the value of business intelligence in construction industry

The Value of

Business Intelligence

In Construction Industry

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Why Business Intelligence is Mission-Critical in Construction

By Damnish Kumar

Damnish Kumar, CTO at HyTech Professionals , leads technology initiatives for a wide variety of clients in the US, the UK, Japan, Germany and Sweden. He brings to HyTech his technological expertise in n-tier architecture and distributed database applications and a special affinity for industrial environments.

Having managed all stages of the software product life cycle throughout his career, Damnish has ultimately been responsible for hundreds of operational e-commerce, mobile, ERP, SCM and retail applications. He also brings to the leadership of development teams mastery of RUP and Extreme Programming development methodology.

Damnish holds an M.S degree in Mathematics and Scientific Computing from the Indian Institute of Technology (IIT), Kanpur campus, and is a certified project manager.

Business Intelligence Defined

THE NEED

In a broad sense, business intelligence encompasses all the strategic information that management relies on to plan and decides. We use the term strategic precisely, not in the loose way it is often bandied around, because every CEO and committed head of an operating unit feels the urgency to contribute to growth and profits.

Every annual, monthly and weekly plan rests, whether deliberately or otherwise, on a finite set of six known or imponderable factors (see Figure, page 4). On one hand, stakeholder preferences and organizational factors are usually well known. But the rest are fluid and dynamic. In a dynamic and volatile business environment, its important to make these decisions on an almost real -time basis. Management is better positioned to make these decisions by utilizing data and visibility into all the departments of the organization.

Disclaimer:

This study was conducted using market data and HyTechs historical information. This whitepaper is brought to you for educational purposes only. The information is sometimes related to interpretive individual opinion, and is not intended to represent the standard. The views are those of the contributors and are not necessarily endorsed by HyTech Professionals.

Tip:

Business Intelligence is a whole class of applications, data storage, analysis and networking technologies targeted at assembling, granting access to, and combining information to foster more timely and on-target decisions. The essential difference from ERP is the emphasis on:

External factors that impact the business; and,

Performance reports and the state of company resources.

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Business Intelligence in Construction

Managers know what resource base the enterprise owns but they often lose track of how much is available and where it is precisely. Feedback on the state of performance is uneven and does not always arrive in timely fashion. All planners know that the economic, social, political and technical ecology surrounding the firm changes the conditions for competition and enduring advantage from day to day. Worst of all are gaps about how one stands vis--vis the competition. But all this vitally-needed information is frequently imperfect and incomplete. The truth is that growing and even established businesses often lack a means of visibility into all aspects of the company.

The solution is business intelligence (BI), the combination of market research and internal performance data warehousing.

Firms intuitively recognize the necessity for complete and timely information. But BI is not about simply having a mass of information scattered throughout the network or in stand- alone desktops. Neither Excel spreadsheets nor financial package reports, if uncoordinated (and worse, contradictory) delivers vital intelligence to a firm in the form of analytics for decision-making.

Figure 1: Strategic Management Process: Basic Conceptual Framework


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All rights reserved. The content of the publication is copyrighted.


WHAT TO LOOK FOR

Analytics Extracts meaning from company data. Information that is strategic, coherent, timely and enables well-informed decisions.

Synthesized Information has been validated across various databases where it exists, sliced, and diced and rendered useful for mission-critical decisions. BI is not about the past alone, it is about the present to get foresight about future impact of decisions.

Real-time while projects are ongoing and up to the minute because reliable decisions demand it.

Information is accurate and reconciled -- One consistent, common version of how the firm and construction projects are doing.

Connects all facets of the firm Across accounting, sales, field projects, warehousing, purchasing, bill collecting, Employee Relations, your customers, your suppliers, and your partners.

The Advantage BI Brings

In plain terms, BI stops waste and inefficiency dead in its tracks.

Slashes the time staff spends on unproductive search and reconciliation missions. The Center for Media Research found in a 2005 survey that professionals spend more than half their time digging out information. This may amount to as much as 5.4 billion lost man-hours for American firms.

Reduces the risk of faulty decisions and time and money spent on backtracking.

For proactive management rather than management by hindsight.





Without BI, What If Scenarios Missed

Excellent BI advances your Risk Analyses miles ahead of plain financial reporting and inflexible what if spreadsheet work mainly by allowing you to input ranges of risk, not just point estimates.

Planning ahead, means taking risk into account. You must know what the risks are and what impact they will have.

What if in September 2008, you needed to forecast production for the U.S. holiday season? Year-to-date sales had run 15% below prior year because cautious consumers kept reading about homes repossessed and employees thrown out of work. Will sales increase at all during the holiday season? By how much: 3%, 5%, 10%, 15% or more? What grounds does the BI reading of the business climate give you for even being optimistic?

Or another what if scenario: Indias dry season has commenced and you expect your construction companys projects to go full blast. Several clients your sales engineers prospected seem ready to sign on the dotted line. So contracts will rise and thats totally good news, right? But being an experienced manager, you know this will use up consumables like POL and welding rods fast. By how much should you replenish now? And what if the utilization rate for graders, backhoes, pneumatic drills, etc. exceeds 95% without maintenance downtime? What is the risk you might not have enough leased equipment in reserve? What will delays cost if you wait to decide till those projects actually come on stream?

A capable BI system should permit you to simultaneously plan different levels of risk:

Overtime costInventory shortagesVariable contract build-upGeological survey resultsRecruitment shortfallsDelays in government

approvalsUnderground installationUnfinishedFinancing and insurancemaps that cannot benegotiations with thecostsfoundlabor union

Schedule slippagePenalty clausesEffect on gross project

income





Excellent BI must permit you to simultaneously process three levels of what if scenarios: best case, worst case and most likely case. The model, in short, accepts range estimates of risk so managers can decide if the consequences are acceptable.

Figure 2: How connected can you be? The July 2008 Oracle release of the free Business Indicators client for the iPhone.

The Tools

In brief, the alternatives are:

Have your IT Department create a homegrown solution from scratch. This looks cost-effective. But if the most complicated project they have done so far is the company Web site, be wary of how long you must wait while risk piles up every day on the shop and factory floor.

Purchase an off-the-shelf suite like Oracles Business Intelligence Enterprise Edition Plus that integrates modules for end-to-end Enterprise Performance Management System, including category-leading performance management applications, BI applications, BI foundation and tools, and data warehousing based on Oracle EPM. Be sure to ask hard questions about consultants costs to customize and implement. Total cost-of-ownership can be an eye-opener.


