It is not always possible. Current management techniques always recommend forecasting demand, planning production backwards from the day the finished goods are needed, producing them and hoping that the forecast was correct!

This is always a hit and miss approach but the better way to produce only those quantities that are already spoken for!

In some industries this is already somewhat possible, as in buying a desktop or laptop from Dell or HP. They assemble the machine according to yoru specifications and then ship it!Even here you will have to forecast the potential demand for different components ahead of time and make sure they are available at the right time at the right place! Components can be reused in other assemblies and to that extent, the financial outlay of the company is reduced a bit.

However, the "Pull" method of Demand Forecasting and Production is already in place with Toyota with their Toyota Production System (TPS). The entire production planning system is different from other industries and other countries. The cars that are  being manufactured are already sold to different dealers in the exact colors and models they have ordered.

This also explains the way in which they are handling their current crisis. For the first time in their history, Toyota is going to make a quarterly loss. People around the world have stopped buying cars being worried about their jobs and financial future. Banks have stopped lending money for cars around the globe. Both these factors have affected Toyota sales just as they have affected all other auto makers.

The striking difference is in how different automakers are handling this downturn.

The story Toyota orders 11-day output halt as sales slump  explains how Toyota adjusts its production schedule continuously based on what their demand is. The temporary shutdowns more than adequately adjust for changes in demand and they are able to do this because they are using a 'Pull" model of production planning.

It also helps that they have built their assembly lines in a flexible way so that within a few days or even within a day sometimes they can reconfigure a SUV assembly line to products smaller cars.

The Pull method is probably the logically best way of adjusting production to demand. It wastes the least!

Something to think about whether it is demand for products or services! Business Processes can also benefit from staffing enough number of people for different parts of the business process based on demand. You don;t need to layoff people as long as you train them in multiple skills and can be reassigned to different parts of the company based on demand there.

Supply always comes on the heels of demand - Robert Collier

Very interesting piece that holds a lot of lessons for services and business processes also.

Japan Airlines Pilots are working with the U.S and its airports to approach the airport in a straight line and land directly instead of going on a circling pattern around the airport waiting to land. This way they can save fuel wasted in going into a waiting mode.

They are replacing aluminum sides of cargo holding contaiiners with fabric so that they are lighter and the air craft can consume less fuel!

They are reducing the weight of food containers as well as magazines on board so that they all weigh less!

Petroleum prices and Aircraft Fuel prices have all come down from the lofty heights they were even 6 months ago. But this kind of waste reduction pays off forever, irrespective of whether fuel prices warrant them or not!

This is the kind of obsessive waste reduction that can pay off in spades in services and business processes also! They can not only build a base of science that can help individual companies but also help them build this expertise that they can export and help other companies also elsewhere!

The Toyota Production System is freely shared by Toyota with anyone who wants to study it and apply it to their manufacturing operations. Toyota feels so comfortable that their methodology is in the DNA of their employees and their usage over decades and decades, that they don't feel possessive about these methods. They feel quite confident that none of their competitors can match them in what they have done so far!

Services and Business Processes also afford similar powerful operating advantages for companies that adopt them and use them diligently! Waste reduction in any form is so logical and consistent in its objectives that once they become a way of operating naturally!

Logic is the anatomy of thought - John Locke.

It is sad to see icons of American Industry go down the tubes like this. It is not that they did not have advance warning of this.

Almost three decades worth! From a high of 60 to 70 % market share of the U.S market, the big 3 automakers have been reduced to about 20 to 30 % over the past 30 years and it has been a steady erosion.

There are many mis-steps and reasons for this steady erosion, but a major contributor is the Continous Process Improvement that Toyota has made in its manufacturing. In other functions, Toyota is just as bad as the Big 3, but in Manufacturing, they have steadily improved their manufacturing process, factory by factory, model by model, imcreasing flexibility of the assembly lines to switch from one model to another very very quickly as well as constantly cutting the costs of manufacturing while improving the quality of the end product at the same time!

Continuous process improvement provides such a potent weapon and that too your competitor wielding it for dacades with you paying it lip service is just a  sad story and inexcusable at that.

This is because the Quality Fad of the time american companies usually go through as a routine thing. They never allow any one method to settle down and start producing results in a consistent way before it's time for the next one - Total Quality Management, Zero Defects, and the list goes on!

Toyota also lucked out in that they were manufacturing small gas-stingy cars when they were needed most but that's only part of the story.

