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Rajagiri Center for Business Studies

Kakkanad, Kochi
E-mail: vineethmnair@gmail.com

 
 Enterprise Resource Planning or ERP is the practice of consolidating an enterprise¶s planning,
manufacturing, sales and marketing efforts into one management system. It attempts to integrate all
departments and functions across a company onto a single computer system that can serve all those
different departments' particular needs. This paper deals with the importance of Data warehousing, Data
mining and ERP. This paper also deals with the relationship of Data warehousing and Data mining with
ERP.

c  ERP, Data Warehouse, OLAP, Data Mining

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As companies grow, the business manager¶s need to obtain reliable information for decision-support
increases. The Data Warehouse is a means to fulfill this need, by providing the organization with a
central repository of historical data. In any business organization, there are two fundamentally
different types of data because there are two types of business systems: One system that runs the
business operations and the other that reports business. The first type of data is Operational data,
which consists of the critical information necessary to conduct day-to-day business. These can be
order entry data, payroll, invoices, accounting data, etc. The second type of data is Analytical
(informational) data, which helps management study the business to decide how things are going, to
pinpoint problem areas or to identify and exploit business opportunities. Analytical data is as critical to
the survival and growth of the organization, as operational data. Business functions like marketing
planning, engineering planning, and financial analysis also require informational data support.

A Data Warehouse is essentially a platform for a Decision Support System (DSS) or an Executive
Information System (EIS). Data warehouse data spans a range of time periods, and excludes data
that will not be used for decision support. The Data Warehouse relates to the enterprise in its entirety,
 whereas data marts can be considered to be µsmall-scale¶ warehouses relating to specific
departments or functions in the organization.

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¢ Presents a dynamic view of the business

¢ Must be kept up-to-date and current at all times
¢ Updated by transactions entered by data-entry operators or specially trained end users
¢ Is maintained in detail
¢ Utilization is predictable. Systems can be optimized for projected workloads
¢ High volume of transactions, each of which affects a small portion of the data
¢ Users do not need to understand data structures
¢ Functional orientation




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¢ Presents a static view of the business
¢ End-user access is usually read-only
¢ More concerned with summary information
¢ Usage is unpredictable in terms of depth of information needed by the user
¢ Smaller number of queries, each of which may access large amounts of data
¢ Users need to understand the structure of the data (and business rules) to draw meaningful
conclusions from the data
¢ Subject ±orientation

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A Data Warehouse is an integrated corporate database of data drawn from an organization¶s
operation systems, with the purpose of providing a rich data repository for managerial decision-
support.

A Data Warehouse organizes and stores a company¶s analytical data. This is the data that the
company management studies and uses to analyze business performance, produce reports, make
forecasts, etc. over a historical time perspective. The data in the Warehouse is periodically extracted
from the company¶s one or many operational databases. Data Warehousing provides data access to
the enterprise.

A Data Warehouse usually includes detailed transaction data for the most recent period (typically,
one month) in addition to archived transaction data for previous periods. As the size of the
Warehouse expands, the oldest detailed information may need to be archived to off-line storage. In
addition, the data warehouse should contain well-organized µSummary data¶. For example, µWeekly
Sales¶ may be summarized along product lines, regions, time periods, etc.

Data needs to be loaded into the Data Warehouse in a consistent, integrated state. Data needs to be
stored in a singular, globally acceptable fashion, even when underlying operational systems store
data differently. Depending on the type of user, the Data Warehouse may be accessed by a host of
query tools. E.g. a powerful statistical tool like SAS for the µpower user¶, and Oracle Express Objects
for the µbusiness analyst¶.

The Data Warehouse is self - defining, i.e., information about the structure of the Data Warehouse is
stored in the Warehouse itself. This information is called ³(


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Data warehouses are used primarily for ad-hoc querying. Analytical reporting, statistical analysis and
forecasting. Two main types of systems that do these jobs are Decision Support Systems and
Executive Information Systems.

Decision support systems: A Decision Support System (DSS) is a system that provides managers
with information they need to make decisions. These systems have the effect of empowering
employees at all levels, providing them access to business and financial information that directly
impact their productivity and quality of work.

Executive information systems: An Executive information system (EIS) is a concise snapshot of how
the company is doing today. Consider it as an electronic executive briefing. EIS allows greater
flexibility in ³slicing-and-dicing´ data, i.e.; it allows exploration of data through multiple dimensions or
views.

Intelligent CASE-based Reasoning (CBR): CBR provides new ways to explore data, just like ³

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´. Data mining is basically, knowledge discovery from historical data. CBR applications help
decision making by considering the factors of a current event, searching for a similar event in the
past, and extrapolating / interpolating to derive an optimal response. The response, however, can
only be as optimal as the number of cases it has to draw from.

