Lesson 4
Operational
Excellence and
Customer Intimacy:
Enterprise Systems
LEARNING OUTCOMES OF THIS UNIT:
• Identify and describe the major components of an enterprise system.
• Explain how enterprise systems help businesses achieve operational excellence
• Explain enterprise resource planning, its advantages, disadvantages, business value, the
challenges and trends.
• Discuss the role of supply chain management, its benefits and also the challenges.
• Explain the trends in supply chain management. Discuss the role of customer relationship
management (CRM), the phases in CRM its benefits and also the challenges.
• Comment on the applications of CRM.
• Discuss the role of Supplier Relationship Management (SRM) with regards to procurement
• Outline the benefits and barriers of SRM
Froilan G. Cantillo, CCpE
Topic
• Introduction
• What Is Meant by Enterprise Systems?
• Business Value of Enterprise Systems
• Enterprise Resource Planning (ERP)?
• Supply Chain Management (SCM)
• Customer Relationship Management (CRM)
• Supplier Relationship Management (SRM)
Froilan G. Cantillo, CCpE
Introduction
The value of Business Information Systems (BIS) to an organization is dependent on how the
hardware, software and network technologies described in the previous units are applied to
support the organization’s objectives. This is achieved through deployment of specific business
applications that support different organizational processes and functions.
This unit considers enterprise systems and their major components:
Enterprise Resource Planning (ERP)
Supply Chain Management (SCM)
Customer Relationship Management (CRM)
Supplier Relationship Management (SRM).
Froilan G. Cantillo, CCpE
What Is Meant by Enterprise Systems?
Enterprise systems aim to support the business processes of an organization across any
functional boundaries that exist within that organization.
Froilan G. Cantillo, CCpE
Business Value of Enterprise Systems
Enterprise systems can offer big rewards. If done incorrectly can cause a firm huge headaches,
loss of business, employee turmoil, and wasted dollars.
The changes in the enterprise will be tremendous:
• 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.
Bottom Line: 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.
Froilan G. Cantillo, CCpE
Enterprise Resource Planning (ERP)?
Enterprise resource planning (ERP) systems serve as a cross-functional enterprise backbone
that integrates and automates many internal business processes and information systems
within the manufacturing, logistics, distribution, accounting, finance, and human resource
functions of a company.
Froilan G. Cantillo, CCpE
Enterprise Resource Planning (ERP)
Characteristics of ERP software include:
• ERP software is a family of software modules that supports the business activities involved in
vital back-office processes.
• ERP is viewed as a necessary ingredient for the efficiency, agility, and responsiveness to
customers and suppliers that an E-business enterprise needs to succeed in the dynamic world
of E-commerce.
Business value of ERP software:
• ERP creates a framework for integrating and improving back-office systems which results in
major improvements in customer service, production, and distribution efficiency.
• ERP provides vital cross-functional information quickly on business performance to managers
to significantly improve their ability to make better business decisions across the enterprise.
Froilan G. Cantillo, CCpE
Enterprise Resource Planning (ERP)
Advantages of ERP
• Integration of all internal and external processes resulting in increased efficiency and quality of
customer service
• Better sharing of information within the organization due to integration of modules leading to
better decision making and a more agile organization
• Simplified support and maintenance through a single supplier rather than dealing with many
legacy systems.
• Use of “best-of- breed” ERP solution applied by other companies.
The main disadvantage of ERP systems are:
• High costs charged by suppliers for what is a large complex system.
• Implementation of the major organizational change required by these systems-a major
planning, training and development effort is needed to successfully introduce a system that will
radically change both the information systems and business processes of the organization.
Froilan G. Cantillo, CCpE
Enterprise Resource Planning (ERP)
The Cost of ERP
• Costs and risks involved in implementing ERP are considerable.
• Hardware and software costs are a small part of the total costs. The cost of developing new
business processes (reengineering) and preparing employees for the new system (training
and change management) make up the bulk of implementing a new ERP system.
• Converting data from previous legacy systems to the new cross-functional ERP system is
another major category of ERP implementation costs.
