a large company, we have a long way to go to be able to support advanced analytics with the current state of our data.

Does this resonate with you for your company? If so, doing nothing to move down the path to gain this Holy Grail is nonsensical.

This problem has been solved by many forward-thinking companies using advances in cloud computing solutions and focused methodologies. They took on the challenge and solved this “secret” to gain significant operating advantages.

Take a look at the ROI figures from a recent Gartner research report, “Deconstructing Supply Chain Analytics,” by Noha Tohamy (also referenced in the DHL paper mentioned above).

Blog022_ROIofSupplyChainAnalytics

After reviewing the ROI, make an honest assessment about your organization’s capability to use the power of analytics that exist today. Consider the competitive advantage of having one source of trusted data and the full use of business-focused analytics to transform your enterprise.

If your problem centers on the state of your data, what is more important than to eliminate that barrier? The task may be significant, but it starts by recognizing that it can be done. Seek the support of your Senior Management to create a cross-functional Team charged with defining a road map that includes an ongoing data-governance process. If needed, seek outside assistance to help with the process. You will discover that it is not so much rocket science as it is perseverance!

I would love to hear your thoughts.

All the best,

Richard

Richard Sharpe

Richard Sharpe is CEO of Competitive Insights, LLC (CI), a founding officer of the American Logistics Aid Network(ALAN) and designated by DC Velocityas a Rainmaker in the industry. For the last 25 years, Richard has been passionate about driving business value through the adoption of process and technology innovations. His current focus is to support CI’s mission to enable companies to gain maximum value through specific, precise and actionable insights across the organization for smarter growth. CI delivers Enterprise Profit Insights (EPI) solutions that enable cross-functional users to increase and protect profitability. Prior to his current role, Richard was President of CAPS Logistics, the forerunner of supply chain optimization. Richard is a frequent speaker at national conferences and leading academic institutions. His current focus is to challenge executives to improve their company’s competitive position by turning enterprise wide data from a liability to an asset through the use of applied business analytics.

The Twelve Days of Christmas

Richard Sharpe Analytics & Big Data

 

One of the most well loved Christmas carols is The Twelve Days of Christmas. This popular song actually originated in England in 1780 as a rhyme.  The lyrics are based on a “cumulative” theme with each verse building on the previous one.  Are you starting to sing it?

“On the first day of Christmas my true love gave to me____”

 

Blog021_12DaysOfXmas

 

What does this have to do with analytics and big data?

Nothing more than an analogy to my favorite part FIVE GOLDEN RINGS!”

Just like the song, there are five golden rings that offer real business value in applying analytics on large volumes of data.  The gold lies in effectively using different forms of analytics by recognizing that each serves a specific role in improving the financial performance of products, customers and channels.

To achieve the most benefit, the use of analytics should also be focused using a cumulative mindset.  Starting with Descriptive Analytics, the insights and knowledge gained should be used to help build a strong foundation for the next use of analytics.  If all of the analytics are tightly integrated for business users, the following can become true gold for an organization:

  • Descriptive Analytics – what exactly happened? (precise and specific)
  • Diagnostic Analytics – why did it happen? (getting to the root cause)
  • Predictive Analytics – what would happen? (if we Do or Do Not change specific drivers)
  • Prescriptive Analytics – what are the results of specific new operating scenarios?
  • Cognitive Analytics – what insights can be gained using machine learnings or, more practically today, adding specific fact based insights from the first four rings above to Senior Management’s cumulative knowledge?

Santa may not be real but the results obtained through effective analytics are!  So please excuse this Holiday theme but just chalk it up to someone who is very grateful for the many blessings that I have received over the course of my career.

I wish each and every one of you a wonderful Holiday and I look forward to an exciting New Year filled with success stories of business value being realized through analytics and big data.

All the best,

Richard

Richard Sharpe

Richard Sharpe is CEO of Competitive Insights, LLC (CI), a founding officer of the American Logistics Aid Network(ALAN) and designated by DC Velocityas a Rainmaker in the industry. For the last 25 years, Richard has been passionate about driving business value through the adoption of process and technology innovations. His current focus is to support CI’s mission to enable companies to gain maximum value through specific, precise and actionable insights across the organization for smarter growth. CI delivers Enterprise Profit Insights (EPI) solutions that enable cross-functional users to increase and protect profitability. Prior to his current role, Richard was President of CAPS Logistics, the forerunner of supply chain optimization. Richard is a frequent speaker at national conferences and leading academic institutions. His current focus is to challenge executives to improve their company’s competitive position by turning enterprise wide data from a liability to an asset through the use of applied business analytics.

