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An Intelligent Recommendation Framework for ERP Systems.

Conference Paper · January 2005


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AN INTELLIGENT RECOMMENDATION FRAMEWORK

FOR ERP SYSTEMS

Andreas L. Symeonidisa,b,*, Kyriakos C. Chatzidimitrioua, Dionisis Kehagiasa,b


and
Pericles A. Mitkasa,b
a
Electrical and Computer Engineering Dept.,
Aristotle University of Thessaloniki,
b
Intelligent Systems and Software Engineering Laboratory,
Informatics and Telematics Institute/CERTH,
57001, Thessaloniki, Greece

Andreas L. Symeonidis Kyriakos C. Chatzidimitriou Dionisis D. Kehagias Pericles A. Mitkas


Tel. +30-310-99-6399 Tel. +30-310-99-6349 Tel. +30-310-99-6349 Tel. +30-310-99-6390
Fax +30-310-99-6398 Fax +30-310-99-6398 Fax +30-310-99-6396 Fax +30-310-99-6398
email: asymeon@ee.auth.gr email: kyrxa@ee.auth.gr email: diok@iti.gr email: mitkas@eng.auth.gr

ABSTRACT – especially legacy ones – lack advanced Decision-


Enterprise Resource Planning systems efficiently Support (DS) capabilities, resulting therefore in decreased
administer all tasks concerning real-time planning and company competitiveness. In addition, from a
manufacturing, material procurement and inventory functionality perspective, most ERP systems are
monitoring, customer and supplier management. deprecated to mere transactional IT systems, capable of
Nevertheless, the incorporation of domain knowledge and acquiring, processing and communicating raw or
the application of adaptive decision making into such unsophisticated processed data on the company’s past and
systems require extreme customization with a cost that present supply chain operations [2]. In order to optimize
becomes unaffordable, especially in the case of SMEs. business processes in the tactical supply chain
We present an alternative approach for incorporating management level, the need for analytical IT systems that
adaptive business intelligence into the company’s will work in close cooperation with the already installed
backbone. We have designed and developed a highly ERP systems has already been identified, and DS-enabled
reconfigurable, adaptive, cost efficient multi-agent systems stand out as the most successful gateway towards
framework that acts as an add-on to ERP software, the development of more efficient and more profitable
employing Data Mining and Soft Computing techniques solutions. Probing even further, Davenport [3] suggests
in order to provide intelligent recommendations on that decision-making capabilities should act as an
customer, supplier and inventory management. In this extension of the human ability to process knowledge and
paper, we present the architectural details of the proposes the unification of knowledge management
developed framework. systems with the classical transaction-based systems,
while Carlsson and Turban [4] claim that the integration
KEY WORDS of smart add-on modules to the already established ERP
ERP systems, Data Mining, Multi-Agent Systems systems could make standard software more effective and
productive for the end-users.
1. Introduction The benefits of incorporating such sophisticated DS-
enabled systems inside the company’s IT infrastructure
Enterprise Resource Planning (ERP) systems are business are analyzed in [5]. The most significant, among others,
management tools that automate and integrate all are:
company facets, including real-time planning, 1. Provision of evidence in support of a decision,
manufacturing, sales, and marketing. These processes 2. Improvement or sustainability of organizational
produce large amounts of enterprise data that are, in turn, competitiveness,
used by managers and employees to handle all sorts of 3. Augmentation of the decision makers’ abilities to
business tasks such as inventory control, order tracking, tackle large-scale, complex problems.
customer service, financing and human resources [1]. Within the context of Small and Medium sized
Despite the support current ERP systems provide on Enterprises (SMEs) however, applying analytical and
process coordination and data organization, most of them mathematical methods as the means for optimization of
the supply chain management tasks is highly impractical, 2.1 IRF Architecture
being both money- and time-consuming [6]. This is why
alternative technologies, such as Data Mining (DM) and The MAS add-on is composed of 6 different agent-types,
Agent Technology (AT) have already been employed, in working in close cooperation with each other. The agent
order to provide efficient DS-enabled solutions. The types along with the human agents and other objects are
increased flexibility of multi-agent applications, which depicted in Figure 1.
provide multiple-loci of control [7] can lead to less
development effort, while the application of DM
techniques on existing ERP historical data can provide C u s to m ers C us tom e rs C u s to m ers C u s to m ers

