EIS Notes Final-compressed PDF

Enterprise Information Systems 1. Digital Economy In the past few years, and due to several reasons (growth of data available, development of systems and even the pandemic) we have been witnessing a huge evolution digital wise. Digital evolution: punched tape → magnetic tape → loppy disk → compact...

Enterprise Information Systems 1. Digital Economy In the past few years, and due to several reasons (growth of data available, development of systems and even the pandemic) we have been witnessing a huge evolution digital wise. Digital evolution: punched tape → magnetic tape → loppy disk → compact disk → hard drive → USB drive → CLOUD The 3 core concepts for the digital economy (that are also technological drivers) are:  storage  processing – speed of processing data  bandwidth – implies processing + communication: huge impact on processes The 4 important laws usually associated with digital evolution are: Moore’s Law From careful observation of an emerging trend, Moore extrapolated that computing would dramatically increase in power and decrease in relative costs. Shortly, it states that the processor speed (and the overall processing power) doubles every two years. (higher capacity of processing data – it is exponential – access to systems) Metcalfe’s Law Metcalfe’s Law postulates that the value of a network is proportional to the square of the number of users. It’s a concept used in computer networks and telecommunications to represent the value of a network but often questioned if it can be applied in other networks, namely, neurons in the human brain. Gilder’s Law Gilder’s Laws states that bandwidth grows at least three times faster than computer power: while computer power doubles every 18 months (as stated in Moore’s Law), communications power doubles every six months. Nielsen’s Law Connectivity + speed – direct and linear relationship – it is not so valuable to have more speed but less connectivity. The network effect is expanding the human race's collective intelligence. We should expect that we humans are getting smarter overall. Companies have more and more possibilities of connecting to the market and doing business through digital platforms. Objectives of Enterprise Information Systems 1) create value for the business: managers today need a detailed information of the business – that is what enterprise information systems create. 2) competitive advantages: companies seek to build competitive advantages and expect more of their enterprise information systems than just performing repetitive tasks such as process ordered or issue invoices – operational excellence. 3) accelerate innovation: companies seek for enterprise information systems to accelerate innovation – new business models, product development, support cost control, enhance the efficiency of processes, improve NOTE: they all need a digital core to run the business processes Prosumers concept: we have producers + consumers → people that provide information and services to a business/platform. NOTE: Enterprise system planning – a type of Enterprise System. Functional structure + organizational structure – it provides support to whole functional areas, middle and all hierarchical levels. Related to transactions/operations: o FM o SCM o HCM o BI o E-commerce CRM is NOT related to transactions – not the main modules that support buying and selling. Why does EIS matter? 4 reasons: 1) Capital management: managers and business need to know how to invest capital in IT wisely – consider people and their needs. 2) Foundation of doing business: it can increase market share, help firms become high- quality, low-cost producers and it is vital to the development of new products. 3) Productivity: it is one of the most important tools that managers have to increase productivity and efficient businesses 4) Strategic opportunity and advantages: create competitive advantages (ex. iTunes), create new business models (ex. Dell), create new services (ex. eBay), differentiate from competitors (ex. Amazon). Why now? 5 reasons: 1) The growth of internet and technology convergence a. Growth of internet, growth in e-business, e-commerce b. The Internet is bringing about rapid changes in markets and market structure c. The internet is making many traditional business models obsolete: music stores and video stores 2) Transformation of the business enterprise a. flexibility b. decentralization c. Location of Independence d. low transaction and coordination costs e. collaborative teamwork  3) Growth of a globally connected economy – globalization a. Management and control in a global marketplace b. Competition in world markets c. Global delivery systems 4) Growth of knowledge and information-based economies a. increase of digital literacy b. new products and services c. time-based competition d. shorter product life e. knowledge as a central productive and strategic asset 5) Emergence of the digital firm – changing business processes and models a. Digitally enabled relationships with customers, suppliers and employees b. Core business processes accomplished using digital networks How much EIS matters? 3 reasons: 1) Commoditization of technology: it is typically a spur to innovation and new business models, products and services – adopt business models to new technologies 2) Competitive advantage: derives NOT from the technology, but on how businesses USE the technologies – companies set when they deploy 3) Innovations: in business processes, management and organization are NOT easily copied from one firm to another – if they have both concepts above, they would be more likely to create new products. 2. Enterprise Information Systems Business perspective: EIS are an organizational and management solution to business challenges that arise from the business environment. i. They require significant investment in organizational and management changes and innovations ii. It creates value primarily by changing business processes and management of decision making iii. Businesses invest in IS to create value and increase profitability Technology perspective: a set of interrelated components that collect or retrieve, process, store and distribute information to support decision-making and control in an organization. ➔ Data: streams of raw facts representing events (ex. Business transactions) ➔ Information: clusters of facts meaningful and useful to human beings in the processes like decision-making ➔ Relies on i. Communication technologies: transfers data from one physical location to another ii. Network: links computers to share data or resources iii. Hardware: physical equipment iv. Software: detailed preprogrammed instructions v. Storage: physical media for storing data Relationship between technology and business organizations Mediating factors: variables that can be molded. They can increase, decrease or maintain organization’s goals. What is technological business organization? Organization: stable, formal and social structure. It takes resources from the environment and processes them to produce outputs. The two-way relationship is defined by the firm’s routines and business processes Understanding the firm´s routines and business processes we can then set an Enterprise Information System that will support the firm’s value chain and consequently firm’s business strategy. Firm’s routines and Business processes Routines are patterns of individual behavior Business processes are a collection of routines – they enable organizations to cope with all recurring expected situations Business firms are a collection of business processes NOTE: it is the firm’s routines and business processes that creates firm’s value chain The typical 9 business flows are: Order to cash procure to pay plan to produce design to deploy forecast to plan, inspect to quality in- to outbound acquire to retire and account to report Firm value chain and industry value chain Understanding the firm’s value chain, we can clearly understand the firm’s business strategy Firm’s value chain includes support and primary activities Industry value chain: everything the firm has, plus the other components, including suppliers, distributors and customers altogether. Business-level strategy Understanding the firm’s business strategy, we can set an EIS correctly. Relation between value chain, business strategy and EIS Understanding the firm’s routines and business processes → we can understand firm’s value chain Understanding the firm’s value chain → we can understand firm’s business strategy Understanding firm’s business strategy → we can set a correct and adequate EIS CONCLUSION: to understand the firm’s routines and business processes we can set a correct EIS that will support the firm’s value chain and consequently the firm’s business strategy There are four reasons why it makes a difference to the success of a business:  Capital management - Managers and business need to know how to invest capital in IT wisely.  