Management Information Systems:

Managing the Digital Firm

Sixteenth Edition • Global Edition

Chapter 9
Achieving Operational Excellence
and Customer Intimacy: Enterprise
Applications

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Learning Objectives
9.1 How do enterprise systems help businesses achieve
operational excellence?
9.2 How do supply chain management systems coordinate
planning, production, and logistics with suppliers?
9.3 How do customer relationship management systems
help firms achieve customer intimacy?
9.4 What are the challenges that enterprise applications
pose, and how are enterprise applications taking
advantage of new technologies?
9.5 How will M I S help my career?

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Video Cases
• Case 1: Life Time Fitness Gets in Shape with Salesforce
CRM
• Instructional Video: G S M S Protects Patients by
Serializing Every Bottle of Drugs

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Warehouse Management at Norauto:
Conversational Commerce (1 of 2)
• Problem
– Volume and diversity of product range
– Global operations
– Complex supply chain
– Manual processes
• Solutions
– Scalable replacement
– Voice recognition software

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Warehouse Management at Norauto:
Conversational Commerce (2 of 2)
• Norauto used a scalable warehouse management system
from Manhattan Associates and a voice recognition
solution by Vocollect to reduce errors and enhance order-
fulfilment accuracy.
• Demonstrates why companies need enterprise
applications
• Illustrates the ability of ERP systems to dramatically
improve operational effectiveness and decision making on
a global scale

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 Achieving operational excellence &
customer intimacy: Enterprise
Applications
1. Enterprise systems
2. Supply chain management systems
3. Customer relationship management systems

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1.Enterprise Systems
• Also known as Enterprise resource planning (ER P)
systems
• Suite of integrated software modules and a common
central database
• 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
available for other processes
• Ex: If a sales representative places an order for tire rims, for
example, the system verifies the customer’s credit limit,
schedules the shipment, identifies the best shipping route, and
reserves the necessary items from inventory.
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Figure 9.1 How Enterprise Systems
Work

Enterprise systems feature a set of integrated software modules and a central

database by which business processes and functional areas throughout the
enterprise can share data.
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Enterprise Software
• Built around thousands of predefined business processes
that reflect best practices
– Finance and accounting
– Human resources
– Manufacturing and production
– Sales and marketing
• To implement, firms:
– Select functions of system they wish to use
– Map business processes to software processes
 Use software’s configuration tables for customizing

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Enterprise Software

Table 9. 1 describes some of the major business processes that enterprise software
supports.

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Business Value of Enterprise
Systems
• Increase operational efficiency
• Provide firm-wide information to support decision making
• Enable rapid responses to customer requests for
information or products
• Include analytical tools to evaluate overall organizational
performance and improve decision-making

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2.The Supply Chain
• A firm’s supply chain is a network of organizations and business
processes for procuring raw materials, transforming these materials
into intermediate and finished products, and distributing the finished
products to customers.
• Upstream supply chain-includes the company’s suppliers, the
suppliers’ suppliers, and the processes for managing relationships with
them
• Downstream supply chain-consists of the organizations and processes
for distributing and delivering products to the final customers.
• Companies that manufacture manage their own internal supply chain
processes for transforming materials, components, and services their
suppliers furnish into finished products or intermediate products
(components or parts) for their customers and for managing materials
and inventory.

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Figure 9.2 Nike’s Supply Chain

This 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,
with the upstream portion focusing only on the suppliers for sneakers and
sneaker soles. Copyright © 2020 Pearson Education, Ltd. All Rights Reserved
 Figure 9.2 Nike’s Supply Chain
•. Nike’s contract suppliers do not manufacture sneakers from scratch. They
obtain components for the sneakers—the laces, eyelets, uppers, and soles—
from other suppliers and then assemble them into finished sneakers. These
suppliers in turn have their own suppliers.
• For example, the suppliers of soles have suppliers for synthetic rubber,
suppliers for chemicals used to melt the rubber for molding, and
suppliers for the molds into which to pour the rubber.
• Nike’s contract manufacturers are its primary suppliers. The suppliers
of soles, eyelets, uppers, and laces are the secondary (Tier 2)
suppliers. Suppliers to these suppliers are the tertiary (Tier 3)
suppliers.

