Is ERP enough by itself? Many manufacturers who have implemented ERP systems have not experienced the kind of benefits they imagined they would. The more enlightened members of the manufacturing community have turned to business intelligence solutions for help. Dean Palmer reports.
Most of us would agree that in order to make better tactical and strategic decisions, a business must have useful and relevant intelligence at its fingertips. This intelligence may be information about business operations, customers or partners. In today’s tough manufacturing climate, it is therefore vital that organisations provide cost-effective and rapid access to business information for executives, managers and other important decision-makers.
So what exactly are business intelligence systems? To answer this, we need to start by looking at the different generations of business information systems. Indeed, many of the concepts of business intelligence systems are not new – they have evolved and have been refined based on experience gained from early host-based corporate information systems, and more recently, data warehousing systems.
The first generation of business information systems were very difficult to use. Typically, they were host-based query and reporting tools, employing batch applications and relying on experienced ‘information providers’, with lots of computer experience, to extract data and report this to higher management. You can imagine the scenario – an executive trying to wade through pages and pages of printouts trying to find a trend in the data.
The next generation saw a more sophisticated approach using a data warehouse. This was designed with the business user in mind, not day-to-day operational applications. These systems hold clean and consistent information, drawn from a variety of disparate databases, and are capable of supplying historical reports and summarised information, at a business level, for decision support purposes.
But data warehouses usually require considerable implementation effort, significant investment and are not packaged for specific industries. This is where the new generation of business intelligence (BI) solutions come in.
Mother Parkers, a tea and coffee producer for vending machine distributors, is currently exploiting Cognos BI to make decisions which boost sales and the bottom line.
The company has an annual turnover of $200 million, but realised in 1995 that the legacy batch-file system it was using to create reports for management wasn’t organised to match the way the business ran.
Harry Hastilow, IT director at Mother Parkers, explains some of the original problems. “Before we deployed Cognos, it could take weeks for a report to catch up with a rep on a business trip. Today, reps normally receive…summary reports before the third day of each month. If they need information right away, someone in sales or finance can pull out the information in minutes.”
By the time the reports were generated, the data was too old to be of any use. The answer was to deploy BPCS, an ERP solution from System Software Associates.
But ERP on its own was not enough. Hastilow continues. “But to make optimal use of our BPCS data, we wanted to enhance the system with front-end tools that would give us real-time snapshots of where the business was at.”
Mother Parkers wanted ad hoc reporting and drill-down tools, integrated with its existing IBM AS/400 environment. The result is a custom-designed set of sales and finance reports. Each night, a program running on an IBM AS/400 generates a summary file from sales data captured that day by the BPCS system. The file contains information about all of the current month’s transactions, and is held on an IBM DB2 database on the same machine.
The data from DB2 is then downloaded to a Netfinity 3500 server where the Cognos front-end software resides. Using this data, Impromptu, Cognos’ query and reporting tool, generates daily and monthly reports. Views of the overall business status can be created, as well as being able to spot trends and anomalies. Users can now easily identify which products are selling well, or which distribution channels need more attention.
As Hastilow enthuses. “Having real-time access to our information has made us more productive. We can run a Cognos report, drill into BPCS, and answer our questions in an hour or half-hour. That was not possible before.”
Mother Parkers is not standing still though. The company aims to install Cognos BI on individual sales laptops so that reps can analyse data whilst on the road, and Cognos tools will also be used to analyse and report on production, purchasing and materials data within the company.
BI systems available today focus on improving the access and delivery of business information to a wide audience. Ron Zambonini, president and chief executive of Cognos, one of the world’s leading BI software vendors, describes why organisations need BI solutions. “Most companies have huge mountains of data. Our software allows people to access that data and put it in a form that’s useful for them…we think people make better decisions if they have access to data in a way that they can analyse it and understand what’s happening in their business, what’s driving their business, and gives them insight into their business.”
BI systems achieve these improvements by providing online analytical processing (OLAP) tools and information mining technologies, and packaged applications that exploit the power of those technologies. In short, BI delivers personalised, relevant informational views, querying, reporting and analysis capabilities that go far beyond the standard reporting capabilities of ERP and other transaction-based systems – a requirement for making better and faster decisions.
Typical well-known vendors of BI systems are companies such as IBM, Cognos, Microsoft, Seagate, Business Objects, Silvon Software, Brio and Microstrategy.
Mike Hennel, CEO of Silvon Software, believes that enterprise resource planning (ERP) systems, on their own, are not enough. “An ERP system is very good at processing orders, but it doesn’t tell you what is driving the business forward.”
Don Campbell, product specialist at Cognos, agrees. “ERP reports are far too basic and were never really designed for that task. A business intelligence solution can sit over the top of your ERP system and has the capability to aggregate information from a number of different reports, giving management the overall high-level big picture of the business.”
So what do the analysts think? Martin Butler, chairman and founder of the Butler Group, predicts an explosion in sales of BI solutions over the next five years. “Chief executives find it very hard to think of IT solutions on the business or customer-side. They just focus their IT on operations and automation. Over the next five years, e-commerce will accelerate the need for sophisticated intelligent BI applications.”
These comments are mirrored by another IT analyst company, IDC, who predict that, “global revenues from business intelligence software will quadruple from $3.9 billion in 2000, to £12.78 billion in 2004.”
The analysts may well be right. There is already a trend away from standalone decision-making systems toward integrating third-generation BI systems into the overall business process. In addition, the increasing use of the Internet as a sales, marketing, and support channel is also encouraging this integration, since companies need to be able to react much faster to changing business conditions in the e-business world, than they do in the more traditional ‘bricks-and-mortar’ environment.
This means that ERP systems, whilst providing executives with a good operational grip on their manufacturing, do not bridge the gap between business decisions and manufacturing operations. BI applications are now evolving to support a ‘closed loop’ decision-making process whereby the output of BI applications is routed to operational system users in the form of suggested actions that could be taken to remedy specific business problems. Some systems are even adopting automatic adjustment of business operations based on decisions made by BI applications.
As Martin Butler explains. “There will be little or no time to look for trends with data mining techniques. The information must be automatically routed to the relevant decision-makers wherever those people are located. BI will have to be rules-based, automated, and arrive in seconds rather than days or weeks.”
But how much will all this cost the end-user? According to Don Campbell of Cognos, “typical BI implementations are difficult to put a price on because each end-users’ requirements can differ greatly. They will certainly cost tens of thousands rather than hundreds of thousands of pounds these days.”
“It depends on the number of users, the hardware infrastructure required to handle the software, as well as the amount of consultancy advice necessary. More importantly, will the BI system need to act on a real-time basis or will it just be used to extract information every couple of days?”
One thing is for sure though – the price of BI solutions are lower compared to five years ago. “Our BI software typically costs between £75,000 and £100,000. There are more pre-packaged solutions on offer now, which means lower prices for end-users,” says Mike Hennel of Silvon. “Manufacturers typically come to us for a BI solution which integrates with their existing ERP system. These end-users have benefited from lower inventories and cycle times, as well as ‘soft’ benefits like improved information flow around the business, and better decision support, particularly for sales and marketing staff.”
So what trends can we expect in the near future? Ron Zambonini of Cognos predicts that, “within two to three years, half of the information that people consume within our products will be done over a wireless device.” He believes that the new third generation of mobile phones coming out this year will, “make business intelligence a killer application for wireless devices.” I suppose we’ll have to wait and see.
Author: Dean Palmer