Business Intelligence Systems

1
Business Intelligence Systems

• Deals with how businesses can attain sustainable
  competitive advantage using intelligent software
  systems
• The intelligence usually refers to clever
  data/information processing
• The intelligence will have a bias towards applied
  mathematics

2
Course objectives

• Provide insight in applications and application
  areas of intelligent software systems
• Taking a competitive view on software in general
  and intelligent software systems in particular,
  and seeing the added value.

3
Introduction part I

• The basics of business information systems
• from a competitive perspective

4
Business Strategy (Porter)

• Cost Leadership
• Diversification
• Focus
• Any clue how software systems effect Business
  Strategy?

5
The value chain paradigm (Porter)
Supporting activities
Infrastructure
Human resource management
Margin
Technology
Procurement
Inbound logistics
Outbound Logistics
Marketing Sales
Operations
Service
Margin
Primary proces
6
Competitive strategy in the value chain paradigm

• How can you translate competitive strategy in the
  value chain activities
• Difference in scale of processes economies of
  scale lead to cost leadership
• 2. Difference in processes themselves, better
  targeting a segment of customers

7
Be aware of the following

• Knowing customer and prospects is a marketing
  intelligence business process, which is highly
  information intensive
• Planning and management of the primary process is
  a business process which is highly information
  intensive
• Knowing where you create added value and margin
  is a highly information intensive business process

8
ICT is crucial !!!

• All business processes require information
  processing to support there functioning.
• Some business processes require intelligent
  information processing, and therefore may benefit
  from intelligent software systems.can you name a
  few?

9
Functional software systems
Supporting activities
Accounting Information system
Management information system
Infrastructure
HRM system
Human resource management
Margin
Technology
Procurement
Transportation management system
Manufacturing Execution System
Transportation management system
Customer Relation Management System
Inbound logistics
Outbound Logistics
Marketing Sales
Operations
Service
Margin
Warehouse management system
Billing Invoicing
Warehouse management system
MRP system
Primary proces
10
Enterprise Resource Systems
Supporting activities
Enterprise Resource System
Infrastructure
Human resource management
Margin
Technology
Procurement
Inbound logistics
Outbound Logistics
Marketing Sales
Operations
Service
Margin
Primary proces
11
ERP from a competitive perspective

• ERP helps businesses to integrate and align their
  business processes ? giving the haves a
  competitive advantage over the havenots
• ERP systems are quite uniform, eliminating a
  source of differentiation between competitors
  (there are even best practise implementations)
• But, ERP systems can be configured to fit
  variations in businesss processes between
  businesses.

12
ERP software vendors

• Microsoft Business Solutions Navision, Axapta
• Oracle (Oracle applications)
• SAP (SAP R/3, mysap.com)
• JD Edwards
• Peoplesoft
• Baan (Baan V, iBaan)

13
The Core of ERP Transaction processing

• The first task of ERP systems is to keep track of
  the execution of business processes
• A pallet is moved in the warehouse
• A toothbrush is ordered
• A customer pays the bill
• An employee receives a wage increase
• A machine is stopped for maintenance

14
From transactional processing to business
intelligence

• Transactional processing requires little
  intelligence, apart from a good model of the
  business resources and processes.
• Intelligence is required when
• Reports are constructed from the transactional
  data which provide useful competitive information
  about the past and present
• Processes are planned using the busines models,
  so that resources are competitively utilized in
  the future

15
The planning hierarchy
Value chain design/ Quarterly and yearly reports
MRP/ APS/ Weekly and monthly reports
Data aggregation
Scheduling
Execution
Transactional System
16
Introduction part II

• The value of information
• and information systems
• learning by example

17
CaseSams VisionSam Waltons Walmart
18
Success in strategy

• Walmart is the world largest company, and is
  known to deliver high quality at low price
• Walmart is always looking for technological
  innovations to strengthen its competitive
  position
• Walmart always views its own performance
  critically, using so called key performance
  indicators (KPIs)
• Strategy is expressed in KPIs, goals are set in
  KPIs, performance in measured in KPIs

19
Walmart History

• 1972 30 stores in Arkansas, Missouri, Oklahoma.
• 1982 650 stores, 4.7 billion sales.
• 1987 1200 stores, 16 billion sales gt 50 Kmart
• 1991 Walmart gt Kmart
• 1993 Kmart differentiated, Walmart costleader
• 2003 Global player, sales gt 250 billion, 8.2
  billion net profit
• Question 1 What are the competitive weapons and
  market KPIs which are important for
  supermarkets/grocery retailers?
• Question 2 Which are consequently the important
  Value Chain KPIs for the chain as a whole?
• Question 3 And the corporate KPIs for Walmart
  itself?

20
Walmarts early technology innovations

• Analyzing inventory using computers since the
  early 60s. In 1980s first to adopt bar code
  technology to track stock keeping units
• In 1983 Point of Sale Terminals with bar code
  scanners and satellite communication to have
  information real time centrally available.
• Question 4 Which of the aforementioned corporate
  or SC KPIs can be improved using this technology?

21
Walmarts CPFR program

• 1995 Walmart started sharing data in real time
  with suppliers, and took up a collaborative
  planning forecasting replenishment program
  with supplier Warner Lambert (pharmaceuticals
  health)).
• Question 5 Which Corporate or SC KPIs can be
  improved using this technology?

22
Walmarts RFID strategy

• Walmart requires its top 100 suppliers to be RFID
  compliant by January 1, 2005.
• Question Why?

23
RFID

• RFID is the future of visibility!!!

24
Appendix RFID
Reader (receiver)
Tag (transponder)

• Tag broadcasts radio signals (e.g. ID) to reader
  using antenna
• Reader receives radio signals using antenna
• Reader may even send information back to which
  tag transponds using antennas
• Use in SCM RFID tag is on goods, readers at
  important points in the supply chain....

25
RFID

• Doesnt require Line of Sight (unlike bar codes)
• Passive tags receive energy from signal by
  reader, no battery needed
• Passive tags are cheap lt 50 cents and may store
  up to 2 kb information.
• There are still many standards
• Especially useful in closed loop systems since
  tags can be reused

26
Conclusions of the Walmart case

• For Walmart, innovative ICT was an important tool
  in its competitive strategy.
• Walmart uses advanced technology, both at the
  transactional level, as well as intelligent
  applications.
• Information and information systems are very
  valuable to Walmart

It is important to understand the economy of
information
27
The Information Economy

• Shapiro Varian Information rules
• Topics
• Price and cost of information
• Versioning information
• Lock in and switching costs
• Standards
• Network effects

28
Tentative schedule

• 6/9 Introduction
• 9/9 The value, cost and price of information
• 13/9 Value chain processes, transactions, and
  visibility
• 16/9 Versioning information
• 20/9 Operational planning and scheduling
• 23/9 Standards, Lock In, Switching Costs
• 27/9 Tactical planning MRP, JIT, SCP.
• 30/9 Datawarehousing OLAP

29
Tentative schedule (cont.)

• 4/10 Networks Positive feedback
• 7/10 Supply chain planning mathematics
• 11/10 The value of information sharing
• 14/10 Customer behavior (pattern recognition)
• 18/10 Segmentation,Classification Clustering
• 21/10 Modeling and solving clustering problems