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Supply Chain Management
• Inefficiencies cut into a company’s operating costs
– Can waste up to 25 percent of operating expenses
• If a manufacturer had perfect information about exactly how many
units of product customers wanted, when they wanted them, and when
they could be produced, it would be possible to implement a highly
efficient Just-in-time strategy.
– Components arrive as they are needed
– Finished goods shipped after leaving assembly line
• Safety stock: buffer for lack of flexibility in supply chain
• Bullwhip effect (One recurring problem in supply chain management)
– Information about product demand gets distorted as it passes from
one entity to next across supply chain

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 Figure 9.3 The Bullwhip Effect

A slight rise in demand for an item might cause different members in the supply chain—
distributors, manufacturers, suppliers, secondary suppliers (suppliers’ suppliers), and tertiary
suppliers (suppliers’ suppliers’ suppliers)—to stockpile inventory so each
has enough just in case.
Inaccurate 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.
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Supply Chain Management Software
• Supply chain planning systems
– Model existing supply chain
– Enable demand planning
– Optimize sourcing, manufacturing plans
– Establish inventory levels
– Identify transportation modes
• Supply chain execution systems
– Manage flow of products through distribution centers
and warehouses

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Global Supply Chains and the
Internet
• Global supply chain issues
– Global supply chains typically span greater geographic
distances and time differences than domestic supply
chains and have participants from a number of
countries.
 Different performance standards
 Different legal requirements
• Internet helps manage global complexities
– Warehouse management
– Transportation management
– Logistics
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Demand-Driven Supply Chains: From
Push to Pull Manufacturing and
Efficient Customer Response
• Push-based model (build-to-stock)
– Earlier SCM systems
– Schedules based on best guesses of demand
• Pull-based model (demand-driven)
– Web-based
– Customer orders trigger events in supply chain
• Internet enables move from sequential supply chains to
concurrent supply chains
– Complex networks of suppliers can adjust immediately
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 Figure 9.4 Push- Versus Pull-Based
Supply Chain Models

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. With new flows of information
made possible by web-based tools, supply chain management more easily follows a pull-based
model.

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 Figure 9.4 Push- Versus Pull-Based
Supply Chain Models

In a pull-based model , also known as a demand-driven or build-to-order model, actual

customer orders or purchases trigger events in the supply chain. Transactions to produce and
deliver only what customers have ordered move up the supply chain from retailers to
distributors to manufacturers and eventually to suppliers.
Only products to fulfill these orders move back down the supply chain to the retailer.
Manufacturers use only actual order demand information to drive their production schedules
and the procurement of components or raw materials

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Figure 9.4 Push- Versus Pull-Based
Supply Chain Models

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 Figure 9.5 The Emerging Internet-
Driven Supply Chain

The emerging 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.

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Business Value of Supply Chain
Management Systems
• Match supply to demand
• Reduce inventory levels
• Improve delivery service
• Speed product time to market
• Use assets more effectively
– Total supply chain costs can be 75 percent of operating
budget
• Increase sales

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Interactive Session: Management:
Physical Flow in Alibaba

• Class discussion
– Identify the delivery problems Alibaba faced. How does
physical flow impact its business?
– What factors contributed to Alibaba’s problems with
physical flow?
– How did Cainiao Networks impact Alibaba’s business? ‘

– How did Cainiao Networks improve the delivery of

service for the customer?

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3.Customer Relationship
Management
• Knowing the customer
• In large businesses, too many customers and too many
ways customers interact with firm
• CRM systems
– 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
– Provide single enterprise view of customers

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Figure 9.6 Customer Relationship
Management (CR M)

CRM 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.

