"Almost all technology today is focused on compressing to zero the amount of time it takes to acquire and use information, to learn, to make decisions, to initiate action, to deploy resources, to innovate. When action and response are simultaneous, we are in real time."1 Regis McKenna
Imagine the competitive edge you could gain by compressing time to market, increasing the speed of innovation, streamlining manufacturing and personalizing customer relationships at every point of contact. The strategy is "market velocity," and it requires the ability to discover and act on important business intelligence in real time. Today, real-time business has finally become cost-effective because of the convergence of enterprise resource planning (ERP) applications, data warehousing and the Internet.
Fine- Tune ERP
By themselves, ERP systems serve an important function by integrating separate business functions materials management, product planning, sales, distribution, financials and others into a single application. ERP systems have three significant limitations, however. First, managers cannot generate custom reports or queries without help from a programmer. This inhibits managers from obtaining information quickly so they can act on it for competitive advantage. In addition, this can also create a backlog for IT. Second, ERP systems provide current status only, such as open orders. Managers often need to look past the current status to find trends and patterns that aid decision-making. Third, the data in the ERP application is not integrated with other enterprise or division systems and does not include external intelligence, such as A. C. Nielsen or Dun & Bradstreet databases.
You can overcome these limitations by adding a data warehouse and a business intelligence front end to your ERP system. Just as ERP fine-tunes resource planning and management, business intelligence for ERP fine-tunes ERP. A data warehouse or data mart organizes ERP data so that it is easily accessible for on-line analysis. Business intelligence systems improve business competitiveness by providing reporting and analysis tools to the desktop, enabling communication with the entire supply chain via the Web and automating alerts and actions.
Flexible Reporting and Analysis
Operational reports from the ERP system show recent events, but they do not satisfy managers' requirements for planned versus actual monitoring, forecasting and exception analysis. Without business intelligence, managers must compile these reports manually from standard reports.
By allowing flexible reporting and analysis, a business intelligence system can unlock the value of the data in ERP reports. The information in the ERP daily orders report, for example, can be of use to numerous departments, as shown in Figure 1.
|Department||Uses for daily orders reports|
|Order||Which products have not shipped by their expected ship date?|
|Marketing||What types of products are selling best and worst?|
|Which customers are most profitable?|
|Which customers have made purchases that meet the criteria for a thank-you note?|
|Sales||Did any customers purchase a product that requires another product?|
|Figure 1: ERP reports can be of use to numerous departments.|
Business intelligence systems provide on-line analytical processing (OLAP) and data mining tools that managers can use from the desktops to answer the types of questions listed in Figure 1 and to discover significant trends and patterns. For example, analysts can drill down to obtain progressively more detailed information about retail sales, change metrics, view graphs and charts, reuse reports, create "what-if" analyses and generate best-case and worst-case scenarios.
Valuable in its own right, ERP information becomes even more valuable when it is combined with information from other sources. A business intelligence system allows this, as well. For example:
Customer relationship management. A marketing manager might want to combine sales information from the ERP system with consumer demographics from A. C. Nielsen or business demographics from Dun & Bradstreet. With this information, the company can better segment its customers and improve customer relationship management. An automobile manufacturer, for instance, can combine its internal ERP data with external databases to identify customers likely to be receptive to advertisements for a sports car, sedan, van or sports vehicle. Similarly, a pharmaceutical company can integrate its ERP information with sales and prescription information from pharmacies and doctors to better target its advertising.
Purchasing. The purchasing department of a computer manufacturer might combine its ERP data with external data about sales forecasts for microprocessors. With this information, purchasing can react to rising demand by consolidating all memory purchases to obtain a better price from a single supplier.
Sales. A sales organization could combine the data from its ERP system with that of its sales force automation (SFA) system. With the combined information, sales analysts and sales engineers can create special promotions for overstocks and supply up-to-date product availability to the sales force at the point of sale.
Closing the Loop
Businesses can optimize their investment in ERP systems by closing the loop between the business intelligence system and the ERP system. The loop begins when the company discovers valuable business information from the ERP system; it closes when the company feeds those discoveries back into the ERP system to continually improve business processes. For example, an on-line business can use the business intelligence system to discover each customer's purchasing patterns and then update the operational system with recommended products. The next time the customer visits the site, the operational system would tailor the Web page to feature products the customer would be likely to purchase.
Automatic Alerts and Actions
Business intelligence systems for ERP can also issue alerts when certain events occur or thresholds are met, enabling your business to react more quickly to problems and opportunities. For example, if a certain number of customers return product for the same reason, the system can automatically alert engineering, manufacturing, customer service and send a letter to customers to apologize and offer a replacement or a reduced price on an enhanced product. Similarly, a customer service manager might want the system to generate a thank-you note to all customers who purchase a product and suggest the customer also purchase a warranty.
