Lecture Management information systems (9/e) – Chapter 8: Enterprise business systems

In this chapter, you will learn to: Identify and give examples to illustrate the following aspects of customer relationship management, enterprise resource manage-ment, and supply chain management systems: Business processes supported, customer and business value provided, potential challenges and trends; understand the importance of managing at the enterprise level to achieve maximum efficiencies and benefits.

Enterprise Business Systems

Chapter

8

Chapter

8

1 Identify and give examples to illustrate

the following aspects of customer relationship management, enterprise resource management, and supply chain management systems:

• Business processes supported

• Customer and business value provided

• Potential challenges and trends

Learning Objectives

Why Study Customer Relationship Management?

Why Study Customer Relationship Management?

• It is easier than ever for customers to

comparison shop and, with a click of the

mouse, to switch companies As a result, customer relationships have become a

company’s most valued asset

Case #1: Implementing CRM Systems

Mitsubishi Motor Sales Goal:

• Call center should provide one voice and

one set of ears for the customer

Case #1: Implementing CRM Systems

CRM Project Goals:

• Choose best-of-breed CRM software

components rather than integrated CRM suites

• Implement changes slowly Must be

simple, scalable, and satisfy need

Case #1: Implementing CRM Systems

Case #1: Implementing CRM Systems

1 What are the key application

components of Mitsubishi’s CRM

system? What is the business purpose

of each of them?

2 What are the benefits to a business and

its customers of a CRM system like

Mitsubishi’s?

Case #1: Implementing CRM Systems

3 Do you approve of Mitsubishi’s

approach to acquiring and installing its CRM system? Why or why not?

4 Why have many CRM systems failed to

provide promised benefits like those

generated by Mitsubishi’s system?

Customer Relationship Management (CRM)

Definition:

• The use of information technology to

create a cross-functional enterprise

system that integrates and automates

many of the customer-serving processes

in sales, marketing, and customer

services that interact with a company’s

customers

CRM Application Clusters

CRM Application Components

• Contact and Account Management – helps

sales, marketing, and service professionals

capture and track relevant data about every

past and planned contact with prospects and

customers, as well as other business and life

cycle events of customers

• Sales – provides sales reps with tools and

company data sources needed to support and manage sales activities, and optimize cross-

selling and up-selling

CRM Application Components

• Marketing Fulfillment – help marketing

professionals accomplish direct marketing

campaigns by automating such tasks as

qualifying leads for targeted marketing, and

scheduling and tracking direct marketing

mailings

• Customer Service and Support – provides

service reps with software tools and real-time access to the common customer database

shared by sales and marketing professionals

CRM Application Components

• Retention and Loyalty Programs – help a company identify, reward, and market to their most loyal and profitable customers

Three Phases of CRM

Three Phases of CRM

• Acquire new customers by doing a superior job

of contact management, sales prospecting,

selling, direct marketing, and fulfillment

• Enhance relationship with customer by

supporting superior service from a responsive

networked team of sales and service specialists and business partners

• Retain and expand business with customers by proactively identifying and rewarding the most

loyal and profitable customers

Benefits of CRM

• CRM allows a business to identify and

target their best customers so they can be retained as lifelong customers for greater and more profitable services

