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Natural Beauty Pty Ltd

INFS1602 Information Systems in Business

Assignment B

Semester 2 2013

Group Members:

Young Kun Kim (z3254594)

Poh Jin Shen (z3385350)

Evon Lai Yee Ven (z3421738)

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Table of Contents

Overview 3

Executive Summary 3

1.0 Introduction 4

2.0 SCM and CRM

2.1 SCM and CRM for Efficiency and Effectiveness 4

2.2 Analytical CRM software 5

2.3 IS/IT security, Ethics and Privacy Issues 7

3.0 Recommendation of Product/Solutions

3.1 Scoring Model Analysis 9

3.2 Justification of Selection Criteria 10

3.3 Recommended Vendor 11

3.4 Cost and Benefit Analysis 12

4.0 Conclusion 12

Appendices 13

References 14

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Overview

Overview will provide how the analysis in this report relates to our course material and used to achieve this report. To begin with, the whole group made use of the textbook and lecture notes as the main sources of gathering information as well as understand key definitions for terms like Supply Chain Management (SCM), Customer Relationship Management (CRM) and Analytical CRM. The textbook only gave the group a brief idea of features and functions, thus, information in the textbook and lecture notes were insufficient and were not really relevant to analyse the case of Natural Beauty. Hence, further research had to be done to provide more sufficient information to support our claims with regards to the solutions provided in the case of Natural Beauty. The library resources such as academic journals and also research reports are used to complete this report. We had faced a few confusions while completing the report thus part of the group had decided to attend a Peer Assisted Study Session (PASS). We consulted the PASS tutor to gain a better understanding on the scoring model as well as the process to determine the criteria set in the scoring model. Weekly attendance of tutorials had also helped us in conducting a critical analysis on the SCM and CRM. Discussions, debates and questions that occurred during tutorials had also provided a good opportunity for us to gain various opinion from peers. We found that assessed component of this course particularly useful in helping us to form a well justified and supported argument we needed as everyone had varying opinions in weekly discussions of workshop preparations. Overall, the textbook was used as a basis of our understanding to allow us to analyse the solutions Natural Beauty needs, further research through the internet as well as journals helped us in preparing the report.

Executive summary

Recent acquisition and expansion of Natural Beauty had call for an improvement on the legacy management reporting and decision support systems. CIOs priority is to improve this poor system by adopting suitable products and solutions. The report is going to provide recommendation of products and solution through the analysis of SCM, CRM, IS/IT security, ethics, privacy issues and other factors. Finally the most beneficial vendor will be determined by analysis of score model and cost and benefit model among the three competitors; NetSuite, JDA and Oracle.

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1.0 Introduction

The purpose of this report is to provide potential information systems for Natural Beauty as their corporate strategy changes. In this report, Supply Chain Management (SCM) and Customer Relationship Management (CRM) analyse to improve the efficiency and effectiveness of the companys supply network and analytical CRM software discusses to optimize customer satisfaction, customer retention and product mix. The report also identify and analyse the main IS/IT security, ethics and privacy issues in relation to an integrated enterprise systems strategy. From this analysis, some of products and solutions recommended to Natural Beauty and by comparing three researched vendors, the most beneficial vendor are determined through scoring model and cost and benefit analysis.

2.0 Supply Chain Management (SCM) and Customer Relationship Management (CRM)

2.1 SCM and CRM for efficiency and effectiveness

Supply Chain Management (SCM)

According to the Tom Guffog, SCM can be defined by Maximising added value and reducing total cost across the entire trading process through focusing on speed and certainty of response to the market. The main purpose of improving supply chain is to improve product development and reduce costs to optimize the companys profitability. Supply Chain Management (SCM) system could be broken down in to three stages which are planning, execution and analytics. Each of components consists of many modules or application to support and optimize the supply network.

