Chapter 9(Enterprise Systems)

9.1 Enterprise Systems

What are Enterprise Systems?
Enterprise systems aim to correct the problem of firms not having integrated information. Also
known as enterprise resource planning (ERP) systems, their main goal is to bridge the
communication gap among all departments and all information users within a company.
If production enters information about its processes, the data are available to accounting, sales,
and human resources. If sales and marketing is planning a new advertising campaign, anyone
anywhere within the organization will have access to that information. Enterprise systems truly
allow a company to use information as a vital resource and enhance the bottom line.
Q. BUSINESS VALUE OF ENTERPRISE SYSTEMS
Enterprise systems provide value both by increasing operational efficiency and by providing
firm-wide information to help managers make better decisions. Large companies with many
operating units in different locations have used enterprise systems to enforce standard practices
and data so that everyone does business the same way worldwide.
• Management: Improved management decision making, with a comprehensive view of
performance across all functional areas.
• More efficient operations and customer-driven business processes: All functional
areas can focus more on the customer and respond to product demand more efficiently.
• A more uniform organization: A more disciplined approach to business throughout the
entire firm, regardless of physical location and/or organizational structure.
Enterprise systems force a company to fully integrate all business processes. These systems
usually require massive changes in the structure and organization of a business and are difficult
to implement. However, the changes can make a tremendous improvement in a firm by using
the best practices of the industry and requiring all functional areas to focus more on the
customer.
9.2 SUPPLY CHAIN MANAGEMENT SYSTEMS
THE SUPPLY CHAIN
A supply chain is similar to a spider’s web. It includes all of the internal functions of an
organization, along with suppliers, distributors, retailers, and customers. They are all rely on
information from each other to effectively meet the business’s objectives.
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.
Nike’s Supply Chain Management System:
Goods start out as raw materials and, as they move through the supply chain, are transformed
into intermediate products (also referred to as components or parts), and finally, into finished
products. The finished products are shipped to distribution centers and from there to retailers
and customers. Returned items flow in the reverse direction from the buyer back to the seller.
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.

Figure 9-2 provides a simplified illustration of Nike’s supply chain for sneakers; it shows the
flow of information and materials among suppliers, Nike, and Nike’s distributors, retailers, and
customers. 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.
Upstream: The upstream portion of the supply chain includes the company’s suppliers, the
suppliers’ suppliers, and the processes for managing relationships with them.
Downstream: The downstream portion consists of the organizations and processes for
distributing and delivering products to the final customers.
Companies doing manufacturing, such as Nike’s contract suppliers of sneakers, also manage
their own internal supply chain processes for transforming materials, components, and services
furnished by their suppliers into finished products or intermediate products (components or
parts) for their customers and for managing materials and inventory.
Q. INFORMATION SYSTEMS AND SUPPLY CHAIN MANAGEMENT
Inefficiencies in the supply chain, such as
➢ Parts shortages,
➢ Underutilized plant capacity,
➢ Excessive finished goods inventory,
➢ High transportation costs, are caused by inaccurate or untimely information.
For example, manufacturers may keep too many parts in inventory because they do not know
exactly when they will receive their next shipments from their suppliers. Suppliers may order
too few raw materials because they do not have precise information on demand. These supply
chain inefficiencies waste as much as 25 percent of a company’s operating costs.
Just-in-time Strategy: 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 would
arrive exactly at the moment they were needed and finished goods would be shipped as they left
the assembly line.
Safety Stock: In a supply chain, however, uncertainties arise because many events cannot be
foreseen uncertain product demand, late shipments from suppliers, defective parts or raw
materials, or production process breakdowns.
To satisfy customers, manufacturers often deal with such uncertainties and unforeseen events by
keeping more material or products in inventory actually need. The safety stock acts as a buffer
for the lack of flexibility in the supply chain. Although excess inventory is expensive, low fill
rates are also costly because business may be lost from canceled orders.
Bullwhip Effect: One recurring problem in supply chain management is the bullwhip effect, in
which information about the demand for a product gets distorted as it passes from one entity to
the next across the supply chain.
The bullwhip is tamed by reducing uncertainties about demand and supply when all members of
the supply chain have accurate and up-to-date information. If all supply chain members share
dynamic information about inventory levels, schedules, forecasts, and shipments, they have
more precise knowledge about how to adjust their sourcing, manufacturing, and distribution
plans.
Q. SUPPLY CHAIN MANAGEMENT SOFTWARES
Supply chain software is classified as either software to help businesses plan their supply chains
(supply chain planning) or software to help them execute the supply chain steps (Supply chain
execution).
1. Supply Chain Planning Systems:
Supply chain planning systems enable firms to:
• To model its existing supply chain
• Generate demand forecasts for products
• Develop optimal sourcing and manufacturing plans.
• Share information about changes easier and faster so work can be better coordinated.
• Determining how much of a specific product to manufacture in a given time period.
• Establishing inventory levels for raw materials, intermediate products and finished goods.
• Determine where to store finished goods;
• Identifying the transportation mode to use for product delivery
• Develop better demand planning that matches production closer with customer demands.
Demand Planning: Demand planning which determines how much product a business needs to
make to satisfy all of its customers’ demands.
2. Supply Chain Execution Systems:
• Manage the flow of products through distribution centers
• Coordinate activities with supply chain partners.
• Warehouses to ensure that products are delivered to the right locations in the most
efficient manner.
• Handle complex interdependencies among various supply chain processes.
• Track the physical status of goods, the management of materials, warehouse and
transportation operations, and financial information involving all parties.
Q. Demand-Driven Supply Chains: Push-Based Supply Model V/s Pull-Based
Supply Model:
Push-Based Supply Model:
Earlier supply chain management systems were driven by a push-based model. It’s also known
as build-to-stock. In Push-Based Model, production master schedules are based on forecast or
best guesses of demand for products and products are pushed to the customer by the
manufacturer.
Pull-Based Supply Model:
With new flows of information made possible by web tools, supply chain management more
easily follows a pull-based model. It also known as a demand-driven model or build-to-order.
Pull-Based Model depend on actual customer orders or purchase before the manufacturer
commit to building the product or providing the service.
9.3 CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS
WHAT IS CUSTOMER RELATIONSHIP MANAGEMENT?
CRM systems gather customer information from all corners of a business, consolidate the
information and then provide it to all of the organization’s customer touch points. By offering a
consolidated viewpoint of the customer to these touch points, a company can cater to the
customer that offers the most profitability.

