In 1967—decades before the advent of the Internet—the philosopher Marshall McLuhan said, “We live habitually in a state of information overload. There’s always more than you can cope with.” Though he made the statement more than 48 years ago, anyone in modern business can sympathize. If success was ever simple, it isn’t anymore: It’s now about sorting relevant variables from the reams of information available and finding within that a secret weapon—an edge that can speed up your central practices, improve customer service and differentiate your business from the competition. For supply chain management, which involves the oversight of several organizations, this gets even more complicated.
What we call big data is rapidly growing (a McKinsey report puts the figure at 40 percent per year) and it’s fundamental to the future of supply chain management. Learning to manage it is increasingly essential, yet many executives remain suspicious of analytical technology.
A recent survey from the Fortune Knowledge Group found that 62 percent of executives trust their gut feelings and believe that soft factors should be given the same consideration as hard factors like data. In some areas, there seems to be a real hostility to information, as though a sensation in the pit of your stomach is worth more than blunt facts.
For supply chain managers, this is a dangerous (and unprofitable) mindset. Data analysis isn’t yet ubiquitous, but it’s making serious inroads in the industry and any business slow to incorporate it into their operations risks being left behind by the competition.
Why Executives Are Hesitant about Big Data
To some extent, the reluctance is understandable. The chatter from certain overeager industry insiders sounds not unlike the practiced patter of a snake oil salesman: “Buy big data’s all-natural miracle cure-all! You’ll swim faster, sprint longer and be irresistible to the opposite sex.” Of course it isn’t a one-size-fits-all solution to the problems that supply chain managers face and treating it like it is—and just throwing money at the first data scientist you find—isn’t the way to go.
Big data isn’t without its difficulties. The results don’t always stand up to scrutiny—just look at Google. According to The New York Times, “Google reported […] that by analyzing flu-related search queries, it had been able to detect the spread of the flu more quickly than the Center for Disease Control and Prevention.” But, over the last 24 months, it’s made “more bad predictions than good ones.”
And it’s not always perfect when deployed for business either. Typical internal management systems can barely handle the operations of their enterprise, let alone the age of complex, outsourced supply chains. This seems like it can make end-to-end visibility a tough proposition, and when you factor all of this into how expensive it can sometimes be to get an analytics platform up, running and performing well, it’s easy to feel like big data isn’t worth it.
Making Big Data Work for You
While big data analytics isn’t a miracle cure-all or a crystal ball, to ignore it is foolish and can cost your business in the long run. The fact is that smart use of low-cost, high-power modern computing can revitalize your business in the short term and lay the foundations for future success.
Look at Amazon—the e-commerce giant pioneered online data analytics with its “You might also like …” system. In the beginning, it was based on indexing items that were obviously related to each other (i.e. somebody looking for a raincoat may also be offered an umbrella), but it became more sophisticated as technology improved and now makes more accurate suggestions based on the purchase history of previous buyers. It’s now difficult to imagine Amazon without it.
Business intelligence (BI) software is big data analytics done right. As Nada Sanders, author of Big Data Driven Supply Chain Management, puts it: “We no longer guess or use hunches. We know exactly what each customer wants to buy […] This information drives entire supply chains.” The technology isn’t here to tell your company’s fortune—but it can change it.
One of the best features of BI software is its capacity for trend identification. This used to be a time-consuming, tedious affair that largely involved plowing through spreadsheet after dull spreadsheet in the vain hope of finding a meaningful correlation. But with modern technology, those dark days are over. BI software sifts through volumes of data, locates important information and makes actionable recommendations grounded in established patterns. A furniture supply chain manager using a BI program will be able to spot a potential shortage in socket-head cap screws well in advance, for example—giving him or her the time needed to source substitute parts.
BI software offers greater transparency for stakeholders, customers and everyone in between. Where the precise causes of underperformance were once a mystery, the correct tool can locate and highlight them anywhere across the chain, from manufacturer through to end user. For example, if margins are slipping, BI software can issue an alert showing the exact cause of the margin erosion, enabling you to identify and resolve the minor problem before it becomes seriously damaging.
When combined with relationship management tools, better communication is easier than ever before. Customers may be the lifeblood of the supply chain, but it’s tricky to please them unless you’re collaborating effectively with partner organizations. This is complicated by the often elaborate, involved nature of the chain, which can make maintaining rapport with key personnel hard work. But managers are expected to do exactly this—or risk alienating their partners.
The right technology, however, will make this job infinitely easier—software can help manage these relationships more efficiently, providing insight into the needs, behavior and performance of vendors and manufacturers at the drop of a hat. If an executive needs to make a crucial phone call, but isn’t properly prepared, all he or she needs to do is input the customer’s name into a search field and the relevant information will be returned instantly.
The greatest benefit BI software provides supply chain managers—the one that makes it vital rather than nice to have—is efficiency.
Revising your best-practice techniques used to involve rifling through invoices and timesheets, compiling Excel documents, and trying to sort the wheat from the chaff—or commissioning expensive researchers to do all this for you. BI software updates databases as business is occurring, making suggestions based on up-to-date statistical norms, thereby facilitating the quick enactment of macro- and micro-level change to your supply chain’s operational efficiency and effectiveness.
Don’t Be a Data Hater
Big data isn’t soothsaying. It’s not a replacement for good management, but it will facilitate it. It’s gaining widespread traction in small businesses, enterprises and supply chains alike, and it’s now clear that going with your gut when the competition is making real, constructive changes based on hard data and facts will yield disappointing results.
Business intelligence software is the way forward—less because of any one impressive leading-edge feature and more because the cumulative streamlining process grinds out inefficiency that would otherwise go without notice. With a lesser focus on mitigating ineffective practices, staff across every link of the chain are able to emphasize improving their margins and customer service.
It’s no longer a matter of who can afford an in-house data scientist, or who can commit the proper resources to information-gathering and analysis. Relatively inexpensive technology is leveling the playing field, improving supply chain infrastructure and making it possible for canny executives of limited means to gain a clear edge on their bigger competitors. Making the most of the technology available to them, managing its development—and making the best of it—will be critical for any manager looking to stay ahead of the game this year.