Supply Chain planning includes demand, distribution, production and inventory planning. For Natural Beauty Pty Ltd, inventory and cost management could improve by forecasting accurate demand. The companys recent expansion in Australia and overseas will lead to increase in demand and inaccurate demand forecasting will result in an over or under production. Under production will increase the customer dissatisfaction and over production will lead to left in stocks in its warehouse. Furthermore, the company is dealing with organic products so the expiration date of products is relatively low, thus over production might result in wasting inventory or increase cost of storage (Romi Malik, 2013). Therefore, accurate demand planning and forecasting could improve the efficiency and effectiveness of managing inventory and cost.

The recent domestic and global expansion might cause a problem of communication between Natural Beauty and its suppliers. Communication via phone or other social media might confuse suppliers to misunderstand shipment date or destination and result in misdelivery and early or late shipment. Miscommunication will occur costs and time to correct. The elements of supply chain execution such as product flow, information flow and financial flow will improve the collaboration of all members of the supply chain by removing of paper document, including payment schedules or supporting activities of production and distribution. Hence increase efficiency and effectiveness of the companys supply network.

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The managers in Natural Beauty cannot monitor performance of the entire supply chain, thus use of key performance metrics can provide information to mangers to monitor performance of the entire supply chain, including sourcing, planning, sales, production and distribution. Being able to access key performance metrics can also help managers to improve insufficient part of modules and applications and maximizing the companys profitability. Hence, use of key performance metrics could increase efficiency and effectiveness of the companys supply network.

Customer Relationship Management (CRM)

Customer Relationship Management (CRM) system is about managing all aspects of companys interaction with its customer such as sales, customer service, marketing and more on. CRM system consists of three primary components which are Operational CRM, Analytical CRM and Collaborative CRM. Each of elements could be used to improve efficiency and effectiveness of the Natural Beautys supply network.

Today, many companies do not provide customer services because of aggressive cost cutting to maximize the profit. However, it is quite importance to provide customer services to attract new customers and maintain the customer relationship (Industrytoday, 12/20/2011). Currently, Natural Beauty provides no customer service to meet customers satisfaction. If Natural Beauty creates customer service and support or customer interaction center, it will communicate with customers through various communication channels such as the Web, social media network, face to face and telephone to attract new customers and it will help to maintain customer relationship. Also feedbacks and frequent complaint from customers could be used to improve the quality of products and meet the customer satisfaction. Furthermore, automated service of request, complaints, refunds and information service will effectively solve customer complaints and increase the efficiency of using time for staffs. Hence the system will improve customer retention in domestic and overseas.

Collaborative CRM will provide effective and efficient communication between the customers and Natural Beauty. The companys strategy of extending online sales and expansion in oversea will increase size of various departments and sharing useful customer information to various departments like sales, marketing, distributing and IT support will improve the quality of customer service and increase customer satisfaction and loyalty (John Edwards, 2007). Therefore, integrating customers data and sharing information would effectively improve customer relationship and maintain communication with customers.

2.2 Analytical CRM software

In this highly competitive industry, it is important for Natural Beauty to be able to provide customer satisfaction and suitable product mix in order to retain customers. Studies had shown that analytical CRM software is important for company to manage customer acquisition, development and retention. It directly affects company profitability and also customer satisfaction (Ang and Buttle, 2006). Through Analytical CRM, Natural Beauty can analyse behaviour and impression of their customers in order to accurately offer business intelligence and excellent customer service. As operational and analytical CRM are

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interrelated, data gathered in operational CRM such as satisfaction surveys, customer locations and purchase history would be entered into the data warehouse of analytical CRM, subsequently for data mining. Analytical CRM can be divided into four dimensions based on the diagram below:

Figure 1: Stages of Analytical CRM (Kracklauer et al., 2004)

Stage 1: Customer Identification

Firstly, as Natural Beauty is expanding its business to include international customers, a centralised database is convenient to store increasing customers data over time. It is important for Natural Beauty has to identify their target customers through target customer analysis and customer segmentation. As Natural Beauty is aiming to extend online sales to international customers, customers may be grouped based on their similar characteristics such as location, shopping patterns, product preferences and service and support history. Conducting a target customer analysis based on customer profiles and consumer market research, Natural Beauty may identify their most profitable customer segment. For Natural Beauty, their target customer segment is customers from different locations.

