The Data Heads

A recent article on SearchDataManagement.com about a Gartner Group conference on Business Intelligence (BI) discusses the fact that business intelligence is probably the number one priority for CIOs, but most companies have not translated that prioritization into high value.

That conclusion doesn’t surprise me. I’ve been arguing for sometime that most businesses under-utilize their data assets. Here are a couple of blog posts, looking at topics like BI as an oxymoron, technology and culture, and the key drivers of Best-in-Class manufacturing.

In this latest story, I especially like this prescription for addressing the problem:

IT workers must reconsider how they deliver information to end users. Traditionally, on one end of the spectrum, users either access information through static reports or through ad hoc queries, Schlegel said. Instead, IT should focus on developing interactive reports to meet both demands.

On the other end of the spectrum, more sophisticated users often create their own spreadmarts, which by definition fall outside the view of IT, to make up for the limitations of ad hoc queries. IT departments should develop data discovery environments that empower users to do the analysis they need, but which also let them connect that analysis back to the organization.

That sounds to me like a dashboard that users can drill into to get to the underlying data. It sounds to me like an analysis wizard that guides users to the underlying sources of variation in a process.

IT people do sometimes lose sight of their real goal. As one conference attendee, Chad Erman, head of BI for Southwestern Energy put it, “We noticed a lot of people think in terms of reports, instead of BI or key metrics. What I constantly had to remind them … is: What is the question you’re trying to answer? Then work to achieve that goal.”

Getting business leaders the right tools can go a long way to enabling that shift.

What about you? Are you getting high value from BI? If not, what are your road blocks? You can leave a comment, tweet me, schedule a conversation, or call 800-958-2709.

Over the years I’ve had many conversations with people who own or run plastics molding companies. Persistently I’ve heard them say:  “We don’t worry too much about scrap because we can always regrind it. It’s not waste.”

I’ve always found myself stuttering in response to that.

On the one hand, it seems obvious to me that any time you have to do something more than once, your costs have to go up. On the other hand, these are smart people and they know their business. I make software, not plastic.

Recently I got into one of these conversations with the owners and the CFO at a molding company. They had told me they have a 10% - 12% scrap rate, but “We don’t worry too much about scrap because we can always regrind it. It’s not waste.”

At one point the CFO grabbed a pocket calculator and started punching numbers. In about 30 seconds he announced: “I come up with __X__ dollars.” (I can’t tell you what the number was, but I will tell you that it made all of us sit up in our chairs.)

Here is how he came up with his numbers. (This example is for a fifty million dollar company with a scrap rate of 11 % and a COGS (Material Cost of Goods Sold) of 52%).

Use this information to calculate the Scrap Material Costs, and then use that to calculate the number of Regrind Pounds produced each year.

With this estimate of Regrind Pounds produced each year, we need to calculate the actual cost of regrind:

Now that we know the number regrind pounds produced each year and the actual cost of regrind per pound we can calculate the annual cost of regrind:

This process made a lot of sense to all of us, and put the true cost of regrind at this company in a different light. In today’s economy, can anybody afford to squander over six percent of their revenue on a non-value-added activity like regrinding scrap?

I thought you might be interested in running these numbers for your own business, so I put together a little spreadsheet that you can download and plug in your own figures and come up with your own cost of regrind value. Are there any other costs of regrind that we should have included in our model?

The spreadsheet includes a space to show the impact of stepwise reductions in regrind. Obviously you can’t eliminate regrind because of job change overs, planned or unplanned down time, and so forth. But what is the value of reducing scrap by 1%” or 2% or 5%?

Does this model apply to your business? Please comment, schedule a conversation, or call us at 800-958-2709.