IBM BUSINESS ANALYTICS: BECKER UNDERWOOD

THE BOTTOM LINE

Nucleus Research examined Becker Underwood’s deployment of IBM Business Analytics and found it improved the forecasting and planning processes between the sales and operations teams. This resulted in improved productivity, enhanced communications across the organization and to suppliers and customers, and ultimately a 50 percent increase in inventory turns.

ROI: 383%
Payback: 4 months
Average annual benefit: $931,660

THE COMPANY
Becker Underwood is a global multinational company founded in 1982 with offices in nine different countries on five continents. The company creates and produces specialty bio-agronomic and colorant products for turf management, agriculture, seed treatment, vegetation management, forestry, pest control, and many other industries.

THE CHALLENGE
Over the years, Becker Underwood expanded its business operations through acquisition and organic growth from new product offerings. Like many organizations with disparate systems, it was faced with the challenge of measuring and communicating organizational performance between applications that were not integrated. Because it used different terminology and metrics, the organization couldn’t deliver timely, consistent reporting.

As a result, the forecasting of its business relied on the use of historical sales and production data. Adjustments to the forecast relied on manual efforts following iterative conversations between Becker Underwood’s sales and delivery teams, as well as their customers.

At the same time, Becker Underwood believed better forecasting would enable it to increase inventory turns and reduce inventory levels. The company recognized that the current forecasting process couldn’t keep pace with reporting demands and it needed reporting and analysis tools that provide a consistent view of global operations.

THE STRATEGY
In 2007, the business intelligence (BI) project team started a company-wide business analytics evaluation and implementation. At the same time, Becker Underwood’s CFO asked the project team to include consolidation and planning capabilities in their evaluation. The team evaluated offerings from QlikTech, OutlookSoft, Business Objects, and IBM. It ultimately chose IBM Business Analytics for the following reasons:

- Becker Underwood wanted to work with one vendor that could support both its consolidation and BI requirements.

- The company felt that, given its various analytics needs, IBM provided the most complete solution and was price competitive.

The team worked with a number of IBM partners to build a data warehouse, integrate data from their existing financial and ERP systems, and build the necessary BI, planning, and consolidation tools that could be rolled out across the organization. After completing the consolidation portion, the team moved to address analytics for the supply chain. The application was first rolled out to marketing, product management, and operations because the company wanted to gain some experience with the process before deploying it to sales. All users were live on the application by the end of the 12-month rollout.

KEY BENEFIT AREAS
Through the use of IBM Business Analytics (specifically, Cognos), the company was able to increase visibility into supply chain operations and provide marketing, sales, and operational users with better information for planning and decision making.

Benefits of the project included

- Improved forecasting. Because of the improved visibility of order data, forecasting is no longer based only on historical data. This has improved Becker Underwood’s ability to manage and control its inventory and overall supply chain. This improvement resulted in direct cost savings because of greater inventory turns and lower inventory levels. Furthermore, the team’s forecasting conversations have transformed from the use of estimates based on historical events to more timely and accurate business predictions based on the most current information available.

- Increased inventory turns. Achieving greater inventory turns allows Becker Underwood’s team to simultaneously reduce their inventory levels and provide suppliers with more accurate and timely raw materials orders. For the procurement team, this improvement allows them to negotiate better pricing from their suppliers.

- Reduced inventory. Better forecasting and production scheduling led to inventory reductions attributed to timely ordering of supplies and improved delivery of finished goods to its customers. The company decreased the average inventory it once required incrementally each year while meeting customer delivery dates.

- Increased productivity. The elimination of previous manual efforts and spreadsheet use saved several hours per employee each week for operations and improved the process of sales forecasting. The operations and product management teams no longer need to build large spreadsheets in order to calculate finished goods and raw materials forecasts. Also, the elimination of spreadsheet budgeting and forecasting not only saves time for sales personnel, but provides updated forecasting information each month. With these updates, Becker Underwood’s sales team reviews rolling 12-month forecasts which were not available before because of reporting limitations.

- Improved communication. The availability of current information between sales, operations, Becker Underwood’s suppliers, and customers has improved the way teams communicate and identify future improvement areas. Local language support within the software also helps teams across countries work together. With the availability of this information, the company can also provide better customer service and shorter lead times.

KEY COST AREAS
Key cost areas for the deployment included consulting, software, personnel, and training. The greatest cost areas included initial and ongoing consulting required to support the implementation. Becker Underwood capitalized some of these consulting costs as they were considered software development; however, Nucleus has included them as expenses to enable easier comparison for budgeting purposes.

Software, the second largest area, was based on the percentage of Becker Underwood’s total IBM Cognos license investment that was utilized by the project. Personnel costs for both initial implementation and support amounted to 22 percent of overall project costs. Most of the consulting and personnel costs were associated with the initial development and deployment. Because the project had a relatively small footprint, the company found it was able to use existing hardware to support the project so there was no additional investment needed.

BEST PRACTICES
The company expected to improve production planning and reduce its inventory levels as a result of improved supply chain management. A less-expected benefit was the ability of Becker Underwood’s procurement team to use better data to plan and order materials, enabling them to take advantage of more available discounts from suppliers.

CALCULATING THE ROI
Nucleus calculated the costs of software, consulting, personnel, and training over a 3-year period to quantify Becker Underwood’s investment in IBM Business Analytics. Software costs were estimated as a percentage of the company’s overall investment in IBM software licenses based on actual license usage for the project.

Direct benefits Nucleus quantified include the working capital savings associated with reduced inventory which is calculated based on the annual savings in inventory costs and the cost of capital. Other direct savings included the reduction in costs of goods procurement was able to negotiate through more accurate orders.

Indirect benefits were quantified based on the increase in productivity of sales, marketing, and operations staff. Savings were quantified based on time saved and the average fully loaded cost of employees, using a correction factor to realistically account for the inefficient transfer of time between time saved and additional time worked.

SUMMARY
Project: IBM Business Analytics
Annual return on investment (ROI) 383%
Payback period (years) 0.36
Average annual benefit 931,660
Average annual total cost of ownership 102,389