Sheet for Final

Types of E-commerce
E-commerce business models
E-commerce revenue model
If a sales representative places an order for tire rims, for example, the system would verify
the customer’s credit limit, schedule the shipment, identify the best route, and reserve the
necessary items from inventory. If inventory stock was insufficient to fill the order, the
system would schedule the manufacture of more rims, ordering the needed materials and
components from suppliers. Sales and production forecasts would be immediately
updated. General ledger and corporate cash levels would be automatically updated with
the revenue and cost information from the order. Users could tap into the system and
find out where that particular order was at any minute. Management could obtain
information at any point in time about how the business was operating.

Absence of ERP causes:

 Data Redundancy: Multiple inputs

 Data inconsistency: Wrong inputs
Components of ERP

Accounting and finance ERP components manage accounting data and financial processes
within the enterprise with functions such as general ledger, accounts payable, accounts
receivable, budgeting, and asset management. One of the most useful features included
in an ERP accounting/finance component is its credit-management feature.

Production and materials management ERP components handle the various aspects of
production planning and execution such as demand forecasting, production scheduling,
job cost accounting, and quality control. Companies typically produce multiple products,
each of which has many different parts. Production lines, consisting of machines and
employees, build the different types of products. The company must then define sales
forecasting for each product to determine production schedules and materials
purchasing.
Human resources ERP components track employee information including payroll, benefits,
compensation, and performance assessment, and assure compliance with the legal
requirements of multiple jurisdictions and tax authorities. Human resources components
even offer features that allow the organization to perform detailed analysis on its
employees to determine such things as the identification of individuals who are likely to
leave the company unless additional compensation or benefits are provided.

The business intelligence components of ERP systems typically collect information used
throughout the organization (including data used in many other ERP components),
organize it, and apply analytical tools to assist managers with decisions. Data warehouses
are one of the most popular extensions to ERP systems, with over two-thirds of U.S.
manufacturers adopting or planning such systems.
How Enterprise Systems Work

1. Before building the enterprise system the firm needs to identify if it is beneficial for
them. If so then what are the things that the firm wants to be incorporated into the
system.
2. The software is built around thousands of predefined business processes.
Organizations implementing this software would have to 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.
3. If the enterprise software does not support the way the organization does business,
companies can rewrite some of the software to support the way their business
processes work. However, enterprise software is unusually complex, and extensive
customization may degrade system performance, compromising the information
and process integration that are the main benefits of the system.
Business Value of Enterprise Systems

A More Uniform Organization Companies can use enterprise systems to support

organizational structures that were not previously possible or to create a more disciplined
organizational culture. For example, they might use enterprise systems to integrate the
corporation across geographic or business unit boundaries or to create a more uniform
organizational culture in which everyone uses similar processes and information. An
enterprise-enabled organization does business the same way worldwide.

For example, Nestlé SA, for instance, installed a SAP R/3 enterprise system as a way of
standardizing and coordinating its business processes in 500 facilities in 80 countries. Its
management had found that decentralized management and lack of standard business
processes and information technology prevented the company from leveraging its
worldwide buying power to obtain lower prices for raw materials and from measuring the
effectiveness of its promotional activities.

More Efficient Operations and Customer-Driven Business Processes Enterprise systems can
help create the foundation for a more customer-driven organization. By integrating
separate business processes in sales, production, finance, and logistics, the entire
organization more efficiently respond to customer requests for products or information,
forecast new products, and build and deliver them as demand requires.

For example, after installing an Oracle enterprise system in 1999, Lucent Microelectronics
Group reduced processes that used to take 10 or 15 days to less than 8 hours. It can
deliver an order of silicon chips used in cell phones to customers such as Ericsson in about
56 hours after that order has been received. If a plant cannot operate because of a power
shortage or natural catastrophe, Lucent can shift production to another plant within 8
hours. The system has helped Lucent lower its logistics costs from 1.5 percent of revenue
to less than 1 percent of revenue.

Firm wide Information for Improved Decision Making Enterprise systems also improve
organization-wide reporting and decision making. Enterprise systems create a single,
integrated repository of data for the entire firm. The data have common, standardized
definitions and formats that are accepted by the entire organization. Senior management
can more easily find out at any moment how a particular organizational unit is performing.

For example, an enterprise system might help management immediately determine which
products are most or least profitable.

Customer relationship management systems

Firms use customer relationship management (CRM) systems to help manage their relationships
with their customers. Integrate firm’s customer-related processes and consolidate customer
information from multiple communication channels to one single place.

Customer relationship management (CRM) programs help a company manage all aspects of
customer encounters, including marketing and advertising, sales, customer service after the sale,
and programs to retain loyal customers. CRM can help a company collect customer data, contact
customers, educate them about new products, and actively sell products to existing and new
customers. Often, CRM software uses a variety of information sources, including sales from retail
stores, surveys, e-mail, and Internet browsing habits, to compile comprehensive customer profiles.
CRM systems can also get customer feedback to help design new products and services.

Tesco, Britain’s largest retail operation uses a CRM Clubcard program to provide outstanding
customer service and deliver loyalty rewards and perks to valued customers. Customers can earn
services such as meals out, travel, dry cleaning, and car maintenance. The Clubcard loyalty
program also extends to Tesco’s business partners, introducing Tesco customers to other
businesses. To be of most benefit, CRM programs must be tailored for each company or
organization.

Benefits:

1. CRM systems provide information to coordinate all of the business processes that deal
with customers in sales, marketing, and service to optimize revenue, customer satisfaction,
and customer retention.
2. This information helps firms identify, attract, and retain the most profitable customers;
provide better service to existing customers; and increase sales.
Supply chain management (SCM) systems

Firms use supply chain management (SCM) systems to help manage relationships with their
suppliers. These systems help suppliers, purchasing firms, distributors, and logistics companies
share information about orders, production, inventory levels, and delivery of products and services
so they can source, produce, and deliver goods and services efficiently.

