Benefits and Uses of a Data Warehouse: A Business Perspective

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Benefits and Uses of a Data WarehouseA Business
Perspective
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Immediate Access to Information

• Data warehouses shrink the length of time it
  takes between when business events occurrence and
  executive alert. For example, in many
  corporations, sales reports are printed once a
  month - about a week after the end of each month.
  Thus, the June sales reports are delivered during
  the first week in July.
• Using a warehouse, those same reports are
  available on a daily basis. Given this data
  delivery time compression, business decision
  makers can exploit opportunities that they would
  otherwise miss.

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Data integration from across, and even outside,
the organization

• To provide a complete picture, warehouses
  typically combine data from multiple sources such
  as a company's order entry and warranty systems.
  Thus, with a warehouse, it may be possible to
  track all interactions a company has with each
  customer - from that customer's first inquiry,
  through the terms of their purchase all the way
  through any warranty or service interactions.
• This makes it possible for managers to have
  answers to questions like, "Is there a
  correlation between where a customer buys our
  product and the amount typically spent in
  supporting that customer?"

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Future vision from historical trends

• Effective business analysis frequently includes
  trend and seasonality analysis. To support this,
  warehouses typically contain multiple years of
  data
• Also, warehouses are designed to do time-based
  (temporal, longitudinal) analysis

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Tools for looking at data in new ways

• Instead of paper reports, warehouses give users
  tools for looking at data differently. They also
  allow those users to manipulate their data.
• There are times when a color coded map speaks
  volumes over a simple paper report.
• An interactive table that allows the user to
  drill down into detail data with the click of a
  mouse can answer questions that might take months
  to answer in a traditional system.

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Freedom from IS department resource limitations

• One of the problems with computer systems is that
  they usually require computer experts to use
  them.
• When a report is needed, the requesting manager
  calls the IS department. IS then assigns a
  programmer to write a program to produce the
  report. The report can be created in a few days
  or, in extreme cases, in over a year.
• With a warehouse, users create most of their
  reports themselves. Thus, if a manager needs a
  report for a meeting in half an hour, they, or
  their assistant, can create that report in a
  matter of minutes.

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DW Applications

• Sales Analysis
• Determine "moment in time" product sales to make
  vital pricing and distribution decisions
• Analyze past product sales to determine success
  or failure attributes
• Evaluate successful products and determine key
  success factors
• Use corporate data to understand the margin as
  well as the revenue implications of a decision
• Rapidly identify a preferred customer profile
  based on revenue and margin
• Quickly isolate past preferred customers who no
  longer buy
• Identify daily where product is in the
  manufacturing and distribution pipeline
• Instantly determine which salespeople are
  performing, on both a revenue and margin basis,
  and which are behind

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Diapers and Beer

• Several years ago, a large retailer implemented a
  data warehouse to analyze sales.
• Loaded huge volumes (Terabytes) of POS data into
  the warehouse
• Built an application, based on specialized data
  mining software to perform market basket
  analysis
• What items are purchased with other items in the
  same in the same transactions

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Diapers and Beer

• Noticed some unusual correlations, one was many
  transactions where beer in same market basket as
  diapers
• Analysis identified a micro-segment of customer
  base young fathers, buying diapers, deciding to
  get beer at same time
• Based on information, retailer reorganized diaper
  aisle placed beer at end on aisle
• Beer sales increased.

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DW Applications

• Financial Analysis
• Compare actual expenses to budgets on an annual,
  monthly and month-to-date basis
• Review past cash flow trends and forecast future
  needs
• Identify and analyze key expense generators
  Instantly generate a current set of key financial
  ratios and indicators
• Receive near-real-time, interactive financial
  statements

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DW Applications

• Human Resource Analysis
• Evaluate trends in benefit program use
• Identify the wage and benefits costs to determine
  company-wide variation or variation of firm vs
  industry

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DW Applications

• Manufacturing
• Operating efficiency
• Defects/quality control analysis why do certain
  products have high/low defect rates?
• Operating efficiency across plants what factors
  lead to efficiency

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DW Applications

• Web Analysis
• Analyze traffic on your web site
• Understand what pages are effective, which are
  not (e.g., are there certain pages that are
  viewed before a sale? Are there pages where
  viewers get stuck and leave the site?
• Understand patterns of behavior what sequence
  of events leads to an abandoned shopping cart?
  Are there types of products people will buy on
  the web vs those they will not?

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Cyberian Outpost

• US-based computer and computer products retailer.
• Built a website Outpost.com
• Built a data warehouse to analyze traffic and
  purchase behavior on the website
• Analysts using web site began to notice pattern
• Certain types of products and products that cost
  greater than X dollars were often abandoned.
• Based on this intelligence, Outpost ran a series
  of focus groups to understand why

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Cyberian Outpost

• Learned that
• Certain types of customers were afraid to spend
  large sums of money on the web.
• These customers would abandon their carts and
  call Cyberian Outpost to order the product
• Based on this information, Outpost redesigned
  their web site to make it much easier to call and
  complete orders. Sales increased dramatically

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DW Applications

• Customer Analysis
• Analyze customer overall customer behavior
  purchases (from across applications), calls for
  product service, response to marketing activity,
  etc.
• Allows organization to understand who best
  customers are so you can treat them in a special
  way to retain them. Also, allows you to identify
  the characteristics of your best customers so you
  can recruit new customers
• Segment customers
• Predict Customer behavior

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Large US Bank

• Had a problem with credit card customer
  attrition customers leaving the bank for
  competitors
• Built a data warehouse and developed a
  predictive model using special statistical
  software.
• Looked at the descriptive characteristics and the
  behavior of customers who had left the bank in
  the past.
• The model was run against data from the warehouse
  and was able to identify those customers who
  looked like they might leave the bank.

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Large US Bank

• The model was extremely successful. It would
  generate lists of good customers who looked
  like they might leave. The bank would contact
  these customers and make special offers
  (favorable interest rates, etc.) to keep them
• Cost of the model 50,000 - 75,000
• Benefits derived 50,000,0000 per year

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A Word on Cost Justification

• Data warehouses provide information that lets
  organizations make good decisions that ultimately
  provide an ROI.
• However, the data warehouse has virtually no
  value unless the intelligence derived is
  actionable the business can use the
  information to effect some change in the
  organization
• Therefore
• Data warehouses need to be integrated, at some
  level with business processes within an
  organization