Chapter

8
Enterprise Business Systems

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives

• Identify and give examples to

illustrate the following aspects of
customer relationship, enterprise
research, and supply chain
management systems
– Business processes supported
– Customer and business value
provided
– Potential challenges and trends
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Customer Relationship Management

• A customer-centric focus
– Customer relationships have become
a company’s most valued asset
– Every company’s strategy should be
to
find and retain the most profitable
customers possible

8-3
Case 1: NetSuite Inc., Berlin Packaging,
Churchill Downs, and Others
• CRM software enables sales and marketing professionals to
increase sales revenue by providing more and better services
to customers and prospects.
• Many CRM implementations have failed because of the
difficulty data migration from old disparate systems to new
system.
• CRM implementation is lot easier to do early in a company’s
history than it is later.
• Companies need to make sure data are in order before they
launch any major CRM initiative.
• Without accurate, complete, and comprehensive data, any
CRM effort will be less than optimal

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 Case Study Questions
1. What are the business benefits of CRM
implementations for organizations such as Berlin
Packaging and Churchill Downs? What other uses of
CRM would you recommend to the latter? Provide
several alternatives.
2. Do you agree with the idea that smaller organizations
are better positioned to be more effective users of
CRM than larger ones? Why or why not? Justify your
answer.
3. One of the main issues noted in the case is the
importance of “good” data for the success of CRM
implementations. We discussed many of these in
Chapter 5, when we compared the file processing and
database
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What is CRM?
• Managing the full range of the customer
relationship involves
– Providing customer-facing employees with a single,
complete view of every customer at
every touch point and across all channels
– Providing the customer with a single, complete view of
the company and its extended channels
• CRM uses IT to create a cross-functional
enterprise system that integrates and automates
many of the customer-serving processes

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Application Clusters in CRM

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Contact and Account Management

• CRM helps sales, marketing, and service

professionals capture and track relevant
data about
– Every past and planned contact with prospects and
customers
– Other business and life cycle events of customers
• Data are captured through customer
touchpoints
– Telephone, fax, e-mail
– Websites, retail stores, kiosks
– Personal contact

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Sales

• A CRM system provides sales reps with

the
tools and data resources they need to
– Support and manage their sales activities
– Optimize cross- and up-selling
• CRM also provides the means to check
on a customer’s account status and
history before scheduling a sales call

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Marketing and Fulfillment

• CRM systems help with direct marketing

campaigns by automatic such tasks as
– Qualifying leads for targeted marketing
– Scheduling and tracking mailings
– Capturing and managing responses
– Analyzing the business value of the
campaign
– Fulfilling responses and requests

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Customer Service and Support

• A CRM system gives service reps real-time

access to the same database used by sales
and marketing
– Requests for service are created, assigned,
and managed
– Call center software routes calls to agents
– Help desk software provides service data
and suggestions for solving problems
• Web-based self-service enables customers
to access personalized support information

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Retention and Loyalty Programs

• It costs 6 times more to sell to a new customer

• An unhappy customer will tell 8-10 others
• Boosting customer retention by 5 percent can
boost profits by 85 percent
• The odds of selling to an existing customer are
50 percent; a new one 15 percent
• About 70 percent of customers will do business
with the company again if a problem is quickly
taken care of

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 Retention and Loyalty Programs

• Enhancing and optimizing customer

retention and loyalty is a primary
objective of CRM
– Identify, reward, and market to the most
loyal
and profitable customers
– Evaluate targeted marketing and
relationship programs

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The Three Phases of CRM

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Benefits of CRM

• Benefits of CRM
– Identify and target the best customers
– Real-time customization and personalization
of products and services
– Track when and how a customer contacts
the company
– Provide a consistent customer experience
– Provide superior service and support across
all customer contact points

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CRM Failures

• Business benefits of CRM are not

guaranteed
– 50 percent of CRM projects did not produce
promised results
– 20 percent damaged customer relationships
• Reasons for failure
– Lack of understanding and preparation
– Not solving business process problems first
– No participation on part of business
stakeholders involved

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Trends in CRM

• Operational CRM
– Supports customer interaction with
greater convenience through a variety
of channels
– Synchronizes customer interactions
consistently across all channels
– Makes the company easier to do
business with

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Trends in CRM

• Analytical CRM
– Extracts in-depth customer history,
preferences, and profitability from
databases
– Allows prediction of customer value
and behavior
– Allows forecast of demand
– Helps tailor information and offers to
customer needs
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Trends in CRM

• Collaborative CRM
– Easy collaboration with customers,
suppliers, and partners
– Improves efficiency and integration
throughout supply chain
– Greater responsiveness to customer
needs through outside sourcing of
products
and services
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Trends in CRM

• Portal-based CRM
– Provides users with tools and information
that fit their needs
– Empowers employees to respond to
customer demands more quickly
– Helps reps become truly customer-faced
– Provides instant access to all internal and
external customer information

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ERP: The Business Backbone

• ERP is a cross-functional enterprise

backbone that integrates and automates
processes within
– Manufacturing
– Logistics
– Distribution
– Accounting
– Finance
– Human resources

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 Case 2: IT Leaders, Vertex Distribution, and
Prevention Partners
• ERP systems have become the vital business software
backbone to many companies that just cannot live
without them anymore.
• According to Gregor Bailar, former CIO of Capital One,
the most exciting emerging technology for enterprises
in the next three to five years is Open source ERP.
• Many small to medium size companies are finding the
licensing fee for commercial ERP systems to be very
high and are looking for open source ERP systems.
• Some of the companies are spending the money they
are saving from the license fees on customizing the
package as per their needs.