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Customer Relationship Management
Software (1 of 2)
• Packages range from niche tools to large-scale enterprise
applications
• More comprehensive packages have modules for:
– Partner relationship management (PR M)
 Integrating lead generation, pricing, promotions, order
configurations, and availability
 Tools to assess partners’ performances
– Employee relationship management (ER M)
 Setting objectives, employee performance management,
performance-based compensation, employee training

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Customer Relationship Management
Software (2 of 2)
• CRM packages typically include tools for:
– Sales force automation (SF A)
 Sales prospect and contact information
 Sales quote generation capabilities
– Customer service
 Assigning and managing customer service requests
 Web-based self-service capabilities
– Marketing
 Capturing prospect and customer data, scheduling and
tracking direct-marketing mailings or e-mail
 Cross-selling
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Figure 9.7 How CRM Systems
Support Marketing
Responses by Channel for January 2019 Promotional Campaign

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Figure 9.8 CR M Software Capabilities

The major CRM software products support business processes in sales, service, and
marketing, integrating customer information from many sources. Included is support for
both the operational and analytical aspects of CRM
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 Figure 9.9 Customer Loyalty
Management Process Map

This process map shows how a best practice for promoting customer loyalty through
customer service would be modeled by customer relationship management software.
The CRM software helps firms identify high-value customers for preferential treatment.

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Operational and Analytical CRM
• All of the applications we have just described support
either the operational or analytical aspects of customer
relationship management.
• Operational CRM
– Customer-facing applications
– Sales force automation call center and customer
service support
– Marketing automation
• Analytical CRM
– Based on data warehouses populated by operational
CRM systems and customer touch points
– Analyzes customer data (O LA P, data mining, etc.)
 Customer lifetimeCopyright
value©(C LPearson
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Figure 9.10 Analytical CRM Data
Warehouse

Analytical CRM uses a customer data warehouse or analytic platform and tools to analyze
customerdata collected from the firm’s customer touch points and from other sources.

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Interactive Session – Organizations:
Kenya Airways Flies High with
Customer Relationship Management
• Class discussion
– What was the problem at Kenya Airways described in this case?
What people, organization, and technology factors contributed to
this problem?
– What was the relationship of customer relationship management
to Kenya Airway’s business performance and business strategy?
– Describe Kenya Airway’s solution to its problem. What people,
organization, and technology issues had to be addressed by the
solution?
– How effective was this solution? How did it affect the way Kenya
Airways ran its business and its business performance?

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Business Value of Customer
Relationship Management Systems
• Business value of CRM systems
– Increased customer satisfaction
– Reduced direct-marketing costs
– More effective marketing
– Lower costs for customer acquisition/retention
– Increased sales revenue
• 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
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Enterprise Application Challenges
• Expensive to purchase and implement enterprise
applications
– Multi-million dollar projects in 2018
– Long development times
• Enterprise applications require not only deep-seated
technological changes but also fundamental changes in
the way the business operates.
• Organizational learning, changes
• Introduce Switching costs, dependence on software
vendors
• Data standardization, management, cleansing
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Next-Generation Enterprise
Applications (1 of 2)
• Enterprise solutions/suites
– Make applications more flexible, web-enabled,
integrated with other systems
• SO A standards (service- oriented architecture (SOA) )
• include open source and cloud solutions as well as more
functionality available on mobile platforms. Open source
products such as Compiere, Apache Open for Business
(OFBiz), and Openbravo do not offer as many capabilities
as large commercial enterprise software but are attractive
to companies such as small manufacturers because of
their low cost.
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Next-Generation Enterprise
Applications (2 of 2)
• Social CRM
– Incorporating social networking technologies
– Company social networks
– Monitor social media activity; social media analytics
– Manage social and web-based campaigns
• Business intelligence
– Inclusion of BI with enterprise applications
– Flexible reporting, ad hoc analysis, “what-if” scenarios,
digital dashboards, data visualization

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How Will MIS Help My Career?
• The Company: XY Z Global Industrial Components
• Position Description: Manufacturing management trainee
• Job Requirements
• Interview Questions
• Author Tips

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Copyright

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