CUSTOMER RELATIONSHIP MANAGEMENT SOFTWARE

Commercial CRM software packages range from niche tools that perform limited functions.
The more comprehensive CRM packages contain modules for partner relationship management
(PRM) and employee relationship management (ERM).
Partner Relationship Management (PRM): PRM systems are a reflection of internal
customer relationship management. PRM uses many of the same data, tools, and systems as
customer relationship management to enhance collaboration between a company and its selling
partners. If a company does not sell directly to customers but rather works through distributors
or retailers. PRM helps these channels sell to customers directly. It provides a company and its
selling partners with the ability to trade information and distribute leads and data about
customers, integrating lead generation, pricing, promotions, order configurations, and
availability.
Employee Relationship Management (ERM): ERM software deals with employee issues that
are closely related to CRM, such as setting objectives, employee performance management,
performance-based compensation, and employee training. Major CRM application software
vendors include Oracle-owned Siebel Systems and PeopleSoft, SAP, Salesforce.com, and
Microsoft Dynamics CRM.
Q. 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. Directly servicing
customers provides firms with opportunities to increase customer retention by singling out
profitable long-term customers for preferential treatment. CRM software can assign each
customer a score based on that person’s value and loyalty to the company and provide that
information to help call centers route each customer’s service request to agents who can best
handle that customer’s needs. The system would automatically provide the service agent with a
detailed profile of that customer that includes his or her score for value and loyalty. The service
agent would use this information to present special offers or additional service to the customer
to encourage the customer to keep transacting business with the company.
Q. OPERATIONAL AND ANALYTICAL CRM
It’s important to understand the difference between the operational and analytical aspects of
CRM systems.
Operational CRM includes everything a company should provide those employees who
interface directly or indirectly with the customer such as the sales force automation, call centers,
and customer support and marketing automation.
Analytical CRM includes applications that analyze customer data generated by operational
CRM applications to provide information for improving business performance. Analytical CRM
applications are based on data warehouses that consolidate the data from operational CRM
systems and customer touch points for use with online analytical processing (OLAP), data
mining, and other data analysis techniques.
One of the most important benefits of analytical CRM is the ability to determine the customer
lifetime value (CLTV).
 Chapter 12 (Enhancing Decision Making)
Q. TYPES OF DECISIONS
There are different levels in an organization. Each of these levels has different information
requirements for decision support and responsibility for different types of decisions. Generally
there are three classifications of decisions:
1. Unstructured Decisions
2. Structured Decisions
3. Semistructured Decisions
1. Unstructured Decisions: Unstructured decisions are those in which the decision maker must
provide judgment, evaluation, and insight to solve the problem. Each of these decisions is
novel, important, and nonroutine, and there is no well-understood or agreed on procedure for
making them. Usually made at senior levels of management.
2. Structured Decisions: Structured decisions, by contrast, are repetitive and routine, and they
involve a definite procedure for handling them so that they do not have to be treated each time
as if they were new. Usually made at the lowest organizational levels.
3. Semistructured Decisions: Many decisions have elements of both types of decisions and are
semistructured, where only part of the problem has a clear-cut answer provided by an accepted
procedure. Usually made by middle managers.

