Lecture 2: Achieving Operational Excellence and Customer Intimacy PDF

Lecture 2: Achieving Operational Excellence and Customer Intimacy: Enterprise Applications ISIT224 Management Information Systems Lecture Outline Enterprise Applications Enterprise systems Supply Chain Management systems Customer Relationship Management systems ...

Lecture 2: Achieving Operational Excellence and Customer Intimacy: Enterprise Applications ISIT224 Management Information Systems Lecture Outline Enterprise Applications Enterprise systems Supply Chain Management systems Customer Relationship Management systems  Learning Objectives How do enterprise systems help businesses achieve operational excellence? How do supply chain management systems coordinate planning, production, and logistics with suppliers? How do customer relationship management systems help firms achieve customer intimacy? What are the challenges that enterprise applications pose, and how are enterprise applications taking advantage of new technologies? How do enterprise systems help businesses achieve operational excellence? Background Scenario 1 – Imagine that you had to run a business based on information from tens or even hundreds of different databases and systems, none of which could speak to one another? Scenario 2 – Imagine your company had 10 different major product lines, each produced in separate factories, and each with separate an incompatible sets of systems controlling production, warehousing, and distribution. Background However, you may want to – React instantaneously when a customer places a large order or when a shipment from a supplier is delayed. – Know the impact of these events on every part of the business and how the business is performing at any point in time, especially if you’re running a large company. Impact – Your decision making would often be based on manual hardcopy reports, often out of date, and it would be difficult to really understand what is happening in the business as a whole. Enterprise systems provide the integration to make this possible. Enterprise Systems 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 How Enterprise Systems Work Enterprise systems are built to promote data integration streamline business processes enhance efficiency enable real-time access to information. Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved Enterprise Software Built around thousands of predefined business processes that reflect best practices – Finance and accounting – Human resources – Manufacturing and production – Sales and marketing To implement, firms: – Select functions of system they wish to use – Map business processes to software processes Use software’s configuration tables for customizing Enterprise Software Enterprise Software If the enterprise software does not support the way the organization does business, companies can rewrite some of the software to support the way their business processes work. If companies want to reap the maximum benefits from enterprise software, they must change the way they work to conform to the business processes defined by the software. Enterprise Software Example Tasty Baking Company – Identify its existing business processes and then translated them into the business processes built into the SAP ERP software it had selected. – Deliberately planned for customizing less than 5 percent of the system and made very few changes to the SAP software itself. – It used as many tools and features that were already built into the SAP software as it could. Leading enterprise software vendors include SAP, Oracle, IBM, Infor Global Solutions, and Microsoft. Business Value of Enterprise Systems 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 How do supply chain management systems coordinate planning, production, and logistics with suppliers? Background Scenario – If you manage a small firm that makes a few products or sells a few services, chances are you will have a small number of suppliers. You could coordinate your supplier orders and deliveries using a telephone and fax machine. – But if you manage a firm that produces more complex products and services, then you will have hundreds of suppliers, and your suppliers will each have their own set of suppliers. – Suddenly, you are in a situation where you will need to coordinate the activities of hundreds or even thousands of other firms in order to produce your products and services. Supply chain management (SCM) systems are an answer to the problems of supply chain complexity and scale. The Supply Chain Network of organizations and processes for: – Procuring materials, transforming them into products, and distributing the products – It links suppliers, manufacturing plants, distribution centers, retail outlets, and customers to supply goods and services from source through consumption. – Materials, information, and payments flow through the supply chain in both directions. Nike’s Supply Chain Please watch the following video to understand the background of Nike’s Supply Chain. https://www.youtube.com/watch?v=m2kJgpNWCrU Nike’s Supply Chain Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved The Supply Chain 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 – 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 Supply Chain Management Inefficiencies cut into a company’s operating costs – Can waste up to 25 percent of operating expenses 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 The Bullwhip Effect Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved Supply Chain Management Software Supply chain planning systems – Model existing supply chain – Enable demand planning – Optimize sourcing, manufacturing plans – Establish inventory levels – Identify transportation modes Supply chain execution systems – Manage flow of products through distribution centers and warehouses Global Supply Chains and the Internet Global supply chain issues – Greater geographical distances, time differences – Participants from different countries Different performance standards Different legal requirements Internet helps manage global complexities – Warehouse management – Transportation management – Logistics – Outsourcing Demand-Driven Supply Chains: From Push to Pull Manufacturing and Efficient Customer Response Push-based model (build-to-stock) – Earlier SCM systems – Schedules based on best guesses of demand Pull-based model (demand-driven) – Web-based – Customer orders trigger events in supply chain Internet enables move from sequential supply chains to concurrent supply chains – Complex networks of suppliers can adjust immediately Push- Versus Pull-Based Supply Chain Models Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved 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 – Total supply chain costs can be 75 percent of operating budget Increase sales How do customer relationship management systems help firms achieve customer intimacy? What is Customer Relationship Management? Customer relationship management (CRM) – Knowing the customer – In large businesses, 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 enterprise – Provide single enterprise view of customers A good CRM system What is the value of a particular customer to the firm over his or her lifetime? Who are our most loyal customers? Who are our most profitable customers? What do these profitable customers want to buy? Acquire new customers Provide better service and support to existing customers Customize their offerings more precisely to customer preferences Provide ongoing value to retain profitable customers. Customer Relationship Management (CRM) Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved Customer Relationship Management Software Packages range from niche tools to large-scale enterprise applications More comprehensive packages have modules for: – 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 Customer Relationship Management Software…continues CRM packages typically include tools for: – Sales force automation (SFA) Sales prospect and contact information Sales quote generation capabilities – Customer service Assigning and managing customer service requests Web-based self-service capabilities – Marketing Capturing prospect and customer data, scheduling and tracking direct-marketing mailings or e-mail Cross-selling How CRM Systems Support Marketing CRM Software Capabilities Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved Customer Loyalty Management Process Map Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved Operational and Analytical CRM Operational CRM – Customer-facing applications – Sales force automation Call center and customer service support – Marketing automation Analytical CRM – Based on data warehouses populated by operational CRM systems and customer touch points – Analyzes customer data (OLAP, data mining, etc.) Customer lifetime value (CLTV) Analytical CRM Data Warehouse Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved Business Value of Customer Relationship Management Systems Business value of CRM systems – 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 What are the challenges that enterprise applications pose, and how are enterprise applications taking advantage of new technologies? Enterprise Application Challenges Highly expensive to purchase and implement enterprise applications – Average cost of ERP project in 2015—$6.1 million Technology changes Business process changes Organizational learning changes Switching costs, dependence on software vendors Data standardization, management, cleansing Next-Generation Enterprise Applications Enterprise solutions/suites – Make applications more flexible, web-enabled, integrated with other systems SOA standards Open-source applications On-demand solutions Cloud-based versions Functionality for mobile platform Next-Generation Enterprise Applications… continues Social CRM – Incorporating social networking technologies – Company social networks – Monitor social media activity; social media analytics – Manage social and web-based campaigns Business intelligence – Inclusion of BI with enterprise applications – Flexible reporting, ad hoc analysis, “what-if” scenarios, digital dashboards, data visualization  Thanks for attending & thanks for your contribution! ☺