Foundation of doing business - It can increase market share, help firms becoming a highquality, low-cost producer and Its vital to the development of new products.  Productivity.  Strategic opportunity and advantage - create new services, create new business models, differentiate from competitors, and create competitive advantages. There are three reasons why it makes a difference to the success of a business:  Commoditization of technology is typically a spur to innovation and new business models, products and services.  Competitive advantage derives not from the technology, but from how businesses use the technology.  Innovations in business processes, management and organization are not easily copied from one firm to another. Summarising, there are 5 reasons for why EIS are so important:  The growth of internet and technology convergence.  Transformation of the business enterprise.  Growth of a globally connected economy (globalization).  Growth of knowledge and information-based economies  Emergence of the digital firm. 3. Enterprise Applications What is an Enterprise Application? An enterprise application is a big business application, meaning, there are highly complex systems. Rather than storing information in separate places throughout the organization, enterprise systems provide a central repository common to all corporate users. Since it provides a common interface, it allows personnel to share information seamlessly no matter where the data is located. They may be deployed on a variety of platforms across corporate networks, intranets or internet. They are data-centric, user-friendly, and must meet security, administration, and maintenance requirements. These requirements follow the enterprise application model. The dynamics of the business: 3 business roles 1. Operations 2. Finance 3. Sales *They are complementary, not exclusively separate. ➔ Managers 4 functions: 1. Plan 2. Organization: which resources need to be applied to who/ where 3. Motivate and lead other people 4. Control: if everything is going to be accomplished Type of enterprise applications  Packaged applications - Two or more computer programs that together address a specific business need.  Custom applications - Two or more computer programs that were customized/developed specifically to address a specific business need.  Stand-alone applications - A computer program that is run as a separate computer process, not an addon of an existing process. What is the enterprise application model? It’s a logical summary of all requirements that contribute to implementing every enterprise application. By grouping similar requirements together into a small number of abstract categories, you can approach them in a more orderly way. In other words, it is modelling the business process.  The development model  Development team  Development process  Project management  Source code control  Testing Application milestones  Deliverables  The business model  Business goals  Development cost  Return on investment  Resources needed  Time constraints  Security and maintenance  Existing infrastructure investment  Business rules  Policies  The user models  User interface  Ease-of-use requirements  Training and documentation  Application support  User’s desktop configuration  Network connection  The logical model  Logical structure of the application  Object and data modeling  Business objects and services  Interface definitions  The technology model  Component development or reuse  Development tools  Deployment platforms  System and database technologies  Clustering, pooling, and messaging technologies  The physical model  Physical application architecture  Distribution and interconnection of components  End product of the iterative inputs of each of the other sub-models Revenue > costs → they should be unbalanced What is the business process modelling? Business process modelling (BPM) is the activity of representing a firm’s processes so that the current process may be analyzed, implemented or improved. It’s typically performed by: business analysts, who provide expertise in the modelling discipline; subject matter experts, who have specialized knowledge of the processes being modelled; or more commonly by a team comprising both. The business objective is: to increase process speed or reduce cycle time to increase quality to reduce costs, such as labour, materials, scrap, or capital costs. 4. Business processes What is a business process? Business processes include the various business activities for internal operations (manufacturing, warehouse, order processing, human resource management, among others) as well as external interactions with customers, suppliers, and business partners. In terms of enterprise applications – it’s the information flow for a demand or supply - sales, purchase, production, picking, receivables, payables, campaigns, etc. Example of information flow for an order: Information begins to accumulate when a customer sends an order to the company and flows through the various links. When a customer places an order, the order is entered into an order-entry application. The information containing the order is sent to the fulfilment department. The Fulfilment department picks the items from inventory, packages them for distribution, and produces packing list. The package, along with the packing list, is forwarded to the shipping department. The shipping department coordinates the shipment, produces invoice, and sends the package and invoice to the customer. Business transactions and documentation Business process maps the value chain There are 2 main activities in a company that generate value – Support and Primary Business process – internally focused applications Value chain – the set of business activities. Functional areas can be broken down into primary and support activities: o Primary activities are functional areas within an organization that process inputs and produces outputs (example: Inbound logistics, Operations and manufacturing, Outbound logistics, Marketing and Sales, Customer service). o Support activities are those activities that enable primary activities to take place In externally focused applications there are still two main activities: Support and Primary – one pair per company.  Integrate internal applications with those outside: suppliers, partners, customers.  Upstream information - Information received from another organization.  