Addressing Barriers to Success – Technology

Richard Sharpe Analytics & Big Data

 

This is the third posting of a series addressing the barriers to success in gaining sustainable value from analytics and big data.  The series centers around the primary pillars for having an effective solution: peopleprocess and technology.  This posting is on technology.

There are a variety of reasons that technology can be a handicap when trying to apply analytics to provide meaningful business insights.  I have witnessed numerous examples for a variety of companies over the years.  But today we are going to focus on four areas that are pervasive today:

 

Lack of organizational confidence in the data:  when I was running CAPS Logistics we served over 16% of the Fortune 500 companies by supporting their network optimization and transportation and routing & scheduling needs.  Unfortunately, about half of the improvement opportunities identified through the use of technology would not be fully implemented because someone in the organization would take exception to the data that was used for the analysis.  Talk about a lack of ROI!

Takeaway: To get value from analytics and big data, you must invest in a process to ensure that all organizational objections related to the data are addressed.

 

Analytical results that are not intuitive:  to be most effective, analytical applications must be designed for business users, not data scientists.  This means that the analytics are focused on a business problem defined by the business user and that the results are intuitive and meaningful for that user.

Takeaway: Needing someone else to run the analytics or to interpret the outcome of the analysis places a real handicap to value.

 

Difficult to repeat:  we are all aware of the speed of change in the world we live in today.  The days are gone when a company can rely on the outcome of specific analytical work to remain valid for an extended period of time.  Today, the mode of operation is to refine plans by making incremental (“course corrections”) changes versus a large analytical study done every two years.

Takeaway: Analytics must be easily performed on an ongoing basis and must have the flexibility to be changed based on early efforts and insights.

 

Hard to measure financial impact:  to maintain senior level support of your analytics and big data initiatives, they have to deliver value.   Naturally, there are some initiatives that have intangible benefits but typical senior-level sponsorship is based on a plan demonstrating that the investment will provide measurable financial improvements.

Unfortunately, many people don’t take the time to carefully consider how they are going to measure financial results until they are well into the initiative.  Do not fall into that trap.  First consider how you are going to baseline current performance.  Once defined, tie the anticipated areas of improvement back to the baseline for defensible measurements.

Takeaway: Careful planning on how you will demonstrate value needs to be part of any analytics and big data initiative.

 

The effective use of analytics and big data can drive significant competitive advantage.  Companies that undertake their initiatives by placing the proper amount of priority on people, process and technology will be the winners.

I would love to hear your thoughts.

All the best,

Richard

Richard Sharpe

Richard Sharpe is CEO of Competitive Insights, LLC (CI), a founding officer of the American Logistics Aid Network(ALAN) and designated by DC Velocityas a Rainmaker in the industry. For the last 25 years, Richard has been passionate about driving business value through the adoption of process and technology innovations. His current focus is to support CI’s mission to enable companies to gain maximum value through specific, precise and actionable insights across the organization for smarter growth. CI delivers Enterprise Profit Insights (EPI) solutions that enable cross-functional users to increase and protect profitability. Prior to his current role, Richard was President of CAPS Logistics, the forerunner of supply chain optimization. Richard is a frequent speaker at national conferences and leading academic institutions. His current focus is to challenge executives to improve their company’s competitive position by turning enterprise wide data from a liability to an asset through the use of applied business analytics.

Addressing Barriers to Success – Process (Moneyball anyone?)

Richard Sharpe Analytics & Big Data

 

Have you ever heard the following question when trying to solve a business issue? What is the issue?  We have always solved this problem this way!”  We hear this type of response from many companies when talking about building laser focused performance strategies using analytics and big data.

The good news is that we also have found companies that have leaders that are Champions for Change.   However, their biggest frustration is the resistance they encounter to a new idea or new way to solve a problem.

