MODERN ERP

SELECT, IMPLEMENT & USE TODAYS ADVANCED

BUSINESS SYSTEMS
Second Edition

Chapter 12: Business Intelligence and Performance Management

Business Intelligence
Business Intelligence (BI) a discipline that includes a

collection of practices and technologies used to explore

raw data extracted from various business systems and
data sources in order to reveal meaningful knowledge
Used to mine customer data and purchasing histories
for associations, personalization, segmentation, and
forecasting demand
Exposes areas that are most profitable and improve
business processes by finding bottlenecks and
inefficienciesFigure 12-1: Major Business Intelligence Vendor Consolidation
Many ERP systems now include BI as a bolt-on

2010 by Marianne Bradford. All rights reserved

Degree of Intelligence in BI Tools

Figure 12-2: Reactive vs. Proactive Decision Making
Source: SAS Institute, Inc.

2010 by Marianne Bradford. All rights reserved

Types of Business Intelligence

Ad hoc Querying and Reporting using a query method

users can obtain answers to questions and develop their

own reports and graphs
Predefined reports standard reports and graphs that
come defined in the BI tool
Scorecarding metrics that communicate when business
performance is satisfactory or needs attention
Alerts event notifications
Extract, Transform, Load (ETL) moves data from one
repository to another and uses data cleansing techniques
Data mining what you didnt know you didnt know
Analytics advanced statistical analysis
Predictive analytics uses data about the past to predict

future behavior
Text mining uses the computer to explore unstructured

2010 by Marianne Bradford. All rights reserved

text to look for previously unknown information

Data Stores for Business Intelligence

Data Warehouse a large relational database that

combines pertinent data in an aggregate,

summarized form suitable for enterprise wide data
analysis, reporting, and management decision
makingTable 12 1: Key Characteristics of a Data Warehouse
Subject oriented: Organized by subject rather than process; domains are suppliers, customers, projects,
sales, etc.
Stable, Non-volatile: Once stored, not changed except for compelling reason; batch updates done
periodically; different than ERP that processes transactions/events every second
Time variant: Reporting over a period of time
Integrated: Integrates data including ERP, legacy systems, point of sale (POS) data, economic datawhatever is needed to answer managers' questions

Source: CIO Magazine

Data Mart a subset of a data warehouse that is

usually designed for a specific set of users

2010 by Marianne Bradford. All rights reserved

Data Governance
Data Governance the creation and management of the

organizational structures, policies, and processes

needed to define, control, and ensure the quality of
enterprise data
A sound data governance program includes a data

governance committee, which is typically a crossfunctional committee empowered by senior management, a

defined set of procedures for data quality, and a plan to
execute those procedures.
Data Cleansing a process that makes sure data is

consistent and complications arising from errors or other

inconsistencies in the creation of the original data
records are detected and resolved
Techniques applied to correct data within the system:
Format the data
Enforce data integrity
2010 by Marianne Bradford. All rights reserved

Derive missing data values

Best Practices for Business Intelligence

Clearly define business objectives and have a business

case rationale prior to implementation

Standardize and cleanse dirty data
Integrate data using the best data structuring alternatives
available and avoid subsequent roadblocks resulting
from poor data structure, fidelity, and reliability
Train users to manipulate the data to get the most
meaningful and valuable answers
Quickly deliver reports that provide the most value and
then tweak them
Deploy with the idea that there are answers out there
that need to be found and know roughly where the
information might be
Outline the specific benefits expected to be achieved,
then do a reality check at set intervals
7
2010 by Marianne Bradford. All rights reserved

Business Performance Management

Business Performance Management (BPM) creating,

sustaining, and improving processes for successful strategy

execution
Consists of various frameworks for organizing, automating,
and analyzing business methodologies, metrics, processes,
and systems that drive business performance
Bridges the gap between long-tem strategies and day-to-day
operations by aligning business measures with critical
success factors identified by management
Business metrics provide meaningful measures of the

companys performance

KPIs Table
business
metrics
to users roles
12-3: Comparison
of BI tied
and BPM
Business Intelligence
Appeals to operations users and line-of-business
managers.
Embeds metrics analysis within internal processes
to help users make timely business decisions, and
to enable strategic or tactical planning.

Business Performance Management

Appeals to financial applications users.
Focuses on defined metrics to help users improve
processes, and manage and increase performance.

Provides data needed to answer essential business Uses scorecarding and dashboarding to measure
issues and to plan and act based on the analysis of organizational metrics and to help organizations manage
business problems.
performance.

2010 by Marianne Bradford. All rights reserved

Source: Technology Evaluation Centers

The Balanced Scorecard

The Balanced Scorecard A structure around the way

organizations measure how well they are functioning and

how well they might do in the future; entails mapping and
translating complex business information into something
that understandable to everyone in the organization
Bolt-on to ERP
Is a management system, not merely a measurement system

Focuses attention on the companys most important goals first,

and then makes sure that every organizational and individual

action supports these goals.

Two types of measures/indicators:

Lagging indicators provide knowledge of past activity

and thus, in isolation, provide an incomplete picture of

organizational performance
Leading indicators balances financial metrics and sets
expectations for future activities
2010 by Marianne Bradford. All rights reserved

Perspectives of The Balanced Scorecard

Financial Perspective How do we look to

shareholders?
Learning and Growth Perspective Can we
continue to improve and create value?
Internal Business Process Perspective What can
we do better than anyone else?
Customer Perspective
How
Table 12-4: Example Balanced
Scorecard
KPIs do our customers
view us?
Financial

Cash Flow
ROI
Profit to Earnings Ratio
Return on Capital Employed
Return on Equity
Internal Business Processes
Number of Activities
Order to Cash Cycle Time
Accident Ratios
Defect Ratios
Inventory Turns

2010 by Marianne Bradford. All rights reserved

Customer
On-time Delivery Rate
Return Rate
Customer Satisfaction
Customer Retention
Customer Growth
Learning and Growth
New Patents Pending
Absence Rate
Internal Promotion Rate
Employee Turnover
Average Training Hours

10

The Balanced Scorecard

Benefits:
Clarifies strategy throughout

the organization
Provides a central source of
key information
Creates attention directed to
vital issues
Provides advance warning of
problems
Aligns organizations around
strategy
Yields higher control and
flexibility
Prioritizes initiatives
Organizes information
Reduces information
2010 by Marianne Bradford. All rights reserved
overload

Limitations:
Failure of

management to follow
through with
converting measures
to operational
performance
improvements
Will not add value if
the companys initial
strategy is not a
profitable one
Requires companies
to alter their mission,
vision, and
performance
measures in the face 11
of changing