Distribution SMBs: Think about how your organization uses business intelligence (BI). Do you use it to historically look back and analyze data or do you use it to plan for the future? Do you use it for both? Or, not at all?
Global revenue in the business intelligence and analytics market is forecast to reach $16.9 billion in 2016, an increase of 5.2 percent from 2015, according to Gartner. Let's discuss how distributors who are using BI to accurately measure, track and plan will reap the rewards.
Using BI for predictive analytics
Most people, when they think of BI, think of robust reporting developed from taking a comprehensive look in the review mirror. For many large organizations, this type of financial reporting is the norm.
However, there are still many SMB wholesale distributors running on a rudimentary financial or operational software program, or even a paper-based system.
When you step into the world of a true ERP, you have access to a number of different data points, as well as the ability to slice, dice and view data from different perspectives. Predictive analytics that are now becoming more available and help, not only look backward, but guide decision making for the future.
With predictive analytics, you can:
- Examine critical components to running the business, such as cash flow analysis, open AR and open AP.
- Review the performance of a particular product down to a micro-level.
- Analyze margin generated on a customer by customer basis, or by a product by product basis.
- Evaluate performance of sales reps, as well as efficacy of marketing and sales campaigns.
By deploying and leveraging BI capabilities across and on top of data that already exists within your ERP system, you can make either minor or major tweaks to your business plan,
In the "buy low, sell high" wholesale distribution business, there are discrepancies to understand. For example, perhaps you are quickly moving through all of the low margin items in your inventory at such a volume that you think you're making money.
However, when you look at the true cost of processing those orders - perhaps extra staff needed in your warehouse - you still have the outlay of cash to pay for that inventory. It may turn out, by leveraging deeper analytics, that your organization is not generating profit as originally thought.
Better inventory planning
By analyzing customer segments and product profitability, you can better determine what kind of product mix to keep in your warehouse, and steer customers to complementary or supplementary items with a higher margin. Having that information at your fingertips enables you to make business decisions on a real-time basis.
Stay tuned for Part Two of this series where I'll dive deeper into predictive analysis. Want to accelerate success with advanced analytics? Check out the OnDemand webcast.