Turban and Volonino. Enterprise Systems: Supply Chains, ERP, CRM & KM

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1 Turban and Volonino Chapter 10 Enterprise Systems: Supply Chains, ERP, CRM & KM Information Technology for Management Improving Performance in the Digital Economy 7 th edition John Wiley & Sons, Inc. Slides contributed by Dr. Sandra Reid Chair, Graduate School of Business & Professor, Technology Dallas Baptist University Copyright 2010 John Wiley & Sons, Inc. 10-1

2 Enterprise Systems: Supply Chains, ERP, CRM & KM 1. Essentials of Enterprise Systems and Supply Chains 2. Supply Chain Management and Its Business Value 3. Enterprise Resource Planning (ERP) Systems 4. Customer Relationship Management (CRM) 5. Knowledge Management and IT 6. Managerial Issues Copyright 2010 John Wiley & Sons, Inc. 10-2

3 10.1 Essentials of Enterprise Systems and Supply Chains Copyright 2010 John Wiley & Sons, Inc. 10-3

4 Figure IT7eU Copyright 2010 John Wiley & Sons, Inc. 10-4

5 ESSENTIALS OF ENTERPRISE SYSTEMS AND SUPPLY CHAINS ERP and Supply Chains It is comprised of a set of applications that automate routine back-end operations such as: Financial management Inventory management Scheduling Order fulfillment Cost control Accounts payable and receivable It includes front-end operations such as: POS Field Sales Service ERP or enterprise systems control all major business processes with a single software architecture in real time. It also increases efficiency, improves quality, productivity, and profitability. Chapter 8 5

6 Enterprisewide Systems ERP - designed to coordinate all the resources, information, and activities needed to complete business processes such as order fulfillment or billing. Extended ERP also supports business partners, & most common form. CRM - software is used to support these processes; information about customers and customer interactions can be entered, stored and accessed by employees in different company departments. Source: wikipedia.org Copyright 2010 John Wiley & Sons, Inc. 10-6

7 Enterprisewide Systems cont d Knowledge Management Systems (KM) - refers to a (generally IT based) system for managing knowledge in organizations, supporting creation, capture, storage and dissemination of information. Business Process Management (BPM) - is a field of management focused on aligning organizations with the wants and needs of clients. It is a holistic management approach that promotes business effectiveness and efficiency while striving for innovation, flexibility and integration with technology. Source: wikipedia.org Copyright 2010 John Wiley & Sons, Inc. 10-7

8 Enterprisewide Systems cont d Supply Chain Management (SCM) - is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers. Materials Requirement Planning (MRP) - is a software based production planning and inventory control system used to manage manufacturing processes. Source: wikipedia.org Copyright 2010 John Wiley & Sons, Inc. 10-8

9 Enterprisewide Systems cont d Decision Support Systems (DSS) - are a specific class of computerized information systems that supports business and organizational decisionmaking activities. Intelligent Systems expert systems such as KM. Business Intelligence (BI) - Common functions of business intelligence applications are reporting, OLAP, analytics, data mining, business performance management, benchmarks, text mining, and predictive analytics. Source: wikipedia.org Copyright 2010 John Wiley & Sons, Inc. 10-9

10 Figure 10.1 Overview of enterprise system. (Source: Prepared by E. Turban and D. Amoroso.) Copyright 2010 John Wiley & Sons, Inc

11 Figure 10.2 The structure of a typical supply chain. (Source: Drawn by E. Turban.) Copyright 2010 John Wiley & Sons, Inc

12 Figure Digital supply chains. (Source: Intel, Building the Digital Supply Chain: An Intel Perspective, Intel Solutions White Paper, January 2005, Figure 5, p. 9.)

13 Deployed integrated enterprise system structured around supply chain, financial management, ERP, & CRM. Automated sales force. Campaign management tools to improve marketing effectiveness. Note: See article for more: Brewing Good Business Copyright 2010 John Wiley & Sons, Inc

14 10.2 Supply Chain Management and Its Business Value Copyright 2010 John Wiley & Sons, Inc

15 Supply Chain Chapter 8 15

16 Supply Chain Problems Adding value along the chain is essential for competitiveness, however, problems exist especially in complex or long chains and in cases where many business partners are involved. These problems are due to uncertainties and the need to coordinate several activities, internal units, and business partners. Demand forecasts are a major source of uncertainties Competition Prices Weather conditions Technological development Customer confidence Uncertainties exist in delivery times Machine failures Road conditions Shipments Quality problems may also create production delays Chapter 8 16

17 Supply Chain Problems (Continued) The bullwhip effect refers to erratic shifts in orders up and down the supply chain because of poor demand forecasting, price fluctuation, order batching, and rationing within the chain. Even slight demand uncertainties and variability become magnified if each distinct entity, on the chain, makes ordering and inventory decisions with respect to its own interest above those of the chain. Distorted information can lead to tremendous inefficiencies, excessive inventories, poor customer service, lost revenues, ineffective shipments, and missed production schedules. A common way to solve the bullwhip problem is by sharing information along the supply chain through EDI, extranets, and groupware technologies. For example employing a vendor-managed inventory (VMI) strategy, the vendor monitors inventory levels and when it falls below the threshold for each product this automatically triggers an immediate shipment. Chapter 8 17

