AMR Research separates the purchasing function into procurement, with goals of efficiently executing purchasing processes, and sourcing, which strives to dynamically reconfigure the supply base and manage suppliers for maximum effectiveness and profitability. Until recently, procurement software that improved purchasing processes definitely dominated the landscape.
Yet purchasing surveys routinely report that purchasing department personnel spend a greater percentage of their time on sourcing than on any other single activity. And, sourcing is becoming ever more complicated now that purchasing no longer just entails finding the lowest cost supplier, but is tasked with optimizing across a number of variables.
According to John Trush, supply chain and purchasing specialist and partner with IBM Consulting, “It has been a genuine challenge for many companies to assess suppliers not only on cost, but also on quality, service, lead time, financial viability, profile of goods procured, and technology. Yet only with this kind of broad spectrum analysis and understanding of hidden costs and benefits can companies remain competitive and agile.”
One reason is that there’s just no good way to do that without BI tools. Multiple and frequently interdependent variables quickly raise the computational bar above human capabilities. Factoring in time constraints and a workforce typically unskilled in complex analytics means that without BI tools, purchasing departments simply will not be able to meet these challenges.
Business Intelligence Software
Business intelligence (small “b”, small “i”) started out simply enough with IT departments providing standard, pre-defined reports for operations personnel and management. Reports would be issued weekly or monthly and acted as hard copy dashboards for the organization and departments within it. As time frames collapsed and the need for better, timelier information grew, so did the requests coming into IT, often creating report request backlogs. Eventually, ERP systems sprouted report writers to help individual users and departments take control of their own data requirements. But, even today, the most popular feature in any reporting system is “Export to Excel” – canned reports usually miss the mark for the needs of individual users without additional massaging. All too frequently, individual spreadsheets end up acting as central repositories for critical corporate information.
Business Intelligence (capital “B”, capital “I”) more often describes big picture, “insight” tools software specifically designed to help companies understand what makes the corporate wheels turn and to predict the future impact of current decisions. BI encompasses canned analytics, independent business intelligence processes, data mining decision support, and analytic technologies. The programs search databases using techniques such as neural networks and decision trees, looking for telling correlations and patterns that are virtually impossible for humans to detect, and serve them up to help executives steer the corporate ship.
Most BI systems operate without knowledge of the underlying domains they’re investigating, however, making power users critical to ensure correct interpretation. Without the fail safe of technologically savvy users, BI’s ability to deliver executional support is hampered. Consequently, Gartner VP Howard Dresser, observes “While some inroads have been made to bring BI out of corporate strategic planning and into operations, BI has lived, to a great extent, in the very rarified world of statisticians and analysts.”
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