Chapter 11 Enterprise Resource Planning Systems

Reporter 23 - CHAPTER 11 - Enterprise Resource Planning Systems 545

What Is an ERP? 546 Data Warehousing 554
ERP Core Applications 547 Modeling Data for the Data Warehouse 555
Online Analytical Processing 548 Extracting Data from Operational Databases 555
ERP System Configurations 549 Cleansing Extracted Data 557
Server Configurations 549 Transforming Data into the Warehouse Model 557
OLTP Versus OLAP Servers 549 Loading the Data into the Data Warehouse
Database Configuration 553 Database 558
Bolt-On Software 553

Guide Questions:
1) Definition of ERP systems and its objective.
Enterprise Resource Planning Systems
ERP systems are multiple module software packages that evolved primarily from traditional
manufacturing resource planning (MRP II) systems. ERP combines all of these (systems) into a single,
integrated system that accesses a single database to facilitate the sharing of information and to improve
communications across the organization.

Objective:
The objective of ERP is to integrate key processes of the organization such as order entry,
manufacturing, procurement and accounts payable, payroll, and human resources. By doing so, a single
computer system can serve the unique needs of each functional area.

2) Explain the difference between the 2 general groups of applications for ERP functionality. Give examples
for each.
Core Applications
Applications that operationally support the day-to-day activities of the business. If these applications
fail, so does the business. Core applications are also called online transaction processing (OLTP)
applications.

Examples: (but are not limited to) sales and distribution, business planning, production planning, shop
floor control, and logistics

Business Analysis Applications

Also known as On-Line Analytical Processing (OLAP), is a decision support tool for management-critical
tasks through analytical investigation of complex data associations. It supplies management with “real-
time” information and permit timely decisions to improve performance and achieve competitive
advantage.

Examples: On-Line Analytical Processing (OLAP) Includes decision support, modeling, information retrieval,
ad hoc reporting/analysis, and what-if analysis.
3) Is OLAP built-in in ERP? Explain the 3 ways how OLAP can be integrated in ERP.
Yes. The 3 ways are
a. ERPs support these functions with their own industry-specific modules that can be added to the core
system
b. Other ERP vendors have designed their systems to accept and communicate with specialized bolt-on
packages that third-party vendors produce
c. integrate in-house legacy systems into the ERP
4) Explain the 3 factors to consider in the ERP system configurations. Differentiate the 2 basic architectures of
ERP client-server model.
3 Factors to consider in the ERP system configurations
a. Server Configuration - Most ERP systems are based on the client-server model which is a a form of
network topology in which a user’s computer or terminal (the client) accesses the ERP programs
and data via a host computer called the server. The servers may be centralized, but the clients are
usually located at multiple locations throughout the enterprise
b. Database Configuration ERP systems are composed of thousands of database tables. Each table is
associated with business processes that are coded into the ERP. The ERP implementation team,
which includes key users andinformationtechnology (IT) professionals,selects specific database
tables and processes by setting switches in the system. Determining how all the switches
needtobesetforagivenconfigurationrequiresa deepunderstandingoftheexistingprocesses used in
operatingthebusiness. Often,however,choosingtablesettings involves decisions to reengineer the
company’s processes so that they comply with the best business
practicesinuse.Inotherwords,thecompanytypicallychangesitsprocessestoaccommodate the ERP
rather than modifying the ERP to accommodate the company.
c. Bolt-On Software Many organizations have found that ERP software alone cannot drive all the
processes of the company. These firms use a variety of bolt-on software that third-party vendors
provide. The decision to use bolt-on software requires careful consideration. Most of the leading
ERP vendors have entered into partnership arrangements with third-party vendors that provide
specialized functionality. The least risky approach is to choose a bolt-on that is endorsed by the ERP
vendor.
2 basic architectures of ERP client server model
Two-Tier Model
In a typical two-tier model, the server handles both application and database duties. Client
computers are responsible for presenting data to the user and passing user input back to the server.
Some ERP vendors use this approach for local area network (LAN) applications for which the demand
on the server is restricted to a relatively small population of users. This configuration is illustrated in
Figure 11.3.
Three-Tier Model
The database and application functions are separated in the three-tier model. This architecture
is typical of large ERP systems that use wide area networks (WANs) for connectivity among the users.
Satisfying client requests requires two or more network connections. Initially, the client establishes
communications with the application server. The application server then initiates a second connection
to the database server. Figure 11.4 presents the three-tier model. and database duties where as in the
three-tier model, the database and application functions are separated.
5) Explain the difference between OLTP servers and OLAP servers in terms of task and database.
 OLTP events consist of large numbers of relatively simple transactions, such as updating accounting
records that are stored in several related tables. For example, an order entry system retrieves all of the
data relating to a specific customer to process a sales transaction.
OLAP can be characterized as online transactions that:
• Access very large amounts of data
• Analyze the relationships among many types of business elements such as sales, products, geographic
regions, and marketing channels.
• Involve aggregated data such as sales volumes, budgeted dollars, and dollars spent.
• Compare aggregated data over hierarchical time periods (e.g., monthly, quarterly, yearly).
• Present data in different perspectives such as sales by region, by distribution channel, or by product.