18 Supply Chain Solutions Information sharing among supply chain partners (c-commerce) sometimes referred to as the collaboration supply chain is one method to overcome problems in the flow. Others are: Optimal Inventory Levels Supply Chain Coordination and Collaboration Supply Chain Teams Performance Measurement and Metrics Various IT-Assisted Solutions Wireless technology Optimal shipping plans Strategic partnerships with suppliers Just-in-time Chapter 8 18

19 Supply Chain Solutions (Continued) Chapter 8 19

20 Supply Chain Collaboration Management Every company that has business partners has to manage the relationships with them. Information needs to flow between the firms and must be constantly updated and shared. Manual methods include: phone, fax, and mail EDI is typically used by large corporations EC PRM functions include: Partner profiles Partner communications Lead management (of clients) Targeted information distribution Connecting the extended enterprise Partner planning Centralized forecasting Group planning Price lists Chapter 8 20

21 Managing Collaboration Managing Collaboration Collaborative planning, forecasting, and replenishment Vendor-Managed inventory E-Business Systems and the Supply Chain Collaborative fulfillment networks (CFNs) Electronic marketplaces Electronic data interchange Electronic ordering and funds transfer Electronic Data Interchange (EDI) Copyright 2010 John Wiley & Sons, Inc

22 Managing Collaboration Inventory management require coordination of all activities & links in supply chain. Goods move smoothly & on time from supplier to manufacturer to distributor to customer. Partner collaboration is key success factor. Sharing of information, upline & downline is essential. Take this tutorial from cio.com : Supply Chain Management Definition and Solutions Copyright 2010 John Wiley & Sons, Inc

23 Collaborative Planning Designed to synchronize production & distribution plans & product flows. Optimize resource utilization over expanded capacity base. Increase customer responsiveness. Reduce inventories. Copyright 2010 John Wiley & Sons, Inc

24 Figure 10.4 CPFR model. (Source: VICS.org, Collaborative Planning, Forecasting, and Replenishment (CPFR): An Overview, May 18, 2004, Figure 1, p.6.) Copyright 2010 John Wiley & Sons, Inc

25 Vendor Managed Inventory Automatic information sharing. Reduces warehousing costs for suppliers. Inventory levels are monitored for trigger level for immediate shipment as needed. Efficient manufacturing schedules. All participants should share in benefits of efficiencies of scale. Copyright 2010 John Wiley & Sons, Inc

26 E-Business Systems & Supply Chains Better cost performance from improved productivity & lower costs. Enhanced customer service from improved quality of service. Improved process capabilities from online business quality consistency. Higher productivity & dependability from increased control of material flows along the supply chain. Shortened cycle times due to fewer delays & higher speed. Greater flexibility in planning & replanning. Shorten the supply chain itself. Smooth the related production processes. Copyright 2010 John Wiley & Sons, Inc

27 Managing Collaboration Managing Inventory Managing E-Procurement Managing Other It-Assisted Solutions Supply chain Teams Virtual Factories Mobility and Wireless Solutions The Leaning of the Supply Chain Copyright 2010 John Wiley & Sons, Inc

28 Business Value of SCM Effective transformation of raw materials into goods and/or services. Reduce uncertainty & risk. Improved collaboration to decrease inventory levels & cycle time. Improved processes & customer service. Increased profitability & competitiveness. Copyright 2010 John Wiley & Sons, Inc

29 Successful Supply Chain Management Copyright 2010 John Wiley & Sons, Inc

30 10.3 Enterprise Resource Planning (ERP) Systems Copyright 2010 John Wiley & Sons, Inc

31 What is ERP? Software integrates planning, management & use of all resources in entire enterprise. Comprises sets of applications that automate back-end operations (financial, inventory management & scheduling). Modules for cost control, accounts payable/receivable, treasury management & fixed assets. Benefits range from increased efficiency to improved quality, productivity & profitability. Copyright 2010 John Wiley & Sons, Inc

32 Continuously seeks to streamline its supply chain operations. Must accelerate new product development. Devises ways to offer customers greater choice of better products at lower cost. ERP allowed company to access more timely & accurate data & reduce cost. Copyright 2010 John Wiley & Sons, Inc

33 Successful ERP Implementations Copyright 2010 John Wiley & Sons, Inc

34 Figure 10.5 ERR application modules. (Source: Prepared by D. Amoroso.) Copyright 2010 John Wiley & Sons, Inc

35 ERP Lease or Buy? Self-develop an integrated system, either linking together existing functional packages or by programming a new custom-built system. Purchase commercially available product (often quicker &/or less expensive). Leading vendor is SAP. Oracle & Computer Associates also make similar products. Lease from application service providers (ASP) to get the best modules of different vendors. Lease will typically be least expensive option making it more affordable by even small firms. Copyright 2010 John Wiley & Sons, Inc