Data Warehousing provides a process for storing integrated, summarized, re-organized, historical,
non-volatile information, permitting a variety of µcanned¶ reports and much-simplified drill-down
capabilities. Such solutions often need revolutionary multidimensional data warehouse modeling
techniques (e.g., the star schema)

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The Data Warehouse provides a tool for Online Analytical Processing (OLAP). The data modeling for
Data Warehouse (OLAP) differs from that of traditional operational databases (OLTP). There are two
main schemas for data warehousing, *
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The Star schema is used in many OLAP systems. Star schema consists of one Fact (major) table and
many Dimension (minor) tables. The design is organized in such a way that it has the appearance of
a star, with the major table in the center, and dimension tables connected to it by radial lines. The
Fact table stores the primary keys for all dimension tables. That is, the Fact table contains all key
performance indicators.

Consider the following example of Star schema. If SALES is a Fact table and Customer, Product,
Time and Store are Dimensions, the relationship between the fact and dimension tables is One-to-
Many. The fact table contains quantitative, measurable data. For example, Revenue from product
sold. The Fact table may contain atomic data, as well as partially consolidated data. The Fact table
keys are generated which allows flexibility and high performance over composite or concatenated
keys. The generated key is numeric, and acts as the primary key of the Fact table.

Dimension tables are smaller and contain more qualitative data like Customer, and Product. The non-
key fields of dimension tables are called µattributes¶. It is possible that dimension tables will, in turn,
have their own dimension tables. In this case, the Store dimension will contain District ids and Region
ids, which will reference district and region dimensions of Store dimension, respectively. This Schema
is called r
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Data warehousing is combining data from multiple and usually varied sources into one
comprehensive and easily manipulated database. Common accessing systems of data warehousing
include queries, analysis and reporting. Because data warehousing creates one database in the end,
 the number of sources can be anything you want it to be, provided that the system can handle the
volume, of course. The final result, however, is homogeneous data, which can be more easily
manipulated.

Data warehousing is commonly used by companies to analyze trends over time. In other words,
companies may very well use data warehousing to view day-to-day operations, but its primary
function is facilitating strategic planning resulting from long-term data overviews. From such
overviews, business models, forecasts, and other reports and projections can be made. Routinely,
because the data stored in data warehouses is intended to provide more overview-like reporting, the
data is read-only. If you want to update the data stored via data warehousing, you'll need to build a
new query when you're done.

This is not to say that data warehousing involves data that is never updated. On the contrary, the data
stored in data warehouses is updated all the time. It's the reporting and the analysis that take more of
a long-term view.

Data warehousing is not the be-all and end-all for storing all of a company's data. Rather, data
warehousing is used to house the necessary data for specific analysis. More comprehensive data
storage requires different capacities that are more static and less easily manipulated than those used
for data warehousing.

Data warehousing is typically used by larger companies analyzing larger sets of data for enterprise
purposes. Smaller companies wishing to analyze just one subject, for example, usually access data
marts, which are much more specific and targeted in their storage and reporting. Data warehousing
often includes smaller amounts of data grouped into data marts. In this way, a larger company might
have at its disposal both data warehousing and data marts, allowing users to choose the source and
functionality depending on current needs.

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OLAP and Data Mining form part of the Decision Support System.

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characterizes inter-relationships among multi-variablec dimensions, analyzed single dimension at-a-
time. The trends and patterns in thec data are searched for unusual or potentially significant
information by automatedcmeans, and in this way data mining is µknowledge discovery¶. By looking forc
interesting patterns and associations in the transactional data, a company mayc discover data with
which it can take action to reduce costs, check frauds andc expand market share. Data mining
techniques include associations, affinityc tables, segmentation / clustering, modeling / classification
and visualization.
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Presently, more and more vendors are offering tools that make sophisticated data mining (MineSet
2.0) available. American Express used data mining techniques to identify prospective Gold
Cardholders from current Green Card holders. Commercial vendors in Data mining include Cognos,
Business Objects, Information Discovery Inc., MIT GmbH (DataEngine) and Cross/Z.

!.c is used to verify more complex human-generated hypotheses involving multiple dimensions.
OLAP produces Information summaries and does not look for unusual patterns. OLAP describes a
class of technologies that are designed for live ad-hoc data access and analysis. Thus, OLAP is
µknowledge verification¶. OLAP systems focus on providing access to multidimensional data, while
Data Mining deals with influence analysis of data along a single dimension.

