Page 295 - DLIS402_INFORMATION_ANALYSIS_AND_REPACKAGING

Information Analysis and Repackaging

Notes and with fewer errors. Data becomes visible across the organization. Tasks that benefit from this
integration include:
• Sales forecasting, which allows inventory optimization
• Order tracking, from acceptance through fulfillment
• Revenue tracking, from invoice through cash receipt
• Matching purchase orders (what was ordered), inventory receipts (what arrived),
and costing (what the vendor invoiced)
ERP systems centralize business data, bringing the following benefits:
• They eliminate the need to synchronize changes between multiple systems—consolidation of
finance, marketing and sales, human resource, and manufacturing applications.
• They enable standard product naming/coding.
• They provide a comprehensive enterprise view (no “islands of information”). They make
real–time information available to management anywhere, any time to make proper decisions.
• They protect sensitive data by consolidating multiple security systems into a single structure.

Disadvantages

• Customization is problematic.
• Re-engineering business processes to fit the ERP system may damage competitiveness and/
or divert focus from other critical activities
• ERP can cost more than less integrated and/or less comprehensive solutions.
• High switching costs increase vendor negotiating power vis a vis support, maintenance and
upgrade expenses.
• Overcoming resistance to sharing sensitive information between departments can divert man-
agement attention.
• Integration of truly independent businesses can create unnecessary dependencies.
• Extensive training requirements take resources from daily operations.

14.5 Information Analysis and Consolidation

Information is the vital input into any active management strategy. Information separates active
management from passive management. Information, properly applied, allows active managers to
outperform their informationless benchmarks.
Information analysis is the science of evaluating. Information content, and refining information to
build portfolios. Information analysis works both for managers who use a non-quantitative process
and for those who use a quantitative investment process. The only requirement is that there is a
process. Information is a fuzzy concept. Information analysis begins by transforming information
into something concrete:- investment portfolios.
Then it analyzes the performance of those portfolios to determine the value of the information.
Information analysis can work with something as simple as an analyst’s buy and sell
recommendations. Or it can work with alpha forecasts for a broad universe of stocks. Information
analysis is not concerned with the intuition or process used to recommendations themselves.
Information analysis can be precise. It can determine whether information is valuable on the upside,
the downside, or both. It can determine whether information is valuable over short horizons or
long horizons. It can determine whether information is adding value to your investment process.

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