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

• Different definitions1. Small version of data warehouse

2. Temporary storage of data– possibly from multiple sources

– for a specific study

On-Line Analytic Processing

• OLAP• Multidimensional databases• Display data on selected dimensions

– 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 WarehouseFoote & 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– 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– 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 & ERPManetti [2001]

• Mobile commerce & other IT makes ERP extensions possible, attractive– 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-OnsMabert 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 - shared data sources– Messaging-oriented - 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 VendorsStein & 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 PortalsStein & 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 Threat

Physical Theft, damage, copying

Unauthorized access

Natural disasters or accident

Social Tricks to gain information

Network 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 Brown et al. [2001]

Dow Corning Teresko [1999]

Kellogg Company Bolt-On

• Kellogg developed their own ERP– 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