• CRM makes possible real-time

customization and personalization of

products and services based on customer wants, needs, buying habits, and life

cycles

Benefits of CRM

• CRM can keep track of when a customer

contacts the company, regardless of the

contact point

• CRM systems can enable a company to

provide a consistent customer experience and superior service and support across

all the contact points a customer chooses

CRM Failures

• Lack of understanding and preparation

• Rely on CRM to solve business problem

without first developing the business

process changes and change

management programs that are required

• CRM projects implemented without the

participation of the business stakeholders involved

Operational CRM

• Supports customer interaction with

greater convenience through a variety of channels

• Synchronizes customer interactions

consistently across all channels

• Makes your company easier to do

business with

Analytical CRM

• Extracts in-depth customer history, preferences,

and profitability information from your data

warehouse and other databases

• Allows you to analyze, predict, and derive

customer value and behavior and forecast

demand

• Lets you approach your customers with relevant

information and offers that are tailored to their

needs

Collaborative CRM

• Enables easy collaboration with

customers, suppliers, and partners

• Improves efficiency and integration

throughout the supply chain

• Allows greater responsiveness to

customer needs through sourcing of

products and services outside of your

enterprise

Portal-based CRM

• Provides all users with the tools and information

that fit their individual roles and preferences

• Empowers all employees to respond to

customer demands more quickly and become

truly customer-focused

• Provides the capability to instantly access, link,

and use all internal and external customer

information

Partner Relationship Management (PRM)

Definition:

• Applications that apply many of the same

tools used in CRM systems to enhance

collaboration between a company and its business partners, such as distributors

and dealers, to better coordinate and

optimize sales and service to customers across all marketing channels

Case #2: Challenges of Implementing ERP

• Enterprise resource planning (ERP)

implementations are a lot more than

software packages They are a

Case #2: Challenges of Implementing ERP

Reasons for ERP Failures:

• Management’s inability to spec out their

Case #2: Challenges of Implementing ERP

1 What are the main reasons companies

experience failures in implementing ERP systems?

2 What are several key things companies

should do to avoid ERP systems

failures? Explain the reasons for your

proposals

Case #2: Challenges of Implementing ERP

3 Why do you think ERP systems in

particular are often cited as examples of failures in IT systems development,

implementation, or management?

Enterprise Resource Planning (ERP)

Definition:

• A cross-functional enterprise system

driven by an integrated suite of software modules that supports the basic internal business processes of a company

ERP Application Components

ERP Process & Information Flows

ERP Benefits

• Quality and Efficiency – ERP creates a

framework for integrating and improving a company’s internal business processes

that results in significant improvements in the quality and efficiency of customer

service, production, and distribution

• Decreased Costs – Significant reductions

in transaction processing costs and

hardware, software, and IT support staff

ERP Benefits

• Decision Support – Provides vital

cross-functional information on business

performance quickly to managers to

significantly improve their ability to make better decisions in a timely manner

• Enterprise Agility – ERP breaks down

many former departmental and functional walls of business processes, information systems, and information resources

Costs of ERP

Causes of ERP Failures

• Business mangers and IT professionals

underestimate the complexity of the planning,

development, and training needed

• Failure to involve affected employees in the

planning and development phases

• Trying to do too much too fast in the conversion

process

• Failure to do enough data conversion and

testing

Trends in ERP

Case #3: Business Value of SCM

Benefits of SCM:

• Reduces production and distribution costs

• Improves timeliness of shipments

• Reduces manufacturer inventory levels

Case #3: Business Value of SCM

Challenges of SCM:

• Acquisition of secure extranet

• Change company structure

• Resistance from employees wedded to

traditional processes

Case #3: Business Value of SCM

1 How could moving business information

systems with suppliers and distributors

to the Web result in such dramatic

business benefits as experienced by

TaylorMade Golf?

2 How does HON Industries’ new SCM

system improve the efficiency of their

supply chain?

Case #3: Business Value of SCM

3 What other SCM initiatives would you

recommend that TaylorMade Golf or HON

Industries implement to improve their supply

chain performance and business value?

Explain the business value of your proposals.

4 What are several ways a small business could

use supply chain management to improve the efficiency and business value of its supply

chain? Give several examples to illustrate

your answer.

