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Operational excellence
New products, models services, and business
Operational Excellence:
Improved efficiency results in higher profitability Information systems and technologies help to improve higher levels of efficiency and productivity Wal-Mart (largest retailer) is the champion of combining information systems, best business practices, and supportive management to achieve operational efficiency $408 billion in sales in 2010 Wal-Mart is the most efficient store in the world as a result of digital links between its suppliers and stores (the first to use CRP)
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Operational Excellence Cont Continuous replenishment planning system (CRP) is defined as the practice of partnering between distribution channel members that changes the traditional process from distributor-generated purchase orders based on economic order quantities to the replenishment by the vendor of product based on actual and forecast data. (cited in Vergin and Barr, 1999)
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The goal of CRP is to reduce the cost of producing and moving product thru the vendor-retailer supply chain as well as to have open communication and seek alliances with manufacturers. Thus, they seek manufacturers who had the capability to:
1. monitor their sales 2. react to changes in sales as quickly as they occurred 3. manage their ordering and inventories efficiently
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the manufacturer/suppliers:
Faster flow of retail sales information allow more efficient production Quick adjustment to demand changes before large inventory deficits or excess occurs.
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Competitive advantage:
Achieving the previously mentioned business objectives often leads to competitive advantage Advantages over competitors include charging less for superior products, better performance, and better response to suppliers and customers which add up to higher sales and higher profits Dell Computer is one of the best examples of establishing competitive advantage as the company has continued to be profitable during a time when PC prices have been falling steadily
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Survival:
Businesses may need to invest in information systems out of necessity
Necessity arises from keeping up with competitors, such as when Citibank New York introduced ATMs in 1977 Necessity also arises from federal and state regulations, such as the Toxic Substances Control Act and the Sarbanes-Oxley Act
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SIS (contd)
SIS is able to change significantly the manner in which biz is done. How? Contributing to the strategic goals of the organization Ability to increase performance and productivity significantly. SIS should be distinguished from strategic level systems (executive information system) that are used by senior managers. SIS can be used at all organizational levels. SIS profoundly alter the way a firm conducts its business or the very business of the firm itself.
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Management Challenges
Implementing SIS can be riskythe investment involved in implementing SIS is high SIS requires planningPorter and Millar framework can be used to plan and develop a strategy of how to use SIS Sustainability of competitive advantagecompetitive advantage isnt always sustainable
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THE FIRM
SUPPLIERS
CUSTOMERS
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INDUSTRY SET
INDUSTRY 1 INDUSTRY 2
INDUSTRY COMPETITORS
INDUSTRY 3 INDUSTRY 4
SUPPLIERS
CUSTOMERS
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Network Economics
Model of strategic systems at the industry level based on the concept of a network where adding another participant entails zero marginal costs but can create much larger marginal gain.
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Implemented a GIS, sensors in machines computers that diagnosed problems and instruct technicians in how to make repairs and IS that ties together all its factories, distribution centers, dealers, and large customers.
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