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Chapter 8 Enterprise Business Systems

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Learning Objectives 1.

Identify and give examples to illustrate the following aspects of customer relationship management, enterprise resource management, and supply chain management systems: • • • Business processes supported Customer and business value provided Potential challenges and trends

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Why Study Customer Relationship Management?

• It is easier than ever for customers to comparison shop and, with a click of the mouse, to switch companies. As a result, customer relationships have become a company’s most valued asset.

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Case #1: Implementing CRM Systems

Mitsubishi Motor Sales Goal:

• Call center should provide one voice and one set of ears for the customer

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Case #1: Implementing CRM Systems •

CRM Project Goals:

Choose best-of-breed CRM software components rather than integrated CRM suites • Implement changes slowly. Must be simple, scalable, and satisfy need.

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Case #1: Implementing CRM Systems •

CRM Project Challenges:

Keeping 18 vendors heading in the same direction • Dirty data had to be cleansed

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Case #1: Implementing CRM Systems 1.

What are the key application components of Mitsubishi’s CRM system? What is the business purpose of each of them?

What are the benefits to a business and its customers of a CRM system like Mitsubishi’s?

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Case #1: Implementing CRM Systems 3.

Do you approve of Mitsubishi’s approach to acquiring and installing its CRM system? Why or why not?

Why have many CRM systems failed to provide promised benefits like those generated by Mitsubishi’s system?

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Customer Relationship Management (CRM) • Definition: The use of information technology to create a cross-functional enterprise system that integrates and automates many of the customer-serving processes in sales, marketing, and customer services that interact with a company’s customers

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CRM Application Clusters

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CRM Application Components • Contact and Account Management – helps sales, marketing, and service professionals capture and track relevant data about every past and planned contact with prospects and customers, as well as other business and life cycle events of customers • Sales – provides sales reps with tools and company data sources needed to support and manage sales activities, and optimize cross selling and up-selling

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CRM Application Components • Marketing Fulfillment – help marketing professionals accomplish direct marketing campaigns by automating such tasks as qualifying leads for targeted marketing, and scheduling and tracking direct marketing mailings • Customer Service and Support – provides service reps with software tools and real-time access to the common customer database shared by sales and marketing professionals

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CRM Application Components • Retention and Loyalty Programs – help a company identify, reward, and market to their most loyal and profitable customers

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Three Phases of CRM

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Three Phases of CRM • Acquire new customers by doing a superior job of contact management, sales prospecting, selling, direct marketing, and fulfillment • Enhance relationship with customer by supporting superior service from a responsive networked team of sales and service specialists and business partners • Retain and expand business with customers by proactively identifying and rewarding the most loyal and profitable customers

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Benefits of CRM • CRM allows a business to identify and target their best customers so they can be retained as lifelong customers for greater and more profitable services.

• CRM makes possible real-time customization and personalization of products and services based on customer wants, needs, buying habits, and life cycles.

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Benefits of CRM • CRM can keep track of when a customer contacts the company, regardless of the contact point.

• CRM systems can enable a company to provide a consistent customer experience and superior service and support across all the contact points a customer chooses.

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CRM Failures • Lack of understanding and preparation • Rely on CRM to solve business problem without first developing the business process changes and change management programs that are required • CRM projects implemented without the participation of the business stakeholders involved

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Trends in CRM • Operational • Analytical • Collaborative • Portal-based

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Operational CRM • Supports customer interaction with greater convenience through a variety of channels.

• Synchronizes customer interactions consistently across all channels • Makes your company easier to do business with

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Analytical CRM • Extracts in-depth customer history, preferences, and profitability information from your data warehouse and other databases • Allows you to analyze, predict, and derive customer value and behavior and forecast demand • Lets you approach your customers with relevant information and offers that are tailored to their needs

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Collaborative CRM • Enables easy collaboration with customers, suppliers, and partners • Improves efficiency and integration throughout the supply chain • Allows greater responsiveness to customer needs through sourcing of products and services outside of your enterprise

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Portal-based CRM • Provides all users with the tools and information that fit their individual roles and preferences • Empowers all employees to respond to customer demands more quickly and become truly customer-focused • Provides the capability to instantly access, link, and use all internal and external customer information

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Partner Relationship Management (PRM) • Definition: Applications that apply many of the same tools used in CRM systems to enhance collaboration between a company and its business partners, such as distributors and dealers, to better coordinate and optimize sales and service to customers across all marketing channels

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Case #2: Challenges of Implementing ERP • Enterprise resource planning (ERP) implementations are a lot more than software packages. They are a fundamental transformation of a company’s business processes. People, processes, policies, the company’s culture are all factors that should be taken into consideration when implementing a major enterprise system.

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Case #2: Challenges of Implementing ERP •

Reasons for ERP Failures:

Management’s inability to spec out their own requirements • Implementer’s inability to implement specs • Undertake too much too quickly

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Case #2: Challenges of Implementing ERP 1.

What are the main reasons companies experience failures in implementing ERP systems?

What are several key things companies should do to avoid ERP systems failures? Explain the reasons for your proposals.

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Case #2: Challenges of Implementing ERP 3.

Why do you think ERP systems in particular are often cited as examples of failures in IT systems development, implementation, or management?