“That would be a huge change in the way we do business”

“We’ve never done it that way”

“We aren’t ready for this”

The same was true in the movie Moneyball portraying Billy Beane, General Manager of the Oakland Athletics (played by Brad Pitt).  Billy didn’t have the payroll to compete with the big city teams like New York and Boston.  What he and every team had was an abundance of data on players in the major and minor leagues. Beane challenged his staff to fill playing positions in a new way.  Beane focused on player selection based on a specific type of performance analytics called Sabermetrics.  Billy found value in players that other teams did not see. Do you remember the scene?

 

 

The Oakland A’s used analytics in new ways to identify young players or out of favor players who are more productive offensively and defensively.  They defied conventional wisdom and built their Team using a new form of analysis and the data that was available.  They go on to win their division.  The poorest team in baseball with the smallest budget wins.  That is a truly remarkable story.

The story doesn’t end there.  As the A’s continue to win, players start to be recognized as stars.  The A’s also begin to see performance issues with some of their players.  So they make trades with other teams who evaluate players the same way they always did.  For the emerging stars, the A’s get new talent and give up players they couldn’t afford to pay anyway. For the slipping players, they avoid the down years and rebuild the team.  So the A’s end up in the hunt, winning, year after year.

What was different?  Billy Beane decided he would change the decision making process of selecting players with the use of a new form of performance analytics BEFORE anyone else.  He met incredible resistance because no one had ever done it that way before.  He championed its use in the organization even though most of management wanted to do business the old way.

All companies are hoping to get meaningful value from their analytics and big data initiatives.  Unfortunately, many lack the energy to get the full value by breaking away from established decision making processes.

Integrated Business Planning (IBP) is the practice of embracing descriptive, diagnostics, predictive and prescriptive analytics with big data to enhance or change specific business processes in order to outperform the competition.

Do you want to be the leader in your company and industry, even in the face of fierce resistance?  Are you willing to be the champion early in the game?  In many organizations this is exactly what it will take.  Just like Billy Beane, after others catch on, the use of actionable analytics will be the norm and the competitive advantage of moving first will be lost.

The smart companies will lead from the forefront using an IBP platform tailored to their specific business needs!

One caveat.  Just because you adopt the use of IBP analytics and big data does NOT mean Brad Pitt will play you in a movie.  But then, maybe he would.

I would love to hear your thoughts.

All the best,

Richard

Richard Sharpe

Richard Sharpe is CEO of Competitive Insights, LLC (CI), a founding officer of the American Logistics Aid Network(ALAN) and designated by DC Velocityas a Rainmaker in the industry. For the last 25 years, Richard has been passionate about driving business value through the adoption of process and technology innovations. His current focus is to support CI’s mission to enable companies to gain maximum value through specific, precise and actionable insights across the organization for smarter growth. CI delivers Enterprise Profit Insights (EPI) solutions that enable cross-functional users to increase and protect profitability. Prior to his current role, Richard was President of CAPS Logistics, the forerunner of supply chain optimization. Richard is a frequent speaker at national conferences and leading academic institutions. His current focus is to challenge executives to improve their company’s competitive position by turning enterprise wide data from a liability to an asset through the use of applied business analytics.

Addressing Barriers to Success – People

Richard Sharpe Analytics & Big Data

Recently I was listening to and interview on Bloomberg Business with Eric Schmidt, Executive Chairman of Google, and Civis Analytics CEO, Dan Wagner.  They were talking about the power of big data and analytics. The interview was entitled Why Data Analytics Is the Future of Everything.

Their message was very clear.  Coupling effective analytics with big data can change everything from the creation of corporate strategies to the way that people vote!

This is certainly a hot topic in the Supply Chain industry.  In a recent benchmark study done by SupplyChainDigest™, 88.3% of the company participants said that the potential value that they could derive from analytics was a good or outstanding opportunity.  However, 63.9% of the same participants noted their analytical capabilities were very basic or not advanced.  Only 10.7% felt that their analytical capabilities had moved to an advanced level.

So what is holding back companies in developing the capabilities to actually realize significant value from analytics and big data?  It boils down to the same three cornerstones or building blocks of every effective solution; the People involved, the Processes they follow and the Technology selected to enable the solution.  Therefore this posting is the first of three.  Today we will address People.

