Smarter ERP with Decision Management and Business Rules

Smarter ERP with Decision ManagementJames Taylor, CEO

Your presenter – James Taylor CEO of Decision Management Solutions Works with clients to improve their business by applying analytics and analytic technology to automate and improve decisions Spent the last 8 years developing the concept of Decision Management 20 years experience in all aspects of software including time in FICO, PeopleSoft R&D, Ernst & Young ©2011 Decision Management Solutions 2

AGENDA 1 2 The challenges of enterprise applications Decisions in Enterprise Applications 3 Introducing Decision Management 4 5 6 The power of The role of Wrap and next business rules anlaytics steps management systems

The one slide you need Enterprise Applications are too dumb You need Enterprise Applications that Are agile and transparent Empower a flat organization Use data to act an analytically So Externalize decisions Use a business rules management system Apply analytics ©2011 Decision Management Solutions 4

The challenges ofenterprise applications

“Onceto getpour electronic concrete, it’s you hard Shell out. ” “ There is no such thing as a temporary solution. Don’t put in things you don’t want to keep. Unilever ”

Enterprise Applications Wait Report rather than act but don’t learn Built to last, BOSS not to change Escalate rather Local exceptions than empower Global standards ©2011 Decision Management Solutions 7

Decisions inEnterpriseApplications

Decisions in Enterprise Applications Handled inconsistently Different channels, different outcomes Handled manually Worklists and escalation Policy manuals and “cheat sheets” More inconsistency Handled only at a macro level Everyone treated the same Ignored ©2011 Decision Management Solutions 12

What decisions could they make? They could Determine if a customer is eligible for a benefit Validate the completeness of an invoice Calculate the discount for an order Assess the risk of a transaction Select the terms for a loan Choose which claims to Fast Track These are decision words The system must answer a question each time ©2011 Decision Management Solutions 13

Case: Materials Master Single worldwide SAP instance to standardize processes, ensure consistent customer treatment Some products are dangerous, some are complicated, some can’t be sold in some places 300,000 material masters with 50 supply chains “Validate material master” Results Eliminated need for detailed knowledge in operations Cycle time dropped from 6 weeks to 1.6 days Rework down by 98%, waste down by 95% Customer sat up 90%, on-time delivery up 90% ©2011 Decision Management Solutions 14

Introducing DecisionManagement

Decision Management An approach or business discipline for automating and improving decision-making It improves day to day business results by Supporting Automating and Improving operational decisions ©2011 Decision Management Solutions 16

Builds on Enterprise Applications by Increasing agility and transparency Giving the business more control Reducing complexity and manual intervention Putting your data to work Managing uncertainty and risk ©2011 Decision Management Solutions 17

Delivering Decision Management 3 stages to better operational decisions Create a “closed loop” between operations and Design and build analytics to independent measure results decision processes and drive to replace decision improvement Identify the points embedded in decisions (usually operational systems about customers) that are most important to your operational success ©2011 Decision Management Solutions 18

Decision Services remain in sync Conventional Approach Decision Management Other Systems CRM System CRM System Decision Service Frequent code changes Infrequent code changes Other Systems sor t ed=1: sor t ed=1: f or I y = I–I= y > 11; y –I t f or I y = I–I= y > 11; y –I t p ri n t ( y –Id ,y) : p ri n t ( y –Id ,y) : if [1a r r ayI y] < 1a rr ayI y -1]) t if [1a r r ayI y] < 1a rr ayI y -1]) t holder - [a rr a y[ y -1] | holder - [a rr a y[ y -1] | Iar ra yl y -1]) = 1 [y]) Iar ra yl y -1]) = 1 [y]) 1 a rr a y = holder 1 a rr a y = holder Programmers Programmers Frequent policy changes Policy Changes Business users Business users Smart (Enough) Systems, Prentice Hall June 2007 Fig 211 ©2011 Decision Management Solutions 19

Why manage decisions independently? Faster, easier, independent changes Coordination of decisions across channels Simpler more customer-centric processes Higher employee productivity Apply analytic insights everywhere Continuous improvement Create systems that handle uncertainty ©2011 Decision Management Solutions 20

Case: Country specific Exceptions Major manufacturer had a single process design for supplier onboarding Many country-specific variations in required data, allowed values and formats for suppliers Externalized “Validate supplier” decision and used rules to manage logic Results: Common process Reduced time to onboard a supplier by 50% Still supported local variations. ©2011 Decision Management Solutions 21

A Business Rules Management System Validation Testing and Verification Decision Deployment Production Rule Service Application Repository Rule EngineDesign Rule Tools Management Applications Operational Database After Smart (Enough) Systems, Prentice Hall June 2007. Fig 6.6 ©2011 Decision Management Solutions 24

Unmanageable business rulespublic class Application {private Customer customers[];private Customer goldCustomers[];...public void checkOrder() { for (int i = 0; i < numCustomers; i++) { Customer aCustomer = customers[i]; if (aCustomer.checkIfGold()) { numGoldCustomers++; goldCustomers[numGoldCustomers] = aCustomer; if (aCustomer.getCurrentOrder().getAmount() > 100000) aCustomer.setSpecialDiscount (0.05); } }} ©2011 Decision Management Solutions 26

