Chapter 03Strategic Initiatives for

Implementing Competitive Advantages

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LEARNING OUTCOMES

1. Explain supply chain management and its role in business

2. Explain customer relationship management systems and how they can help organizations understand their customers

3. Summarize the importance of enterprise resource planning systems

4. Identify how an organization can use business process reengineering to improve its business

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Strategic Initiatives

OOrganizations can undertake high-profile strategic initiatives including:

O Supply Chain Management (SCM)O Customer Relationship Management

(CRM)O Business Process Reengineering

(BPR)O Enterprise Resource Planning (ERP)

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O This is simply an introduction of SCM, CRM, BPR, and ERP

O Each of these initiatives is discussed in detail throughout the semester

O There are also business plug-ins in this textbook offering advanced material on SCM, CRM, BPR, and ERP

Supply ChainO A supply chain is a system of

organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer

Supply Chain Management

O Supply Chain Management (SCM) – involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability

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Supply Chain Management

OFour basic components of supply chain management include:

1. Supply chain strategy – strategy for managing all resources to meet customer demand

2. Supply chain partner – partners throughout the supply chain that deliver finished products, raw materials, and services including pricing, delivery, and payment processes

3. Supply chain operation – schedule for production activities including testing, packaging, and preparation for delivery

4. Supply chain logistics – product delivery process including orders, warehouses, carriers, defective product returns, and invoicing.

SCMO SCM software can enable an

organization to generate efficiencies by automating and improving the information flow throughout and among the different supply chain component.

Supply Chain ManagementO Wal-Mart and Procter & Gamble (P&G) SCM

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O The SCM system save time, reduce inventory and decrease order-processing cost for P&G. P&G passes on these saving to Wal-Mart in the form of discounted prices.

Supply Chain Management

O Effective and efficient SCM systems can enable an organization to:O Decrease the power of its buyersO Increase its own supplier powerO Increase switching costs to reduce the threat

of substitute products or servicesO Create entry barriers thereby reducing the

threat of new entrantsO Increase efficiencies while seeking a

competitive advantage through cost leadership

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Supply Chain Management

O Effective and efficient SCM systems effect on Porter’s Five Forces

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Supply Chain ExampleO The steps typically taken when a customer buys a bike

from Trek bike1.Customer places an order for a Trek bike with a store2.Store (such as Gart Sports, local bike shop, or local sporting

goods store) receives the order3.Store receives the payment from the customer4.Store orders the bike from Trek5.Store sends payment to Trek6.Trek orders materials from its suppliers, such as packaging

material, metal, and accessories7.Trek sends payments to suppliers8.Trek receives materials from suppliers9.Trek assembles the bike10.Trek ships the bike to the store11.Customer picks up the Trek bike from the store

SCM

OEM=Original Equipment Manufacturer

Videos

O Keeping the Global Supply Chain Moving (6 mins)

O Starbucks Supply Chain ( 2 mins)

O Integrated Planning for Supply Chain ( 3 mins)

Customer Relationship Management

O Customer relationship management (CRM) involves managing all aspects of a customer’s relationship with an organization to increase customer loyalty and retention and an organization's profitability

O Many organizations, such as Charles Schwab and Kaiser Permanente, have obtained great success through the implementation of CRM systems

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Customer Relationship Management

OCRM is not just technology, but a strategy, process, and business goal that an organization must embrace on an enterprisewide level

OCRM can enable an organization to:O Identify types of customersO Design individual customer marketing

campaigns O Treat each customer as an individualO Understand customer buying behaviors 3-17

Customer Relationship Management

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Charles Schwab’s CRM Case

O Charles Schwab recouped the cost of a multimillion-dollar CRM system in less than two yearsO The system allowed Schwab to segment its

customers in terms of serious and non-serious investors

O The CRM system looked for customers that had automatic withdrawal from a bank account as a sign of a serious investor

O The CRM system looked for stagnant balances as a sign of a nonserious investor

O Charles Schwab could then focus efforts on selling to serious investors, and spend less time attempting to sell to nonserious investors

VideosO What is CRM? ( 7 mins)

Business Process Reengineering

OBusiness process ( or workflow ) a standardized set of activities that accomplish a

specific task, such as processing a customer’s order

OBusiness process reengineering (BPR) – the analysis and redesign of workflow within and between enterprisesO The purpose of BPR is to make all business processes

best-in-class

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Finding Opportunity Using BPR

O A company can improve the way it travels the road by moving from foot to horse and then horse to car

O BPR looks at taking a different path, such as an airplane which ignore the road completely 3-22

BPRO There is nothing more frustrating than a broken

process. O The process can be a university process, mail-

order process, Internet-order process, return merchandise process, etc.

O Can you think of some process you are involved on everyday basis and needs to be re-engineered?

Finding Opportunity Using BPRO Progressive Insurance Mobile Claims Process

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Finding Opportunity Using BPRO Types of

change an organization can achieve, along with the magnitudes of change and the potential business benefit

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VideosO Business Process Management ( 6

mins)

O Workflow - Improving Business Processes ( 2 mins)

Enterprise Resource Planning

O Enterprise resource planning (ERP) – integrates all departments and functions throughout an organization into a single IT system so that employees can make decisions by viewing enterprise wide information on all business operations

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Enterprise Resource Planning

ODifferences between SCM, CRM, and ERP

OSCM systems focus specifically on suppliers

OCRM systems focus specifically on customers

OERP systems focus on everything, all processes, departments, and operations for an enterprise

Enterprise Resource Planning

O Sample data from a sales database

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Enterprise Resource PlanningO Sample data from an accounting

database

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Non-correlating DataO How can you understand customers when one

spreadsheet has customer name and one has customer ID?

O How can you understand sales reps when one spreadsheet has sales rep names and one spreadsheet has sales rep ID?

O Date format is different – will this cause problems?O One quantity is in units and one quantity has decimal

points – what problems will this cause?O Unit price and unit cost is rounded to dollars in one

spreadsheet and contains cents in another – what problems will this cause?

Enterprise Resource Planning

O ERP systems collect data from across an organization and correlates the data generating an enterprisewide view

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ERPO The true benefit of an ERP system is its

ability take the many different forms of data from across the different organizational systems and correlate, aggregate, and provide an enterprise wide view of organizational information

O The two previous spreadsheets display examples of differences in data that can be fixed by using an ERP system

ERPO Why it is important to have an enterprise

wide view of data?

O Without understanding how all of the different divisions, products, departments, etc. are operating you cannot run the business

Video

Why do we need ERP? ( 8 mins)