Chapter 3


Systems in the

Business Processes and Information Systems

Business processes:
• Is a set of logically related activities for accomplishing a specific business results. • Manner in which work is organized, coordinated, and focused to produce a valuable product or service • Unique ways to coordinate work, information, and knowledge • Ways in which management chooses to coordinate work • Concrete work flows of material, information, and knowledge—sets of activities • Performance of a firm depends on how well the business processes are designed and coordinated

Examples of Business Processes Manufacturing and production: • Assembling product, checking quality, producing bills of materials Sales and marketing: • Identifying customers, creating customer awareness, selling
Table 2.6

managing cash accounts Human resources: • Hiring employees.6 continued .Examples of Business Processes (Continued) Finance & accounting: • Paying creditors. evaluating performance. creating financial statements. enrolling employees in benefits plans Table 2.

producing bills of materials Identifying the customers. creating financial statements Hiring employees. making customers aware of the product Paying creditors. checking for quality.Functional area Manu& Pro Business process Assembling the product. evaluating employees job performance Sales & Mktg Fin and accounting Human resources .

Business Processes and Information Systems Cross-Functional Business Processes: • cross boundary between sales. marketing. manufacturing. and research and development • Group employees from different functional specialties to complete a piece of work Example: Order Fulfillment Process .

The Order Fulfillment Process Figure 2-12 .

.Business Processes and Information Systems • Purpose of IS is to enable highly efficient business processes • Information systems help organizations achieve great efficiencies by automating parts of processes • IS also contributes to completely rethinking processes.

HOW INFORMATION TECHNOLOGY ENHANCES BUSINESS PROCESSES: EFFICIENCY AND TRANSFORMATION Information systems enhance business processes in two ways: •Increasing the efficiency of existing processes. . •Enabling entirely new processes that are capable of transforming the business.

how much it many steps involved . .how many people involved.• Analyzing the customer request for service process .

Traditional “Silo” View of Information Systems Within the business: • There are functions. each having its uses of information systems Outside the organization’s boundaries: • There are customers and vendors Functions tend to work in isolation .

Traditional View of Systems Figure 2-14 .

Systems for Enterprise-Wide Process Integration Enterprise applications: • Designed to support organization-wide process coordination and integration .

Systems for Enterprise-Wide Process Integration (Continued) Consist of : • Enterprise systems • Supply chain management systems • Customer relationship management systems • Knowledge management systems All these enterprise applications integrates a related set of functions and business processes to enhance the performance of the organization as a whole. .

Information Islands B .

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Enterprise Application Architecture Figure 2-13 .

accounting. • Information that was previously fragmented in different systems can seamlessly flow throughout the firm so that it can be shared by business processes in manufacturing. human resources. and other areas.Enterprise Systems • Enterprise systems. provide a single information system for organization-wide coordination and integration of key business processes. also known as enterprise resource planning (ERP) systems. .

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Enterprise Systems Figure 2-15 .

Management Information Systems ENTERPRISE SYSTEMS What Are Enterprise Systems? Enterprise System Architecture Figure 11-1 .


manufacturing and production. human resources. and sales and marketing .How Enterprise Systems Work Enterprise Systems: • Enterprise Resource Planning (ERP) systems • Interdependent software modules with a common central database that support basic internal business processes for finance and accounting.

agility. • Serves as a cross-functional enterprise backbone that integrates & automates many internal business processes and information systems • Helps companies gain the efficiency. & responsiveness needed to succeed today .How Enterprise Systems Work (Continued) Enterprise Systems: (Continued) • Enables data to be used by multiple functions and business processes for precise organizational coordination and control.

• Gives a company an integrated real-time view of its core business processes • ERP software suites typically consist of integrated modules of… Manufacturing Distribution Sales Accounting Human Resource Management .

REASONS FOR THE GROWTH OF ERP MARKET • To enable improved business performance – Cycle time reduction – Inventory reduction – Order fulfillment improvement • To support business growth requirements – New product/product lines. new customers – Global requirements including multiple languages and currencies .

real time decision support • To take advantage of untapped midmarket . integrated.Contd… • To provide flexible.

risk is due to changes. benefits are not immediate • Investment ? • Is a strategic decision. difficult to get reversed .Selection of ERP • ERP procurement & successful implementation are very costly affairs • Implementation involves risk.long term decision.