managers with information non-trivial, implicit, E n d U s e rs


previously unknown and potentially useful [8], which can
be used as an advisor to their decision-making O pe ra to r O p e rato r O pe ra to r O p era to r

capabilities. Our approach employs Soft Computing (SC),


DM, Expert Systems (ES), standard Supply Chain G ra p h ic a l U se r C u s to m e r C u sto m e r C u sto m e r C u s to m er
O rd e r O rd e r O rd e r O rd e r
Management (SCM) and AT primitives, in order to In te rfa ce
L ay e r Agent A gent Agent Agent

provide intelligent recommendations on customer,


supplier and inventory issues. It is addressed not only to
the managers of a company - “Managing by wire” R e c o m m e n d a tio n
D e c is io n M a k ing Agent
approach [9] -, but also the lower-level, distributed L ay e r

decision makers - “Cowboys” approach [10].


Going briefly through related work, we see that DM
and MAS have been used separately for efficient In fo rm a tio n
C u sto m e r
P a ttern
In ve n to ry
P a tte rn
S u p p lie r
P a tte rn
P ro c e ss in g
enterprise management and decision support. Rygielski et. L ay e r
Id e n tific a tio n
A gent
Id e n tifica tio n
Agent
Id e n tifica tio n
Agent
al. [11] have exploited DM techniques for Customer
Relationship Management (CRM), while Choy et. al. [6]
have used a hybrid machine learning methodology for ERP
performing Supplier Relationship Management (SRM). A ge n t
M id d le w a re L a y e r
On the other hand, MAS integrated with ERP systems
have been used for production planning [12], and for the
X M L -S Q L
identification and maintenance of oversights and C o n n e c to r

malfunctions inside the ERP systems [13].


The rest of the paper is organized as follows. Section
2 presents the extensive Recommendation Framework in D a ta S o u rc e L a y e r
ERP
detail and describes the functional characteristics of the
different types of agents that comprise it. Finally, Section
Figure 1. IRF Functional diagram
3 summarizes the work presented, and concludes this
paper.
2.1.1. Customer Order Agent type (COA)
2. The Intelligent Recommendation COA is a Graphical User Interface (GUI) agent that could
Framework be found at the distributed stores, or at the telephone
center of an enterprise. COA enables the system operator
The arrival of a new customer order designates the (either manager or lower-level employee) to: (a) transfer
initialization of the Intelligent Recommendation information in and out the rest of the system, (b) input
Framework (IRF) operation. All customer order order preferences into the system and (c) explain by
preferences are, at first, gathered by the system operator means of visualization the proposed recommendations.
via a front-end agent and are then transferred to the When an order comes into the system, COA provides the
backbone (order) agents for further processing. These human agent with basic functionalities for inserting
agents are of different types, each one related to a specific information on customer id, ordered products along with
entity of the supply chain (company, customers, suppliers, their corresponding quantities, payment terms (cash,
products), and manage entity-specific data. In order to check, credit etc.), backorder policies and, finally, the
establish connectivity to the ERP system’s database and party (client or company) that will undertake
access ERP data, another agent has also been transportation costs. COA also offers an explanatory unit
implemented. By the use of DM techniques, all related for the final recommendation.
entities’ profiles are constructed for the recommendation
procedure to be based on. When all processes are 2.1.2. Recommendation Agent type (RA)
finalized, the front-end agent returns to the operator the
intelligent recommendations produced by the framework, RA is responsible for gathering the profiles of the related
along with an explanatory memo. to the current order entities. By requesting from the
Information Processing Layer agents (CPIA, SPIA and 2.1.5. Inventory Profile Identification Agent Type
IPIA) the corresponding profiles, and by taking into (IPIA)
account concurrency issues, RA diminishes the cycle-time
of the recommendation process. RA is a rule-based agent IPIA is responsible for identifying product profiles. These
and static business rules can be incorporated into it, by consist of raw data found inside the ERP (i.e. product
writing the latter into a document that RA reads during its price, related store, remaining quantities), unsophisticated
execution phase. In this way, business rules can be processed data (for example, statistical data on product
changed on-the-fly, without the need of recompiling, or demand) and intelligent recommendations on products
even restarting the application. RA is responsible for the (such as related products that the customer may be willing
final formatting of the recommendation that is forwarded to purchase). Besides the directly derived data, IPIA is
to COA. responsible for identifying buying patterns Market Basket
Analysis (MBA) by the use of Association Rule
2.1.3. Customer Profile Identification Agent Type Extraction techniques.
(CPIA)