Let’s start with the top of the organization, the Executives.  Every Executive makes decisions based on the best information available at the time they must decide, even when they know the information is lacking or incomplete.  Every Executive would say that they value meaningful and actionable insights that could help formulate and lend support to corporate strategies. Strategies that help drive higher profits and / or gain market share.  However, here are a few questions:

  • Are they willing to be a first mover within their company to invest in the effort for advanced analytics (see earlier Change Agent blog) or are they waiting for others to take this initial step?
  • Are they communicating their support to the organization so that everyone knows that creating effective analytics is a high long-term priority for the business?
  • Finally, are they creating ways for the organization to celebrate the ongoing success that is being realized through this investment?

Let me share a story from the time when I was the President of CAPS Logistics.  CAPS was on the forefront of creating supply chain optimization solutions and served over 16% of the Fortune 500.   We were finalizing a deal with a large corporation for a national deployment of routing and scheduling software.

The CFO of a potential client organization and I were in my office finalizing a deal and the deployment plans.  During the conversation, the CFO stated that he had a particular deployment approach that he wanted to use.  I listened carefully and certainly wanted to make him happy and to close the deal.  However, I knew this approach would not work and diplomatically told him so.  Needless to say, he was not happy and said it was either his way or no deal.

Normally, one does everything they can do to satisfy the customer but in this case I could not justify his substantial investment in a plan doomed for failure.  The CFO left my office with no deal being finalized.  The next morning, I received a call from him asking that we meet again.  Later, he shared that he respected the fact that we were so confident about the right way to do this and that he wanted to follow our plan.  That result lead to 5 national deployments of the software and he became the most active executive in our customer base to find clever ways to communicate to the entire organization the strategic value of this effort. The CFO was a barrier to the organization’s success, but it was good that the CFO caved in and broke through the barrier.

People issues extend beyond the Executives. What about the people that are actually performing the analytical activities?  In many cases, the most meaningful results from the application of analytics will be gained if the analysis is done by Business Users not Data Scientists (see earlier blog on business users not data scientists).  To ensure that maximum value is derived from your analytics and big data initiatives, your Business Users need to:

  • Have a good working knowledge of the business in order to recognize opportunities that are uncovered through new insights on customers, products or channel performance.
  • Have received the proper training on how to integrate analytics into their problem solving skills versus self-taught, hands on training
  • Have confidence that the data they are using is valid so that they remain on point in answering specific questions and solving prioritized problems versus having the distraction of defending their analysis to the data nay-sayers.
  • Be open to working with their cross-functional counterparts to involve them in the analysis and to share analytical results to take advantage of enterprise based tactics and strategies versus “siloed” decisions.

Politics, cultural norms and / or just the reality of different personalities can also pose issues as you advance your organization’s capabilities to drive profit improvements through the use of advanced analytics.  The key is to find ways to work through any of these issues in order to obtain a “win” for the organization that helps build excitement, buy in and momentum. Eric Schmidt firmly believes that coupling effective analytics with big data will change everything. If you believe in the wisdom that has driven Google’s success, these changes will lead to organizational wins that demonstrate financial performance improvements and that solidify the organization’s commitment to analytics and big data.

Everyone likes to be on a winning Team.  If your people issues are addressed, you will be better positioned to continue to build financial success stories using analytics and big data.

I would love to hear your thoughts.

All the best,

Richard

Richard Sharpe

Richard Sharpe is CEO of Competitive Insights, LLC (CI), a founding officer of the American Logistics Aid Network(ALAN) and designated by DC Velocityas a Rainmaker in the industry. For the last 25 years, Richard has been passionate about driving business value through the adoption of process and technology innovations. His current focus is to support CI’s mission to enable companies to gain maximum value through specific, precise and actionable insights across the organization for smarter growth. CI delivers Enterprise Profit Insights (EPI) solutions that enable cross-functional users to increase and protect profitability. Prior to his current role, Richard was President of CAPS Logistics, the forerunner of supply chain optimization. Richard is a frequent speaker at national conferences and leading academic institutions. His current focus is to challenge executives to improve their company’s competitive position by turning enterprise wide data from a liability to an asset through the use of applied business analytics.

You Are Going To Have a Heart Attack!