The Toyota Production System constantly is looking for ways to cut waste, waste of effort, people, time and unncessary movement in the manufacturing workplace. When you do this for three decades with the actual people who are on the floor contributing to this, the results are astounding! The cost to manufacture a car gets improved constantly since waste is cut out all the time.

This makes them a formidable manufacturer of cars! The same approach and the thought process can be applied systematically to Business Processes, realizing the same kinds of results if needed.

Hope Fortune 500 businesses realize this and start efforts towards doing thsi for all business processes. They can become very formidable, unbeatable competitors like Toyota became in manufacturing! The same principle applies whether yoy are selling insurance, healthcare, soap or cars. There are always ways to cut waste from business processes, improving margins.

All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved. - Sun Tzu 

Not quite so fast!

In my own actual experiences I have found a number of truths that anybody considering SaaS may find very useful:

• It is not suitable for every kind of software - In fact, the more detached the application's functions are from the rest of the company's operations, the more suitable it is! You can use the Outsourceability Test - If a function can be easily outsourced to a third party vendor, that function can be easily done in a SaaS application. For example, Payroll services, HR services are all being outsourced by a majority of companies, even large ones! These are perfect for SaaS rollouts.

• It needs to be as integration-independent as possible - Functions within the company that depend upon many other internal systems for inputs, and from where many other systems need to get their outputs, is a bad choice for SaaS. For example, an Order Processing Module needs to talk to Sales Management, Manufacturing, Sales Accounting, Warehousing and Finance systems. Bad Choice!  There will be so many interfaces between your own internal systems and this SaaS system, your head will spin!

• Data needs to be Third-Party Friendly-  Government regulations regarding Privacy of Personal Information (Identity information, Credit Card Information), Medical Information (Like HIPAA rules) may all make certain kinds of data very sensitive! Try convincing these customers that they need to store them in your servers for them to use your SaaS offering! Good Luck!

• Total Cost of Ownership Profile - A Sales Force Automation SaaS offering is perfect for your 20 sales people, especially when they are scattered geographically. Using the Internet is the perfect interface for them and they might all as well use a SaaS offering! Try doing that for the 200 customer service agents in one location. Your cost profile may indicate that you are better off by buying the same software and installing it locally on your servers as a regular software product. The SaaS Cost Profile may equal or be mire than if you buy it as software and run it on your own machines! 

SaaS deployments have their own headaches. If you think not having to deal with hardware and software and upgrade issues, you are right!. You just got rid of those headaches but you just might have some brand new, but different ones!

A similar thing could again happen to Open Source Business Intelligence! This is especially true of subscription based Open Source BI and those companies that were on the verge of finishing their basic IT projects automating functions that needed automation.

Once basic functional software like Enterprise Resource Planning (ERP) or CRM systems are in place automating daily functions, companies have the budgets and the face time for Business Intelligence solutions. With the Banking, Finance and Insurance Services (BFSI) sector in big trouble, with lots of uncertainties about the Global economy, many companies may dip their toes in the Open Source BI waters.

Of course, Open Source Software is not by any means free, since it always costs money for support and ongoing maintenance of the BI effort. With the recent downturn in Sun Microsystems performance and their announcements of layoffs, I wonder where their purchase of MySql open source product is! Would there be any cutbacks in their business model for MySQL support? What would this mean for those Open Source BI solutions based on MySQL

If anything, touch times are actually good for companies to experiment wih new technologies, especially if it is open source, and it does not cost too much to get something going!

Will be interesting to see if this is true and Open Source BI takes off during these touch times for the global economy!

We are all faced with a series of great opportunities brilliantly disguised as impossible situations. - Charles R. Swindoll.

They seem to be Master Data Managament (MDM), Data Warehousing and Complex Event Management (CEP)!

Master Data Management (MDM) involves gathering up ALL information about a Customer or a Patient, in a single place from multiple applications and databases. HIPAA regulations require hospitals and Insurance companies to provide on-demand, all data and information about a single patient, in one single place for privacy purposes.

Companies need MDM solutions to gather a single unified picture of what a customer may have bought from them by way of products or services. This can help them plan their cross-selling, up-selling strategies!

End-user driven reporting, as well as flexible Data Warehousing seems to be gathering a lot of momentum. DW solutions have been used by organizations for a while, but the latest demands seem to be in more flexible reporting solutions against these Data Warehouses. Flexibility of what data gets collected, stored and reported against, has been a topic of discussion for sometime now. Many organizations have found out painfully that once they freeze the Data Warehhouse design and start collecting the data, they lose flexibilitty in altering what data they collect going forward and how they get reported.

