Transcript Chapter 8 Business Intelligence & ERP

Hour 7:
Business Intelligence & ERP
ERP offers opportunity to store vast
volumes of data
This data can be data mined
Customer Relationship Management
Data Storage Systems
• Data Warehousing
– Orderly & accessible repository of known facts &
related data
– Subject-oriented, integrated, time-variant, non-volatile
– Massive data storage
– Efficient data retrieval
• CRM one data mining application
– Can use all of this data
– Common ERP add-on
Granularity
• Definition – level of detail
– Most granular – each transaction stored
– Averaging & aggregation loses granularity
• Data warehouses usually store data at fine
levels of granularity
– You can’t undo averages & aggregates
Data Marts
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Different definitions
1. Small version of data warehouse
2. Temporary storage of data
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possibly from multiple sources
for a specific study
On-Line Analytic Processing
• OLAP
• Multidimensional databases
• Display data on selected dimensions
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Time
Region
Product
Department
Customer
Etc.
Data Quality
• Problem causes
– Data corrupted or missing
– Failure of software transferring data into or out
of data warehouse
– Failure of data cleansing process
Data Integrity
• No meaningless, corrupt, or redundant data
• Part of data warehousing function to clean
data
• Data standardization
– Remove ambiguity (different ways to
abbreviate)
• Matching
– Associating variables (unique mapping)
Database Product Comparison
Product
Use
Duration Granularity
Data
warehouse
Repository
Permanent Finest
Data mart
Specific
study
Temporary Aggregate
OLAP
Report &
Analysis
Repetitive
Summary
Data Mining
• Analysis of large quantities of data by
computer
• Micromarketing
• Versatile
– Apply to a wide variety of models
• Scalable
– Can analyze very large data sets
Types of data mining
• Hypothesis Testing
– Traditional statistics
• Knowledge Discovery
– No predetermined expectation of relationships
Business Data Mining
Applications
Area
Applications
Retailing
Market basket analysis, cross-sell
Banking
Customer relationship mgmt
Credit Card Mgmt
Lift, churn
Insurance
Fraud detection
Telecommunications
Churn (customer turnover)
Telemarketing
On-line caller information
Human Resource Mgmt
Churn (employee turnover)
Customer Relationship
Management
• Determine value of customer
• Identify what they want
– Package products (services) to keep them
• Maximize expected net present value of
customer
Data Warehouse Use
Wal-Mart
Fingerhut
Wal-Mart Data Warehouse
Foote & Krishnamurthi [2001]
• Wal-Mart dominates retail market
• Heavy user of information technology
• Supply chain distribution to 2,900 outlets
– A critical success factor
• Data warehouse of 101 terabytes
– Possibly world’s largest
– Investment over $1 billion
– Can handle 35,000 queries per week
• Benefits over $12,000 per query
Wal-Mart
• Initial data warehouse
– point-of-sale & shipment data
• Added data
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Inventory
Forecast
Demongraphic
Markdown
Return
Market basket information
Wal-Mart Data Warehouse
• Process 65 million transactions per week
• 65 weeks of data per item
– By store
– By day
• Support decision making
• Many users have access
– Including 3,500 vendor partners
FINGERHUT
• Founded 1948
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today sends out 130 different catalogs
to over 65 million customers
6 terabyte data warehouse
3000 variables of 12 million most active
customers
– over 300 predictive models
• Focused marketing
Fingerhut
• Purchased by Federated Department Stores
for $1.7 billion in 1999 (for database)
– 2002 – more recent developments
• Fingerhut had $1.6 to $2 billion business
per year, targeted at lower-income
households
• Can mail 400,000 packages per day
• Each product line has its own catalog
Fingerhut
• Used segmentation, decision tree,
regression, neural network tools from SAS
and SPSS
• Segmentation - combined order &
demographic data with product offerings
– could target mailings to greatest payoff
• customers who recently had moved tripled their
purchasing 12 weeks after the move
• send furniture, telephone, decoration catalogs
Advanced Technology & ERP
Bolt-ons
Middleware
Security
Technology & ERP
Manetti [2001]
• Mobile commerce & other IT makes ERP
extensions possible, attractive
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Broader use of web-enabled systems
Greater AI-driven applications
Greater use of ERP in mid-sized manufacturing
Flexible modular systems
More bolt-ons (3rd party applications)
• Creates security issue
Conflict: ERP & Open Systems
• Original concept of ERP closed
– Easy to control access
• Openness creates security issues
– But there are too many good things to do with
open systems
– ERP vendors also provide such products
Example Bolt-Ons
Mabert et al. [2000]
Bolt-On
Example
Vendor
Demand planning
Demand Planner
BAAN
E-procurement
Ariba Network
Ariba, Inc.