• Vendor Evaluation
– Factors
1. 2. 3. 4. 5. Business strength of the vendor Product share in total business of the vendor R & D investment in the product Future plans of the vendor Market reach & resource strength of the vendor

ERP Market and

ERP Market and vendors Vendor

Top 10 ERP vendors by Revenue Share:

ERP Market and vendors 2006 total

SAP is an acronym for Systems. It is the largest ERP solution software provider in terms of revenue.SAP Founded in 1972. application server and client. Over 12 million people in more than 120 countries use SAP products. headquartered in Walldorf. Germany. SAP products focus on ERP systems. There are over 91.500 SAP installations at more than 28. SAP is the largest European software enterprise. Its main product is SAP R/3. R stands for real-time data processing. Applications And Products in Data Processing.000 companies. and the number 3 relates to the three-tier application architecture of its database. .

Example of ERP ERP Market and vendors modules (SAP) .

to provide financial and administrative consulting services Upon acquiring the Baan software. still thousands of manufacturers are running on Baan software. including Boeing. especially for Make to Order and Engineering to order market. SSA renamed Baan as SSA ERP In May 2006. SSA was acquired by Infor Global Solutions of Atlanta.BAAN • • • • • ERP Market and vendors Baan was a vendor of popular enterprise resource planning (ERP) software that is now owned by Infor Global Solutions The Baan Corporation was created by Jan Baan in 1978 in Barneveld. Netherlands. Nowadays. Ferrari . Baan is still one of the best ERP product for discrete manufacturing industries.

CRM and business management software (including manufacturing and construction-specific ranges) as well as related services to small and medium-sized enterprises • The company is focusing on Vertical market software and has recently purchased several industry-focused groups. payroll.The Sage Group ERP Market and vendors • The Sage Group plc is a UK based supplier of accounting. .

Microsoft Dynamics NAV: The product is part of the Microsoft Dynamics family. .Microsoft Dynamics ERP Market and vendors Is a line of software for business made by Microsoft • Microsoft Dynamics AX is Microsoft’s flagship enterprise resource planning software system. • Microsoft Dynamics SL : Microsoft Dynamics SL provides businesses functionality in finance. manufacturing. analytics. • • • Microsoft Retail Management System: (RMS) is an electronic point-of-sale (EPOS) software solution for retailers. supply chains. supply chains. and intended to assist with finance. project accounting. customer relationship management. field service. and electronic commerce and is primarily targeted for Small and Medium-sized Enterprises. manufacturing. Microsoft Dynamics GP is a mid-market business accounting software package that runs on top of a Microsoft SQL Server database. analytics and electronic commerce for small and medium-sized enterprises.

QAD ERP Market and vendors • QAD produces Enterprise Resource Planning software. Industrial Products. The software is targeted to 6 main industries: Automotive. and Life Sciences. . Electronics. • QAD Enterprise Application provides single-site companies and multinational organizations with a fully integrated. Consumer Products. core enterprise solution. Food and Beverage.

ERP Market and Vendors ERP Market and vendors .

Indian ERP Market 03rd Aug. 2007 Company Revenue (Rs crore) SAP Oracle Tally 415 195 98 Microsoft Ramco 3i Infotech SSA Global (Infor) 59 54 37 29 QAD Intentia Cognos Others Total 18 8 5 138 1.056 Source: DQ estimates CyberMedia .

Contd… • Technology evaluation – Client server architecture & its implementation – two tier or three tier – Front end tools & back end data based management system tools for the data. real time access – Use of case tools. report writers & screen painter . process & presentation management – Interface mechanism. screen generators. data transfer.

communication & network – Downloading to PC based package.Contd… • Technology evaluation (contd…) – Support system technologies like bar coding. etc – Hardware .Software configuration management . MSoffice. imaging. EDI.

Difficulty in selecting ERP • Selection is difficult by an internal. better to approach the external consultants • ERP package may be cheaper. but may not fulfill the requirement • Some take a lot of time in implementation • Validated information on the vendor • Objective of the organization may not be clear .

ERP IMPLEMENTATION • Typical costs of implementing a new ERP System 15% 15% Training & Change Management Re-engineering Software 12% 15% Hardware 43% Data conversions .