Complex Event Processing (CEP) deals with real-time event monitoring and triggering of appropriate real-time actions within organizations. This is, of course, very useful in making sure that real-time events within organizations like an inappopriate fraudulent charge on a credit card triggers off protective actions immediately! CEP has a multitude of applications that goes way beyond these kinds of simple examples and is very powerful!

Very heartwarming to see that there are some areas in IT and software products space that are drawing a lot of interest, attention and investor money in spite of all the doom and gloom bad news about the economy, downsising and layoffs!

A promise is a cloud; fulfillment is rain - Arabian Proverb

In that sense, they are very similar to data warehouses that store Financial Data and allow you to slice and dice that data, whether they be income or expenses.

In data warehouses that store Point of Sales (POS) systems data, they are dealing with tens of thousands of SKUs and thousands of stores or outlets. The sales data that is generated in just one day could easily run into gigabytes. This is what builds up to terabytes of data over longer periods like a quarter or a year.

Unlike Sales Data, Process KPI data may be tiny in size. Each Business Process has usually about 20 to 25 KPIs per day or per shift. Some processes depend upon the number of people execute that process - like Agents handling Customer Service or Support calls on the phone. Mostly, they are summarized information that get rolled up divisions or departments.

Process KPI data when collected may run into a few gigabytes a month when compared to hundreds and thiousands of gigabytes for Sales data.

So when we call for a Process Datawarehouse as compared to a Sales Datawarehouse, they are very similar in the kinds of slcing and dicing reports that they may provide. But the backend data supporting them may be an order of magnitude smaller.

This also means that you need less powerful processors and disk space for storing all this data. You can implement many of these kinds of Process Datawarehouses with off-the-shelf reasonably inexpensive deskop or rackmounted low end servers!

All the more reason, that for business critical processes, collecting process KPI data and using them for Continuous Process Improvement becomes compelling!

It's not the size of the dog in the fight, it's the size of the fight in the dog. - Mark Twain

To see what I am talking about checking out how well the Stock Market recently!
Smartmoney.com's Map of the Market.

This shows clearly the relative sizes of the Market caps of different companies, which went up, which went down, etc!

If you are wondering about Inflation and why your wallet is thinner than it used to be, you can see which of your different things you spend money on are costing you more relative to each other:
All of Inflation’s Little Parts

If you are wondering about which President caused prices of things to go up (inflation) check this out:
Can a President Tame the Business Cycle?

If you are wondering what genes cause what diseases, check this out:
Mapping the Human ‘Diseasome

Visualizations are powerful ways of presenting information and have them understood at many levels. Beats seeing a table or numbers or a database table or a report anyday!

Information is a source of learning. But unless it is organized, processed, and available to the right people in a format for decision making, it is a burden, not a benefit. - William Pollard

In our company, we work closely with many Business Process Outsourcing companies, especially Offshore companies. I have observed a lot of specifics about what and how BPO vendors handle BPMor parts of it!

Dennis is absolutely right in the first place saying that BPO usually involves processes that have a lot of manual aspects to it!

What we found in our interactions with our company's customers are the following:

a. Many BPO providers execute parts of a business process even when other parts are automated. Wherever manual document checking or calling people on the phone and getting or checking information is involved, it is outsourced and in many cases, offshored. For example, there might be a totally automated system for new Insurance policy underwriting. However iin some cases, they may need additional medical information. This may involve calling people, getting information in scanned form and entering this into the system. Thereafter again, Rule based underwriting may automate the rest of the process!

b. In many cases, many processes are still highly manual with no BPM or automated systems doing anything. In these cases, processes are being documented for the first time in their life! Outsourcing service providers have to do this because of legal contracts involving what needs to be provided as a service. This can form the basis for BPM application later on!

c. Unlike what people imagine, BPO service providers like GE units in India are much more savvy in Six Sigma and Process Improvement techniques than even their customers. GE units whereever they are in the world, insist upon managers becoming Six Sigma Black Belts as early as possible. So you have a funny situation where Black Belts are available but do not have visibility into the full process!

d. There is a lot of measurement and reporting going on in the BPO context even if nothing happens in the context of the full process! This is because Outsourcing to an external party will involve a contract and putting down some specific paramaters for performance measurements. For example, if it is a Call center process they may need to specify Average Handle Time (AHT) etc as the Service Level Agreement (SLA) parameter.

Many interesting things happening in the intersection of BPM and BPO. Good thing that Dennis brought them up!