Richard Sharpe Analytics & Big Data

 

Recent research that I have read suggests that there is still a lot of confusion and questions about Integrated Business Planning (IBP) analytics.  Questions like “what does predictive analytics really mean and what is its actual business value?”  This is completely understandable given the amount of attention this subject is getting in the media.  Let’s demystify the industry buzz using an analogy, your health!

 

There are multiple forms of IBP analytics: Descriptive, Diagnostic, Predictive and Prescriptive.  Here are two situations that are offered to help explain the purpose and value of each one:

  • Doctor – you go to your Doctor because you have had a sharp pain in your left arm several times this month.  We will label this situation with the abbreviation (DR).
  • Business – you have a problem with the profits being generated by a business unit.  Sales (top line) growth is up but profits are down.  We will label this situation (BU) for Business User.

The following compares how each form of analytics can be sequentially used to support your personal health as well as the profitability of your business:

 

 Descriptive Analytics (what is the problem)

  • (DR) – Analysis of the test results shows that you have a 50% blockage in part of your left coronary artery
  • (BU) – Analytics show that for the last 4 quarters over 22% of your customers have consistently been unprofitable

 

Diagnostic Analytics (what caused the problem)

  • (DR) – The reason for this extensive blockage is a buildup of plaque in the circumflex artery that is a result of a lack of exercise and a poor diet
  • (BU) – These customers have been consistently unprofitable because of the discounts they receive and the cost to service their orders

Predictive Analytics (what impact will continue if the problem is not addressed)

  • (DR) – If you don’t exercise and change your diet, then there is a 90% chance you will have a heart attack in the next two years
  • (BU) – If a changes are not made to these customers’ discount structures and how we handle their expedited orders, profits will continue to plunge next quarter

Prescriptive Analytics (what solution steps need to be taken to address the problem)

  • (DR) – Based on current research of different scenario results, your best option is to do aerobic exercises for one hour, 3 times a week and to reduce the amount of fat in your diet by one half
  • (BU) – Looking at different options considering the various order mix patterns for these and other similar customers, the best strategy is to implement a revised discount structure and different guaranteed service commitments to make these customers profitable

Monitoring Analytics (what were the results of implementing these solution steps)

  • (DR) – The new test results indicate that your artery blockage is almost completely gone!
  • (BU) – This quarter’s performance shows a reduction of total unprofitable customers to a level under 7% and a quarterly earnings increase of over 9%!

Most companies do some form of analytics today and I hope that the analogies offered above bring clarity as to how you might expand your current and/or future applications to help drive performance improvements.  Regardless of where your company is in the “analytics journey”, three things are very certain:

  1. There will be an ever increasing amount of data that can be used to add value if you learn how to master that data to create “One Version of the Truth”
  2. The sequence of how you apply your IBP Analytics is critical and will determine how you build knowledge and reduce “analysis paralysis” to drive meaningful results as quickly as possible
  3. Your IBP analytics should be designed for cross-functional business use to maximize the value you gain from those insights

Integrating these considerations in your analytical plans will minimize the possibility of having an organizational heart attack.  Your business will be stronger and healthier and your shareholders will be continually pleased with a positive growth in quarterly earnings!

I would love to hear your thoughts.

All the best,

Richard

Richard Sharpe

Richard Sharpe is CEO of Competitive Insights, LLC (CI), a founding officer of the American Logistics Aid Network(ALAN) and designated by DC Velocityas a Rainmaker in the industry. For the last 25 years, Richard has been passionate about driving business value through the adoption of process and technology innovations. His current focus is to support CI’s mission to enable companies to gain maximum value through specific, precise and actionable insights across the organization for smarter growth. CI delivers Enterprise Profit Insights (EPI) solutions that enable cross-functional users to increase and protect profitability. Prior to his current role, Richard was President of CAPS Logistics, the forerunner of supply chain optimization. Richard is a frequent speaker at national conferences and leading academic institutions. His current focus is to challenge executives to improve their company’s competitive position by turning enterprise wide data from a liability to an asset through the use of applied business analytics.

We Have Always Done It This Way . . .

Richard Sharpe Analytics & Big Data

 

Blog017_a_WeHaveAlwaysDoneItThisWay

In this blog, we will address how to maximize the value of analytics and big data. A lot of attention is being given in the media to both of these topics. What is not being discussed much is the basic question:

Is your organization ready to actually embrace making decisions and setting strategies based on new operational insights and facts versus on traditional information, experience, tribal knowledge and/or opinions?

