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8Chapter

A hi i O ti lA hi i O ti lA hi i O ti lA hi i O ti lAchieving Operational Achieving Operational Excellence and CustomerExcellence and Customer

Achieving Operational Achieving Operational Excellence and CustomerExcellence and CustomerExcellence and Customer Excellence and Customer

Intimacy: Enterprise Intimacy: Enterprise A li tiA li ti

Excellence and Customer Excellence and Customer Intimacy: Enterprise Intimacy: Enterprise

A li tiA li tiApplicationsApplicationsApplicationsApplications

8.1 © 2007 by Prentice Hall

Essentials of Business Information SystemsEssentials of Business Information SystemsChapter 8 Achieving Operational Excellence and CustomerChapter 8 Achieving Operational Excellence and Customer

Intimacy: Enterprise ApplicationsIntimacy: Enterprise Applications

STUDENT LEARNING OBJECTIVES

H d t i t h l b i• How do enterprise systems help businesses achieve operational excellence?

• How do supply chain management systems• How do supply chain management systems coordinate planning, production, and logistics with suppliers?

• How do customers relationship management systems help firms achieve customer intimacy?




STUDENT LEARNING OBJECTIVES (continued)

Wh t th h ll d b t i• What are the challenges posed by enterprise applications?

• How are enterprise applications used in platforms for new cross-functional services?




Tasty Baking Company: An Enterprise System Transforms an Old Favorite

P bl D i• Problem: Dropping market share, low profitability,

td t doutdated information systems.

• Solutions: Implement a new enterprise systemp yusing specially designed software from SAP.





• SAP’s enterprise system and Microsoft SQL Server database helped Tasty increase sales and reducedatabase helped Tasty increase sales and reduce writedowns.

• Demonstrates the importance of efficient information• Demonstrates the importance of efficient information systems to profitability.

• Illustrates the critical role of enterprise applications• Illustrates the critical role of enterprise applications.




Enterprise Systems

• Enterprise Systems• Enterprise Systems

• Aka enterprise resource planning (ERP) systems

• Suite of integrated software modules and a common central database

C ll t d t f di i i f fi f i• Collects data from many divisions of firm for use in nearly all of firm’s internal business activities

• Information entered in one process is immediately• Information entered in one process is immediately available for other processes




Enterprise Systems

• Enterprise Software• Built around thousands of predefined business processes

that reflect best practices/ G• Finance/accounting: General ledger, accounts payable, etc.

• Human resources: Personnel administration, payroll, etc.

• Manufacturing/production: Purchasing shipping etcManufacturing/production: Purchasing, shipping, etc.

• Sales/marketing: Order processing, billing, sales planning, etc.

• To implement, firms:• Select functions of system they wish to use

• Map business processes to software processes


• Map business processes to software processes

• Use software’s configuration tables for customizing



Enterprise Systems

• Business Value of Enterprise Systems• Business Value of Enterprise Systems

• Increase operational efficiency

P id fi id i f ti t t d i i• Provide firmwide information to support decision making

• Enable rapid responses to customer requests for• Enable rapid responses to customer requests for information or products

• Include analytical tools to evaluate overall yorganizational performance




Enterprise Systems

How Enterprise Systems WorkHow Enterprise Systems Worko te p se Syste s oo te p se Syste s o

Figure 8-1Enterprise systems feature a set of integrated software modules and a central database that enables data to


be shared by many different business processes and functional areas throughout the enterprise



The Supply ChainThe Supply Chain

Supply Chain Management Systems

e Supp y C ae Supp y C a• Network of organizations and processes for:

• Procuring raw materials

• Transforming them into products

• Distributing the products

• Upstream supply chain: • Firm’s suppliers, suppliers’ suppliers, processes for managing

relationships with themrelationships with them

• Downstream supply chain: • Organizations and processes responsible for delivering


• Organizations and processes responsible for delivering products to customers



Nike’s Supply ChainNike’s Supply Chain


e s Supp y C ae s Supp y C a

Figure 8-2This figure illustrates the major entities in Nike’s supply chain and the flow of information upstream and downstream to coordinate the activities involved in buying, making, and moving a product. Shown here is a simplified supply chain,

ith th t ti


with the upstream portion focusing only on the suppliers for sneakers and sneaker soles.



Information and Supply Chain ManagementInformation and Supply Chain Management


o at o a d Supp y C a a age e to at o a d Supp y C a a age e t

• Inefficiencies cut into a company’s operating costs• Can waste up to 25% of operating expensesp p g p

• Just-in-time strategy:• Components arrive as they are needed• Finished goods shipped after leaving assembly line

• Safety stockff f f f• Buffer for lack of flexibility in supply chain

• Bullwhip effect• Information about product demand gets distorted as it passes


• Information about product demand gets distorted as it passes from one entity to next across supply chain



The Bullwhip EffectThe Bullwhip Effect


e u p ecte u p ect

Figure 8-3Figure 8-3Inaccurate information can cause minor fluctuations in demand for a product to be amplified as one moves further back in the supply chain. Minor fluctuations in


retail sales for a product can create excess inventory for distributors, manufacturers, and suppliers.



