Professional Documents
Culture Documents
5
PRACTICAL ASPECTS AND APPLICATIONS OF IT/IS
ERP
• ERP is defined as a software package which integrates all the department of an organization.
Several department of an organization are marketing, sales, finance, production etc. Since
an ERP package integrates these entire departments, thus the performance of an
organization will be improved. It is used to manage the important part of business including
product planning, purchasing, maintaining inventories, customer service etc.
• Every department has its own computer system optimized for their particular work but an
ERP system combines them all together into a single computer through integrated system
approach. In short ERP system provides a single database where business transaction are
recorded, processed, monitored and reported.
Benefits of ERP
• Reduce paper documents by providing on‐line formats for quickly entering and retrieving
information.
• Improves timeliness of information by permitting posting daily instead of monthly.
• Greater accuracy of information with detailed content, better presentation satisfactory for
the auditors.
• Improved cost control.
• Faster response and follow –up on customers.
• Better monitoring and quicker resolution of queries.
• More efficient cash collection, say, material reduction in delay in payments to customers.
• Improves information access and management throughout the enterprise.
• Improves supply‐demand linkage with remote locations and branches in different countries.
• Helps to achieve competitive advantage by improving its business process.
• Provides a unifies customer database usable by all applications.
Challenges of ERP
• Success depends on the skill and experience of the workforce, including training about how
to make the system work correctly. Many companies cut costs by cutting training budgets.
ERP system is often operated by personnel with inadequate education in ERP in general
• Customization of the ERP software is limited. Some customization may involve changing of
the ERP software structure which is usually not allowed.
• Many of the integrated links need high accuracy in other applications to work effectively. A
company can achieve minimum standards, then over time "dirty data" will reduce the
reliability of some applications.
• Resistance in sharing sensitive internal information between departments can reduce the
effectiveness of the software.
• ERPs are often seen as too rigid and too difficult to adapt to the specific workflow and
business process of some companies ”this is cited as one of the main causes of their failure”.
ERP Implementation Methodologies
• Different companies may install the same ERP software in totally different processes. The
same company may implement different ERP software in the same approach. There are
three commonly used methodologies for implementing ERP systems.
• The Big Bang
• Modular Implementation
• Process‐Oriented Implementation
The Big‐Bang
• The installation of ERP systems of all modules happens across the entire organization at
once. The big bang approach promised to reduce the integration cost in the condition of
thorough and careful execution.
• It partially contributed the higher rate of failure in ERP implementation.
• Today, not many companies dare to attempt it anymore.
• Many parties involved in ERP software systems are not IT professionals. ERP transforms the
business processes.
Modular Implementation
• The method of modular implementation goes after one ERP module at a time. This limits the
scope of implementation usually to one functional department. This approach suits
companies that do not share many common processes across departments or business units.
• Independent modules of ERP systems are installed in each unit, while integration of ERP
modules is taken place at the later stage of the project. This has been the most commonly
used methodology of ERP implementation.
• Each business unit may have their own "instances" of ERP and databases. Modular
implementation reduces the risk of installation, customization and operation of ERP systems
by reducing the scope of the implementation.
Process‐Oriented Implementation
• It focus on the support of one or a few critical business processes which involves a few
business units.
• The process‐oriented implementation may eventually grow into a full‐blown
implementation of the ERP system.
• The initial customization of the ERP system is limited to functionality closely related to the
intended business processes.
• This approach is utilized by many small to mid‐sized companies which tend to have less
complex internal business processes.
ERP & Related Technologies
ERP systems have three significant limitations:
1. Managers cannot generate custom reports or queries without help from a programmer.
2. ERP systems provide current status only, such as open orders. Managers often need to look
past the current status to find trends and patterns that aid better decision‐making.
3. The data in the ERP application is not integrated with other enterprise or division systems
and does not include external intelligence.
• There are many technologies that help to overcome these limitations. These technologies,
when used in conjunction with the ERP package, help in overcoming the limitations of a
standalone ERP system and thus, help the employees to make better decisions. Some of
these technologies are:
• Business Process Reengineering (BPR)
• Management Information System (MIS)
• Decision Support Systems ( DSS)
• Executive Information Systems (EIS)
• Data warehousing
• Supply Chain Management
Business Process Re‐engineering
• BPR stand for Business Process Re‐engineering. It can be define as a management approach
aiming at improvement by means of elevating efficiency and effectiveness of process that
exists within and across the organization.
