Answer the Review Question chapter 9 from book• How do enterprise systems help businesses achieve operational excellence?

Define an enterprise system and explain how enterprise software works. Enterprise system is an integrated enterprise-wide information system that

coordinates key internal processes of the firm. Enterprise software consists of a set of interdependent software modules that support basic internal business processes. Set of integrated modules for applications such as sales and distribution, financial accounting, investment management, materials management, production planning, plant maintenance, and human resources that allow data to be used by multiple functions and business processes.

The common central database collects data from and feeds the data into numerous applications that can support nearly all of an organization’s internal business activities. When new information is entered by one process, the information is made available immediately to other business processes. Organizations implementing enterprise software would have to adopt the business processes embedded in the software and, if necessary, change their business processes to conform to those in the software.

The software allows data to be used by multiple functions and business processes for precise organizational coordination and control. Organizations implementing this software would have to first select the functions of the system they wish to use and then map their business processes to the predefined business processes in the software. A particular firm would use configuration tables provided by the software to tailor a particular aspect of the system to the way it does business.

List Business processes that are supported by enterprise systems.• Financial and Accounting Processes , including general ledger, account payable, account

receivable, fixed assets, cash management and forecasting, products-cost accounting, cost-center accounting, asset accounting, tax accounting, credit management, and financial reporting.

• Human Resources Processes , including personal administration, time accounting, payroll, personnel training and development, benefits accounting, applicant tracking, time management, compensation, workforce planning, performance management, and travel expense reporting.

• Manufacturing and production prosesses , including procurement, inventory management, purchasing, shipping, production planning, production scheduling, material requirements planning, quality control, distribution, transportation execution,

and plan and equipment maintenance.• Sales and marketing processes , including order processing, quotations, contract, product

configuration, pricing, billing, credit checking, incentive and commision management, and sales planning.

• How do supply chain management systems coordinate planning, production, and logistics with suppliers?Describe supply chain management software. How does it help in demand planning.

Supply chain management software (SCMS) is a business term which refers to a whole range of software tools or modules used in executing supply chain transactions, managing supplier relationships and controlling associated business processes. A requirement of many SCMS often includes forecasting. Such tools often attempt to balance the disparity between supply and demand by improving business processes and using algorithms and consumption analysis to better plan future needs

Supply chain management software is classified as either software to help businesses plan their supply chains (supply chain planning) or software to help them execute the supply chain steps (supply chain execution). Supply chain planning systems enable the firm to model its existing supply chain, generate demand forecasts for products, and develop optimal sourcing and manufacturing plans. Such systems help companies make better decision such as determining how much of specific product to manufacture in a different time period; establishing inventory level for raw materials, intermediate products, and finished goods; determining whewe to store finished goods; and identifiying the transportation mode to use for product delivery.

Supply chain execution systems manage the flow of produts through distribution centers and werehouses to ensure that products delivered to the right location in the most efficient manner. They track the phisycal status of goods, the management of material, werehouse and transportation operations, and financial information involving all parties.

One of the most important functions is demand planning, which determines how much product a business needs to make to satisfy all of its customers’ demands. These functions are referred to as order planning, advanced scheduling, demand planning, distribution planning, and transportation planning.

Provide an example of an effective supply chain management system in a current organization. Explain what makes it successful.

Define and compare supply chain planning systems and supply chain execution systems.Supply chain planning systems enable the firm to generate demand forecasts for a

product and to develop sourcing and manufacturing plans for that product. They help companies make better operating decisions such as determining how much of a specific product to manufacture in a given time period; establishing inventory levels for raw materials, intermediate products, and finished goods; determining where to store finished goods; and identifying the transportation mode to use for product delivery. One of the most important functions is demand planning, which determines how much product a business needs to make to satisfy all of its customers’ demands. These functions are referred to as order planning, advanced scheduling, demand planning, distribution planning, and transportation planning.

Supply chain execution systems manage the flow of products through distribution centers and warehouses to ensure that products are delivered to the right locations in the most efficient manner. They track the physical status of goods, the management of materials, warehouse and transportation operations, and financial information involving all parties. These functions are referred to as order commitments, final production, replenishment, distribution management, and reverse distribution.

Supply chain planning (SCP) and supply chain execution are the two main categories of SCM software. SCP software applications apply algorithms to predict future requirements and balance supply and demand; SCE software applications track the physical status of goods, the management of materials, and financial information involving all parties.

