Hour 7 Business Intelligence ERP offers opportunity to
Hour 7: Business Intelligence & 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 definitions 1. 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 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 – – – 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 & ERP Manetti [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 (3 rd 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 On. Line 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 One. World • SAP my. SAP. 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 i. BAAN Application integration J. D. Edwards Activ. Era Portal Interface to ERP, e-mail, spreadsheets, Internet Oracle 11 i Connect to business intelligence People. Soft Business Network Tie applications to online communities SAP my. SAP-Employee workplace Travel reservation, online procurement SAP my. SAP. 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 – – – 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
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