Froilan G. Cantillo, CCpE
Enterprise Resource Planning (ERP)
Causes of ERP Failures:
• Business managers and IT professionals underestimate the complexity of the planning,
development, and training that are needed to prepare for a new ERP system that would
radically change their business processes and information systems.
• Failure to involve affected employees in the planning and development phases and change
management programs
• Trying to do too much too fast in the conversion process.
• Insufficient training in the new work tasks required by the ERP system.
• Failure to do enough data conversion and testing.
• Over reliance by company or IT management on claims of ERP software vendors.
Froilan G. Cantillo, CCpE
Enterprise Resource Planning (ERP)
Trends in ERP
Four major developments and trends that are evolving in ERP applications include:
• ERP software packages are gradually being modified into more flexible products.
• In relation to the growth of the Internet and corporate intranets and extranets prompted
software companies to use internet technologies to build Web interfaces and network
capabilities into ERP systems.
• Development of inter-enterprise ERP system that provide Web-enabled links between key
business systems of a company and its customers, suppliers, distributors, and others.
• ERP software companies have developed modular, Web-enabled software suites that
integrate ERO, customer relationship management, supply chain management, procurement,
decision support, enterprise portals, and other business applications and functions.
Froilan G. Cantillo, CCpE
What is meant by Supply chain?
The supply chain consists of the series of activities that moves materials from suppliers, through
the organization to customers. A representation of the structure of a supply chain.
Third Tier Second Tier First Tier First Tier Second Tier Third Tier
Supplier Supplier Supplier Customer Customer Customer
Operations
Material Component Sub-Assy Wholesalers Retailers End User
Supplier Supplier Supplier
Example of Upstream Supplier Example of Downstream Customer
Froilan G. Cantillo, CCpE
What is meant by Supply Chain Management (SCM)?
Supply chain management and logistics are terms used to refer to the management of the flow of
materials through the entire supply chain. The following figure gives an overview of the terms
used to describe the management of the supply chain.
Upstream/Supply Side Downstream/Demand Side
Suppliers Physical Distribution
Procurement Operation Customers
Management
Inbound Material Outbound
Management Management Management
Supply Chain Management/Logistics
Froilan G. Cantillo, CCpE
Supply Chain Management (SCM)
Terms used in the supply chain management are:
• Upstream suppliers: Suppliers that supply the organization with goods or services.
• Downstream customers: customers of the organization such as wholesalers and retailers.
• Inbound logistics: the activities of moving material in from supplier.
• Outbound logistics: the activities of moving material to customers
• Materials management: the movement of materials within the organization.
Froilan G. Cantillo, CCpE
Supply Chain Management (SCM)
Bullwhip Effect
This effect occurs when there is a lack of
synchronization between supply chain
members. Even a slight change in consumer
sales will ripple backwards in the form of
magnified oscillations in demand upstream
described above.
Froilan G. Cantillo, CCpE
Supply Chain Management (SCM)
SCM supports the objectives of the top three management levels of an organization (strategic,
tactical, and operational). The role of information technology in SCM is to support these
objectives with inter enterprise information systems that produce many of the outcomes a
business needs to effectively manage its supply chain.
Supply chain management is a cross-functional inter-enterprise system that uses information
technology to help support and manage the links between some of a company’s key business
processes and those of its suppliers, customers, and business partners. The goal of SCM is to
create a fast, efficient, and low-cost network of business relationships, or supply chain, to get a
company’s products from concept to market.
Froilan G. Cantillo, CCpE
Supply Chain Management (SCM)
Benefits and Challenges of SCM
Major business benefits that are possible with effective supply chain management systems
include:
• Faster, more accurate order processing, reductions in inventory levels, quicker time to market,
lower transaction and materials costs, and strategic relationships with suppliers.
• Companies can achieve agility and responsiveness in meeting the demands of their
customers and the needs of their business partners.
Froilan G. Cantillo, CCpE
Supply Chain Management (SCM)
Major business challenges include:
• Lack of proper demand planning knowledge, tools, and guidelines is a major source of SCM
failure.
• Inaccurate or overoptimistic demand forecasts will cause major production, inventory, and
other business problems, no matter how efficient the rest of the supply chain management
process is constructed.
