Chapter 7 Electronic Business Systems Mc Graw-Hill Irwin

Learning Objectives 1. Identify the following cross-functional enterprise systems, and give examples of how they can provide significant business value to a company: a. b. c. d. e. f. Enterprise resource planning Customer relationship management Supply chain management Enterprise application integration Transaction processing systems Enterprise collaboration systems 7 - 2

Learning Objectives 2. Give examples of how Internet and other information technologies support business processes within the business functions of accounting, finance, human resource management, marketing, and production and operations management. 3. Understand the need for enterprise application integration to improve support of business interactions across multiple e-business applications. 7 - 3

Cross-functional Systems • Cross the boundaries of traditional business functions • In order to reengineer and improve vital business processes all across the enterprise 7 - 4

Enterprise Application Architecture Source: Adapted from Mohan Sawhney and Jeff Zabin, Seven Steps to Nirvana: Strategic Insights into e-Business Transformation (New York: Mc. Graw-Hill, 2001), p. 175. 7 - 5

Customer Relationship Management (CRM) • CRM uses technology to – Create a cross-functional enterprise system – That integrates and automates many of the processes in sales, marketing and customer service that interact with customers – Create a framework of web-enabled software and databases that integrate these processes with the rest of the company’s processes 7 - 6

CRM Applications Clusters 7 - 7

CRM applications • Contract and Account Management – Helps sales, marketing and service professionals – Capture and track data about past and planned contacts with customers and prospects • Sales – Provides sales reps with software tools and data they need to support and manage sales activities – Cross-selling is trying to sell a customer of one product with a related product – Up-selling is trying to sell customer a better product than they are currently seeking 7 - 8

CRM applications • Marketing and Fulfillment – Help marketing professionals accomplish direct marketing campaigns by tasks such as – Qualifying leads for targeted marketing and scheduling and tracking direct marketing mailings 7 - 9

CRM applications • Customer Service and Support – Provides sales reps with software tools and database access to customer database shared by sales and marketing professions – Helps create, assign and manage requests for service – Call center software routes calls to customer support agents based upon their skills and type of call – Help desk software provides relevant service data and suggestions for resolving problems for customer service reps helping customers with problems 7 - 10

CRM applications • Retention and Loyalty Programs – Try to help a company identify, reward, and market to their most loyal and profitable customers – Data mining tools and analytical software – Customer data warehouse 7 - 11

CRM supports customer life cycle 7 - 12

CRM benefits • Identify and target best customers • Real-time customization and personalization of products and services • Track when a customer contacts a company • Provide consistent customer experience and superior service and support 7 - 13

Reasons for CRM failures • Lack of understanding and preparation • Rely on application to solve a problem without first changing the business processes • Business stakeholders not participating and not prepared 7 - 14

Enterprise Resource Planning (ERP) • Cross-functional enterprise system – with an integrated suite of software modules – that support the basic internal business processes of a company 7 - 15

ERP application components 7 - 16

Business benefits of ERP • Quality and efficiency • Decreased costs • Decision support • Enterprise agility 7 - 17

Costs of implementing a new ERP 7 - 18

Causes of ERP failure • Underestimating the complexity of planning, development and training • Failure to involve affected employees in planning and development • Trying to do too much too fast • Insufficient training in new work tasks • Failure to do enough data conversion and testing • Over reliance on ERP vendor or consulting companies 7 - 19

Supply Chain Management (SCM) • A cross-functional interenterprise system • To help support and manage the links between a company’s key business processes • And those of its suppliers, customers and business partners 7 - 20

SCM goal • Fast, efficient, low-cost network of business relationships or supply chain to get a company’s products from concept to market • A supply chain: – Interrelationships with suppliers, customers, distributors, and other businesses that are needed to design, build and sell a product 7 - 21

SCM 7 - 22

Electronic Data Interchange (EDI) • EDI: – The electronic exchange of business transactions – Over the Internet and other networks – Between supply chain trading partners 7 - 23

EDI Examples 7 - 24

Role of SCM 7 - 25

Goals and Objectives of SCM 7 - 26

Causes of problems in SCM • Lack of proper demand-planning knowledge, tools and guidelines • Inaccurate or overoptimistic demand forecasts • Inaccurate production, inventory, and other data • Lack of adequate collaboration within the company and between partners • SCM software considered immature, incomplete and hard to implement 7 - 27

