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AB1401
Information Technology
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Enterprise Systems
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Agenda
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Understanding the key features of Enterprise Systems, and
The organizational benefits and challenges of using ES
The extension of ES across organizational boundaries:
Supply Chain Management Systems Customer Relationship Management System
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Enterprise Systems (ES)
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Suite of integrated softwaremodules with a common centraldatabase that cover the majorfunctions within an organization
Initially designed to automateinternal back-office bizprocesses=>externally orientedand capable of communicating withcustomers and suppliers
Major functional areas include: Manufacturing and production
Procurement and logistics Finance and accounting Sale and marketing Human Resources
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Key features of an ES
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Modules integrated by a central database
Embedded, standard processes (best practices)
Limited customizability through built-in parameters
Costly to customize
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Enterprise Systems: Modules
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ERP features a set of integrated
software modules and a central
database that enables data to be
shared by biz processes and
functional areas throughout the
enterprise
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Major ES Software Vendors
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Source:
http://whatiserp.net/erp-
report/erp-market-share-and-
vendor-evaluation-2011/
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Embedded Best Practices
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Enterprise systems (aka ERP systems) are built around
predefinedbusiness processes in each of the functional areas
Eg. the steps that organizations usually take to compute payroll
Some degree of variation is allowed by the Enterprise System
package software by having the organization select from a set ofparameters.
Eg. An organization can specify whether payroll is computed based
on hourly or daily rates, or weekly or monthly salaries.
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Embedded Best Practices
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What happens when the organizations requirements cannot be
accommodated within the ES parameters? Customization of the source code
Workarounds: additional steps get around the problem. Eg. downloading data to spreadsheets for further analysis
Customization is usually discouraged because
It is costly
It can introduce errors into the system
It makes it difficult to upgrade to future versions of the ES
Degrade system performance, compromising the info and process integration
When there are customers with similar customization needs, the softwarevendor may produce an industry or country-specific version
Eg. SAP has a local HR version that reflects Singapores unique CPFcontribution scheme
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The Benefits of ES
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SAP videoon benefits (http://www.youtube.com/watch?v=9_YY6z-_rsw&feature=related)
Integration enables
Capture of data once at point of origination
Reduced data capture effort and error reduction
Automatic triggering of downstream transactions
Eg. capture of order at point of sale, triggers scheduling of shipment,
update of inventory, sales accounts,.
Access to updated information
http://www.youtube.com/watch?v=9_YY6z-_rsw&feature=relatedhttp://www.youtube.com/watch?v=9_YY6z-_rsw&feature=related -
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The Benefits of ES
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MNCs use ES to promote the adoption of standard processes andstandard data definitions across their business units in multiplecountries.
Benefits: Increase efficiency due to integration, data capture at source
Standardization of processes throughout the enterprise (across differentbiz units), enabling One face to the customer. Global customers expect consistency when dealing with
the MNC, regardless of country
Scale economies through aggregation in certain functions such as global procurement inorder to get the best prices from suppliers
Reduction in cycle time (i.e. the total elapsed time from the beginning to the end of aprocess)
Allows optimization of the organizations global supply chain, as design, marketing,production, procurement, and logistics occur in different parts of the world
Provides headquarters management with timely and standardized
information (across countries) for better decision making
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Challenges of ES
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The adoption of standard processes1) Often requires significant change in the way employees work
2) The amount of training to use an ES can be substantial
These can contribute to user resistance to the system
3) Sometimes leads to inappropriate processes (eg. that do not meetthe industrys or countrys requirements), triggering inefficientworkarounds and/or lower
This triggers workarounds that undermine the hoped for benefits of the ES
In the worst cases, poorly managed implementation of ES can lead to
organizational losses Eg. Hersheys ES system led to losses during peak Halloween period
4) Increases dependence on the ES software vendor
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Extending ES Beyond the Organization
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Major ES vendors such as SAP and Oracle now offer modulesthat allow the organization to further integrate its operations
beyond its boundaries,
With suppliers: Supply Chain Management (SCM) systems
With customers: Customer Relationship Management (CRM)
systems
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Supply Chain Management (SCM)
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A supply chain comprises organizations and processes for Procuring raw materials Turning these into intermediate and finished products Distributing these to customers (often through distributors
and other intermediaries)
ES supply some integration of internal supply chain processesbut they are not designed to deal with external supply chainprocesses
The challenge in supply chain is managing the efficient flow of
goods and information so that materials and finished goods areavailable at the right place at the right time.
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Supply Chain Partners
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Information Systems and SCM
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Inefficiencies cut into a companys operating costs
Can waste up to 25% of operating costs.
