e nterprise -w ide i nformation s ystems chapter 7

ENTERPRISE-WIDE INFORMATION SYSTEMS

Chapter 7

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SYSTEM CATEGORIES

Enterprise-wide Systems aka Enterprise Systems, are systems that allow companies to integrate information across operations on a company-wide basis

Interorganizational Systems (IOS)Systems that communicate across organizational boundaries whose goal it is to streamline information flow from one company to another

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THE VALUE CHAIN – INTERNALLY FOCUSED

Used to identify the flow of information through a set of business activities. It identifies two types of activities: primary and support.

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THE VALUE CHAIN - PRIMARY ACTIVITIES

Functional areas within an organization that process inputs and produce outputs. These activities may vary widely based on the unique requirements of a company’s industry

Functional areas within an organization that process inputs and produce outputs. These activities may vary widely based on the unique requirements of a company’s industry

Primary Activities include:• Inbound Logistics – receiving and stocking raw materials,

parts, products• Operations/Manufacturing – processing orders and raw

materials into finished product• Outbound Logistics – distribution of the finished product to

customers • Marketing and Sales – creating demand for the product (pre-

sales activities)• Customer Service – providing support for the product or

customer (post-sales activities)

Primary Activities include:• Inbound Logistics – receiving and stocking raw materials,

parts, products• Operations/Manufacturing – processing orders and raw

materials into finished product• Outbound Logistics – distribution of the finished product to

customers • Marketing and Sales – creating demand for the product (pre-

sales activities)• Customer Service – providing support for the product or

customer (post-sales activities)

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THE VALUE CHAIN - SUPPORT ACTIVITIES

Support activities are business activities that enable Primary Activities. These activities can be unique by industry but are generally more typical across industries.

Support activities are business activities that enable Primary Activities. These activities can be unique by industry but are generally more typical across industries.

Support Activities include:

• Infrastructure – hardware and software that must be implemented to support applications for primary activities

• Human Resources – employee management activities: hiring, interview scheduling, and benefits management

• Technology Development – the design and development of applications that support the organization

• Procurement – purchase of goods or services that are required as inputs to primary activities

Support Activities include:

• Infrastructure – hardware and software that must be implemented to support applications for primary activities

• Human Resources – employee management activities: hiring, interview scheduling, and benefits management

• Technology Development – the design and development of applications that support the organization

• Procurement – purchase of goods or services that are required as inputs to primary activities

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A VALUE SYSTEM – EXTERNALLY FOCUSED

• A connection of value chains across organizations• Allows the flow of information between organizations to

support business activities• Upstream flow is information received from another

organization• Downstream Flow is information sent to another organization

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OPTIONS FOR ENTERPRISE SYSTEMS – PACKAGED VS. CUSTOM

Packaged Applications “Off-the-Shelf” computer applications purchased from a vendor or the company that created the system (i.e. Quicken or MS Money for financial applications)

Packaged Applications “Off-the-Shelf” computer applications purchased from a vendor or the company that created the system (i.e. Quicken or MS Money for financial applications)

Packaged Key Characteristics• Best Use –

• Cost Effectiveness –

• Organizational Fit –

• Maintenance –

Packaged Key Characteristics• Best Use –

• Cost Effectiveness –

• Organizational Fit –

• Maintenance –

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OPTIONS FOR ENTERPRISE SYSTEMS – PACKAGED VS. CUSTOM

Custom Applications

“Custom-built” computer applications created by the organization or a third party (e.g. a consulting organization)

Custom Applications

“Custom-built” computer applications created by the organization or a third party (e.g. a consulting organization)

Custom Key Characteristics • Best Use –

• Cost Effectiveness –

• Organizational Fit –

• Maintenance –

Custom Key Characteristics • Best Use –

• Cost Effectiveness –

• Organizational Fit –

• Maintenance –

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ENTERPRISE SYSTEM EVOLUTION System TypesSystem Evolution

Standalone Systems

Integrated Systems(Intraorganizational)

Integrated Systems(Interorganizational)

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ENTERPRISE SYSTEMS - LEGACY SYSTEM EXAMPLE

Legacy (stand-alone) Systems – information is not readily shared between systems (i.e. Inbound Logistics inventory information shared with Operations)

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ENTERPRISE RESOURCE PLANNINGIntegrated Packages (Enterprise Resource Planning)Richly functional systems designed to support many organizational functions (e.g. accounting and finance)

Integrated Packages (Enterprise Resource Planning)Richly functional systems designed to support many organizational functions (e.g. accounting and finance)

ERP Key Characteristics• Internally focused systems designed to support the internal

operations of the organization• Highly integrated systems sharing a common data warehouse for

information sharing across functions, using real-time updates • Organizational fit may be less for individual departments but the

integrated sharing of information usually outweighs these issues• Usually packaged applications supported by the vendor utilizing a

common user interface• Customization is discouraged but these systems have the

flexibility to support other outside applications using the common data repository and interfaces

