Integrating BI and ERP

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Summary

Market demand is forcing the need for sophisticated Business Intelligence (BI) tools down into the organizational depths of even mid-sized companies. BI providers, who until recently targeted corporate strategists and statisticians, are now looking to the VP of Operations as their future source of new opportunity. But, even if a company can afford big ticket BI, many of these tools cannot tap into or exploit business processes. Confined to high-level data analysis, they are significantly hampered in their ability to deliver on operationally useful information. New software from ERP providers that can be embedded in the enterprise software itself may end up being more functionally adept.

Background

Business intelligence (small "b", small "i") started out simply enough with IT departments providing standard, pre-defined reports for operations personnel and management. Reports would be issued weekly or monthly and acted as hard copy dashboards for the organization and departments within it. As time frames collapsed and the need for better, timelier information grew, so did the requests coming into IT, often creating report request backlogs. Eventually, ERP systems sprouted report writers to help individual users and departments take control of their own data requirements. But, even today and even in the largest and most sophisticated companies, the most popular feature in any reporting system is "Export to Excel" - canned reports usually miss the mark for the needs of individual users without additional massaging. Frequently, individual spreadsheets end up acting as central repositories for critical corporate information.

Business Intelligence (capital "B", capital "I") more often describes big picture, "insight" tools - software specifically designed to help companies understand what makes the corporate wheels turn and to predict the future impact of current decisions. BI encompasses canned analytics, independent business intelligence processes, data mining decision support and analytic technologies. The programs search databases using techniques such as neural networks and decision trees, looking for telling correlations and patterns that are virtually impossible for humans to detect, and serve them up to help executives steer the corporate ship.

Most BI systems operate without knowledge of the underlying domains they're investigating, however, making power users critical to ensure correct interpretation. Without the fail safe of technologically savvy users, BI's ability to deliver executional support is hampered. Consequently, Gartner VP Howard Dresser observes, "While some inroads have been made to bring BI out of corporate strategic planning and into operations, BI has lived, to a great extent, in the very rarified world of statisticians and analysts."

The brand new promise is that BI tools are being formulated that will help "rank and file" employees harness data too complicated for manual manipulation. Some new BI business applications, including those from Cognos, Business Objects, SAS and others are designed to support day to day operational blocking and tackling. Few departments are as hard pressed for new tools as Purchasing, where rapid increases in materials costs, greater deviations in lead times, and supplier base growth and instability require ever increasing buyer dexterity. BI applications from Informatica and CombineNet specifically target purchasing.

Informatica's PowerAnalyzer analyzes purchasing data to ensure that buyers around the world are taking advantage of negotiated deals. The tool automatically alerts buyers when they exceed spending thresholds that entitle the company to discounts.

The consumer package giant P&G is using CombineNet, an electronic expressive bidding tool that relies on combinatorial science and gives suppliers the power to change economic order quantities, product bundling, delivery routes and timing or other variables to optimize efficiency.

SAS has recently introduced SAS 9, a BI heavyweight that promises to deliver "fit to task" intelligence. Data integrated from every corner of the enterprise is used to provide decision support capabilities to functional areas within the organization, including purchasing. SAS promises that this wide-ranging system will provide a "single, verifiable version of the truth".

Although the price tag on these tools varies considerably, they tend to be big ticket, big company items. In addition, Forrester analyst Keith Gile recently argued that price is not their only drawback, stating, "Today's BI vendor products lack a consistent mechanism for defining, managing, and implementing or inheriting prescribed business processes from external applications. Consequently, BI-based performance management is useful only to a handful of employees that target strategic initiatives that are based exclusively on the available data, and not the processes that the data supports."

For the masses, true usability will mean combining the technology with common applications, integrating BI with existing business systems and processes. BI that's as easily deployed and rolled out as a new desktop application. Bottom Up BI.

Some progress appears to be emanating not from the BI establishment whose point of view is, almost by definition, external to manufacturing, but from the very software vendors whose products are already deeply involved in operations: ERP providers.

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Case in Point

For the last twelve months, TriContinent Scientific, a Hitachi Chemical Company providing liquid handling products and instrument components to the medical diagnostics and biotechnology industries, has been using new software to streamline operations. The software was developed by Relevant Business Systems, a provider of Enterprise Software for project-oriented businesses, primary in Aerospace & Defense and Contract Manufacturing. TriContinent employs Relevant's ERP system throughout their organization and since last year, has used Relevant's new software, the Business Wizard (BW), to reduce the time and steps required to acquire or retrieve, analyze, and act on critical information. The Business Wizard is an information application that provides interactive views into all, or specific, areas of a company's enterprise. TriContinent used its purchasing department as a Business Wizard beta site.

The Business Wizard looks like a management dashboard that accesses legacy data, ERP systems, and off line data in Access databases or data warehouses. It sits like a mantle over disparate software within an organization, is database independent, and can be used throughout an enterprise or on a single desktop. End users create consolidated, tailored views of the data their job function requires, using pre-existing templates as a basis, or by creating a totally custom view. The Business Wizard assembles a "model" of what a buyer has identified as important data, pulling that information from disparate databases in the ERP or other systems and presenting it for the end user in real time. The Business Wizard's self-serve, end-user driven templates encapsulate the domain expertise of both the buyer and the underlying manufacturing system and provide a major point of difference from other business intelligence tools. This self-serve model gives control to the user and at the same time relieves the traditionally overloaded IT department backlog. Relevant recently added a Predictive Analytics capability to the Business Wizard, and the BW now provides complex analysis on the fly at the behest of the end user.

