Achieving Operational

Excellence and
Customer Intimacy:
Enterprise Applications
IT 221
 WHAT ARE ENTERPRISE SYSTEMS?

Module 2 introduced enterprise systems, also known as

enterprise resource planning (ERP) systems, which are
based on a suite of integrated software modules and a
common central database. The database collects data
from many different divisions and departments in a firm,
and from a large number of key business processes in
manufacturing and production, finance and accounting,
sales and marketing, and human resources, making the
data available for applications that support nearly all of
an organization’s internal business activities. When new
information is entered by one process, the information is
made immediately available to other business processes
ENTERPRISE SOFTWARE
Enterprise software is built around thousands of predefined business processes that reflect best
practices.
Companies implementing this software must first select the functions of the system they wish to
use and then map their business processes to the predefined business processes in the software.
Identifying the organization’s business processes to be included in the system and then mapping them
to the processes in the enterprise software is often a major effort. A firm would use configuration tables
provided by the software to tailor a particular aspect of the system to the way it does business.
Leading enterprise software vendors include SAP, Oracle (with its acquisition PeopleSoft) Infor
Global Solutions, and Microsoft There are versions of enterprise software packages designed for small
businesses and on-demand versions, including software services delivered over the Web. Although
initially designed to automate the firm’s internal “back-office” business processes, enterprise systems
have become more externally-oriented and capable of communicating with customers, suppliers, and
other entities.
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.
Enterprise systems help firms respond rapidly to customer requests for information or products.
Because the system integrates order, manufacturing, and delivery data, manufacturing is better informed
about producing only what customers have ordered, procuring exactly the right amount of components
or raw materials to fill actual orders, staging production, and minimizing the time that components or
finished products are in inventory.
BUSINESS VALUE OF ENTERPRISE SYSTEMS

Enterprise systems provide much valuable information for improving management decision making.
Corporate headquarters has access to up-to-the minute data on sales, inventory, and production and uses
this information to create more accurate sales and production forecasts. Enterprise software includes
analytical tools for using data captured by the system to evaluate overall organizational performance.
Enterprise system data have common standardized definitions and formats that are accepted by the entire
organization. Performance figures mean the same thing across the company. Enterprise systems allow
senior management to easily find out at any moment how a particular organizational unit is performing,
determine which products are most or least profitable, and calculate costs for the company as a whole
 SUPPLY CHAIN MANAGEMENT SYSTEMS

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. It links suppliers, manufacturing plants, distribution centers, retail outlets, and customers to supply
goods and services from source through consumption. Materials, information, and payments flow through the
supply chain in both directions
THE SUPPLY CHAIN

The upstream portion of the supply chain includes

the company’s suppliers, the suppliers’ suppliers,
and the processes for managing relationships with
them.
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.
INFORMATION SYSTEMS AND SUPPLY CHAIN MANAGEMENT

Inefficiencies in the supply chain, such as parts shortages, underutilized plant capacity, excessive
finished goods inventory, or high transportation costs, are caused by inaccurate or untimely information.
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.
To satisfy customers, manufacturers often deal with such uncertainties and unforeseen events by keeping
more material or products in inventory than what they think they may actually need. The safety stock acts as a
buffer for the lack of flexibility in the supply chain.
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.
Supply chain management systems provide the kind
of information that helps members of the supply
chain make better purchasing and scheduling
decisions.
SUPPLY CHAIN MANAGEMENT SOFTWARE
Supply chain software
 software to help businesses plan their supply chains (supply chain planning)
 software to help them execute the supply chain steps (supply chain execution)
Supply chain planning systems enable the firm to model its existing supply chain, generate demand
forecasts for products, and develop optimal sourcing and manufacturing plans.
One of the most important—and complex— supply chain planning functions is demand planning,
which determines how much product a business needs to make to satisfy all of its customers’ demands.
Supply chain execution systems manage the flow of products through distribution centers and
warehouses to ensure that products are delivered to the right locations in the most efficient manner. They
track the physical status of goods, the management of materials, warehouse and transportation
operations, and financial information involving all parties.
GLOBAL SUPPLY CHAINS AND THE INTERNET

Enterprise and supply chain management systems enhanced with Internet

technology supply some of this integration. A manager will use a Web interface to
tap into suppliers’ systems to determine whether inventory and production
capabilities match demand for the firm’s products. Business partners will use Web-
based supply chain management tools to collaborate online on forecasts. Sales
representatives will access suppliers’ production schedules and logistics
information to monitor customers’ order status.
Global Supply Chain Issues

More and more companies are entering international markets, outsourcing manufacturing
operations, and obtaining supplies from other countries as well as selling abroad. Their supply
chains extend across multiple countries and regions. There are additional complexities and
challenges to managing a global supply chain.