Downstream information - Information sent to another organization. Business process – externally focused applications There are still 2 main activities: support and primary – one pair per company Business processes map the value chains. Externally focused applications: o Integrate internal applications with those outside: suppliers, partners, customers o Upstream information: SUPPLIERS – information received from another organization o Downstream information: CUSTOMERS – information sent to another organization Types of enterprise applications Packaged applications: 2+ computer programs that together address a specific business need Custom applications: 2+ computer programs that were customized/developed specifically to address a specific business need o Deploy themselves – no changes are made Stand-alone applications: a computer program that is run as a separate computer process, not an add-on of an existing process – connects with no other app o Buy a software and ask suppliers to make something different to our service – it responds better because each firm is unique and has its own business model Stages of enterprise applications evolution Legacy systems: order systems, not integrated. o It doesn’t comply with our needs anymore o Usually linked to a specific business need o More errors, more costs, less efficiency ERP: integrated apps. o Less errors, less costs, more efficient  CRM: sales force automation o New opportunities for competitive advantage SCM: supply network o Supply chain – the producers of supplies that a company uses o Two objectives of upstream information flow:  Accelerate product development  Reduce costs associated with suppliers Types of Enterprise Information Systems:  Executive Support Systems (ESS)  Decision Support Systems (DSS)  Management Information Systems (MIS)  Transaction Processing Systems (TPS) Today’s Enterprise Systems business suites integrate these Management information systems (MIS) Middle level of management – know how to read data that analysts provide Transaction processing systems (TPS) – very low level: operational level  Decision support systems (DSS) Adequate knowledge to decide – aggregate TPS information and then decide. They don’t have time to read - dashboards Executive support systems (ESS) – predictive model + big picture of business Business processes are: Tasks and behaviors that organizations develop over time to produce good results - organization and coordination of activities. Workflows of materials, data, information and knowledge They have a high impact on the company’s performance, depending on how they are designed and managed. Information systems have everything to do with the improvement of business processes. Many of these processes can be simply applied to a specific area. While other more comprehensive - covering different functional areas Business processes: (Re)design examples  Event driven Process Chains (EPC’s) o Events drive logistics, finance, HR, etc. o Processes consist of a collection of events which match each other (activities).  Cycle-approach (examples) o O2C: Order to Cash o P2P: Purchase to Pay Business processes: (Re)design examples: O2C Contacting the Customer  Customer seeks contact o Company seeks contact  Sales promotion  CRM Issuing Sales Quotation  Request for Quotation (RFQ) o Not always necessary o Register customer data and quotation data  Fast tabs  Item lines o Creating Quotation o Send to customer  Obligation to deliver  Reaction period  Management information Sales Order Processing  Does the customer agree? The quotation is converted into a sales order. Or a direct sales order (without quotation)  Creditability check  Availability check (AtP, CtP)  Integration with Office  Release order for delivery Delivery and Shipping  Warehouse gets assignments (sales orders with today’s delivery date)  Picking and packing, then shipping  Create shipping documents  Postings in the ERP system o Logistic o Financial Billing  Creating and sending Sales Invoice  Invoice is usually made from data sales order  Separation of goods and money streams  Prepayment  Event driven action: o Logistical o Financial  Matching principle  Actions o Update obligations administration o Update customer open debt-claim o Update general ledger (financial mutation)  o Update stock (logistic mutation) o Update VAT registration o Update analyses and reports Collecting money Blanket Orders  Long term relationship with customer  Usually a special price or discount (or afterwards: revenue bonus)  Sell a large quantity, deliver/ship (and bill) in parts Return Orders  Items are damaged on arrival at customer site  Shipping the wrong items  Customers have ordered too much  RMA (Return Material Authorization) procedure  Destination of returned items  Credit memo (sales) Discounts and Credit Memos  Discounts because of RMA, revenue bonus, correction of mistakes  Sales decides upon contents credit memo  Credit memo lowers the debt-claim on the customer  Detailed checks are necessary Business processes: (Re)design examples: P2P Purchase Initiative  Coming from sales: sales orientated  Coming from production: production orientated  Based on sales forecasts  Inventory levels  Sometimes customer specific purchasing RFQ and Vendor Selection  Request for Quotation (RFQ)  Comparing conditions  Time, Price, Quality Assurance, etc?  Purchasing decision: one quotation becomes a purchase order Create Purchase Order  Coming from quotation?  Purchase order number  Order confirmation  Planning for the warehouse Goods Receipt  Warehouse workers  Determine goods receipt  Determine storage location Vendor Invoice Check  3-way matching o Order o Goods receipt o Invoice  Approved vendor invoice -> Accounts Payable (A/P)  Contact with vendor if no consensus  Electronic invoicing  Self-billing  Registration of obligations Vendor Payment  Only approved vendor invoices  Selection on base of due date  Liquidity position  Authorization   Reconciliation  EDI / Electronic Banking  ML Pros and Cons of ERP Difference between ERP and BOB (Best of Breed): BOB has no integrated approach It has a functional approach Interfaces and middleware Specific needs, very different from ERP ERP systems Integrated system: support the company in every functional area, hierarchical level and decision level. 5. ERP History and Positioning Materials Resource Planning (1964) - controlling the raw materials needed for production The principles of MRP were:  Demand vs. Supply  BOM – Bill of Material - “recipe” or “formula” that includes how to produce the products, list of components, how much of each, special conditions, standards, etc.  Routings – “manufacturing process” that describes the steps required for assembly, define shop floor operations, arrangements of a possible manufacturing sequence, etc. Economic order quantity o When it is below a certain level, we have to order. o Emerged from Re-order point (RP) o Stock level and EOQ Principles of MRP: i. Demand vs supply ii. BOM’s – bill of materials a. How to produce our products b. List of components including substitutes c. How much of each - Expected yields and labor productivity d. Extrapolate costs per unit e. Stored in a Bill of Material (BOM) iii. Routings – manufacturing processes a. Describe the steps required for assembly b. Define shop floor operations c. Arrange them in a possible manufacturing sequence How does an MRP work? Inputs:  Master production schedule - drives the system based on customer orders (independent demand)  Bill of material (dependent demand)  Inventory records  MRP package – contains the logic Outputs:  Purchase/materials/work orders →Without MRP: the minimum stock had to remain continuous and be able to cope with seasonal peaks in demand →With MRP: we can flatten the product/production line - In the same way, we can cope with fluctuations in demand - Stock closer to the demand value, and not just a fixed formula for the entire year. Manufacturing Resource Planning II (1984) - allows you to enter production formulas (equations) > It includes the MRP base functions:  Master production schedule  BOM  Inventory status file  MRP package > But also incorporates Capacity Resource Planning (CRP)  Workers  Machines centers  Work centers > Computer Integrated Manufacturing (CIM) followed an engineering approach > MRP II followed a management/enterprise business approach Enterprise Resource Planning (1990) The Enterprise Resource Planning, besides the characteristics of MRP II, includes Financial Management (FM), that is general ledger, costing & accounting and payables & receivables. companies had separate systems (they had to retrieve separate information from each functional area in the form of a diskette to import the data into accounting) FM:  Ensure the quality of information, but without so many errors – pass information from operational areas to middle management  General ledger  Costing & accounting  Payables & receivables → involves many errors and