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Chapter 8

Chapter 8. Enterprise Information Systems. We have this beautiful, elegant, high-I.Q. part of our business that we have been working hard on for many years.” Jeff Bezos, Founder and CEO of Amazon.com. Learning Objectives. 9- 2. Learning Objectives. 9- 3. Enterprise Systems. Problem:

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Chapter 8

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  1. Chapter 8 Enterprise Information Systems We have this beautiful, elegant, high-I.Q. part of our business that we have been working hard on for many years.” Jeff Bezos, Founder and CEO of Amazon.com

  2. Learning Objectives 9-2

  3. Learning Objectives 9-3

  4. Enterprise Systems • Problem: • Information systems growing over time • Lack of integration • Different computing platforms • Difficult to integrate • Data must be reentered from one system to another • Same pieces of data stored in several versions • Functional areas should be interrelated

  5. Legacy System Approach

  6. Enterprise System Approach

  7. Supporting Business Processes • Internally focused systems • Support functional areas, business processes, and decision making within an organization • New information (value) is added at every step

  8. Supporting Business Processes • Externally focused systems (interorganizational systems) • Coordinate business activities with customers, suppliers, business partners, and others who operate outside the organization • Streamline the flow of information between companies

  9. Internally Focused Applications: Value Chain • Flow of information through a set of business activities • Core activities—functional areas that process inputs and produce outputs • Support activities—enable core activities to take place

  10. Core Activities • Inbound logistics activities • Receiving and stocking raw materials, parts, and products • Cisco—delivery of electronic components from suppliers • Operations and manufacturing activities • Order processing and/or manufacturing of end products • Dell—component parts assembled to make products • Outbound logistics activities • Distribution of end products • Amazon.com—delivery of books to customers

  11. Core Activities (cont’d) • Marketing and Sales activities • Presale marketing activities (e.g., creating marketing brochures) • Amtrak—use of IS to update prices and schedules • Customer service activities • Post-sale activities • HP—downloads related to purchased products

  12. Support Activities • Administrative activities • Support of day-to-day operations (for all functional areas) • Infrastructure activities • Implement hardware and software needed • Human resource activities • Employee management

  13. Support Activities (cont’d) • Technology development activities • Design and development of applications to support the primary activities • Procurement activities • Purchasing of goods and services (inputs into the primary activities)

  14. Externally Focused Applications—Value System • Coordination of multiple value chains

  15. Externally Focused Applications—Value System (cont’d) • Information Flows in a Value System • Upstream information flow—information received from another company • Downstream information flow—information produced by a company and sent to another organization

  16. The Rise of Enterprise Systems • Packaged applications • Written by third-party vendors • Used by many different organizations • Useful for standardized, repetitive tasks • Cost effective • Examples: Microsoft Money and Quicken • Custom applications • Developed exclusively for a specific organization • Designed for particular business needs • Higher development costs

  17. The Rise of Enterprise Systems • Evolution of enterprise systems • Organizations start with stand-alone applications • Legacy systems

  18. Legacy Systems • Each department has its own system • Infrastructure specific • Inefficient processes • Potential for inaccuracies

  19. The Need for Integrated Enterprise Systems • Advantages of integrated systems • Centralized point of access • Conversion of information from legacy systems needed • Enterprise Resource Planning (ERP) vendors offer different modules • Components that can be selectively implemented • Example: Modules of mySAP business suite

  20. Vanilla Versus Customized Software • Vanilla version • Features and modules that an enterprise system comes with out of the box • Certain processes might not be supported • Customization • Additional software or changes to vanilla version • Always needs to be updated with new versions of vanilla

  21. Best Practices-Based Software • Most ERP vendors build best practices into their ERP systems • Identify business processes in need of change • Future updates are smoother if businesses change their business processes to fit with ERP systems • Is following the best practices always the best strategy? • If companies have competitive advantage from unique business processes

  22. Learning Objectives 9-22

  23. Business Process Management (BPM) • Systematic and structured improvement approach • All or part of organization is involved • Rethinking and redesign of business processes • Became popular in 1990s • IS seen as key enabler for radical change • Processes intended to be cross-functional • Various related terms:

  24. BPM Steps • Develop a vision for the organization (specify business objectives) • Identify critical processes that are to be redesigned • Understand and measure existing processes as a baseline • Identify ways IS can be used for improvement • Design and implement a prototype of the new processes

