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Facilitate Business Change with Data Warehousing

Data warehousing involves facilitating change in business processes. In addition to being able to make better, information-driven operational and tactical decisions, you gain insight into key areas that can help you make strategic decisions about the fundamental aspects of your business.

Your data warehouse can act as an early-warning system to let you know that you might need to make some major business changes. Imagine that it’s 2000 and you just got into the video-rental business. You’re the part owner and purchasing manager for a regional chain of retail stores that rents digital video discs (DVDs) and video games, and sells compact discs (CDs).

If you had a data warehouse that gathered information from the point-of-sale computers in all your stores and external data about your competitors’ sales activity (purchased from an external source), you probably would have noticed a couple of interesting trends when you looked at product revenues over time:

  • Sales of music in their historically popular CD format have dropped off remarkably. Because your competitors’ sales for those items are also way off, you might decide that you don’t need to devote the shelf space to stock these types of items anymore.

  • Video games for Playstation 2 (PS2) are rented much more frequently than the same games in Dreamcast format. Because the video game business is rapidly evolving (remember, it’s 2000), your rental numbers might be declaring PS2 the winner of the next-generation gaming consoles and that the Dreamcast games are another item probably not worth ordering and putting on the shelves.

Both these decisions are, for the most part, tactical because they involve product-stocking decisions. Neither decision fundamentally changes the way your company does business, but rather helps you decide which products you want to keep in stock.

But suppose that trend-line information coming back from the data warehouse shows relatively flat sales of all types of music and dramatically increasing revenues from DVD and video game rentals. The future of your chain might lie not in sales of music at all, but rather in DVD and video game rentals.

Rather than have to rely on a gut feeling, you can make data-driven strategic decisions about how your business should change.

Imagine having to make the same type of decision in 2008 if you’re in the automotive business. Gas guzzler sales are plummeting as fast as the price of gas is increasing. While worldwide demand for oil grows, the supply and demand curve isn’t friendly to traditional car sales.

The highly positive growth curve that sport utility vehicles (SUVs) had a few years ago is giving way to the hybrid and green products. Again, your data warehouse gives you the information to make data-based decisions, rather than have to rely on hunches or, at best, bits and pieces of data gathered from various computer systems.

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