Enterprise Business Intelligence From Erp Systems V3

Enterprise Business Intelligence for ERP Systems1© 2006 IdealCMS All Rights Reserved

Enterprise Business Intelligence from ERP Systems

Dave Guevara

[email protected]

www.idealcms.com


You Will Learn Objectives

• Pragmatic design and analysis techniques that expose enterprise information from ERP systems

• Straightforward metrics alignment process

• Examples of what to do when the ERP system is only partially deployed or modules aren’t integrated

• Trade-offs between when to use a EDW, data marts, data federation, ODS or reporting mart


Agenda

• Challenges: enterprise info people want to use.

• Biz value driven design of enterprise info.

• Metrics, strategic & business alignment

• CDI enables EBI with ERP & non-ERP sources

• “Side view” data for EA, SOX and SLA.

• Wrap-up discussion, Q&A


Challenges in Providing Enterprise Information that People want to

Use

Lot’s of busy reports and “so what” data

No clear visibility of cause & effect

Where is the business value?

Need it sooner than later

Transactions data from ERP isn’t enough


Business Impact

• 52% never realized strategic value.

• 89% are flying blind!

• 57% cannot deliver market driven demands & capabilities.

• 50% say they could have realized value at 50% of cost.

“IT Portfolio Management”, Bryan Maizilish, Robert Handler © 2005

Business Impact


The “What” and “How” Dilemma

Delivering Maximum Value

Technical Requirements

Decomposition

Delivery

ProjectDevelopment

Test&

Validation

TestRequirements Development

Iteration

How Should You Do It?

Cost Justification

Resource Planning

Project Objectives

Ideas Prioritization Prioritization

Competitive Strength / Market attractiveness

Business Objectives

What Should We Do?

Business Value

Roadmap

Business Milestone Roadmap

Cost Justification

Resource Planning

PrioritizationBusiness Milestone Roadmap

Project Objectives

Ideas Prioritization

Project A


Cost Justification

Resource Planning

PrioritizationBusiness Milestone Roadmap

Project Objectives


Project B


Cost Justification

Resource Planning

PrioritizationBusiness

Value Roadmap

Project Objectives


Project C

Bridge the “What” to the “How” with Business Value Alignment


Business Value Milestones Connect Your Value to Project Milestones

Resource & Asset Allocation

Budgets (Opexp, Capex) & Cash Flow

Scope, Change, and Cost Control

Opportunity Management

Time Sequencing

Capability Development

Resource Planning

Risk Assessment & Management

Business Impact & Performance Goals

Functions & FeaturesBusiness

Value Milestone


Example of Actionable Metrics


MDM: Master Data Management

• Operational– Integrates operational applications for ERP, CRM,

financials, etc.

• Analytic– Prominent in data warehousing since it balances between

tracking data lineage and repurposing data to create new structures (e.g. aggregates and time series)

• Enterprise– Broader in scope than operational and analytic MDM and

may encompass both


1st Step in Designing Software Solutionfor MDM

• Decide data model of business entities– Hierarchical, multidimensional, object-oriented, relational

or flat

• “Move past reacting (like out-of-sync systems) to proactively searching for opportunities for improvement (like more systems in the MDM grid).”

TDWI Study “Master Data Management: Consensus-Driven Data Definitions for Cross-Application Consistency” by Philip Russom Oct 2006


Business Value Driven Design of Enterprise Information

Only 5 ways to impact business value

Use market or service driven (not vendor) approach

4 levels of data abstraction

Business context comes from metadata


Ways to Impact Business Value

• Increase Revenue

• Reduce Costs

• Improve Process Efficiencies

• Risk Mitigation or Improve Governance

• Enhance or Preserve Capabilities


The Investors’ View

River of Cash™ Flowing through Your Business

Financing (FCF)

Investors & Debtors

Investment

Loan

s & L

easing

Returns to

Investors

Return

s to

Debto

rs

Investing (ICF)IT Systems & Projects

Fixed Assets &

Investments

Operating

Expenses PaidColle

cted S

ales

Operating (OCF)Revenue & Costs

Processes & People

River of Cash™ is a trademark of IdealCMS

Project Pipeline

Cash Flow: Financial Context for Decisions

Increase Business Value from IT is from:

1) Increase Sales,2) Reduce Costs,3) Improve Process Efficiency

4) Mitigate Risks, Improve Governance5) Capabilities: Enhance/Preserve

Research & Development

IT & Product


Your Company’s River of Cash™

Your Company

Collections[direct, channels…]

(OCF in)

Labor OperatingExpenses (OpExp) Paid

Non-Labor OperatingExpenses Paid

Dra

ws

from

LOC

(FCF

in)

