Three Mistakes Keeping B2B Companies from Turning Data Into Information
- November 29th, 2012
- By: Loraine Lawson
There’s no shortage of data in supply chains. The problem is, supply chains tend to be data-rich, but information and knowledge poor, experts say.
But as more business executives focus on making data-driven decisions, it’s going to be crucial to learn how to use that data.
“Data does not equal visibility,” writes Dave Brooks, B2B.com writer and a supply chain thought leader who leads Software AG’s Supply Chain practice for the Americas. “While the phrase “data rich and information poor” is all too often uttered these days, it seems many people are so busy trying to turn data into information that they forget what they need is knowledge.”
For Brooks, that means adding context to your information so you know what you need to know when you need to know it, he adds.
But when it comes to data business leaders need, B2B companies of all types tend to fall into one of three “traps” with data, Gordon said during a recent interview with B2B.com.
1. A silo mindset that keeps them too inwardly focused. This type of stovepipe approach to data means the data is only useable to the particular department.
“Some people are all mired in collecting data, a kind of the stovepipe approach, where procurement, operations, everybody is their own little planet and they just do what their VP of ops or purchasing or whoever wants,” Gordon said.
To move beyond that, you need executive input into what you’re collecting.
“Some senior people should be looking at this stuff at an aggregated level,” she said. “It just depends on the company. They’re mostly going to be interested in whatever information, how are they being measured and how is it important to the organization and what’s actionable – that’s what needs to be collected.”
You’ll also need to think about what data you should be feeding up the executive chain, which means integrating that data into enterprise information management systems and ensuring the data is prepared for use.
There’s more focus on using enterprise-wide data with Business Intelligence systems. A 2012 cross-industry study by Forrester Research found that 60 percent of manufacturers say BI is critical to their business and another, 31 percent of the manufacturers report having immediate plans to increase their use of BI.
To ensure that data can be meaningful, you’ll need to work with your CIO and IT division on data quality and data governance.
Finally, don’t forget to talk with other divisions and departments for input.
“There are many stakeholders outside of procurement and supply chain who are impacted by supplier performance,” advised Gordon. “Their input and participation is important.”
2. Measuring what’s easy, without considering what’s useful. For instance, supplier inventory turn is a lagging indicator that’s easily measured, but not actionable for the customer.
“It’s usually a waste of time to put that data on a supplier scorecard,” Gordon said.
Measuring what’s easy but not actionable leads to dissatisfaction with key performance indicators and scorecard systems, she explained.
“It’s quality of measurement, not quantity,” she said. “Everybody says you manage what you measure, but you have to measure the right things. Sometimes people only look at what they can easily measure.”
While it’s tempting to measure what’s easy or at least obvious, it can lead to frustration with quality improvement efforts and, worse, the creation of meaningless data that’s useless to the business. Instead, your metrics and KPIs should be based on what’s going to be useful to the business and lead to improvements.
That means every measurement and KPI decision should start with one question: Does this help align to the business goals?
“You start out with aligning whatever it is you’re going to capture with whatever is strategically important to the business and how that translates to suppliers and supply chain management before you start collecting every piece of data you can get your hands on in an organization, because it gets unwieldy and nobody maintains that kind of a system,” she said. “It has to be useful.”
3. Ignoring other sources of external meaningful data. This goes back to that silo-mentality, where divisions are so focused on their own work, they forget to think about what type of data they could collect to create useful knowledge. Dun & Bradstreet, Rapid Ratings and other suppliers of financial stability information are commonly reference in many industries, but there are other sources of data, such as address confirmation services.
Suppliers and other business partners can also be a good source of additional data, either through collaboration or site visits or even audits, Gordon noted.
That’s how one consumer packaging goods and food company managed to cut millions of dollars out of third-party logistics costs, according to a recent Supply & Demand Executive article written by Brooks and fellow B2B contributor Sean Riley, who specializes in retail and manufacturing supply chain practices. The company needed to reduce operating costs while better meeting customer service level agreements.
The company monitored its third-party transportation partners and warehouse operators, then synchronized the deliveries with the warehouse schedules. This significantly cut unloading wait times. It also stopped the warehouse workers from having to restock an order because the trucks didn’t arrive in time for pickup.
In service-focused B2B companies, it’s not always so easy to monitor your partners and service providers, Jordan pointed out. In these situations, it’s important to monitor internal perception by surveying internal stakeholders. The challenge here is in collecting responses from every pertinent party — not just the people who are complainers or who love the supplier.
For internal stakeholders, executive support can be crucial. In one company, senior management had to personally push employees to fill out the supplier satisfaction surveys. These surveys are often the only way to collect performance data, which can then be aggregated and used to help you bargain with suppliers.
“It takes what I call organizational discipline to make it work really well,” Gordon said.
Gordon explains her process for assessing suppliers in “Seven Steps To Measure Supplier Performance.”