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Chapter

8
Enterprise Business Systems

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Learning Objectives
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

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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
companys most valued asset.

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Case #1: Implementing CRM Systems

Mitsubishi Motor Sales Goal:
Call center should provide one voice and
one set of ears for the customer

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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.

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Case #1: Implementing CRM Systems

CRM Project Challenges:
Keeping 18 vendors heading in the same
direction

Dirty data had to be cleansed

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Case #1: Implementing CRM Systems

1. What are the key application
components of Mitsubishis 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
Mitsubishis?

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Case #1: Implementing CRM Systems

3. Do you approve of Mitsubishis 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 Mitsubishis system?

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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 companys
customers

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CRM Application Clusters

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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 crossselling and up-selling
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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
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CRM Application Components

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

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Three Phases of CRM

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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
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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.
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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.

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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
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Trends in CRM
Operational
Analytical

Collaborative
Portal-based

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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
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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
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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
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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
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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

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Case #2: Challenges of Implementing ERP

Enterprise resource planning (ERP)
implementations are a lot more than
software packages. They are a
fundamental transformation of a
companys business processes. People,
processes, policies, the companys culture
are all factors that should be taken into
consideration when implementing a major
enterprise system.
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Case #2: Challenges of Implementing ERP

Reasons for ERP Failures:
Managements inability to spec out their
own requirements

Implementers inability to implement specs

Undertake too much too quickly

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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.

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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?

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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

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ERP Application Components

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ERP Process & Information Flows

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ERP Benefits
Quality and Efficiency ERP creates a
framework for integrating and improving a
companys 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
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ERP Benefits
Decision Support Provides vital crossfunctional 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
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Costs of ERP

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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
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Trends in ERP

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Case #3: Business Value of SCM

Benefits of SCM:
Reduces production and distribution costs
Improves timeliness of shipments
Reduces manufacturer inventory levels

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Case #3: Business Value of SCM

Challenges of SCM:
Acquisition of secure extranet
Change company structure
Resistance from employees wedded to
traditional processes

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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?
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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.
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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 companys key business
processes and those of its suppliers,
customers, and business partners

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SCM Life Cycle

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Electronic Data Interchange (EDI)

Definition:
Involves the electronic exchange of
business transaction documents over the
Internet and other networks between
supply chain trading partners

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EDI Activities

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Role of SCM

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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
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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
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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
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SCM Execution Functions

Supply Chain Performance Management
report key measurements in the supply
chain, such as filling rates, order cycle
times, and capacity utilization

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SCM Objectives

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SCM Benefits
Faster, more accurate order processing
Reductions in inventory levels

Quicker times to market

Lower transaction and material costs
Strategic relationship with suppliers
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Causes of SCM Failures

Lack of proper demand planning knowledge, tools and
guidelines
Inaccurate or overoptimistic demand forecasts
Inaccurate production, inventory and other business
data provided by a companys other information
systems
Lack of adequate collaboration among marketing,
production, and inventory management departments
within a company
Immature, incomplete or hard to implement SCM
software tools
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Trends in SCM

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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
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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

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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?
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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?

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Case #5: SCM Best Practices

Why is Wal-Marts IT infrastructure a key
competitive advantage?
Wal-Mart invested early and heavily in cuttingedge 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.
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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
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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.

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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.

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Summary
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 companys customers.

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Summary
Enterprise resource planning is a crossfunctional 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.

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Summary
Supply chain management is a crossfunctional 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.

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Chapter

8
End of Chapter

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