B INFORMATION TECHNOLOGY IS CISB 434 DECISION SUPPORT

B. INFORMATION TECHNOLOGY (IS) CISB 434: DECISION SUPPORT SYSTEMS Chapter 8: Enterprise Systems

LEARNING OBJECTIVES Discuss the concepts, definitions, and issues in Enterprise Information Systems (EIS) Discuss the capabilities and charac-teristics of (Webbased) Enterprise Information Portals 2

LEARNING OBJECTIVES Discuss the Supply-Chain Manage-ment (SCM) issues How EIS handle them Describe the following Material Requirements Planning (MRP) Enterprise Resource Planning (ERP) Supply Chain Management solutions 3

LEARNING OBJECTIVES Discuss Customer Relationship Management (CRM) concepts and issues Describe the emerging EIS of Product Lifecycle Management (PLM) Business Process Management (BPM) Describe how EIS improved frontline decision making 4

ENTERPRISE SYSTEMS Enterprise Information Systems (EIS)

ENTERPRISE INFORMATION SYSTEMS CONCEPTS & DEFINITIONS Systems that serve an entire enterprise, or at least two functional departments 6

ENTERPRISE INFORMATION SYSTEMS CONCEPTS & DEFINITIONS Consists one or more of: Business Intelligence (BI) Enterprise Resource Planning (ERP) Knowledge Management (KM) Supply-Chain Management (SCM) Business Process Management (BPM) Customer Relationship Management (CRM) 7

ENTERPRISE INFORMATION SYSTEMS ENTERPRISE INFORMATION PORTALS Corporate (enterprise) portals A system that integrates internal appli-cations with external applications such as database management, document management, and e-mail such as news services, customer Web sites A Web-based interface that gives users access to such applications 8

ENTERPRISE INFORMATION SYSTEMS ENTERPRISE INFORMATION PORTALS Enterprise (information) portal A corporate internal Web site on the company’s intranet that integrates many internal applica-tions with external ones Users access this type of portal via a standard Web browser 9

ENTERPRISE INFORMATION PORTALS BENEFITS & GOALS Groupware/collaboration technologies Presentation Personalization and customization Publishing and distribution Search Categorization Integration 10

ENTERPRISE INFORMATION PORTALS TYPES Suppliers’ and other partners’ portals Customers’ portals Employee portals Executives’ and supervisors’ portals Functional portals 11

ENTERPRISE INFORMATION PORTALS PORTAL APPLICATIONS Knowledge bases and learning tools Business process support Customer-facing (frontline) sales, marketing, and services Collaboration and project support Access to data from disparate corporate systems Personalized pages for various users 12

ENTERPRISE INFORMATION PORTALS PORTAL APPLICATIONS Effective search and indexing tools Security applications Best practices and lessons learned Directories and bulletin boards Identification of experts News Internet access 13

ENTERPRISE INFORMATION PORTALS INTEGRATION WITH ENTERPRISE SYSTEMS Organizations deploy portals to support strategic business initiatives Portals are used as tools for managing enterprise applications 14

ENTERPRISE INFORMATION PORTALS INTEGRATION WITH ENTERPRISE SYSTEMS Portals provide the much-needed ability to integrate and unify access to a firm’s applications back-end systems data sources content repositories 15

ORGANIZATIONAL DSS (ODSS) CONCEPTS & DEFINITIONS Organizational Decision Support Systems A networked DSS that serves people at several locations usually dealing with several decisions 16

ORGANIZATIONAL DSS (ODSS) CHARACTERISTICS Focus of an ODSS Organizational task, activity, or decision that affects several organizational units or corporate problems An ODSS cuts across organizational functions or hierarchical layers 17

ORGANIZATIONAL DSS (ODSS) CHARACTERISTICS An ODSS almost necessarily involves computer-based technologies, and communication technologies 18

PORTAL EXAMPLES Clarian Health Partners, an integrated health care company, developed an enterprise information portal for its three hospitals. The portal directly assists doctors, administrators, and consumers (see Ericson, 2002). Bank One Corp. developed a foreign currency exchange portal to let its customers examine exchange rates, execute trades of foreign currency, confirm settlement, make crosscurrency payments, and view account status (see Boyd, 2001). 19

ENTERPRISE SYSTEMS Supply-Chain Management (SCM)