Global supply chains typically span greater geographic distances and time differences than
domestic supply chains and have participants from a number of different countries. Supply chain
management may need to reflect foreign government regulations and cultural differences. All of
these factors impact how a company takes orders, plans distribution, sizes warehousing, and
manages inbound and outbound logistics throughout the global markets it services.
Global Supply Chain Issues

As goods are being sourced, produced, and shipped, communication is required among retailers,
manufacturers, contractors, agents, and logistics providers. Many, especially smaller companies, still share
product information over the phone, via e-mail, or through faxes. These methods slow down the supply chain
and also increase errors and uncertainty. With e-SPS, all supply chain members communicate through a Web-
based system. If one of Koret’s vendors makes a change in the status of a product, everyone in the supply
chain sees the change

In addition to contract manufacturing, globalization has encouraged outsourcing warehouse

management, transportation management, and related operations to third-party logistics providers, such as
UPS Supply Chain Solutions and Schneider Logistics Services. These logistics services offer Webbased
software to give their customers a better view of their global supply chains. Customers are able to check a
secure Web site to monitor inventory and shipments, helping them run their global supply chains more
efficiently.
Demand-Driven Supply Chains:
From Push to Pull Manufacturing and Efficient Customer Response

In addition to reducing costs, supply chain management systems facilitate efficient customer response,
enabling the workings of the business to be driven more by customer demand.
Earlier supply chain management systems were driven by a push-based model (also known as build-to-stock)
push-based model – production master schedules are based on forecasts or best guesses of demand for
products, and products are “pushed” to customers.
pull-based model - also known as a demand driven model or build-to-order, actual customer orders or
purchases trigger events in the supply chain.

The Internet and Internet technology make it possible to move from sequential supply chains, where
information and materials flow sequentially from company to company, to concurrent supply chains, where
information flows in many directions simultaneously among members of a supply chain network.
BUSINESS VALUE OF SUPPLY CHAIN MANAGEMENT SYSTEMS

Supply chain management systems enable firms to streamline both their internal and external supply
chain processes and provide management with more accurate information about what to produce, store, and
move. By implementing a networked and integrated supply chain management system, companies match
supply to demand, reduce inventory levels, improve delivery service, speed product time to market, and use
assets more effectively.

In addition to reducing costs, supply chain management systems help increase sales. If a product is not
available when a customer wants it, customers often try to purchase it from someone else. More precise
control of the supply chain enhances the firm’s ability to have the right product available for customer
purchases at the right time.
 CUSTOMER RELATIONSHIP MANAGEMENT
SYSTEMS

WHAT IS CUSTOMER RELATIONSHIP MANAGEMENT?

In a small business operating in a neighborhood, it is possible for business owners and
managers to really know their customers on a personal, face-to-face basis. But in a large
business operating on a metropolitan, regional, national, or even global basis, it is impossible
to “know your customer” in this intimate way.
-too many customers
-many different ways that customers interact with the firm
A large business’s processes for sales, service, and marketing tend to be highly
compartmentalized, and these departments do not share much essential customer information.
 CUSTOMER RELATIONSHIP MANAGEMENT
SYSTEMS
Customer relationship management (CRM) systems
Capture and integrate customer data from all over the
organization
 Consolidate the data
 analyze the data
 distribute the results to various systems
 customer touch points across the enterprise
Touch point (contact point) - method of
interaction with the customer
 CUSTOMER RELATIONSHIP MANAGEMENT
SYSTEMS

Good CRM systems provide data and analytical tools for answering questions such as
these:
“What is the value of a particular customer to the firm over his or her lifetime?”
“Who are our most loyal customers?”
“Who are our most profitable customers?”
“What do these profitable customers want to buy?”
Firms use the answers to these questions to acquire new customers, provide better service
and support to existing customers, customize their offerings more precisely to customer
preferences, and provide ongoing value to retain profitable customers.
CUSTOMER RELATIONSHIP MANAGEMENT SOFTWARE

 Partner relationship management (PRM)

 Employee relationship management (ERM).

Partner 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. 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. It also provides a firm with tools to assess its
partners’ performances so it can make sure its best partners receive the support they need to close more
business
CUSTOMER RELATIONSHIP MANAGEMENT SOFTWARE

 Partner relationship management (PRM)

 Employee relationship management (ERM).