Prior to implementing the Business Wizard, TriContinent followed fairly typical sourcing steps. John McDaniel, Materials Manager for TriContinent, described the process as four basic steps:

1. Establishing "We need to buy this": Assessing the current inventory position. MRP (Materials Resource Planning) creation of purchase requisition information
   • What item needs to be purchased
   • What is the item's description
   • When must the item be in-house and available in order to support manufacturing
   • What quantity is required
2. Starting programs to execute Requirements Analysis
   • Pull up screen showing dates and demand history for the part in question
   • Execute requirements analysis
3. Determining how to get the best price
   • Run a usage report for the item, determine if typical usage is high or low and whether or not to go to a higher order quantity to obtain a price break
4. Opening the Purchase Item Vendor Menu to get a look at all possible vendors, pricing, delivery times, and quality
   • Analyze all the information and select the vendor and order quantity
   • Execute a purchase order

These steps required that purchasing employees had fairly sophisticated system navigation skills and good familiarity with where all the required information resided in the underlying software. Vendor analysis was a best judgment call, based on available history and the extent of the employee's ability to mentally balance multiple variables.

John McDaniel used Business Wizard to create a single view that showed all the information required to complete each of the four procurement steps in three separate panels, showing:

• Requisition information from MRP. In this panel, highlighting an item number links to Parts Demand information
• Parts Demand information, from the work order side of the ERP system. Right clicking puts the user into Requisition Maintenance, where he/she can change any information without leaving Business Wizard. Tabs take the user to
  • Inventory information
  • Usage for 2004
  • Usage for 2003
• Vendor Information. Displayed information includes
  • Name
  • Last 3 purchase orders and pricing
  • Quality

A tab allows the user to look at any open orders for that vendor.

Within these views, Purchasing could right click and launch any underlying ERP program and effect changes in it, without closing down other programs or leaving Business Wizard.

Business Wizard showing Panel 1: Requisitions Information from MRP. Panel 2: Receipts Information with details on Days Late and Quality Performance (% RTV) highlighted. Panel 3: Vendor Information with Supplier Rankings

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With Predictive Analytics

To the basic Business Wizard tool, Relevant has added a layer of sophistication that could make it a "killer app", by enabling users to quickly assess expected performance against multiple variables. In the Purchasing environment, buyers can anticipate how suppliers will perform on a given purchase order or can predict which vendor would be expected to perform best, given the parameters of a specific purchase.

Companies primarily concerned with cost that purchase from a small number of vendors can easily and accurately rank their suppliers. However, add an additional metric, such as "days late" to the mix, and evaluating even ten vendors of a single product across hundreds of purchases begins to require spreadsheet agility. As soon as evaluation is expanded to include multiple criteria (quality, shorts, financial terms, etc.), or interacting or potentially correlated variables (lateness and shipping options, for example), accurately scoring vendors becomes very computationally complex.

Finally, the overall performance rating of a vendor may hide very good or very bad performance on certain types of orders. For example, a Printed Circuit Board (PCB) vendor may have an excellent performance history for boards with less than 10 layers and standard delivery times, but may perform abysmally on quick turn, high-layer boards. Most supplier ranking programs cannot computationally find and accommodate such subtleties.

BW's Predictive Analytics detects the patterns and finds the attributes in company's transactions history that enable finely tuned prediction of future vendor performance. It accomplishes this without separate data input and without running software isolated from the firm's underlying technology structure. It works within existing processes to enhance them.

With finely tuned analytics, purchasing personnel can easily look at anticipated vendor performance on specific order types at the moment when a purchasing agent needs the information to execute a purchase.

Predictive Analytics Analysis screen shot, showing:
Top panel: BW dataset of receipt history on a given part. In this example, variables shown include quantity, days late, rejects (RTV), price, vendor, and carrier

Bottom panel: Within the dataset, PA identifies fields with predictive capabilities (determinants). Determinants are weighed for importance and the resultant formula is used to return a recommendation.

Pulling information directly from on-going operations, Business Wizard constantly feeds its predictive analytics capability real-time information. The predictive analytics feature continually relearns, tracking vendor performance on an on-going basis. As vendor strengths ebb and flow, purchasing agents are always making their decisions from performance predictions based on the latest vendor information.

The Business Wizard/Predictive Analytics combination delivers sophisticated analytic capability. Its direct link between operational data and the business intelligence allows non-statisticians to confidently take the reins.

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Conclusion

BI has long proven itself invaluable in database information enhancement and exploitation in the retail and banking industries. To be truly useful in Manufacturing, BI will need to be intimately and constantly informed by the manufacturing environment's existing technology information structure. That may best be accomplished by embedding BI into the system itself.

If you would like to know more about Relevant's Business Wizard, please click here.

Phone: 800.473.5382 . FAX: 925.867.3840
www.relevant.com . relevant@relevant.com

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