Chapter 8

Achieving Operational
Excellence and Customer
Intimacy: Enterprise
Applications

8.1 © 2007 by Prentice Hall

 Agenda

 Enterprise applications
 What are Enterprise
systems or ERP?
 What is SAP?
 SAP Basics
 SCM
 CRM

8.2 © 2007 by Prentice Hall

 Essentials of Business Information Systems
Chapter 8 Achieving Operational Excellence and Customer
Intimacy: Enterprise Applications

STUDENT OBJECTIVES

• Enterprise application
• Demonstrate how enterprise systems achieve
operational excellence by integrating and
coordinating diverse functions and business
processes in the firm.

• Demonstrate how supply chain management

systems coordinate planning, production, and
logistics with suppliers.

8.3 © 2007 by Prentice Hall

 Essentials of Business Information Systems
Chapter 8 Achieving Operational Excellence and Customer
Intimacy: Enterprise Applications

STUDENT OBJECTIVES

• Demonstrate how customer relationship

management systems achieve customer intimacy
by integrating all customer information and
making it available throughout the firm.

• Assess the challenges and new opportunities

raised by enterprise applications.

8.4 © 2007 by Prentice Hall

 Enterprise application

 Enterprise systems=ERP
 Supply chain management
 CRM

8.5 © 2007 by Prentice Hall

 Why we need enterprise
systems or ERP
 How does a business manage all
the information needs from
different functional areas
 Serving different managerial
requirements?
 Let’s find out.

8.6 © 2007 by Prentice Hall

 Early Automation
 Automation of tasks within departments
 Therefore, each dept had its own system(s)
 Functionality for tasks for that department only
 Systems weren’t powerful enough to attempt broader range of
tasks
 Usually single vendor for all parts of system (e.g. IBM)
 All
hardware and network components
 All operating system and application software

 Result: Generally communication between departments

remained largely manual
 IS/IT was often at the mercy of single vendors

Antony Upward,CGI
8.7 © 2007 by Prentice Hall
 Problems that give rise
to ERP
 Run a business based on information
from tens of different databases and
systems none of which speak to each
other.
 Company I0 different product lines
,produced in separate factories, don’t
exchange information.
 No business can afford disjointed
information systems that don’t work
together to
 produce a coherent picture of the entire
organization.

8.8 © 2007 by Prentice Hall

 What Are enterprise
applications
 Business need enterprise systems
to integrate information.
 Enterprise applications easily
combine internal and external
information to present a complete
picture of the business.

8.9 © 2007 by Prentice Hall

 Essentials of Business Information Systems
Chapter 8 Achieving Operational Excellence and Customer
Intimacy: Enterprise Applications

Enterprise Systems

• What Are Enterprise Systems?

• Based on integrated software modules and a common
central database
• Integrate information from across company’s
divisions, departments, key business processes in
the four functional areas
• Updated information made available to all business
processes
• Generate enterprise-wide data for management
analyses

8.10 © 2007 by Prentice Hall

 Essentials of Business Information Systems
Chapter 8 Achieving Operational Excellence and Customer
Intimacy: Enterprise Applications

Enterprise Systems

How Enterprise Systems Work

Enterprise systems
feature a set of
integrated software
modules and a
central database that
enables data to be
shared by many
different business
processes and
functional areas
throughout the
enterprise

Figure 8-1
8.11 © 2007 by Prentice Hall
 How enterprise system
work
example
 Place order for tire rims

 Verifies customers credit limit

 Schedules the shipment, identifies the best shipping route
and reserves the item from inventory.
 If inventory stocks insufficient to fill order, system orders from
suppliers.
 Sales and production forecast are immediately updated
 General ledger and cash levels are automatically updated
 User could tap into the system to find the status of the order,
at any min.
 Management could obtain info about how business operating
 Generate enterprise wide data for management analyses
of product cost and profitability.

8.12 © 2007 by Prentice Hall

 Management Information Systems
Chapter 2 Global E-Business: How Businesses Use Information Systems

Business Processes and Information Systems

•Close
coordination of
major functional Cross functional business process
groups in a firm. The Order Fulfillment Process
•Require great
deal of
information.
•Information
must rapidly flow
within firm and
business
partners and
delivery firm.
Information
system make
this happen.

Fulfilling a customer order involves a complex set of steps that

requires the close coordination of the sales, accounting, and
manufacturing functions.
Figure 2-1
8.13 © 2007 by Prentice Hall
 Enterprise software

 Built around thousands of predefined

business processes that reflect best
practices .(Refer to next slide.)
 Companies map business processes to
enterprise softwares predefined
processes for desired functions
 System software can be rewritten in part,
but may degrade performance and
process integration
 For maximum benefit company must
change its working to business processes
in software.

8.14 © 2007 by Prentice Hall

 Business processes
supported by enterprise
systems
 Financial and accounting: General ledger,
accounts payable, cost-center
accounting, financial reporting, etc.
 Human resources: Personnel
administration, benefits accounting, time
management, compensation, etc.
 Manufacturing and production:
Procurement, inventory management,
purchasing, shipping, quality control, etc.
 Sales and marketing: Order processing,
quotations, product configuration, billing,
credit checking, sales planning, etc.