Management Information System
• MIS is a computer based system that optimizes the collection, transfer and presentation of
information throughout an organization through an integrated structure of data bases and
information flow.
The main characteristics of MIS are :
1. MIS supports the data processing functions of transactions handling and record keeping.
2. MIS uses an integrated database and supports a variety of functional areas.
3. MIS provides operational, tactical and strategic levels of the organization with the timely, but
for the most part structured information.
4. MIS is flexible and can be adapted to the changing needs of the organization.
Decision Support System (DSS)
• Managers spend a lot of time and effort in gathering and analyzing the information before
making the decisions. DSS were created to assist managers in this task. DSS are interactive
information systems that rely on integrated set of user‐friendly softwares and hardware
tools.
• To produce and present information targeted to support management in the decision
making process. DSS facilitates the decision making process, helping the decision makers to
choose between alternatives.
• Some DSS can automatically rank the alternatives, based on the criteria given by the decision
maker.
• Characteristics of DSS are:
1. A DSS is designed to address semi structured and unstructured problems.
2. The DSS mainly supports decision making at the top management level.
3. DSS is interactive; user friendly can be used by the decision maker with little or no assistance
from a computer professional.
Executive Information Systems
An executive information system (EIS) is the type of information system used by executives to
access and manage the data they require to make informed business decisions. Although there
are tools for managing an executive information system, the EIS in itself is not a tool, but rather,
an infrastructure within a company. In the hierarchical structure of information systems, the EIS
Not a piece of hardware or software, but an infrastructure that supplies to a firm's executives the
up‐to‐the‐minute operational data, gathered and sifted from various databases. The typical
information mix presented to the executive may include financial information, work in process,
inventory figures, sales figures, market trends, industry statistics, and market price of the firm's
shares. It may even suggest what needs to be done, but differs from a decision support system (DSS)
in that it is targeted at executives and not managers.
Data Warehousing Systems
• Since operational data can’t be kept in the database of ERP system because as time passes
volume of data will increase and this will affect the performance of ERP system, thus need
arise to save this data.
• The primary concept of data warehouse is that data stored for business analysis can be
accessed most effectively by separating it from the data in operational system. Thus Data
warehouse provides the analytical tools. It combines data from sales, marketing, finance,
and other departments.
• If operational data is kept in database then it will create a lot of problem by affecting the
performance of ERP system. So it is better to archive operational data once its use is over.
‘Use is over’ does not mean that archived data is useless rather it is one of the most valuable
resources of organization.
• However once the operational use of data is over it should be removed from operational
database. Once the data is imported into Data warehouse it becomes non‐volatile i.e. no
modification can be made afterward once data has been imported in data warehouse.
Supply Chain Management
• A supply chain is a network of facilities and distribution options that performs the functions
of procurement of materials, transformation of these materials to intermediate and finished
products, and the distribution of these finished products to customers.
• Supply chains exists in both service and manufacturing organizations although the
complexity of chain may vary greatly from industry to industry and firm to firm
Top 8 Pitfalls of ERP Implementations
• Implementing an Enterprise Resource Planning, or ERP system in any company is filled with
promise and fraught with danger.
• Along with the many benefits that ERP systems bring, the chief among these being rapid
access to customer and supplier information, there are also pitfalls. One pitfall that can be
so very costly is a poorly executed ERP implementation, and this can cripple a company and
cause a loss of jobs.
• 1. When there is no executive sponsor. ERP crosses functions within a company. Therefore,
the program needs someone with the authority to bring various functional managers
together. People must devote time and resources to the project, and if they don't think that
doing so is in their best interest or important enough to the organization, they will
undoubtedly find something else to do.
• 2. When the project is viewed as being of interest to only one department. If the project is
seen as being important to just the finance department, or the IS department, or just the
manufacturing department, it will fail. It applies to all departments not just one and people
need to understand that.
• 3. When there is no full‐time project manager. ERP implementations are important enough
to warrant at a minimum, one full time person to manage the project.
• 4. When, because of the hardware/software/communications intensity, the IS people
make the decisions. The problem here is that the IS people may not have a good
understanding of functional requirements of the other departments and how others will use
the ERP system. Input from all departments is needed for the system to be most effective
and to create a sense of buy‐in.
• 5. When there is a lack of internal resources applied to the project. Implementing an ERP
systems take a good amount of time and effort from the people within the company. This
project is work on top of the tasks that people currently are responsible for performing. If
the implementation constantly put aside to do “important” day to day work the schedule
will slip and the project risks failure. The question on priorities should not be an “either/or”
question. Work and task planning must take into account the increased time demands of the
project for all participants.