If you work at the parts the whole will be a success - Anonymous

Efficiency Metrics (How well are you doing things?) and Effectiveness Metrics (How well are you doing the Right Things?). Sometimes Efficiency Metrics go hand in had with Effectiveness Metrics and many times not.

In an Insurance Claims Settlement process, settling the claim qucikly achieves the Turn-Around Time (TAT) Efficiency Metric, customers are also very happy increasing the Customer Satisfaction Index (CSAT) Index, an Effectiveness Metric.

On the other hand, if the business process is Customer Support on the phone, the Efficiency Metric may ba Average Handle Time (AHT). Companies may try to keep this metric within a certain range. However, keeping calls shorter may affect the Customer Satisfaction Index (CSAT) metric the opposite way. Getting off the phone quickly withour resolving the problem fully will only make the customers less happy! In this case, the Efficiency Metric and Effectiveness metric may be oppoed to each other!

Here's a framework for determining what metrics may be of use for any business process. The framework can be quite comprehensive when considered under three main groups - People, Process and Techniology.

People Metrics are important, especillay in business processes where there is an inordinate proportion of manual activities - Like for for example Insurance Underwriting of Commercial Properties for eacmple. People metrics become even more important when business processes are outsourced.

Technology Metrics are also important, especially business processes that involve computer systems and application software. When customers can apply for Insurance online or file claims online or pay their annual road tax at the local Department of Motor Vehicles, availability of servers and response time become important metrics that may need to be monitored.

Process Metrics are the biggest group - They contain an equal number of Efficiency and Effectiveness Metrics.

A Framework approach to thinking about Business Process Metrics makes sure that you measure an as comprehensive set of metrics as possible.

This will also enable someone to include metrics that are complementary to each other as well those that are in conflict with each other.

It is the framework which changes with each new technology and not just the picture within the frame. - Marshall McLuhan

How can Cost Reductions become a potent competitive weapon that can take your competitors lots of time to match and exceed?

Cost reductions are always ridiculed and minimized that their value is not appreciated that much. We always think of companies doing great things with innovations and coming up with products and services that have not been seen before but it appears that true competitive advantages come from improving processes relentlessly.

In my previous blog entry - http://www.ebizq.net/blogs/nari/2008/09/business_intelligence_should_h.phpBusiness Intelligence Should Help Squeeze Inefficiencies Out! - Honda Motor Company Example , I referred to a recnt story in the Wall Street Journal - Honda's Flexible Plants Provide Edge .

What's mind boggling is that a simple improvement to the Assembly process that Honda implemented by way of making the welding robots flexible enough to manufacture Honda Civics or Honda CR-Vs is going to cost Ford $75M and 13 Months time. The same thing will be costing General Motors $350M, Is that a competitive advantage or what?

I am sure that this flexibility did not come overnight. It miay have come from years and years or study on the manufacturing floor and thinking about the switchover problem in great great detail.

Where's Business Intelligence in all this? This is where the subtle difference between Correlation and Causality comes in. Correllation is an apparent relationship between two variables while Causality is a proven relationshop that one variable causes in another!

Business Intelligence can provide in great enough detail what parts of a business process need to be improved first. Then you need to establish Causality between what you are trying to improve and other things that cause it.
Then you run small experiments on a smaller scale to see if the improvement actually works and if yes to what extent? Then after you have done the improvement, you can see if it has improved by measuring things again.

Doing things in the MOST EFFICIENT and at the same time MOST EFFECTIVE way possible, reduces costs by orders of maginitude. This directky translates to lowest cost of operations and hence directly how competitive you can be in the marketplace! You may be able to cut prices to the bone while your competitor may not be.

So cutting Tea and Cofee expenses may not help you increase your competitiveness but Business Intelligence can definitely help you slice and dice your business processes, your costs and ways of improving what you business processes accomplish. They directly translate to competitibve advantages and sometimes, substantially large ones!

There's always room for improvement, you know-it's the biggest room in the house. - Louise Heath Leber

The invention of the wheel speeded up our travel from manually powered ones like the bi-cycle to he bullet train that travels at 300+ mph!

This is a never ending quest for efficiencies, to squeeze our those wastages of time and eenrgy somewhere in the chain!

On the other hand, effectiveness also dictates that we are effective at what we do, whether it is handling a customer query on the phone to persuading someone on the phone to donate money to a cause! Effectiveness neasures the end results of the process and how well it achieved what it is supposed to achieve, with the minimal effort possible!