Stage 2: Customer attraction

The identification of target customer segment means that Natural Beauty need to concentrate their efforts and allocate resources to attract that particular customer segment. Factors that impact the attractiveness of products include price, convenience of purchase, and product differentiation based on customer reviews and preferences. Databases containing customers personal information and preferences are important in order to analyse products that are creating value for customers. In addition to that, data from the analysis itself can be used to filter out most profitable customers.

2.4 Analytical CRM

Figure 2.1: Analytical CRM stages. (Kracklauer et al., 2004)

customers characteristics. The selection of the target groups requires

the collection of quantitative and qualitative data on these groups.

2. Customer attraction: This stage follows customers identification. Hav-

ing identified the target groups, companies concentrate efforts and al-

locate resources to attract these segments. Competitive advantages,

such as price and other differentiation characteristics, can be drivers

of customers attraction. Another customer attraction driver is direct

marketing. This is an element of companys marketing mix that mo-

tivates customers to place an order immediately (Cheung et al., 2003;

Liao and Chen, 2004; He et al., 2005; Prinzie and Vandenpoel, 2005).

For instance, direct mail or coupon distribution are typical examples

of direct marketing. Customer attraction involves the use of an ap-

propriate method of communication and the elimination of any sort of

wasted effort (Kracklauer et al., 2004).

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Stage 3: Customer development

Customer development is vital for the increase companys profitability because it relates to the transaction intensity, value and individual customer sales (Oliveira, 2012). Consider customer lifetime value (total net income derived from that customer) and up or cross-selling programs (activities to promote the usage of services or products). Promotional activities such as long-standing customers are able to purchase a full range at a lower price may increase the profitability of Natural Beauty, at the same time retaining existing customers.

Stage 4: Customer retention

Customer satisfaction has the largest impact on customer retention (Kracklauer et al., 2004). Conventional marketing such as loyalty programs are still being used, but methods such as one-to-one marketing and personalised campaigns are popular alternatives to increase customer satisfaction. Using ACRM Natural Beauty can tailor marketing campaigns to target the main customer segment identified, giving differentiated services to each customer with different needs. Last but not least, having excellent customer service is vital for a successful business that is highly dependent on the customers perception like Natural Beauty. Thus, being able to achieve first call resolution will enhance companys positive image and keeping good perceptions in customers minds. The overall shopping experience with Natural Beauty can be enhanced through software such as Social Networking Add-ons, which is capable of identifying trends through the customers daily conversations and browsing history. Knowing the trends will lead to a better understanding of the needs and wants of customers.

2.3 IS/IT security, ethics and privacy issues

IT/IS security

Access control

Utilization of SCM also gives rise to IT security issues, mainly, access control, which is the authentication of identity and authorization of the employees rights. Due to the large number of stakeholders using the integrated system, access control rises to become one of the simplest forms potential security issue in SCM. Although it is important for Natural Beauty to implement an integrated system to ensure timely dissemination of accurate data, Natural Beauty also has to ensure that users are not authorized to access data irrelevant to their work scope. A survey by Cyber-Ark reflects that 30 percent of the respondents admit to accessing information from a system that was not relevant to their role in the firm (Peggy E. Chaudhry et al. 2012). A potential unauthorized access to sensitive data could result in information leak by authorised users to existing and/or potential competitors, which could result in loss of market share. Hence, Natural Beauty should authorise the access of data based on the relevance of the users role in the company to reduce potential unauthorised access of data, no matter its sensitiveness.

Security

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By utilizing an integrated enterprise system, Natural Beauty would have a centralized database to store all company related information. However, although a centralised database adds to Natural Beautys competitive edge due to its convenience, it also makes the company more vulnerable to security breaches. Peggy E. Chaudhry et al. 2012 () states that Security breaches (malicious or unintentional) can result in continuity disruption, poor reliability of information, lowered effectiveness and efficiency of processes, and can even have legal implications. Hence, to reduce potential security breaches, Natural Beauty should implement strong network security with stringent protocols by using VPN to minimize the risk of information leakage due to data transfer between its international offices.

