Business Intelligence Business Essay
|✅ Paper Type: Free Essay||✅ Subject: Business|
|✅ Wordcount: 3475 words||✅ Published: 1st Jan 2015|
Business Intelligence has been a result of 50 years of research from statistical reporting through MIS up till data mining and OLAP. The traditional methods of decision making through knowledge, experience and some times guess work were very inefficient. This paper shows how BI has come out as an apt solution to this problem in the present competitive world. Companies like British Airways, Volkswagen AG, Shell Services International, etc. have obtained operational efficiency through BI implementation. This paper also shows how BI is an essential factor in most of the industries including airways, FMCG, services, manufacturing, logistics, hospitality, etc. as it makes you understand your business better. This paper discusses about how companies can enjoy a lot of advantages through BI implementation and the most important of them are: reduced cost, increased revenue and better customer satisfaction. BI has become essential to all size of organizations as the amount of data is ever increasing and so is the cost. To sustain in the market a company has to implement BI. BI is projected to grow exponentially in the future.
Keywords: BI, Data Mining, Data Warehouse, OLAP, predictive analysis
List of contents
Table of Contents
Business Intelligence or BI is a computer-based system which is used by organizations for decision making purpose. It consist of huge data warehouse or data marts of business data, from which it performs mining, spotting, digging or analysing operations to produce appropriate results or reports. BI applications include a wide range of activities for statistical analysis, Data mining, querying and reporting, business performance analysis, benchmarking, Online Analytical Processing (OLAP), Decision Support System (DSS), forecasting and predictive analysis. It provides organizations with meaningful information regarding employees, customers, suppliers and other business associates, which can be used in effective decision making.
Up till 1989, a lot business decision-making system existed. In 1989, Howard Dresner coined the term “BI” which acted as an umbrella term for all such systems. The figure below shows how the decision making process is affected by application of BI.
Statement of Problem
In this paper we will discuss, how the use of BI will improve the decision making capability of managers and what will be its impact on revenues. We will analyse the effectiveness and performance of companies who have implemented BI. We will also discus how BI can be implemented in various fields and its advantages.
Purpose of Study
In an organization a lot of decisions are taken daily and it is very important to take effective decisions to achieve organization goals. If you attempt to define policies for all decisions or hire extra skilled staff for taking decisions it only adds to cost and may not result in effective decisions. If you give you’re existing employees the tools for effective decisions, it will result in an agile organization and it will be a cost effective solution.
But before implementing BI solutions it is important to understand your requirements and selecting the correct application. A good BI application for the wrong business functions is a waste of time and money.
BI can be customized for implementation in lot of industries depending on the specific needs of that field. Finally, we will also analyse the advantages of BI implementations to managers and organizations.
Significance of the study
This paper will give an insight in to business intelligence and its importance in today’s competitive world. It will answer the basic questions regarding BI like what it is, why to use it and how to use it. This paper will organizations realize the importance of BI in helping them sustain in modern world.
Importance of good decisions
In an organization, managers have to have good entrepreneurship skills in order to take effective and timely decisions which will result in business success. The importance and magnitude of these decisions increases as the level of managers become higher. Managers have to constantly take decisions while working in an organization like
How much to produce and where?
How much demand to expect?
How much to purchase and at what price?
When to launch marketing campaign and what channel to use?
How much discount to offer and to whom?
Where to sell and at what price?
How to measure performance and what reward to offer?
It is very important to take good decisions in all scenarios, for well-being of organization. Effective decisions taken have direct impact on the revenues, profitability, productivity and performance of employees. Any decisions taken for the financing of the organization are very critical and have to be taken with utmost care.
The quality of service or product greatly depends on the decisions taken during manufacturing or requirement specification stage. The decisions are also taken for predicting or forecasting the demand. If effective decisions are taken in this case then it will lead to reduced wastage, delays and other hindrances.
Decisions are taken with regard to customers, suppliers, employees and other partners. A good decision making process will ensure that these decisions are taken effectively, which will inturn result in cordial and long term relationship with them
Evolution of BI
Traditionally, good decisions where a result of experience and knowledge. But it takes years to get such experience and knowledge, while some employees may never achieve it. Hence decision support systems came to use.
In 1958, IBM researcher Hans Peter Luhn was the first one to use the term BI and he defined intelligence in his words: “the ability to apprehend the interrelationships of presented facts in such a way as to guide action towards a desired goal”. The business intelligence that we understand today is evolved from the decision support systems whose development began from 1960 through 1980’s. In 1989, Howard Dresner coined the term Business intelligence as an umbrella term for all such systems.
During the 1980’s, manual reports were prepared. Data was stored manually as each transaction occurred. These reports were used for forecasting and demand-supply management.
In the late 80’s, Management Information System (MIS) was developed which automated all the business processes under one single framework. It provided the managers with static reports needed to manage organizations effectively. As the MIS was developed more and more modules were added which then covered all the areas of business functions including people management, supply chain management, customer relationship management, finance management, performance management, etc.