Deb

t Rep

aym

ent

(FCF

out

)

Bank

Fixed Assets, PP&E(ICF out)

Direct Cost ofGoods/Sales Paid

Shareholders

Unusual & Spec ProjectExpenses Paid

Dividends

(FCF out)

Paid In Capital

(FCF in)


Align Sales to Customers’ Pain

MARKETS

CUSTOMERS

YourCompany

CollectedSales

“Must Have”Service &/or Products

“Pain” BasedValue Proposition

VA

LID

ATE,

VA

LID

ATE,

VA

LID

ATE

Consistent sales growth requires:• Consistent sales activity• Clear “Pain” based value

proposition• Perceived “Must Have”

Services/Products

Constantly VALIDATE your customer’s Pain (it changes), THEIR

understanding of your Value Proposition, and THEIR decision if you

are “Must Have”.


4 Levels of Data to Information Abstraction

Decision Level

Strategic

Management

Task, EventProblem Solving

Task

Data Abstraction

KPI, Goals, Goodness

Actionable Metrics

Business Context &Sequence of Transactions

Transaction

Type of Information

Performance, Financial, Economic

Economic, Financial, Operational

Operational, Financial

Operational, Financial


Customer Order Example in Context of MDM

• Data design at transaction level and of metadata must be able to support Analytic & Enterprise analysis, and visualization at each decision level.

An

alyt

icE

nte

rpri

seO

per

atio

nal

Customer Places Order with 3 Line

Items

Order ID links SKU, Customer ID, Discounts,

Order Date, Order Method

Cust ID is associated with a

demographic profile

SKU is associated with product taxonomy,

vendor, vendor SKU taxonomy, fulfillment

centers, warranty

Orders by time period are categorized by income category, product taxonomy, COGS, GM, promotions, seasonal

events, advertising spends

Order Line Item is associated with product taxonomy, pick list, pricing, COGS, fulfillment center, service center, shipping method, must

ship date, vendor sales, item level promos, order level promos, item status, order status, returns

Order ID is associated with pick queue, marketing campaign, time period, order placement method, payment method,

payment processing, order status

Sales, sales velocity, profitability and inventory on-hand goals are

updated quarterly

Customer service events & correspondence is associated

with order, order item, disposition

Customer touch points are associated with life cycle value, history & sequence

of events, demographic changes, mindshare responses, buying patterns

Side View tracking includes time to complete each

status, audit data, processing center


Business Value Exercise

• Enough talking!

• Let’s get into small groups

• Objective:– Determine how to translate an

earnings growth goal into the key performance indicators that your BI solution will report from the ERP financials.


Lessons Learned on DesigningBusiness Value Driven BI

• Determine early the level(s) of decision making & decision making stakeholders.• Actionable metrics show what needs attention, what to do and who to call• Actionable information is defined from decisions being made, cause & effect

analysis, and the actions taken• Define the full vision, but implement in small steps• Work side-by-side with your key constituents for a few days or a week• Identify exceptions to the rule, or decisions that are made “outside the system”• Identify HOW your “customer” determines cause & effect.• Verify level of data abstraction and the relationships of these data to decision

making criteria• Design your reporting data architecture then evaluate the appropriate data access• Map the high-level actionable or scoreboard metrics down to the transactional

source data prior to deciding the preferred architecture


Metrics, Strategic & Business Alignment

Start with the end-in-mind

IT Portfolio Management provides guidance

Focus on metrics not reports

Lead the alignment discussion, don’t wait


Business Alignment of Enterprise Info

“IT Portfolio Management”, Bryan Maizilish, Robert Handler © 2005

IT Portfolio Management

Enterprise Strategic Intent

Enterprise Business Objectives

Business Unit Objectives/Requirements

IT Plan(IT Policies, Principles, Road Map, etc.)

What are the Key Performance Indicators?

What belongs in the Performance Scorecard?

What are the Critical Success Factors?

Customer Requirements

Enterprise Architecture

Business Intelligence

Competitive Intelligence

What selection criteria will be used to filter the Portfolio?


Portfolio Management Processes Simplify Business Alignment Into

Data Architecture

Strategies

Risk Management

Methodologies (eg SOA, MDM, CDI)

Design Processes

Enterprise

Architecture

Business Value Governance

Initiatives

Portfolio

Management

Technologies

Visibility

Projects Architectures

RoadmapsArchitecture BlueprintsInvestments

Budgets

Best Practices


Line-of-Sight AcrossLevels of Decision Making

Decisions

Need

s

Reve

nu

e &

Pro

fit

Resu

lts

Desi

red

Ou

tcom

es

Investors

Board of Directors

Executive Team

Management Teams & Key Employees

Work Groups & Customers

Vendors & Subcontractors

Supply Chains

Distribution Channels

Goals

StakeholdersLine of Sight


Organization Structure

Alignment For Actionable Metrics

ActionableMetrics

Operations Model Economic Model

Operations Metrics Financial Metrics


Metric Alignment Exercise

• Get back into small groups

• Objective:– Using the KPI from the first

exercise to define the Actionable Metrics for the COO who is driving down COGS.