Let’s assume that your organization has invested in the ability to gain meaningful insights about your internal operation, your customers and the marketplace from analytics and big data. You are now at the Intersection of Change to integrate this information into your business decision making processes. How will your organization act? Will those insights be fully embraced, cautiously considered or mostly ignored?

Blog017_a2_WeHaveAlwaysDoneItThisWay

 

Naturally we are not discounting the value of using experience and knowledge of the business in making smart decisions and setting future business strategies. However, companies now have the opportunity to embrace the insights gained from analytics and big data and use that experience to create cross-functionally developed strategies that break functionally siloed decisions! Decisions that will benefit the financial performance of the enterprise and not just specific functional operating metrics.

Let’s think objectively about your organization’s ability to facilitate change. Which of the colors below would you assign them?

Blog017_b_WeHaveAlwaysDoneItThisWay Blog017_c_WeHaveAlwaysDoneItThisWayBlog017_d_WeHaveAlwaysDoneItThisWay
My guess is that most companies, if being honest, would assign their organization a red or yellow rating. Therein lies the problem. 

In order to get the most value out of your investments in analytics and big data, you must provide the leadership and commitment to address change management issues. Often, it takes the leadership and courage of one person to say, “Just because we have always done it this way, doesn’t make it the best way, or the only way…we can do better!” We call this person, the “Agent of Change.”

During the transition, the organization will push back. There are always reasons to return to the older, more comfortable way of doing business. The organizations that recognize that the wisdom of senior management will be improved and more highly prized when using analytics and big data will be the ones that gain significant competitive advantage. Those who do not have “Agents of Change” will see very little in the way of ROI from the analytics and big data investments.

Here is a great source for Change Management best practices: Harvard Business Review

Are you ready to be the “Agent of Change”?

All the best, Richard

Richard Sharpe

Richard Sharpe is CEO of Competitive Insights, LLC (CI), a founding officer of the American Logistics Aid Network(ALAN) and designated by DC Velocityas a Rainmaker in the industry. For the last 25 years, Richard has been passionate about driving business value through the adoption of process and technology innovations. His current focus is to support CI’s mission to enable companies to gain maximum value through specific, precise and actionable insights across the organization for smarter growth. CI delivers Enterprise Profit Insights (EPI) solutions that enable cross-functional users to increase and protect profitability. Prior to his current role, Richard was President of CAPS Logistics, the forerunner of supply chain optimization. Richard is a frequent speaker at national conferences and leading academic institutions. His current focus is to challenge executives to improve their company’s competitive position by turning enterprise wide data from a liability to an asset through the use of applied business analytics.

Maximizing Your S&OP – IBP Profit Contributions

Richard Sharpe Analytics & Big Data
 

Maximizing Your S&OP – IBP Profit Contributions

There is a lot of discussion in the market about Sales and Operations Planning (S&OP) and Integrated Business Planning (IBP). One line of thought is that companies with mature S&OP programs will naturally evolve to include enhanced IBP capabilities. I have a separate view and believe these two important business activities serve different but complimentary purposes. Regardless of where you are on this issue, the question is “How do I get the maximum value out of S&OP and IBP activities that will continue to positively impact the bottom line?”

What does that have to do with analytics and big data? Well just about everything. Regardless of how you are addressing your S&OP and IBP business requirements, they both require the support of user driven analytics that utilize cross-functionally validated data. Getting this right provides tremendous synergy not only in supporting both of these critical business needs, but in growing sales, cutting costs, expanding market share and therefore increasing the profit of the enterprise.

Let’s start by looking at a simple definition for each:

  • Sales & Operations Planning – a single operating plan that has executive commitment that allocates critical resources to most effectively satisfy customer demands in a profitable way.
  • Integrated Business Planning – planning, implementation and monitoring activities that focus on the identification of specific improvement opportunities (strategic or operational) related to a product(s), customer(s), channel(s) or an operating region to continually improve financial performance and/or gain market share.
IPB_S&OP

To be most effective, both S&OP and IBP require strong collaborative and cross-functional decision making processes. Decisions that are based on accurate insights regarding historical performance (descriptive and diagnostic analytics) as well as anticipated customer and business requirements (predictive and prescriptive analytics).

