Wednesday, January 12, 2011

Time Value of Information

Every now and then, there’s a flurry of activity, questions and debate around real time information, on inventory, sales, production, process approvals, financial metrics, and so on. The passionate appeals by vendors makes one wonder whether the business is really inefficient or missing out on a large opportunity by not disseminating information to the managers and CXOs in real time. Add to this the new dimension of “complex event processing”, and the picture depicts a Jurassic era of information enablement.

Real time information availability has been business’ aspiration for a long time. IT enablement of the processes and operations in an enterprise expedited availability, but batch processing still did not provide the information as the event happened. As the data mining tools matured and models appeared for predictive modeling, gaps of the present became very evident. SOA Integration and middle layer technology solutions reduced the time gap. Mobile computing removed the physical presence limitation, as trickles of information could be provided on the handheld.

Now cast an eye across industries and various processes that are fed with, or create information. We will observe that today information flows with every step, decision, and event, irrespective of the sector, size or geography, the paradigm is uniform. People create information, people consume information, and people transform information. Managers, supervisors, CXOs, and even customers, seek control with real time information availability. Is it necessary to provide real time information to all the stakeholders? How does it change their behavior, decision or end outcome, if at all?

Take the case of retail. For a customer shopping in a store, price information on nearby stores in real-time is valuable, as it helps her get the best price for a product. To the retailer, a product sold is information, as it indicates that a customer has chosen a product from the shelf, and the stock count is down by one. Based on the supply chain’s agility, the retailer can use this information to plan for replenishment. The information can also be shared with a supplier who may use this snippet for planning next delivery and the impact on production schedule.

All this looks good in a one-one relationship, but when you multiply the dimensions, the complexity renders the simplistic scenario unviable as the optimization across the value chain has multiple constraints that operate on each decision point. Even when the collation and decision points can be automated, “complex events” have a way of making decision making a really difficult task requiring human intervention. In the above scenario, if the retailer received hourly information, will it materially impact the quality of decisions or process triggers (like a replenishment)?

The ground reality is that real time information does matter to an enterprise, but the rule cannot be applied for every byte of information. For a nuclear reactor, there is no other way. In case of a manufacturing plant, PLC data is, inventory data is not. Similarly for a financial institution, risk positions can build up quickly unless near real time monitoring exists, but a trial balance can wait for end of day. The application of technology for real time information is a good tool to be judiciously applied, and not get carried away by the use cases presented by the seller of the technology. If you are not doing it, get started, but ask the question at every stage. What changes with real time information?

Paradoxically, this post is delayed due to travel !


  1. Anonymous4:15 AM

    RFID is going to evolve the way retailers think about real-time information

    Well all information does not have to real-time or event driven. There are areas within Retail where real-time information will and does matter for example:

    1) A real-time POS and inventory visibility can impact certain decisions like price markups, instant promotions, or markdowns

    2) RFID (now or in future) will and does provide retailers with real-time inventory information that can help to prevent stock outs, locate stock within a store to avoid ‘shrinkage’ of inventories, and can help to enable retailers to use more yield effective pricing strategies

    3) RFID provides technology that practically eliminates the need for human checking of stock. Labor reductions will be realized in the following areas of retail operations; receiving, stocking, check out, cycle counting and physical counting. Presence of RFID reduce a wide array of costs: receiving by 50 to 65%, stocking by 22 to 30%, checkout by 22 to 30% cycle counting by 40 to 60% and physical counting by 90 to 100%.

    4) Real time visibility to inaccurate inventory counts as a result of customer theft, employee theft, inaccurate inventory counts due to misplaced items, and stock reordered because items are on a display shelf in another area of the store


  2. I agree completely on scenario to apply real time information. I met CIO of an cement company and we were discussing on Advanced planning and Optimization, efficiency related to that. However the whole planning depends on the transporter getting the return truck load after dropping the load at factory, making it waste to think of APO for their supply chain.We will get immense such example where a technology actual optimized usage depend on the culture, environment and structure.

    Praveen Sengar

  3. I completely agree with the conclusion comment "The application of technology for real time information is a good tool to be judiciously applied". Absolutely. Technology is a part of the solution, not the solution itself. Many-a-times, the biggest and most complicated part of the solution lies in re-modelling a business process or practice.

    Technology, or more specifically accurate data/information, is essential to quantify the problem and justify the solution. I agree that going overboard with a solution even before the root problem is clearly understood/substantiated/proven will only result in loss of time/effort/money.