Chapter 11 Enterprise Systems Learning Objectives Explain how supply chain management is used. Describe customer relationship management systems. Describe knowledge management systems. Describe enterprise resource planning systems. Chapter Outline Introduction An enterprise system is an application that is used in all the functions of a business and supports decision making throughout the organization. Enterprise systems are another way to make important information readily available to decision makers throughout an organization. I. Supply Chain Management A supply chain is an integrated network consisting of an organization, its suppliers, transportation companies, and brokers used to deliver goods and services to customers. Supply chains exist in both service and manufacturing organizations, although the chain’s complexity can vary widely in different organizations and industries. In manufacturing, the major links in the supply chain are suppliers, manufacturing facilities, distribution centers, retailers, and customers. In service organizations—such as those in real estate, the travel industry, temporary labor, and advertising—these links include suppliers (service providers), distribution centers (such as travel agencies), and customers. Supply chain management (SCM) is the process of working with suppliers and other partners in the supply chain to improve procedures for delivering products and services. An SCM system coordinates the following functions: Procuring materials (in service organizations, can include resources and information) Transforming materials into intermediate and finished products or services Distributing finished products or services to customers In a manufacturing firm’s SCM system, communication takes place among the following areas: Product flow—managing the movement of goods all the way from suppliers to customers, including customer service and support Information flow—overseeing order transmissions and delivery status updates throughout the order-processing cycle Finances flow—handling credit terms, payment schedules, and consignment and title ownership arrangements Four key decisions in SCM related to manufacturing are: location, inventory, production, and transportation. For organizations that do not have in-house resources to develop an SCM system, several vendors offer comprehensive solutions: SAP, Oracle, JDA Software, and Manhattan Associates. In addition, hosting services are now available for SCM systems; this trend is called “software as a service.” A. SCM Technologies Information technologies and the Internet play a major role in implementing an SCM system. Electronic Data Interchange Electronic data interchange (EDI) enables business partners to send and receive information on business transactions. By using the Internet and established Web protocols for the electronic exchange of information, companies can improve the efficiency and effectiveness of the supply chain process. EDI expedites the delivery of accurate information in the following processes, among others: Transaction acknowledgments Financial reporting Invoice and payment processing Order status Purchasing Shipping and receiving Inventory management and sales forecasting In addition, using the Internet and Web protocols for EDI lowers the cost of transmitting documents. This method is called “Web-based EDI” or “Open EDI.” It also has the advantage of being platform independent and easy to use. Using EDI does have some drawbacks. For instance, EDI uses proprietary standards. An EDI provider sets up an EDI network (as a VPN), and organizations enroll in the network. EDI is more beneficial when there are more companies in the EDI network, because when the number of partners is small, the cost per partner is higher. With the advent of XML, organizations can use the Internet and Open EDI to perform the same function that EDI performs, so traditional EDI has declined in popularity. Internet-Enabled SCM Internet-enabled SCM improves information sharing throughout the supply chain, which helps reduce costs for information transmission and improves customer service. Internet-enabled SCM can improve the following SCM activities: Purchasing/procurement Inventory management Transportation Order processing Customer service Production scheduling E-Marketplaces An e-marketplace is a third-party exchange (a B2B business model) that provides a platform for buyers and sellers to interact with each other and trade more efficiently online. E-marketplaces help businesses maintain a competitive edge in the supply chain in the following ways: Providing opportunities for sellers and buyers to establish new trading partnerships Providing a single platform for prices, availability, and stock levels that is accessible to all participants Solving time-constraint problems for international trade and making it possible to conduct business around the clock Making it easy to compare prices and products from a single source instead of spending time contacting each seller Reducing marketing costs more than traditional sales channels can E-distributors are common examples of e-marketplaces. An e-distributor is a marketplace owned and operated by a third party that provides an electronic catalog of products. Another common offering from e-distributors is maintenance, repair, and operations (MROs) services; a company can purchase an MRO package that might include services from different vendors, but the e-distributor coordinates them into one package for customers. This packaging is an example of a horizontal market, which concentrates on coordinating a business process or function involving multiple vendors. E-distributors offer fast delivery of a wide selection of products and services, usually at lower prices, and they help companies reduce the time and expense of searching for goods. Online Auctions Auctions help determine the price of goods and services when there is no set price in the marketplace. An online auction is a straightforward yet revolutionary business concept. By using the Internet, it brings traditional auctions to customers around the globe and makes it possible to sell far more goods and services than at a traditional auction. It is based on the brokerage business model, which brings buyers and sellers together in a virtual marketplace. Typically, the organization hosting the auction collects transaction fees for the service. Online auctions are particularly cost-effective for selling excessive inventory. Some companies use reverse auctions, which invite sellers to submit bids for products and services. In other words, there is one buyer and many sellers: a one-to-many relationship. The buyer can choose the seller that offers the service or product at the lowest price. Collaborative Planning, Forecasting, and Replenishment Collaborative planning, forecasting, and replenishment (CPFR) is used to coordinate supply chain members through point-of-sale (POS) data sharing and joint planning. In other words, any data collected with POS systems is shared with all