Building Organizational Partnerships Using Enterprise Information Systems

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8
Chapter
Building Organizational Partnerships Using
Enterprise Information Systems
If the Internet turns out not to be the future
of computing, were toast. Larry Ellison,
Founder and CEO, Oracle Corporation
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Learning Objectives
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Learning Objectives
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Enterprise Systems

• Problem
• Information systems growing over time
• Lack of integration
• Different computing platforms
• Difficult to integrate
• Data must be reentered from one system to another
• Same pieces of data stored in several versions

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Legacy System Approach
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Enterprise System Approach
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Supporting Business Activities

• Internally focused systems
• Support functional areas, business processes and
  decision-making within an organization
• New information (value) is added at every step

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Externally Focused Systems

• Coordinate business activities with customers,
  suppliers, business partners and others who
  operate outside the organization

• Interorganizational systems
• Streamline the flow of information between
  companies

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Internally Focused Systems Value Chain

• Flow of information through a set of business
  activities
• Core activities functional areas that process
  inputs and produce outputs
• Support activities enable core activities to
  take place

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Core Activities

• Inbound logistics activities
• Receiving and stocking raw materials, parts and
  products
• Cisco delivery of electronic components from
  suppliers
• Operations and manufacturing activities
• Order processing and/or manufacturing of end
  products
• Dell component parts assembled to make products
• Outbound logistics activities
• Distribution of end products
• Amazon.com delivery of books to customers

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Core Activities (II)

• Marketing and Sales activities
• Presale marketing activities (e.g., creating
  marketing brochures)
• Amtrak use of IS to update prices and schedules
• Customer service activities
• Postsale activities
• HP downloads related to purchased products

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Support Activities

• Administrative activities
• Support of day-to-day operations (for all
  functional areas)
• Infrastructure activities
• Implement hardware and software needed
• Human resource activities
• Employee management

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Support Activities

• Technology development activities
• Design and development of applications to support
  the primary activities
• Procurement activities
• Purchasing of goods and services (inputs into the
  primary activities)

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Externally Focused Applications Value System

• Coordination of multiple value chains

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Externally Focused Applications Value System

• Information Flows in a Value System
• Upstream information flow information received
  from another company
• Downstream information flow information
  produced by a company and sent to another
  organization

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The Rise of Enterprise Systems

• Packaged applications
• Written by third-party vendors
• Used by many different organizations
• Useful for standardized, repetitive tasks
• Cost effective
• E.g., Microsoft Money and Quicken

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The Rise of Enterprise Systems

• Custom applications
• Developed exclusively for a specific organization
• Designed for particular business needs
• Higher development costs

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Evolution of Enterprise Systems

• Enterprise systems
• Organizations start with stand-alone applications
• Legacy systems

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Legacy Systems

• Each department has its own system
• Infrastructure specific
• Inefficient processes
• Potential for inaccuracies

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The Need for Integrated Enterprise Systems

• Advantages of integrated systems
• Centralized point of access
• Conversion needed
• Enterprise Resource Planning (ERP) vendors offer
  different modules
• Components that can be selectively implemented
• E.g., modules of mySAP business suite

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Vanilla Versus Customized Software

• Vanilla version
• Modules the version comes with out of the box
• Certain processes might not be supported
• Customization
• Additional software or changes to vanilla version
• Always needs to be updated with new versions of
  vanilla

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Best Practices-Based Software

• Most ERP vendors build best practices into their
  ERP systems
• Identify business processes in need of change
• Future updates are smoother if businesses change
  their business processes to fit with ERP systems
• Is following the best practices always the best
  strategy?
• If companies have competitive advantage from
  unique business processes

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Learning Objectives
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Business Process Management

• Systematic and structured improvement approach
• All or part of organization is involved
• Rethinking and redesign of business processes
• Became popular in 1990s
• IS seen as key enabler for radical change
• Process intended to be cross-functional

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BPM Steps

• Develop a vision for the organization (specify
  business objectives)
• Identify critical processes that are to be
  redesigned
• Understand and measure existing processes as a
  baseline
• Identify ways IS can be used for improvement
• Design and implement a prototype of the new
  processes

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Conditions Leading to a Successful BPM

• Support by senior management
• Shared vision by all organizational members
• Realistic expectations
• Participants empowered to make changes
• The right people participating
• Sound management practices
• Appropriate funding

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Enterprise Resource Planning

• Data warehouse
• Large, centralized data repository
• Single place for data storage and access

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Choosing an ERP System

• Control
• Centralized control vs. control within specific
  business units
• Level of detail provided to management
• Consistency of policies and procedures
• Business requirements
• Selection of modules
• Core and extended components

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Core and Extended ERP Components

• Core components support primary internal
  activities
• Extended components support primary external
  activities

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ERP Limitations

• ERP falls short in communicating across
  organizational boundaries
• Not well suited for managing value system
  activities
• Other systems can work with ERP to provide these
  capabilities

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Learning Objectives
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Customer Relationship Management
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Customer Relationship Management