Enterprise Application Integration (EAI) • EAI connects cross-functional systems • Serves as middleware to • Provide data conversion • Communication between systems • Access to system interfaces 7 - 28

How EAI works 7 - 29

Enterprise Collaboration Systems (ECS) • ECS – Cross-functional IS that enhance communication, coordination and collaboration among the members of business teams and workgroups 7 - 30

ECS Goals • Communicate: share information with each other • Coordinate: coordinate individual work efforts and use of resources with each other • Collaborate: work together cooperatively on joint projects and assignments 7 - 31

ECS Tools 7 - 32

Functional Business Systems • A variety of information systems (transaction processing, management information systems, decision support, etc. ) • That support the business functions of – Accounting, finance, marketing, operations management and human resource management 7 - 33

Examples of functional information systems 7 - 34

Marketing Information Systems 7 - 35

Interactive marketing • Interactive marketing: – A customer-focused marketing process – Using the Internet, intranets, and extranets – To establish two-transactions – Between a company and its customers or potential customers • Goal: – to profitably attract and keep customers – who will become partners with the business – in creating, purchasing and improving products and services 7 - 36

Targeted Marketing • An advertising and promotion management concept that includes five targeting components 7 - 37

Targeted Marketing Components • Community – customize advertising to appeal to people of specific virtual communities • Content – advertising placed on a variety of selected websites aimed at a specific audience • Context – advertising placed on web pages that are relevant to the content of a product or service • Demographic/Psychographic – web marketing efforts aimed at specific types or classes or people • Online Behavior – promotion efforts tailored to each visit to a site by an individual, e. g. , using cookies files 7 - 38

Sales Force Automation • Outfit sales force with notebook computers, web browsers and sales contract management software • Connect them to marketing websites and company intranet • Goal: – Increase personal productivity – Speeds up capture and analysis of sales data from the field to marketing managers – Gain strategic advantage 7 - 39

Manufacturing Information Systems • Support the production/operations function • Includes all activities concerned with planning and control of producing goods or services 7 - 40

Computer-Integrated Manufacturing 7 - 41

CIM Objectives • Simplify production processes, product designs, and factory organization as a vital foundation to automation and integration • Automate production processes and the business functions that support them with computers, machines, and robots • Integrate all production and support processes using computer networks, cross-functional business software, and other information technologies 7 - 42

CIM Systems • Computer-aided manufacturing (CAM) automate the production process • Manufacturing execution systems (MES) – performance monitoring information systems for factory floor operations • Process Control – control ongoing physical processes • Machine Control – controls the actions of machines 7 - 43

Human Resource Management (HRM) • Information systems designed to support – Planning to meet the personnel needs of the business – Development of employees to their full potential – Control of all personnel policies and programs 7 - 44

HRM Systems 7 - 45

HRM and the Internet • Recruiting employees using the corporate website and commercial recruiting services • Posting messages in selected Internet newsgroups • Communicating with job applicants via e-mail 7 - 46

HRM and Corporate Intranets • Process common HRM applications • Allow HRM department to provide around-theclock services • Disseminate valuable information faster than through previous company channels • Collect information from employees online • Allow managers and other employees to perform HRM tasks with little intervention by the HRM department • Training tool 7 - 47

Employee Self-Service (ESS) • Intranet applications that allow employees to – View benefits – Enter travel and expense reports – Verify employment and salary information – Update their personal information – Enter data that has a time constraint to it 7 - 48

Accounting Information Systems • Record and report the flow of funds through an organization • Produce financial statements • Forecasts of future conditions 7 - 49

Accounting Information Systems 7 - 50

Six essential Accounting Information Systems • Order Processing – Captures and processes customer orders and produces data for inventory control and accounts receivable • Inventory Control – Processes data reflecting changes in inventory and provides shipping and reorder information • Accounts Receivable – Records amounts owed by customers and produces customer invoices, monthly customer statements, and credit management reports 7 - 51

Six essential Accounting Information Systems • Accounts Payable – Records purchases from, amounts owed to, and payments to suppliers, and produces cash management reports • Payroll – Records employee work and compensation data and produces paychecks and other payroll documents and reports • General Ledger – Consolidates data from other accounting systems and produces the periodic financial statements and reports of the business 7 - 52

Financial Management Systems • Support business managers and professionals in decisions concerning – The financing of a business – The allocation and control of financial resources within a business 7 - 53