  25. Conditions Leading to a Successful BPM • Support by senior management • Shared vision by all organizational members • Realistic expectations • Participants empowered to make changes • The right people participating • Sound management practices • Appropriate funding

  26. Enterprise Resource Planning (ERP) • Integrating data to integrate applications • Data warehouse • Large, centralized data repository • Single place for data storage and access

  27. Choosing an ERP System • Control • Centralized control vs. control within specific business units • Level of detail provided to management • Consistency of policies and procedures • Business requirements • Selection of modules • Core and extended components

  28. Core and Extended ERP Components • Core components—support primary internal activities • Extended components—support primary external activities

  29. ERP Limitations • ERP falls short in communicating across organizational boundaries • Not well suited for managing value system activities • Other systems can work with ERP to provide these capabilities

  30. Learning Objectives 9-30

  31. Customer Relationship Management (CRM)

  32. Customer Relationship Management(CRM) (cont’d) • The Web has changed the business • Customers have the power • Transactions vs. relationships • Keeping customers satisfied is key • CRM • Corporate-level strategy • Concentrates on the downstream information flow • Attract potential customers • Create customer loyalty • Managers need to be able to monitor and analyze factors driving customer satisfaction

  33. Key Benefits of CRM • Enables 24/7/365 operation • Individualized service • Improved information • Speeds problem identification/resolution • Speeds processes • Improved integration • Improved product development • Improved planning

  34. Developing a CRM Strategy • More than just software purchase and installation • Enterprise-wide changes

  35. Policy and Business Process Changes • Policies and procedures need to reflect customer-focused culture

  36. Customer Service Changes • Customer-focused measures of quality • Process changes to enhance customer experience

  37. Employee Training Changes • Employees from all business areas must value customer service and satisfaction

  38. Data Collection, Analysis, and Sharing Changes • All aspects of customer experience must be tracked, analyzed, and shared • Consider ethical concerns

  39. Architecture of a CRM Environment

  40. Operational CRM • Systems for customer interaction and service • Personalized and efficient customer service • Access to complete information about customer

  41. Sales Force Automation • Component of operational CRM • Supports day-to-day sales activities: • Order processing and tracking • Account and contact management • Opportunity management • Sales management • Territory management • Customer history, preferences, (product and communication), and management • Sales forecasting and performance analysis

  42. Advantages of Sales Force Management Systems for Sales Personnel

  43. Advantages of Sales Force Management Systems for Sales Managers

  44. Examples of Sales Measures Tracked by SFA • Revenue per sales person, per territory, or as a percentage of sales quota • Margins by product category, customer segment, or customer • Number of calls per day, time spent per contract, revenue per call, cost per call, ratio of orders to calls • Number of lost customers per period or cost of customer acquisition • Percentage of goods returned

  45. SFA Provides Improved Understanding of Market Conditions • Improved understanding of markets, segments and customers • Improved understanding of competitors • Enhanced understanding of organization’s strengths and weaknesses • Better understanding of economic structure of the industry • Enhanced product development • Improved strategy development and coordination with the sales function

  46. Customer Service and Support (CSS) • Second component of operational CRM • Automation of traditional “help desk” services • Customer interaction center (CIC) • Multiple communication channels • Customer service anytime, anywhere through any communication channel • Low support cost

  47. Enterprise Marketing Management (EMM) • Third component of an operational CRM • Make sure right messages are sent to the right people through the right channels • Customer lists need to be managed carefully • Individualized attention to each potential customer • Extensive analytical capabilities

  48. Analytical CRM • Analysis of customer behavior and perceptions • Customized marketing • Up-selling, cross-selling • Retaining customers • Key technologies used to create predictive models • Data mining • Decision support systems • Continuous data collection and analysis is necessary

  49. Customer Focused Business Processes Addressed by Analytical CRM • Marketing campaign management and analysis • Customer campaign customization • Customer communication optimization • Customer segmentation and sales coverage optimization • Pricing optimization and risk assessment and management

  50. Customer Focused Business Processes Addressed by Analytical CRM (cont’d) • Price, quality, and satisfaction analysis of competitors • Customer acquisition and retention analysis • Customer satisfaction and complaint management • Product usage, life-cycle analysis, and product development • Product and service quality tracking and management

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