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. 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

3. 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

4. Data Marts Different definitions 1.Small version of data warehouse 2.Temporary storage of data –possibly from multiple sources –for a specific study

5. On-Line Analytic Processing OLAP Multidimensional databases Display data on selected dimensions –Time –Region –Product –Department –Customer –Etc.

6. Data Quality Problem causes –Data corrupted or missing –Failure of software transferring data into or out of data warehouse –Failure of data cleansing process

7. 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)

8. Database Product Comparison ProductUseDurationGranularity Data warehouse RepositoryPermanentFinest Data martSpecific study TemporaryAggregate OLAPReport & Analysis RepetitiveSummary

9. 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

10. Types of data mining Hypothesis Testing –Traditional statistics Knowledge Discovery –No predetermined expectation of relationships

11. Business Data Mining Applications AreaApplications RetailingMarket basket analysis, cross-sell BankingCustomer relationship mgmt Credit Card MgmtLift, churn InsuranceFraud detection TelecommunicationsChurn (customer turnover) TelemarketingOn-line caller information Human Resource MgmtChurn (employee turnover)

12. Customer Relationship Management Determine value of customer Identify what they want –Package products (services) to keep them Maximize expected net present value of customer

13. Data Warehouse Use Wal-Mart Fingerhut

14. 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

15. Wal-Mart Initial data warehouse –point-of-sale & shipment data Added data –Inventory –Forecast –Demongraphic –Markdown –Return –Market basket information

16. 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

17. 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

18. 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

19. 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

20. Advanced Technology & ERP Bolt-ons Middleware Security

21. 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 (3rd party applications) Creates security issue

22. 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

23. Example Bolt-Ons Mabert et al. [2000] Bolt-OnExampleVendor Demand planningDemand PlannerBAAN E-procurementAriba NetworkAriba, Inc. Business to businessMANAGE:MfgCincom Integrated suitesManugistics 6Manugistics Order trackingIntellipriseAmerican Software Factory plan/scheduleCapacity PlanningJDEdwards On-line collaborationAspen OnLineAspen Technology Warehouse mgmtCSW Warehouse Management System Cambar Data miningEnterprise MinerSAS Institute

24. 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

25. Web ERP J.D. Edwards OneWorld SAP mySAP.com Trends –More web links –More functionality

26. Middleware & Data Acquisition Bar-code data collection Radio frequency data collection Web portals

27. Portals of Major ERP Vendors Stein & Davis [1999]; Stein [1999] VendorPortalFunction BAANiBAANApplication integration J.D. EdwardsActivEra PortalInterface to ERP, e-mail, spreadsheets, Internet Oracle11iConnect to business intelligence PeopleSoftPeopleSoft Business Network Tie applications to online communities SAPmySAP-Employee workplace Travel reservation, online procurement SAPmySAP.comCenter for SAP users LawsonInsight II SeaportFiles, data warehouse, e-mail, Internet

28. Other Vendor Portals Stein & Davis [1999] TypeVendorFunction Business intelligence CognosAccess data warehouses, data mining Information Advantage SAS Institute Documentation management DocumentatumManage text OtherGlyphicaIntegrate ERP data with applications Plumtree Software Viador

29. ERP Security Threats Type of SecurityThreat PhysicalTheft, damage, copying Unauthorized access Natural disasters or accident SocialTricks to gain information NetworkTelephone taps Dial-up entry Internet hacking Viruses

30. 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

31. Bolt-On/Middleware Examples Kellogg Company Brown et al. [2001] Dow Corning Teresko [1999]

32. 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

33. 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

34. 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

35. 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

36. 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

37. 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

38. 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