Seminar: Bolt-ons

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Seminar: Bolt-ons

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

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