Information Systems Today: Managing in the Digital World – Dr. Ali Zolait 8-1 8 Chapter Building...

Information Systems Today: Managing in the Digital World – Dr. Ali Zolait 8-1

8Chapter

Building Organizational Partnerships Using Enterprise Information Systems

“If the Internet turns out not to be the future of computing, we’re toast.”

Larry Ellison, Founder and CEO, Oracle Corporation

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Learning Objectives

Information Systems Today: Managing in the Digital World – Dr. Ali Zolait

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Learning Objectives

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Enterprise Systems

• Problem:o Information systems growing over time

o 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

Information Systems Today: Managing in the Digital World 8-7

Supporting Business Activities• Internally focused systems

o Support functional areas, business processes and decision-making within an organization

o New information (value) is added at every step

Information Systems

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Externally Focused Systems• Coordinate business activities with customers,

suppliers, business partners and others who operate outside the organization

• Interorganizational systemso Streamline the flow

of information between companies


Internally Focused Application: Value Chain

• Flow of information through a set of business activitieso Core activities – functional areas that process inputs and

produce outputs

o 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


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


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


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)


Externally Focused Applications – Value System

• Flow of Information can be streamlined outside organizational boundaries

• Coordination of multiple value chains

• Value System

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Externally Focused Applications – Value System

• Information Flows in a Value Systemo Upstream information flow – information received from another

company

o Downstream information flow – information produced by a company and sent to another organization


The Rise of Enterprise SystemsSoftware programs have two forms:

1. Packaged applicationso Written by third-party vendors

o Used by many different organizations

o Useful for standardized, repetitive tasks

o Cost effective

o E.g., Microsoft Money and Quicken


The Rise of Enterprise Systems2. Custom applications

o Developed exclusively for a specific organization

o Designed for particular business needs

o Higher development costs

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Evolution of Enterprise Systems• Enterprise

systemso Organizations

start with stand-alone applications

o Legacy systems


Legacy Systems• Each department has its own system

o Infrastructure specific

o Inefficient processes

o Potential for inaccuracies

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The Need for Integrated Enterprise Systems• Advantages of integrated systems

o Centralized point of access• Conversion needed

• Enterprise Resource Planning (ERP) vendors offer different moduleso Components that can be selectively implementedo E.g., modules of mySAP business suite

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Vanilla Versus Customized Software• Vanilla version

o Modules the version comes with out of the box

o Certain processes might not be supported

• Customizationo Additional software or changes to vanilla

versiono 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 systemso Identify business processes in need of change

o Future updates are smoother if businesses change their business processes to fit with ERP systems

• Is following the best practices always the best strategy?o 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

o All or part of organization is involved

o 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 Steps1.Develop a vision for the organization (specify

business objectives)

2. Identify critical processes that are to be redesigned

3.Understand and measure existing processes as a baseline

4. Identify ways IS can be used for improvement

5.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 warehouseo Large,

centralized data repository

o Single place for data storage and access

o Misnomers

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Choosing an ERP SystemAmong the most factors in ERP selection

1.ERP Controlo Centralized control vs. control within specific

business units

o Level of detail provided to management

o Consistency of policies and procedures

2.ERP Business requirementso 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 activitieso 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

o Customers have the powero Transactions vs. relationshipso Keeping customers satisfied is key

• CRMo Corporate-level strategyo Concentrates on the downstream information flow

• To attract potential customers

• Creation of customer loyalty

o Managers need to be able to monitor and analyze factors driving customer satisfaction

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Key Benefits of CRM1.Enables 24/7/365 operations

2. Individualized service

3. Improved information

4.Speeds up problem identification/resolution

5.Speeds up processes

6. Improved integration

7. Improved product development

8. Improved planning

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Developing a CRM Strategy

• More than just software purchase and installation

• Must include 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 have a consistent focus that values 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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1).Operational CRM( Front Office Systems)

• Include systems for customer interaction and serviceo Personalized and

efficient customer service

o Access to complete information about customer

Architecture of a CRM

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Sales Force Automation• Component of operational CRM

• Primary goalso Identification of potential customers

o Streamlining of selling processes

o Improvement of managerial information

Architecture of a CRM ( Front Office Systems)

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Sales Force Automation• Supports day-to-day sales activities

o Order processing and tracking

o Contact development, assignment and management

o Customer history preferences

o Sales forecasting and performance analysis

o Sales administration



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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Sales performance Measures Tracked by SFAExample :