➢ Senior Management: Senior executives face many unstructured decision situations, such
as establishing the firm’s five- or ten-year goals or deciding new markets to enter.
Answering the question “Should we enter a new market?” Makes decisions based on
internal business information but also external industry and society changes; decisions
affect long-term, strategic goals and the firm’s objectives.
➢ Middle Management: Decisions affect resource allocation, short-range plans and
performance of specific departments, task forces, teams, and special project groups. A
typical middle-level management decision might be “Why is the reported order
fulfillment report showing a decline over the past six months at a distribution center in
Minneapolis?”
➢ Operational Management: Decisions affect subunits and individual employees
regarding the resources, schedules and personnel decisions for specific projects, specific
vendors, other employees and most importantly, the customer.
Q. THE DECISION-MAKING PROCESS
Making a decision is a multistep process. There are four different stages in decision making:
intelligence, design, choice, and implementation

1. Intelligence: Intelligence consists of discovering, identifying, and understanding the

problems occurring in the organization—why a problem exists, where, and what effects it is
having on the firm.
2. Design: Design involves identifying and exploring various solutions to the problem.
3. Choice: Choice consists of choosing among solution alternatives.
4. Implementation: Implementation involves making the chosen alternative work and
continuing to monitor how well the solution is working.
Q. Compare Classical Model of management with the Behavioral Model:
Classical Model: Classical Model describe the five classical functions of managers as
planning, organizing, coordinating, deciding and controlling. This description of
management activities dominated management thought for a long time. The Classical Model
describes formal managerial functions but does not address what exactly managers do when
they plan, decide things and control the work of others.
Behavioral Model: Behavioral models state that the actual behavior of managers appears to
be less systematic, more informal, less reflective, more reactive, and less well organized than
the classical model.
Q. MINTZBERG 10 MANAGERIAL ROLES
Mintzberg found that it could be classified into 10 managerial roles. Managerial roles are
expectations of the activities that managers should perform in an organization. Mintzberg
found that these managerial roles fell into three categories:
1. Interpersonal
2. Informational
3. Decisional
Interpersonal Roles:
1. Figurehead: Managers act as figureheads for the organization when they represent their
companies to the outside world and perform symbolic duties, such as giving out employee
awards, in their interpersonal role.
2. Leader: Managers act as leaders, attempting to motivate, counsel, and support
subordinates.
3. Liaison: Managers also act as liaisons between various organizational levels; within each
of these levels, they serve as liaisons among the members of the management team.
Managers provide time and favors, which they expect to be returned.
Informational Roles:
4. Nerve Center: In their informational role, managers act as the nerve centers of their
organizations, receiving the most concrete, up-to-date information and redistributing it to
those who need to be aware of it.
5. Disseminator: Managers are therefore information disseminators and spokespersons for
their organizations.
6. Spokespersons: Managers are spokespersons for their organizations.
Decisional Roles:
 7. Entrepreneur: Managers make decisions. In their decisional role, they act as
entrepreneurs by initiating new kinds of activities;
8. Disturbance Handler: Managers handle disturbances arising in the organization;
9. Resource Allocator: Managers allocate resources to staff members who need them;
10. Negotiator: Managers act as a negotiator. They negotiate conflicts and mediate between
conflicting groups.
Q. WHAT IS BUSINESS INTELLIGENCE?
“Business intelligence” is a term used by hardware and software vendors and information
technology consultants to describe the infrastructure for warehousing, integrating, reporting,
and analyzing data that comes from the business environment. The foundation infrastructure
collects, stores, cleans, and makes relevant information available to managers.
“Business analytics” is also a vendor-defined term that focuses more on tools and
techniques for analyzing and understanding data. Such as online analytical processing
(OLAP), statistics, models, and data mining.
Q. THE BUSINESS INTELLIGENCE ENVIRONMENT
There are six elements in this business intelligence environment:
1. Data from the business environment: Businesses must deal with both structured and
unstructured data from many different sources, including mobile devices and the Internet.
The data need to be integrated and organized so that they can be analyzed and used by
human decision makers.
2. Business intelligence infrastructure: The underlying foundation of business intelligence
is a powerful database system that captures all the relevant data to operate the business.
The data may be stored in transactional databases or combined and integrated into an
enterprise-data warehouse or series of interrelated data marts.
3. Business analytics toolset: A set of software tools are used to analyze data and produce
reports, respond to questions posed by managers, and track the progress of the business
using key indicators of performance.
4. Managerial users and methods: Business intelligence hardware and software are only as
intelligent as the human beings who use them. Managers impose order on the analysis of
data using a variety of managerial methods that define strategic business goals and specify
how progress will be measured.
5. Delivery platform MIS, DSS, and ESS: The results from business intelligence and
analytics are delivered to managers and employees in a variety of ways, depending on
what they need to know to perform their jobs. MIS, DSS, and ESS which deliver
information and knowledge to different people and levels in the firm operational
employees, middle managers, and senior executives.
 6. User interface: Business people are no longer tied to their desks and desktops. They often
learn quicker from a visual representation of data than from a dry report with columns and
rows of information.BI and BA systems make it easy to visually display data, thereby
making it easy to quickly understand information on a variety of computing devices.