ERP Key Characteristics• Internally focused systems designed to support the internal

operations of the organization• Highly integrated systems sharing a common data warehouse for

information sharing across functions, using real-time updates • Organizational fit may be less for individual departments but the

integrated sharing of information usually outweighs these issues• Usually packaged applications supported by the vendor utilizing a

common user interface• Customization is discouraged but these systems have the

flexibility to support other outside applications using the common data repository and interfaces

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ENTERPRISE SYSTEMS – INTEGRATED SYSTEM EXAMPLE

Integrated Systems – Information is stored in a single data repository and can be accessed and updated by all functional systems (e.g. Operations)

In Tech We trust

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CHOOSING AN ERP SYSTEM - ISSUES

ERP Systems are: •Supplied by multiple vendors including SAP, Baan,

Oracle, etc., with each having their own unique features and structures

•Packaged systems that follow a one-size-fits-all strategy which means they may not support all functions as well as a custom system does

•Similar but are also different. They should be selected based on factors including control, business requirements, and best practices

ERP Systems are: •Supplied by multiple vendors including SAP, Baan,

Oracle, etc., with each having their own unique features and structures

•Packaged systems that follow a one-size-fits-all strategy which means they may not support all functions as well as a custom system does

•Similar but are also different. They should be selected based on factors including control, business requirements, and best practices

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CHOOSING AN ERP SYSTEM – SELECTION FACTORS

Control refers to where the power lies related to computing and decision support systems (centralized vs. decentralized) in selecting systems, developing policies and procedures, etc. (Who will decide?)

Control refers to where the power lies related to computing and decision support systems (centralized vs. decentralized) in selecting systems, developing policies and procedures, etc. (Who will decide?)

Business Requirements refers to the system’s capabilities and how they meet organizational needs through the use of software modules or groups of business functionality (What do you need?)

Business Requirements refers to the system’s capabilities and how they meet organizational needs through the use of software modules or groups of business functionality (What do you need?)

Best Practices refers to the degree to which the software incorporates industry standard methods for doing business which can cause a need for significant business processes reengineering (How much change is required?)

Best Practices refers to the degree to which the software incorporates industry standard methods for doing business which can cause a need for significant business processes reengineering (How much change is required?)

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ERP CAPABILITIES – SAP EXAMPLE

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ERP AND BUSINESS PROCESS REENGINEERING

Hammer and Champy, (“Reenginerring the Corporation”)“The radical redesign of an organization was sometimes necessary in order to lower costs and increase quality and information technology was the key enabler for that radical change.”

Hammer and Champy, (“Reenginerring the Corporation”)“The radical redesign of an organization was sometimes necessary in order to lower costs and increase quality and information technology was the key enabler for that radical change.”

Business Process Reengineering

A systematic, structured improvement approach by all or part of an organization whereby people critically examine, rethink, and redesign business processes in order to achieve dramatic improvements in one or more performance measures (e.g. quality, cycle time, cost)

Business Process Reengineering

A systematic, structured improvement approach by all or part of an organization whereby people critically examine, rethink, and redesign business processes in order to achieve dramatic improvements in one or more performance measures (e.g. quality, cycle time, cost)

EXAMPLE OF BPR

a retail service company, not a manufacturing company

new process, meat, beans, corn shells, lettuce, tomatoes and cheese for their products are prepared outside of the restaurant in central commissaries

greater quality control, better employee morale, fewer employee accidents and injuries (due to preparation task off-site), big savings and more time to focus on the customer business processes

from a $500 million regional company to a $3 billion national company

Taco Bell created the K-Minus program

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BUSINESS PROCESS REENGINEERING

Steps in Business Process Reengineering

• Develop a vision for the organization that specifies business objectives (e.g. reduced costs, shorter time to market, improved quality, etc.)

• Identify critical processes that are to be redesigned

• Understand and measure the existing processes as a baseline for future improvements

• Identify ways that information technology can be used to improve processes

• Design and implement a prototype of the new process(es)

Steps in Business Process Reengineering

• Develop a vision for the organization that specifies business objectives (e.g. reduced costs, shorter time to market, improved quality, etc.)

