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Chapter 8 Enterprise Business Systems

James A. O'Brien, and George Marakas Management Information Systems, 9th ed. Boston, MA: McGraw-Hill, Inc., 2009. ISBN: 13 9780073376769


Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives
1. 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


Customer Relationship Management

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


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 companys 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.

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.

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

Application Clusters in CRM


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

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 customers account status and history before scheduling a sales call


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


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


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 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

The Three Phases 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


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


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

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

Trends in CRM (contd)

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

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

ERP: The Business Backbone

ERP is a cross-functional enterprise backbone that integrates and automates processes within
Manufacturing Logistics Distribution Accounting Finance Human resources


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.

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? 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.

What is ERP?
Enterprise resource planning is a crossfunctional enterprise system
An integrated suite of software modules Supports basic internal business processes Facilitates business, supplier, and customer information flows


ERP Application Components


ERP Process and Information Flows


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

Costs of Implementing a New ERP


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

Trends in ERP


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


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


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 theyre making educated guesses and bets on what demand is going to be, and theyre 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.

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.

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


Supply Chain Life Cycle


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 ecommerce supply chain process

Many transactions occur over the Internet, using secure virtual private networks

Typical EDI Activities


Roles and Activities of SCM in Business


Planning & Execution Functions of SCM

Supply chain design Collaborative demand and supply planning

Materials management Collaborative manufacturing Collaborative fulfillment Supply chain event management Supply chain performance management


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


Goals and Objectives of SCM


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


Trends in SCM


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

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


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?