members of the supply chain, which is useful in coordinating production and planning for inventory needs. The goal is to improve operational efficiency and manage inventory. One main obstacle to improving supply chain performance is companies not knowing enough about what customers want, which can lead to lost sales and unsold inventory for retailers and manufacturers. CPFR has the advantage of decreasing merchandising, inventory, and logistics costs for all supply chain members. Coordinating the supply chain can be difficult. CPFR ensures that inventory and sales data are shared across the supply chain so everyone knows the exact sales and inventory levels. The collaboration part of this process is the agreement between all supply chain partners that establishes how data is shared, how problems with overstock are solved, and how to ensure that costs for each partner are shared or minimized. The agreement also encourages retailers to share important data with the distributor and manufacturer, often by offering them better discounts. II. Customer Relationship Management Customer relationship management (CRM) consists of the processes a company uses to track and organize its contacts with customers. The main goal of a CRM system is to improve services offered to customers and use customer contact information for targeted marketing. Marketing strategies in a CRM system focus on long-term relationships with customers instead of transactions. These strategies include identifying customer segments, improving products and services to meet customers’ needs, improving customer retention, and identifying a company’s most profitable (and loyal) customers. CRM gives organizations more complete pictures of their customers. CRM systems include tools for conducting complex analyses on customer data, such as a data warehouse and data-mining tools. Organizations can better target products to customers and manage customer issues, which increases customer satisfaction and retention. In addition, organizations can classify customers based on how valuable they are to the organization and manage them accordingly. Organizations can also pay external agencies for additional data about their potential customers. This data might be public or semiprivate. This gives organizations more information to analyze. With a CRM system, an organization can do the following: Provide services and products that meet customers’ needs Offer better customer service through multiple channels (traditional as well as the Internet) Increase cross-selling and upselling of products to increase revenue from existing customers Help sales personnel close deals faster by offering data on customers’ backgrounds Retain existing customers, and attract new ones Several IT tools are used to improve customer service. For example, e-mail, the Internet, Web portals, and automated call centers have played a major role in CRM systems. Database systems, data warehouses, and data-mining tools are effective in tracking and analyzing customers’ buying patterns, which helps businesses meet customers’ needs. A CRM system includes the following activities: Sales automation Order processing Marketing automation Customer support Knowledge management Personalization technology A. CRM Applications Typically, CRM applications are implemented with one of two approaches: on-premises CRM or Web-based CRM. Organizations with an established IT infrastructure often choose an on-premises CRM, which is implemented much like any other IT system. With Web-based CRM, the company accesses the application via a Web interface instead of running the application on its own computers and pays to use CRM software as a service (SaaS), which is similar to Web-hosting services. The SaaS vendor also handles technical issues. Several software packages are available for setting up a CRM system, including Amdocs CRM, Optima Technologies ExSellence, Infor CRM, SAP CRM, and Oracle CRM. Although these packages vary in capabilities, they share the following features: Salesforce automation—assists with such tasks as controlling inventory, processing orders, tracking customer interactions, and analyzing sales forecasts and performance. eCRM or Web-based CRM—allows Web-based customer interaction and is used to automate e-mail, call logs, Web site analytics, and campaign management. Survey management—automates electronic surveys, polls, and questionnaires, which is useful for gathering information on customers’ preferences. Automated customer service—used to manage call centers and help desks and can sometimes answer customers’ queries automatically. B. Personalization Technology Personalization is the process of satisfying customers’ needs, building customer relationships, and increasing profits by designing goods and services that meet customers’ preferences better. It involves not only customers’ requests but also the interaction between customers and the company. Customization, which is somewhat different from personalization, allows customers to modify the standard offering, such as selecting a different home page to be displayed each time the Web browser is opened. Because personalization and customization help companies meet customers’ preferences and needs, customers often experience a more efficient shopping process and, as a result, are less likely to switch to competitors to get similar products or services. However, using personalization requires gathering a lot of information about customers’ preferences and shopping patterns, and some customers get impatient with answering long surveys about their preferences. In addition, collecting this information might affect customers’ sense of privacy. To implement a personalization system, several IT tools are needed, including the Internet, databases, data warehouse/data marts, data-mining tools, mobile networks, and collaborative filtering. Collaborative filtering (CF) is a search for specific information or patterns using input from multiple business partners and data sources. It identifies groups of people based on common interests and recommends products or services based on what members of the group purchased or did not purchase. It works well for a single product category, such as books, computers, and so forth. One drawback of CF is that it needs a large sample of users and content to work well. In addition, it is not useful for making recommendations across unrelated categories, such as predicting that customers who liked a certain CD would also like a particular computer. One application of collaborative filtering is making automatic predictions about customers’ preferences and interests based on similar users. III. Knowledge Management Knowledge management (KM) is a technique used to improve CRM systems (and many other systems) by identifying, storing, and disseminating “know-how”—facts about how to perform tasks. Know-how can be explicit knowledge (formal, written procedures) or tacit knowledge (personal or informal knowledge). Knowledge is an asset that should be shared throughout