duplications (not sustainable) → integrated ERP solution Extended ERP (1990s) Incorporation of new functional modules:  Fixed assets – all forms of fixed investment: transportation, IT, construction. Consult companies for more than 1 year and help with production – it is included as a cost, but is not recorded in the accounts – it depreciates over the years (less visible)  Cash management  Human resources – human capital management  WH management – logistics: products in process, finished products, semi-finished products ERP II - EAS (2005) Enterprise Resource Planning II, also known as Enterprise Application Suite EAS, joins Service Management (SM), Customer Management (CRM), Business Intelligence (BI) and E- Commerce to the already existing services of Extended ERP. ERP (2010) As more functionalities per industry are coming up, they have been Generally grouped into 3+2 applications:  Financial Management  Supply Chain Management  Customer Relationship Management And because technology evolved into two areas:  External connectivity: E-Commerce  Delivery info: on-premises vs. cloud computing Enterprise Systems (Historical Evolution) Nowadays, In Europe, enterprises use resource planning software applications mostly in Information and Communication; Manufacturing; Electricity, gas, steam and air conditioning, water supply …  Main ERP providers (proprietary systems): SAP, Oracle, Sage, Infor, Kronos, Microsoft Dynamics  Main ERP providers (non-proprietary systems): odoo, dolibarr, openbravo Enterprise Systems Background of enterprise systems Problems with functional based applications NOTE: a functional area might contain 1+ business processes which generally have 1+ business functions Example: Logistics functional area → inventory management & distribution business processes → sales and shipping business functions Functional area → business processes → business functions Integrated Systems What is an ERP? How does an ERP work? The business benefits of ERP Common disadvantages in implementing an ERP 6. Financial Management (Chapter 3) Financial Management Basic Functions Accounting main branches Financial accounting – set of techniques for recording economic/financial/treasury assets Cost accounting – it produces reports to assess the elements of the economic activity o Has an internal and confidential character o Records all costs and income to inform and support management decision o Demonstrates how the business reaches profitability of each product National accounting – register and report to assess a country’s economic activity Public accounting – records and reports to assess state-owned public sector operations Concepts: Accounts – used to store recorded monetary information from its transactions, events and arrangements Charts of Accounts T-Accounts – format used for all accounts Debit – left side of a t-account Credit – right side of a t-account Double-entry system – for each transaction, event or arrangement that is recorded, the total amount of the debits must always equal to the total amount of credits Assets – everything a company owns, including cash, accounts receivable, property and goods. Liabilities – everything that a company owes to others, like loans and mortgages Balance sheet – a document that records company’s assets and liabilities at a certain moment in time. * If public company – it also shows the stakeholder’s equity  Economic & Financial demonstrations Balance Sheet o Financial perspective o Static map, like a snapshot of a company at a certain day o Demonstrates where the capital is and where it comes from Profits & Loss Account o Economical perspective o Dynamic map, it reports all the economical year (not just a certain moment/day) o Demonstrates how results were achieved – it tells how profit or loss was achieved. Accounting information systems Order processing Inventory control – stocks Account receivable Account payable Payroll General ledger Invoicing All invoices should be delivered to customers by the 5th day Dated & sequentially numbered Name & address of the supplier and NIF Should be integrated with other information:  Orders and shipping o Purchase order o Shipping/transportation note  Receivables o Supplier’s trial balance o Shipping trial balance o Customer’s trial balance Advantages:  gain a detailed view of accounting transactions and perform deep analysis with hierarchically organized data for multi-level reporting.  reduces time spent on accounting tasks and increases accuracy.  sets up multiple sub-journals for posting recurring transactions and adds accounts as needed during transaction entry.  posts financials into multiple ledgers to create separate books for different reporting purposes such as taxes and cash flow analysis. The Fixed Assets module enables maintenance and tracking of valuation of fixed assets such as buildings, land, vehicles, and equipment. Employ different depreciation methods and conventions to track multiple evaluations for the same fixed asset. The Accounts Payable module allows tracking of all purchases and expenses. It sets up vendor groups and payment options; defines cost parameters relating to vendors, purchase orders, discounts, supplementary items, deliveries, etc.; settles invoices, creates and manages purchase orders and planned purchase orders with various journals. The Accounts Receivable module allows tracking of all sales and incoming payments from customers.  It sets up customer groups and payment options.  create interest notes and collection letters.  defines parameters relating to customers, sales orders, prices, discounts, supplementary items, deliveries, etc.  settles customer invoices and makes inquiries with all available data in the Accounts Receivable module. The Project Accounting module supports the accounting needs of multiple projects including fixed price, time and materials, and internal projects such as investment and cost and time projects. Project Accounting helps to avoid cost overruns by quickly identifying and addressing production delays. Financial Management Functional Area This function covers all activities within the financial scope: a) Preparation of financial information to support decisions b) financial decision making c) Execution of the actions resulting from the decisions taken d) Control of the results obtained Financial decision making; Execution of the actions resulting from the decisions taken; Control of the results obtained. What is the difference between financial analysis and financial management? Financial analysis consists of collecting and processing information to allow an assessment of the company's financial situation while financial management encompasses all decision- making related to the company's financing, as well as the study and control of the profitability of all applications of resources. Accounting and Companies flows What are the company flows?  Financial perspective o Expenses - measure the outflows of assets that a company consumes and the obligations a company incurs in the process of operating the business. o Revenue - measure the inflows of assets and the settlements of obligations from selling goods and providing services to customers. o Gains or losses - result from transactions in which the company sells assets or settles liabilities for more or less than their book values.  Economic outlook (Costs, Income)  Treasury/ monetary outlook (Payments, Receipts) Financial & Corporate Accounting has a dual purpose:  recording the total costs and income to allow the calculation of profits/loses - records all types of information flows (internal and external);  calculating the total assets (assets and rights) and liabilities (obligations) to analyze the evolution and composition of the total capital. Accounting Information Flow * Accounts are used to store recorded monetary information from its transactions, events and arrangements. All accounts use a format called T-Accounts. On the left side of a t-account we register the debit and on the right side we put the credit. It’s a double entry system meaning, for each transaction, event, or arrangement that is recorded, the total amount of the debits must always equal the total amount of the credits. * Balance Sheet A balance sheet is a document that records a company’s assets and liabilities at a certain moment in time. The balance sheet is based on the accounting equation: Assets = liabilities + owner’s equity   Assets are everything a company owns, including cash, account receivable, property, and goods.  