All of the above should ideally be supporrted by Business Intelligence, if you think about it. Business Intelligence should ideally give you a clear picture of how efficient you are compared to last hour, last day, last month and last quarter!

You don't want to fix something that is not broken. You want to figure out, in as much detail as you can, where exactly your inefficiencies are, and squeeze them out of the system.

Similarly with respect to effectiveness, some of your Customer Help Desk agents may be very good at handling customers and their Customer Satisfaction surveys show consistently high ratings. You want to know in sufficient detail, where exactly your ineffective agents are coming up short so that you can send them to appropriate training to remedy those effectiveness deficits!

Here;s a interesting story about how Honda Motor Company is able to switch from an aseembly line that making Honda Civics to making Honda CRVs!.

The assembly robots are fitted with different hands that can work on maiking Civics to making Honds CRVs by simply changing the hands of the robot! The article says that the same process of retooling a factory to manufacture one model of an automobile to another costs millions or dollars and takes as long as years!

This principle is just applicable to every business process in a company! You need to have a constant contiinuous IInprovement that looks at every activity and squeezes out inefficient ways of doing thinga and improve them. Same for effectiveness!

Business Intelliigence in the Process Space is not just about cutting costs alone! When you squeeze out inefficiencies and make things more effective, you are increasing a company's competitiveness by an order of magnitude! You get more work done with less people and resources! Like the example of Honda Motor Company!

Time to explore this area in earnest and more detail!

Progress isn't made by early risers. It's made by lazy men trying to find easier ways to do something. - Robert A.Heinlein

Mortgage backed securities are a great example - these are groups of mortgage loans with similar loan profiles - many with shaky income profiles or employment profiles. They may have to restructure these mortgages one by one, even if bailouts happen.

In fact the National Association of Call Centers in its latest newsletter has a very interesting article - $700 Billion can buy a lot of call cetner time. .

This article points out to a lot of manual processes such as verifying information about a loan applicant that will allow the restructuring of these loans.

The interesting thing is that this may be a very time sensitive issue. These have to be done in parallel for a large number of loans - an many as some part of $700 Billion or some other amount that is spent on shoring up these bad loans. A lot of this manual work will be outsourced since they are manual work and you need a lot of people doing this in short order!

Process Intellijence can really help make sure that these processes are executed efficiently and effectively! Especially when there are so much work to do in as short a time as possbile to stem further losses as quickly as possible. They will have to done quickly if further disasters were to be avoided also.

Hiccups in the Financial Industry can cause riipples in so many other areas, countries and markets. What is interesting here is the opportunity it opens up to other seemingly unrelated areas.

Success is a process more than a realization. - Anonymous

No matter where in the world, you go to, you will hear this story without fail. The blame lies all around!

End users are notoriously unable to articulate their precise information needs ahead of time. So it is not surprising that the data warehouses created and data being collected for business intelligence is always behind a bit compared to end user needs.

Consequently, invariably, every organization in the world, extracts data even from Business Intelligence tools into Excel spreadsheets, and then shape it the way they want manually. This seems to be a universal theme!

It doesn't have to be this way! Of course users are known famously for assuming that data exists and available readily in the format they need for doing their work.

Classic example is an audit trail of actions or events happening in a company. For example, someone wants to collect the beginning timestamp and ending timestamp of say when an Accounts Payable Invoice is beginning to be processed and when it is all done. They want to see how long it took. They also want to track all the people who processed this Invoice all through its processing lifecycle.

Unfortunately, most database tables are designed to capture Modified By, Modified Date/Time. These fields get written over again and again. This means that only the last set of changes are available for use!

So even though users want the information, and they assume that it is readily available, and captured in the backend, expect these to show up in the reports they need, it may not be possible. This is because the data is
captured in an incomplete form!

However tools are evolving, especially in the lower end of Business Intelligence tools. Open Source and Business Intelligence solutions that are served as a hosted model (Software as a Service - SaaS) seem to be supporting more end-user driven reporting.

At a time, when almost all applications and software products seem to be already supporting a web/browser interface, Business Intelligence solutions can also support end-user driven reporting easily.

If it is a Hosted model, by its very nature, the service/software provider may need to push many of the reporting
design functions down to the end user! Otherwise, the economics of that hosted model may not work for the customer or the provider.

The time seems to be right for end-user driven reporting. It can drive up the utilization and value of business intelligence tools!

One of the Internet's strengths is its ability to help consumers find the right needle in a digital haystack of data - Jared Sandberg