• Inaccurate production, inventory, and other business data provided by a company’s other
information systems are frequent causes of SCM problems.
• Lack of adequate collaboration among marketing, production, and inventory management
departments within a company, and with suppliers, distributors, and others.
• SCM software tools are considered to be immature, incomplete, and hard to implement by
many companies who are installing SCM systems.
Froilan G. Cantillo, CCpE
Supply Chain Management (SCM)
Trends in SCM
Three possible stages in a company’s implementation of SCM systems.
• First stage – a company concentrates on making improvements to its internal supply chain
process and its external processes and relationships with suppliers and customers.
• Second stage – a company accomplishes substantial supply chain management applications
by using selected SCM software programs internally, as well as externally via intranet and
extranet links among suppliers, distributors, customers, and other trading partners.
• Third stage – company begins to develop and implement cutting-edge collaborative supply
chain management applications using advance SCM software, full-service extranets links, and
private and public e-commerce exchanges.
Froilan G. Cantillo, CCpE
Customer Relationship Management (CRM)
Customer-focused business is one of the top business strategies that can be supported by
information technology. Many companies are implementing customer relationship management
(CRM) business initiatives and information systems as part of a customer-focused or customer
centric strategy to improve their chances for success in today’s competitive business
environment.
Froilan G. Cantillo, CCpE
Customer Relationship Management (CRM)
What is meant by CRM?
• CRM is described as a cross-functional E-business application that integrates and automates
many customer-serving processes in sales, direct marketing, accounting and order
management, and customer service and support.
• CRM systems create an IT framework that integrates all the functional processes with the rest
of a company’s business operations.
• CRM systems consist of a family of software modules that perform the business activities
involved in such front office processes.
• CRM software provides the tools that enable a business and its employees to provide fast,
convenient, dependable, and consistent service to its customers.
Froilan G. Cantillo, CCpE
Customer Relationship Management (CRM)
It is important to bear the following in mind:
• It costs six times more to sell to a new customer than to sell to an existing one.
• A typical dissatisfied customer will tell eight to ten people about his or her experience.
• A company can boost its profits 85 percent by increasing its annual customer retention by only
5 percent.
• The odds of selling a product to a new customer are 15 percent, whereas the odds of selling a
product to an existing customer are 50 percent
• Seventy percent of complaining customers will do business with the company again if it
quickly takes care of a service snafu.
More than 90 percent of existing companies do not have the necessary sales and service
integration to support E-commerce.
Froilan G. Cantillo, CCpE
Customer Relationship Management (CRM)
Customer Relationship Management (CRM) Systems
CRM systems are built around a database and when this database is accessed by employees
and customers using a website the technology is often referred to as e-CRM. Common
applications which would be integrated in a CRM system include:
Customer data collection: This includes personal details such as age, sex and contact address
and also a record of purchase transactions undertaken
Customer data analysis: The captured data allow the categorisation and targeting of customers
according to criteria set by the firm. This information can be useful for marketing campaigns.
Salesforce automation: The entire sales cycle from lead generation to close of sale and after-
sales service can be facilitated using CRM.
Froilan G. Cantillo, CCpE
Customer Relationship Management (CRM)
CRM programmers typically include:
• Sales. CRM software tracks customer contacts and other business and life cycle events of
customers for cross-selling and up-selling.
• Direct Marketing and Fulfilment. CRM software can automate tasks such as qualifying leads,
managing responses, scheduling sales contacts, and providing information to prospects and
customers.
• Customer Service and Support. CRM helps customer service managers quickly create,
assign, and manage service requests. Help desk software assists customer service reps in
helping customers who are having problems with a product or service, by providing relevant
service data and suggestions for resolving problems.
Froilan G. Cantillo, CCpE
Customer Relationship Management (CRM)
Examples of business benefits of customer relationship management include:
• CRM allows a business to identify and target their best customers; those who are the most
profitable to the business, so they can be retained as lifelong customers for greater and more
profitable services.
• CRM enables real-time customization and personalization of products and services based on
customer wants, needs, buying habits, and life cycles.
