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

SummaryRepetitiveReport & Analysis

OLAP

AggregateTemporarySpecific study

Data mart

FinestPermanentRepositoryData warehouse

GranularityDurationUseProduct

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

Churn (employee turnover)Human Resource Mgmt

On-line caller informationTelemarketing

Churn (customer turnover)Telecommunications

Fraud detectionInsurance

Lift, churnCredit Card Mgmt

Customer relationship mgmtBanking

Market basket analysis, cross-sellRetailing

ApplicationsArea

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]

SAS InstituteEnterprise MinerData mining

CambarCSW Warehouse Management System

Warehouse mgmt

Aspen TechnologyAspen OnLineOn-line collaboration

JDEdwardsCapacity PlanningFactory plan/schedule

American SoftwareIntellipriseOrder tracking

ManugisticsManugistics 6Integrated suites

CincomMANAGE:MfgBusiness to business

Ariba, Inc.Ariba NetworkE-procurement

BAANDemand PlannerDemand planning

VendorExampleBolt-On

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]

Files, data warehouse, e-mail, Internet

Insight II SeaportLawson

Center for SAP usersmySAP.comSAP

Travel reservation, online procurement

mySAP-Employee workplace

SAP

Tie applications to online communities

PeopleSoft Business Network

PeopleSoft

Connect to business intelligence11iOracle

Interface to ERP, e-mail, spreadsheets, Internet

ActivEra PortalJ.D. Edwards

Application integrationiBAANBAAN

FunctionPortalVendor

Other Vendor PortalsStein & Davis [1999]

Viador

Plumtree Software

Integrate ERP data with applications

GlyphicaOther

Manage textDocumentatumDocumentation management

SAS Institute

Information Advantage

Access data warehouses, data mining

CognosBusiness intelligence

FunctionVendorType

ERP Security Threats

Viruses

Internet hacking

Dial-up entry

Telephone tapsNetwork

Tricks to gain informationSocial

Natural disasters or accident

Unauthorized access

Theft, damage, copyingPhysical

ThreatType of Security

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