BUSINESS DRIVEN
TECHNOLOGY
Chapter Three:
Strategic Initiatives
for Implementing
Competitive Advantages
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
3.3
Summarize the importance of enterprise resource
planning systems
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OPENING CASE
Trek: a leader in bicycle products and accessories
• 30% worldwide market by streamlining operations
• Through the implementation of several IT systems
• Ability to obtain key management information to
drive business decision in line with business goals
• Their 1,400 dealers enter orders, check availability,
view account receivable and credit summaries via
the web. Order increase 20 – 30 % per week
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CHAPTER THREE OVERVIEW
• Introduces three high-profile strategic initiatives:
– Supply chain management (SCM)
– Customer relationship management (CRM)
– 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:
– Supply chain strategy – strategy for managing all
resources to meet customer demand
– Supply chain partners – partners throughout the
supply chain that deliver finished products, raw
materials, and services.
– Supply chain operation – schedule for production
activities, testing, packaging, preparation for delivery
– Supply chain logistics – product delivery process
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Wal-Mart & Procter-Gamble
• Tremendous successful SCM system
• Link Wal-Mart’s distribution centers directly to P&G ’s
manufacturing centers
• Every purchase, the system sends a message directly to
factory to restock the product and alert when the product is
running low
• This on line system allows P&G to efficiently make and
deliver products without having to maintain large stock,
generate invoices and receives payment automatically
• So P&G can offer a discount price to Wal-Mart
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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
10/24
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
(brokers) and Kaiser Permanente (84,000 diabetic
patients), have obtained great success through the
implementation of CRM systems
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Charles Schwab
• Gain return on investment of their CRM in less than
two years.
• Developed by Siebel, allows brokerage firm to trace
each interaction with a customer or prospective
customer
• Provide services e.g. retirement planning
• Can classify: serious investors and non-serious one
to allocate time and resources to serious one
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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:
– Increase customer loyalty & retention, spending
– Identify types of customers
– Design individual customer marketing campaigns
– Treat each customer as an individual
– Understand customer buying and shopping behaviors
– Increase sales and greater profitability
13/24
CUSTOMER
RELATIONSHIP MANAGEMENT
• CRM overview
14/24
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 enterprisewide decisions by
viewing enterprisewide information on all business
operations
• Keyword in ERP is “enterprise”
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ENTERPRISE RESOURCE PLANNING
• Organizations typically operate by functional areas
or functional silos or independent areas
» Each functional area has it
own systems and communicates
with every other functional area.
• In fact functional areas are interdependent: e.g. sales
must rely on information from operation to understand inventory and be able to
place orders, calculate transportation costs, and gain insight into product
availability based on production schedules
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Functional Silos:
undertakes a specific core function
• Sales & Marketing: demand forecasting, sales forecasting, market
segmentation, advertising, campaigns and promotions, bids and
quotes, order processing, order management, customer relationship
management, and customer support
• Operation & Logistic: purchasing, supplying, receiving,
transportation, production, shipping, manufacturing and
maintenance, production planning, material management, order
entry and order processing, warehouse management, transportation
management, and customer service management
• Accounting & Finance: financial and cost accounting, planning,
budgeting, cash flow, tax compliance, general ledger, accounts
payable, treasury management, and cost control
• Human Resource: hiring, training, benefits, and payroll
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ENTERPRISE RESOURCE PLANNING
• ERP’s goal – every department or functional area work together
sharing common information and not be a “silo”
• This requires that all IT systems – including hardware,
software, information and people – be integrated with one another.
• The organization must maintain a consistent IT
infrastructure
– hardware, software, and telecommunications equipment that, when combined,
provide the underlying foundation to support the organization's goal
– The problem with maintaining a consistent IT infrastructure occurs when a
single department decides to implement a new system without taking into
consideration the other departments or overall organizational
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ENTERPRISE RESOURCE PLANNING
• Organizations use many integration tools to
integrate IT infrastructures including:
– Intranets – an internalized portion of the Internet,
protected from outside access, that allows an
organization to provide access to information and
application software to only its employees
» Intranets support information and application software sharing
across different IT infrastructures
– Enterprise information portals (EIPs) – an Internet
site owned and operated by an organization to support
its operations.
» EIPs often operate within an intranet and work in a fashion
similar to popular Internet search tools such as Google.
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ENTERPRISE RESOURCE PLANNING
20/24
ENTERPRISE RESOURCE PLANNING
• Large ERP vendors include
– SAP: One of the first vendors to develop a
comprehensive ERP system / Market Dominant
– PeopleSoft
– Oracle
• Most ERP solutions include SCM and CRM
components
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OPENING CASE STUDY QUESTIONS
How Levi’s Got Its Jeans into Wal-Mart
1.
Which of Porter’s Five Forces did Levi’s address through
the implementation of its updated supply chain
management system?
2.
Evaluate how Levi’s can gain business intelligence
through the implementation of a customer relationship
management system
3.
Create an argument against the following statement:
“Levi’s should not invest any resources to upgrade its
current supply chain management system”
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CHAPTER THREE CASE
Consolidating Touchpoints for Saab
• Saab required a consolidated customer view among its three
primary channels (touch points):
• Dealer network (220 dealers)
• Customer assistance center
• Lead management center
Each one has different database
which causes a number of problems
e.g. redundant contact, ineffective pitch
• Saab’s challenge is to complete with rivals who attract
customer through aggressive marketing campaign, reduced
prices, and inexpensive financing.
• Using Siebel Automotive, Saab received the following
benefits:
•
•
•
•
Direct marketing costs decreased by 5 %
Lead follow-up increased from 38% to 50%
Customer satisfaction increased from 69% to 75%
Gained a single view of its customers across multiple channels
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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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