Editorial from the December 2007 issue of Managing Automation

BI: A New Operational Model Emerges

by Jeff Moad, MA Editorial Staff

Posted on Friday, November 30, 2007 2:09:16 PM                                     

Early last year, soon after their company was acquired by consumer products giant Nestle S.A., officials at Dreyer's Grand Ice Cream decided they needed a better way to track and improve the ice cream manufacturer's performance. Like most companies, 79-year-old Dreyer's for years had generated monthly reports that were reviewed by a handful of analysts and top managers seeking insight into the company's performance. Those reports, however, often arrived too late to allow operational managers on the company's front lines to do much to head off problems, such as supply chain inefficiencies resulting in stock-outs at the retail level.

"We were getting reports on our historical progress, not on what was going on right now," says Ajay Raikar, director of growth and profitability at $2 billion Dreyer's. "We didn't have information that was close to real time, so we weren't close to the pulse of the business, and we couldn't influence what our results would be for the current month."

So Dreyer's officials decided to change not just how the company generates reports, but also how its managers run the business by putting in place what Raikar calls a "KPI culture." All managers at Dreyer's, including those running warehouses and plants, were given a handful of key performance indicators — between five and 10 — that they would be responsible for tracking and managing on a daily basis. Warehouse managers, for example, might track perfect order, labor productivity, and safety KPIs.

In support of that initiative, Dreyer's deployed at each of its six facilities a real-time business intelligence (BI) appliance from Cognos Corp., CognosNow, that downloads transactional data from Dreyer's key business systems into an in-memory database that is used to generate up-to-the minute reports on the status of the company's operations. Managers can drill down into the numbers to understand the causes of trends or problems.

Now, Raikar says, managers up and down the Dreyer's organization get daily reports on what went right and what went wrong the previous day, and insights into what they can do to correct problems. "We can now influence the process closer to the time we see a deviation," Raikar says. "We get better decision-making, from our company's leadership down to the manager who runs the warehouse."

Manufacturers have access to lots of data that could, in theory, be used to track and tune business processes on the fly. Between ERP, plant floor, supply chain, and CRM systems, most manufacturers are generating enough data to choke a horse.

The problem has been getting the right data into the hands of front-line operational managers quickly enough to help them fix or even head off inventory build-ups or out-of-stock blips before they bloom into serious problems. Traditional BI tools, such as canned reports or data warehouses, typically weren't designed for that purpose. Increasingly, however, manufacturers are turning to a rapidly emerging set of technologies that promise to deliver what some call operational business intelligence — BI that is real-time, easily accessed by front-line operational managers, and tightly integrated with day-to-day business processes. These operational BI tools offer manufacturers a way to react more quickly and effectively to an accelerating rate of business change and its effects on such critical issues as inventories, quality, and order fulfillment, experts say.

"In order to react to changes in the business brought on by things like globalization and intense competition, manufacturers need more visibility into the operational aspects of their organizations, the shop floor, the supply chain, etc.," says John Hagarty, an analyst at AMR Research. "For that reason, the notion of operational BI is resonating in a big way right now."

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