Big Data and Predictive Analytics in ERP Systems
for Automating Decision Making Process
Prof. M.S. Prasada Babu
Department of CS & SE
Andhra University
Visakhapatnam - 530003, India
profmspbabu@gmail.com
Abstract—ERP systems, at present, are found to be inflexible to
adapt to changing organizational processes. They are required to
quickly adjust to changing processes and value-added chains and
streamline their internal organizational structure. Data in ERP
systems is becoming increasingly voluminous in their transactional
programs. In this scenario, ERP systems are increasingly exposed to
big data wherein the combined analysis of larger amounts of
structured and unstructured data from disparate systems takes place
in a short amount of time. Big data analytics requires greater use of
predictive analytics to uncover hidden patterns and their relationships
to visualize and explore data. The evolution of big data and predictive
analytics have given a new way for exploring new frontiers in
analytics-driven automation and decision management in high-
volume, front-line operational decisions. In this paper the authors
have focused on predictive capabilities of ERP systems, to analyze
current data and historical facts in order to identify potential risks and
opportunities for any organization. Analytical Decision Management
& Business Rules are used to deploy decision as a service.
Keywords- ERP; Predictive Analytics; Clustering; Regression;
Analytical Decision Management; Forecasting; Decision Service
I. INTRODUCTION
ERP systems count and measure things across the
enterprise and links various departments of enterprise and
gives employees a holistic view of all the information that has
a financial impact on the business [3]. ERP reflects only what
has already happened instead of what is happening or will
happen and is perceived as an impediment in business
scenarios for decision making. Predictive analytics in ERP
systems improve the competitiveness of an enterprise and
determines the probable future outcomes or the likelihood of a
situation occurring. Adding analytical capability to ERP
systems provides the forward-looking guidance to yield better
and more-informed decisions [1]. In the current enterprise
scenario, effective decision making involves structured and
unstructured big data accessed from variety of sources like
web logs, documents, call center transactions, sensors etc.
The term Big Data was first introduced by John Mashey
in early 1990’s but became popular from 2012 onwards. Big
Data usually includes data sets with sizes beyond the ability of
commonly used software tools to capture, curate, manage, and
process the data within a tolerable elapsed time [2]. Big data
sizes are a constantly moving target, as of 2012 ranging from a
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978-1-4799-3279-5 /14/$31.00 ©2014 IEEE

S.Hanumanth Sastry
Department of CS & SE
Andhra University
Visakhapatnam - 530003, India
hanusistla@gmail.com
few dozen terabytes to many petabytes of data in a single data
set. Predictive analytics is the branch of data mining
concerned with the prediction of future probabilities and
trends [4] and predict the risk, segmentation, propensity and
associations where as optimization handles tradeoffs and
constraints [1] [2]. With predictive analytics, organizations
can achieve higher revenues and growth by improving key
metrics [5]. In predictive analytics, to deal with different
parameters at different stages of business framework, varieties
of models are to be used. Analytical Decision Management
(ADM) is a key model used to generate weekly forecasts for
setting sales goals, production levels, and distribution plans in
ERP systems [4] [5]. ADM models decision services, Business
intelligence, Predictive insights and Optimization into
repeatable decisions, which are mostly operational or tactical
in nature. Strategic decisions are usually one-off in nature and
won’t be considered in ADM framework [7]. ADM allows the
organizations to deeply embed analytics and push better
decisions to the front line. Decision services are deployed that
are consumed by business processes, business events and
applications [8]. The following typical tasks are performed in
ADM and Business Rules to handle policies, regulations, best
practices and know-how.
TABLE I. TASKS AND ACTIONS PERFORMED IN ADM
ADM Task Typical Actions Performed
Connect to big data Use predefined data sources
Define global selections Include/Exclude data from analysis
Define desired outcomes Define allowed answers in form of tree
Optimize & Simulate Define trade-off matrices to balance business rules
outcomes & predictive analytic models
Deploy into operational If the results are acceptable, deploy decision
systems services.
Reporting A set of reports are provided to measure decision
performance and outcomes
Optimization of Results Optimization provides the highest value in situations
where the complexity is overwhelming to the human
In April 7, 2014, SAP ERP has published that HANA
framework may be used to integrate predictive analytics, big
data and Text in a single package [11].
In this paper the authors introduced a new implementation
framework for big data predictive analytics aimed at
automating operational decision making in SAP ERP systems.
They opined that R and Hadoop open source software may be
used for giving better results than SAP HANA framework.
II. ENTERPRISE PLATFORM FOR DECISION MAKING
PROCESS
Predictive analytics on enterprise platform will help
organizations uncover previously hidden patterns, identify
classifications, Associations, and segmentations, and make
highly accurate predictions from structured and unstructured
information [4]. Organizations will use real-time analysis of
current activity to anticipate what will happen and identify
drivers of various business outcomes so that they can make
strategic course corrections [5]. The deployment of decision as
a service in ERP system landscape is designed as below [3].
IV. ALGORITHMIC FRAMEWORK FOR
PREDICTIVE ANALYTICS
Data Mining algorithms for predictive analytics are basically
supervised methods, in which both input data & valid output
data are available for training process [2] [9]. During the
training phase for Predictive models, algorithms try to
determine the relationships that exist in the data to match the
“Known” outcome. During this process rules are generated to
predict the outcome for a new unknown set of data [3].
Predictive Data Mining algorithms for ERP systems are shown
in Fig 2. An Application Integration framework may be used to
convert unstructured big data from varied data source into
semantic representation suitable for analysis by predictive
algorithmic framework. This framework transforms raw
transactional data into a mathematical representation that
reveals latent information, and makes data more usable by
predictive models.