• 6. When there is no documentation of the implementation procedure. Most ERP
implementation will constitute different degrees of business re‐engineering. It is imperative
for companies to document their current processes "as is" and reflect the re‐engineering
effort in a documented "to be" process. This approach will maximize the input from
company resources and bring the need to revamp legacy practices to the forefront.
• 7. Lack of training. Companies often overlook the importance of training in enabling the
success of enterprise implementation. Training should be delivered in stages. At first,
company team leaders should be trained during different stages of the implementation. The
training should be delivered by a product and process expert. It should follow a methodical
approach which maps the company's way of doing business, performed on company data.
The second tier of training should be rolled out and populated to the rest of the company
staff prior to the enterprise application "going live."
• 8. If there is a massive change of everything. From experience, companies embarking on
massive re‐engineering in their core processes, subject the company enterprise
Customer Relationship Management
• Customer relationship management (CRM) has the business purpose of intelligently finding,
marketing, selling to and servicing customers. CRM is a broadly used term that covers
concepts used by companies, and public institutions to manage their relationships with
customers and stakeholders. Technologies that support this business purpose include the
capture, storage and analysis of customer, vendor, partner, and internal process
information. Functions that support this business purpose include Sales, Marketing and
Customer Service, Training, Professional Development, Performance Management, Human
Resource Development and compensation.
Need of CRM
The experience from many companies is that a very clear CRM requirement with regards to
reports, e.g. output and input requirements, is of vital importance before starting any
implementation. With a proper demand specification a lot of time and costs can be saved based
on right expectations versus systems capability. A well operative CRM system can be an
extremely powerful tool for management and customer strategies.
Customer Relationship Management is a comprehensive approach for creating, maintaining and
expanding customer relationships‟.
Significance of the words used in the definitions:
(a) Comprehensive: CRM does not belong to just sales or marketing. It is not the sole
responsibility of customer service group or an IT team; i.e. CRM must be a way of doing
business that touches all the areas.
(b) Approach: An approach is broadly a way of treating or dealing with something. CRM is a way
of thinking about and dealing with the customer relationship. We can also use the word
„strategy‟ because CRM involves a clear plan. In fact, CRM strategy can usually serve as a
benchmark for other strategies in your organization, because any strategy sets directions for
your organization.
• We can also consider this from a department or area level. Just as a larger organization has
strategies for shareholder management, marketing etc. Each strategy must support
managing customer relationships. Thus CRM is strategic. To realize this, one can make a list
of key strategies, to brief your area of responsibility. Then write down organizational
approach towards customers. Compare the CRM strategies with other strategies. They
should support each other.
Advantages of CRM
• By using CRM methodology, an enterprise can:
• Provide better customer service
• Increase customer revenues
• Discover new customers
• Cross sell/Up Sell products more effectively
• Help sales staff close deals faster
• Make call centers more efficient
• Simplify marketing and sales processes.
Disadvantages of CRM Systems
• Record Loss
• Training
• Require additional work inputting data
• Require continuous maintenance, information updating, and system upgrading costly
• Difficult to integrate with other management information systems.
E‐CRM
• E‐CRM provides companies with a means to conduct interactive, personalized and relevant
communications with customers across both electronic and traditional channels. It utilizes a
complete view of the customer to make decisions about the following.
• Messaging
• Promotional offers, and
• Channel delivery.
• It synchronizes communications across otherwise disjointed customer‐facing systems. It asks
for the permission of the potential customer before talking to him about product or services.
It focuses on understanding how the economics of customer relationships affect the
business CRM strategy along with its electronic component constitutes E‐CRM. The trust of
E‐CRM is not what an organization is doing on the web but how fully an organization ties its
online channel back to its traditional channel or customer touch points.
Components of E‐CRM
• E‐CRM Assessment: It is very important to devise numerical measures of how a company
measures up in the eyes of the customers with respect to its competitors. An E‐CRM
capability index is devised which provides a benchmark for cross company comparison.
Based on these results, a company identifies quick hits, which can be immediately
implemented to improve business processes; impact the bottom line and future enhance its
understanding of its customers view of the company.
• E‐CRM strategy alignment: Each company must identify, measures and align to the gaps that
exist between customer expectation already measured in the e‐CRM assessment stage and
the internal capabilities that serve these customer expectations.