CPIA is designed to identify customer profiles, according COA sends order preferences to RA

to historical data found in the ERP system’s records. The


customer profile identification process can be described at RA requests order profiles

a glance as: Initially, managers and application developers


produce a model for generating the profiles of customers.
They select the appropriate customer attributes that can be SPIA receives request for suppliers' profiles

mapped from the data residing in the ERP database; these IPIA receives request for products' profiles
[Profiles exist]

are the attributes that are considered as valuable assets for


reasoning on customer value. Then, they decide on the Query ERPA for all supplier data Pre-specified time-window
for analysis has been
desired classification of customers, e.g. added-value to the exceeded

company, discount due to past transactions etc. CPIA, by CPIA receives request for customer profile Preprocess

the use of clustering techniques, analyzes customer Query order specific supplier data
Maximin
profiles periodically, and stores the outcome of this
analysis into a profile repository for posterior retrieval. Kmeans
Preprocess

When a CPIA is asked to provide the profile of a Match current with stored profiles

customer, the current attributes of the specific customer


Characterize clusters through fuzzy inference
are requested from the ERP database and are matched
Send profiles to RA
with those inside the profile repository, resulting into the
identification of the group the specific customer belongs.
RA applies fixed business policies to profiles

2.1.4. Supplier Pattern Identification Agent Type


(SPIA)
COA communicates order to MAS operator

SPIA is responsible for identifying supplier profiles


according to their historical records found in the ERP
database. In a similar to CPIA manner, managers identify Figure 2. The workflow of SPIA
the valuable attributes for generating the supplier profiles.
Such profiles can be consisted of value of a supplier for 2.1.6. Enterprise Resource Planning Agent Type
the company and his/her credibility. In the case there is a (ERPA)
pool of suppliers responsible for procuring an item
requested in the current processed order, SPIA as ERP Agents provide the middleware between the MAS
requested by RA, can retrieve all the current records of application and the ERP system. These agents can be
the suppliers, match them with the classified ones found resembled to transducers [14], because they are
inside the profile repository and return all corresponding responsible for transforming data from heterogeneous
supplier profiles, characterized on the classification applications into agent comprehensible message formats.
attribute (e.g. credibility). Then RA can select the most ERPA handles all queries posted by CPIAs, IPIAs, and
appropriate one, and recommend it to the human operator SPIAs by connecting to the ERP database and fetching all
of the system. Figure 2 illustrates the workflow of the the required data. It works in close cooperation with an
SPIA, once it is instantiated. In this workflow all tasks XML connector used for sending XML-SQL queries to
can be detected, as described earlier in this section. The the ERP and receiving data in XML format. ERPAs are
IPIA and CPIA workflows are similar to the one shown in the only agent types that need to be configured properly,
Figure 2. in order to meet the connection requirements of different
ERP systems.
2.1.7. Technologies adopted or probabilistic. We represent the deterministic attributes,
which are directly extracted from the ERP database by
IRF has been developed with the use of Agent Academy ERPA, as Di, i=0..n, where n is the cardinality of the