As I have commented in earlier postings (earlier posts here) descriptive, diagnostics, predictive and prescriptive analytics must be based on accurate and validated data. Many companies are struggling with how to turn their data from a liability into an asset. For those companies, this issue will only grow as more and more sources of data are made available to support various forms of decision making activities. If you are not proactively addressing this issue, it will significantly impact the capability of your S&OP and IBP activities to drive the value that you should expect from these business activities.

How many times have you been involved in an S&OP meeting where everyone brings in their laptop and sits down to start the meeting? The discussion focuses on the fact that there were large variances in the plan developed in the last S&OP meeting versus what actually occurred operationally. For the first half of the meeting, people offer different explanations and opinions on the variances based on their analysis using the disparate data available to them. Alternatively, everyone could have had advanced information with regard to exactly what happened and the “root cause” of why it happened. The focus at the start of the meeting would then be to discuss these facts and decide on a course of action.

To gain the most value in your S&OP and IBP activities business users must be empowered by having access to meaningful analytics that rely on one source of consistent, validated data and that support cross-functional planning, execution and monitoring activities. Get it right, and you won’t start your meetings trying to ‘convince’ others why variances happened. You will walk into your meeting understanding specific performance details. Get it right and your meetings will be based on fact based discussions leading to the adjustments that you should make to drive positive impact. Impact that is measured by ongoing contributions to financial performance, i.e. shareholder value. Value that drives competitive advantage!

I would appreciate hearing your thoughts and comments.

All the best, Richard

Richard Sharpe

Richard Sharpe is CEO of Competitive Insights, LLC (CI), a founding officer of the American Logistics Aid Network(ALAN) and designated by DC Velocityas a Rainmaker in the industry. For the last 25 years, Richard has been passionate about driving business value through the adoption of process and technology innovations. His current focus is to support CI’s mission to enable companies to gain maximum value through specific, precise and actionable insights across the organization for smarter growth. CI delivers Enterprise Profit Insights (EPI) solutions that enable cross-functional users to increase and protect profitability. Prior to his current role, Richard was President of CAPS Logistics, the forerunner of supply chain optimization. Richard is a frequent speaker at national conferences and leading academic institutions. His current focus is to challenge executives to improve their company’s competitive position by turning enterprise wide data from a liability to an asset through the use of applied business analytics.

Sustainable Profit Growth

Richard Sharpe Analytics & Big Data

Sustainable Profit Growth

If you have been following this blog you know that the emphasis is to encourage companies to work smarter in their mission to drive shareholder value through a sustainable growth in profit performance.

I know that this seems like a no brainer but the reality is that companies are often trying to achieve this mission with limited visibility to the real drivers and inhibitors of profit performance.  Everyone has the P&L.  However, I find that most companies today cannot easily peel back that onion to have very specific and actionable insights for a specific customer or product that can make an immediate and measurable profit impact.  Instead, by default, strategies are often developed using a “one size fits all” approach.  The common mantras are “cut costs” and “increase sales” to increase overall margins.

  One Size Fits Most  

However, there is a growing level of need to tackle this problem.  And while it is rarely articulated, the real solution is to increase profits by truly understanding the product and customer profit “winners” and “losers” and to group or segment them in order to create specific strategies that increase their profit contributions.

Customer and product segmentation activities are a very hot topic in the industry today.  What successful companies are doing differently is developing the capability to better understand how customers and products differ in their profit performance.  Intelligent segmentation activities support the fundamental need for companies to work smarter, not necessarily harder, to increase their quarterly earnings and shareholder value, and quickly.

How do I approach customer and product segmentation activities?  Let me offer three straight forward questions that I hope will be helpful.  Empowering the organization to be able to answer these questions will lead to smart decisions to create sustainable growth in profits:

  • Where do I specifically make and lose money with my customer transactions and what is causing the specific profit performance spectrum (selling price, discounts, cost to serve, etc.) by individual customer, channel and region?
  • What specific actions can I take right now to increase the profit contributions by product and/or by customer?
  • Once specific actions have been implemented, are these specific strategies for a customer, product, channel, and/or region working and having a direct positive impact on their profit performance?