Liabilities are everything that a company owes to others like loans and mortgages. The balance sheet is important for potential investors. Being a static map of a financial perspective just like a snapshot of a company on a certain day (usually at the end of the economical year) it demonstrates how the company is doing, where the capital is and where it comes from or goes. To help out, we have the profit & loss account. It’s an economical perspective dynamic map that reports all the economical year and not just the situation of a certain day like the balance sheet. Being more of a story book, it demonstrates how the results were achieved, how profit or loss was achieved. [cost accounting] Accounting Information Systems  Order processing / Processamento de encomendas  Inventory Control / Controlo de Inventário  Account Receivables / Contas a receber de terceiros  Account Payable / Contas a pagar a terceiros  Payroll / Processamento de salários  General Ledger / Contabilidade geral Invoice Requisites: Mandatory components of an invoice in Portugal:  All the invoices should be delivered to customers until to the 5th day ( week days)  Dated & sequentially numbered  Name & address of the supplier and fiscal number (NIF)  Detailed description of the products and services  Price without taxes, and with taxes (Vat)  Taxes that must be inputted  Name of the customer and fiscal address  Software must be certified  Among other things *Invoicing is very important to better manage orders and connect with storehouse but also to register customer information (CRM)* Invoicing Accountability Requisites:  Must comply with Finance Ministry legal aspects: balance sheet; profit and loss account; general ledger and trial balance accounts; tax report -SAFT  Finance and cost accounting  Cost centers. *Integrating spreadsheets & report, eBanking and eGovernment might make things easier.* Invoicing -> Customer Management, CRM Accountability - > Corporate Finance Warehouse notes-> Stock Management 7. Supply Chain Management (Chapter 4) NOTE: DO NOT MIX supply chain with supply chain management or with Logistics Disambiguation: Supply chain vs. supply chain management. Supply chain management is the management of such a chain i. Supply chain is a set of firms directly linked by one or more upstream and downstream flows of products, services, finances, or information from a source to a customer a. The flow of material, information, and services from raw material suppliers through factories and warehouses to the end customers. ii. Supply chain management is the management of such a chain. It acknowledges procurement, distribution, maintenance, and inventory management, but also includes activities such as marketing, new product development, finance, and customer service. Supply chain management views the supply chain and the organization’s logistics as a single entity. a. Supply chain management goal is to supply demand b. to plan, organize, and coordinate all the supply chain’s activities. Benefits:  reducing uncertainty and risk in the supply chain  positively affecting inventory levels, cycle time, business processes and customer service  increase profitability and competitiveness i. Logistics refers to activities that occur within the boundaries of a single organization. a. It focuses its attention on activities such as procurement, distribution, maintenance, and inventory management. Supply chain management acknowledges all the above and also includes activities like marketing, new product development, finance and customer service. - Views the supply chain and the organization’s logistics in it as a single entity. Supply chain management stages: 1. Creation Stage: the need for large-scale changes, re-engineering, downsizing driven by cost reduction programs, and widespread attention to Japanese management practices. 2. Integration Stage: when firms use electronic data interchange (EDI) systems and enterprise resource planning (ERP) systems for cost reductions through integration. 3. Globalization Stage: expansion of supply chains over national boundaries and into other continents for cost reductions through global sourcing. 4. Specialization Stage: focus on "core competencies" and specialization. Abandoned vertical integration. Extending the supply chain beyond the company walls and distributing management across specialized supply chain partnerships – outsourcing. Critical for manufacturing and distribution models. How does SCM work? Taking the 5 basic areas of SCM: 1. Production Production refers to the capacity of a supply chain to make and store products. Factories can be built to accommodate one of two approaches to manufacturing:  product focus (focused on a product line from fabrication to assembly)  functional focus (just a few operations like fabrication or assembly). As with factories, warehouses too can be built to accommodate different approaches. There are three main approaches:  stock keeping unit storage (all types of products),  job lot storage (different products related to the needs of a certain type of customer),  cross-docking (trucks from suppliers arrive and unload large quantities of different products in the facility and then these are broken down into smaller lots and sent to customers directly). 2. Inventory The creation and storage of inventory is a cost and to achieve high levels of efficiency, the cost of inventory should be kept as low as possible. There are three basic decisions to make regarding the creation and holding of inventory:  cycle inventory (amount of inventory needed to satisfy demand for the product in the period)  safety inventory (buffer against uncertainty)  seasonal inventory (inventory that is built up in anticipation of predictable increases in demand that occur at certain times of the year). 3. Location Location refers to the geographical siting of supply chain facilities. It also includes the decisions related to which activities should be performed in each facility. Factors that should be considered:  cost of facilities,  cost of labor,  skills available in the workforce  infrastructure conditions  taxes and tariffs  proximity to suppliers and customers 4. Transportation Referring to the movement from raw material to finished goods between different locations. Transportation costs can be as much as a third of the operating cost. There are six basic modes of transport that a company can choose from:  ship and rail – cost efficient but slow  trucks – quick and flexible  airplanes – fast and responsive  pipelines – efficient but restrictive  electronic transport – the fastest, flexible and cost efficient (electric energy, data, and products composed of data such as music, pictures, and text) 5. Information Information is the basis for making decisions regarding the other 4 supply chain drivers. Information is used for two purposes in any supply chain:  coordinating daily activities (related to the other four supply chain drivers)  forecasting and planning (anticipating and meeting future demands and used to guide decisions about whether to build new facilities, enter a new market, or exit an existing market). Supply chain management (SCM) systems Participants in the management of the supply chain A supply chain is composed of a company and the suppliers and customers of that company. There are companies that are producers, distributors, retailers and companies who are customers 1. Producers / manufacturers - organizations that make a product or a service (tangible or intangible items and services). 2. Distributors / wholesalers - companies that take inventory in bulk from producers and deliver a bundle of related product lines to retailers or customers. 