H. D. Smith overcame a several-years-long struggle to rein in its supply chain information using analytics software that tracks data on the 100,000 products, including prescription drugs, health, wellness and beauty products, the company ships to hospitals and drugstores. CIO David Guzman, who led the initiative for the Springfield, Ill.-based company, says analytics have also helped reduce costs and boost sales and will eventually help customers improve their patient outcomes.
“Analytics and data is gold for our suppliers and customers,” Guzman told CIO.com.
Big data analytics has emerged as a strategic priority for corporate IT departments tasked by senior management to drive operational efficiencies or lend new insights into customer activity. Some 76 percent of companies are investing or planning to invest in big data services in the next two years, according to a new survey of IT and business leaders by Gartner.
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H.D. Smith says analytics can help it refine its operations, thereby improving customer service to gain an edge over rivals such as AmeriSourceBergen, McKesson and Cardinal Health. “The ability to use analytics through our entire business function was a key requirement for us,” Guzman told CIO.com.
Pushing data from ERP to the cloud
Getting to that point proved challenging. Guzman faced a crucial decision in December 2013. H.D. Smith had just completed an implementation of SAP business software, which is no mean feat. Its next task was improving how the company tracked the path pharmaceuticals took as they moved through the pipeline.
Prior to the SAP installation, this was a laborious exercise in which IT workers pulled data from a proprietary ERP system and loaded it into Excel spreadsheets, and handing it off to business analysts to conducted basic reporting. But this ad-hoc approach was too slow and didn’t allow for “periodic sanctity,” or careful tracking of inventory by day, week or month. The question Guzman faced: Should H.D. Smith build the data warehouse from scratch or purchase a solution?
Building a solution would devour huge chunks of time and tax a budget already shrunken from the Herculean SAP project. “We were wary and weary of another big implementation,” Guzman says. Moreover, he noted, by the time they built a data warehouse the business requirements will have changed and the opportunities will have passed the company by. So he scoured the market and settled on software from a relatively unknown company, called FusionOps. Among the things he liked about FusionOps was that it ran in the cloud, which was consistent with his push to consume more cloud services, including Office 365 for productivity and SugarCRM for salesforce management.
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By January 2014, H.D. Smith had begun using FusionOps, which enabled it to segment profit margin by product and customer, as well as crucial financial metrics as chargebacks, returns, credits and performance incentive fees. It also gauged interruptions in the supply chain that could yield too little inventory, or anomalies that could leave with too much inventory, as well as sales and other customer service metrics.
Business line leaders segment inventory queries, viewing such key metrics as gross margin, demand, volume, manufacturing absorption and service level targets on Web dashboards populated with bar graphs. Using mobile software Guzman’s team built to aggregate FusionOps data, sales representatives show customers, via iPads, the performance and cost drivers of certain products, enabling them to adjust their ordering decisions. In short, H.D. Smith is “right-sizing inventory levels without sacrificing customer service,” he says.
Supply chain analytics is gaining traction
Guzman says H.D. Smith recognized margin improvements and more timely financial closes with the software, with which the company currently hosts about 10 terabytes of data. “We saw some really nice results by getting all of the data in one place.” As H.D. Smith is privately held, he declined to cite specific revenue benefits, or share metrics gleaned from the software. But he said the benefits have been “significant” for the business. He was encouraged enough by the results that he plans to apply FusionOps to study the efficacy of treatment for its customers patients, though this project is in early stages.
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H.D. Smith isn’t the only company finding success with FusionOps. Retailer Columbia Sportswear says the software, which it used to track purchase orders, product fill rate, and sales, helped boost the share of merchandise delivered on-time and in-full, considered a core metric among retailers, from 28 percent to 78 percent. “We’re raising gross margin because we’re selling products at full price versus discounting because we didn’t move it around right,” said Fred Pond, the retailer’s CIO.
Supply chain analytics is an increasing priority for companies that desire more visibility into the products they ship, says Noha Tohamy, a Gartner analyst who tracks supply chain technologies. For example, companies want to know the trade-offs of a manufacturing decision on other supply chain functions. “They’re trying to create a profitable response to the market demands, taking into account the entire supply chain, not just their internal operation.”