• Web has changed the business
• Customers have the power
• Transactions vs. relationships
• Keeping customers satisfied is key
• CRM
• Corporate-level strategy
• Concentrates on the downstream information flow
• To attract potential customers
• Creation of customer loyalty
• Managers need to be able to monitor and analyze
  factors driving customer satisfaction

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Key Benefits of CRM

• Enables 24/7/365 operations
• Individualized service
• Improved information
• Speeds up problem identification/resolution
• Speeds up processes
• Improved integration
• Improved product development
• Improved planning

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Developing a CRM Strategy

• More than just software purchase and installation
• Enterprise-wide changes

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Policy and Business Process Changes

• Policies and procedures need to reflect
  customer-focused culture

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Customer Service Changes

• Customer-focused measures of quality
• Process changes to enhance customer experience

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Employee Training Changes

• Employees from all business areas must value
  customer service and satisfaction

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Data Collection, Analysis and Sharing Changes

• All aspects of customer experience must be
  tracked, analyzed and shared
• Consider ethical concerns

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Architecture of a CRM
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Operational CRM

• Systems for customer interaction and service
• Personalized and efficient customer service
• Access to complete information about customer

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Sales Force Automation

• Component of operational CRM
• Primary goals
• Identification of potential customers
• Streamlining of selling processes
• Improvement of managerial information

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Sales Force Automation

• Supports day-to-day sales activities
• Order processing and tracking
• Contact development, assignment and management
• Customer history preferences
• Sales forecasting and performance analysis
• Sales administration

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Advantages of Sales Force Management Systems for
Sales Personnel
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Advantages of Sales Force Management Systems for
Sales Managers
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Examples of Sales Measures Tracked by SFA

• Revenue per sales person, per territory, or as a
  percentage of sales quota
• Margins by product category, customer segment, or
  customer
• Number of calls per day, time spent per contract,
  revenue per call, cost per call, ratio of orders
  to calls
• Number of lost customers per period or cost of
  customer acquisition

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SFA Provides Improved Understanding of Market
Conditions

• Improved understanding of markets, segments and
  customers
• Improved understanding of competitors
• Enhanced understanding of organizations
  strengths and weaknesses
• Better understanding of economic structure of the
  industry
• Enhanced product development
• Improved strategy development and coordination
  with the sales function

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Customer Service and Support

• Second component of operational CRM
• Automation of traditional help desk services
• Customer interaction center (CIC)
• Multiple communication channels
• Customer service anytime, anywhere through any
  communication channel
• Low support cost

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Enterprise Marketing Automation

• Third component of an operational CRM
• Comprehensive view of the competitive environment
• Common factors tracked by EMS
• Economic
• Governmental and public policy
• Technology and infrastructure
• Ecology
• Cultural
• Suppliers

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Analytical CRM

• Analysis of customer behavior and perceptions
• Customized marketing
• Up-selling
• Retaining customers
• Key technologies used to create predictive models
• Data mining
• Decision support systems
• Continuous data collection and analysis is
  necessary

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Customer Focused Business Processes Addressed by
Analytical CRM

• Marketing campaign management and analysis
• Customer campaign customization
• Customer communication optimization
• Customer segmentation and sales coverage
  optimization
• Pricing optimization and risk assessment and
  management

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Customer Focused Business Processes Addressed by
Analytical CRM

• Price, quality and satisfaction analysis of
  competitors
• Customer acquisition and retention analysis
• Customer satisfaction and management
• Product usage, life cycle analysis, and product
  development
• Product and service quality tracking and
  management

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Collaborative CRM

• Effective communication with the customer from
  the entire organization
• CIC is the key
• Collaborative CRM enhances communication
• Greater customer focus
• Understanding of historical and current needs
• Lower communication barriers
• Communication preferences of the customer
  considered
• Increased information integration
• Customer information shared across the
  organization

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Ethical Concerns with CRM

• Can personalization get too personal?

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Learning Objectives
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Supply Chain Management

• Upstream activities
• Improvement of business processes spanning
  organizational boundaries
• Adopted by large organizations
• Collaboration with suppliers (supply network)
• Ability to compete more effectively in the market
  place
• Cost reduction
• Increased responsiveness to market demands
• Focus on upstream information flows
• Acceleration of product development
• Reduction of costs of raw materials procurement

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Supply Network
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Functions That Optimize the Supply Network (SCM
Modules)

• Supply chain collaboration
• Collaborative design
• Collaborative fulfillment
• Collaborative demand and supply planning
• Collaborative procurement
• Production planning
• Supply chain event management
• Supply chain exchange
• Supply chain performance management

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SCM architecture

• SCM modules support two functions
• Supply chain planning - development of resource
  plans to support production
• Supply chain execution - execution of supply
  chain planning

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Supply Chain Planning

• Four types of plans are developed
• Demand planning and forecasting
• Examination of historic data
• Distribution planning
• Delivering products to consumers
• Warehousing, delivering, invoicing and payment
  collection
• Production scheduling
• Coordination of activities needed to create the
  product/service
• Optimization of the use of materials, equipment
  and labor
• Procurement planning
• Development of inventory estimates