Analysts and managers, who frequently want a higher-level aggregated view of data, use OLAP
systems. OLTP databases are not optimized for OLAP activities, hence need arises for special OLAP
Database servers. OLAP deals with multidimensional historic data, and needs processing that is
 subject oriented and can handle huge volumes of data. OLAP is optimized for rapid identification,
reporting of problems and drill-down analysis. OLAP still requires users to select paths through user
data. OLAP is multi-dimensional analysis, and Data mining is multi-variable single dimension
analysis.

Uses of Data mining in the banking sector, for example, are fraud detection, customer profiling to
tailor services to different customers, and customer loyalty. OLAP tools are widely used in building
Data marts and in front-ends for data warehousing with multidimensional capabilities. OLAP tools
allow users to ³slice-and-dice´ data along multiple dimensions. Thus, direct marketers, business
managers who need business intelligence, can use OLAP. Currently two OLAP models are popular
for multidimensional data analysis. They are multidimensional database OLAP approach (MDDB
OLAP) and relational OLAP (ROLAP). The ROLAP products are also classified into High-end
ROLAP, Database ROLAP and desktop ROLAP.


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Data mining is an iterative process within which progress is defined by discovery, through either
automatic or manual methods. Data mining is most useful in an exploratory analysis scenario in which
there are no predetermined notions about what will constitute an "interesting" outcome. Data mining
is the search for new, valuable, and nontrivial information in large volumes of data. It is a cooperative
effort of humans and computers. Best results are achieved by balancing the knowledge of human
experts in describing problems and goals with the search capabilities of computers.

In practice, the two primary goals of data mining tend to be prediction and description. Prediction
involves using some variables or fields in the data set to predict unknown or future values of other
variables of interest. Description, on the other hand, focuses on finding patterns describing the data
that can be interpreted by humans. Therefore, it is possible to put data-mining activities into one of
two categories:

1) Predictive data mining, which produces the model of the system described by the given data set,
or
2) Descriptive data mining, which produces new, nontrivial information based on the available data
set.

On the predictive end of the spectrum, the goal of data mining is to produce a model, expressed as
an executable code, which can be used to perform classification, prediction, estimation, or other
similar tasks. On the other, descriptive, end of the spectrum, the goal is to gain an understanding of
the analyzed system by uncovering patterns and relationships in large data sets. The relative
importance of prediction and description for particular data-mining applications can vary considerably.
The goals of prediction and description are achieved by using data-mining techniques, explained later
in this book, for the following primary data-mining tasks:

1. Classification - discovery of a predictive learning function that classifies a data item into
one of several predefined classes.

2. Regression - discovery of a predictive learning function, which maps a data item to a real-
value prediction variable.

3. Clustering - a common descriptive task in which one seeks to identify a finite set of
categories or clusters to describe the data.

4. Summarization - an additional descriptive task that involves methods for finding a

compact description for a set (or subset) of data.

5. Dependency Modeling - finding a local model that describes significant dependencies

between variables or between the values of a feature in a data set or in a part of a data
set.

6. Change and Deviation Detection - discovering the most significant changes in the data
set.

The success of a data-mining engagement depends largely on the amount of energy, knowledge,
and creativity that the designer puts into it. In essence, data mining is like solving a puzzle. The
individual pieces of the puzzle are not complex structures in and of themselves. Taken as a
collective whole, however, they can constitute very elaborate systems. As you try to unravel these
systems, you will probably get frustrated, start forcing parts together, and generally become
annoyed at the entire process; but once you know how to work with the pieces, you realize that it
was not really that hard in the first place. The same analogy can be applied to data mining. In the
beginning, the designers of the data-mining process probably do not know much about the data
sources; if they did, they would most likely not be interested in performing data mining.
Individually, the data seem simple, complete, and explainable. But collectively, they take on a
whole new appearance that is intimidating and difficult to comprehend, like the puzzle. Therefore,
being an analyst and designer in a data-mining process requires, besides thorough professional
knowledge, creative thinking and a willingness to see problems in a different light.

Data mining is one of the fastest growing fields in the computer industry. Once a small interest
area within computer science and statistics, it has quickly expanded into a field of its own. One of
the greatest strengths of data mining is reflected in its wide range of methodologies and
techniques that can be applied to a host of problem sets. Since data mining is a natural activity to
be performed on large data sets, one of the largest target markets is the entire data warehousing,
data-mart, and decision-support community, encompassing professionals from such industries as
retail, manufacturing, telecommunications, healthcare, insurance, and transportation. In the
business community, data mining can be used to discover new purchasing trends, plan
investment strategies, and detect unauthorized expenditures in the accounting system. It can
improve marketing campaigns and the outcomes can be used to provide customers with more
focused support and attention. Datamining techniques can be applied to problems of business
 process reengineering, in which the goal is to understand interactions and relationships among
business practices and organizations.