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But these systems provided only statistic report. These reports were good for analysing past transactions but they did not aid the decision making process. Online Analytical Processing (OLAP) allowed users to analyse and manipulate data from various perspectives. It arranged the data in the form of cube which enabled users to consider more dimensions for analysis. The reports generated from OLAP where faster than those from relational databases due to this. Data Mining is a process of extracting patterns from data. Data Mining from Data Warehouses was then used for predictive analysis. Querying and reporting techniques were used for forecasting and decision making.
The Business Intelligence was developed on the back drop of Data Mining technique. BI is a system which analysed the historical, real time and predictive data and provided with solutions to decision making problems.
Performance of organizations using BI
Companies of all sizes are implementing business intelligence to optimize the usage of their data. According to a survey by a leading research firm, Business Intelligence was the top priority of the organizations worldwide. Here are some of the companies who have implemented BI:
Volkswagen AG: This Company has implemented BI in all of its departments like finance, sales and marketing, purchasing, production and research and development. It is now the third largest car manufacturer in the world. It has a market share of 20 % in the world passenger car segment.
MasterCard International: It is an American multinational company, who process the payments between banks of merchants and the card-issuing banks who use credit and debit card for making purchases. It has extended its BI from internal users to external users as well. It allows merchants and advertising agents to monitor their business closely through access to BI.
Handspring, Inc: BI has standardized their transactions, report formats, etc and resulted in better efficiency.
Shell Services International: The implementation of BI has resulted in reduced working capital, increased turnover and margin and better deals with customers and suppliers. Shell is now the world leader in lubricant supply.
TruServ: Implementation of BI has resulted in better efficiency in logistic operations and reduces inventory costs by $50 million.
BOC Gases: It is one of the world’s leading industrial gas supplier and has incorporated BI with its ERP for better efficiency.
Owens & Minor: It is a medical supplies distributor company and implementation of BI has resulted in increased revenues up to $80 billion.
Ben & Jerry’s: It is an American ice-cream maker. BI has helped this company better understand the consumer behaviour and accordingly adopt appropriate marketing or promotional strategies. It has also helped them in satisfying the customer demands.
TaylorMade: The implementation of BI has helped this golfing products company empower its sales force with timely and accurate information resulting in increased sales revenue.
Ingram Micro: This Company is the world’s largest technology distributor and a leading technology sales, marketing and logistics company. It has used BI to achieve new levels of customer satisfaction.
British Airways: The implementation of BI has resulted in increased revenues and it has cut costs to about $100 million.
ABN AMRO: This bank has implemented BI in its HR department resulting better performance by employees and their contribution to business success.
Process of implementing BI
Before you implement business intelligence system it is very critical to analyse and thoroughly study the requirements of your business from the system. This can be done by preparing a questionnaire and taking surveys. Key individuals should be identified and interviewed. They may be internal (employees, managers and owners) as well as external (customers, suppliers and other business associates). It is very important to get the requirements correct for the success of you business intelligence system.
The development of a BI system is not an entirely vendor side process. It requires efforts from your side as well. Once an apt vendor is selected, the development should progress with continuous supervision and inputs from organization side.
Applications of BI
As we have seen the implementation of business intelligence has helped organizations to achieve their goals in an effective way. Its application is not restricted to limited segments. It has a wide-spread use. It has now become mandatory for organizations to implement BI to sustain and maintain their market share in the competitive market. Some of the industries in which BI can be implemented are listed below:
Retailing: Business Intelligence can be used to forecast the demand and analyse its fluctuations over time. This will help in optimizing the size of inventory in order to meet the customer demands. It will also help the companies to better understand the consumer behaviour in order to direct their marketing campaigns. It will also help in enhancing relationship with suppliers.
Banking: BI will help the banks and financial institutions in identifying the customer base. This will help them in planning their marketing strategies. It will also help the banks in deducing performance metrics and benchmarks in order to measure the business performance. It can also help in knowledge management or learning management. It will help in management of large amount of data.
FMCG: BI will provide predictive analysis to forecast demand and understand consumer behaviour. Optimization of manufacturing processes and procurement functions will lead to better relationship with suppliers. Standardization will ease the load of transaction recording and multiple source reports.
Automobile: BI can help in optimization of production, research, HR, distribution, marketing and finance functions by providing effective decision making tools. In short Business Intelligence has enterprise wide applications in all departments.
Distribution and Logistics: BI will enhance communication with business partners which will lead to efficient and coordinated operations. BI will provide intelligent reports to optimize the whole operations of the enterprise.
Airways: BI will remove hindrances in the ticket management system. BI can be used to analyse the consumer behaviour pattern and predict future behaviour patterns in order to increase operations efficiency by improving flight management and improve sales revenue. Consumer demands can be satisfied efficiently.