Financial Management System Examples 7 - 54

Case 1: Forex Capital Markets and Wyse Technology: The Business Benefits of CRM • International buying and selling of global currencies is the largest and most liquid market in the world. • Microsoft Excel & Access programs could not handle the increase in business volume and customer information could not be easily shared. • FXCM decide to implement CRM software from Salesforce. com to handle the complexities of their business. • CRM software enables sales and marketing professionals to increase sales revenue by providing more and better services to customers and prospects. 7 - 55

Case Study Questions 1. Why can’t 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? 2. What business benefits has the Salesforce CRM system provided to FXCM? To Wyse Technology? 7 - 56

Case Study Questions 3. Salesforce. com is an example of an ASP (application service provider), which we 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? Why? 7 - 57

Real World Internet Activity 1. The success of Salesforce. com hurt traditional software companies like Siebel Systems, which only offered CRM as a complex installed software solution. Siebel, since acquired by Oracle, responded with Siebel On. Demand, an ASP solution like Salesforce. Other companies jumped into the CRM/ASP market to compete with Salesforce. com. – Use the Internet to research these companies and discover how Salesforce is responding to this intense competition for customers in the CRM market. 7 - 58

Real World Group Activity 2. The CRM solutions in this case highlight how much information on customers and prospects is easily captured, integrated with other customer data, and accessible to company employees and even business partners. How are FXCM and Wyse securing this sensitive data? Is it enough? What else could be done to protect customer privacy and security? – Discuss how companies and their customers can benefit from CRM systems while still protecting customer privacy. 7 - 59

Case 2: Yahoo, Google, and Chrysler: How the Internet Is Changing Advertising and Marketing • Today companies are spending more money on online advertising. • With the increase in online advertising, Yahoo and Google have become the most highly prized media companies in the world. • Yahoo has led the way in persuading large companies to use online advertising instead of traditional media. • According to a survey, sixty-three percent said that online advertising was a brand building tool “equal to or better than” advertising on TV or in print. 7 - 60

Case Study Questions 1. Why are companies like Chrysler now looking more favorably at the Internet as a great medium for their advertising dollars? What has happened to change their view? 2. How do Google’s online ad revenue sources and strategy differ from Yahoo’s? Which online ad strategy is superior for attracting advertising from small companies? For attracting advertising from large companies? Defend your position. 7 - 61

Case Study Questions 3. If you were director of marketing communications at Chrysler, how would you distribute Chrysler’s advertising dollars among online and traditional TV and print media? Defend your position. 7 - 62

Real World Internet Activity 1. Google and Microsoft’s MSN realize that they must move beyond search advertising revenue to block Yahoo’s attempt to dominate the move of big advertisers to online advertising. Use the Internet to discover how the three rivals are faring in the battle for online advertising and the reasons for any changes you find. 7 - 63

Real World Group Activity 2. Online advertising can be viewed as an entertainment experience, as a helpful source of clues to find what you and other customers want, or as a bothersome intrusion into your online experience and right to privacy. – Discuss this issue. Attempt to formulate a joint position on these aspects of online advertising to present to the rest of the class. 7 - 64

Case 3: Tesco: Applying Lean Logistics to Supply Chain Management • Many companies are using lean logistics management to save money and Tesco is one example. • With lean logistics, companies can eliminate waste along with huge opportunities for savings while increasing the satisfaction of the end customer. • At Tesco, with lean logistics system, – the total throughput time, from the filling line at the supplier to the customer leaving the store with the cola, has declined from 20 days to 5 days. – The number of inventory stocking points has been reduced from five to two, and – the supplier’s distribution center for the items has disappeared. 7 - 65

Case Study Questions 1. What key insights of Tesco’s SCM director Graham Booth helped revolutionize Tesco’s supply chain and range of retail store formats? Can these insights be applied to any kind of retail business? Why or why not? 2. How did Dan Jones and his research group from 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? Why or why not? 7 - 66

Case Study Questions 3. 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. 7 - 67

Real World Internet Activity 1. Use the Internet to investigate Tesco’s present financial success and competitive position and what other retailers in Britain are doing to compete with Tesco. Then investigate if other retail chains or stores in the United States or any other country seem to be applying a supply chain management strategy similar to Tesco’s. 7 - 68

Real World Group Activity 2. Many retail chains and stores have loyalty cards similar to Tesco’s. Use the Internet to research the loyalty-card performance of these companies. – Discuss how these and other retail stores you know could improve their loyalty-card performance compared with Tesco’s stellar performance with its customers. 7 - 69