8.15 © 2007 by Prentice Hall

 Business Value of
Enterprise Systems
 Increase operational efficiency
 Support decision making and rapid responses to
requests
 Include analytical tools to evaluate overall
performance
 Respond rapidly to customer request for
information or products.
 Enforcing standard practices and data throughout
company
 Providing firm-wide information to help managers
make better decisions

8.16 © 2007 by Prentice Hall

 Business Value of
Enterprise Systems
 Allowing senior management to easily
find out at any moment how a particular
organizational unit is performing
 Determine which products are most or
least profitable
 For e.g. Coca cola uses enterprise
systems to standardize and coordinate
important business processes in 200
countries.
 Colgate palmolive uses Sap R/3 ERP
system.
8.17 © 2007 by Prentice Hall
 ERP software
Vendors
 Over 100 vendors globally
 5 major vendors
 SAP:German, pioneer of ERP

– Oracle (acquired PeopleSoft)

– Microsoft
– Different versions are available for small
businesses to large firms.

8.18 © 2007 by Prentice Hall

 SAP
 As the world's leading provider of business software

 SAP (which stands for "Systems, Applications, and

Products in Data Processing")

 Delivers products and services that help accelerate

business innovation for our customers.

 Offers enterprise software and supply chain modules

and CRM solutions.

8.19 © 2007 by Prentice Hall

 SAP in Pakistan

 National Foods, MCB Bank, Tetra

pak, Nestle Pakistan, Coca Cola,
Punjab Beverages, Barclays Bank,
Shell, PSO, ICI,Service.

8.20 © 2007 by Prentice Hall

 Essentials of Business Information Systems
Chapter 8 Achieving Operational Excellence and Customer
Intimacy: Enterprise Applications

Supply Chain Management Systems

Supply Chain Definition and and components

A network of organizations and processes

• for procuring raw materials,
• transforming them into products,
• and 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
8.21 © 2007 by Prentice Hall
 Essentials of Business Information Systems
Chapter 8 Achieving Operational Excellence and Customer
Intimacy: Enterprise Applications

Supply Chain Management Systems

Nike’s Supply Chain Figure 8-2

This figure illustrates the major entities in Nike’s supply chain and the flow of information upstream and
downstream to coordinate the activities involved in buying, making, and moving a product. Shown here is a
simplified supply chain, with the upstream portion focusing only on the suppliers for sneakers(tier1) and sneaker
soles,uppers(tier2),supplier to these suppliers(tier3).

8.22 © 2007 by Prentice Hall

 Management Information Systems
Chapter 9 Achieving Operational Excellence and Customer Intimacy:
Enterprise Applications

Supply Chain Management Systems

• Information and supply chain management

• Supply chain inefficiencies
• E.g. parts shortages, excessive inventory
• Waste up to 25% of operating costs
• Caused by inaccurate or untimely information
• Uncertain product demand
• Late shipments from suppliers
• Defective parts and raw materials

• To deal with these Safety stock: Kept as buffer for

lack of flexibility in supply chain adds to costs
8.23 © 2007 by Prentice Hall
 Management Information Systems
Chapter 9 Achieving Operational Excellence and Customer Intimacy:
Enterprise Applications

Supply Chain Management Systems

• Information and supply chain management

• Bullwhip effect
• Demand for product gets distorted as it is estimated by
successive members in supply chain, causing excess
stockpiling of inventory, warehousing, shipping costs
• Just-in-time strategy
• Perfect information about supply and demand so that
components arrive at moment they are needed and finished
goods are shipped as they leave assembly line

8.24 © 2007 by Prentice Hall

 Management Information Systems
Chapter 9 Achieving Operational Excellence and Customer Intimacy:
Enterprise Applications

Supply Chain Management Systems

The Bullwhip Effect

Figure 9-3
Inaccurate
information can
cause minor
fluctuations in
demand for a
product to be
amplified as one
moves further back
in the supply chain.
Minor fluctuations
in retail sales for a
product can create
excess inventory
for distributors,
manufacturers, and
suppliers.

8.25 © 2007 by Prentice Hall

 Supply chain management
applications

Supply chain software is classified

•Plan their supply chain(Supply chain planning)

•Execute their supply chain(Supply chain execution)

Supply chain planning systems

Enable a firm to generate demand forecasts for a product and to develop
sourcing and manufacturing plans for that product.

Supply chain execution systems

Supply chain execution systems manage the flow of products through
distribution centers and warehouses to ensure that products are delivered to
the right locations in the most efficient manner.