3. Retailers - stock inventory and sell in smaller quantities to the public. 4. Customers / consumers - any organization that purchases and uses a product. 5. Service providers - organizations that provide services to producers, distributors, retailers, and customers. They develop special expertise and skills that focus on a particular activity needed (IT, design, marketing, among others) Types of supply chain Components of supply chain management Upstream supply chain – includes the organization’s first-tier suppliers and their suppliers. Internal supply chain – includes all the processes used by an organization in transforming the inputs of the suppliers to outputs. Downstream supply chain – includes all the processes involved in delivering the products to final customers. Supply chain management (SCM) systems There are two basic types of SCM systems:  Supply Chain Planning (SCP) – uses mathematical models to predict inventory levels based on the efficient flow of resources into the supply chain.  Supply chain execution (SCE) - used to automate different steps in the supply chain such as automatically sending purchase orders to vendors when inventories reach specified levels. NOTE: effective SCM implies using both in 1 system Supply chain management can be broken down into 2 typical businesses:  Manufacturing A manufacturing environment purchases material and then produces manufactured items either to stock or to order or both. The transformations from purchased material to manufactured items are defined by bill of material (BOM) information and by the processing steps and resource requirements defined by routing information.  Distribution Saleable products are made of purchased material. These items are typically stocked in advance of sales orders but may be purchased to order. An effective management of supply chain activities in manufacturing and distribution requires an integrated enterprise application. An effective SCM of the activities in manufacturing and distribution requires an integrated enterprise application – ERP Business processes for managing the supply chain 1. Sales Order Processing a. The sales order process typically starts with sales order entry and finishes with shipment and customer invoices. b. It requires definition of customers and involves related activities such as quotes and customer returns, and the larger context of managing customer relationships (CRM). 2. Purchase Order Processing a. The purchase order process typically starts with a purchase order and finishes with receipts and vendor invoices. b. It requires definition of vendors and involves related activities such as quotes and vendors return and the larger context of managing vendor relationships (SRM). 3. Production Order Processing a. The production order process starts with creation of the production order and finishes with a completed product. b. Coordination of production activity focuses on production schedules by work center and suggested actions to replenish inventory or meet demand. 4. Multisite Operation a. Some multi-site operations involve transfer orders between locations. b. Starting with the creation of a transfer order, this involves shipping and receiving activities on the ship-from and ship-to-date locations. 5. Warehouse Management a. The Warehouse Management process involves inbound and outbound shipments in support of multisite operation, warehouse management, and sales and operations planning. 6. Sales and Operation Planning a. This critical business process requires balancing sales demand against the ability of operations to supply products. b. It starts with the definition of all demands from the firm’s products and formulates S c. &OP game plans that drive supply chain activities to meet those demands. 8. Human Capital Management (HCM) Human Resources (HR) department responsibilities:  Attracting, selecting, and hiring new employees  Communicating information regarding new positions and hires  Ensuring proper education, training, and certification for employees  Handling issues related to employee conduct.  Making sure employees understand job responsibilities.  Employee performance process (salary increases and bonuses)  Managing salary and benefits for each employee and communicating changes in these.  Supporting management plans for changes in the organization HR system  A good information system allows all relevant information for an employee to be retrieved in a matter of seconds.  HR system (SAP) provides tools for: o Managing an organization’s roles and responsibilities o Definitions o Personal employee information o Tasks related to time management, payroll, training  Firm and staffing plan to define: o Company’s management structure o Positions within the organizational structure  Distinguishes between task, job, position and person Other essential factors are:  Communication o Communication is the exchange of information between individuals, through voice, text, common code, or by behavior.  Coordination o Coordination consists in working with others to achieve shared and explicit goals, organizations use collaborative systems to accomplish them  Collaboration o Collaboration consists of working with others (in informal or formal groups) to achieve shared and explicit goals. Organizations use collaborative systems to accomplish such tasks and goals and focuses on task or mission accomplishment and usually takes place in a business. o Collaborative systems can be classified according to interaction and communication o Collaboration tools (collaborative systems) may be classified according to the place of interaction (face or distance) and time (synchronous or asynchronous) o Today, organizations enhance collaboration by embracing social business – the use of social networking platforms (Facebook, twitter, internal corporate social tools) to engage their employees, customers and suppliers Note: Cooperation is not collaboration. Cooperation: consists in the sum of the parts Collaboration: consists of working on the same base to the whole work, usually it achieves effectiveness of a group of things each interacting with one another within the same base. Collaboration Requirements  Collaboration Capability o Open culture o Decentralized structure o Breadth of collaboration  Collaboration Technology o Use of collaboration and social technology for implementation and operations o Use of collaborative and social technology for strategic planning  Collaboration quality → irm performance A combination of these two, we can achieve collaboration quality and consequently firm performance. Requirements for collaboration Business Benefits of Collaboration Productivity  People interacting and working together can capture expert knowledge and solve problems more rapidly than the same number of people working in isolation  Fewer errors Quality  People working collaboratively can communicate errors and correct actions faster than if they were in isolation. Innovation  People working in collaboration can come up with more innovative ideas for products, services and administration than if they were working separately Customer service  People working together using collaboration and social tools can solve customer complaints and issues faster and more effectively Financial performance (profitability, sales growth)  As a result of everything above, collaborative firms have superior sales, sales growth and financial performance Teamwork Teamwork Role Types Teamwork and Activities: RACI vs RASCI IBM Coaching Conflict A guide from Weiss & Huges (2005) to follow when having conflicts. Blue Cross and Blue Shield (Trade-off Matrix) Space/Time Matrix (this last method can be used in a variety of subjects like workplace availability) KMS – knowledge Management Systems IT system that stores and retrieves information to enhance comprehension, coordination and process alignment. Information management systems can be used in organizations and teams, but they can also be used to centralize the knowledge base for users or consumers. KMS Process 9. CRM System (Sales & Marketing) Marketing -> Process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organization