McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, All Rights Reserved

Chapter 3Chapter 3

Strategic Initiatives for Strategic Initiatives for Implementing Competitive Implementing Competitive

AdvantagesAdvantages

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Learning Outcomes

3.1 List and describe the four basic components of supply chain management

3.2 Explain customer relationship management systems and how they can help organizations understand their customers

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Learning Outcomes

3.3 Summarize the importance of enterprise resource planning systems

3.4 Identify how an organization can use business process reengineering to improve its business

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Strategic Initiatives

• Organizations can undertake high-profile strategic initiatives including:– Supply chain management (SCM)– Customer relationship management (CRM)– Business process reengineering (BPR)– Enterprise resource planning (ERP)

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Supply Chain Management

• Supply Chain Management (SCM) – involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability

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Supply Chain Management

• Four basic components of supply chain management include:

1. Supply chain strategy – strategy for managing all resources to meet customer demand

2. Supply chain partner – partners throughout the supply chain that deliver finished products, raw materials, and services.

3. Supply chain operation – schedule for production activities

4. Supply chain logistics – product delivery process

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Supply Chain Management

• Wal-Mart and Procter & Gamble (P&G) SCM

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Supply Chain Management

• Effective and efficient SCM systems can enable an organization to:– Decrease the power of its buyers– Increase its own supplier power– Increase switching costs to reduce the threat of

substitute products or services– Create entry barriers thereby reducing the threat

of new entrants– Increase efficiencies while seeking a competitive

advantage through cost leadership

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Supply Chain Management

• Effective and efficient SCM systems effect on Porter’s Five Forces

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Customer Relationship Management

• Customer relationship management (CRM) – involves managing all aspects of a customer’s relationship with an organization to increase customer loyalty and retention and an organization's profitability

• Many organizations, such as Charles Schwab and Kaiser Permanente, have obtained great success through the implementation of CRM systems

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Customer Relationship Management

• CRM is not just technology, but a strategy, process, and business goal that an organization must embrace on an enterprisewide level

• CRM can enable an organization to:– Identify types of customers– Design individual customer marketing campaigns – Treat each customer as an individual– Understand customer buying behaviors

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Customer Relationship Management

• CRM overview

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Business Process Reengineering

• Business process – a standardized set of activities that accomplish a specific task, such as processing a customer’s order

• Business process reengineering (BPR) – the analysis and redesign of workflow within and between enterprises– The purpose of BPR is to make all business

processes best-in-class

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Business Process Reengineering

• Reengineering the Corporation – book written by Michael Hammer and James Champy that recommends seven principles for BPR

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Finding Opportunity Using BPR

• A company can improve the way it travels the road by moving from foot to horse and then horse to car

• BPR looks at taking a different path, such as an airplane which ignore the road completely

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Finding Opportunity Using BPR

• Progressive Insurance Mobile Claims Process

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Finding Opportunity Using BPR

• Types of change an organization can achieve, along with the magnitudes of change and the potential business benefit

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Enterprise Resource Planning

• Enterprise resource planning (ERP) – integrates all departments and functions throughout an organization into a single IT system so that employees can make decisions by viewing enterprisewide information on all business operations

• Keyword in ERP is “enterprise”

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Enterprise Resource Planning

• Sample data from a sales database

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Enterprise Resource Planning

• Sample data from an accounting database

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Enterprise Resource Planning

• ERP systems collect data from across an organization and correlates the data generating an enterprisewide view

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OPENING CASE STUDY QUESTIONSApple – Merging Technology, Business, and

Entertainment1. Evaluate how Apple can gain business

intelligence through the implementation of a customer relationship management system

2. Create an argument against the following statement: “Apple should not invest any resources to build a supply chain management system

3. Why would a company like Apple invest in BPR?

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CHAPTER THREE CASEConsolidating Touchpoints for Saab

• Saab required a consolidated customer view among its three primary channels:– Dealer network– Customer assistance center– Lead management center

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Chapter Three Case Questions

1. Explain how implementing a CRM system enabled Saab to gain a competitive advantage

2. Estimate the potential impact to Saab’s business if it had not implemented a CRM system

3. What additional benefits could Saab receive from implementing a supply chain management system?

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Chapter Three Case Questions

4. Create a model of Saab’s potential supply chain

5. How is Saab’s CRM implementation going to influence its SCM practices?