Management Information Systems
Chapter Nine
Achieving Operational Excellence and
Customer Intimacy: Enterprise Applications
Md. Golam Kibria
Lecturer, Southeast University
Enterprise Business Systems
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E-business means using the Internet, other
networks, and IT to support
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Electronic commerce
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Enterprise communications and collaboration
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Web-enabled business processes
E-commerce is the buying, selling, and
marketing of products, services, and
information over the Internet and other
networks
Transaction Processing Systems
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Cross-functional information systems that
process data resulting from the occurrence of
business transactions
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Transactions include sales, purchases, deposits,
withdrawals, refunds, and payments
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Online transaction processing (OLTP) is a
real-time system that captures transactions
immediately
The Transaction Processing Cycle
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Enterprise Resource Planning ( ERP)
Enterprise systems, also known as ERP, which are based on a
suite of integral software modules and a common database that
enables data to be shared by many different business processes
and functional areas throughout the enterprise.
Finance &
Sales & Marketing
Accounting
Database
Human Resources
Management
Production &
Manufacturing
Why ERP is Required?
Typical Business Process:
Inventory
HR
Finance &
Accounting
Shop Floor
Execution
Sales
Production
Planning
Customer
Vendors
Key Observations:
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A typical enterprise has many departments
These departments continuously communicate and
exchange data with each other
The success of any organization lies in effective
communication and data exchange within the
departments as well as associated third party such as
Vendors, Outsourcers, and customers.
Types of Enterprise Systems
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Decentralized Systems
Centralized Systems or ERP
Decentralized Systems
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Data is Maintained locally at the individual departments
Departments do not have access to data of other
departments
Problems with Decentralized Systems
Loss of Revenue and
Customer Dissatisfaction Labor cost increase
Inventory
HR
Data Maintenance cost
goes up
Finance &
Accounting
Shop Floor
Execution
Sales
Production
Planning
Customer
Vendors
Material and Inventory cost
increases
Loss of reputation and may
face legal action
Centralized Systems
Data is maintained at a central location
and is shared with various departments
 All departments have access in data of all
departments
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Benefits of Centralized Systems/ ERP
Labor
No data
costduplication
decreases
HR
Inventory
Finance &
Accounting
Sales
Customer
Shop Floor
Execution
Production
Planning
Increase revenue and customer delight
Payments on-time, no legal action
Vendors
Benefits of ERP
The Aberdeen Group found the following quantifiable benefits from ERP
implementation:
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22% reduction in operating cost
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20% reduction in administrative cost
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17% inventory reduction
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19% improvement in complete and on-time delivery
Source: Aberdeen Group, August 2010
After implementing ERP, Colgate-Palmolive reported significant improvement in
operations:
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Before ERP, it took 7 days for order acquisition and processing. Now it take
only four hours.
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Distribution planning and picking used to take up to four days; today, they
take 14 hours.
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Before ERP, on-time deliveries used to occur only 91.5% of the time. After
ERP, the figure is 97.5%
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After ERP, domestic inventories have dropped by one-third, and receivables
outstanding have dropped 22.4 days from 31.4.
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Working capital as a percentage of sales has plummeted to 6.3% from 11.3%.
Satisfaction Statistics
There is evidence that organizations are
satisfied with ERP. Based upon a sample of
117 firms in 17 countries, the conference
board reported that :
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34% of the organizations were satisfied
58% were somewhat satisfied
7% were somewhat unsatisfied
1% were unsatisfied
ERP Implementation Challenges
Huang et al. (2004) presented the top eight
challenges:
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Lack of management commitment
Inefficient training with users
Ineffective communication with users
Inadequate support from executive
Conflicts between department users
Attempt to build bridges to legacy application
Failure to redesign business processes
Misunderstanding of change requirements
Cost and Time of ERP Implementation
Option-1: In house Development
Cost: $240 Million
Time: Over 7-10 Years
Option-2: Partial ERP Implementation
Cost: $108 Million
Time: 2-3 Years
Option-3: Vanilla ERP Implementation
Cost: $150 Million
Time: Over 5 Years
Supply Chain Management Systems
What is Supply Chain
A firm’s supply chain is a network of organizations
and business processes for procuring raw materials,
transforming these materials into intermediate and
finished products, and distributing the finished
products to customer. It links suppliers,
manufacturing plants, distribution centers, retail
outlets, and customers.
Management Information Systems
Supply Chain Management Systems
NIKE’S SUPPLY CHAIN
This figure illustrates the major entities in Nike’s supply chain and the flow of information upstream and
downstream to coordinate the activities involved in buying, making, and moving a product. Shown here is
a simplified supply chain, with the upstream portion focusing only on the suppliers for sneakers and
sneaker soles.
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© Prentice Hall 2011
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Upstream supply chain:
 Firm’s suppliers, suppliers’ suppliers, processes for
managing relationships with them
Downstream supply chain:
 Organizations and processes responsible for delivering
products to customers
Information Systems and Supply Chain Management
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Inefficiencies cut into a company’s operating costs
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Just-in-time strategy:
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Components arrive as they are needed
Finished goods shipped after leaving assembly line
Safety stock
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Can waste up to 25% of operating expenses
Buffer for lack of flexibility in supply chain
Bullwhip effect
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Information about product demand gets distorted as it passes
from one entity to next across supply chain
How IS Facilitates SCM?
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Decide when and what to produce, store, and move
Rapidly communicate orders
Track the status of orders
Check inventory, transportation, and warehousing
costs
Track shipments
Plan production based actual customer demand
Rapidly communicate changes in product design
Customer relationship Management