Supply Chain Management ApplicationsSupply Chain Management Applications


Supp y C a a age e t pp cat o sSupp y C a a age e t pp cat o s

• Supply chain planning systems• Model existing supply chainModel existing supply chain

• Demand planning

• Optimize sourcing, manufacturing plans

• Establish inventory levels

• Identifying transportation modes

• Supply chain execution systems• Manage flow of products through distribution centers and

h


warehouses



Global Supply Chains and the InternetGlobal Supply Chains and the Internet


G oba Supp y C a s a d t e te etG oba Supp y C a s a d t e te et• Before Internet, supply chain coordination hampered

by difficulties of using disparate internal supply chain systemssystems

• Enterprise systems supply some integration of internal supply chain processes but not designed to deal withsupply chain processes but not designed to deal with external supply chain processes

• Intranets and Extranets• Intranets: To improve coordination among internal supply

chain processes


• Extranets: To coordinate supply chain processes shared with their business partners



Intranets and Extranets for Supply Chain ManagementIntranets and Extranets for Supply Chain Management


t a ets a d t a ets o Supp y C a a age e tt a ets a d t a ets o Supp y C a a age e t

Figure 8-4Intranets integrate information from isolated business processes within the firm to help manage its internal supply chain. Access to these private intranets can also be extended to authorized


suppliers, distributors, logistics services, and, sometimes, to retail customers to improve coordination of external supply chain processes.





G oba Supp y C a s a d t e te etG oba Supp y C a s a d t e te et• Global supply chain issues

• Global supply chains typically span greater geographic pp y yp y p g g g pdistances and time differences

• More complex pricing issues (local taxes, transportation, etc )etc.)

• Foreign government regulations

• Internet helps companies manage many aspects ofInternet helps companies manage many aspects of global supply chains• Sourcing, transportation, communications,


ginternational finance





G oba Supp y C a s a d t e te etG oba Supp y C a s a d t e te et

• Supply chain management systems• Push-based model (build-to-stock)( )

• Schedules based on best guesses of demand

• Pull-based model (demand-driven)• Customer orders trigger events in supply chain

• Sequential supply chains• Information and materials flow sequentially from company to q y p y

company

• Concurrent supply chains• Information flows in many directions simultaneously among


• Information flows in many directions simultaneously among members of a supply chain network



PushPush-- Versus PullVersus Pull--Based Supply Chain ModelsBased Supply Chain Models


usus e sus ue sus u ased Supp y C a ode sased Supp y C a ode s


Figure 8-5The difference between push- and pull-based models is summarized by the slogan “Make what we sell, not sell what we make.”



Business Value of Supply Chain Management SystemsBusiness Value of Supply Chain Management Systems


• Match supply to demand

Red ce in entor le els

us ess a ue o Supp y C a a age e t Syste sus ess a ue o Supp y C a a age e t Syste s

• Reduce inventory levels

• Improve delivery service

• Speed product time to market

• Use assets more effectively

• Reduced supply chain costs lead to increased profitability


• Increased sales



The Future InternetThe Future Internet--Drive Supply ChainDrive Supply Chain


e utu e te ete utu e te et e Supp y C ae Supp y C a

Figure 8-6The future Internet-driven supply chain operates like a digital logistics nervous system. It provides multidirectional Communication among firms, networks


of firms, and e-marketplaces so that entire networks of supply chain partners can immediately adjust inventories, orders, and capacities.



What Is Customer Relationship Management?What Is Customer Relationship Management?

Customer Relationship Management Systems

at s Custo e e at o s p a age e tat s Custo e e at o s p a age e t• Knowing the customer

• In large businesses, too many customers and too many ways customers interact with firm

• Customer relationship management (CRM) systemssystems• Capture and integrate customer data from all over the

organization• Consolidate and analyze customer data• Distribute customer information to various systems and

customer touch points across enterprise


customer touch points across enterprise• Provide single enterprise view of customers



Customer Relationship Management (CRM)Customer Relationship Management (CRM)


Custo e e at o s p a age e t (C )Custo e e at o s p a age e t (C )

Figure 8-7CRM systems examine customers from a multifaceted perspective. These systems


use a set of integrated applications to address all aspects of the customer relationship, including customer service, sales, and marketing.