Employee relationship management (ERM) : deals with employee issues that are closely related to CRM
 setting objectives
 employee performance management
 Performance based
 Compensation
 employee training
CUSTOMER RELATIONSHIP MANAGEMENT SOFTWARE
Customer relationship management systems typically provide software and online tools for sales, customer
service, and marketing.

Sales Force Automation (SFA)

Sales force automation modules in CRM systems help sales staff increase their productivity by focusing sales
efforts on the most profitable customers, those who are good candidates for sales and services.

Customer Service
Customer service modules in CRM systems provide information and tools to increase the efficiency of call centers,
help desks, and customer support staff.

Marketing
Provides capabilities for capturing prospect and customer data, for providing product and service information, for
qualifying leads for targeted marketing, and for scheduling and tracking direct-marketing mailings or e-mail
 OPERATIONAL AND ANALYTICAL CRM

Operational CRM
 includes customer-facing applications, such
as tools for sales force automation, call
center and customer service support, and
marketing automation

Analytical CRM
 includes applications that analyze customer data
generated by operational CRM applications to
provide information for improving business
performance
 ENTERPRISE APPLICATIONS: NEW OPPORTUNITIES
AND CHALLENGES

ENTERPRISE APPLICATION CHALLENGES

 Enterprise applications involve complex pieces of software that are very expensive to purchase
and implement.
 Enterprise applications require not only deep-seated technological changes but also fundamental
changes in the way the business operates.
 Supply chain management systems require multiple organizations to share information and
business processes.
 Some firms experienced enormous operating problems and losses when they first implemented
enterprise applications because they didn’t understand how much organizational change was
required.
 ENTERPRISE APPLICATIONS: NEW OPPORTUNITIES
AND CHALLENGES

ENTERPRISE APPLICATION CHALLENGES

 Enterprise applications also introduce “switching costs.”
 Enterprise applications are based on organization-wide definitions of data.

Enterprise software vendors are addressing these problems by offering pared-down versions of
their software and “fast-start” programs for small and medium-sized businesses and best-practice
guidelines for larger companies. Companies adopting enterprise applications can also save time
and money by keeping customizations to the minimum.
 ENTERPRISE APPLICATIONS: NEW OPPORTUNITIES
AND CHALLENGES

NEXT-GENERATION ENTERPRISE APPLICATIONS

The major enterprise software vendors have created what they call enterprise solutions,
enterprise suites, or e-business suites to make their customer relationship management, supply
chain management, and enterprise systems work closely with each other, and link to systems of
customers and suppliers.
 SAP’s next-generation enterprise applications are based on its enterprise service-oriented
architecture.
 Oracle also has included SOA and business process management capabilities into its Fusion
middleware products. Businesses can use Oracle tools to customize Oracle’s applications
without breaking the entire application.
 Next-generation enterprise applications also include open source and on-demand solutions.
 ENTERPRISE APPLICATIONS: NEW OPPORTUNITIES
AND CHALLENGES

NEXT-GENERATION ENTERPRISE APPLICATIONS

 SAP now offers an on-demand enterprise software solution called Business ByDesign for small
and medium-sized businesses in select countries.
 The major enterprise application vendors also offer portions of their products that work on
mobile handhelds.

Enterprise application vendors have also beefed up their business intelligence features to help
managers obtain more meaningful information from the massive amounts of data generated by
these systems. Rather than requiring users to leave an application and launch separate reporting
and analytics tools, the vendors are starting to embed analytics within the context of the
application itself.
 ENTERPRISE APPLICATIONS: NEW OPPORTUNITIES
AND CHALLENGES

Service Platforms
 A service platform integrates multiple applications from multiple business functions, business
units, or business partners to deliver a seamless experience for the customer, employee,
manager, or business partner.
 For instance, the order-to-cash process involves receiving an order and seeing it all the way
through obtaining payment for the order.
.
 ENTERPRISE APPLICATIONS: NEW OPPORTUNITIES
AND CHALLENGES
Service Platforms
A service such as order-to-cash requires data
from enterprise applications and financial
systems to be further integrated into an
enterprise-wide composite process. To
accomplish this, firms need software tools that
use existing applications as building blocks for
new cross-enterprise processes. Enterprise
application vendors provide middleware and
tools that use XML and Web services for
integrating enterprise applications with older
legacy applications and systems from other
vendors .
END