Although external threats can affect and contribute to possible information leakage, research has shown that the biggest threat to information security remains internal (Peggy E. Chaudhry et al. 2012). Due to poor IT security habits such as regular change of password or bringing work home, employees increase the chances of compromising sensitive data. Thus, Natural Beauty needs to enforce a set of security policy and ensure that users of its integrated system abides to the policy.

Ethics

Given that Natural Beautys priorities are to tailor its product mix for specific outlets, while improving customer satisfaction and retention of customer loyalty, certain ethical issues have to be addressed. Each country has its unique culture and Natural Beauty have to consider the varying differences of its stakeholders, such as the local communities, employees, governments and consumers, to ensure fair and safe working conditions that would not violate human rights i.e. hiring/workplace discrimination and fair wages.

David Krueger mentioned that International firms are still vulnerable to criticism back home and in the eyes of the international media and international NGOs who may fairly accuse the compliance regime of having insufficient oversight and auditing (David A. Krueger, 2008). As Natural Beauty adopts the use of global supply chain management, not ensuring proper ethnics within the company would result in possible reputation loss for Natural Beauty which might affect its sales figure. Hence, a potential solution proposed by David Krueger would have Natural Beauty demand its partners to adhere to its code of conduct (David A. Krueger, 2008).

Privacy

As SCM requires suppliers and buyers to partner closely through a process called electronic data interchange, privacy then poses as a challenge. Customers may feel an invasion of privacy as they are required to provide information to companies that the learn more about than they wish to provide (Hopwood, 2000). In addition, there is a possibility that in-house employees would steal and sell customer information to competitors without the customers knowledge or permission, resulting in customers loss of faith towards the company.

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3.0 Recommendation of Product/Solutions

3.1 Scoring Model Analysis

Criteria Weight (1-10)*

Vendor 1:

NetSuite

Score Vendor 2: JDA

Score Vendor 3:

Oracle

Score Best of

Breed = V1 + V2

Overall Score

Demand planning and forecasting

9 60 540 80 720 80 720 80 720

Communication with suppliers

8 80 640 80 640 70 560 80 640

Order Management

5 70 355 60 300 70 350 70 350

Supply chain collaboration

and Performance management

7 70 490 70 490 70 490 70 490

Contact and support service

center

9 50 450 60 540 65 585 60 540

Distribution 5 55 275 50 250 60 300 55 275

Grand Total

2750

2940

3005

3015

*The weights range from 1-10 with 10 being the most important and 1 being the least important.

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3.2 Justification of Criteria Selection

Demand forecasting and planning

This will increase the precision of Natural Beauty in their plan and forecast of inventory to meet future demand of the market. As over production will lead to increasing storage costs, production of inventory should be just enough to serve demand of customers. Besides, considering that cosmetics are perishable goods, keeping over produced inventory might lead to increased costs of expired products.

Communication with suppliers

The importance of this component can be demonstrated in keeping adequate inventory levels with suppliers. It provides real time information of inventory so the suppliers are up to date. Automated electronic document exchange between Natural Beauty and suppliers improves overall efficiency because allows the reduction of errors of communication and reduction of order-making time.

Order management

A good order management module will improve the billing and invoicing of Natural Beauty. Not only will Natural Beauty have a good record of sales, customers will also be able to receive their orders on time, which creates value for the customers. Ultimately, it leads to customer retention and satisfaction.

Supply chain collaboration and Performance management

Often miscommunications occur due to the inefficiencies of information tranferring medium such as mobile phones. With the help of exchanged information between Natural Beauty and the suppliers, errors that will occur on paper documents can be eliminated.