Lessons Learned on Alignment

• The business and strategic alignment process for any enterprise program (EDW, BI, EA) is the same as that used in IT Portfolio Management. So don’t reinvent the wheel, use the pieces that help you.

• Often the business or executive teams will not provide the strategies or initiatives with enough clarity that they are actionable at a design level. Plan on doing your own alignment analysis and to facilitate this process with your business, process and finance SME’s.

• The metrics alignment process runs in parallel to the business/strategic alignment process, however the outcomes are Actionable Metrics, Back-of-the Envelop metrics, Key Performance Indicators (KPI) and Enterprise metrics (side view).


Using CDI EnablesEnterprise Business Intelligence from ERP and Non-ERP Sources

Timeliness and time frames

Cross-correlation of data into decisioning context

Business context to provide meaning

Goals to provide measures of goodness


Timeliness of Visibility in BI

• Timeframes:– Real Time: O&G trading, customer service, telecomm– Near Real-Time: Online retailer, Webcasting, Walmart– Periodic (day, week, month, quarter): Scoreboards– On-demand: Use determines refresh rate– Scheduled: EFT batch submit– Event Driven: Notification reports (SLA, major customer sale)

• Cross-relating data sources requires that both sources refresh on like timeframes– Find slowest common denominator.– Note data refresh and report refresh in report, scoreboard...


Overstock.com EDW/BI Architecture

• Overstock architecture diagram is not available electronically per conditions applied by Overstock.com in how their system is briefed.

• The system is described in the Speakers notes.


TDWI MDM Study Mid-2006 ofMDM Business Entities

• Customer 74%

• Products 54%

• Financials 56%

• Biz Partners 49%

• Employees 45%

• Locations 41%

• Sales Contracts 25%

• Physical Assets 21%

% of 741 respondents that identified Business Entity as important in MDM.

TDWI Study “Master Data Management: Consensus-Driven Data Definitions for Cross-Application Consistency” by Philip Russom Oct 2006


Relating Financial Data to Operational Data

Debit CreditAccount Type

ARAPInv

AssetsLiab

Equity

Account

1100120020002500

…Report Metric

Sales by DivisionDepreciation

Account Inversion

+1-1

Chart of Accounts

1100120020002500

…

Credit Inversion

+1+1

FilterAttributes

xxx yyy zzzxxx yyy zzz


SOA Exampleof Data SourcingIssues for EBI

• Develop data governance standards sooner than later.

• Use new initiatives (like SOA) as way to introduce data standards & rework old structures.

• SOA adds transaction data that is outside the ERP & non-ERP systems, so design in how you will get visibility.

Services that Support the Sales Business Functionsfrom Lead to Order to Fulfillment Operations

Deal Management Order Management Operations

Use

r In

tera

ctio

n

P roduct

SVC

Bu

sin

ess

Pol

icie

s L2O: Lead to Order

CS: Customer Support

QTC: Quote to Cash

Tra

nsa

ctio

n

Pro

cess

ing

Dat

a

Mg

mt

Lead Management

Integration

Product Sale Leads

Services Sale Leads

Product Deal Management

Services Deal Management

Product Order Management

Service Order Management

ProductFulfillmentOperations

ServicesFulfillmentOperations

Lead & Territory

Management

Scheduling, Configuration,

Pricing, Quoting, Validation

Transaction Engines

Deal Management Business Process

Transactions

Sales Contact Processing, Opportunity

& Service Contact Management

L2OLead to Order

QTCQuote to Cash

Claiming, Credit, Tax and Account

Transaction Engines

CSCustomer Support

Business Services

Business Services

Pre-Sales Identify Qualify Post-SalesSolve Present Close

Common Integration Layer

Business Intelligence

Dashboards

Order Processing Transaction Engines

Order Management Manufacturing &

Services CRM


Lessons Learned on CDI enabling EBI

• Get in front of the problem where ever you can!

• Identify early on where you will need trend or historical reporting capabilities.

• When relating financial data to operational, sales or service data design:– COA mapping tables– Sign inversion tables– User interface for finance or accounting to manage these mappings

• Define and document the different definitions for the core data entities (customer, products, partners, etc.), then determine what is the master source of record and the defining business context.