Give a diagrammatic sketch of a future Internet-driven supply chain system. How does this vary from contemporary systems?

Distinguish between a push-based and pull-based model of supply chain management and explain how contemporary supply chain management systems facilitate a pull-based model.

Under pull supply chain, products are manufactured or procured based on specific customer requests. We also know it as “Built to Order” or “Configured to Order” model. We often see this model operating in IT/High Tech Industries, where customization is the competitive advantage. Briefly, we have seen this model in automotive industry and it is being used in high end luxury market segment. The objective of this model is to minimize the Inventory carrying and optimize supply. Pull model are is as a response to growing uncertainty in demand and short product cycle. Some of the characteristics of this model include:

1. Volatile demand situation;2. High rate of Customization;3. Minimal Inventory Carrying;4. Not a off the shelf product;5. Highly dynamic and effective distribution network.

Under Push model, products are manufactured or procured based on anticipated customer orders (speculative). This model is also known as Built to Inventory or Built to Sock. The name itself reveals its functionality. Products are manufactured in anticipation of customer needs. There are no prizes for identifying industries that use push model, it is obvious that retail heavily uses push model. Even though direct to store or cross docks are implemented, overall retail supply chain is based on push model. Some of the big names in the retail industry are trying to adopt the hybrid model which is a combination of pull and push. Some of the key challenges and characteristics could include:

1. High inventory costs,2. Challenging working capital requirements due to low inventory turns;3. Huge warehousing and distribution costs;4. Inability to meet dynamic market conditions and5. Seasonal demand and off the shelf product.

In a push-based model, production master schedules are based on forecasts or best guesses of demand for products, and products are “pushed” to customers. In a pull-based model, actual customer orders or purchases trigger events in the supply chain.

In contemporary supply chain management systems, the Internet and Internet technology make it possible to move from sequential supply chains, where information and materials flow sequentially from company to company, to concurrent supply chains, where information flows in many directions simultaneously among members of a supply chain network. Members of the network immediately adjust to changes in schedules or orders.

• How do customer relationship management systems help firms achieve customer intimacy?Define customer relationship management and explain why customer relationships are so important today.

Customer relationship management: the strategy that a company uses to handle customer interactions. a business and technology discipline that uses information systems to coordinate all of the business processes surrounding the firm’s interaction with its current and future customers in sales, marketing, customer service, and technical support.

Importance of customer relationships: Customer Relationship Management is the strongest and the most efficient approach in maintaining and creating relationships with customers. Its not only pure business but also ideate strong personal bonding within people. Once this personal and emotional linkage is built, it is very easy for an organization to identify the actual needs of customer and help them to serve them in a better way. CRM allows you to identify and satisfy your best customers, the small percentage of people who generate the biggest chunk of your sales and profits. Even sole proprietors can deepen their relationships with their most valuable customers. With enough information, the company knows when to send the customer information about an upcoming sale or a new product or service offering. The more the company knows about the customer’s buying patterns and preference, the more likely it is that the offer will be on target. Not all customers are equal and 80 percent of profits come form 20 percent of customers. How much do you know about your customers? If you don’t have detailed knowledge of your customers and their needs, you are likely to be blindsided by someone who does. Globalization of business, the Internet, and electronic commerce have put more power in the hands of customers. Companies are realizing that their only enduring competitive strength may be their relationships with their customers. Some say that the basis of competition has switched from who sells the most products and services to who “owns” the customer, and that customer relationships represent the firm’s most valuable asset.

Describe how partner relationship management (PRM) and employee relationship management (ERM) are related to customer relationship management (CRM).

Good CRM systems provide data and analytical tools for determining the financial lifetime value of a customer and customer loyalty and for identifying profitable customers and their needs. Commercial customer relationship management (CRM) software packages range from niche tools that perform limited functions, such as personalizing Web sites for specific customers, to large-scale enterprise applications.

CRM systems capture and integrate customer data from all over the organization, consolidate the data, analyze the data, and then distribute the results to various systems and customer touch points across the enterprise. Companies can use this customer knowledge when they interact with customers to provide them with better service or to sell new products and services. CRM systems integrate and automate many customer-facing processes in sales, marketing, and customer service, providing an enterprise-wide view of customers. These systems track all of the ways in which a company interacts with its customers and analyze these interactions to maximize customer lifetime value for the firm. CRM extends to a firm’s business partners who are responsible for selling to customers.