Methodologies • The Big Bang • Modular Implementation • Process-Oriented Implementation .

on other areas of the company. Data integrity becomes critical.ERP implementation issues Technical and Business issues: Implementation effort will be bigger than ever talked about or even imagined. Users need to become more computer literate. Understanding the implications of actions of one area. . is not something that happens overnight. The computer cannot make human judgments. The word "Enterprise" in ERP means that whatever happens in one area has a ripple effect in other areas. We are yet to hear from an organization who have implemented ahead of schedule and under budget.

etc. is the biggest impact is on "Corporate Culture". attitude to staff. It is always underestimated and never overestimated. Corporate Culture is a combination of two things. The focus. habits etc. Their personal values. skills. The type of people who are employed by a company. decision making process.Corporate Culture Most managers who have been through an ERP implementation. The way the organization works. stability. . tells.

Change Management is about getting them used to the idea that C is the real destination.Change Management Change Management is about setting expectations that lessen the pain of change. People involved in a change expect to go from A to B. . Perhaps where they are actually going is to C.

It identified “9 Common issues for ERP implementation".Other experience: A survey of organizations that have implemented ERP's was carried out recently. • Change Management and Training • To BPR or not to BPR • Planning • Estimating IT skills • Project Management .

Other experience: Continued. • Technology Trials • Executive Buy-in • Estimating Resources • Software Evaluation ..

•Resource availability •Project scheduling and Change management.Critical success factors for ERP implementation •Status of legacy systems •Impact of new ERP system on their business processes •Whether all the business processes are well defined and could be delivered thro’ ERP system •Whether to go for a complete integrated system or to implement any one ERP module for the time being •Duration of the ERP project and expected service from the ERP system to the customers. •Level of cooperation from the top management throughout the project. .

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Benefits of Enterprise Systems • Help to unify the firm’s structure and organization: One organization • Management: Firm wide knowledge-based management processes • Technology: Unified platform • Business: More efficient operations & customerdriven business processes .

Benefits (conti) •Quality and efficiency---Helps improve the quality and efficiency of customer service. and work roles . managerial responsibilities. production. and IT support staff •Decision support---Provides cross-functional information on business performance to assist managers in making better decisions •Enterprise agility----Results in more flexible organizational structures. software. & distribution by creating a framework for integrating and improving internal business processes •Decreased Costs---Reductions in transaction processing costs and hardware.

BENEFITS OF ERP • • • • • Business integration Flexibility Better Analysis & planning capabilities Use of latest technology Better management of resources reducing the cost • Customer satisfaction increase due to shorter delivery cycle • Business operations transparency between business partners & customers .

E-mail. releasing the burden on the middle management • Due to the support technologies like EDI.Contd… • Intelligent ERP download the decision making at lower level. office automation. paperless office is a new possibility as communication is faster and systems get connected directly .

market & technology .Contd… • The ERP scope can be enlarged through the Internet/Intranet access. making the ERP sensitive to the latest events in the business.

money.INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Challenges of Enterprise Systems • Difficult to build: Require fundamental changes in the way the business operates • Technology: Require complex pieces of software and large investments of time. and expertise .

development. and training required •Failure to involve affected employees in the planning & development phases and change management programs •Trying to do too much.Causes of ERP failures •Underestimating the complexity of the planning. too fast •Insufficient training •Believing everything the software vendors and/or consultants say .

Potential risks • • • • • Difficult to implement Inflexible Where to buy What to buy How to implement .

Hidden cost • • • • • Training Integration and testing Data conversion Data analysis Implementation .

order acquisition and processing takes 4 hrs •Distribution planning and picking used to take 4 days-------now it is 14 hrs •Order to delivery time has been cut in half .2 days to process the order Now.•Colgate took 1 to 5 days to acquire an order.

