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ERP Analytics vs. BI for Manufacturing: Which Is Right for Your Organization?

Written By: TEC Staff
Published On: February 19 2008

Organizations are constantly looking for ways to maintain their competitive advantage and increase sales while lowering costs. Analytics helps organizations identify whether they are getting the most out of their resources. Is the money they spend going to good use? Are they proactively identifying ways to cut costs while maximizing resources?

Enterprise resource planning (ERP) solutions for manufacturers have analytics embedded within them. But do these systems actually give organizations the depth and breadth of analytics required to sustain a competitive advantage? Or is business intelligence (BI) for manufacturing the better solution?

In some cases, ERP analytics will be enough to meet an organization’s needs. But what about those organizations that aren’t lowering production costs, improving sales, or managing their supply chains effectively through the use of their current systems? In this case, BI for manufacturing may be the better way to meet and exceed an organization’s strategic goals. Let’s explore both options to help you determine which type of analytics is more beneficial to your organization.

Organizations using an ERP solution should ask themselves whether their ERP system helps them

  • determine which customers are most profitable

  • understand their company’s inventory worth

  • track which items have remained in inventory for too long

  • identify what products have the best margin growth

  • recognize how company profits are developing


Organizations implementing an ERP solution need to have a continual view of the organization’s operational status, have access to business indicators that influence the organization, and have a visualization feature that provides management with constant access to business strategy. ERP analytics allows organizations to address these issues through financial, operations, and workforce-based analytics. But what does this really mean for the organization? Why are these analytics important as an enhancement for an ERP system?

Components of ERP Analytics

Aside from tracking order processing, getting products to the right place at the right time, and creating accurate sales forecasting, ERP analytics allow organizations to hone in on financial, operations, and workforce-based analytics to move beyond a traditional ERP solution and thus create and sustain a competitive advantage.

ERP analytics includes the following:

  • Financial analytics, which help the organization develop business plans and budgets, and track performance during execution. Financial analytics includes financial and management reporting, planning, budgeting and forecasting, scorecards, working capital and cash flow management, and payment behavior analysis.

  • Operations analytics, which help the organization optimize its supply chain, improve revenues, and increase customer satisfaction.

  • Workforce analytics, which help the organization understand workforce trends, measure workforce processes and benchmark results against what is happening in the market, align business activities with the strategic goals of the organization, and measure the success of employee compensation programs.


How BI Differs

Organizations that want to move beyond the limited scope of ERP analytics and manage performance on an organization-wide level should consider a BI solution. This will help them move toward an inclusive approach to setting metrics, collaborating on tasks, and tying initiatives to the organization’s overall goals. By focusing on organization-wide business issues, a more cohesive view of the organization is created.

For manufacturers, the added value of implementing a BI solution includes

  • Increase in profitability

    • Gain visibility into demand and sales trends to minimize inventory investment.

    • Analyze cost components and drivers to reduce the cost of goods sold.



  • Improvement in sales performance

    • Analyze sales trends and customer buying behavior.

    • Monitor key sales, marketing, and revenue metrics.

    • Analyze pipeline and performance by brand, product, customer, channel, and geography.



  • Improvement of operational effectiveness

    • Monitor key operational metrics.

    • Identify and analyze excess, obsolete, or slow-moving inventory that can be scrapped or repurposed.

    • Receive timely notification of events, such as late supplier delivery, changes in customer demand, or production stoppages.



  • Optimization of the supply chain

    • Evaluate supplier performance in terms of quality, delivery, and price.

    • Monitor and analyze freight costs.




Conclusion

Manufacturers need to identify which approach works best for them. Do built-in ERP analytics meet business requirements and help manage organizational performance, or should manufacturers take advantage of the additional benefits of a full BI solution? Organizations may be using their current set of ERP analytics, and it may provide sufficient benefit to the organization.

Click here for your free custom comparison of ERP solutions.

If not, BI solutions can create an organization-wide approach to managing performance and gaining competitive advantage that goes beyond ERP analytics.

Click here for your free custom comparison of BI solutions.

 
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