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 Case Study Questions

1. The case highlights differences in adoption of open

source ERP systems between small or medium and
large companies. What are the main reasons behind
these differences? Do you think it is only a matter of
cost? Justify your answer.
2. Enterprise resource planning systems are clearly the
backbone of the modern enterprise. How comfortable
would you feel about recommending the adoption of
an open-source package to perform these functions,
and why? What kinds of resistance, if any, would you
expect to find about your proposal?

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Case Study Questions

3. Do you agree with the rationale

stated by some of the CIOs in this
case that if ERP systems need to
be customized anyway, starting
with an open-source package may
make more sense than with a
commercial one? Why or why
not? Justify your answer.

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What is ERP?

• Enterprise resource planning is a

cross-functional enterprise system
– An integrated suite of software
modules
– Supports basic internal business
processes
– Facilitates business, supplier, and
customer information flows

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ERP Application Components

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Benefits and Challenges of ERP

• ERP Business Benefits

– Quality and efficiency
– Decreased costs
– Decision support
– Enterprise agility
• ERP Costs
– Risks and costs are considerable
– Hardware and software are a small part
of total costs
– Failure can cripple or kill a business
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Costs of Implementing a New ERP

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Causes of ERP Failures

• Most common causes of ERP failure

– Under-estimating the complexity of planning,
development, training
– Failure to involve affected employees in
planning and development
– Trying to do too much too fast
– Insufficient training
– Insufficient data conversion and testing
– Over-reliance on ERP vendor or consultants

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Trends in ERP

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Supply Chain Management (SCM)

• Fundamentally, supply chain

management
helps a company
– Get the right products
– To the right place
– At the right time
– In the proper quantity
– At an acceptable cost

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Goals of SCM

• The goal of SCM is to efficiently

– Forecast demand
– Control inventory
– Enhance relationships with customers,
suppliers, distributors, and others
– Receive feedback on the status of
every link in the supply chain

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 Case 3: Perdue Farms and Others
• Every year even the best companies are challenged
by the pressure placed on their supply chain during
the holiday season.
• According to Brian Tomlin “The holiday season is a
difficult time for manufacturers and retailers
because they’re making educated guesses and
bets on what demand is going to be, and they’re not
going to get it right every single time.”
• Delivering the right number of products to the right
customers at the right time has become very
important for businesses and they are turning to
forecasting and supply chain management tools.

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 Case Study Questions
1. What are the key factors that determine the
success or failure of supply chains during the
holiday season? Which of these are or could be
under the control of companies, and which are
inherent in the end consumer business? Provide
several examples.
2. Consider the increasing use of gift cards in lieu of
gifts during the holiday season. What effects does
this new practice introduce into demand planning
and supply chain management? Consider the fact
that virtually nothing is known about the recipients
of gift cards.

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What is a Supply Chain?

• The interrelationships
– With suppliers, customers, distributors, and
other businesses
– Needed to design, build, and sell a product
• Each supply chain process should add
value to the products or services a
company produces
– Frequently called a value chain

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Supply Chain Life Cycle

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Electronic Data Interchange

• One of the earliest uses of information

technology for supply chain management
• The electronic exchange of business
transaction documents between supply
chain trading partners
• The almost complete automation of an e-
commerce supply chain process
• Many transactions occur over the Internet,
using secure virtual private networks

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Typical EDI Activities

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Roles and Activities of SCM in Business

8-39
Planning & Execution Functions of SCM

• Planning
– Supply chain design
– Collaborative demand and supply planning
• Execution
– Materials management
– Collaborative manufacturing
– Collaborative fulfillment
– Supply chain event management
– Supply chain performance management

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Benefits and Challenges of SCM

• Key Benefits
– Faster, more accurate order
processing
– Reductions in inventory levels
– Quicker times to market
– Lower transaction and materials costs
– Strategic relationships with supplier

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Goals and Objectives of SCM

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Benefits and Challenges of SCM

• Key Challenges
– Lack of demand planning knowledge, tools,
and guidelines
– Inaccurate data provided by other
information systems
– Lack of collaboration among marketing,
production, and inventory management
– SCM tools are immature, incomplete, and
hard to implement

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Trends in SCM

8-44
Case 4: Autosystems: The Business
Value of a Successful ERP

• Autosystems produces headlamps for

major automobile manufacturers
– Until a few years ago, the manufacturing
process was managed with paper
documents
– An ERP system was installed, but did not
extend to the shop floor
– Significant research was done before
deciding to add the shop floor reporting
module

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Case 4: Autosystems: The Business
Value of a Successful ERP

• Installing PCs and ERP software on the

shop floor allows Autosystems to
– Enter timely, accurate information
– Plan more efficiently
– Make production changes in order to avoid
labor or scrap problems
– Discuss these issues with employees while
they are still current and meaningful

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 Case Study Questions

1. Why did Autosystems decide to install the

ActivEntry system? Why did they feel it
necessary to integrate it with their TRANS4M
ERP system?
2. Which three business benefits of the use of
ActivEntry provided the most business value?
3. What changes are already being planned to
improve the use of ActivEntry? What other
improvements should the company consider?

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