Manageable business rules If customer is GoldCustomer and Home_Equity_Loan_Value is more than $100,000 then college_loan_discount = 0.5% If member has greater than 3 prescriptions and prescription’s renewal_date is less than 30 days in the future then set reminder=“email” If patient’s age is less than 18 and member’s coverage is “standard” and member’s number_of_claims does not exceed 4 then set patient’s coverage to “standard”Smart (Enough) Systems, Prentice Hall June 2007. Fig 4.3 ©2011 Decision Management Solutions 27

Clarity and transparency are needed If customer is GoldCustomer and Home_Equity_Loan_Value is more than $100,000 then college_loan_discount = 0.5% If member has greater than 3 prescriptions and prescription’s renewal_date is less than 30 days in the future then set reminder=“email” If patient’s age is less than 18 and member’s coverage is “standard” and member’s number_of_claims does not exceed 4 then set patient’s coverage to “standard” ©2011 Decision Management Solutions 29

Alternatives to business rulesExplicitly coded within application or databasePros ConsFamiliar to IT IT department must be involved in any changeSimplifies development and testing Little re-use of logic across multipleprocesses decisionsParameterized in tables or configuration filesPros ConsDecreases cost of change Use of parameters can decrease readabilityNo business/IT collaboration Assumes kinds of changes can be exhaustively specified ©2011 Decision Management Solutions 30

Or use business process management? Age<21 No Class I or II sports Accept low-risk applicant Class II sport Previous Heart Attack, Decline high- Existing Cancer risk applicant 21<=Age<50 Class I sport Process medium-risk Good Medical Record applicant Age>50 1 or fewer Claims Multiple Claims New Customer … Long-standing Customer ©2011 Decision Management Solutions 31

Decisions make for simpler processes Low risk Process low- risk applicant Medium risk Process Determine medium-risk applicant type applicant High risk Process high- risk applicant Class I Class II New # Age sports sports Heart Attack? Cancer? Customer? Claims Action <21 N N Low Risk <21 Y High Risk <21 Y N Medium Risk 21 - 50 Y High Risk 21 - 50 Y High Risk 21 - 50 N N Medium Risk >50 Y High Risk >50 N <2 Medium Risk >50 N >1 High Risk ©2011 Decision Management Solutions 32

When should you rules? Decision is based on many policies or regulations The logic involved changes often The logic is complex or has complex interactions You want business users to truly participate and collaborate. You need to apply analytics ©2011 Decision Management Solutions 33

Why manage business rules Reduce Costs • Fewer resources, less time to change decisions • Lower fines, legal costs from bad decisions • Reduced IT costs to implement decisions Improve Decision Making • Clear policies and procedures • Consistently applied across channels, systems • Increased accuracy from business users participation Business Agility • More rapid response to business threats • Fewer missed opportunities • Faster time to market ©2011 Decision Management Solutions 34

Case: Identifying failures Industrial parts manufacturer Lots of different models each with their own failures and symptoms Regular updates to models plus new symptoms identified for failures “What failure do these symptoms imply” decision Results: Captured expert knowledge Improved leverage of experts Dramatic decrease in time to add new models ©2011 Decision Management Solutions 35

The role of analytics

“ Analytics simplify data to amplify its meaning ”

Analytics power operational decisions How do I… prevent this customer from churning? convert this visitor? acquire this prospect? make this offer compelling to this person? identify this claim as fraudulent? correctly estimate the risk of this loan? It’s about making better operational decisions ©2011 Decision Management Solutions 39

Different kinds of analyticsBusiness Intelligence Data Mining Predictive Analytics X X X X X X X X X X X X X X X X X X X X X XX X X X X XX X X X X X X XX X X X X X X X XX XX X X X X X X X X X X X XX X X X X X XX XHow do I use data to Who are my How are thoselearn about my best/worst customers likely tocustomers? What customers? How do behave in thehas been happening I turn my data into future? How do theyin my business? rules for better react to the myriad decisions? ways I can “touch” them?Knowledge - Description Action - Prescription ©2011 Decision Management Solutions 41

Insights must drive action * * ** * ** * * * * Predictive models * * * * **** * * * * * ** * don’t DO anything, * * * * ** * * * * * * * * * * ** * they just make * * * ** * * * predictions. ©2010-2011 Decision Management Solutions 42

Insights must drive action Business Rules make analytics actionable * ** * ** * * * * * * * * * ** * * ** * * * ** * * * * * * * * ** * * * * * * ** * * * * * ** * * * Analytic insights are deployed via a BRMS built in a Decision Service, making them actionable. ©2010-2011 Decision Management Solutions 43

Wrap upand next steps

Action Plan 1 Adopt business rules management 2 Empower don’t escalate 3 Eliminate manual reviews Standard processes, custom 4 decisions 5 Inject analytic insight into operations ©2011 Decision Management Solutions 46

The one slide you need Enterprise Applications are too dumb You need Enterprise Applications that Are agile and transparent Empower a flat organization Use data to act an analytically So Externalize decisions Use a business rules management system Apply analytics ©2011 Decision Management Solutions 47

Decision Management Solutions Decision Management Solutions can help you Focus on the right decisions Implement a technology blueprint Build decisioning systems For assistance, to find out more or if you have questions james@decisionmanagementsolutions.com http://www.decisionmanagementsolutions.com http://jtonedm.com @jamet123 or @decisionmgt ©2011 Decision Management Solutions 48

Thank you! James Taylor, CEO james@decisionmanagementsolutions.comwww.decisionmangementsolutions.com/learnmore

Smarter ERP with Decision Management and Business Rules

by Decision Management Solutions on Mar 09, 2011

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