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ACSC105Enterprise Applications

Week/Lecture 9Eleni Michailidou

Resources: Dr. Panos Constantinides & Prentice Hall Slides

24/11/09 ACSC105 - Bus. Inform. Systems 2

Outline• Enterprise Applications

– Enterprise Resource Planning (ERP) Systems– Supply Chain Management (SCM) Systems– Customer Relationship Management (CRM)

Systems• Challenges of Enterprise Applications

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• Enterprise Resource Planning (ERP) systems

• Based on suite of integrated software modules and commoncentral database

• Integrate information from across company’s divisions,departments, key business processes in the four functionalareas

• Updated information made available to all business processes

• Generate enterprise-wide data for management analyses

Enterprise Systems


How Enterprise Systems WorkHow Enterprise Systems Work

Figure 9-1

Enterprise systemsfeature a set ofintegrated softwaremodules and a centraldatabase that enablesdata to be shared bymany differentbusiness processesand functional areasthroughout theenterprise.

Enterprise Systems

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• Business processes supported by enterprisesystems• Financial and accounting: General ledger, accounts payable,

cost-center accounting, financial reporting, etc.

• Human resources: Personnel administration, benefitsaccounting, time management, compensation, etc.

• Manufacturing and production: Procurement, inventorymanagement, purchasing, shipping, quality control, etc.

• Sales and marketing: Order processing, quotations, productconfiguration, billing, credit checking, sales planning, etc.

Business Processes


• Business value of enterprise systems• Increasing operational efficiency

• Helping respond to customer requests rapidly

• Producing, procuring, shipping right amounts

• Enforcing standard practices and data throughout company

• Providing firm-wide information to help managers make betterdecisions

• Allowing senior management to easily find out at any momenthow a particular organizational unit is performing or todetermine which products are most or least profitable

Enterprise Systems

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• Supply chain:• Network of organizations and business processes for:

• Procuring raw materials• Transforming them into intermediate and finished products• Distributing finished products to customers

• Includes secondary and tertiary suppliers• Links suppliers, manufacturing plants, distribution centers, retail

outlets and customers to supply goods and services fromsource through consumption.

• Upstream portion: Suppliers• Downstream portion: Distributors

Supply Chain Management (SCM)Systems


NikeNike’’s Supply Chains Supply Chain

Figure 9-2

This figure illustrates themajor entities in Nike’ssupply chain and theflow of informationupstream anddownstream tocoordinate the activitiesinvolved in buying,making, and moving aproduct. Shown here isa simplified supplychain, with the upstreamportion focusing only onthe suppliers forsneakers and sneakersoles.

Supply Chain Management (SCM)Systems

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• Information and supply chain management• Supply chain inefficiencies

• E.g. parts shortages, excessive inventory

• Waste up to 25% of operating costs

• Caused by inaccurate or untimely information

• Uncertain product demand

• Late shipments from suppliers

• Defective parts or materials

• Safety stock: Kept as buffer for lack of flexibility in supply chainadds to costs

SCM Systems


• Information and supply chain management• Bullwhip effect

• Demand for product gets distorted as it is estimated bysuccessive members in supply chain, causing excessstockpiling of inventory, warehousing, shipping costs

• Just-in-time strategy• Perfect information about supply and demand so that

components arrive at moment they are needed and finishedgoods are shipped as they leave assembly line

SCM Systems

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The Bullwhip EffectThe Bullwhip EffectInaccurateinformation cancause minorfluctuations indemand for a productto be amplified asone moves furtherback in the supplychain. Minorfluctuations in retailsales for a productcan create excessinventory fordistributors,manufacturers, andsuppliers.

SCM Systems

Figure 9-3


• Supply chain management and the Internet• Before Internet, difficult to share supply chain

information with external partners or internallybecause of incompatible technology platforms

• Internet enables:• Intranets and extranets for sharing information

• Web-based tools and interfaces to suppliers’, partners’systems

• Coordination of overseas suppliers, communications,transport, compliance, etc.

SCM Systems

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Intranets and Extranets for Supply Chain ManagementIntranets and Extranets for Supply Chain Management

Intranets integrateinformation fromisolated businessprocesses within thefirm to help manageits internal supplychain. Access tothese privateintranets can also beextended toauthorized suppliers,distributors, logisticsservices, and,sometimes, to retailcustomers to improvecoordination ofexternal supply chainprocesses.

SCM Systems

Figure 9-4


• Push-based model (Build-to-stock)• Production master schedules based on forecasts or best guesses of product

demand; products “pushed” to customers

• Pull-based model (Demand-driven, build-to-order)• With IT, manufacturers can use only order demand information to drive

schedules and procurement of components or raw materials

• Move from• Sequential supply chains

• Information, materials move sequentially• to

• Concurrent supply chains• With IT, information moves in many directions simultaneously

SCM Systems

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Push- Versus Pull-Based Supply Chain ModelsPush- Versus Pull-Based Supply Chain Models

Figure 9-5

The differencebetween push-and pull-basedmodels issummarized bythe slogan“Make what wesell, not sellwhat we make.”