Manufacturing: BI will enhance communications with suppliers and standardize all the transactions occurring with them hence increasing efficiency. BI will forecast the demand for product which will optimize inventory, production and procurement size. BI implemented in HR department will help in understanding the employee needs and difficulties and for their performance appraisal.
Hospitality: BI will help Hospitality companies to respond quickly to problematic situations. It will help them in handling problems in an efficient and timely manner. It will also give them an edge over their competitors by notifying them of new market opportunities and help them in taking advantage of it.
Pharmaceutical: BI will help these companies in understanding the customer behaviour pattern. It will help them in research and development. It will enhance communication with suppliers and distributors.
Services: BI will help in people management. This is important as in services industries employees are a critical part of business success. Business Intelligence will also help in performance management of business through benchmarking and to enhance relationship with business associates. It will also help in managing huge amount of data within the company. It will also help in training the employees and in knowledge management.
Advantages of BI
Listed below are some of the advantages of business intelligence implementation:
Single point access to data: By maintaining a data warehouses and data marts, BI can act as an access to point to the data present in these.
Implementation in all departments: BI can be implemented enterprise wide or it can be local to a single department. If implemented in all departments, organizations will benefit.
Timely solutions: BI allows users to make ad hoc requests and obtain ad hoc reports as and when needed in order to solve problems.
Customer or centrally driven: BI can be implemented in two ways: one where reports are generated according to customer demands and second where employees trigger the transactions.
Access to external users: By giving access of BI systems to external users like customers who might be interested in analysing their buying behaviour, can find out cost saving opportunities and suppliers can analyse the sales data.
Improve operational efficiency: By providing real time reports to customers and employees, BI enables quick solutions to problems and easy error detection and correction. Hence improving efficiency.
Reduction of delays and backlogs: BI systems allow users to design the queries in the system and get reports. Hence human resource can be managed efficiently by reallocating of backlog work to other employees, thus reducing delays.
Better relationship and deals with customers and suppliers: By analysing historical data we can review the past performance of the suppliers like on-time delivery, quality, etc. which will help in negotiating with them. Understanding customer buying pattern will allow us to qualify some of the customers to discounts or other offers in order to maintain long term relationship.
Problem detection: BI systems provide historical, real time and predictive reports. This can be accessed by customers, suppliers and employees. This results in faster detection of problems or errors.
Minimize Wastage: By analysing the performance of products, customers, projects and marketing strategies, we can allocate resources appropriately and minimize resource wastage.
Reduced inventory costs: BI systems give the optimum inventory level required at all times, thus reducing cost.
Leverage investment in ERP: By implementing BI with your existing ERP will allow non-technical users to reap the fruits and get tailor made reports.
Better Marketing Analysis: BI systems provide the performance of marketing strategies or campaigns, behaviour of customers and existence of new opportunities.
Revenue through information: Revenue can be generated by selling information from BI to customers and suppliers.
Informed and qualified sales force: Sales force will be provided with previous sales figures, information about clients, brands and customers thus empowering them.
Better decisions: Through reports generated from BI, the decisions taken by managers will drastically improve and will be a result of thorough analysis.
Improved internal communication: BI systems result in improved job satisfaction, knowledgeable work force and better motivation.
Understand Customers: BI systems can be used to understand customers and improve customer experience.
Understand Competitors and Market: BI systems help mangers with information on latest trends in the market and the actions taken by competitors.
Guesswork Avoided: By providing thoroughly analysed decision supporting reports reliance on guess work is minimized.
Improved Performance: All these factors result in improved performance of business.
Future of BI
It is projected that due to loss of information and processing systems, 35 percent of the top 5000 companies of the world will be affected by bad decision making.
By 2012, most of the top companies will invest almost 40 percent of their budget on implementing BI.
By the same time the small and medium size enterprise will invest in business intelligence systems by means of software-as- a-service (SaaS) technology. This means renting of software packages.
According to Aberdeen group, the interest in business intelligence through SaaS will increase with twice as many organizations using it. It is also predicted that the product sophistication of BI will increase resulting in 22 percent annual increase in business intelligence through 2013.
In an organization, managers have a key role in the success of operations. The managers have to take decisions that directly affect the organization. A bad decision by a poorly informed source will lead to disastrous outcomes. The decisions are taken at individual level right to the organizational level
The implementation of BI will improve the decisions taken by the mangers. The BI systems will in fact empower all the employees with enough information and make them capable of decision making.
In an organization a lot of data is present. Data can be related to customers, suppliers, invoices, purchase orders, pay slips, employee information, sales data, financial data, training data, product data, client data, etc. It becomes cumbersome to manage such huge amounts of ever increasing data. BI systems can make the management of these huge amounts of data easy by using technologies like OLAP and Data Warehousing.
From this paper, we can conclude that the implementation of Business Intelligence will result in three main
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