Enterprise Systems

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Agenda
Understanding the key features of Enterprise Systems, and The organizational benefits and challenges of using ES The extension of ES across organizational boundaries:
Supply Chain Management Systems Customer Relationship Management System

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Enterprise Systems (ES)

Suite of integrated software

modules with a common central database that cover the major functions within an organization Initially designed to automate internal back-office biz processes=>externally oriented and capable of communicating with customers and suppliers Major functional areas include:

Manufacturing and production Procurement and logistics Finance and accounting Sale and marketing Human Resources

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Key features of an ES
Modules integrated by a central database Embedded, standard processes (best practices) Limited customizability through built-in parameters Costly to customize

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Enterprise Systems: Modules

ERP features a set of integrated software modules and a central database that enables data to be shared by biz processes and functional areas throughout the enterprise

Major ES Software Vendors

Source: http://whatiserp.net/erpreport/erp-market-share-andvendor-evaluation-2011/
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Embedded Best Practices

Enterprise systems (aka ERP systems) are built around

predefined business processes in each of the functional areas

Eg. the steps that organizations usually take to compute payroll

Some degree of variation is allowed by the Enterprise System

package software by having the organization select from a set of parameters.

Eg. An organization can specify whether payroll is computed based

on hourly or daily rates, or weekly or monthly salaries.

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 What happens when the organizations requirements cannot be

Embedded Best Practices

accommodated within the ES parameters?

Customization of the source code Workarounds: additional steps get around the problem. Eg. downloading data to spreadsheets for further analysis

Customization is usually discouraged because

It is costly It can introduce errors into the system It makes it difficult to upgrade to future versions of the ES Degrade system performance, compromising the info and process integration

When there are customers with similar customization needs, the software

vendor may produce an industry or country-specific version

contribution scheme

Eg. SAP has a local HR version that reflects Singapores unique CPF

The Benefits of ES
SAP video on benefits (http://www.youtube.com/watch?v=9_YY6z_rsw&feature=related)

Integration enables
Capture of data once at point of origination Reduced data capture effort and error reduction Automatic triggering of downstream transactions Eg. capture of order at point of sale, triggers scheduling of shipment, update of inventory, sales accounts,. Access to updated information

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The Benefits of ES
MNCs use ES to promote the adoption of standard processes and

standard data definitions across their business units in multiple countries.

Benefits: Increase efficiency due to integration, data capture at source Standardization of processes throughout the enterprise (across different biz units), enabling
One face to the customer. Global customers expect consistency when dealing with

the MNC, regardless of country Scale economies through aggregation in certain functions such as global procurement in order to get the best prices from suppliers Reduction in cycle time (i.e. the total elapsed time from the beginning to the end of a process) Allows optimization of the organizations global supply chain, as design, marketing, production, procurement, and logistics occur in different parts of the world

Provides headquarters management with timely and standardized

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information (across countries) for better decision making

 The adoption of standard processes

Challenges of ES

1) Often requires significant change in the way employees work 2) The amount of training to use an ES can be substantial These can contribute to user resistance to the system 3) Sometimes leads to inappropriate processes (eg. that do not meet the industrys or countrys requirements), triggering inefficient workarounds and/or lower This triggers workarounds that undermine the hoped for benefits of the ES In the worst cases, poorly managed implementation of ES can lead to organizational losses
Eg. Hersheys ES system led to losses during peak Halloween period

4) Increases dependence on the ES software vendor

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Extending ES Beyond the Organization

Major ES vendors such as SAP and Oracle now offer modules

that allow the organization to further integrate its operations beyond its boundaries,
With suppliers: Supply Chain Management (SCM) systems With customers: Customer Relationship Management (CRM)

systems

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 A supply chain comprises organizations and processes for Procuring raw materials Turning these into intermediate and finished products Distributing these to customers (often through distributors

Supply Chain Management (SCM)

and other intermediaries) ES supply some integration of internal supply chain processes but they are not designed to deal with external supply chain processes The challenge in supply chain is managing the efficient flow of goods and information so that materials and finished goods are available at the right place at the right time.

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Supply Chain Partners

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Information Systems and SCM

Inefficiencies cut into a companys operating costs
Can waste up to 25% of operating costs.

