Business firms invest heavily in information systems to achieve six strategic business objectives:
New products, services, and business models
Customer and supplier intimacy
Improved decision making
Information Systems and technology applications enable organizations to improve efficiency in operations resulting in higher profits.
Example: Wal-Mart's Retail Link system links suppliers to stores for superior replenishment system
Suppliers have complete access to inventory information and in turn are held accountable for KPIs
Vendor managed inventory system.
Power of Buyer -->Mercy of Buyer
Wal-Mart is the most efficient retailer in the industry and exemplifies operational excellence.
AKA "enterprise resource planning (ERP) systems"
Suite of integrated software modules and a common central database
Collects data from many divisions of firm for use in nearly all of firm's internal business activities
Information entered in one process (application component) is immediately available for other processes
Examples: Sage and Microsoft Dynamics
Built around thousands of predefined business processes that reflect best practices
Finance/accounting: General ledger, accounts payable, etc.
Human resources: Personnel administration, payroll, etc.
Manufacturing/production: Purchasing, shipping, etc.
Sales/marketing: Order processing, billing, sales planning, etc.
To implement, firms:
Select functions of system they wish to use
Map business processes to software processes
Use software's configuration tables for customizing
Process Mapping -> Microsoft Visio
Enterprise systems feature a set of integrated software modules and a central database that enables data to be shared by many different business processes and functional areas throughout the enterprise.
Sales/Mktg, Finn & Acct, HR, and Mfg. & Production are all stored on a centralized database.
Business value of enterprise systems (goal)
Increase operational efficiency
Provide firm wide information to support decision making
Enable rapid responses to customer requests for information or products
Include analytical tools to evaluate overall organizational performance
Network of organizations and processes for:
Procuring raw materials
Transforming them into products
Distributing the products
Upstream portion of supply chain
company's suppliers, the suppliers' suppliers, and the processes for managing relationships with them. (Supplier-->Supplier-->Supplier) Tier 1, 2, and 3
Downstream portion of supply chain
Organizations and processes for distributing and delivering products to final customers. (Distributor --> Retailer --> Customer)
Information and supply chain management
Inefficiencies cut into a company's operating costs
Can waste up to 25% of operating expenses
Components arrive as they are needed
Finished goods shipped after leaving assembly line
Buffer for lack of flexibility in supply chain
Information about product demand gets distorted as it passes from one entity to next across supply chain
Recurring problem in supply chain mgmt is the BULLWHIP EFFECT. Information about the demand for a product gets distorted as it passes from one entity to the next across the supply chain. A slight rise in demand for an item might cause different members in the supply chain- distributors, mfgs., suppliers, etc to stockpile inventory so each has enough "just in case." It can create excess inventory, production, warehousing, and shipping costs. It is tamed by reducing uncertainties about demand and supply when all members of the supply chain have accurate and up-to-date information.
Supply chain execution systems
Manage flow of products through distribution centers and warehouses. Track physical status of goods, the mgmt of materials, warehouse and transportation operations, and financial information involving all parties.
-Global supply chain issues?
-Internet helps companies manage many aspects of global supply chains such as sourcing, transportation, communications, international finance
Global supply chain issues
-Global supply chains typically span greater geographic distances and time differences
-More complex pricing issues (local taxes, transportation, etc.)
-Foreign government regulations
Push-based supply chain mgmt system (build-to-stock)
Production master schedules are based on forecasts or best guesses of demand for products, and products are "pushed" to customer. Many earlier models followed this.
Pull-based supply chain mgmt system (demand driven)
Because of the new flows of information made possible for the internet, this model is also known as a demand-driven or build-to-order model. Actual customer orders or purchases trigger events in the supply chain. Walmart's continuous replenishment system is an example of pull-based model.
Sequential supply chains
Concurrent supply chains
Information and materials flow sequentially from company to company
Information flows in many directions simultaneously among members of a supply chain network
Business value of SCM systems
Match supply to demand
Reduce inventory levels
Improve delivery service
Speed product time to market
Use assets more effectively
Reduced supply chain costs lead to increased profitability
Emerging internet driven supply chain
Emerging internet driven supply chain operates like a digital logistics nervous system. It provides multidirectional communication among firms, networks of firms, and e-marketplaces so that the entire networks of supply chain partners can immediately adjust inventories, orders, and capacities.
Customer relationship management (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
-Touch point (Contact Point): a method of interaction with the customer, such as telephone, email, customer service, etc.
-Provide single enterprise view of customers
Customer relationship management ( CRM )
CRM systems examine customers from a multifaceted perspective. These systems use a set of integrated applications to address all aspects of the customer relationship, including customer service, sales, and marketing.
CRM packages range from niche tools to large-scale enterprise applications
More comprehensive have modules for:
Partner relationship management (PRM)
Employee relationship management (ERM)
PRM: Integrating lead generation, pricing, promotions, order configurations, and availability
Tools to assess partners' performances
ERM: E.g. Setting objectives, employee performance management, performance-based compensation, employee training
CRM packages typically include tools for:
-Sales force automation (SFA)
E.g. sales prospect and contact information, and sales quote generation capabilities
E.g. assigning and managing customer service requests; Web-based self-service capabilities
E.g. capturing prospect and customer data, scheduling and tracking direct-marketing mailings or e-mail
How CRM Systems support marketing
CRM software provides a single point for users to manage and evaluate marketing campaigns across multiple channels, including email, direct mail, telephone, the Web, and wireless messages.
Customer-facing applications, such as tools for sales force automation, call center and customer service support, and marketing automation.
Includes applications that analyze customer data generated by operational CRM applications to provide information for improving business performance. Uses a customer data warehouse or analytic platform and tools to analyze customer data collected from the firm's customer touch points and from other sources.
Customer lifetime value (CLTV)
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 between the customer and company.
Business value of CRM
Increased customer satisfaction
Reduced direct-marketing costs
More effective marketing
Lower costs for customer acquisition/retention
Increased sales revenue
Reduce churn rate
Number of customers who stop using or purchasing products or services from a company.
Indicator of growth or decline of firm's customer base
Enterprise Applications: Challenges
Highly expensive to purchase and implement
Averages $3.5 million to over $12 million
Business process changes
Switching costs, dependence on software vendors
Data standardization, management, cleansing
Next generation enterprise applications
-Move is to make applications more flexible, Web-enabled, integrated with other systems
-Software to enable CRM, SCM, and enterprise systems work together and with suppliers and client systems
-Utilize Web services, SOA
-Open source & on-demand solutions
-Mobile compatible; Web 2.0 capabilities
-Complementary analytics products
Order-to-cash is a composite process that integrates data from individual ERP's and legacy financial applications. The process must be modeled and translated into a software system using application integration tools.
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