The Need for Integrated Information

For information to be useful, it needs to be looked at in context with other information that it relates to. In today’s world of “relational databases,” this would all seem to be eminently achievable. After all, your system contains information from almost all your departments—finance, plant, design, customer service, shipping, delivery, maintenance, personnel, and possibly others. By pulling information from all of these areas, we should be able to create the proper context for almost everything that we measure and report.

Yet what I often see in my travels is a lot of disjointed data that is generally shown in expedient ways. As we have discussed before, income statements are often dumps of general ledger information that are shown as a percentage of sales or per MSF or per ton, even though this is not the proper context in which to gain an understanding of most of the reported figures. Estimating is often done without any production information on how the order being quoted has run in the plant, and without real-time information on current plant scheduling. Sales reports often lack integrity, because the books and the estimating system are not properly reconciled and adjusted. There is very little information on the design department, the customer service department, the sales department, and maintenance department, because no one has ascertained what information is available and how to present it. In general, operational data is not related to financial data, and financial data is presented with the accompanying operational data.

In a prior edition of BoxScore, I wrote an article titled “It’s About Time and Other Dimensions,” in which I discussed the need to get beyond the two-dimensional world that accounting gives us and add such things as time, capacity, efficiency, and other dimensions to make our data more meaningful. Creating a reporting system using integrated information is an operational plan to accomplish this goal of multidimensional reporting. If you embrace the need to improve your reporting systems by integrating the information that is in your system, the question then becomes where to start. In my opinion, you first need to figure out what data you collect, where it resides, and whether it’s searchable, and if so, what programs and/or data bases you must utilize. Some of the older systems in use may be more problematic in this regard, but useful integrated reporting can still be accomplished.

Next, you need to decide which areas to focus on. Generally, this becomes a combination of what is expedient and what is relevant. Those of you who have gone through SWOT analysis and some element of strategic planning have set goals and are already measuring key areas that require improvement. Many of you have a sense of the key performance indicators of your company, and these are certainly areas to focus on. Starting with this issue, I will begin offering you some advice based upon what I see in my travels.

Key Information Integration Project No. 1: Order Acceptance and Profit Estimate

As mentioned earlier, I believe that the best predictor of how an order will run in your plant across your equipment should be based mainly upon how similar orders have run in the recent past. The setup and run times in your estimating system are purely hypothetical and generally static. In the “real world,” some orders are more difficult to set up and run, and longer orders tend to run faster per piece than shorter orders. At the end of the time, machine hours in every plant are a finite resource.

In addition, not every shift can run every order efficiently every day. It may be that the second-shift operators are capable of running only simpler orders. Certain machine centers may be overbooked when an order comes in. The ability to have actual plant data, and real-time production and delivery scheduling can help you improve the order’s profitability, and the efficiency of how it will run through the plant and be delivered to the customer. In addition, if you embrace the concept of variable profit per hour predictions, this information is essential.

In future articles, I will examine other key information-integration projects, such as:

• Adding people data to financial reporting.
• Adding production data to financial reporting.
• Adding maintenance data to financial reporting.
• Creating managerial reporting for sales.
• Creating managerial reporting for design.
• Creating managerial reporting for maintenance.

Mitch Klingher is a partner at Klingher Nadler LLP. He can be reached at 201-731-3025 or mitch@klinghernadler.com.