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
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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.
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.
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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.
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 Â 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
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:
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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
Implementation in all departments
User or centrally driven
Access to external users
Improve operational efficiency
Reduction of delays and backlogs
Better relationship and deals with customers and suppliers
Reduced inventory costs
Leverage investment in ERP
Better Marketing Analysis
Revenue through information
Informed and qualified sales force
Improved internal communication