Archive for the ‘Value of BI for ERP’ Category

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Take advantage of best-of-breed open source business intelligence technology.  Reliable, cost effective solutions can be developed providing value to your organization.  The more popular technology is highlighted in the presentation Open Source Business Intelligence

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Companies who utilize business intelligence with their ERP system get the most value and are more likely to implement business performance improvements.  These are the results of Aberdeen’s 2011 ERP servey of 549 organizations (see ERP Plus BI: Maximizing the Return on Your ERP).

Top performing organizations integrate BI with their ERP solution and are more productive as they have better visibility for decision-making.

  • When BI is integrated with ERP, Managers are 24% more likely to find information required compared with organizations that use ERP alone.
  • Knowledge workers spend 6.2 hours looking for information, but only 4.2 hours when BI is integrated with ERP.

Also, organizations that ally BI with ERP are twice are likely to have have a performance-driven culture that drives accountability.  And they are twice as likely to have an open exchange of operational data across business functions.

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Great post on why Business Intelligence is only utilized by 22% of small to mid-size businesses. 

Invest in Business Intelligence Right Now

Solutions built with open source business intelligence technology can remove the “Too Expensive” excuse.  And pre-built solutions are even a better way to get started ( www.erpbisolution.com )

Also, if “Data is Not Up to Snuff” a  good solution can also help with data cleansing.

 

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By some estimates, about 13% of a company’s revenue can be tied up in excess working capital.  Freeing up this capital can make more cash available for needed investments or to reduce debt.

Your company’s financial data can give you valuable insights into how efficiently you operate.  Three areas to measure are:  how long is inventory on hand before being sold, how long does it take to receive money from customers and how long does it take you to pay vendors?  The standard key performance indicators are:

Days Sales Outstanding (DSO) – average collection period for outstanding receivables.  A low DSO means it takes your company fewer days to collect, and a high DSO means you are selling to customers on credit and taking longer to collect.

Days in Inventory (DII) – average number of days inventory is held before sale.  A low DII means you have less cash tied up in inventory.  If you are a services company, inventory may not be important.  Instead you can use a measure of how long it takes to complete services (for example, the average Order to Delivery days)

Days Payable Outstanding (DPO) – average number of days it takes to pay suppliers.  A larger DPO can indicate your company’s ability to delay payments and conserve cash.

Calculating and tracking these indicators sounds like a good idea, but can be a lot of work.  Business intelligence makes it easy to see the indicators on an ongoing basis and allows you to quickly identify trends and the causes of issues.  For example, you can compare the trends of all indicators for a given time period.  And show the percent difference with the same period in the previous year.

Business Intelligence can also help you see the details behind the calculation of indicators.  For example, Days In Inventory can be estimated from the general ledger using the cost of goods in inventory and the cost of goods sold.

Days In Inventory = (Inventory / Cost of Goods Sold) * Days in Time Period

Pivot tables can show how this is calculated and each of general ledger accounts that contribute to Inventory or Cost of Goods Sold.

All these indicators come together in the Cash Conversion Cycle (CCC). CCC indicates how long it takes  your business to turn resource inputs into cash.

Cash Conversion Cycle = Days  In Inventory + Days Sales Outstanding – Days Payable Outstanding

For example, let’s say that your business is able to sell its products quickly so that your Days In Inventory  is seven days.  And when you sell a product, you require your customers to pay you in ten days.  Also, you are able to purchase the resources needed to produce your products from suppliers with payment due in thirty days.

Cash Conversion Cycle = 7 + 10 – 30 = –13

This is good as you have thirteen days to use cash before it is due to your supplier. You could use this to invest in additional capital or to earn interest. If your suppliers offer discounts, you could also take advantage of these savings with early payments.

One of the advantages of Business Intelligence is that you can understand complex KPIs quickly. For example, the following line chart shows CCC and the three KPIs used in the calculation.

For more information on measuring efficiency and your financial performance see

http://www.erpbisolutions.com

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Open Source Business Intelligence Technology is growing rapidly – see Open Source Technology Heats Up.  Open Source Business Intelligence (OSBI) offers a number of advantages over proprietary business intelligence including cost-effectiveness, high innovation and ease of integration with existing systems.  And of course, more freedom from licensing restrictions and vendor lock-in.

OSBI can provide an excellent infrastructure for building a solutions.  But although it is maturing rapidly, OSBI tends to be more complex than proprietary BI, requiring higher levels of technical expertise.

The best approach is to use a well-architected solution already developed with OSBI.  Or at least, use the existing solution as a starting point.  You can also team up with a services partner who has expertise in developing solutions.

But if you develop the solution yourself, what skills will you need?  That depends on the scope of your solution.  Business intelligence solutions range from simple reporting to enterprise data warehousing and sophisticated analytics.  The following list assumes a data warehouse with OLAP support and Web-based reports and dashboards.

  1. Getting the Data.  Extracting your opertional data typically means navigating a relational database.  Good SQL skills will save you a great deal of time.
  2. Transforming and Loading the Data.  Data is often transformed for faster analysis and to enable OLAP.  Good knowledge of Extract, Transform and Load (ETL) tools is essential.  Especially when you need to develop processes that will scale to large databases.  ETL tools will probably not handle every transformation you need so you might need to extend them with scripts.
  3. Data Warehousing.  Designing and tuning a data warehouse that scales with increasing data and users requires good data warehousing and relational database skills.
  4. Analysis (OLAP Cube).  Designing cubes and analysis queries requires knowledge of the Multidimensional Expression (MDX) query language.
  5. Web Presentation.  Development of Web-based reports and dashboards typically requires skills in html, cascading style sheets and scripting.

Companies such as Actuate, Jaspersoft and Pentaho offer free community editions as well as commercial products.  The commercial products build on the community version and provide more end-user tools for creating reports and dashboards.  The commercial products also provide more comprehensive documentation.  This can reduce the time needed to develop a solution, but not necessarily the skills required.

Using commercial editions of OSBI can also help with support.  Or you can team up with a services partner who has expertise in the technologies.  You can also get help from the open source communities.  But you need to research the strength and helpfulness of the communities.  And note that within an OSBI technology stack, the communities for some components may be stronger and more active than communities for other components.  If in doubt, post a question in the community forum and see how much help you receive.

 

 

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