PPTTEST 04/20/23 02:10
1
IT
Ron Williams
Business Innovation Through Information Technology
ERP, CRM, & SCM
PPTTEST 04/20/23 02:10
2
IT
Ron Williams
The Holistic View of IT Strategy Organization
Bus.
ORG IT
ProcessesJobs Beliefs
Incentives
Processes
Task
Relationship
Architecture
Business Needs
Policies
Technology
InformationalInformational
StrategicStrategic
TransactionalTransactional
InfrastructureInfrastructure
InformationalInformational
StrategicStrategic
TransactionalTransactional
InfrastructureInfrastructure
IT Investment Portfolio
Technology
HardwareSoftware
InformationNetwork
“Emerging”
IS Management
OwnSourceManage
IS Development
SDLC
Project Mgn’t
Business
Technology
PPTTEST 04/20/23 02:10
3
IT
Ron Williams
Value Chain
Inbound Logistics
Operations Outbound Logistics
Marketing & Sales
Service
Procurement
Technology & Development
Human Resource Management
Firm Infrastructure
Support Activities
Primary Activities
Source: Michael Porter 1985
Processes: Activities that the firm has value enabledReduce cost & cycle time Improve qualityImprove service
PPTTEST 04/20/23 02:10
4
IT
Ron Williams
What’s the core of ERP?
• It’s not resources, it’s not planning, but it is enterprise
• It is back office software
• It’s a common platform for taking the customer order and processes through invoice and revenue– Order processing with customer history, inventory levels, and credit info.– Manufacturing planning– Inventory Management– Purchase order processing/management– Cost accounting– Financials– Human resources
• Integrated set of software programs that run off a single database
• Enables internal departments to better share information and communicate
• Started in discrete manufacturing and moved on.
• Other industries – Some have implemented modulus like order management or finances– Other have their own industry specific back office systems
PPTTEST 04/20/23 02:10
5
IT
Ron Williams
Enterprise Resource Planning (ERP)
Source: Davenport
Focus on cross-functional activitiesTask-driven processesCommon operational databaseReducing legacy systems
PPTTEST 04/20/23 02:10
6
IT
Ron Williams
ERP Implementation & Issues• Who has done it
– 60% of multi-national firms had implemented ERP by 19992
– General survey - 38% had implemented, 26% were implementing according to CIO survey of 10/07/01
• Implementations cost & time– Average cost $15 million (can run as high as 2-3% of revenue)13
• Highest - $300 million• Lowest - $400,000• Total cost of ownership for heads-down user - $53,000
– Takes on average 21 months to install with benefits starting to accrue after 31 months3
– Why so long and cost so much?• Simultaneous process redesign of multiple functional areas within the firm• Need to adapt processes to the capabilities of the software
• Median annual savings - $1.6 million13
• Many reported problems– Hershey Foods, Nike, Whirlpool– Agilent Technologies, August 19, 2002 Reports that ERP installation problems cost them
• $105 million in revenue for the quarter• $70 million in operating profit
3. Hitt, Wu, Xiaoge13. Meta Survey of 63 companies in 1998 reported by Hitt, Wu, Xiaoge and CIO Magazine
PPTTEST 04/20/23 02:10
7
IT
Ron Williams
Application Heterogeneity Built over The Years
Some Shared InfrastructureSome Servers, Possibly a data center or two, Network?
Desktop platforms, e-mail
Sales
Marketing
Mfg.
Dist.
DataWarehouse
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Many point to point connections (only 2 sources shown here)Change one - Broad impact on internals of many other systemsSystems are complex and increasingly fragile
PPTTEST 04/20/23 02:10
8
IT
Ron Williams
ERP was also a Technology Fix
Shared InfrastructureNetwork, Some Servers, Possibly a data center or two
Sales
Marketing
Mfg.
Dist.
DataWarehouseA
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New ERP Application becomes extension to Infrastructure
Reduce # of Legacy SystemsBuild Common Operational DatabaseReduce Maintenance and Future Development
PPTTEST 04/20/23 02:10
9
IT
Ron Williams
General ERP Benefits12
• Improved information flow across sub-units through standardization and integration of activities
• Enable centralization of administrative activities such as account payables and payroll
• Reduced IS maintenance costs and increased the ability to deploy new IS functionality
• Enable a transformation from inefficient business processes toward accepted best of practice processes
• Often resulting in – Improved information to customers– Reduced cycle times– On-time completion rates
12. Gattiker and Goodhue (2000)
PPTTEST 04/20/23 02:10
10
IT
Ron Williams
ERP
Suppliers Enterprise Customers
Value Chain
ERP
Enterprise
PPTTEST 04/20/23 02:10
11
IT
Ron Williams
What is CRM?
