By Philip E. Quigley, CFPIM

1. There is general awareness that you are dealing with your suppliers from the basis of several independent businesses of medium size versus as one large corporation, and you feel that the corporation is not getting the best prices it could.
2. Several of your customers report that they are dealing with different divisions of your corporation and believe they should be getting bigger discounts because of the size of their purchases. You have no ready data to tell whether the customers have a point.

Your team now has to report to the CEO and his associates on a recommended systems solution to these problems. Does this sound familiar?

It is familiar because many companies are grappling with these issues. Obviously, part of the solution seems to be to centralize certain functions across the company. But your success has been built on independent divisions that won't give up their independence. There is a practical problem of integrating different systems that were designed and implemented at different times for different markets and management requirements. Designing and implementing one system for the company will be difficult. The problems will be organizational, technical and political — all of which will run up the cost. So what do you do?


Data warehousing is the answer
The answer may be in using a new technology: data warehousing. Basically, data warehousing allows you to copy data from different systems and put it into a storage area or warehouse. Once in this warehouse, the data can be used by different groups of users. Naturally, the actual process isn't as simple as I've just stated. There's a lot of work in analyzing the data, cleaning it up, and formatting it for the warehouse so that it can be integrated with data from other systems, groups, etc. But it can be done, and usually at a much smaller cost than implementing new centralized systems. Let's look at some sample problems.

A data warehouse would include part number, part number descriptions, quantity required, etc. Once collected, reports could be run showing total, corporatewide demand for individual parts, classes of parts by commodity, etc. With this data, corporatewide contracts could be established. The operating divisions would then use the contracts for their purchases. Now the divisions can reap the benefit of purchasing against these contracts and reduce their material costs. To optimize the data warehouse and this process, common material needs to be identified for the corporation as a whole, and a common part numbering system needs to be established; but operating divisions can keep their own systems.

In the second example, data on customer IDs, orders, etc., would be loaded into the warehouse from each division. Reports could be run detailing total orders from each customer. The information would now be available for the company to manage the total relationship with the customer. The process of managing the customer relations and expectations would have to be implemented using the data, but no new central systems would have to be implemented.


Reaping the benefits
Use of the warehouse has allowed the company to reap the benefits of centralization without actually centralizing the systems or organizations. Work would have to be done on agreeing to standard processes for assigning part numbers and customer IDs to gain the greatest benefit, but these are manageable tasks.

This new tool then offers some interesting alternatives for successful, multidivision companies that are grappling with the issue of maintaining division independence and yet gaining the benefits of centralization. This tool also offers the alternative of implementing simpler, smaller ERP systems for each division, rather than implementing one corporatewide system.

But the tool does demand that senior management understand what the data warehouse can and can't do and that senior management understands and demands the benefits of the warehouse be realized.