• CRM can keep track of when a customer contacts the company, regardless of the contact
point.
• CRM enables a company to provide a consistent customer experience and superior service
and support across all the contact points a customer chooses.
Froilan G. Cantillo, CCpE
Customer Relationship Management (CRM)
The three phases of CRM
CRM can be viewed as an integrated system of Web-enabled software tools and databases
accomplishing a variety of customer-focused business processes that support the three phases
of the relationship between a business and its customers.
• Acquire – a business relies on CRM software tools and databases to help it acquire new
customers by doing a superior job of contract management, sales prospecting, selling, direct
marketing and fulfilment. The goal of these CRM functions is to help customers perceive the
value of a superior product offered by an outstanding company.
• Enhance – Web-enabled CRM account management and customer service and support tools
help keep customers happy by supporting superior service from a responsive networked team
of sales and service specialists and business partners. CRM sales force automation and direct
marketing and fulfilment tools help company’s cross-sell and up-sell to their customers, thus
increasing their profitability to the business. The value perceived by customers is the
convenience of one-stop shopping at attractive prices.
• Retain – CRM analytical software and databases help a company proactively identify and
reward its most loyal and profitable customers to retain and expend their business via targeted
marketing and relationship marketing programs.
Froilan G. Cantillo, CCpE
Customer Relationship Management (CRM)
Benefits and Challenges of CRM
• CRM allows a business to identify and target their best customers; those who are the most
profitable to the business, so they can be retained as lifelong customers for greater and more
profitable services.
• CRM enables real-time customization and personalization of products and services based on
customer wants, needs, buying habits, and life cycles.
• CRM can keep track of when a customer contacts the company, regardless of the contact
point.
• CRM enables a company to provide a consistent customer experience and superior service
and support across all the contact points a customer chooses.
CRM Failures:
• Major reason for the failure of CRM systems is the lack of understanding and preparation.
Froilan G. Cantillo, CCpE
Customer Relationship Management (CRM)
Trends in CRM
Four types or categories of CRM that are being implemented by many companies today include:
• Operational CRM – most businesses start out with operational CRM systems such as sales
force automation and customer service centers.
• Analytical CRM – analytical CRM applications are implemented using several analytical
marketing tools, such as data mining, to extract vital data about customers and prospects for
targeted marketing campaigns.
• Collaborative CRM – CRM systems to involve business partners as well as customers in
collaborative customer service.
• Portal-based CRM – Internet, intranet, and extranet Web-based CRM portals as a common
gateway for various levels of access to all customer information, as well as operational,
analytical, and collaborative CRM tools for customers, employees, and business partners.
Froilan G. Cantillo, CCpE
What Is Meant by Supplier Relationship Management (SRM)?
What Is Meant by Supplier Relationship Management (SRM)?
Supplier Relationship Management (SRM) refers to all activities involved with obtaining items
from a supplier, which includes procurement, but also inbound logistics such as transportation
and warehousing. Procurement is an important aspect of SRM as the cost of materials can
represent a substantial amount of the total cost of a product or service. Another issue that has
increased the importance of procurement is that the efficient use of automated systems requires
a high quality and reliable source of materials to be available. This is also the case with the
adoption of production planning systems such as JIT which require the delivery of materials of
perfect quality, at the right time and the right quantity.
Froilan G. Cantillo, CCpE
Supplier Relationship Management (SRM)?
Froilan G. Cantillo, CCpE
Supplier Relationship Management (SRM)?
Advantages of SRM
• SRM can achieve significant savings and other benefits which directly impact the customer
including faster purchase cycle times leading to a need for less material in inventory and less
staff time spent in searching and ordering products and reconciling deliveries with invoices.
• SRM enables greater flexibility in ordering goods from different suppliers according to best
value.
• SRM allows the integration of the many information systems that are used to cover different
parts of the SRM process.
Disadvantages of SRM
• The major barrier to the use of SRM is in the difficulty of linking systems with suppliers whose
systems may be incompatible or non-existent.
Froilan G. Cantillo, CCpE
End of Presentation
Froilan G. Cantillo, CCpE
