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Chapter 8: ERP Systems

Enterprise Systems
Also known as “enterprise resource planning (ERP) systems”; suite of integrated software modules and a common central database; collects data from many divisions of firm for use in nearly all of firm’s internal business activities; Information entered in one process is immediately available for other processes; “one company, one database”
Enterprise Software
Built around thousands of predefined business processes that reflect best practices; Finance/accounting: general ledger, accounts payable, etc.; HR: personnel administration, payroll, etc.; Manufacturing/production: purchasing, shipping, etc.; Sales/marketing: order processing, billing, sales planning, etc.; To implement, firms: Select functions of system they wish to use, map business processes to software processes; Use software’s configuration tables for customizing
Business value of ERP
Increase operational efficiency; provide firm-wide information to support decision making; enable rapid responses to customer requests for information or products; include analytical tools to evaluate overall organizational performance
Supply Chain
Network of organizations and processes for: Procuring raw materials; transforming them into products; distributing the products
Upstream Supply Chain
Firm’s suppliers, suppliers’ suppliers, processes for managing relationships with them
Downstream Supply Chain
Organizations and processes responsible for delivering products to customers
Internal supply chain
Processes for transforming materials, components, and services furnished by their suppliers into finished products or intermediate products (components or parts) for their customers and for managing materials and inventory
Just-in-time strategy
Components arrive as they are needed; finished goods shipped after leaving assembly line
Safety stock
Buffer for lack of flexibility in supply chain
Bullwhip Effect
Information about product demand gets distorted as it passes from one entity to next across supply chain; Minor fluctuations in retail sales for a product can create excess inventory for distributors, manufacturers, and suppliers
Supply Chain planning systems
Enable the firm to model existing supply chain; generate demand forecasts for products; develop optimal sourcing and manufacturing plans; establish inventory levels for raw materials, products, finished goods; determine where to store finished goods; identify transportation modes
Supply Chain execution systems
Manage flow of products through distribution centers and warehouses to ensure that products are delivered to the right locations in the most efficient manner
Demand Planning
Important function of Supply Chain planning systems: Determines how much product a business needs to make to satisfy customer demand
Global supply chain issues
Greater geographical distances; greater time differences; participants from different countries: different performance standards/legal requirements; Internet helps companies manage global complexities through outsourcing: warehouse management, transportation management, and logistics
Push-based model
(Build to stock) Supply chain management system: Schedules are based on best guesses or forecasts of demand for products, and products are “pushed” to customers; sequential supply chain: information and materials flow sequentially from company to company
Pull-based model
(Demand-driven) Supply chain management system: Customer orders or purchases trigger events in the supply chain; concurrent supply chain: information flows in many directions simultaneously among members of a supply chain network
Business value of supply chain management systems
Match supply to demand; reduce inventory levels; improve delivery service; speed product time to market; use assets more effectively; reduced supply chain costs lead to increased profitability (total supply chain costs can be 75% of operating budget); increase sales
Future Internet-Driven Supply Chain
Operates like a digital logistics nervous system; provides multi-directional communication among firms, networks of firms, and e-marketplaces so that entire networks of supply chain partners can immediately adjust inventories, orders, and capacities
Private industrial networks
Typically a large firm using an extranet to link to its suppliers and other key business partners
Net marketplaces
Digital marketplaces based on Internet technology for many different buyers and sellers
Customer Relationship Management (CRM)
Knowing the customer: In large business, too many customers and too many ways customers interact with firm
CRM Systems
Capture and integrate customer data from all over the organization; Consolidate and analyze customer data; Distribute customer information to various systems and customer touch points across enterprises; Provide single enterprise view of customers
Touch Points
Aka a contact point; Method of interaction w/ the customer, such as telephone, email, customer service desk, conventional mail, social media, wireless device, or retail store
CRM Software
CRM packages range from niche tools to large-scale enterprise applications; PRM and ERM
Partner relationship management (PRM)
Integrating lead generation, pricing, promotions, order configurations, and availability; Tools to assess partners’ performances
Employee relationship management (ERM)
Setting objectives, employee performance management, performance-based compensation, employee training
Sales force automation (SFA)
Provide sales prospect and contact information, product information, product configuration capabilities, and sales quote generation capabilities; Help sales staff increase their productivity by focusing sales efforts on the most profitable customers
Customer Service
Assigning and managing customer service requests, Web-based self-service capabilities; Tools/information to increase the efficiency of call centers, help desks, and customer support staff
Marketing
Capturing prospect and customer data, scheduling and tracking direct-marketing mailings or email; cross-selling
Cross-selling
Marketing of complementary products to customers
Operational CRM
Customer-facing applications such as sales force automation, call center and customer service support, and marketing automation
Analytical CRM
Includes applications that analyze customer data generated by operational CRM applications to provide information for improving business performance; Based on data warehouses that consolidate the data from operational CRM systems and customer touch-points; OLAP: online analytical processing; Data mining
Customer Lifetime Value (CLTV)
Based on the relationship between the revenue produced by a specific customer, the expenses incurred in acquiring and servicing that customer, and the expected life of the relationship between the customer and the company
Business benefits of CRM
Increased customer satisfaction; reduced direct-marketing costs; more effective marketing; lower costs for customer acquisition/retention; increased sales revenue
Churn rate
Number of customers who stop using or purchasing products or services from a company; Indicator of growth or decline of firm’s customer base
Enterprise Application Challenges
Highly expensive to purchase and implement enterprise applications; technology changes; business process changes; organizational learning changes; switching costs, dependence on software vendors; data standardization, management, cleansing
Next-generation Enterprise Applications
To bring greater value from enterprise applications; Enterprises solutions+suites/service platform; open-source applications, on-demand solutions
Enterprise solutions/suites
Make applications more flexible, Web-enabled, integrated w/ other systems
Service platform
Integrates multiple applications to deliver a seamless experience for all parties
Social CRM
Incorporating social networking technologies; company social networks; customer interaction via Facebook; Ex. Buzzient platform integrates social media with enterprise applications
Business Intelligence
Inclusion of Business Intelligence w/ enterprise applications; flexible reporting, ad hoc analysis, “what-f” scenarios, digital dashboards, data visualization
Open-Source
Computer software with its source code made available with a license in which the copyright holder provides the right to study, change, and distribute the software to anyone and for any purpose

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