Q. Balance Scorecard Method

Currently, the leading methodology for understanding the really important information needed
by a firm's executives is called the balanced scorecard method. The balanced score card is a
framework for operationalizing a firm's strategic plan by focusing on measurable outcomes on
four dimensions of firm performance: financial. business process, customer, and learning and
growth.
The balanced scorecard framework is thought to be "balanced" because it causes managers to
focus on more than just financial performance. In this view, financial performance is past
history-the result of past actions-and managers should focus on the things they are able to
influence today, such as business process efficiency, customer satisfaction, and employee
training. Once a scorecard is developed by consultants and senior executives, the next step is
automating a flow of information to executives and other managers for each of the key
performance indicators. There are literally hundreds of consulting and software firms that offer
these capabilities, which are described below.
Business Performance Management (BPM) is yet another tool for executives to
systematically translate the strategy they've developed for their company into operational
targets. BPM methods use KPIs to help users measure the organization's progress toward the
targets. BPM is similar to the balanced scorecard approach but with a stronger strategic
viewpoint than an operational viewpoint.
Q. GROUP DECISION-SUPPORT SYSTEMS (GDSS)
A GDSS is an interactive computer-based system for facilitating the solution of unstructured
problems by a set of decision makers working together as a group in the same location or in
different locations. Collaboration systems and Web-based tools for videoconferencing and
electronic meetings described earlier in this text support some group decision processes, but
their focus is primarily on communication. GDSS, however, provide tools and technologies
geared explicitly toward group decision making.
GDSS-guided meetings take place in conference rooms with special hardware and software
tools to facilitate group decision making. The hardware includes computer and networking
equipment, overhead projectors, and display screens Special electronic meeting software
collects, documents, ranks, edits, and stores the ideas offered in a decision-making meeting. The
more elaborate GDSS use a professional facilitator and support staff. The facilitator selects the
software tools and helps organize and run the meeting.
A sophisticated GDSS provides each attendee with a dedicated desktop computer under that
person's individual control. No one will be able to see what individuals do on their computers
until those participants are ready to share information. Their input is transmitted over a network
to a central server that stores information generated by the meeting and makes it available to all
on the meeting network. Data can also be projected on a large screen in the meeting room.

Chapter 13 (Building Information Systems)

Q. Systems Development and Organizational Change
There are Four Kinds of structural Organizational Change that enabled by information
technology: 1. Automation, 2. Rationalization, 3. Business process redesign, and 4. Paradigm
shifts. Each Carries different risk and rewards.