an organization to generate business intelligence and maintain a competitive advantage in the marketplace. Knowledge management, therefore, draws on concepts of organizational learning, organizational culture, and best practices to convert tacit knowledge into explicit knowledge, create a knowledge-sharing culture in an organization, and eliminate obstacles to sharing knowledge. Explicit knowledge, such as how to close a sale, can be captured in data repositories and shared. Tacit knowledge, however, cannot be captured as easily. Knowledge that someone has gained through experience might vary depending on the situation in which it was used—the context. Typically, the best way to gather this information is interactively, such as asking the employee specific questions about how he or she would handle an issue. Because interaction is a key part of managing tacit knowledge, a knowledge management system must encourage open communication and the exchange of ideas, typically via e-mails, instant messaging, internal company wikis, videoconferencing, and tools such as WebEx or GoToMeeting, which create virtual instructional environments. By storing knowledge captured from experts, a knowledge repository can be created for employees to refer to when needed. Knowledge bases can also be used when new products are being designed. Employees might be reluctant to share their expertise because, once everybody knows what they know, their value to the organization would be diminished. To motivate them to share knowledge, rewards must be offered. Knowledge management plays a key role in the success of a CRM system because it helps businesses use their knowledge assets to improve customer service and productivity, reduce costs, and generate more revenue. A knowledge management system should help an organization do one or more of the following: Promote innovation by encouraging the free exchange of ideas Improve customer service by reducing response time Increase revenue by reducing the delivery time for products and services Improve employee retention rates by rewarding employees for their knowledge Because of the importance of knowledge, knowledge management, and knowledge management systems, some organizations have created an executive position called chief knowledge officer (CKO. He/she makes sure that key knowledge resources are properly collected, stored, and disseminated among the key decision makers and also makes sure that the organization profits from knowledge resources, including its employees, its processes, and its intellectual property. IV. Enterprise Resource Planning Enterprise resource planning (ERP) is an integrated system that collects and processes data and manages and coordinates resources, information, and functions throughout an organization. A typical ERP system has many components, including hardware, software, procedures, and input from all functional areas. To integrate information for the entire organization, most ERP systems use a unified database to store data for various functions. A well-designed ERP system offers some of the following benefits: Increased availability and timeliness of integrated information Improved customer satisfaction Improved planning and scheduling Improved reliability of information Reduction in labor costs Along with all its advantages, an ERP system also has drawbacks, such as high cost, difficulties in installation, a need for extensive training, and compatibility problems with legacy systems. Most ERP systems are available as modules, so an organization can purchase only the components it needs and add others later, if needed. Having modular components is a major factor in the success of ERP systems because it keeps costs down. More than 40 vendors, such as SAP, Oracle, Sage Group, and Microsoft, offer ERP software with varying capabilities. If an organization decides to use a full-featured ERP system, the systems development life cycle (SDLC) method can be used. Key Terms An enterprise system is an application used in all the functions of a business and that supports decision making throughout the organization. (P. 235) A supply chain is an integrated network consisting of an organization, its suppliers, transportation companies, and brokers used to deliver goods and services to customers. (P. 235) Supply chain management (SCM) is the process of working with suppliers and other partners in the supply chain to improve procedures for delivering products and services. (P. 236) Electronic data interchange (EDI) enables business partners to send and receive information on business transactions. (P. 237) An e-marketplace is a third-party exchange (B2B model) that provides a platform for buyers and sellers to interact with each other and trade more efficiently online. (P. 238) By using the Internet, an online auction brings traditional auctions to customers around the globe and makes it possible to sell far more goods and services than at a traditional auction. (P. 239) A reverse auction invites sellers to submit bids for products and services. In other words, there is one buyer and many sellers: a one-to-many relationship. The buyer can choose the seller that offers the service or product at the lowest price. (P. 240) Collaborative planning, forecasting, and replenishment (CPFR) is used to coordinate supply chain members through point-of-sale (POS) data sharing and joint planning. (P. 240) Customer relationship management (CRM) consists of the processes a company uses to track and organize its contacts with customers. It improves services offered to customers and uses customer contact information for targeted marketing. (P. 241) Personalization is the process of satisfying customers’ needs, building customer relationships, and increasing profits by designing goods and services that meet customers’ preferences better. It involves not only customers’ requests, but also the interaction between customers and the company. (P. 243) Customization allows customers to modify the standard offering, such as selecting a different home page to be displayed each time you open your Web browser. (P. 243) Collaborative filtering (CF) is a search for specific information or patterns, using input from multiple business partners and data sources. It identifies groups of people based on common interests and recommends products or services based on what members of the group purchased or did not purchase. (P. 245) Knowledge management (KM) draws on concepts of organizational learning, organizational culture, and best practices to convert tacit knowledge into explicit knowledge, create a knowledge-sharing culture in an organization, and eliminate obstacles to sharing knowledge. (P. 245) Enterprise resource planning (ERP) is an integrated system that collects and processes data and manages and coordinates resources, information, and functions throughout an organization. (P. 247) Instructor Manual for MIS Hossein Bidgoli 9781305632004, 9781337625999, 9781337625982, 9781337406925
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