IBM Cognos BI Helps Home Building Materials Firm Weather Recession

Many technology companies didn’t see the sharp drops associated with this recession until late 2008, but like others in the home building market, U.S. Lumber, which caters to customers including Home Depot, started feeling the pain in 2006.

But things could have been worse. U.S. Lumber, a mid-sized business with about 280 employees, has weathered the recession so far, and at least one of the people who work there credits the company’s business intelligence system with the fact that U.S. Lumber actually made a profit during its most recent fiscal year -- a year when its competitors continued to struggle to stay afloat.

“We were the first ones into the hole,” says Felipe Herrera, an industrial engineer and MBA who heads up U.S. Lumber’s implementation of IBM Cognos business intelligence software at U.S. Lumber. “We are the supply chain for housing. Our spigot started heading down in 2006. But we made money last year. I don’t know a lot of people in our industry that can say that.”

Herrera says that he attributes the profit to “being able to see things unraveling with the data, and managing our customers.” Herrera says that because U.S. Lumber was able to recognize the downward trend in real time, it was able to react quickly to the changing market. It could recognize who was still buying and direct its sales people accordingly.

IBM Cognos solution provider channel partner Lodestar Solutions helped U.S. Lumber with the upgrade from Cognos 7 to Cognos 8.

Lodestar CEO Heather Cole says that while IT budgets have changed significantly in the last six months, now is an even more important time for businesses to get accurate information faster to make quicker decisions. U.S. Lumber was fortunate that they already had the Cognos system in place.

Herrera says before U.S. Lumber implemented Cognos BI “it’s hard to remember because it was so horrible.” Queries to the ERP system yielded hundreds of thousands of lines of data that Herrera would have to split into multiple spreadsheets.

“A lot of the decisions we made on sales programs and changing terms with customers were all made on a gut feeling,” says Herrera.

But Cognos got its foot in the door at U.S. Lumber about five years ago when the company’s president and CFO went in search of a new solution to improve upon the Microsoft Excel spreadsheets they were using for planning. The company went with Cognos Analyst. Later, U.S. Lumber invested in Cognos BI to replace the company’s customized third-party solution that really just provided it with three graphs per day – inventory, daily sales and margin, says Herrera.

“When we looked at what Cognos had for BI in 2005, we saw the possibility of so many different things we could do with the data,” says Herrera.  “We only realized then we could do a lot more with our own data. We didn’t know how much we had. We didn’t realize how data starved we were until we got Cognos BI.”

While Herrera says it’s hard to quantify the pay off of implementing a BI system, he says that one thing the company managed to avoid was spending the $100,000 quoted by the third-party vendor for a custom software project to gather procurement data. Instead, Herrera ran a pilot using Cognos to extract the same information.

“Companies have the data,” says Cole. “But they don’t have the tools to leverage the data from their applications – particularly with ERP systems. The reporting available with these systems is not the best, but that’s where Cognos BI really steps up, and it allows you to report off that data and to be able to see that one version of the truth from multiple sources”

That’s what Herrera was able to do with U.S. Lumber’s data.

“Any BI user that has this system can do this, but a lot of people aren’t creative and don’t know how to leverage what they have,” says Cole. “It was an instance where Felipe could leverage the system to get all the data the company wanted.”

Lodestar’s participation in the most recent project amounted to some brief consulting with U.S. Lumber, says Cole, while Herrera really did the heavy lifting on the project. Like everyone else, U.S. Lumber is holding off on big consulting projects that will cost significant money, says Cole.

Cole says that Lodestar’s overall business, which specializes in Cognos implementations, still sees some deals closing, but those deals are much smaller than they used to be. Companies will run more pilot programs.

But pilot programs do tend to pan out, says Cole, who adds that almost all of the pilots Lodestar began with customers last fall have now turned into new projects and opportunities.

For example, many companies are looking to move from annual forecasts to rolling forecasts, she says, because return on investment (ROI) for that kind of project is very rapid.

“The ability to make a better decision is absolutely key,” says Cole. “The only way to do that is to have the right data available – and not have 10 different versions of the truth.”

Herrera reports that the Cognos BI system installed quickly, over a weekend. In addition, U.S. Lumber was able to use Cognos BI to help with an ERP upgrade.

“We used Cognos to combine information from two ERPs, pulling data from both into several SQL tables,” Herrera says. “Cognos helped us through that process and we didn’t miss a step.”