Figure 1. Enterprise Platform for Decision Making Process [4][5]

III. ERP WITH BIG DATA USING PREDICTIVE

ANALYTICS
Big data enables ERP to get a contextual view with more
and broader data points like machine and sensor data. With Big
data organization can reduce its reliance on sampling and
address the totality of information sets [7]. Big data derives
most of its value from the insights it produces when
analyzed—finding patterns, deriving meaning, making
decisions, and ultimately responding with intelligence. The
sources for big data used in ERP systems could be as varied as
social media, call center interactions, Web behavior, warranty
and repair histories, purchase details, and demographics [8]. Figure 2. Application Framework for Big Data Analytics in ERP Systems [2]
The outcome of big data analytics is measured in reduced
customer churn, high customer lifetime value, and more V. TRANSACTIONAL PROFILING IN ERP
positive sentiment through earned reputation. Distinction SYSTEMS
between Predictive, Descriptive and Decision models used in Transaction Profiling accumulates data across multiple
ERP systems for analyzing big data is shown in table II [9]. transactions of many types to create and update profiles of
TABLE II. CLASSIFICATION OF ANALYTIC MODELS [10] transaction patterns [6]. These profiles enable the predictive
models to efficiently and effectively make accurate
PREDICTIVE DESCRIPTIVE DECISION MODELS
assessments of, for example, fraud risk and credit risk within
MODELS MODELS
Finds causality Finds clusters of data Find optimal and most real-time transaction streams [3].The following issues are most
relationships and elements with certain outcome for a relevant for predictive analytics in ERP systems [2] [5]-
patterns between similar characteristics. specific decision. Focus
explanatory variables Focus is on as many is on a specific decision A. Ability to conduct “what-if ” scenario analysis and
and dependent variables as possible monitoring
variables. Focus is on
specific variables B. Data mining for root-cause analysis and issue detection,
Examples: next Examples: customer Examples: critical path, including causal factors and promotional events into
customer preference, segmentation based network planning, demand forecasts.
fraud, credit on socio-demographic scheduling, resource
worthiness, system characteristics, life optimization, C. Predicting the present by applying patterns of current
failure cycle, profitability, simulation, stochastic behavior and shaping the future by generating new
product preferences modeling assumptions on anticipated behavior & creating new data.


 VI. IMPLEMENTATION METHODOLGY 3 Cleansing and Integrating data We have utilized ETL workbench of
SAP for ensuring data quality
In predictive modeling, data is collected, a statistical model is
4 Building Predictive Model Used SAP APD tool for modeling
formulated, predictions are made, and the model is validated
(or revised) as additional data become available from other 5 Big Data in ERP system An Application Integration Connector
is used to bring in unstructured data
sources. The methodology followed here is shown in figure 3. into mathematical form suitable for
Goal Definition Predictive modeling
6 Incorporating analytics into We have adopted closed-loop
Data Collection business processes analytics approach to utilize model
results for business operations