TYPICAL SCM PROBLEMS-EXAMPLE difficulty of fulfilling orders received electronically for toys during the holiday season of 1999– 2000. During the last months of 1999, online toy retailers, including e. Toys, Amazon. com, and Toys‘ ’ Us, conducted a massive advertising campaign for Internet orders featuring $20 to $30 discount vouchers. Customer response was overwhelming, but some retailers had underestimated the demand as a result made incorrect ordering, inventory, and shipment decisions. they were unable to obtain the necessary toys from manufacturing plants and warehouses and deliver them to customers by Christmas Eve. Hershey’s Chocolates experienced a similar problem when the foundation of its ERP system for SCM was built on data of low 21 quality and accuracy. This almost bankrupted the firm. Hershey’s finally got it right through a new ERP implementation.

SUPPLY, VALUE CHAINS & DECISION SUPPORT Demand chain The flow of materials from an operation to the final demand includes order generation, taking, and fulfillment has been integrated into the supply chain 22

SUPPLY, VALUE CHAINS & DECISION SUPPORT Supply chain The flow of materials, information, money from the creation of raw materials to their final processing into a product, or service, and the delivery of the product, or service, to end users Includes all the organizational units, people, procedures that support the flow 23

SUPPLY, VALUE CHAINS & DECISION SUPPORT Supply-chain Management (SCM) The activities involved in managing supply chains, including planning, organizing, staffing, and control 24

SUPPLY, VALUE CHAINS & DECISION SUPPORT Benefits of SCM Modern SCM methods and software reduce uncertainty and risks of supply chain thereby positively affecting inventory levels cycle time, processes, and customer service which contribute to increased profitability and competitiveness In today’s competitive environment, efficient and effective supply chains are critical for the survival of organizations and are greatly dependent on the supporting information systems 25

SUPPLY, VALUE CHAINS & DECISION SUPPORT The components of the supply Upstream Suppliers e. g. manufacturers, assemblers, their suppliers 26

SUPPLY, VALUE CHAINS & DECISION SUPPORT The components of the supply Internal processes used in transforming the inputs from suppliers to outputs i. e. from the time materials enter an organiza-tion to the time the product(s) goes to distribu-tion outside the organization 27

SUPPLY, VALUE CHAINS & DECISION SUPPORT The components of the supply Downstream processes involved in delivering the product to the final customers 28

SUPPLY, VALUE CHAINS & DECISION SUPPORT 29

SUPPLY, VALUE CHAINS & DECISION SUPPORT 30

SUPPLY, VALUE CHAINS & DECISION SUPPORT Reverse logistics A flow of material or finished goods back to the source e. g. the return of defective products by customers 31

SUPPLY, VALUE CHAINS & DECISION SUPPORT Value Chain The actual steps an item follows as it moves along the supply chain describes how value is added when a product moves along the supply chain primary activities - e. g. , manufacturing, testing, storage add value directly secondary activities - e. g. , accounting, personnel, engineering - support the primary activities 32

SUPPLY, VALUE CHAINS & DECISION SUPPORT Value system In a firm’s value chain, the suppliers and other business partners and their supply chains 33

SUPPLY, VALUE CHAINS & DECISION SUPPORT Decision making and the supply chain To maximize the value added along the supply chain, it is necessary to make decisions and evaluate their potential impact SCM software is available for decision support for both primary and secondary activities, including optimization of manufacturing processes 34

SUPPLY, VALUE CHAINS & DECISION SUPPORT Decision making and the supply chain Special DSS/BA models can determine the costs and benefits of investing in IT in an attempt to create value along the supply chain 35

INVENTORY PROBLEMS ALONG THE SUPPLY CHAIN. Not enough Too much Wrong place, Wrong stage

SUPPLY-CHAIN PROBLEMS Problems along the supply chain stem mainly from Uncertainties (i. e uncertainty in demand, cost, technology forecast, unforeseen quality problems, delay delivery etc) the need to coordinate several activities internal units and business partners 37

SUPPLY-CHAIN PROBLEMS The major source of uncertainties demand forecast can be influenced by several factors, such as competition, prices, weather condi-tions and technological developments Access to accurate, real-time SCM data is critical for a system to succeed 38

SUPPLY-CHAIN SOLUTIONS Effective SCM requires that suppliers and customers work together in a coordinated manner by sharing and communicating the information necessary for decision making 39

SUPPLY-CHAIN SOLUTIONS Outsource rather than do-it-yourself during demand peaks Buy rather than make when appro-priate Configure optimal shipping plans Optimize purchasing Strategic partnerships with suppliers 40

