McGraw-Hill/Irwin

Copyright 2008, The McGraw-Hill Companies, Inc. All rights reserved.

Chapter

8
Enterprise Business Systems

McGraw-Hill/Irwin

Copyright 2008, The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives
Identify and give examples to illustrate the following aspects of customer relationship, enterprise research, and supply chain management systems
Business processes supported Customer and business value provided Potential challenges and trends

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Customer Relationship Management

A customer-centric focus
Customer relationships have become a companys most valued asset Every companys strategy should be to find and retain the most profitable customers possible

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Case 1: Business Benefits of CRM

Forex Capital Markets trades $20 billion worth of currency per month
12,000 clients in 70 countries

Tracking sales leads and prospects

Began with Excel spreadsheets Switched to Access database Volume forced move to CRM system

Access controlled through data security and information sharing privileges

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Case 1: Business Benefits of CRM

Wyse Technology
World leader in thin-client computing Revenues in excess of $180 million Doubled sales within 12 months of installing CRM system No additional staff needed

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Case Study Questions

Why cant Microsoft Excel spreadsheets and Access database software handle the customer relationship needs of companies like FXCM?
What functions do CRM systems like Salesforce provide to a company that these software packages do not?

What business benefits has the Salesforce CRM system provided to FXCM?
To Wyse Technology?

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Case Study Questions

Salesforce.com is an example of an ASP (application service provider), which was discussed in Chapter 4.
What benefits do you see in this case for that method of providing a CRM system to a company versus installing a CRM software package? What disadvantages might arise? Which method would you prefer?

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What is CRM?
Managing the full range of the customer relationship involves
Providing customer-facing employees with a single, complete view of every customer at every touch point and across all channels Providing the customer with a single, complete view of the company and its extended channels

CRM uses IT to create a cross-functional enterprise system that integrates and automates many of the customer-serving processes
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Application Clusters in CRM

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Contact and Account Management

CRM helps sales, marketing, and service professionals capture and track relevant data about
Every past and planned contact with prospects and customers Other business and life cycle events of customers

Data are captured through customer touchpoints

Telephone, fax, e-mail Websites, retail stores, kiosks Personal contact
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Sales
A CRM system provides sales reps with the tools and data resources they need to
Support and manage their sales activities Optimize cross- and up-selling

CRM also provides the means to check on a customers account status and history before scheduling a sales call

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Marketing and Fulfillment

CRM systems help with direct marketing campaigns by automatic such tasks as
Qualifying leads for targeted marketing Scheduling and tracking mailings Capturing and managing responses Analyzing the business value of the campaign Fulfilling responses and requests

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Customer Service and Support

A CRM system gives service reps real-time access to the same database used by sales and marketing
Requests for service are created, assigned, and managed Call center software routes calls to agents Help desk software provides service data and suggestions for solving problems

Web-based self-service enables customers to access personalized support information

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Retention and Loyalty Programs

It costs 6 times more to sell to a new customer

An unhappy customer will tell 8-10 others

Boosting customer retention by 5 percent can boost profits by 85 percent The odds of selling to an existing customer are 50 percent; a new one 15 percent

About 70 percent of customers will do business with the company again if a problem is quickly taken care of
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Retention and Loyalty Programs

Enhancing and optimizing customer retention and loyalty is a primary objective of CRM
Identify, reward, and market to the most loyal and profitable customers Evaluate targeted marketing and relationship programs

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The Three Phases of CRM

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Benefits of CRM
Benefits of CRM
Identify and target the best customers Real-time customization and personalization of products and services Track when and how a customer contacts the company Provide a consistent customer experience Provide superior service and support across all customer contact points

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CRM Failures
Business benefits of CRM are not guaranteed
50 percent of CRM projects did not produce promised results 20 percent damaged customer relationships

Reasons for failure

Lack of understanding and preparation Not solving business process problems first No participation on part of business stakeholders involved

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Trends in CRM
Operational CRM
Supports customer interaction with greater convenience through a variety of channels Synchronizes customer interactions consistently across all channels Makes the company easier to do business with

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Trends in CRM
Analytical CRM
Extracts in-depth customer history, preferences, and profitability from databases Allows prediction of customer value and behavior Allows forecast of demand Helps tailor information and offers to customer needs

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Trends in CRM
Collaborative CRM
Easy collaboration with customers, suppliers, and partners Improves efficiency and integration throughout supply chain Greater responsiveness to customer needs through outside sourcing of products and services

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Trends in CRM
Portal-based CRM
Provides users with tools and information that fit their needs Empowers employees to respond to customer demands more quickly Helps reps become truly customer-faced Provides instant access to all internal and external customer information

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ERP: The Business Backbone

ERP is a cross-functional enterprise backbone that integrates and automates processes within
Manufacturing Logistics Distribution Accounting Finance Human resources

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Case 2: Business Value of ERP

Autosystems produces headlamps for major automobile manufacturers
Until a few years ago, the manufacturing process was managed with paper documents An ERP system was installed, but did not extend to the shop floor Significant research was done before deciding to add the shop floor reporting module

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Case 2: Business Value of ERP

Installing PCs and ERP software on the shop floor allows Autosystems to
Enter timely, accurate information Plan more efficiently Make production changes in order to avoid labor or scrap problems Discuss these issues with employees while they are still current and meaningful

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Case Study Questions

Why did Autosystems decide to install the ActivEntry system?
Why did they feel it necessary to integrate it with their TRANS4M ERP system?