Data Preparation 7 Monitor Predictive Model Tracked Results from multiple models

VII. RESULTS AND DISCUSSION

Choice of Vraiables and form With Big data and Predictive Analytics we could combine
business knowledge and data mining techniques to achieve
Choice of Methods
insights into business data. Social media is providing
organizations with plenty of data about its customers. These
Performance Evaluation
insights help organizations understand how people behave as
customers, buyers, sellers, distributors, etc. so that multiple
Model Selection
predictors can be designed into predictive model to forecast
future probabilities with an acceptable level of reliability [5].
Model Deployment
From this analysis it is observed that only those decisions that
Figure 3. Steps in Data Modeling process [3][4] are repeatable are good candidates for being automated and
Building predictive models is an iterative process in which a managed using a Decision Management System. Strategic
model is created from an initial hypothesis and then refined decisions are not candidates for Decision Management
until it produces a valuable business outcome or discarded in Systems as they lack the key element of repeatability [3] [8].
favor of another model with more potential [8]. ERP systems The decision matrix followed here & decisions drawn on big
like SAP have their own BI tools and the integration of these data for SAP ERP system are presented in table 4 and Fig 5.
tools is a key consideration when selecting a predictive TABLE IV. DECISION MATRIX BASED ON CATEGORY OF
analytical tool. Predictive analytics results are incorporated DECISIONS
into dashboards for more analytical insights. Tasks we have Operational Decision Tactical Decision Strategic Decision
performed for predictive model development is shown below. Short-term focus Medium-term focus Long-term focus
Hourly, Daily, weekly Monthly, Quarterly, Annual, Need-basis
Annual
Determine Data Source and Data set Routing deliveries Material procurement Capital Investment
Show optimization-based Has high impact on Corporate policy
data KPI’s decisions
Extraction of data Figure 5. Business decisions drawn on Big Data
Monitor using Custom
Progress Extractors Decision making process in an enterprise can be broadly
categorized as Operational, Tactical and Strategic according to
Implement Check Data the kind of questions asked and reviewed at various levels.
Results Quality This decision making activity requires an enterprise level
analytics platform [4]. The present study would offer
analytical insight into supply-chain data in the following
Run fashion. From ERP system data, Predictive Analytics would
Draw Conclusions
Analysis answers the following probable questions.
1) What will be the impact of increasing prices on demand?
Figure 4. Predictive Analytics Process [3] 2) Which promotion will have a higher impact on sales?
TABLE III. DATA MINING MODEL DEVELOPMENT 3) Should we produce more of Product A or more of Product B
TASKS [4] [6] with limited production capacity to meet our revenue and
Sl. Modeling Task Implementation Tasks
margin goals? [10]
No Based on this study from existing literature on analytics,
these analytics are grouped into 8 levels. The Eight leveled
1 Scope and define predictive Identified business processes to
analytics project analyze and their business outcomes hierarchy in analytics, typical questions posed or answered,
Reports generated and expected capabilities at each level are
2 Exploring & Profiling data Identification of data sources
listed in table 5.


TABLE V. EIGHT LEVELED HIERARCHY IN BUSINESS ANALYTICS FOR ENTERPRISES [3] [8]

Analytics Name of Level Typical Questions Posed or Answered Typical Reports generated at Typical Analytical
Level this level for ERP Systems Capabilities at this level
Level 1 Standard What happened? When did it happen? Monthly and Quarterly Financial Useful for Custom Reports but
Reports reports, Production Reports not for long term decision
making
Level 2 Ad Hoc Reports How many? How often? Where? Daily flash Report on Sales & Custom Reporting on few
Stocks, MIS Reports aspects of Business
Level 3 Query Where exactly is the problem? How do we Exploring data on customer quality Bit of discovery is enabled by
Drilldown find answers? complaints. Useful for root-cause OLAP Engine which allows
analysis data manipulation
Level 4 Alerts When should we react? What actions are Demand Planning, Supply Network Get notified when there is a
needed now? Planning. Examples: E-mail problem and be alerted when
notifications, RSS feeds, Red dials something similar happens
on Dashboard or Scorecard seen in again in the future.
portals
Level 5 Statistical Why is this happening? What opportunities we Specific Report for manufacturers Here we can run some complex
Analysis might be missing? to discover why there is a decline analytics, such as frequency
in production, techno-economic models and regression analysis.
parameters etc. We can see trends in data and
take corrective actions.
Level 6 Forecasting What if these trends continue? How much is Seasonal variations in demand for Forecasting demand is crucial
needed? When will it be needed? certain products across different in Logistics & supply chain
geographical regions and management so that we don’t
anticipated revenue from each of run out or have too much.
the locations
Level 7 Predictive What will happen next? How will it affect the Predicting the impact of rising Analyzes the impact of
Modeling enterprise? input costs on production and marketing campaigns on Sales
customer demand for new products, volume. Identifies Risk
Risk profiling, Fraud detection and Category based on customer
customer churn profile.
Level 8 Optimization How do we do things better? What is the best Production Planning & Demand Supports innovation & takes
decision for a complex problem the enterprise Scheduling is drawn taking into resources, needs into
is facing? account inventory levels, supply consideration & helps
constraints and overall financial enterprise find the best possible
implications for the enterprise. way to accomplish its goals.

VIII. CONCLUSIONS REFERENCES

In this paper the authors have presented contemporary
issues in automation of decision making and forecasting
processing in ERP systems. A new application framework is
presented by integrating big data analytics and predictive
analytics for automating operational decision making to enable
the organizations to build horizontal processes that are in line
with their strategic goals. It was shown that data can be used
as an effective tool when breaking down functional silos for
removing subjectivity from crucial decision-making. As ERP
systems are accessing big data and moving towards predictive
modeling, it is essential to include unstructured and structured
data from variety of sources for effective decision making and
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crucial variables to minimize the model implementation cost
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systems for ERP systems should be designed to be agile,
analytic and adaptive and enable people and processes to be
more analytics driven than ever before. Future work should
involve predictive analytics for strategic decision making on
big data.
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