Business to business
MANAGE:Mfg
Cincom
Integrated suites
Manugistics 6
Manugistics
Order tracking
Intelliprise
American Software
Factory plan/schedule
Capacity Planning
JDEdwards
On-line collaboration
Aspen OnLine
Aspen Technology
Warehouse mgmt
CSW Warehouse
Management System
Cambar
Data mining
Enterprise Miner
SAS Institute
Middleware
• ERP interfaces to external applications
difficult to program
• Middleware is an enabling engine to allow
such external applications eto ERP
– Data oriented products
– Messaging-oriented
- shared data sources
- direct data sharing
Web ERP
• J.D. Edwards OneWorld
• SAP mySAP.com
• Trends
– More web links
– More functionality
Middleware & Data Acquisition
• Bar-code data collection
• Radio frequency data collection
• Web portals
Portals of Major ERP Vendors
Stein & Davis [1999]; Stein [1999]
Vendor
Portal
Function
BAAN
iBAAN
Application integration
J.D. Edwards
ActivEra Portal
Interface to ERP, e-mail,
spreadsheets, Internet
Oracle
11i
Connect to business intelligence
PeopleSoft
PeopleSoft Business
Network
Tie applications to online
communities
SAP
mySAP-Employee
workplace
Travel reservation, online
procurement
SAP
mySAP.com
Center for SAP users
Lawson
Insight II Seaport
Files, data warehouse, e-mail,
Internet
Other Vendor Portals
Stein & Davis [1999]
Type
Vendor
Function
Business
intelligence
Cognos
Access data warehouses, data
mining
Information Advantage
SAS Institute
Documentation
management
Documentatum
Manage text
Other
Glyphica
Integrate ERP data with
applications
Plumtree Software
Viador
ERP Security Threats
Type of Security
Physical
Threat
Theft, damage, copying
Unauthorized access
Natural disasters or accident
Social
Network
Tricks to gain information
Telephone taps
Dial-up entry
Internet hacking
Viruses
Summary
• ERP security originally was not problematic
– Only few internal users could access
• Open systems driven by external applications
– Creates security issues
– Web access especially problematic
• Special ERP Security aspects
– Data quality
– Control over data access
Bolt-On/Middleware Examples
Kellogg Company
Dow Corning
Brown et al. [2001]
Teresko [1999]
Kellogg Company Bolt-On
• Kellogg developed their own ERP
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Forecast demand
Take customer orders
Coordinate raw material purchasing
Coordinate production of over 100 food products
Coordinate distribution
• Added linear programming Kellogg Planning
System (KPS)
– Production, inventory, distribution planning
– Budgeting & capacity expansion
History
• Long user of MRP, DRP (distribution resource
planning)
• 1987 realized product line growth, international
expansion led to need for more computer support
• Developed KPS in 1989, modified over time
• By 1994 strong cost system in place
– Saved $4.5 million in 1995
Kellogg LP
• Minimized total cost
– Purchasing, manufacturing, inventory, distribution
• Variables: product, package size, case size
• 30 week planning horizon
• Constraints:
– Line, packaging capacities, flow constraints,
inventories, safety stocks
• 700,000 variables, 100,000 constraints, 4 million
non-zero coefficients
Kellogg LP
• Continuous model took several hours to run
– Generated starting solution for managers
• Probabilistic features dealt with through
safety stock
• Example of bolt-on to ERP
– Linear programming generated better plans
Dow Corning System Integration
• 1995 adopted SAP R/3 to integrate global
business practices
– Also adopted SAP data warehouse
• Consolidated information generated internally,
externally
– Internal: plant-floor data, patent information,
benchmarking
• Allowed deeper data analysis
Dow Corning System
• Over 4,000 users had access
• Integration & data compatibility problems
dealt with by data warehouse
• Added automated data collection system
– Required middleware
• Middleware allowed expansion into supply
chain management
Summary
• Customer Relationship Management very
promising
– Has not reached all expectations as ERP add-on
• Quite expensive to get needed data storage
capability
• Still an opportunity to use all the data
generated by an ERP
• Many other useful bolt-ons