36 10.4 Customer Relationship Management (CRM) Copyright 2010 John Wiley & Sons, Inc

37 Figure 10.6 Copyright 2010 John Wiley & Sons, Inc

38 CRM Business Strategy Customers are the core of the business. Success depends upon company effectively managing relationships with customers. It is a business strategy to select & manage customers to optimize long-term value. Requires a customer-centric business philosophy & culture to support effective marketing, sales & services processes. Idea is simple treat different customers differently as their needs are different & their value to the company may be different. Check out this tutorial at cio.com for more: Customer Relationship Management Copyright 2010 John Wiley & Sons, Inc

39 Classification of CRM Applications Customer-facing include all areas where customers interact with company (call centers, help desks, sales force automation). Customer-touching customers interact with the applications (self-service, campaign management, general purpose e-business applications). Customer-centric intelligence analyze results of operational processing & use results to improve CRM applications. Online networking methods that provide the opportunity to build personal relationships (chat rooms & discussion lists). Copyright 2010 John Wiley & Sons, Inc

40 Levels & Types of e-crm e-crm Foundational service minimum necessary services such as web site responsiveness. Customer-centered services order tracking, product configuration/customization & security/trust. Services that matter the most to customers. Primarily on the web. Value-added services extra such as online auctions, online training & education. Loyalty programs recognize customers who repeatedly use services (products) offered. Wireless (Mobile) CRM Copyright 2010 John Wiley & Sons, Inc

41 Customer Service on the Web Search and Comparison Capabilities Free Products and Services Technical and Other Information and Services Customized Products and Services Account or Order Status Tracking Copyright 2010 John Wiley & Sons, Inc

42 Tools for Customer Service Personalized web pages used to record purchases & preferences. FAQs commonly used for dealing with repetitive customer questions. & automated response Chat rooms Live chat Call centers Troubleshooting Tools Copyright 2010 John Wiley & Sons, Inc

43 Figure 10.7 Traditional vs. mobile CRM. Copyright 2010 John Wiley & Sons, Inc

44 Issues Related to CRM Failures Difficulty in measuring intangible benefits. Failure to identify & focus on specific business problems that the CRM can solve. Lack of active senior management sponsorship. Poor user acceptance. Trying to automate poorly defined business process. Copyright 2010 John Wiley & Sons, Inc

45 Table 10.1 Copyright 2010 John Wiley & Sons, Inc

46 Business Value of CRM Increase in staff productivity. Cost avoidance. Increased revenue. Margin increases. Reduced inventory costs. Increased customer satisfaction. Copyright 2010 John Wiley & Sons, Inc

47 Risks of e-crm Taking on more than can be delivered. Getting over budget & behind schedule. Poor user adoption. Expensive maintenance & support. Isolation. Garbage in-garbage out. Failure to measure success. Copyright 2010 John Wiley & Sons, Inc

48 10.5 Knowledge Management and IT Copyright 2010 John Wiley & Sons, Inc

49 Figure 10.8 Data, information, and knowledge. Copyright 2010 John Wiley & Sons, Inc

50 Knowledge Knowledge Information that is contextual, relevant & actionable. Extraordinary leverage & increasing returns. Fragmentation, leakage & the need to refresh. Uncertain value. Uncertain value of sharing. Rooted in time. Intellectual capital (intellectual assets) is another term used for knowledge; an implied financial value to knowledge. Explicit and Tacit Knowledge Copyright 2010 John Wiley & Sons, Inc

51 Problem need to keep large employee base up-to-date & ahead of competitors & clients. Spread lessons learned so not to repeat mistakes. Solution implemented knowledge management system. Results early problems, however, initiated modifications to rate usefulness of knowledge. Copyright 2010 John Wiley & Sons, Inc

52 Knowledge Knowledge management System Cycle Create Knowledge Capture knowledge Refine knowledge Store knowledge Manage knowledge Disseminate knowledge Copyright 2010 John Wiley & Sons, Inc

53 Figure 10.9 The knowledge management system cycle. Copyright 2010 John Wiley & Sons, Inc

54 Knowledge Components of KMS Communication Collaboration Storage Retrieval Processing Copyright 2010 John Wiley & Sons, Inc

55 KMS Implementation Knowledge Finding Experts Electronically and Using Expert Location Systems Enterprise Knowledge Portals Using KM in Training and Learning Oxford Case Study Copyright 2010 John Wiley & Sons, Inc

56 Figure ELS : Expert Location System Expert location system of AskMe Corp. (Source: Drawn by E. Turban.) 10-56

57 Figure KM and e-learning (SimMAGIC). (Source: Courtesy of HamStar Technology LTD.) 10-57

58 10.6 Managerial Issues Copyright 2010 John Wiley & Sons, Inc

59 Major Managerial Issues Ethical responsibilities to employees as business needs change. How much to integrate risk. Role of IT support & strategic. Organizational adaptability software versus existing processes. Going global complicate existing processes. Customer is king/queen key success factor. Set CRM policies with care The Lasting importance of knowledge management Implementation in the face of quickly changing technology Copyright 2010 John Wiley & Sons, Inc

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