Supply Chain Management (SCM)

Definition:

• A cross-functional interenterprise system

that uses information technology to help support and manage the links between

some of a company’s key business

processes and those of its suppliers,

customers, and business partners

SCM Life Cycle

Electronic Data Interchange (EDI)

Definition:

• Involves the electronic exchange of

business transaction documents over the Internet and other networks between

supply chain trading partners

EDI Activities

Role of SCM

SCM Planning Functions

• Supply Chain Design – optimize network

of suppliers, plants, and distribution

centers

• Collaborative Demand and Supply

Planning – develop an accurate forecast

of customer demand by sharing demand and supply forecasts instantaneously

across multiple tiers

SCM Execution Functions

• Materials Management – share accurate

inventory and procurement order information,

ensure materials required for production are

available in the right place at the right time, and reduce raw material spending, procurement

costs, safety stocks, and raw material and

finished goods inventory

• Collaborative Manufacturing – optimize plans

and schedules while considering resource,

material, and dependency constraints

SCM Execution Functions

• Collaborative Fulfillment – commit to delivery

dates in real time, fulfill orders from all channels

on time with order management, transportation planning, and vehicle scheduling, and support

the entire logistics process, including picking,

packing, shipping, and delivery in foreign

countries

• Supply Chain Event Management – monitor

every stage of the supply chain process, from

price quotation to the moment the customer

receives the product, and receive alerts when

problems arise

SCM Execution Functions

• Supply Chain Performance Management

– report key measurements in the supply chain, such as filling rates, order cycle

times, and capacity utilization

SCM Objectives

SCM Benefits

• Faster, more accurate order processing

• Reductions in inventory levels

• Quicker times to market

• Lower transaction and material costs

• Strategic relationship with suppliers

Causes of SCM Failures

Causes of SCM Failures

guidelines

data provided by a company’s other information systems

production, and inventory management departments

within a company

software tools

Trends in SCM

Case #4: Benefits & Challenges of SCM

Benefits of SCM:

• Materials prices reduced

• Fewer employees needed to manage supply

chain

• Order fulfillment time reduced

• Increased sales by reducing inventory

shortages

• Enables new business partnerships

Case #4: Benefits & Challenges of SCM

Supplier reluctance:

• Cost of hardware and software

• Software can be confusing, contradictory

and not sculpted to their needs

• Impenetrable technical jargon

Case #4: Benefits & Challenges of SCM

1 Why can both large and small

businesses cut costs and increase

revenues by moving their supply chains online? Use the companies in this case

as examples

2 What is the business value to Eastman

Chemical and W W Grainger of their

initiatives to help their suppliers and

customers do business online?

Case #4: Benefits & Challenges of SCM

3 Why are many small suppliers reluctant

to do business online with their large

customers? What can be done to

encourage small suppliers online?

Case #5: SCM Best Practices

Why is Wal-Mart’s IT infrastructure a key

competitive advantage?

• Wal-Mart invested early and heavily in

cutting-edge technology to identify and track sales on

the individual item level.

• The company is still pushing the limits of supply

chain management, searching for and

supporting better technology that promises to

make its IT infrastructure more efficient.

Case #5: SCM Best Practices

The Wal-Mart Example:

• Opened sales and inventory databases to

suppliers

• Implemented a collaborative planning,

forecasting, and replenishment program

• JIT inventory program that reduced

carrying costs for Wal-Mart and its

suppliers

Case #5: SCM Best Practices

1 Do you agree that Wal-Mart is “the best

supply chain operator of all time”? Why

or why not?

2 What has Mattel learned from Wal-Mart?

How well are they applying it to their

own business? Explain your evaluation

Case #5: SCM Best Practices

3 What can other businesses learn from

the experiences of Wal-Mart and Mattel that could improve their supply chain

performance? Use an example to

illustrate your answer

• Customer relationship management is a

cross-functional enterprise system that

integrates and automates many of the

customer-serving processes in sales,

marketing, and customer services that

interact with a company’s customers

• Enterprise resource planning is a

cross-functional enterprise system that

integrates and automates many of the

internal business processes of a

company, particularly those within the

manufacturing, logistics, distribution,

accounting, finance, and human resource functions of the business

• Supply chain management is a

cross-functional inter-enterprise system that

integrates and automates the network of business processes and relationships

between a company and its suppliers,

customers, distributors, and other

business partners