Supply chain management (SCM) helps determine what supplies are required for the value chain,
what quantities are needed to meet customer demand, how the supplies should be processed
(manufactured) into finished goods and services, and how the shipment of supplies and products
to customers should be scheduled, monitored, and controlled. For example, in an automotive
company, SCM can identify key supplies and parts, negotiate with vendors for the best prices and
support, make sure that all supplies and parts are available

Wal-Mart’s use of information systems is an integral part of its operation. The company gives
suppliers access to its inventory system, so the suppliers can monitor the database and
automatically send another shipment when stocks are low, eliminating the need for purchase
orders. This speeds delivery time, lowers Wal-Mart’s inventory carrying costs, and reduces stock
out costs.

Benefits:

1. To get the right amount of the

products from the source to the point of
consumption in the least amount of time
and at the lowest cost.

2. These systems increase firm

profitability by lowering the costs of
moving and making products and by
enabling managers to make better
decisions about how to organize and
schedule sourcing, production, and
distribution.
Management Challenges

A very high percentage (as much as 66 percent) of companies investing in enterprise

systems or systems for supply chain management or customer relationship management
have not obtained the promised benefits on schedule or spend much more on these
systems than originally anticipated.

High Total Cost of Ownership Enterprise systems, supply chain management, and
customer relationship management systems are very expensive to purchase and
implement. It might take a large company three years to fully implement all of the
organizational and technology changes. The total implementation cost including
hardware, software, database tools, consulting fees, personnel costs, and training, might
amount to five to six times the software package purchase price. Costs run even higher
for organizations with global operations.

Organizational Change Requirements Business processes change dramatically, as do

organizational structure and culture. Organizations that do not understand the need for
these changes or that are unable to make them will have problems implementing
enterprise applications and using them effectively.

Employees must accept new job functions and responsibilities. They will have to learn how
to perform a new set of processes and understand how the information they enter into
the system can affect other parts of the company.

Most firms embracing CRM systems need to transform their focus from a product centric
view to a customer-centric view in which retaining a customer is a priority. These changes
require more interdepartmental cooperation.

Firms using SCM may be asked to redesign the way they work to optimize the
performance of the supply chain as a whole.

Realizing Strategic Value Companies may fail to achieve strategic benefits from enterprise
applications if the generic processes enforced by enterprise applications prevent the firm
from using unique business processes that had been sources of advantage over
competitors.
Solution Guidelines

Look at Business Objectives First Many managers contemplating such systems focus too
much on the technology and not enough on business goals. Managers must understand
the business objectives they want to achieve with enterprise applications before buying
any software. They must determine whether an enterprise application will actually help
the company meet these objectives.

Identifying the key business processes the company is trying to improve and how much
these processes must change with an enterprise application should always be the first
step.

Attention to Data and Data Management Firms implementing enterprise applications must
develop organization-wide definitions of data. Understanding how the organization uses
its data and how the data would be handled in a customer relationship management,
supply chain management, or enterprise system is a large-scale research effort. Employees
will have to study the software very carefully to make sure they understand the definitions
of the data elements in the system, how they relate, and how they can be used for decision
making and operational support.

Senior Management Commitment and Employee Support Support and backing from the
CEO are critical for ensuring that all the changes required by enterprise applications will
be adopted by the entire company. People are much more willing to take on different job
responsibilities or change the way they work if senior management is firmly behind the
effort.

Education and Training Education and training are always essential for successful
information system implementation, but even more so for enterprise applications.
Managers must learn how the system can change key processes, organizational structure,
and the information they use.

Searching the data

A data warehouse is a logical collection of information—gathered from many different

operational databases—that supports business analysis activities and decision-making
tasks. The primary purpose of a data warehouse is to aggregate information throughout
an organization into a single repository in such a way that employees can make decisions
and undertake business analysis activities. Therefore, while databases store the details of
all transactions (for instance, the sale of a product) and events (hiring a new employee),
data warehouses store that same information but in an aggregated form more suited to
supporting decision-making tasks. Aggregation, in this instance, can include totals,
counts, averages, and the like. The following figure compiles information from internal
databases or transactional/operational databases and external databases through
extraction, transformation, and loading (ETL), which is a process that extracts information
from internal and external databases, transforms the information using a common set of
enterprise definitions, and loads the information into a data warehouse.
The data warehouse then sends subsets of the information to data marts. A data mart
contains a subset of data warehouse information. To distinguish between data
warehouses and data marts, think of data warehouses as having a more organizational
focus and data marts having focused information subsets particular to the needs of a
given business unit such as finance or production and operations. Data mining is the
process of analyzing data to extract information not offered by the raw data alone. Data
mining can also begin at a summary information level and progress through increasing
levels of detail or the reverse. To perform data mining, users need data-mining tools.
Data-mining tools use a variety of techniques to find patterns and relationships in large
volumes of information and infer rules from them that predict future behavior and guide
decision making. Data-mining tools for data warehouses and data marts include query
tools, reporting tools, multidimensional analysis tools, statistical tools, and intelligent
agents.

Lands’ End created an organization wide data warehouse so all its employees could access
organizational information. Lands’ End soon discovered that there could be “too much of
a good thing.” Many of its employees would not use the data warehouse because it was
simply too big, too complicated, and had too much irrelevant information. Lands’ End
knew there was valuable information in its data warehouse, and it had to find a way for
its employees to easily access the information. Data marts were the perfect solution to
the company’s information overload problem. Once the employees began using the data
marts, they were ecstatic at the wealth of information. Data marts were a huge success for
Lands’ End.