goals. This functional area is customer focused. There are many types of customers:  Consumer  B2B  Channel Distributor Franchisee  Internal Customer Customer Loyalty -> deeply held commitment to rebuy a preferred product/service consistently in the future, despite situational influences and marketing efforts having a potential to cause switching behavior. Why is customer loyalty important? It costs 6x more to sell to a new customer than to sell to an existing. There is a 50% chance of making a sale to an existing customer while only a 15% chance of selling to a new customer. One dissatisfied customer will tell 8-10 others about his experience. “Customer Relationship Management is an enterprise approach to understanding and influencing customer behavior through meaningful communications in order to improve customer acquisition, customer retention, customer loyalty and customer profitability” Customer Relationship Management (CRM) -> Business and technology discipline that uses information systems to coordinate all the business processes surrounding the firm’s interactions with its customers in sales, marketing, and service. Customer Relationship Management Systems -> Information systems that track all the ways in which a company interacts with its customers and analyze these interactions to optimize revenue, profitability, customer satisfaction and customer retention. a. Sales o Telephone sales o Web sales o Retail store sales o Field sales b. Marketing o Campaign data o Content o Data analysis c. Service o Call center data o Web self-service data o Wireless data o Social networking data The CRM Stages: 1. Customer Acquisition: Promotion of products – build a relationship – first date. 2. Customer Extension: An established relationship – cross-selling & up-selling 3. Customer Retention: Adapt to customer requirements – requires a complex understanding of customer needs. * Churn rate: measures the number of customers who stop using or purchasing products or services from a company. This rate indicates the growth or decline of a firm’s customer base. * Can an organisation pursue all 3 objectives? It is extremely difficult. Details of CRM CRM focuses on customers and prospective customers It contains the processes to build a business management centred on customer The management processes are centred on strategy, marketing, and also the economic and financial level It integrates marketing with other enterprise information systems for better understanding of the customer profile CRM system builds customer-centric processes, disseminated throughout the organization, integrating the areas of marketing, sales and services. Usually, an organisation’s core of applications consists of:  Transactional applications: used in the front/mobile-office.  ERP and SCM applications: used in the back/desk-office. Types of CRM  Operational CRM: Applications used in customer contact, such as sales force automation tools, call centers and customer support services and marketing automation. Examples: Campaign Management, account and contact management, emarketing, telemarketing, telesales, e-sales. A typical operational CRM consists of three sub modules / functional areas:  Marketing Automation o CRM systems support direct marketing campaigns, providing capabilities for:  capturing prospect and customer data,  for providing product and service information,  for qualifying leads for targeted marketing  and for scheduling and tracking direct-marketing mailings or e-mail o The following tasks are managed:  Development and analysis of marketing campaigns and customers.  Management of marketing campaigns.  Appropriate customer data organization and storage.  Moving contacts from leads to customers.  Sales Force Automation (SFA)  SFA module enables sales, marketing and shipping departments to share customer and prospect information easily o Sales o Marketing o Shipping o Prospect information  SFA increases each salesperson’s efficiency by reducing the cost per sale  Customer Service Automation  CS modules in CRM systems provide information and tools to increase the efficiency of: o Call centers o Help desks o Customer support staff  CRM systems may also include web-based self-service capabilities  o Includes functions like:  Internet websites, Touch-tone phone, Artificial Intelligence – Chatbot.  Provides information and tools to increase the efficiency of call centers, help desks, and customer support staff. Aside from the subsystems, the following metrics are managed in CRM:  Time management  Call management.  Opportunity management.  Account management.  Territory management.  Sales force management. Note: Operational CRM is the most critical and essential tool for any CRM strategy. Back/front-office processes. Advantages of operating a CRM system: 1. Improving sales management (account and sales management, productivity and planning) and pipeline control. 2. Making the most out of marketing and loyalty (making segmentation easy, planning, integration of mobility and services). 3. Exploring social and mobile CRM and XRM*. * XRM uses a CRM system to manage various types of relationships with several stakeholders: clients; employees, processes, partners, assets, suppliers. * Exploring social CRM, mobile CRM and XRM Social CRM benefits Analytical CRM: Applications that analyze customer data generated by operational CRM applications to provide information to improve business performance. Examples: Strategy and segmentation of customers, customers returns/products, standards identification, leads generation leads.  Collaborative CRM: Applications used in customer contact which support open innovation with the customers. Examples: crowdsourcing innovation systems.  Social CRM: Applications that capture customers’ information in social media and support their analysis. Examples: Systems for sentiment analysis using social network information. Operational CRM Is the most critical and essential tool for any CRM strategy. Back/front-office processes. Advantages of CRM 1. Improving sales management and pipeline control o Improve account management o Sales management o Productivity o Planning o Allows integration opportunity o Develop pipeline management 2. Making the most out of marketing and loyalty o making segmentation easy o planning and executing campaigns o Looking at campaign results and opportunities o keeping customer satisfaction in mind 3. Exploring social CRM, mobile CRM and XRM* Examples of XRM:  Partner Relationship Management (PRM): Applications with the ability to trade information and distribute leads and data about customers, integrating lead generation, pricing, promotions, order configurations, and availability and consequently enhance collaboration between a company and its selling partners.  Employee Relationship Management (ERM): Applications that deal with employee issues that are closely related to CRM, such as setting objectives, employee performance management, performance-based compensation, and employee training. CRM Challenges:  Integrating customer content  Contact management  End-to-end business processes. CRM Difficulties:  CRM requires major integration of systems which few companies have.  CRM requires a change in the store, record and retrieve info on a customer-centric basis.  CRM requires people to stop thinking about departmental boundaries and to start thinking about how as a team the company can help the customer. 