5 and 99% respectively •Inventories have dropped by one-third •Total delivered cost per case has been reduced nearly10 percent .5 percent of time and order delivered correctly 97.5 percent of the time------now 97.•On time deliveries used to occur only 91.

efficient. customers. & low-cost network of business relationships. transforming into products. information.   Goal is to create a fast. • Materials.The Supply Chain Supply chain: • Network of organizations and business processes for procuring raw materials. and distributing them to customers A cross-functional inter enterprise system that uses IT to help support & manage the links between some of company’s key business processes and those of its suppliers. & business partners. and payments flow through the supply chain in both directions. .

manufacturer.INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Supply Chain Management (SCM) • Close linkage and coordination of activities involved in buying. and moving a product • Integrates supplier. distributor customer • Reduces time. making. and inventory costs • Network of organizations and business processes . redundant effort.

transformation of raw materials into intermediate and finished products • Helps in distribution of the finished products to customers • Includes reverse logistics .returned items flow in the reverse direction from the buyer back to the seller • Coordination of business processes to speed information. product. and fund flows up and down a supply chain to reduce time. redundant effort.INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Supply Chain Management (SCM) • Helps in procurement of materials. and inventory costs .


production.Supply Chain Processes SCOR (Chain Operations Reference Model)-cross industry process reference model for SCM. • identifies five major supply chain processes: • Plan: Balancing demand and supply to meet sourcing. •Defines a common set of SC processes to help companies better understand SCM issues and set goals for SC improvement. and delivery requirements • Source: Procurement of goods and services needed to create a product or service .

SUPPLY CHAIN MANAGEMENT SYSTEMS Supply Chain Processes (Continued) • Make: Processes that transform a product into a finished state • Deliver: Processes to manage order transportation and distribution • Return: Processes associated with product returns and post delivery customer support .

SUPPLY CHAIN MANAGEMENT SYSTEMS Supply Chain Processes (Continued) Logistics: • Planning and control of all factors that have an impact on the supply chain .

SUPPLY CHAIN MANAGEMENT SYSTEMS Key Supply Chain Management Processes Figure 11-4 .


Role of SCM .

excessive inventory Just-in-time strategy : • Scheduling system for minimizing inventory by having components arrive exactly at the moment they are needed and finished goods shipped as soon as they leave the assembly line .SUPPLY CHAIN MANAGEMENT SYSTEMS Information and Supply Chain Management Inaccurate or untimely information causes inefficiencies in supply chain. such as shortages.

SUPPLY CHAIN MANAGEMENT SYSTEMS Information and Supply Chain Management (Continued) Bullwhip effect: • Distortion of information about the demand for a product as it passes from one entity to the next across the supply chain .

SUPPLY CHAIN MANAGEMENT SYSTEMS The Bullwhip Effect Figure 11-5 .

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Information from Supply Chain Management Systems helps firms: • Decide when and what to produce. store. and move • Rapidly communicate orders • Track the status of orders • Check inventory availability and monitor inventory levels .

transportation. and warehousing costs • Track shipments • Plan production based on actual customer demand • Rapidly communicate changes in product design .INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Information from Supply Chain Management Systems helps firms: (Continued) • Decide when and what to produce .store and move • Reduce inventory.

SUPPLY CHAIN MANAGEMENT SYSTEMS Supply Chain Management Applications Supply chain management systems: Automate flow of information between company and supply chain partners Supply chain planning systems: Generate demand forecasts for a product (demand planning) and help develop sourcing and manufacturing plans for that product .

SUPPLY CHAIN MANAGEMENT SYSTEMS Supply Chain Management Applications (Continued) Supply chain execution systems: • Manage the flow of products through distribution centers and warehouses to ensure that products are delivered to the right locations in the most efficient manner .

SUPPLY CHAIN MANAGEMENT SYSTEMS Supply Chain Performance Measurement Metrics for measuring supply chain performance: • Fill rate (the ability to fill orders by the due date) • Average time from order to delivery • The number of days of supply in inventory • Forecast accuracy • The cycle time for sourcing and making a product .

SUPPLY CHAIN MANAGEMENT SYSTEMS Supply Chain Management and the Internet Intranets and Extranets for Supply Chain Management Figure 11-6 .

SUPPLY CHAIN MANAGEMENT SYSTEMS Internet-based supply chain management applications: • Provide standard set of tools • Facilitate global supply chains • Reduce costs • Enable efficient customer response • Allow concurrent supply chains .

and products are “pushed” to customers Pull-based model: • Supply chain driven by actual customer orders or purchases .SUPPLY CHAIN MANAGEMENT SYSTEMS Push-based model: • Production master schedules based on forecasts of demand for products.

SUPPLY CHAIN MANAGEMENT SYSTEMS Push.versus Pull-Based Supply Chain Models Figure 11-7 .