• CRM is a technology-enabled business strategy whereby companies leverage increased customer knowledge to build profitable relationships, based on optimizing value delivered to and realized from their customers17
• Typically includes– Data Warehousing – capturing and management of customer information – Automating front-office functions – typically including
• Sales(force automation) – Lead/opportunity identification & tracking, access to information, analysis and reporting, configurators
• Marketing – campaign management & e-marketing• Customer service (Call center effectiveness) – Voice response units, call routing, linking caller info with
call, link to ERP system, problem resolution• eCustomer service• Channel linkage
• Hard to separate CRM front-office functions from e-business– ERP built a base before the Web– CRM is growing along with the Web
• When discussing CRM it is very important to understand the functions being discussed, where the investments are being made, and associated returns or lack thereof
17.The CRM Forum
PPTTEST 04/20/23 02:10
12
IT
Ron Williams
ERP & CRM
Suppliers Enterprise Customers
Value Chain
ERP CRM
Enterprise
PPTTEST 04/20/23 02:10
13
IT
Ron Williams
Customer Relationship Management
• Who has or is implementing 1
– 40% of high tech, aerospace, retailing, & utilities (US & Europe)– 66% of US telecom– >50% of US financial services, pharmaceutical, &
transportations
• Highly complex installations can cost $100 million and take 3 years
• Results– 35% of respondents said met expectations 2
– 20% of US retail banks have raised profitability as a result 3
1. AMR Research 2001
2. IDC Study 2001
3. Mc Kinsey Productivity Study 2001
MGI Study
PPTTEST 04/20/23 02:10
15
IT
Ron Williams
Supply Chain Management (SCM)
• Supply chain planning– Forecasting– Materials & capacity planning– Transportation planning– Facilities planning– Scheduling– Sourcing
• Logistics coordination - Execution– Forward– Reverse
• Software focus– Complex analytical tools – Inter-organizational transactions– Collaboration
PPTTEST 04/20/23 02:10
16
IT
Ron Williams
Enterprise Systems
Suppliers Enterprise Customers
Value Chain
ERPSCM CRM
Enterprise
PPTTEST 04/20/23 02:10
17
IT
Ron Williams
SCM Benefits and Issues
• Benefits– Costs – inventory, people, prices paid, returns, physical assets– Cycle time – design, order fulfillment– Quality
• Issues – Same as ERP & CRM
PPTTEST 04/20/23 02:10
18
IT
Ron Williams
What’s Behind the Problems with Enterprise Systems?
• Business ownership
• Process changes
• Software complexity
• Long cycle times
• Clean-up vs. new value
• Managing inputs vs. outcomes
PPTTEST 04/20/23 02:10
19
IT
Ron Williams
Enterprise Systems - Where They fit, What They Fix from an IT Viewpoint
Shared Infrastructure TCP/IP Network, Web Application Servers, Middleware, Security,
Pervasive PCs, Rationalized Information, Collaboration Capabilities, Analytics, Privacy Management
Sales
Marketing
Mfg. Dist.
DataWarehouseA
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New ERP Application becomes extension to Infrastructure
CRM
SCM
Cu
stom
ers
Cu
stom
ers
Ven
dor
Ven
dor
Process breakageLabor intensiveSlow and Time intensiveFragileDifficult to integrateSlow, Hard, & Expensive to change
PPTTEST 04/20/23 02:10
20
IT
Ron Williams
LegacyApplication
ApplicationProcessing
ApplicationProcessing
DBMS
Database
Server
Distributed computing
Server
Client
Client
Client
Networking: Three-Tier Client/Server
PPTTEST 04/20/23 02:10
21
IT
Ron Williams
Legacy ApplicationsERP Applications
Browser
Web ApplicationServer
DBMS
ERP Database
Server
Distributed computing
Server
Client
Client
Client
Front-ending Enterprise Systems
User Friendly Applications