SCM Systems


• Business value of supply chain managementsystems

• Matching supply to demand and reducing inventory levels

• Improving delivery service and speeding product time to market

• Using assets more effectively

• Increasing sales by assuring availability of products

• Increased profitability

• Supply chain costs can approach 75% of total operating budgets

SCM Systems

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• Capture, consolidate, analyze customer data and distribute resultsto various systems and customer touch points (contact points)across enterprise

• Provide single enterprise view of customers

• Provide customers single view of enterprise at touch points

• Provide analytical tools for determining value, loyalty, profitability ofcustomers

• Assist in acquiring new customers, providing better service and supportto customers, customize offerings to customer preferences, provideongoing value to retain profitable customers

Customer Relationship Management (CRM)Systems


Figure 9-7

CRM systems examinecustomers from amultifaceted perspective.These systems use a set ofintegrated applications toaddress all aspects of thecustomer relationship,including customer service,sales, and marketing.

Customer Relationship Management (CRM)Systems

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• CRM software• Ranges from niche tools to large-scale enterprise applications• More comprehensive CRM packages have:

• Partner relationship management (PRM) modules• Enhances collaboration between company and selling partners

• Employee relationship management (ERM) modules• Deals with employee issues closely related to CRM, e.g. setting

objectives, employee performance management

• Typically include tools for sales, customer service, andmarketing

CRM Systems


• Sales force automation (SFA) modules• Enable focusing efforts on most profitable customers• Enables sharing customer and prospect information• Helps reduce cost per sale and cost of acquiring, retaining

customers

• Customer service modules• Assigning and managing customer service requests• E.g. managing advice phone lines, Web site support

CRM Systems

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• Marketing modules• Capturing prospect and customer data,• Providing product and service information• Qualifying leads for targeted marketing• Scheduling and tracking direct-marketing mailings or e-mail• Analyzing marketing and customer data:

• Identifying profitable and unprofitable customers• Designing products and services to satisfy specific customer needs

and interests• Identifying opportunities for cross-selling

CRM Systems


How CRM Systems Support MarketingHow CRM Systems Support Marketing

Figure 9-8

Customerrelationshipmanagementsoftware provides asingle point forusers to manageand evaluatemarketingcampaigns acrossmultiple channels,including e-mail,direct mail,telephone, theWeb, and wirelessmessages.

CRM Systems

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CRM Software CapabilitiesCRM Software Capabilities

Figure 9-9

The major CRMsoftware productssupport businessprocesses in sales,service, andmarketing,integrating customerinformation frommany differentsources. Includedare support for boththe operational andanalytical aspects ofCRM.

CRM Systems


Analytical CRM Data WarehouseAnalytical CRM Data WarehouseAnalytical CRMuses acustomer datawarehouse andtools to analyzecustomer datacollected fromthe firm’scustomer touchpoints and fromother sources.

CRM Systems

Figure 9-11

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CRM Systems• Important outputs of CRM

– Customer lifetime value (CLTV) -Value based onrevenue produced by a customer, expensesincurred in acquiring and servicing customer, andexpected life of relationship between customerand company

– Churn rate -number of customers who stop usingor purchasing products or services


• Business value of CRM systems• Increased customer satisfaction• Reduced direct marketing costs• More effective marketing• Lower costs for customer acquisition and retention• Increased sales revenue

• By identifying profitable customers and segments for focusedmarketing and cross-selling

• Reduced churn rate (number of customers who stopusing or purchasing products or services)

CRM Systems

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• Enterprise application challenges• Expensive to purchase and implement

• Total implementation cost may be four to five times of cost of software

• Deep-seated technological change• Fundamental changes to organization, business processes

• New functions and responsibilities for employees• SCM systems require business process change for multiple organizations

• Introduce “switching costs”, dependency on enterprise software vendor• Require understanding firm’s data and cleansing data

Challenges of Enterprise Systems


Enterprise SystemsCase Study

• Read the Interactive Session: Organizations, and thendiscuss the following questions:• How did problems implementing the Oracle enterprise

software affect Invacare’s business performance?

• What management, organization, and technology factorsaffected Invacare’s ERP implementation?

• If you were Invacare’s management, what steps would youhave taken to prevent these problems?

Invacare Struggles with Its Enterprise SystemImplementation

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• Read the Interactive Session: Technology, and thendiscuss the following questions:• What problems do Linux and other open-source software

address? How does open-source software help solve theseproblems?

• What issues and challenges do open-source softwarepresent? What can be done to address these issues?

• What are the business as well as the technology issues thatshould be addressed when deciding whether to use open-source software?

Is It Time for Open-Source?

Emerging TechnologiesCase Study


• Read the Interactive Session: Technology, and thendiscuss the following questions:• Compare the experience of Thermos with that of ResortCom.

• Why do you think Thermos had an easier time with a hostedsoftware service than ResortCom? What management,organization, and technology factors account for thisdifference?

• If your company was considering using an application serviceprovider, what management, organization, and technologyfactors should be addressed when making your decision?

Application Service Providers: Two Tales

Emerging TechnologiesCase Study

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