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In the 1960¶s, enterprises began using computers to manage information relating to daily business
transactions, thus, saving valuable manpower and increasing the accuracy of information. This
process represents the automation of basic and routine tasks. In this decade, with advancements in
information technology, many new tools have brought forth revolutionary developments and
applications in the business world such as object-oriented techniques, soft computing techniques,
artificial intelligence, internet, data warehouse, and data mining technology. One of these tools, data
mining technology, can dig up information buried within raw data, allowing high level personnel to
make quick decisions, which helps to increase an enterprise¶ s competitive advantage. To gain a
competitive advantage, knowledge must first be grasped. In an era of knowledge economy,
knowledge will replace the traditional factors of production and become the most important of
resources. To achieve success, enterprises must constantly create new forms of knowledge, infuse
new types of knowledge into existing organizational systems, rapidly absorb new types of technology
and replace outdated technology with new products. As more enterprises implement ERP systems,
they accumulate massive amounts of data. This research will explore some fundamental problems to
be faced by enterprises in the future. These problems are discussed below: ERP system¶s
effectiveness in increasing competitive advantage is gradually disappearing: ERP systems stress the
rapid integrative processes of online transaction processing, focusing upon software to increase
enterprise¶s work efficiency. As many enterprises have implemented ERP systems, the effectiveness
of increasing competitive advantage for enterprises is gradually disappearing. Thus, bringing the
valuable assets held in store by ERP systems back to life, by transforming raw data into organized
information, knowledge into intelligence, and by broadening the range of applications for enterprise¶ s
information systems, is precisely the key factor for enterprises in creating a diverse competitive
advantage.

The inadequacy of traditional decision support systems: When responsible personnel are in the
decision making process, the information provided by traditional decision support systems may be
inadequate. This information may not have reached optimal levels of effectiveness. Therefore, it is
necessary to make up for the inadequacy of traditional decision-making support systems in the
integration and analysis of information. The goal of this research is to implement an intelligent ERP
system. Through the integration of five major subject areas (enterprise resource planning, data
warehouse, online analytical processing, data mining and artificial intelligence) the massive amounts
of data assets accumulated by ERP systems may be used to obtain information valuable to
enterprises in making important decisions. As part of this research, the framework for a data mining
system has been designed. This framework allows for the integration of ERP system and data mining
tasks. Moreover, in accordance, an appropriate information system is practically planned out and
established.

As an electronic business environment changes more rapidly under the globalization, even small and
medium size companies also change their business. With enterprises becoming bigger and bigger,
the legacy business systems may not be flexible enough to adapt this change and the discordance
between business and information systems in their organization may occur. Therefore, recently most
companies use an Enterprise Resource Planning (ERP) system for improving core competency.

Enterprise Resource planning (ERP) integrates the functionality of all the business departments in an
organization in a single system to carry out the particular needs of these different departments and
share their information very easily. Interaction channels between enterprises and customers have
been gradually changed owing to the development of information technology. In the highly specialized
business environment, the interaction model should be re-engineered to enhance the quality of
customer service. c
ERP¶s best hope for demonstrating value is as a sort of battering ram for improving the way your
company takes a customer order and processes it into an invoice and revenue otherwise known as
the order fulfillment process. That is why ERP is often referred to as back-office software. It doesn¶t
handle the up-front selling process (although most ERP vendors have developed CRM software or
acquired pure-play CRM providers that can do this); rather, ERP takes a customer order and provides
a software road map for automating the different steps along the path to fulfilling it. It is now widely
accepted that ERP systems provide a viable alternative to custom application development for the
standard information management needs and that it is often superior in terms of quality of the
implemented business process. Although current common ERP systems provide enough parameters
and can be adjusted according to industry characteristics, they is still too complicated to use only
effective under certain conditions. ERP solutions are designed to solve the fragmentation of
information in businesses, and integrate all the information flowing within a company are designed to
solve the fragmentation of information in businesses, and integrate all the information flowing within a
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Modeling the investigated system and discovering relations that connect variables in a database are
the subjects of data mining. Modern data mining system self learn from the previous history of the
investigated system, formulating and testing hypotheses about the rules, which this system obeys.

When concise and valuable knowledge about the system of interest had been discovered, it can and
should be incorporated into some decision support system, which helps the manager to make wise
and informed business decisions.