Ideally, all parties in the supply chain want a just-in-timesituation,
Components arrive as needed, finished goods shipped after leavingassembly line
So that production is not halted, nor sales lost, and
Minimal inventory holding costs are incurred
This requires accurate forecasting of sales and production
However, uncertainties of shipment, quality, and customer demandprevail
Buffer stock is kept, i.e. safety stock
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Information Systems and SCM
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The bullwhip effect(http://www.youtube.com/watch?v=wLNdDSYqhNw) Where relatively small variations in demand get amplified as they
pass up the supply chain
The result is excess stockpiling of inventory to address uncertainty
about demand. SCM software can reduce the bullwhip effect by providing all
members of the supply chain with dynamic information about
Inventory levels
Sales and product forecasts
Shipments
http://www.youtube.com/watch?v=wLNdDSYqhNwhttp://www.youtube.com/watch?v=wLNdDSYqhNw -
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Supply Chain Management Systems
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Supply chain planning systems
Model existing supply chain
Demand planning (one of the most important and complex function, which
determines how much product a biz needs to make to satisfy customers demands)
Optimize sourcing, manufacturing plans
Establish inventory levels
Identifying transportation modes
Supply chain execution systems
Manage flow of products through distribution centers and warehouses to ensure
that products are delivered to the right locations in the most efficient manner
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Types of Supply Chains
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Sequential supply chains
Information and materials flow sequentially from company to company
Push-based model (aka. build-to-stock)
Schedules based on forecasts or best guesses of demand, and products are
pushed to customers
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Types of Supply Chains (cont)
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Pull-based model (aka. demand-driven or build-to-order) Actual customer orders trigger events in supply chain. Transactions to produce
and deliver only what customers have ordered move up the supply chain from
retailers to distributors to manufacturers and eventually to suppliers
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Concurrent supply chains
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Concurrent supply chains
Information flows in many directions simultaneously amongmembers of a supply chain network
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Global Supply Chains and the Internet
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The internet has made it easier for supply chain partners to
connect to each other to exchange information. Eg. Fords auto exchange
(http://www.youtube.com/watch?v=qyO9QSo0FjU&feature=related)
Changed information flow from sequential to concurrent
Supply chains today are global Eg. Three quarters of electronics components manufacture is done
in Asia, largely for markets in the West
The pervasiveness of glob al supply chains and the rise of the
internet has made concurrent supply chains more attractive andfeasible
http://www.youtube.com/watch?v=qyO9QSo0FjU&feature=relatedhttp://www.youtube.com/watch?v=qyO9QSo0FjU&feature=related -
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Customer Relationship Management (CRM)
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Challenges
How to know your customer in a personal way, when you are alarge corporation with thousands of customers.
Answers to questions such as Who are our most profitablecustomer? What do they want to buy? Who are potentialcustomers?
Business value of customer relationship management
Increased customer satisfaction
Reduced direct-marketing costs
More effective marketing
Lower costs for customer acquisition/retention
Increased sales revenue
Reduced churn rate (churn rate measures the number of customers whostop using or purchasing products or services from a company)
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CRM Systems
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Capture and integrate customer data from all over theorganization
Consolidate and analyze customer data
Distribute customer information to various systems and
customer touch points across enterprise
Provide single enterprise view of customers
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Customer Data Sources
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CRM captures and integrates customer data from all over the org,
consolidate and analyze the data, and distribute the results to varioussystems and customer touch points across the org. (Touch point: aka. contact point,a method to interact with customers, e.g. email, telephone )
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CRM Software: Capabilities
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Sales Force Automation
Provide salespeople (usually in the field)with customer information(including profile of past purchases), product information, sale quotegeneration
Increasingly accessible through mobile devices
Customer Service
To support call centers, helpdesks, customer support staff
Routes call to service representative, provides customer information,tracks resolution of problem
May include a web-based self service capability before routing call to
customer service representative Marketing
Tools for analyzing customer data, identifying customer segments to targetfor various promotions, for cross-selling
Data analytics (eg. use of OLAP, data mining on data warehouses)
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Operational & analytical CRM
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Operational CRM includes customer-facing app (e.g. tools forsales force automation, call center and customer service support,and marketing automation)
Analytical CRM includes app that analyze customer data generatedby operational CRM app to provide info for improving bizperformance
Identify buying patterns
Create segments for targeted marketing
Pinpoint profitable and unprofitable customers
Calculate customer lifetime value (CLTV), which is based on therelationship between the revenue produced by a specific customer,the expenses incurred in acquiring and servicing that customer, andthe expected life of the relationship
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CRM Software Capabilities
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CRM Systems
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nterprise application challenges
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Highly expensive to purchase and implement enterpriseapplications
Total cost may be 4 to 5 times the price of software
Requires fundamental changes
Technology changes Business processes changes
Organizational changes
Incurs switching costs, dependence on software vendors to
upgrade its product and maintain installation Requires data standardization, management, cleansing
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Next generation enterprise applications
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Enterprise solutions / suites:
Replacing stand-alone enterprise, CRM, SCM systems Make these applications more flexible, Web-enabled, integrated with other
systems, including mobile devices
Open-source and on-demand applications SaaS (much less popular, and not yet available from the major enterprise
vendors)
Salesforce.com and Oracle include some Web 2.0 capability to enable customersto identify new ideas
Service platform: Integrates multiple applications to deliver a seamlessexperience for all parties Order-to-cash process: a composite process that integrates data from individual
ES and legacy financial app
Portals: Integrate info from enterprise app and disparate in-house legacy systems,
presenting it to users through a Web interface
Increasingly, new services delivered through portals
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Next generation enterprise applications
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Extending ES to Mobiledevices
Examples:
SAPs mobile applications
Sybase s mobile CRM (seenext slide)
Mobile workforce
management
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