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Supply Chain Execution

• Management of three key elements

• Product flow
• Flow of product from supplier to consumer
• Automation of product returns
• Information flow
• Complete removal of paper documents
• Access to current information at all times
• Financial flow
• Automatic flow of payments

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Developing an SCM Strategy

• SCM efficiency and effectiveness need to be
  balanced
• Efficiency cost minimization
• Effectiveness customer service maximization

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Emerging SCM Trends

• Enterprise portals B2B marketplace
• Access point to proprietary information
• Productivity gains and cost savings

• Distribution portals
• Products from single supplier to many buyers
• Procurement portals
• Procurement of products between single buyer and
  multiple suppliers

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Example Distribution Portal

• Automation of business processes between supplier
  and multiple customers
• Before transaction
• During transaction
• After transaction
• Trading exchanges
• Equilibrium between buyers and sellers
• Vertical markets

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Example Procurement Portal

• Automation of business processes between a buyer
  and multiple suppliers

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Trading Exchanges

• Small companies dont have funds for SCM
• Trading exchanges provide a solution
• Operated by third-party vendors
• Revenue model
• Commission for each transaction
• Usage and association fees
• Advertising
• Many buyers and many sellers can come together
• Popular trading exchanges
• www.scrapsite.com (steel)
• www.paperspace.com (paper)
• www.sciquest.com (medical equipment)

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Key Technologies for Enhancing SCM

• Extensible Markup Language (XML)
• Specifies rules for tagging elements
• Specifies how information should be interpreted
  and used
• Customizable
• XML variations
• Extensible Business Reporting Language (XBRL)
• Publishing of financial information

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Radio Frequency Identification

• Replacement for standard bar codes
• Transceiver and antenna
• Diverse usage opportunities
• Line-of-sight reading not necessary
• RFID tags can contain more information than bar
  codes
• Scanning can be done from greater distance
• Passive tags range of few feet
• Active tags hundreds of feet

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Use of RFID in Supply Chain Management

• Pallet of inventory processed through an RFID gate

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Learning Objectives
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The Formula for Enterprise System Success

• Secure executive sponsorship
• Most failures due to lack of top-level management
  support
• Get help from outside experts
• Consultants are specifically trained
• Implementation tends to happen faster
• Thoroughly train users
• Most overlooked, underestimated and poorly
  budgeted expense
• Training can prevent dissatisfaction
• Take a multidisciplinary approach to
  implementations
• Include end users from all functional areas in
  the implementation

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End of Chapter Content
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Opening Case CRM and Major League Baseball

• Major League Baseball Advanced Media (MLBAM)
• Services MLB.com (since 2001)
• Focus on the customer
• Services
• Team merchandise
• Live audio and video
• 1 million subscribers
• 12-16 million revenue/year
• Fantasy baseball
• Mobile content for cell phones
• Game tickets for all 30 MLB teams
• All services very successful

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Outsourcing Your McDonalds Order

• McDonalds One of Americas success stories
• Founded in 1948 in San Bernardino, California
• 20 billion business
• 31,000 locations
• Outsourcing the drive-through
• All stores already had an
• Internet connection
• Orders processed overseas
• Entered into the queuing system
• Food quality remains the same

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Larry Ellison, Founder and CEO, Oracle Corporation

• Referred to as the other software billionaire
• Oracle second to Microsoft in software sales
• If the Internet turns out not to be the future
  of computing, were toast,
• Ellison said early in his career

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Misusing CRM Data

• 2000
• 10,000 pounds of meat potentially infected with
  mad cow disease distributed in Washington State
• QFC grocery chain sued for not informing
  customers of a recall
• 2004
• Albertsons misused CRM data
• Pharmaceutical companies paid Albertsons to ask
  their customers to switch to more expensive drugs
• Privacy Rights Clearinghouse sued Albertsons

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Targeting or Discriminating? Ethical Pitfalls of
CRM

• CRM can be called a marketers dream
• Getting to know customers
• Maximizing the benefits gained from customers
• Customer segmentation
• Target marketing
• Companies need to develop ethical principles of
  CRM use
• Establish how data will be used
• Inform customers about the use of data
• Refrain from stepping over the ethical/unethical
  line

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Three-Dimensional Fabrication

• Fabbing three-dimensional (3D) printing
• 2 printer heads
• First lays down a fine powder
• Second head is a gluing agent
• With each pass of the heads one layer of the
  model is done
• Prototype made in hours vs. days
• Fast production of prototypes that are
• 3-D
• Usable
• With moving parts
• Hewlett-Packard (HP) leader
• 3-D HP printers now available for 1,000

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RFID on the Rise

• Market for RFID is exploding
• Expected growth from 2.7 billion (2006) to 12.3
  billion (2010)
• Supply chain elements will account for majority
  of the growth

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The Comics Industry Digital Distribution to the
Rescue

• 1998 Marvel Comics goes bankrupt
• The largest player in the industry
• Creator of 5,000 comic book characters
• Other smaller companies were no longer in business

• Transition to big screen and digital media saved
  the comics
• Marvel.com
• 30 older comics online
• 82 of users also buy in the stores
• Japanese companies deliver comics to cell phones
• 400 million yearly revenues