• Identify critical processes that are to be redesigned

• Understand and measure the existing processes as a baseline for future improvements

• Identify ways that information technology can be used to improve processes

• Design and implement a prototype of the new process(es)

Elle Mae Mortgage

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BPR TODAY – OBSERVATIONS AND RESEARCH

Large bodies of research are available on the role of ERP and BPR implementations. Some of this research has come to the following conclusions:

• Reengineering and related organizational issues are as important as the technical implementation issues

• Managers in many cases must choose between making the ERP system fit the organization or the organization fit the ERP system

• For an ERP system to help transform the organization and gain new competitive capabilities, a full organizational and operational change is required

• To be successful, manager must first transform the organization and then implement the ERP system

Large bodies of research are available on the role of ERP and BPR implementations. Some of this research has come to the following conclusions:

• Reengineering and related organizational issues are as important as the technical implementation issues

• Managers in many cases must choose between making the ERP system fit the organization or the organization fit the ERP system

• For an ERP system to help transform the organization and gain new competitive capabilities, a full organizational and operational change is required

• To be successful, manager must first transform the organization and then implement the ERP system

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ENTERPRISE SYSTEMS – INTEGRATED (INTERORGANIZATIONAL)

Integrated PackagesRichly functional systems designed to support externally focused functions Upstream – Supply Chain Management

Downstream – Customer Relationship Management)

Integrated PackagesRichly functional systems designed to support externally focused functions Upstream – Supply Chain Management

Downstream – Customer Relationship Management)

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CUSTOMER RELATIONSHIP MANAGEMENT

Objective Applications that help organizations attract new business and attract and encourage repeat business

Objective Applications that help organizations attract new business and attract and encourage repeat business

FunctionsThere are two primary functions in CRM systems:

• Sales – tools designed to assist in presales activities such as marketing and prospecting (e.g. Sales Force Automation)

• Service – tools that help with the post-sales aspects of the business (e.g. call center technology, analytics)

FunctionsThere are two primary functions in CRM systems:

• Sales – tools designed to assist in presales activities such as marketing and prospecting (e.g. Sales Force Automation)

• Service – tools that help with the post-sales aspects of the business (e.g. call center technology, analytics)

SourcesThere are two primary sources of CRM systems:

• CRM Software Vendors – Siebel, FirePond, Onyx, E.Piphany• ERP Vendors – SAP, Baan, Oracle, etc.

SourcesThere are two primary sources of CRM systems:

• CRM Software Vendors – Siebel, FirePond, Onyx, E.Piphany• ERP Vendors – SAP, Baan, Oracle, etc.

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SALES SUPPORT – SALES FORCE AUTOMATION (SFA)

Sales Force Automation provides salespeople and sales managers with computerized support tools to assist in daily routines

Sales Force Automation provides salespeople and sales managers with computerized support tools to assist in daily routines

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SUPPLY CHAIN MANAGEMENT

Objective Applications that accelerate product development and reduce cost associated with procuring raw materials, components, and services from its suppliers

• Supply Chain – the suppliers that an organization purchases from directly

• Supply Network – the suppliers that an organization purchases from directly and its suppliers

Objective Applications that accelerate product development and reduce cost associated with procuring raw materials, components, and services from its suppliers

• Supply Chain – the suppliers that an organization purchases from directly

• Supply Network – the suppliers that an organization purchases from directly and its suppliers

SourcesThere are two primary sources of SCM systems. These systems are built to tightly integrate with ERP systems

• SCM Software Vendors – Agile, Ariba, I2, Manugistics, Commerce One, etc.

• ERP Vendors – SAP, Baan, Oracle, etc

SourcesThere are two primary sources of SCM systems. These systems are built to tightly integrate with ERP systems

• SCM Software Vendors – Agile, Ariba, I2, Manugistics, Commerce One, etc.

• ERP Vendors – SAP, Baan, Oracle, etc

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SCM – EXAMPLE OF A SUPPLY NETWORKAmazon.com

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SCM APPLICATION FUNCTIONS

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SCM APPLICATION FUNCTIONS 2ND HALF

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SUPPLY CHAIN MANAGEMENT BENEFITS

Supply Chain Management applications can help organizations to gain competitive advantage and provide substantial payback in several ways by:

• Streamlining workflow and increasing employee productivity (i.e. efficiently managing business travel, time, and expenses by collaborating with suppliers in real time)

• Accelerating product development (i.e. enabled by the ability of organizations to swiftly react to market conditions)

• Streamlining cost and creating efficiencies across the supply network (i.e., supporting contract negotiation and measuring effectiveness of those agreements)

Supply Chain Management applications can help organizations to gain competitive advantage and provide substantial payback in several ways by:

• Streamlining workflow and increasing employee productivity (i.e. efficiently managing business travel, time, and expenses by collaborating with suppliers in real time)

• Accelerating product development (i.e. enabled by the ability of organizations to swiftly react to market conditions)

• Streamlining cost and creating efficiencies across the supply network (i.e., supporting contract negotiation and measuring effectiveness of those agreements)

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RECOMMENDATIONS FOR ENTERPRISE SYSTEM SUCCESS

Get Help from Outside ExpertsImplementation success is enabled by deep application experience and access to supporting tools and methods

Take a Multidisciplinary Approach to ImplementationsEnterprise systems span the entire organization and as such require input and participation from all functions

Thoroughly Train UsersTraining in organization, business process, and application functions is critical to success and must be reinforced

Secure Executive SponsorshipThe highest level support is required to obtain resources and make and support difficult reengineering decisions

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