Laudon Mis15 PPT Ch09 H

MANAGEMENT INFORMATION SYSTEMS: MANAGING THE DIGITAL FIRM
Chapter 9
Achieving Operational
Excellence and
Customer
Intimacy: Enterprise
Applications
Copyright © 2018 Pearson Education Ltd.

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?

ENTERPRISE APPLICATION
ARCHITECTURE
May extend
outside the
organization
All levels of
management
ENTERPRISE SYSTEMS
 Enterprise resource planning (ERP) 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

FIGURE 9.1: HOW ENTERPRISE
SYSTEMS WORK
“one company, one database”
If a salesperson places an order?

What's happening in the ERP?

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

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 (Dashboards)

THE SUPPLY CHAIN
 Network of organizations and processes for:

 Procuring materials
 Transforming them into products
 Distributing the products
 Upstream supply chain

 Firm’s suppliers, suppliers’ suppliers, processes for managing
relationships with them
 Downstream supply chain
 Organizations and processes responsible for delivering products to
customers
 Internal supply chain

NIKE’S SUPPLY CHAIN
In real life, Nike has HUNDREDS of contract suppliers as well as many

distributors…the same for Tier2, Tier 3 and retailers …… The figure has been
simplified instead to illustrate the relationships in the supply chain
SUPPLY CHAIN MANAGEMENT
 Inefficiencies cut into a company’s operating costs
(caused by inaccurate or untimely inventory) i.e. parts shortages,
underutilized plant capacity, excessive finished goods inventory, high transportation
costs
 Can waste up to 25 percent of operating expenses
 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 (Because of uncertainties, manufacturers keep a safety stock)
 Bullwhip effect
 Information about product demand gets distorted as it
passes from one entity to next across supply chain Copyright © 2018 Pearson Education Ltd.
THE BULLWHIP EFFECT
A slight rise in demand for an item might cause all parties to stockpile
inventory…. a slight rise in demand by customers for an item will cause successive
participants to slightly overstock related inventory “just in case”
SUPPLY CHAIN MANAGEMENT SOFTWARE
TYPES
1. Supply chain planning systems

 Model existing supply chain
 Enable demand planning (how much product a business needs to make to
satisfy customer demand)
 Optimize sourcing, manufacturing plans
 Establish inventory levels
 Identify transportation modes
2. Supply chain execution systems

 Manage flow of products through distribution centers and
warehouses (to ensure products are delivered to the right locations in the most
efficient manner)
GLOBAL SUPPLY CHAINS AND THE
INTERNET
 Global supply chain issues

 Greater geographical distances, time differences
 Participants from different countries
 Different performance standards
 Different legal requirements
 Internet helps manage global complexities

 Warehouse management
 Transportation management
 Logistics
 Outsourcing
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/build-to-order)

 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

PUSH- VERSUS PULL-BASED SUPPLY
CHAIN MODELS
The difference between push- and pull-based models is

summarized by the slogan
“Make what we sell, not sell what we make.”
THE EMERGING INTERNET-DRIVEN
SUPPLY CHAIN

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
WHAT IS CUSTOMER RELATIONSHIP
MANAGEMENT?
 Customer relationship management (CRM)

 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 (contact point i.e. phone,
social media, email, call center…etc)
 Provide single enterprise view of customers
CUSTOMER RELATIONSHIP
MANAGEMENT (CRM)
Provide single
enterprise view
of customers

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 (PRM)
 Integrating lead generation, pricing, promotions, order
configurations, and availability
 Tools to assess partners’ performances
 Employee relationship management (ERM)

 Setting objectives, employee performance management,
performance-based compensation, employee training
Integrating lead generation: campaign that uses two or more lead-generation
tactics at once. i.e. social media marketing and banner advertising
CUSTOMER RELATIONSHIP MANAGEMENT
SOFTWARE (2 OF 2)
 CRM packages typically include tools for:

 Sales force automation (SFA)
 Sales prospect and contact information
 Sales quote generation capabilities
 Customer service
 Assigning and managing customer service requests (i.e. call center)
 Web-based self-service capabilities (i.e. info on the website, live chat)
 Marketing
 Capturing prospect and customer data, scheduling and tracking direct-
marketing mailings or e-mail
 Tools for analyzing marketing and customer data, identifying profitable and
not profitable customers
 Cross-selling (marketing of complementary products to customers i.e. in a bank,
customers maybe offered a loan) Copyright © 2018 Pearson Education Ltd.
HOW CRM SYSTEMS SUPPORT
MARKETING

CRM SOFTWARE CAPABILITIES

CUSTOMER LOYALTY MANAGEMENT
PROCESS MAP

OPERATIONAL AND ANALYTICAL CRM
TWO MAIN TYPES OF CRM SOFTWARE
 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 (OLAP (Online Analytical Processing) and data
mining to examine and interpret complex datasets related to customer
behavior, preferences and interactions.)
 Customer lifetime value (CLTV): it is based on the relationship between the
revenue produced by a specific customer, the expenses incurred in acquiring and
servicing that customer, and the expected life of the relationship between the
customer and the company.
 CLTV=(Revenue from Customer−Cost to Acquire and Serve Customer)×Expected
Duration of Relationship
 Provide information for improving business performance
ANALYTICAL CRM DATA WAREHOUSE
Analytical Platform and

Tools
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
ENTERPRISE APPLICATION CHALLENGES
 Highly expensive to purchase and implement
enterprise applications
 Many projects experience cost overruns
 Long development changes
 Technology changes
 Business process changes
 Organizational learning, changes
 Switching costs, dependence on software
vendors
 Data standardization, management, cleansing
NEXT-GENERATION ENTERPRISE
APPLICATIONS (1 OF 2)
 Enterprise solutions/suites
 Make applications more flexible, web-enabled,
integrated with other systems
 Cloud-based versions
 Functionality for mobile platform
 Versions also available for small and medium-
sized businesses

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, AI machine learning

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MANAGEMENT INFORMATION SYSTEMS: MANAGING THE DIGITAL FIRM

Copyright © 2018 Pearson Education Ltd.

Copyright © 2018 Pearson Education Ltd.

 Enterprise resource planning (ERP) systems

Copyright © 2018 Pearson Education Ltd.

If a salesperson places an order?

Copyright © 2018 Pearson Education Ltd.

 Built around thousands of predefined business processes that

Copyright © 2018 Pearson Education Ltd.

 Increase operational efficiency

Copyright © 2018 Pearson Education Ltd.

 Network of organizations and processes for:

 Upstream supply chain

Copyright © 2018 Pearson Education Ltd.

In real life, Nike has HUNDREDS of contract suppliers as well as many

 Safety stock: Buffer for lack of flexibility in supply

1. Supply chain planning systems

2. Supply chain execution systems

 Global supply chain issues

 Internet helps manage global complexities

 Push-based model (build-to-stock)

 Pull-based model (demand-driven/build-to-order)

 Internet enables move from sequential supply

Copyright © 2018 Pearson Education Ltd.

The difference between push- and pull-based models is

Copyright © 2018 Pearson Education Ltd.

 Match supply to demand

 Customer relationship management (CRM)

Copyright © 2018 Pearson Education Ltd.

 Packages range from niche tools to large-scale

 Employee relationship management (ERM)

 CRM packages typically include tools for:

Copyright © 2018 Pearson Education Ltd.

Copyright © 2018 Pearson Education Ltd.

Copyright © 2018 Pearson Education Ltd.

Analytical Platform and

 Business value of CRM systems

Copyright © 2018 Pearson Education Ltd.

Copyright © 2018 Pearson Education Ltd.

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