1. Automation: The most common form of IT-enabled organizational change is automation.

The first applications of information technology involved assisting employees with performing
their tasks more efficiently and effectively.
2. Rationalization: Rationalization of procedures is the streamlining of standard
operating procedures. Rationalization of procedures is often found in programs for making a
series of continuous quality improvements in products, services, and operations, such as total
quality management (TQM) and six sigma. Six sigma is a specific measure of quality,
representing 3.4 defects per million opportunities. Most companies cannot achieve this level of
quality, but use six sigma as a goal for driving ongoing quality improvement programs.
3. Business process redesign: A more powerful type of organizational change is business
process redesign, in which business processes are analyzed, simplified, and redesigned Business
process redesign reorganizes workflows, combining steps to cut waste and eliminate repetitive,
paper-intensive tasks).
4. Paradigm shifts: This more radical form of business change is called a paradigm shift. A
paradigm shift involves rethinking the nature of the business and the nature of the organization.
Paradigm shifts and business process redesign often fail because extensive organizational
change is so difficult.
Q. The Systems Development Process
he activities that go into producing an information system solution to an organizational problem
or opportunity are called systems development. illustrates the six-core systems development
process.

1. System Analysis: Systems analysis is the analysis of a problem that a firm tries to solve with
an information system. The systems analysis also includes a feasibility study to determine
whether that solution is feasible, or achievable, from a financial, technical, and
organizational standpoint.
2. System Design: systems design shows how the system will fulfill this objective. The design
of an information System is the overall plan or model for that system. Like the blueprint of a
building or house, it consists of all the specifications that give the system its
form and structure.
3. Programming: During the programming stage, system specifications that were prepared
during the design stage are translated into software program code.
4. Testing: Exhaustive and thorough testing must be conducted to ascertain whether the
System produces the right results. Testing an information system can be broken down into
three types of activities unit testing, system testing, and acceptance testing.
Unit testing or program testing, consists of testing each program separately in the system.
System testing tests the functioning of the information system as a whole.
Acceptance testing provides the final certification that the system is ready to be used in a
production setting.
5. Conversion: Conversion is the process of changing from the old system to the new system
de Four main conversion strategies can be employed: the parallel strategy, the direct cutover
strategy, the pilot study strategy, and the phased approach strategy.
In parallel strategy, both the old system and its potential replacement are rum together for a
time until everyone is assured that the new one functions correctly.
The direct cutover strategy replaces the old system entirely with the new system on
an appointed day.
the pilot study strategy introduces the new system to only a limited area of the organization,
such as a single department or operating unit.
The phased approach strategy introduces the new system in stages, either by functions or by
organizational units.
6. Production and Maintenance: After the new system is installed and conversion is
complete, the system is said to be in production. During this stage, the system will be
reviewed by both users and technical specialist. to determine how well it has met its original
objectives and to decide whether any revisions or modifications are in order.
Q. The Prototyping Process/Step
A four-step model of the prototyping process, which consists of the following:
Step 1: Identify the user’s basic requirements: The systems designer (usually an information
systems specialist) works with the user only long enough to capture the user's basic information
needs.
Step 2: Develop an initial prototype: The systems designer creates a working prototype quickly,
using tools for rapidly generating software.
Step 3: Use the prototype: The user is encouraged to work with the system to determine how
well the prototype meets his or her needs and to make suggestions for improving the prototype.
Step 4: Revise and enhance the prototype: The system builder notes all changes the user
requests and refines the prototype accordingly. After the prototype has been revised, the cycle
returns to Step 3. Steps 3 and 4 are repeated until the user is satisfied.
Q. Advantages and Disadvantages of Prototyping
Advantages
1. Prototyping is most useful when there is some uncertainty about requirements or design
solution
2. often used for designing an information system's end-user interface (the part of the system
with which end users interact, such as online display and data entry screens, reports, or Web
pages).
3. more likely to produce systems that fulfill user requirements.
Disadvantage
1. rapid prototyping can gloss over essential steps in systems development.
2. may not see the need for reprogramming, redesign, or full documentation and testing to build
a polished production system.
3.Some of these hastily constructed systems may not easily accommodate large quantities of
data or a large number of users in a production environment.
Q. RAD, JAD, Agile Definition
The term rapid application development (RAD) is used to describe this process of creating
workable systems in a very short period of time. RAD can include the use of visual
programming and other tools for building graphical user interfaces, iterative prototyping of key
system elements, the automation of program code generation, and close teamwork among end
users and information systems specialists.
joint application design (JAD) is used to accelerate the generation of information requirements
and to develop the initial systems design. JAD brings end users and information systems
specialists together in an interactive session to discuss the system's design.
Agile development focuses on rapid delivery of working software by breaking a large project
into a series of small subprojects that are completed in short periods of time using iteration and
continuous feedback.