SUPPLY CHAIN MANAGEMENT SYSTEMS The Future Internet-Driven Supply Chain Figure 11-8 .

SUPPLY CHAIN MANAGEMENT SYSTEMS Business Value of Supply Chain Management Systems • Improved customer service and responsiveness • Cost reduction • Cash utilization .

more accurate order processing. & strategic relationships with suppliers . quicker time to market. reductions in inventory levels. lower transaction and materials costs.• Benefits – Can provide faster.

Challenges .

PROBLEMS • A lack of proper demand planning knowledge • Inaccurate or overoptimistic demand forecast • Lack of adequate collaboration among marketing. production & inventory management departments within a company & with suppliers. incomplete & hard to implement . distributors & others • Even the software of SCM is immature.


and customer retention .CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS Customer Relationship Management and Partner Relationship Management Customer Relationship Management (CRM): • Business and technology discipline for managing customer relationships to optimize revenue. customer satisfaction. profitability.

marketing and service to optimize revenue.INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications • • • • Customer Relationship Management (CRM) Focuses on coordinating all of the business process surrounding the firms interactions with its customers in sales. Manages all ways used by firms to deal with existing and potential new customers Business and technology discipline Uses information system to coordinate entire business processes of a firm . customer satisfaction and customer retention.

Customer Relationship Management (CRM) (Continued) • Provides end.end customer care • Provides a unified view of customer across the company • Consolidates customer data from multiple sources and provides analytical tools for answering questions like what is the value of a particular customer to the firm over his or her lifetime • Helps by integrating the processes and consolidating customer information from multiple information channels-telephone .to.e-mail etc .

CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS Customer Relationship Management Applications CRM systems: • Capture and integrate customer data from all over the organization • Consolidate and analyze the data • Distribute results to various systems and customer touch points across the enterprise .

such as telephone. Web site. e-mail.CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS Customer Relationship Management Applications (Continued) Touch point: • A method of interaction with a customer. customer service desk. or retail store . conventional mail.

CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS Customer Relationship Management (CRM) Software • Can range from niche tools to large-scale enterprise applications • Can link to other major enterprise applications. such as supply chain management .

CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS Customer Relationship Management (CRM) Software (Continued) • Typically include capabilities for o Sales Force Automation (SFA) o Customer service o Marketing .


CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS Customer Loyalty Management Process Map Figure 11-10 .

telemarketing. lead management.CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS Operational and Analytical CRM Operational CRM: • Customer-facing applications. teleselling. such as sales force automation. eselling. account and contact management. e-marketing. call center and customer service support. field sales . and marketing automation • Examples: Campaign management.

identify trends in sales length cycle. analyze customer or product profitability. analyze leads generated and conversion rates .CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS Analytical CRM: • Applications that analyze customer data generated by operational CRM applications to provide information for improving business performance • Examples: Develop customer segmentation strategies and customer profiles.


CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS Business Value of Customer Relationship Management Systems • Increased customer satisfaction • More effective marketing and reduced direct marketing costs • Lower costs for customer acquisition and retention .

CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS Business Value of Customer Relationship Management Systems (Continued) • Increased revenue from identifying most profitable customers and segments for marketing. up-selling Reduce churn rate: • Number of customers who stop using or purchasing products or services from a company . crossselling.

and metric for evaluation. are clearly defined at outset of project Metrics for CRM may include: • Cost per lead • Cost per sale .CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS The Importance of CRM Performance Measurement Successful CRM implementations require that financial and operation goals.


Customer Relationship Management (CRM)

Figure 2-17

Knowledge Management Systems • Collects relevant knowledge and make it available

wherever and whenever it is needed
• Support business processes and management decisions

• Also link the firm to external sources of knowledge
• Support processes for acquiring, storing,

distributing, and applying knowledge for creating new knowledge and integrating it into the organization

• Support processes for acquiring ,storing,

distributing and applying knowledge, as well as processes for creating new knowledge and integrating it into the organisation. • Include enterprise wide systems for managing and distributing documents ,graphics and other digital graphics for creating corporate knowledge directories of employees with special areas of expertise, office systems for distributing knowledge and information.

• KM applications are expert systems that codify the knowledge of experts in information systems that can be used by other members of the organisation and tools for knowledge discovery that recognise patterns and important relationships in large pools of data. .



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