Friday, May 19, 2006

The weakest data link

There is a thoughtful article in McKinsey quarterly on managing supply chains. It highlights the problem that even if you have perfectly consistent and accessible information in your company, in many situations e.g. with mobile phone, there is a web of separate companies between the designer and the customer e.g.

components supplier -> distributor -> ODM -> OEM -> distributor -> customer

Each of these is dependent to some extent on the other, and so if you want to know how your sales are going or how is product quality, you will want to interact with information from other companies further back in the chain. This presents the problem that the systems in other companies will not use the same terminology and coding structures as yours, meaning that you will need to resolve these differences in some way e.g. through a data warehouse project. The article points out that in many cases companies have not built these links and so have no visibility up and down the supply chain. This information is not just nice to have:

"Bridging these gaps pays off. In one case, a leading enterprise-computing company started gathering better data from field services, which gave it information on the incidence of failures and their costs. By feeding that data to design teams, the company developed products that could be serviced and repaired more easily. The result: total costs over the product life cycle fell by 10 to 20 percent."

Clearly such savings are worth having. The article is an excellent illustration that the issues of dealing with multiple semantics are not confined to internal systems, and indeed in such cases standardization is literally unattainable. Instead software solutions are required that can map multiple business structures together and make sense of them. Companies that invest in such data warehouse solutions are, as this article shows, getting very tangible results.

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