The more comprehensive CRM packages contain modules for partner relationship management (PRM) and employee relationship management (ERM).

PRM uses many of the same data, tools, and systems as CRM to enhance collaboration between a company and its selling partners. It provides a company and its selling partners with the ability to trade information and distribute leads and data about customers, integrating lead generation, pricing, promotions, order configurations, and availability. If a company does not sell directly to customers but rather works through distributors or retailers, PRM helps these channels sell to customers directly.

ERM software deals with employee issues that are closely related to CRM, such as setting objectives, employee performance management, performance-based compensation, and employee training. Employee relationship management (ERM) provides employees with a subset of CRM applications available through a Web browser

Describe the tools and capabilities of customer relationship management software for sales, marketing, and customer service.

Customer relationship management systems typically provide software and online tools for sales, customer service, and marketing. Capabilities include the following:

• Sales:• Sales force automation modules in CRM systems help sales staff increase their

productivity by focusing sales efforts on the most profitable customers, those who are good candidates for sales and services.

• Provide sales prospect and contact information, product information, product configuration capabilities, and sales quote generation capabilities.

• Enable sales, marketing, and delivery departments to easily share customer and prospect information.

• Increase salespeople’s efficiency in reducing the cost per sale as well as the cost of acquiring new customers and retaining old ones.

• Capabilities for sales, forecasting, territory management, and team selling.• Supports direct-marketing campaigns by providing capabilities for capturing

prospect and customer data, for providing product and service information, for qualifying leads for targeted marketing, and for scheduling and tracking direct-marketing mailings or e-mail.

• Customer Service:• Provide information and tools to make call centers, help desks, and customer

support staff more efficient.• Includes capabilities for assigning and managing customer service requests.• May also include Web-based self-service capabilities.

• Marketing:• Support direct-marketing campaigns by providing capabilities for capturing

prospects and customer data, for providing product and service information for qualifying leads for targeted marketing, and for scheduling and tracking direct-marketing mailings or e-mail.

• Includes tools for analyzing marketing and customer data. Identifies profitable and unprofitable customers, designs products and services to satisfy specific customer needs and interests, and identifies opportunities for cross-selling, up-selling, and bundling.

What is the effect of CRM systems on an organization’s ‘churn rate’?Information from CRM system increases sales revenue by identifiying the most

profitable customers and segments for focused marketing and cross-selling. Customer churn is reduced as sales, services, and marketing better response to customer needs. The churn rate measures the number of customers who stop using or purchasing products or

services from a company. It is an important indicator of the growth or declined of a firm’s customer base. CRM solution can be used to create an effective retention model and reduce churn.

• Analyze the reason for customer churnFirst, organizations need to analyze the customer base by those who have left their

organization for a competitor. Many times what moves a customer to a competitor isn’t always clear or understandable to the organization itself. Talking to the customers who have left – finding out what was the deciding factor and building that information into the CRM database can be the first step in putting an exit barrier in front of a valuable customer. In other words, don’t make the same mistake twice, understand what happened and prevent it from happening again.

• Understand who is a valuable customerSecond, organizations need to understand who their most valuable customers are.

There are mathematical measurements which CRM can apply to the customer profile. Products per customer, especially high margin products are just one measure. Measures of customer lifetime value, margin per customer and incremental revenue per customer are all critical factors in knowing who the customer is and the aggregate value in retention or dispersion of that customer. Knowing the lifetime value of a customer is projectable, based upon the data in the CRM base concerning the product basket the customer carries.

This information can also be used to prospect the database for those customers on the verge of becoming “most valuable” and identify those “least valuable” to the organization. The allocation of resources to those most valuable or most likely to become a valued customer provides not only a reduced attrition rate but an improved apportionment of retention dollars.

• Communicate frequently with your customersThird, organizations need to communicate with their valued customers.

Communication can be by phone, mail email or in person. In some cases, this contact may be significant enough to keep a customer from leaving the organization. The CRM solution data should track the frequency and method of communication as well as the success or failure of that interaction in retaining the customer. In some cases less may be more; the CRM data should also identify those customers who request little or no contact.

These three principles – analyze, understand and communicate are the first steps in developing a retention model within the CRM solution data system. Application of these three principles to high valued customers will be the first step in understanding the segmentation of the organization's customer base along the positions of loyalty. It will enable the company to begin to identify those valued customers who are on the brink of

leaving, allowing proactive churn management.