Below are all the questions that can probably be answered if information hidden among megabytes of
data in your database can be found explicitly and utilized.

¢ What goods should be promoted to this customer?

¢ What is the probability that a certain customer will respond to a planned promotion?
¢ Can one predict the most profitable securities to buy/sell during the next trading session?
¢ Will this customer default on a loan or payback on schedule?
¢ What medical diagnosis should be assigned to a particular patient?
¢ How large are the peak loads of a telephone or energy network going to be?
¢ Why does the facility suddenly start to produce defective goods?

Data warehousing

Implementing a data warehouse provides significant benefits - many tangible, some intangible. The
benefits include the following:

More cost-effective decision-making:

A data warehouse allows reduction of staff and computer resources required to support queries and
reports against operational and production databases. This typically offers significant savings. Having
a data warehouse also eliminates the resource drain on production systems when executing long
running, complex queries and reports.

Better enterprise intelligence:

Increased quality and flexibility of enterprise analysis arises the multi-tiered data structures of a data
warehouse that support data ranging from detailed transactional level to high-level summary
information. Guaranteed data accuracy and reliability result from ensuring that a data warehouse
contained only "trusted" data.

Enhanced customer service:

An enterprise can maintain better customer relationships by correlating all customer data via a single,
data warehouse architecture.

Business engineering:

Allowing unlimited analysis of enterprise information often provides an insight into enterprise
processes that may yield breakthrough ideas for reengineering those processes. Just defining the
requirements for data warehouse could results in better enterprise goals and measures. Knowing
what information is important to an enterprise will provide direction and priority for reengineering
efforts.

Information system reengineering:

A data warehouse that is based upon enterprise-wide data requirements provides a cost-effective
means of establishing both data standardization and operational system inter-operability. Data
warehouse development can be an effective first step in reengineering the enterprise's legacy
system.

ERP and data warehousing are two powerful information technologies, which separately help the
company to gain competitive advantages. Although ERP and data warehousing have different
characteristics, functions, architecture and applications, vendors from these two are increasingly
concerned about integrating them to support better management of the company¶s resource,
providing fast and efficient customer service and getting quicker and accurate information from the
system. Some vendors which already tried the integration application, experimented when making
decision on which software to use, and achieved great success. Among companies that have already
introduced the integrated application of ERP and data warehousing, some have even expanded the
use of the integration to the web related application to web related application to gain further
advantages from the system. Obviously this will be trend in the later development of both ERP and
data warehousing. However companies that are thinking about integration also need to be careful to
avoid the possible drawbacks and to get the maximized benefits from it. Several future implications
could be concluded from the use of integrated products. One is that of internet related applications.
With its power and incomparable advantages, the internet will help ERP data warehousing to realize
more functions than ever.
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1) DEVELOPING AN INTEGRATED DATA MINING ENVIRONMENT IN ERP-CRM MODEL ± A
CASE STUDY OF MADAR by A.Abdullah S. Al-Mudimigh, B. Farrukh Saleem, C. Zahid Ullah
: INTERNATIONAL JOURNAL OF EDUCATION AND INFORMATION TECHNOLOGIES
Issue 2, Volume 3, 2009
2) Data Mining for Intelligent Enterprise Resource Planning System by V. Sathiyamoorthi, Dr. V.
Murali Bhaskaran : International Journal of Recent Trends in Engineering, Vol 2, No. 3,
November 2009
3) Enterprise integration with advanced information technologies: ERP and Data warehousing
by Yun Zeng, Roger H.L Chiang and David C Yen.
4) Data warehouse concepts ± An Overview by Data warehousing Center of Excellence
5) Data warehouse ± Basic Concepts by Joao Moura Pires
6) ERP Centric Data Mining and Knowledge Discovery by Naeem Hashmi, Webcast
searchsap.com September 10, 2002 http://infoframeworks.com downloaded on 29/11/2010
7) How data mining and data warehousing are related to ERP? :
http://www.eresourceerp.com/data%20mining-and-data-warehousing-related-to-ERP.html
downloaded on 29/11/2010
8) Thomas Wailgum, "Enterprise Resource Planning: Definition and Solutions", CIO
http://www.cio.com/article/40323/ERP_definition_and_solutions downloaded on 29/11/2010
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downloaded on 29/11/2010
10) http://www.1keydata.com/datawarehousing/inmon-kimball.html downloaded on 29/11/2010
11) http://en.wikipedia.org/wiki/Data_mining downloaded on 29/11/2010
12) http://www.anderson.ucla.edu/faculty/jason.frand/teacher/technologies/palace/datamining.ht
m downloaded on 28/11/2010
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