8.26 © 2007 by Prentice Hall

 Supply Chain
Management Systems
 Automate the flow of information
among members of the supply
chain
 Follow a pull based model eg
Walmart and DELL.
 Help make better decisions about
when and how much to purchase
,produce or ship.
 Minimize inventory levels and
expedite deliveries to customers
8.27 © 2007 by Prentice Hall
 INTRANET AND EXTRANETS FOR
SUPPLY CHAIN MANAGEMENT
 Companies are reengineering supply
chain, aided by internet technologies and
supply chain management software.
 Firms use intranets to improve
coordination among their internal supply
chain processes,
 and they can use extranets to coordinate
supply chain processes shared with their
business partners. Using intranets and
extranets, all members of the supply
chain can instantly communicate with
each other, using up-to-date information
to adjust purchasing, logistics,
manufacturing, packaging, and
schedules.
8.28 © 2007 by Prentice Hall
 i2 technologies and SAP supply
chain management
 i2 technolgies are supply chain
management software vendor
 SAP Supply Chain Management
(SAP SCM) enables collaboration,
planning, execution, and
coordination of the entire supply
network,

8.29 © 2007 by Prentice Hall

 Essentials of Business Information Systems
Chapter 8 Achieving Operational Excellence and Customer
Intimacy: Enterprise Applications

Supply Chain Management Systems

Business Value of Supply Chain Management Systems

• Streamline both internal and external supply chain process
• Match supply to demand
• Reduce inventory levels
• Improve delivery service
• Speed product time to market
• Reduced supply chain costs lead to increased profitability
• Increased sales

8.30 © 2007 by Prentice Hall

 Essentials of Business Information Systems
Chapter 8 Achieving Operational Excellence and Customer
Intimacy: Enterprise Applications

Customer Relationship Management Systems

What Is Customer Relationship Management?

Capture, consolidate, analyze customer data and distribute

results to various systems and customer touch points
(contact points) across enterprise

Provide single enterprise view of customers

Provide analytical tools for determining value, loyalty,

profitability of customers

Assist in acquiring new customers, providing better service and

support to customers, customize offerings to customer
preferences, provide ongoing value to retain profitable
customers
8.31 © 2007 by Prentice Hall
 Essentials of Business Information Systems
Chapter 8 Achieving Operational Excellence and Customer
Intimacy: Enterprise Applications

Customer Relationship Management Systems

Customer Relationship Management (CRM)

CRM systems examine customers from a multifaceted perspective. These

systems use a set of integrated applications to address all aspects of the
customer relationship, including customer service, sales, and marketing.
8.32 © 2007 by Prentice Hall
 Essentials of Business Information Systems
Chapter 8 Achieving Operational Excellence and Customer
Intimacy: Enterprise Applications

Customer Relationship Management Systems

CRM Software
• CRM packages are available with a wide spectrum
of functions

• Typically include tools for sales, customer service, and

marketing

8.33 © 2007 by Prentice Hall

 Management Information Systems
Chapter 9 Achieving Operational Excellence and Customer Intimacy:
Enterprise Applications

Customer Relationship Management Systems

• Sales force automation (SFA) modules

• Help sales staff increase productivity by
• focusing efforts on most profitable customers
• Provide sales prospect and contact information, product
information, product configuration capabilities, and sales quote
generation capabilities

• Customer service modules

• Provide info to Improves efficiency of call centers, help desks etc.
• Assigning and managing customer service requests
• E.g. managing advice phone lines, Web site support
• Handle more calls give better service.
• CRM systems include webbased self service capabilities.
8.34 © 2007 by Prentice Hall
 Management Information Systems
Chapter 9 Achieving Operational Excellence and Customer Intimacy:
Enterprise Applications

Customer Relationship Management Systems

• Marketing modules
• Aid in marketing campaigns by capturing prospect
and customer data,
• Providing product and service information
• Qualifying leads for targeted marketing
• Scheduling and tracking direct-marketing mailings or
e-mail
• Analyzing marketing and customer data:
• Identifying profitable and unprofitable customers
• Designing products and services to satisfy specific customer
needs and interests
• Identifying opportunities for cross-selling
8.35 © 2007 by Prentice Hall
 CRM Application Vendors
 Enterprise software vendors like
SAP
 Oracle people soft
 Sales force.com

8.36 © 2007 by Prentice Hall

 Essentials of Business Information Systems
Chapter 8 Achieving Operational Excellence and Customer
Intimacy: Enterprise Applications

Customer Relationship Management Systems

Business Value of Customer Relationship Management

• Business benefits:
• Increased customer satisfaction
• Reduced direct-marketing costs
• More effective marketing
• Lower costs for customer acquisition/retention
• Increased sales revenue
• By identifying profitable customers and segments for focused
marketing and cross-selling
• Reduced churn rate (number of customers who stop using or
purchasing products or services)

8.37 © 2007 by Prentice Hall

 Challenges posed by
enterprise application
 Enterprise systems are expensive
and difficult to implement.
 Require extensive organizational
change
 Large new software investment
 If implemented atop flawed
processes they cant provide value.
 Employees require proper training

8.38 © 2007 by Prentice Hall

 EXAMPLES OF
enterprise application
 SAP business suite BASED ON
SERVICE ORIENTED
ARCHITECTURE)
 Oracle e business suite
 Microsoft dynamics suite

8.39 © 2007 by Prentice Hall