Contact and Support Service centre

A vendor which provides contact and support service will assist the business in improving its customer satisfaction and retention through the addressing of customer queries and concerns, it will also gather any dissatisfaction of the customers through the various channels such emails, calls and social media.

Distribution

Improper planning of distribution of goods might cause the goods or merchandise being stuck at different intervals starting from the point where it is produced all the way till it reaches the customer. Thus, a proper distribution module will aid businesses in efficiently distributing their products through proper planning of logisitics as well as help in reducing unecessary costs.

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3.3 Recommended Vendor: Best of Breed

Judging from the scale of Oracle, it appears to be the best vendor. However, after much research and analysis, it is conclusive that the best of breed consisting NetSuite and JDA offers a much better solution to match the priorities of Natural Beauty.

Firstly, JDA offers a better solution to demand planning and forecasting as it provides more in-depth understanding of future demand through identification of demand behaviours, demand histories and promotional impacts of activities and also its ability to sense and response to daily changes in product demands quickly.

Besides that, compared to Oracle and JDA, Netsuites order management module had added feature that allows flexible customization of its subsidiaries to meet specific geographic business models. In addition, data can be presented in more than 15 languages to suit the country which it operates.

After comparing all features and capabilities, all three vendors have similar strengths and weaknesses in the supply chain collaotain and performance measurement module. All three vendors aims to support transactions related to acquiring raw materials from suppliers and also settlement of invoices. Also, they all have similar ability to allow flow of important information within the supply chain like inventory levels and stock orders so all parties in the supply chain are kept up to date.

Lastly, JDA has Omni-Channel Commerce captures interaction of customers across all channels and also to turn in-store visits into profitable cross-channel customer engagements. Days-of-supply calculations and profitablity algorithms helps to assure customers satisfaction with good inventory visibility. Also Netsuite have SuiteCloud platform which allows all parties to access real-time information of inventory through electronic devices regardless of location. Knowing the availability of inventory means better customer engagement.

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3.4 Cost and Benefits Analysis

Costs Benefits

Might be difficult to implement both vendors side by side.

Technical support of both vendors is needed in the event of either one failing.

Resistance to change within the organisation.

Employees and suppliers need to learn how to use both vendors.

Constant monitoring of the system. Needs a solid intranet. Not as broad and flexible as single

vendors.

Increases Efficiency Able to adjust for currency, taxation

and legal compliance at the local level.

Able to manage inventory and fufillment across multiple locations

Better monitor of critical success factors

Supports multiple concurrent languages

Improved pricing and promotional activities

Improved consumer centricity with targeted local assortments

Extra negotiating power

4.0 Conclusion

In conclsion, SCM, CRM and other factors such as analytical CRM software, IS/IT security, ethics and privacy issues are analysed to improve the efficiency and effectiveness of the companys supply network and customer satisfaction and retention. Significant modules and applications are recommended and justified. Through the scoring model analysis, Oracle determined to be the most beneficial vendor to Natural Beauty. Some cost and benefit are identifed by adopting new information system. Lastly, Natural Beauty expects to meet their goal by implementing new information system.

(3013 words)

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Appendices

Assumptions

It is assumed that

Natural Beauty have enough funds to implement the recommended solution. Best of breed can be implemented concurrently. Fluctuating demands are observed but market conditions are stable. There are miscommunications between suppliers and Natural Beauty that had caused

inefficiencies. Managers are open minded enough to accept new solutions and are not resistant to

change. Staff and IT staff have sufficient knowledge to implement the new system and are

able to provide support services if needed.

Vendors

Oracle

Oracle Corporation is an American multinational computer technology corporation headquartered in Redwood City, California, United States.

Website: www.oracle.com

JDA Software

JDA Software Group, Inc. is an American software and consultancy company, providing supply chain management, merchandising and pricing solutions. Located in Scottsdale, Arizona.

Website: www.jda.com

Netsuite

NetSuite Inc. is a United States software company based in San Mateo, CA. The company markets cloud-based software-as-a-service integrated business management software

Website: www.netsuite.com.au

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