SUPPLY-CHAIN SOLUTIONS Use just-in-time approach to pur-chasing so that suppliers quickly deliver small quantities whenever supplies, mate-rials, and parts are needed Reduce the number of intermediaries which usually add to supply-chain costs by using e-commerce for direct marketing 41

SUPPLY-CHAIN SOLUTIONS Reduce the lead time for buying and/or selling via automatic processing by using EDI or extranets Use fewer suppliers Improve supplier–buyer relationship 42

SUPPLY-CHAIN SOLUTIONS Manufacture only after orders are in Dell does with its custom-made com-puters Achieve accurate demand by wor-king closely with suppliers Apply true optimization and descrip-tive models to SCM 43

ENTERPRISE SYSTEMS MRP, ERP & SCM Systems

MRP, ERP & SCM SYSTEMS WHY INTEGRATE SYSTEMS? Tangible benefits Inventory reduction Personnel reduction Productivity improvement Order-management improvement Financial close-cycle improvement IT cost reduction 45

MRP, ERP & SCM SYSTEMS WHY INTEGRATE SYSTEMS? Tangible benefits Procurement-cost reduction Cash-management improvement Revenue and profit increase Transportation logistics-cost reduction Maintenance reduction, On-time delivery improvement 46

MRP, ERP & SCM SYSTEMS WHY INTEGRATE SYSTEMS? Intangible benefits Information visibility New and/or improved processes Customer responsiveness Standardization Flexibility Globalization Business performance 47

MATERIAL RESOURCE PLANNING MRP system Production plan for 100% capacity Inventory models Master production schedule Component lists 48

ENTERPRISE RESOURCE PLANNING ERP A process that integrates the infor-mation processing activities in an organization e. g. ordering, billing, production sche-duling, budgeting, staffing and among business partners Also known as Enterprise Resource Management (ERM) 49

ERP & SCM SYSTEMS ERP PROBLEMS & FAILURES ERP implementations report an un-usually high failure rate Jeopardizing the core operations of the implementing organization If the business processes do not match those modeled in the ERP one or two things must be done for the implementation to proceed 50

ERP & SCM SYSTEMS ERP PROBLEMS & FAILURES 1. 2. The actual business processes must be changed to match the model of the ERP system Additional, software - generally expensive must be written, to accommodate the differences 51

ERP & SCM SYSTEMS There are three primary reasons for the failure of all IT-related projects Poor planning or poor management Change in business goals during the project Lack of business management support 52

ERP & SCM SYSTEMS TEN CATEGORIES OF FAILURE 1. 2. 3. 4. 5. Poor leadership from top manage-ment Automating existing redundant or non-valueadded processes in the new system Unrealistic expectations Poor project management Inadequate user education and training 53

ERP & SCM SYSTEMS TEN CATEGORIES OF FAILURE 6. 7. 8. 9. Attempts to maintain the status quo A bad match between the ERP busi-ness model and actual business pro-cesses Use of inaccurate data Significant technical difficulties 54

ERP & SCM SYSTEMS TEN CATEGORIES OF FAILURE 10. ERP implementation is viewed as an IT project It is a set of business processes It evolves as the organization’s envi-ronment and business processes change 55

ERP & SCM SYSTEMS CRITICAL SUCCESS FACTORS Strong leadership provided by an executive management planning committee Implementation is viewed as an ongoing process Implementation teams are composed of the company’s best workers representing all functions 56

ERP & SCM SYSTEMS CRITICAL SUCCESS FACTORS Midlevel management is totally involved in the implementation Excellent project management tech-niques are used Old systems including informal sys-tems, are eliminated Proper measurements are imple-mented and closely monitored 57

ERP & SCM SYSTEMS CRITICAL SUCCESS FACTORS An aggressive but achievable imple-mentation schedule is established Successful change management techniques are applied Extensive education and training are provided 58

ENTERPRISE SYSTEMS Customer Relationship Management (CRM)

AN EXAMPLE OF A CRM APPLICATION FOR CAR MANUFACTURING BUSINESS maintained a database of which customers buy what type of product, and when, how often they make that purchase, what type of options they choose with their typical purchase, their colour preferences, whether the purchase needed financing etc. the manufacturer knows what marketing material to send out, what new products to promote to each customer, what preferences/options may swing the sale, whether a finance package should be included in the marketing material and when would be a good time to target each customer. They could use the information to build a relationship with the customer by reminding customers of service dates, product recalls, and maybe even to send the customer a birthday card. 60