OLTP applications support mission-critical tasks through simple queries of operational databases while
OLAP applications support management-critical tasks through analytical investigation of complex data
associations that are captured in data warehouses
6) Explain the 3 common analytical operations supported by OLAP servers.
OLAP servers support common analytical operations including consolidation, drilldown, and slicing and
dicing.
• Consolidation is the aggregation or roll-up of data. For example, sales offices data can be rolled up to
districts and districts rolled up to regions.
• Drill-down permits disaggregating data to reveal the underlying details that explain certain phenomena.
For example, the user can drill down from total sales returns for a period to identify the actual products
returned and the reasons for their return.
• Slicing and dicing enables the user to examine data from different viewpoints. One slice of data might
show sales within each region. Another slice might present sales by product across regions. Slicing and
dicing is often performed along a time axis to depict trends and patterns.

7) What is the effect of the ERP to the company in terms of business processes?
ERP systems support a smooth and seamless flow of information across the organization by providing a
standardized environment for a firm’s business processes and a common operational database that
supports communications.

8) Definition of data warehousing and data mining. Name 2 techniques used in data mining. Difference
between data warehouse and data mart.

DATA WAREHOUSING is one of the fastest growing IT issues for businesses today. Not surprisingly, data
warehousing functionality is being incorporated into all leading ERP systems. A data warehouse is a
relational or multidimensional database that may consume hundreds of gigabytes or even terabytes of disk
storage. When the data warehouse is organized for a single department or function, it is often called a
data mart. Rather than containing hundreds of gigabytes of data for the entire enterprise, a data mart may
have only tens of gigabytes of data. Other than size, we make no distinction between a data mart and a
data warehouse. The issues discussed in this section apply to both.
 DATA MINING is the process of selecting, exploring, and modeling large amounts of data to uncover
relationships and global patterns that exist in large databases but are hidden among the vast number of
facts. This involves sophisticated techniques that use DATABASE QUERIES and ARTIFICIAL INTELLIGENCE to
model real-world phenomena from data collected from the warehouse.

9) Name 5 stages in the data warehousing process.

The process of data warehousing involves EXTRACTING, CONVERTING, and STANDARDIZING AN
ORGANIZATION’S OPERATIONAL DATA FROM ERP AND LEGACY SYSTEMS and LOADING IT INTO A CENTRAL
ARCHIVE—the data warehouse. Once loaded into the warehouse, data are accessible via various query and
analysis tools that are used for data mining.

The data warehousing process has the following essential stages:3

• Modeling data for the data warehouse
• Extracting data from operational databases
• Cleansing extracted data
• Transforming data into the warehouse model
• Loading the data into the data warehouse database

10) What is the fundamental concept of data warehousing?

The creation of a data warehouse separate from operational systems is
a fundamental data warehousing concept. Many organizations now consider data warehouse
systems to be key components of their information systems strategy. As such, they
allocate considerable resources to build data warehouses concurrently with the operational
systems being implemented.

11) Explain the 5 stages in the data warehousing process based on the following questions: What type of data
is applicable to operational database and data warehouse? What do you mean by data extraction and
extracting snapshots versus stabilized data? Explain the 2 processes that are involved in data cleansing and
the reason for it. What data are transformed into the warehouse model? What is the fundamental concept
of data warehousing?

Operational Database:
- transactional data (sales transaction)

Data Warehouse:
- data that are nonvolatile, stable state.

Data extraction is the process of collecting data from operational databases, flat files, archives, and
external data sources. Operational databases typically need to be out of service when data extraction
occurs to avoid data inconstancies. Because of their large size and the need fora speedy transfer to
 minimize the downtime, little or no conversion of data occurs at this point. A technique called changed
data capture can dramatically reduce the

Extracting Snapshots:
- One way to reflect these dynamics is to extract the operations data in slices of time. These slices provide snapshots of
business activity.

Snapshot versus stabilized data:

• A key feature of a data warehouse is that the data contained in it are in a nonvolatile,stable state.
• Potentially important relationships between entities may, however, be absent from data that are captured in this
stable state.
• Extracting data in slices of time provide snapshots of business activity which assists in depicting trends.

A key feature of a data warehouse is that the data contained in it are in a nonvolatile,
stable state. Typically, transaction data are loaded into the warehouse only when the activity
on them has been completed. Potentially important relationships between entities may,
however, be absent from data that are captured in this stable state. For example, information
about canceled sales orders will probably not be reflected among the sales orders that
have been shipped and paid for before they are placed in the warehouse. One way to reflect
these dynamics is to extract the operations data in slices of time. These slices provide snapshots
of business activity. For example, decision makers may want to observe sales transactions
approved, shipped, billed, and paid at various points in time along with snapshots of
inventory levels at each state. Such data may be useful in depicting trends in the average time
taken to approve credit or ship goods that might help explain lost sales.

Explain the 2 processes that are involved in data cleansing and the reason for it.
(1) Data cleansing involves filtering out or repairing invalid data prior to being stored in the warehouse.
Operational data are dirty for many reasons. Clerical, data entry, and computer program errors
can create illogical data such as negative inventory quantities, misspelled names, and blank
fields.
(2) Data cleansing also involves transforming data into standard business terms with standard data
values.
Data are often combined from multiple systems that use slightly different spellings to represent
common terms, such as cust, cust_id, or cust_no. Some operational systems may use entirely
different terms to refer to the same entity.

What data are transformed into the warehouse model?

To improve efficiency, data can be transformed into summary views before they are loaded into the
warehouse.