(AA) [15], a platform for developing MAS architectures selected deterministic attributes. On the other hand, we
and for enhancing their functionality and intelligence represent the average (AVG) and standard deviation
through the use of DM techniques (Figure 3). All the values (STD) of probabilistic variables, which are
agents are developed over the Java Agent Development calculated by ERPA, as AVGj and STDj, j=0..m, where m
Framework (JADE) [16], which conforms to the FIPA is the cardinality of the selected probabilistic attributes Pj.
specifications, while the required ontologies have been Each customer/supplier is thus represented by a tuple:
developed through the Agent Factory module of AA. Data <D0,... Dn, AVG0, STD0,..., AVGm, STDm)>, i=0..n,
mining has been performed on ERP data that are imported j=0..m, i+j>0..
to AA in XML format, and are forwarded to the Data
Miner (DMM) of AA, a DM suite that expands the Since real-world databases contain missing, unknown
Waikato Environment for Knowledge Analysis (WEKA) and erroneous data, ERPA preprocesses data prior to
tool [17]. sending the corresponding datasets to the Information
The extracted knowledge structures are represented in Processing Layer Agents. Indicative preprocessing tasks
PMML (Predictive Model Markup Language), a language are tuple omission and filling of missing values.
that efficiently describes clustering, classification and After the datasets have been preprocessed by ERPA,
association rule knowledge models. The resulting they are forwarded to CPIA and SPIA. Clustering is
knowledge has been incorporated into the agents by the performed in order to separate customers/suppliers into
use of the Agent Training Module (ATM) of AA. All distinct groups. This way K disjoint customer/supplier
necessary data files (ERP data, agent behavior data, clusters are created.
knowledge structures, agent ontologies) are stored into In order to decide on customer/supplier clusters’
AA’s main database, the Agent Use Repository (AUR). added-value, CPIA and SPIA employ an Adaptive Fuzzy
Agents can be periodically recalled for retraining, since Logic Inference Engine (AFLIE), which characterizes the
appropriate agent tracking tools have been incorporated already created clusters with respect to an outcome
into Agent Academy, in order to monitor agent activity defined by company managers, i.e. supplier credibility.
after their deployment. Domain knowledge is incorporated into AFLIE, providing
XML
Application Data
to IRF the capability of characterization.
The attributes of the resulting clusters are the inputs
of AFLIE, and may have positive (Ò) or negative (Ô)
Design of agent
application
preferred tendencies, according to their beneficiary or
Agent Academy Data
storage
harmful impact on company revenue. Once domain
Agent Factory (main GUI) DMM knowledge is introduced to AFLIE in the form of
Agent Factory (main GUI)
database Extraction of preferred tendencies and desired outputs, the attributes are
the decision
Agent Types Definition model fuzzified according to Table 1. A [LOW, MEDIUM,
instantiated MAS HIGH] value range and triangular membership functions
Behaviour Types Definition ATM
Dummy
have been adopted for the inputs and outputs of the
MAS Creation Tool
agents Insertion of the system, whereas maximum defuzzification is used for
decision model
into agents crisping the produced fuzzy rules.
Ontology definition
The probabilistic variables are handled in an
Instantiation
of a new Agent with
adaptive way, and are used as inputs only when
MAS reasoning
Chebyshev’s inequality (1) is satisfied:
Protégé-2000 ( STD j ) 2
P{| Pj − AVG j |≥ ε } ≤ , for any ε >0 (1)
ε 2