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Enterprise Resource Planning (ERP) • Definition: A cross-functional enterprise system driven by an integrated suite of software modules that supports the basic internal business processes of a company

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ERP Application Components

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ERP Process & Information Flows

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ERP Benefits • Quality and Efficiency – ERP creates a framework for integrating and improving a company’s internal business processes that results in significant improvements in the quality and efficiency of customer service, production, and distribution • Decreased Costs – Significant reductions in transaction processing costs and hardware, software, and IT support staff

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ERP Benefits • Decision Support – Provides vital cross functional information on business performance quickly to managers to significantly improve their ability to make better decisions in a timely manner • Enterprise Agility – ERP breaks down many former departmental and functional walls of business processes, information systems, and information resources

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Costs of ERP

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Causes of ERP Failures • Business mangers and IT professionals underestimate the complexity of the planning, development, and training needed • Failure to involve affected employees in the planning and development phases • Trying to do too much too fast in the conversion process • Failure to do enough data conversion and testing

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Trends in ERP

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Case #3: Business Value of SCM •

Benefits of SCM:

Reduces production and distribution costs • Improves timeliness of shipments • Reduces manufacturer inventory levels

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Case #3: Business Value of SCM •

Challenges of SCM:

Acquisition of secure extranet • Change company structure • Resistance from employees wedded to traditional processes

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Case #3: Business Value of SCM 1.

How could moving business information systems with suppliers and distributors to the Web result in such dramatic business benefits as experienced by TaylorMade Golf?

How does HON Industries’ new SCM system improve the efficiency of their supply chain?

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Case #3: Business Value of SCM 3.

What other SCM initiatives would you recommend that TaylorMade Golf or HON Industries implement to improve their supply chain performance and business value? Explain the business value of your proposals.

What are several ways a small business could use supply chain management to improve the efficiency and business value of its supply chain? Give several examples to illustrate your answer.

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Supply Chain Management (SCM) • Definition: A cross-functional interenterprise system that uses information technology to help support and manage the links between some of a company’s key business processes and those of its suppliers, customers, and business partners

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SCM Life Cycle

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Electronic Data Interchange (EDI) • Definition: Involves the electronic exchange of business transaction documents over the Internet and other networks between supply chain trading partners

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EDI Activities

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Role of SCM

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SCM Planning Functions • Supply Chain Design – optimize network of suppliers, plants, and distribution centers • Collaborative Demand and Supply Planning – develop an accurate forecast of customer demand by sharing demand and supply forecasts instantaneously across multiple tiers

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SCM Execution Functions • Materials Management – share accurate inventory and procurement order information, ensure materials required for production are available in the right place at the right time, and reduce raw material spending, procurement costs, safety stocks, and raw material and finished goods inventory • Collaborative Manufacturing – optimize plans and schedules while considering resource, material, and dependency constraints

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SCM Execution Functions • Collaborative Fulfillment countries – commit to delivery dates in real time, fulfill orders from all channels on time with order management, transportation planning, and vehicle scheduling, and support the entire logistics process, including picking, packing, shipping, and delivery in foreign • Supply Chain Event Management problems arise – monitor every stage of the supply chain process, from price quotation to the moment the customer receives the product, and receive alerts when

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SCM Execution Functions • Supply Chain Performance Management – report key measurements in the supply chain, such as filling rates, order cycle times, and capacity utilization

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SCM Objectives

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SCM Benefits • Faster, more accurate order processing • Reductions in inventory levels • Quicker times to market • Lower transaction and material costs • Strategic relationship with suppliers

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Causes of SCM Failures • Lack of proper demand planning knowledge, tools and guidelines • Inaccurate or overoptimistic demand forecasts • Inaccurate production, inventory and other business data provided by a company’s other information systems • Lack of adequate collaboration among marketing, production, and inventory management departments within a company • Immature, incomplete or hard to implement SCM software tools

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Trends in SCM

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Case #4: Benefits & Challenges of SCM •

Benefits of SCM:

Materials prices reduced • Fewer employees needed to manage supply chain • Order fulfillment time reduced • Increased sales by reducing inventory shortages • Enables new business partnerships

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Case #4: Benefits & Challenges of SCM •

Supplier reluctance:

Cost of hardware and software • Software can be confusing, contradictory and not sculpted to their needs • Impenetrable technical jargon

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Case #4: Benefits & Challenges of SCM 1.

Why can both large and small businesses cut costs and increase revenues by moving their supply chains online? Use the companies in this case as examples.

What is the business value to Eastman Chemical and W. W. Grainger of their initiatives to help their suppliers and customers do business online?

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Case #4: Benefits & Challenges of SCM 3.

Why are many small suppliers reluctant to do business online with their large customers? What can be done to encourage small suppliers online?

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Case #5: SCM Best Practices Why is Wal Mart’s IT infrastructure a key competitive advantage?

• Wal-Mart invested early and heavily in cutting edge technology to identify and track sales on the individual item level.

• The company is still pushing the limits of supply chain management, searching for and supporting better technology that promises to make its IT infrastructure more efficient.

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Case #5: SCM Best Practices •

The Wal-Mart Example:

Opened sales and inventory databases to suppliers • Implemented a collaborative planning, forecasting, and replenishment program • JIT inventory program that reduced carrying costs for Wal-Mart and its suppliers

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Case #5: SCM Best Practices 1.

Do you agree that Wal Mart is “the best supply chain operator of all time”? Why or why not?

What has Mattel learned from Wal-Mart? How well are they applying it to their own business? Explain your evaluation.

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Case #5: SCM Best Practices 3.

What can other businesses learn from the experiences of Wal-Mart and Mattel that could improve their supply chain performance? Use an example to illustrate your answer.

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Summary • Customer relationship management is a cross-functional enterprise system that integrates and automates many of the customer-serving processes in sales, marketing, and customer services that interact with a company’s customers.

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Summary • Enterprise resource planning is a cross functional enterprise system that integrates and automates many of the internal business processes of a company, particularly those within the manufacturing, logistics, distribution, accounting, finance, and human resource functions of the business.

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Summary • Supply chain management is a cross functional inter-enterprise system that integrates and automates the network of business processes and relationships between a company and its suppliers, customers, distributors, and other business partners.

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Chapter 8 End of Chapter

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