Chapter 8 Enterprise Business Systems Mc Graw-Hill Irwin Copyright

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 8 -2

Customer Relationship Management • A customer-centric focus – Customer relationships have become a company’s most valued asset – Every company’s strategy should be to find and retain the most profitable customers possible 8 -3

Case 1: Net. Suite Inc. , Berlin Packaging, Churchill Downs, and Others • CRM software enables sales and marketing professionals to increase sales revenue by providing more and better services to customers and prospects. • Many CRM implementations have failed because of the difficulty data migration from old disparate systems to new system. • CRM implementation is lot easier to do early in a company’s history than it is later. • Companies need to make sure data are in order before they launch any major CRM initiative. • Without accurate, complete, and comprehensive data, any CRM effort will be less than optimal 8 -4

Case Study Questions 1. What are the business benefits of CRM implementations for organizations such as Berlin Packaging and Churchill Downs? What other uses of CRM would you recommend to the latter? Provide several alternatives. 2. Do you agree with the idea that smaller organizations are better positioned to be more effective users of CRM than larger ones? Why or why not? Justify your answer. 3. One of the main issues noted in the case is the importance of “good” data for the success of CRM implementations. We discussed many of these in Chapter 5, when we compared the file processing and database 8 -5

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 8 -6

Application Clusters in CRM 8 -7

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 8 -8

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 customer’s account status and history before scheduling a sales call 8 -9

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 8 -10

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 8 -11

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 8 -12

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 8 -13

The Three Phases of CRM 8 -14

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 8 -15

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 8 -16

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 8 -17

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 8 -18

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 8 -19

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 8 -20

ERP: The Business Backbone • ERP is a cross-functional enterprise backbone that integrates and automates processes within – Manufacturing – Logistics – Distribution – Accounting – Finance – Human resources 8 -21

Case 2: IT Leaders, Vertex Distribution, and Prevention Partners • ERP systems have become the vital business software backbone to many companies that just cannot live without them anymore. • According to Gregor Bailar, former CIO of Capital One, the most exciting emerging technology for enterprises in the next three to five years is Open source ERP. • Many small to medium size companies are finding the licensing fee for commercial ERP systems to be very high and are looking for open source ERP systems. • Some of the companies are spending the money they are saving from the license fees on customizing the package as per their needs. 8 -22

Case Study Questions 1. The case highlights differences in adoption of open source ERP systems between small or medium and large companies. What are the main reasons behind these differences? Do you think it is only a matter of cost? Justify your answer. 2. Enterprise resource planning systems are clearly the backbone of the modern enterprise. How comfortable would you feel about recommending the adoption of an open-source package to perform these functions, and why? What kinds of resistance, if any, would you expect to find about your proposal? 8 -23

Case Study Questions 3. Do you agree with the rationale stated by some of the CIOs in this case that if ERP systems need to be customized anyway, starting with an open-source package may make more sense than with a commercial one? Why or why not? Justify your answer. 8 -24

What is ERP? • Enterprise resource planning is a cross-functional enterprise system – An integrated suite of software modules – Supports basic internal business processes – Facilitates business, supplier, and customer information flows 8 -25

ERP Application Components 8 -26

ERP Process and Information Flows 8 -27

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 a small part of total costs – Failure can cripple or kill a business 8 -28

Costs of Implementing a New ERP 8 -29

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 8 -30

Trends in ERP 8 -31

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 8 -32

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 8 -33

Case 3: Perdue Farms and Others • Every year even the best companies are challenged by the pressure placed on their supply chain during the holiday season. • According to Brian Tomlin “The holiday season is a difficult time for manufacturers and retailers because they’re making educated guesses and bets on what demand is going to be, and they’re not going to get it right every single time. ” • Delivering the right number of products to the right customers at the right time has become very important for businesses and they are turning to forecasting and supply chain management tools. 8 -34

Case Study Questions 1. What are the key factors that determine the success or failure of supply chains during the holiday season? Which of these are or could be under the control of companies, and which are inherent in the end consumer business? Provide several examples. 2. Consider the increasing use of gift cards in lieu of gifts during the holiday season. What effects does this new practice introduce into demand planning and supply chain management? Consider the fact that virtually nothing is known about the recipients of gift cards. 8 -35

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 8 -36

Supply Chain Life Cycle 8 -37

Electronic Data Interchange • 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 8 -38

Typical EDI Activities 8 -39

Roles and Activities of SCM in Business 8 -40

Planning & Execution Functions of SCM • Planning – Supply chain design – Collaborative demand supply planning • Execution – Materials management – Collaborative manufacturing – Collaborative fulfillment – Supply chain event management – Supply chain performance management 8 -41

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 8 -42

Goals and Objectives of SCM 8 -43

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 8 -44

Trends in SCM 8 -45

Case 4: Autosystems: The Business Value of a Successful 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 8 -46

Case 4: Autosystems: The Business Value of a Successful 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 8 -47

Case Study Questions 1. Why did Autosystems decide to install the Activ. Entry system? Why did they feel it necessary to integrate it with their TRANS 4 M ERP system? 2. Which three business benefits of the use of Activ. Entry provided the most business value? 3. What changes are already being planned to improve the use of Activ. Entry? What other improvements should the company consider? 8 -48