CRM SoftwareCRM Software


CRM SoftwareCRM Software• CRM packages range from niche tools to large-

scale enterprise applications• More comprehensive have modules for:

• Partner relationship management (PRM)• Integrating lead generation, pricing, promotions, order

configurations, and availability

• Tools to assess partners’ performancesTools to assess partners performances

• Employee relationship management (ERM)• E.g. Setting objectives, employee performance management,


performance-based compensation, employee training



CRM SoftwareCRM Software


CRM SoftwareCRM Software• CRM packages typically include tools for:

• Sales force automation (SFA)( )

• E.g. sales prospect and contact information, and sales quote generation capabilities

• Customer service

• E.g. assigning and managing customer service requests; Web-based self-service capabilitiesp

• Marketing

• E.g. capturing prospect and customer data, scheduling


and tracking direct-marketing mailings or e-mail



How CRM Systems Support MarketingHow CRM Systems Support Marketing


o C Syste s Suppo t a et go C Syste s Suppo t a et g

Figure 8-8Customer relationship management software provides a single point for users to


manage and evaluate marketing campaigns across multiple channels, including e-mail, direct mail, telephone, the Web, and wireless messages.



CRM Software CapabilitiesCRM Software Capabilities


C So t a e Capab t esC So t a e Capab t es

Figure 8-9The major CRM software products support business processes in sales, service, and


marketing, integrating customer information from many different sources. Included are support for both the operational and analytical aspects of CRM.



Customer Loyalty Management Process MapCustomer Loyalty Management Process Map


Custo e oya ty a age e t ocess apCusto e oya ty a age e t ocess ap

This process map shows how a best practice for promoting customer loyalty through customer service would be modeled by


Figure 8-10

p p p p g y y g ycustomer relationship management software. The CRM software helps firms identify high-value customers for preferential treatment.




Operational and Analytical CRMOperational and Analytical CRM• Operational CRM:

• Customer-facing applications such as sales force

Operational and Analytical CRMOperational and Analytical CRM

automation, call center and customer service support, and marketing automation

• Analytical CRM: • Analyze customer data output from operationalAnalyze customer data output from operational

CRM applications• Based on data warehouses populated by operational

CRM systems and customer touch points


CRM systems and customer touch points• Customer lifetime value (CLTV)



Analytical CRM Data WarehouseAnalytical CRM Data Warehouse


a yt ca C ata a e ousea yt ca C ata a e ouse

Figure 8-11Analytical CRM uses a customer


ydata warehouse and tools to analyze customer data collected from the firm’s customer touch points and from other sources.



Business Value of Customer Relationship ManagementBusiness Value of Customer Relationship Management


us ess a ue o Custo e e at o s p a age e tus ess a ue o Custo e e at o s p a age e t

• Business benefits• Increased customer satisfaction• Reduced direct-marketing costs• More effective marketing• Lower costs for customer acquisition/retention• Increased sales revenue

• Churn rate• Churn rate• Number of customers who stop using or purchasing products

or services from a company.


• Indicator of growth or decline of firm’s customer base



Enterprise Application ChallengesEnterprise Application Challenges

Enterprise Applications: New Opportunities and Challenges

te p se pp cat o C a e geste p se pp cat o C a e ges

• Highly expensive to purchase and implement enterprise applications – total cost may be 4 to 5 times the price of software

• Technology changes• Business process changes• Organizational changesg g• Switching costs, dependence on software vendors• Data standardization management cleansing


Data standardization, management, cleansing



Interactive Session: PeopleInteractive Session: People


ppAlaska Airlines Soars with Customer Relationship ManagementAlaska Airlines Soars with Customer Relationship Management

• Read the Interactive Session and then discuss the following questions:• What was the problem at Alaska Airlines in this story? How did

the problem affect business performance?

• What was the solution chosen by the airline? How well did this solution help the airline compete with its rivals?

• What are the ways in which a typical customer interacts with an airline? List and briefly describe the customer data elements generated during these interactions (making a reservation, using frequent flyer miles, completing a flight.) How does information


q y , p g g )from CRM improve these interactions?




Extending Enterprise SoftwareExtending Enterprise Software

• To bring greater value from enterprise applications

te d g te p se So t a ete d g te p se So t a e

• Enterprise solutions / suites: Make applications more flexible, Web-enabled, integrated with other systemssystems

• Service platform: Integrates multiple applications to deliver a seamless experience for all partiesp p

• Order-to-cash process

• Portal software


Portal software



OrderOrder--toto--Cash ServiceCash Service


O deO de toto Cas Se ceCas Se ce

Fi 8 12Figure 8-12Order-to-cash is a composite process that integrates data from individual enterprise systems and legacy financial applications. The process


must be modeled and translated into a software system using application integration tools.



Interactive Session: OrganizationsInteractive Session: Organizations

Enterprise Systems

ggInvacare Struggles with Its Enterprise System ImplementationInvacare Struggles with Its Enterprise System Implementation

• Read the Interactive Session and then discuss theRead the Interactive Session and then discuss the following questions:• How did problems implementing the Oracle enterprise

software affect Invacare’s business performance?

• What people, organization and technology factors affected Invacare’s ERP implementation?p

• If you were Invacare’s management, what steps would you have taken to prevent these problems?


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