1. Revenue per sales person, per territory, or as a percentage of sales quota

2. Margins by product category, customer segment, or customer

3. Number of calls per day, time spent per contract, revenue per call, cost per call, ratio of orders to calls

4. Number of lost customers per period or cost of customer acquisition


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SFA Provides Improved Understanding of Market Conditions1. Improved understanding of markets, segments

and customers

2. Improved understanding of competitors

3. Enhanced understanding of organization’s strengths and weaknesses

4. Better understanding of economic structure of the industry

5. Enhanced product development

6. 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)o Multiple communication

channelso Customer service anytime,

anywhere through any communication channel

o 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 EMAo Economico Governmental and public policyo Technology and infrastructureo Ecologyo Culturalo Suppliers


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2). Analytical CRM (Back Office Systems)

• Analysis of customer behavior and perceptions

• Customized marketing campaignso Up-sellingo Retaining customers

• Key technologies used to create predictive modelso Data miningo Decision support systems

• Continuous data collection and analysis is necessary

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Customer Focused Business Processes Addressed by Analytical

CRM1. Marketing campaign management and

analysis

2. Customer campaign customization

3. Customer communication optimization

4. Customer segmentation and sales coverage optimization

5. Pricing optimization and risk assessment and management

Cont- Analytical CRM (Back Office Systems)

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Customer Focused Business Processes Addressed by Analytical

CRM6. Price, quality and satisfaction analysis of

competitors

7. Customer acquisition and retention analysis

8. Customer satisfaction and management

9. Product usage, life cycle analysis, and product development

10. Product and service quality tracking and management

Cont- Analytical CRM (Back Office Systems)

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3).Collaborative CRM

• Effective communication with the customer from the entire organizationo CIC is the key

• Collaborative CRM enhances communication o Greater customer focus

• Understanding of historical and current needs

o Lower communication barriers

• Communication preferences of the customer considered

o Increased information integration

• Customer information shared across the organization

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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)o Ability to compete more effectively in the market placeo Cost reductiono Increased responsiveness to market demands

• Focus on upstream information flowso Acceleration of product developmento 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)1. Supply chain collaboration

2. Collaborative design

3. Collaborative fulfillment

4. Collaborative demand and supply planning

5. Collaborative procurement

6. Production planning

7. Supply chain event management

8. Supply chain exchange

9. Supply chain performance management

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SCM architecture• SCM modules support two functions

o Supply chain planning - development of resource plans to support production

o Supply chain execution - execution of supply chain planning

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Supply Chain Planning• Four types of plans are developed

1. Demand planning and forecastingo Examination of historic data

2. Distribution planningo Delivering products to consumerso Warehousing, delivering, invoicing and payment collection

3. Production schedulingo Coordination of activities needed to create the

product/serviceo Optimization of the use of materials, equipment and labor

4. Procurement planningo Development of inventory estimates

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Supply Chain Execution• Management of three key elements

1. Product flowo Flow of product from supplier to consumero Automation of product returns

2. Information flowo Complete removal of paper documentso Access to current information at all times

3. Financial flowo Automatic flow of payments

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Developing an SCM Strategy• SCM efficiency and effectiveness need to be

balancedo Efficiency – cost minimization

o Effectiveness – customer service maximization

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Emerging SCM Trends• Enterprise portals – B2B marketplace

o Access point to proprietary information

o Productivity gains and cost savings

• Distribution portalso Products from single

supplier to many buyers

• Procurement portalso Procurement of

products between single buyer and multiple suppliers

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Example: Distribution Portal• Automation of business

processes between supplier and multiple customerso Before transaction

o During transaction

o After transaction

• Trading exchangeso Equilibrium between

buyers and sellers

o 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 don’t have funds for SCM• Trading exchanges provide a solution

o Operated by third-party vendorso Revenue model

• Commission for each transaction• Usage and association fees• Advertising

o Many buyers and many sellers can come togethero Popular trading exchanges

• www.scrapsite.com (steel)• www.paperspace.com (paper)• www.sciquest.com (medical equipment)

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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

o Passive tags – range of few feet

o Active tags – hundreds of feet


Use of RFID in Supply Chain ManagementPallet of inventory processed through an RFID gate

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Learning Objectives

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The Formula for Enterprise System Success1. Secure executive sponsorship

o Most failures due to lack of top-level management support

2. Get help from outside expertso Consultants are specifically trainedo Implementation tends to happen faster

3. Thoroughly train userso Most overlooked, underestimated and poorly budgeted

expenseo Training can prevent dissatisfaction

4. Take a multidisciplinary approach to implementationso Include end users from all functional areas in the

implementation

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