AN EXAMPLE OF A CRM APPLICATION- AIRLINES Airlines pioneered customer retention programs and revenue management (sometimes called yield management) efforts to provide the right product to the right customer at the right price in the right manner, and they used technology to apply optimization methods to manage price, supply, and demand. Superior and personalized customer service to their best customers and special privileges (e. g. , free flights) have created brand loyalty. Hotels, rental car agencies, passenger railroads, and other travel industry firms have also adopted these methods. Now these methods are being adopted by the mainstream, including industry segments such as retail, insurance, and service. 61

CUSTOMER RELATIONSHIP MNGT. CRM An organizational initiative with the objective to properly deliver various services to cus-tomers ranging from Web-based call centers to loyalty programs e. g. rewarding frequent fliers 62

CRM SYSTEMS BENEFITS Lower cost of recruiting customers No need to recruit so many customers to maintain a steady business volume Reduced sales costs Higher customer profitability through segmentation and targeting of products and services Improved customer service 63

CRM SYSTEMS BENEFITS Increased customer retention and loyalty Evaluation of customer profitability leads to identifying the most profitable classes of customers and how to create new profitable classes Migration from a product focus to a customer focus 64

CRM SYSTEMS MAJOR SHORTCOMING CRM can make an organization seem impersonal Important to use CRM to capture customer knowledge to improve personal touch 65

CRM SYSTEMS STRATEGIES FOR CONTACT CENTERS Seven strategies 1. 2. 3. 4. 5. 6. 7. Make self-service an attractive option Conduct interactions in real-time Exploit the value of Voice over IP (Vo. IP) Integrate the Web into your contacts Keep your best agents on board Make extraordinary service ordinary Integrate everything 66

CRM SYSTEMS CUSTOMER VALUE & SERVICES Know who your customers are who your best customers are Stimulate what your customers buy know what they won’t buy understand why Time when and how your customers buy 67

CRM SYSTEMS CUSTOMER VALUE & SERVICES Learn customers’ preferences make them loyal Define the characteristics of your best /profitable customers Identify and model channels that best meet the needs of specific customer classes 68

CRM SYSTEMS CUSTOMER VALUE & SERVICES Predict what customers may or will buy in the future Retain your best customers for many years 69

CRM SYSTEMS TOOLS & TECHNOLOGIES BI tools Data are gathered in a Data Warehouse for a CRM effort Data mining and BA tools are used to analyze them to find relationships among customer behavior, demographics, products, and other factors CRM and Data mining CRM software 70

CRM SYSTEMS IMPLEMENTATION PROBLEMS & ISSUES Necessary preparations, including allocating enough time and money establishing realistic goals, and getting commitments from top managers Adapting business processes Retraining employees Finding the right system integrators 71

CRM SYSTEMS MEASURING CRM SUCCESS Should include the following areas Cost savings Internal process improvements service center efficiencies marketing campaign-expense reduction 72

CRM SYSTEMS MEASURING CRM SUCCESS Should include the following areas Revenue increases Salesperson increased order size customer profitability campaign response improvement 73

CRM SYSTEMS MEASURING CRM SUCCESS Should include the following areas Other benefits lifetime customer loyalty protecting existing investments customer satisfaction employee turnover 74

ENTERPRISE SYSTEMS Frontline Decision Making

FRONTLINE DECISION MAKING Frontline decision making Automating decision processes and pushing them down the organization to empower employees who are in contact with customers Includes evaluation matrices and ready-made DSS 76

FRONTLINE DECISION MAKING Empowering employees Providing employees with access to information needed for decision making with computer programs that generate recommended decisions for specific scenarios 77

FRONTLINE DECISION MAKING FRONTLINE SYSTEMS In frontline decision making every operational process has a corres-ponding decision process for evaluating choices and improving execution 78

FRONTLINE DECISION MAKING FRONTLINE SYSTEMS Frontline decision making automates simple decisions by predefining business rules and the events that trigger them Real-time frontline systems are under development as EIS capabilities moved to the operational level of the organization 79

LINKS http: //www. microsoft. com/bi/aboutbi/default. aspx http: //www. sap. com/solutions/businesssuite/erp/hcm/demos/index. epx 80

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