Figure 3. The Agent Academy platform Eq. (1) ensures the concentration of probabilistic
variables near their mean value, in the interval
2.2 Embedded Intelligence
( AVG j − ε , AVG j + ε ) . No attributes with high
2.2.1 Benchmarking customer and suppliers distribution are taken as inputs to the final inference
procedure, avoiding therefore decision polarization.
In order to perform customer and supplier segregation, The formulation of the inputs (3 fuzzy values: [LOW,
CPIA and SPIA use a hybrid approach that employs DM MEDIUM, HIGH]) leads to 3ν Fuzzy Rules (FR), where ν
and SC methodologies. Clustering techniques and fuzzy is the number of AFLIE inputs. FRs are of type:
inferencing are adopted, in order to decide on customer If X1 is LX1(k) and X2 is LX2(k) and...and Xn is LXn(k)
and supplier “quality”. Initially, the human experts select
the attributes on which the profile extraction procedures Then Y is LY(l), k=1..3, l=1..q,
will be based on. These attributes can either be socio-
demographic, managerial or financial data, deterministic
where Xi are the system inputs, LXi(k) the corresponding 2.2.2 IPIA products profile
fuzzy values, Y is the system output, LY(q) the
corresponding fuzzy value and q is the cardinality of the The IPIA has a dual role in the system:
fuzzy values of the output. 1. It fetches information on price, stock, statistical
All inputs are assigned a Corresponding Value (CV), data about demand faced by the ordered
ranging from -1 to 1, according to their company benefit products, and
criterion (Table 1). The Output Value (OV) of Y is then 2. It provides recommendations on additional items
calculated for each FR as: to buy, based on association rule extraction
OV = ∑ wi ⋅ CVi (2) techniques.
i =1..n + m In order to provide adaptive recommendations on
where wi is the weight of importance (0 ≤ wi ≤ 1) of the ith ordering habits, IPIA incorporates knowledge extracted
input attribute. by the use of association rule extraction techniques. The
The OVs are mapped to Fuzzy Values (FV), according Apriori algorithm is used [18] and the rules extracted are
to the degree of discrimination of the output decision stored inside the profile repository for later retrieval. The
variables. By categorizing the range of the output into q recommendations of IPIA, as well as the information
fuzzy values, the OV→FV mapping is based on the concerning stock availability and price, are sent to the
following formula: RA.
 2(n + m) 
FV (OV ) = RND (OV ⋅ [ ])  (3) 2.2.3 Intelligence of RA
 q 
where RND[x] is the well-known approximation to-the- As earlier prescribed, RA is an expert agent that
closest-integer function. The FV values, which vary from incorporates fixed business policies applied to customers,
1 to q, are mapped to the corresponding output fuzzy inventories and suppliers. These rules are related, not only
values (i.e. MEDIUM for x=3, MEDIUM_HIGH for x=4 to raw data retrieved from the ERP database and order
etc). preferences provided by customers, but also to the
Table 1. Fuzzy variable definition and Interestingness of extracted knowledge provided by the Information
dataset attributes Processing agents. There are three distinct rule types that
RA can realize:
Variable 1. Simple <If … Then …> statements,
Fuzzy Tuple 2. Rules describing mathematical formulas, and
Preferred
Input
Tendency
3. Rules providing solutions to search problems and
<Di, [LOW, MEDIUM, HIGH], constraint satisfaction problems.
Di Ò
[Di1, Di2], Triangular>
<Di, [LOW, MEDIUM, HIGH],
Example 1 - Simple Rules: Additional discounts or
Di Ô burdens to the total price of an order can be implemented
[Di1, Di2], Triangular>
by the use of simple rules (knowledge extracted is
<AVGj, [LOW, MEDIUM, HIGH],
AVGj Ò denoted in bold):
[AVGj1, AVGj2], Triangular>
(a)IF (TotalOrderRevenue >= 1000 €) AND
<AVGj, [LOW, MEDIUM, HIGH], (CustomerValue = HIGH)
AVGj Ô
[AVGj1, AVGj2], Triangular> THEN TotalDiscount += 5%;
Output Value Range (b)IF (RecommendedProductsPurchased = True)
Varies from THEN ProductDiscount +=5%;
<Y, [#(Y2 – Y1)/x Incremental Fuzzy
Y Y1 to Y2 with
Values], [Y1, Y2], Triangular>
a step of x Example 2 - Mathematical Formulas: The re-order/order-
up-to-level-point metric (sS) provides efficient inventory
After all clusters have been characterized, the management for either no-fixed cost orders or fixed order
corresponding OVs, along with the cluster centers are costs orders [1]. In the case of no-fixed cost orders (where
stored inside a profile repository for posterior retrieval. s=S), the reorder point is calculated as:
This process signals the end of the training phase of CPIA
and SPIA. sS = AVGD ⋅ AVGL +
(4)
In real time, when a new order comes into the + z ⋅ AVGL ⋅ STDD2 + AVGD2 ⋅ STDL2
system, RA requests the corresponding customer profile
and the profiles of the suppliers that are related to the Example 3 - Problem Searching: Problems that require
ordered products. CPIA and SPIA request, in turn, the applying heuristics and satisfying constraints: In the case
attributes of these entities from ERPA, and match them of Supplier and quantity selection decisions, RA can,
with the profiles stored inside the profile repository, by based on raw data from the ERP and on knowledge
the use of the Assigned Cluster (AC) criterion, a provided by SPIA, provide solutions to problems like the
closeness-to-cluster-centre function (Euklidean distance). selection of the most appropriate supplier with respect to
The winning cluster along with its OV is returned to RA. his/her added-value, location to the depleted storage, or
the identification and application of an established 4. Acknowledgements
contract.
Work presented here has been partially supported by the
3. Conclusion European Commission through the IST initiative (IST
project No 2000-31050).
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