Ideally, all parties in the supply chain want a just-in-time

situation,

Components arrive as needed, finished goods shipped after leaving

assembly line So that production is not halted, nor sales lost, and Minimal inventory holding costs are incurred

This requires accurate forecasting of sales and production

However, uncertainties of shipment, quality, and customer demand

prevail Buffer stock is kept, i.e. safety stock

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Information Systems and SCM

The bullwhip effect (http://www.youtube.com/watch?v=wLNdDSYqhNw)
Where relatively small variations in demand get amplified as they

pass up the supply chain The result is excess stockpiling of inventory to address uncertainty about demand.
SCM software can reduce the bullwhip effect by providing all
Inventory levels Sales and product forecasts Shipments

members of the supply chain with dynamic information about

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Supply Chain Management Systems

Supply chain planning systems

Model existing supply chain Demand planning (one of the most important and complex function, which determines how much product a biz needs to make to satisfy customers demands) Optimize sourcing, manufacturing plans Establish inventory levels Identifying transportation modes

Supply chain execution systems

Manage flow of products through distribution centers and warehouses to ensure that products are delivered to the right locations in the most efficient manner

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Types of Supply Chains

Sequential supply chains
Information and materials flow sequentially from company to company

Push-based model (aka. build-to-stock)

Schedules based on forecasts or best guesses of demand, and products are

pushed to customers

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Types of Supply Chains (cont)

Pull-based model (aka. demand-driven or build-to-order)
Actual customer orders trigger events in supply chain. Transactions to produce

and deliver only what customers have ordered move up the supply chain from retailers to distributors to manufacturers and eventually to suppliers

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Concurrent supply chains

Concurrent supply chains Information flows in many directions simultaneously among

members of a supply chain network

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Global Supply Chains and the Internet

connect to each other to exchange information.
Eg. Fords auto exchange
(http://www.youtube.com/watch?v=qyO9QSo0FjU&feature=related)

The internet has made it easier for supply chain partners to

Changed information flow from sequential to concurrent

Supply chains today are global

Eg. Three quarters of electronics components manufacture is done

in Asia, largely for markets in the West

The pervasiveness of glob al supply chains and the rise of the

internet has made concurrent supply chains more attractive and feasible

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Customer Relationship Management (CRM)

large corporation with thousands of customers. Answers to questions such as Who are our most profitable customer? What do they want to buy? Who are potential customers?

Challenges How to know your customer in a personal way, when you are a

Business value of customer relationship management Increased customer satisfaction Reduced direct-marketing costs More effective marketing Lower costs for customer acquisition/retention Increased sales revenue Reduced churn rate (churn rate measures the number of customers who

stop using or purchasing products or services from a company)

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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

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a method to interact with customers, e.g. email, telephone )

CRM captures and integrates customer data from all over the org, consolidate and analyze the data, and distribute the results to various systems and customer touch points across the org. (Touch point: aka. contact point,

Customer Data Sources

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CRM Software: Capabilities

Sales Force Automation
Provide salespeople (usually in the field)with customer information

(including profile of past purchases), product information, sale quote generation Increasingly accessible through mobile devices
Customer Service
To support call centers, helpdesks, customer support staff Routes call to service representative, provides customer information,

tracks resolution of problem May include a web-based self service capability before routing call to customer service representative
Marketing

Tools for analyzing customer data, identifying customer segments to target

for various promotions, for cross-selling Data analytics (eg. use of OLAP, data mining on data warehouses)
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Operational & analytical CRM

Operational CRM includes customer-facing app (e.g. tools for

sales force automation, call center and customer service support, and marketing automation) Analytical CRM includes app that analyze customer data generated by operational CRM app to provide info for improving biz performance

Identify buying patterns Create segments for targeted marketing Pinpoint profitable and unprofitable customers Calculate customer lifetime value (CLTV), which is based on the relationship between the revenue produced by a specific customer, the expenses incurred in acquiring and servicing that customer, and the expected life of the relationship
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CRM Software Capabilities

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CRM Systems

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Enterprise application challenges

Highly expensive to purchase and implement enterprise

applications

Total cost may be 4 to 5 times the price of software

Requires fundamental changes

Technology changes Business processes changes Organizational changes

Incurs switching costs, dependence on software vendors to

upgrade its product and maintain installation Requires data standardization, management, cleansing
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Next generation enterprise applications

Enterprise solutions / suites:

Replacing stand-alone enterprise, CRM, SCM systems Make these applications more flexible, Web-enabled, integrated with other systems, including mobile devices SaaS (much less popular, and not yet available from the major enterprise vendors) Salesforce.com and Oracle include some Web 2.0 capability to enable customers to identify new ideas

Open-source and on-demand applications

Service platform: Integrates multiple applications to deliver a seamless experience for all parties

Order-to-cash process: a composite process that integrates data from individual ES and legacy financial app Integrate info from enterprise app and disparate in-house legacy systems, presenting it to users through a Web interface Increasingly, new services delivered through portals

Portals:

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Next generation enterprise applications

Extending ES to Mobile devices Examples:
SAPs mobile applications Sybase s mobile CRM (see

next slide) Mobile workforce management

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Next generation enterprise applications

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