10. E-Commerce E-commerce refers to transactions that occur over the Internet and the web. Commercial transactions involve the exchange of value (e.g., money) across organizational or individual boundaries in return for products and services. AKA, the exchange of goods and services for money. Mobile Commerce relies on the use of wireless devices, such as personal digital assistants, cell phones, and smart phones, to place orders and conduct business. E-business is about conducting business on the Internet, the transformation of business processes through the Internet. E-business is a wider perspective than e-commerce. E-commerce remains the fast-growing form of commerce when compared to physical retail stores. Pure e-commerce business models are redefined to achieve higher levels of profitability whereas traditional retail brands use e-commerce to retain their dominant retail positions. Also, small businesses and entrepreneurs continue to flood the e-commerce marketplace and increasingly take advantage of cloud-based computing resources. Eight Unique Features of E-commerce Technology  Ubiquity (available everywhere) o Marketplace is virtual o Transaction costs reduced  Global Reach o Transactions cross cultural and national boundaries  University Standards o One set of technology standards: Internet standards o Richness (supports various options – video, audio, text)  Interactivity  Information Density o Greater price and cost transparency o Enables price discrimination  Personalization/Customization o Technology permits modification of messages, goods  Social Technology o Promotes user content generation and social networking There are 3 parties involved:  Buyers – people with money who want to purchase a good or service.  Sellers – people who offer goods and services to the buyer.  Producers – people who create the products and services that sellers offer to buyers. Key Concepts in E-Commerce – Digital Markets and Digital Goods in a Global Marketplace Internet and digital markets have changed the way companies conduct business Information asymmetry reduced Menu costs, search and transaction costs reduced Dynamic pricing enabled Switching costs Delayed gratification Disintermediation Social E-Commerce and Social Network Marketing  Social e-commerce based on digital social graph  Features of social e-commerce driving its growth o Newsfeed o Timelines o Social sign-on o Collaborative shopping o Network notification o Social search (recommendations)  Social media o Fastest growing media for branding and marketing o Social network marketing o Seeks to leverage individuals’ influence over others o Targeting a social network of people sharing interests and advice o Facebook’s “Like” button o Social networks have huge audiences  Social shopping sites  Wisdom of crowds  Crowdsourcing Electronic Data Interchange (EDI)  Computer-to-computer exchange of standard transactions such as invoices, purchase orders  Major industries have EDI standards o Define structure and information fields of electronic documents  More companies are moving toward web-enabled private networks o Allow them to link to a wider variety of firms than EDI allows o Enable sharing a wider range of information E-commerce vs E-business E-commerce: o It’s about doing business electronically o Conduct financial transactions electronically (ERP) o Improves the value chain (SCM) o Provides an effective tool for building, managing and enhancing customer o relationships (CRM) E-business: o It’s conducting business on the internet o It’s the transformation of the business process through the internet o It’s a wider perspective than e-commerce What is e-commerce? Uses electronic technology such as: o Internet o Extranet/intranet o Protocols Distributing, buying, selling and marketing products and services over electronic systems E-business for commercial transactions Involving SCM, E-marketing, online marketing, EDI. New Ways of B2B Buying and Selling  Private industrial networks o Private exchanges o Large firm using a secure website to link to suppliers and partners  Net marketplaces (e-hubs) o Single digital marketplace for many buyers and sellers o May focus on direct or indirect goods o May be vertical or horizontal marketplaces  Exchanges o Independently owned third-party Net marketplaces for spot purchasing Different categories of e-commerce:  Business to Business (B2B): Allows manufacturers to buy at a low cost worldwide; Enterprises can sell to a global market; Offers great promise for developing countries.  Business to Consumer (B2C): Comparison shopping; Many goods and services are cheaper when purchased via the Web; Disintermediation: elimination of intermediate organizations between the producer and the consumer.   Consumer to Consumer (C2C) and Consumer to Business (C2B): Often done through web auction sites.  Mobile E-commerce (M-commerce)  Social E-commerce  Local E-commerce  Drivers of E-commerce 1. Business dimensions: Technological; Political; Social; Economic; Organizational culture; Commercial benefits; Skilled/committed workforce; Competition -stay ahead of or keep up with competitors. 2. Digital dimensions: Data networks; Intense competition; Globalization; Information age; Technologies; Automation; Low-cost high-quality products/services. Digital Goods  Goods that can be delivered over a digital network  Cost of producing first unit is almost entire cost of product  Costs of delivery over the Internet are very low  Marketing costs remain the same, pricing highly variable  Industries with digital goods are undergoing revolutionary changes with publishers, record labels, etc.) E-Commerce Business Models  Portal  E-tailer  Content provider  Transaction broker  Market creator  Service provider  Community provider E-Commerce Revenue Models  Advertising  Sales  Subscription  Free/Freemium  Transaction fee  Affiliate Scope of e-commerce 1. Exchange of digitalized information 2. Technology-enabled transactions 3. Technology-mediated relationships 4. Intra & inter organizational activities How Has E-commerce Transformed Marketing?  Internet provides new ways to identify and communicate with customers  Long tail marketing  Internet advertising formats  Behavioral targeting o Tracking online behavior of individuals  Programmatic ad buying  Native advertising Key technological components for E-commerce  E-commerce software: o Catalog management o Product configuration o Shopping cart facilities o Ecommerce transaction processing o Web traffic data analysis  Electronic Payment Systems: o Digital certificate (DC) o Certificate authority (CA) o Secure Sockets o Layer (SSL), o Electronic cash/wallet. What Issues Must Be Addressed When Building an E-Commerce Presence?  Most important management challenges o Developing a clear understanding of business objectives o Knowing how to choose the right technology to achieve those objectives  Develop an e-commerce presence map o Four areas: websites, e-mail, social media, offline media  Develop a timeline: milestones o Breaking a project into discrete phases Multistage model for E-commerce 1. Search and identification 2. Selection and negotiation 3. Purchasing products and services electronically 4. Product and service delivery 5. After-sales service Designing an E-commerce initiative - The 7C’s of website design:  Context - Site’s layout and design  Connection - Degree site is linked to other sites.  Content - Text, pictures, sound and video on web pages.  Commerce - Site’s capabilities to enable commercial transactions.  Community - The ways sites enable user-to-user communication.  Communication - The ways sites enable site-to-user or two-way communication.  Customization - Site’s ability to self-tailor to different users or to allow users to personalize the site. Strategic approach to implement an E-commerce initiative The 3 approaches to strategy:  Position approach: “Where should we be vs competition?”  Resource approach: “what resources should we possess?”  Simple rules approach: “What processes should we follow?” Advantages of e-commerce  To consumers: think about the consumer buying process: search, value, evaluate and execute  To businesses: think about the common objective of every business Typical scenarios of E-commerce 1. Retailing 2. Servicing 3. Publishing 4. SCM E-commerce mechanisms Transformation of economic activity into digital through: 1. WWW – world wide web 2. Web browsers 3. Web servers 4. Information on users and sites 5. Mobile apps NOTE: without these mechanisms there is no e-commerce NOTE: DoubleClick.Net is an advertising network Limitations of e-commerce Benefits and challenges of e-commerce Social commerce features newsfeed timeliness social sign-on collaborative shopping network notification social search (recommendations)