Product and customer segmentation activities are critical areas of focus for effective Integrated Business Planning (IBP) solutions.  Developing this organizational capability provides immediate and sustainable value.  Value that drives competitive advantage!

I would appreciate hearing your thoughts and comments.

All the best, Richard

Richard Sharpe

Richard Sharpe is CEO of Competitive Insights, LLC (CI), a founding officer of the American Logistics Aid Network(ALAN) and designated by DC Velocityas a Rainmaker in the industry. For the last 25 years, Richard has been passionate about driving business value through the adoption of process and technology innovations. His current focus is to support CI’s mission to enable companies to gain maximum value through specific, precise and actionable insights across the organization for smarter growth. CI delivers Enterprise Profit Insights (EPI) solutions that enable cross-functional users to increase and protect profitability. Prior to his current role, Richard was President of CAPS Logistics, the forerunner of supply chain optimization. Richard is a frequent speaker at national conferences and leading academic institutions. His current focus is to challenge executives to improve their company’s competitive position by turning enterprise wide data from a liability to an asset through the use of applied business analytics.

Where’s the beef?

Richard Sharpe Analytics & Big Data
 

Where’s the beef?

With all of the attention being given to analytics and big data, the question that I often hear is:

“How are companies really solving specific business problems using analytics and big data?  Talk to me about the real and sustainable value that companies are finding by investing in analytics and big data capabilities.”

To coin a phrase made popular years ago by a fast food chain “Where’s the beef?”

In earlier blog postings, I explained how analytics, coupled with accurate and specific data, can be used to facilitate cross functional decision making that is based on facts, not allocations, estimates or opinions.  Moving beyond “siloed’ data and decision making processes can create a real advantage in driving increased financial performance.  This advantage becomes a competitive differentiation that is based on factual insights across the entire enterprise versus departmental decisions that are based on isolated operating metrics.

Navigating in today’s complex business environments requires the ability to make smarter, pinpointed decisions.  The myriad of systems with segregated data often make it difficult to have the right information that is needed.  Better decisions are driven by having complete visibility across the enterprise.  With that visibility, very specific strategies by region, individual customers, product categories, SKU’s or channels can be tested, deployed and monitored.  This avoids the trap of trying to force a 'one size fits all' policy decision based on incomplete data both before and after the decision.

So assume for a moment that your company has defined very specific profit improvement goals that are not being met.  You have a cross functional team assembled.  You have all of the data you need, not just from one system but from EVERY system.  The data is accurate and complete.  There is no organizational anxiety about its source or validity.  With the proper analytics and data, you would want to simply and quickly answer the following questions:

  • What are the specific and detailed facts that offer insights regarding this current lack of performance?  (Descriptive Analytics)
  • Considering the end to end operation, what caused this performance to happen, i.e. the root cause that drove this performance? (Diagnostic Analytics)
  • What would be the financial impact if we make these very specific cross functional changes? (Predictive Analytics)
  • What other options do we have that the team has not considered or that are too complicated to completely define currently?  (Prescriptive Analytics)

It might be utopia for your company, but not for companies that have successfully developed Integrated Business Planning (IBP) solutions through the proper alignment of analytical and data capabilities.  Having this organizational capability provides immediate and sustainable value.  Value that drives competitive advantage by showing “Here’s the beef”!

I would appreciate hearing your thoughts and comments.

All the best, Richard

Richard Sharpe

Richard Sharpe is CEO of Competitive Insights, LLC (CI), a founding officer of the American Logistics Aid Network(ALAN) and designated by DC Velocityas a Rainmaker in the industry. For the last 25 years, Richard has been passionate about driving business value through the adoption of process and technology innovations. His current focus is to support CI’s mission to enable companies to gain maximum value through specific, precise and actionable insights across the organization for smarter growth. CI delivers Enterprise Profit Insights (EPI) solutions that enable cross-functional users to increase and protect profitability. Prior to his current role, Richard was President of CAPS Logistics, the forerunner of supply chain optimization. Richard is a frequent speaker at national conferences and leading academic institutions. His current focus is to challenge executives to improve their company’s competitive position by turning enterprise wide data from a liability to an asset through the use of applied business analytics.