Extend the Power of ERP
The ultimate value from the ERP investment results from integrating the ERP system not only with a business intelligence front end, but also with the Internet. When you provide a Web-based interface to the information in the business intelligence system, the Internet becomes an enterprise information utility for employees, partners, suppliers and customers.
A popular early application for integrating ERP business intelligence with the Internet is supply chain management. All participants engineering and product design, vendors and suppliers, manufacturing, sales and marketing, distributors, and customers can gain access to business intelligence when they need it for their mutual benefit. Consider a national hardware store chain: the retailer can use its business intelligence system to adjust its charges for shelf space and to better manage inventory levels. A tool supplier can take advantage of point-of- sale (POS) information to monitor purchasing trends as they occur and adjust manufacturing before an over-run or under-run occurs. The supplier, in turn, can share the information with its suppliers. Product designers, both for manufacturing and service companies, can capture customer information in real time, refining their products for greater market appeal or customizing them for key customers. In a financial services company, a product designer can capture information about customers' investment habits, using data mining tools to develop new investment packages.
Follow these guidelines to implement a successful business intelligence front end to an ERP solution:
Clarify your business objectives and obtain executive sponsorship. Be clear about what you want to accomplish and at what level you will influence the organization. Then, win the support of management to the level of the data warehouse, whether that is the department level or enterprise level. Sponsorship is crucial for success.
Begin with a reasonable scope and ensure you have adequate resources. Clear business objectives will help determine the scope of your project. It is highly advisable to start with a single business area so that you can quickly demonstrate a return on investment. Team members need to understand the data structures and the data in the ERP systems and the data warehouse. Depending on your resources, you will either deploy the ERP and business intelligence systems in parallel or wait until the ERP system is in production before beginning work on the business intelligence system.
Choose a vendor with industry expertise in both data warehousing and ERP. The complexity of data warehousing and ERP is multiplied when the two are combined. A vendor with experience in both disciplines will deploy the solution more quickly and help you develop an architecture that meets your current needs and will accommodate your future requirements.
Choose a data warehouse platform that delivers high availability. Many business intelligence systems become mission critical, which raises the stakes for availability. For example, a stock exchange might use its business intelligence system to store all trades, both for trending and to supply to a national news channel. A call center might use the business intelligence system as the database of record when customers call.
Select tools that speed implementation and reduce cost. Several third-party vendors provide data extraction tools that support the major ERP applications (SAP, PeopleSoft, Oracle, Baan and J.D. Edwards). The data definitions in the ERP system become a foundation for the business intelligence system. To reduce costs, if you have multiple instances of an ERP system for different countries or divisions, for example it is advantageous to configure them the same way and to standardize tools across the different projects. In the future, it is likely that the ERP vendors will either purchase data extraction tool providers or develop their own tools. It is generally more cost-effective to purchase a pre-packaged data extraction tool than to develop your own.
Increase the velocity of information. The trend is toward real-time updates. Telephone companies that maintain call-detail records typically must extract each minute because huge volumes impose a performance penalty on the servers. Banks that maintain portfolio records also tend to update the business intelligence system each minute.
Plan for performance and growth. The more data you retain on the business intelligence system, the more trends managers can observe and analyze. However, more data usually requires more performance power. Therefore, most companies seek a balance. Some companies decide to store all open items, retain closed items for one quarter and retain financial information for six months after end- of-year processing. Companies that want to perform trend analyses keep closed items for longer periods.
Close the loop for continual improvement. The ultimate in business intelligence for ERP is a closed-loop system, which updates the ERP system with information discovered through business intelligence or from outside sources. Building a closed-loop system usually requires custom programming, but the increase in market velocity is well worth the investment.
By integrating information from disparate company functions, ERP systems are a gold mine of valuable business intelligence. Unfortunately, ERP reports generally provide only a fraction of the useful information in the system. Data warehousing and business intelligence unlock the power of ERP systems by providing managers with simple, on-demand on-line analysis and push reporting; the ability to combine ERP information with external data; and alerts, actions and automated responses. By adding a Web-based interface to your ERP business intelligence, you can integrate the supply chain, speeding time to market and gaining manufacturing efficiencies.
Ultimately ERP business intelligence helps your company increase its market velocity with faster time to market, improved manufacturing and distribution processes, and more personalized customer interaction.
1 McKenna, Regis. Real Time. Harvard Business School Press. 1997. P.4.
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