How to Use Business Intelligence to Improve Supplier Quality Data

Business intelligence software can actually tackle poor supplier quality issues and save companies literally millions of dollars. In one manufacturer's case, the $2 billion company saved $250,000 per year for just one supplier using a business intelligence solution. Here, Knowledge Center contributor Roland Hoelscher explains why these business intelligence solutions are ready for prime time, and how your company can use them to improve supplier quality data and save money.

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As you investigate business intelligence solutions for your company, it's important to realize that most poor supplier quality costs are not due to defective materials. Rather, they are due to non-material costs. One recent study showed that 67 percent of poor supplier quality costs are non-material.

This is important because that 67 percent is the extra supply chain overhead a company is saddled with for late deliveries, delivery to wrong locations and so forth. If those non-material costs end up causing the manufacture of defective products, the cost is even higher. The company will have to pay the extra overhead for producing the defective product, and then pay non-material costs again to start all over and produce a salable product. So, the earlier that quality issues are caught and resolved, the more money can be saved.

Companies using SAP or any other ERP system know that all the secrets of their supply chain have been long hidden in their systems. They also know the reporting about supplier quality, in particular, has been equally cumbersome. It's slow and partial, even if you can find the right data to begin with. Everyone is used to working around issues.

BI front-end solutions are finally delivering on what ERP systems started out promising they would be capable of (but never managed to do). The key difference is, the reporting is truly functional. This breed of front-end applications can extract the meaningful supplier information from disparate, almost inaccessible sources, and quickly automate reporting in dashboards and scorecards. And here's the kicker: any human on the front lines can understand it.

They are specifically designed to complement any ERP or Supply Chain Management (SCM) software. These are BI tools that can get supplier quality information into the hands of people who might otherwise never get it. Then they can act on it, making the changes that can save substantial amounts of money.

Now, everyone in business has a supply chain, but it might be best served to use a manufacturing example to explain what these BI tools do and what to expect as the gold standard of features. If a manufacturer can use these tools to solve their vast supply chain quality issues, so can anyone.