Which three business benefits of the use of ActivEntry provided the most business value?
What changes are already being planned to improve the use of ActivEntry?
What other improvements should the company consider?
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What is ERP?
Enterprise resource planning is a crossfunctional enterprise system
An integrated suite of software modules Supports basic internal business processes Facilitates business, supplier, and customer information flows

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ERP Application Components

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ERP Process and Information Flows

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Benefits and Challenges of ERP

ERP Business Benefits
Quality and efficiency Decreased costs Decision support Enterprise agility

ERP Costs
Risks and costs are considerable Hardware and software are a small part of total costs Failure can cripple or kill a business
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Costs of Implementing a New ERP

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Causes of ERP Failures

Most common causes of ERP failure
Under-estimating the complexity of planning, development, training Failure to involve affected employees in planning and development Trying to do too much too fast Insufficient training Insufficient data conversion and testing Over-reliance on ERP vendor or consultants

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Trends in ERP

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Supply Chain Management (SCM)

Fundamentally, supply chain management helps a company
Get the right products To the right place At the right time In the proper quantity At an acceptable cost

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Goals of SCM
The goal of SCM is to efficiently
Forecast demand Control inventory Enhance relationships with customers, suppliers, distributors, and others Receive feedback on the status of every link in the supply chain

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Case 3: Applying Lean Logistics to SCM

The Tesco supermarket chain is a pioneer in retailing
Used SCM to overcome disadvantage of weak supplier leverage and expensive logistics Changed product distribution methods to reduce labor costs and inventory levels Got suppliers to ship in smaller quantities, preconfigured for sales display Reduced total product touches from 150 to 50 Reduced throughput time from 20 days to 5
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Case Study Questions

What key insights of Tescos SCM direction Graham Booth helped revolutionize Tescos supply chain and range of retail store formats?
Can these insights be applied to any kind of retail business?

How did Dan Jones and the Cardiff Business School of Wales demonstrate the inefficiencies of the Tesco and Britvic supply chains?
Can this methodology be applied to the supply chain of any kind of business?
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Case Study Questions

What are the major business and competitive benefits gained by Tesco as the result of its supply chain initiatives?
Can other retail chains and retail stores achieve some or all of the same results? Defend your position with examples of actual retail chains and stores you know.

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What is a Supply Chain?

The interrelationships
With suppliers, customers, distributors, and other businesses Needed to design, build, and sell a product

Each supply chain process should add value to the products or services a company produces
Frequently called a value chain

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Supply Chain Life Cycle

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Electronic Data Interchange

EDI
One of the earliest uses of information technology for supply chain management The electronic exchange of business transaction documents between supply chain trading partners The almost complete automation of an ecommerce supply chain process Many transactions occur over the Internet, using secure virtual private networks

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Typical EDI Activities

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Roles and Activities of SCM in Business

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Planning & Execution Functions of SCM

Planning
Supply chain design Collaborative demand and supply planning

Execution
Materials management Collaborative manufacturing Collaborative fulfillment Supply chain event management Supply chain performance management
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Benefits and Challenges of SCM

Key Benefits
Faster, more accurate order processing Reductions in inventory levels Quicker times to market Lower transaction and materials costs Strategic relationships with supplier

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Goals and Objectives of SCM

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Benefits and Challenges of SCM

Key Challenges
Lack of demand planning knowledge, tools, and guidelines Inaccurate data provided by other information systems Lack of collaboration among marketing, production, and inventory management SCM tools are immature, incomplete, and hard to implement

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Trends in SCM

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Case 4: Consequences of ERP Failure

The goal Agilent Technologies Inc. specializes in measurement and technology
Its goal is to enable customers to speed their time to market Achieve volume production Obtain high-quality precision manufacturing

Consequences of a new ERP system

One year to stabilize system $105 million in lost revenue $70 million in lost profits
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Case 4: Consequences of ERP Failure

Lessons Learned
Disruptions can be more extensive than expected Enterprise resource planning is very complex ERP implementations are more than software People, process, policies, the companys culture should all be taken into consideration

According to Enterprise Applications Consulting

99 percent of rollout fiascoes are caused by managements inability to spec requirements, and the implementers inability to implement specs
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Case 4: Consequences of ERP Failure

Russ Berrie and Company
First ERP implementation attempt took three years and cost $10.3 million Litigation is pending between Russ Berrie and SAP

Second attempt
Uses new applications Is being implement department by department Uses stand-alone systems

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Case Study Questions

What are the main reasons companies experience failures in implementing ERP systems? What are several key things companies should do to avoid ERP systems failures? Why do you think ERP system in particular are often cited as examples of failures in IT systems development, implementation, or management?

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