• Whenever possible establish data structure standards for any new software development and application enhancements. Same goes for new design approaches like SOA.

• Determine where to incorporate data transformation mapping tables based on development standards, data accessibility and system architecture.

• Develop a roadmap and a data architecture blueprint for your data migration plans to your preferred future data structure.

• Develop an approach (even if sub-optimal) to work with what you have as data sources.

• When all else fails, and depending on your BI, ETL and database technologies, pull the data into a BI mart.


“Side View” Data forEA, SOX and SLA

Side View data is about the systems, processes and performance

SOX compliance data may provide visibility onto candidates for process improvement

Correlating system/app monitoring data with transaction loads may highlight cause & effect


“Side View” into Enterprise Data Sources

• Capturing a little extra data provides tremendous “Side View” visibility

Tra

ns

acti

on

Per

form

ance

Co

mp

lian

ce

Customer Places Order with 3 Line

Items

Order ID links SKU, Customer ID, Discounts,

Order Date, Order Method

Order and Item status changes are

timestamped for FCC compliance

Payment processing & collection (i.e. cash event) is timestamped, cash reconciliation timestamp, disposition & accountant are

recorded for SOX compliance

Performance goals are updated quarterly

COGS data is refreshed weekly or monthly and is forecasted by Finance

Order status is associated with business processes and the respective steps/tasks.

Customer correspondence regarding the order & subsequent service issues are securely archived for discovery up to 7

years for product liability assurance


Relating SOX Audit Structure toFinancial & Operational Data

Revenue/AR

SOX Compliance Cash Cycles

Procurement/AP

Inventory/ Goods

Fixed Assets/ PP&E

Treasury/

Financing

Operating Cash Flow & Earnings

Financing Cash Flow

Investing Cash Flow


CORE ACTIVITIES ARE:• A group of tasks that produce output• Specific enough to be actionable

CORE ACTIVITIES ARE NOT:• Customer orders• Process descriptions

Control

Input

Consumables

Output

Uncontrollables & Environment

•Work products•Measures of Quality•Timeliness•Reporting

•Resource Time•IT Resources & Capacity

•Sales Orders•Work Orders

•CRM•Executive Oversight•Order processing System

Work Function View can IdentifyHigh Value Data for Side View

Time through work function


Lessons Learned on Side View Data

• When designing your primary EDW/BI or enterprise information systems remember to look at how you will see your system, processes and events from a side view.

– Side views may be for compliance (SOX), enterprise architecture (EA), service level performance (SLA), disaster recovery (DRM)

• Relating system monitoring data to transactional data may provide unique visibility into cause & effect.

• SOX compliance is based on the five cash cycles.

• Since logging functions can produce huge files that just burn storage and provide little value, evaluate where to insert event data writes.

• Interrogating transaction rates and latency from the transactional records can provide insights into data loading issues, timing problems, demand surges, performance hits due to external data feeds, and possibly SLA conditions at end-user experience level.


Lessons Learned on Buy-in

• KNOW your “customers’” view of “What’s in for me?”

• Start with the end-in-mind.

• Use a roadmap to set expectations and update

• Frequent communications and reviews are critical

• Use mockups to visualize the “customer” requirements.

• Actionable metrics require knowing:– What Needs Attention, – What to Do– Who to Call

• Set up Change Management at the beginning of the project

• Respect your business SME’s, Humility is good


Wrap-up Session Q&A

General Lessons Learned

• Be prepared to do your own business/strategic alignment analysis

• Focus on metrics alignment as 1st step in requirements.

• Get your requirements into software requirements & framework

• Be specific and offer solutions to the software developers

• Do the performance trade-off analysis

• Verify how you correlate processes, tasks, transactions and data entities into the business context of your decisioning requirements.

• Get a handle early on about data inconsistencies

• Constantly revisit timing performance and load management

• Be prepared to design around sub-optimal implementations

• Be able to capture metadata and reference data not otherwise available

• Use query time optimization techniques to assure timeliness while not interfering with transactional throughput.


References & Information

Articles on BI and EDW topics are available at www.idealcms.com

• Guest authors who would like to contribute an article or white paper on these topics are invited to submit ideas to www.idealcms.com .

• “IT Portfolio Management, Step-by-Step, Unlocking the Business Value of Technology”, Bryan Maizlish & Robert Handler, Wiley © 2005.

• “Managing by the Numbers, A Commonsense Guide to Understanding and Using Your Company’s Financials”, Chuck Kremer and Ron Rizzuto with John Case, Inc. © 2000

Contact Information for Questions

Dave Guevara, IdealCMS

(303) 694-9394, [email protected], www.idealcms.com