McGraw-Hill/Irwin
Copyright © 2008, The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
8
Enterprise Business Systems
McGraw-Hill/Irwin
Copyright © 2008, The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
• Identify and give examples to illustrate the
following aspects of customer relationship,
enterprise research, and supply chain
management systems
• Business processes supported
• Customer and business value provided
• Potential challenges and trends
1-3
Customer Relationship Management
• A customer-centric focus
• Customer relationships have become a company’s
most valued asset
• Every company’s strategy should be to
find and retain the most profitable
customers possible
1-4
Case 1: Business Benefits of CRM
• Forex Capital Markets trades $20 billion
worth of currency per month
• 12,000 clients in 70 countries
• Tracking sales leads and prospects
• Began with Excel spreadsheets
• Switched to Access database
• Volume forced move to CRM system
• Access controlled through data security
and information sharing privileges
1-5
Case 1: Business Benefits of CRM
• Wyse Technology
• World leader in thin-client computing
• Revenues in excess of $180 million
• Doubled sales within 12 months of installing
CRM system
• No additional staff needed
1-6
Case Study Questions
• Why can’t Microsoft Excel spreadsheets and
Access database software handle the customer
relationship needs of companies like FXCM?
• What functions do CRM systems like Salesforce
provide to a company that these software
packages do not?
• What business benefits has the Salesforce
CRM system provided to FXCM?
• To Wyse Technology?
1-7
Case Study Questions
• Salesforce.com is an example of an ASP
(application service provider), which was
discussed in Chapter 4.
• What benefits do you see in this case for that
method of providing a CRM system to a company
versus installing a CRM software package?
• What disadvantages might arise?
• Which method would you prefer?
1-8
What is CRM?
• Managing the full range of the customer
relationship involves
• Providing customer-facing employees with a
single, complete view of every customer at
every touch point and across all channels
• Providing the customer with a single, complete
view of the company and its extended channels
• CRM uses IT to create a cross-functional
enterprise system that integrates and automates
many of the customer-serving processes
1-9
Application Clusters in CRM
1-10
Contact and Account Management
• CRM helps sales, marketing, and service
professionals capture and track relevant
data about
• Every past and planned contact with prospects
and customers
• Other business and life cycle events of customers
• Data are captured through customer touchpoints
• Telephone, fax, e-mail
• Websites, retail stores, kiosks
• Personal contact
1-11
Sales
• A CRM system provides sales reps with the
tools and data resources they need to
• Support and manage their sales activities
• Optimize cross- and up-selling
• CRM also provides the means to check on a
customer’s account status and history before
scheduling a sales call
1-12
Marketing and Fulfillment
• CRM systems help with direct marketing
campaigns by automatic such tasks as
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Qualifying leads for targeted marketing
Scheduling and tracking mailings
Capturing and managing responses
Analyzing the business value of the campaign
Fulfilling responses and requests
1-13
Customer Service and Support
• A CRM system gives service reps real-time
access to the same database used by sales
and marketing
• Requests for service are created, assigned,
and managed
• Call center software routes calls to agents
• Help desk software provides service data
and suggestions for solving problems
• Web-based self-service enables customers
to access personalized support information
1-14
Retention and Loyalty Programs
• It costs 6 times more to sell to a new customer
• An unhappy customer will tell 8-10 others
• Boosting customer retention by 5 percent can
boost profits by 85 percent
• The odds of selling to an existing customer are
50 percent; a new one 15 percent
• About 70 percent of customers will do business
with the company again if a problem is quickly
taken care of
1-15
Retention and Loyalty Programs
• Enhancing and optimizing customer retention
and loyalty is a primary objective of CRM
• Identify, reward, and market to the most loyal
and profitable customers
• Evaluate targeted marketing and relationship
programs
1-16
The Three Phases of CRM
1-17
Benefits of CRM
• Benefits of CRM
• Identify and target the best customers
• Real-time customization and personalization
of products and services
• Track when and how a customer contacts
the company
• Provide a consistent customer experience
• Provide superior service and support across
all customer contact points
1-18
CRM Failures
• Business benefits of CRM are not guaranteed
• 50 percent of CRM projects did not produce
promised results
• 20 percent damaged customer relationships
• Reasons for failure
• Lack of understanding and preparation
• Not solving business process problems first
• No participation on part of business stakeholders
involved
1-19
Trends in CRM
• Operational CRM
• Supports customer interaction with greater
convenience through a variety of channels
• Synchronizes customer interactions consistently
across all channels
• Makes the company easier to do business with
1-20
Trends in CRM
• Analytical CRM
• Extracts in-depth customer history, preferences,
and profitability from databases
• Allows prediction of customer value
and behavior
• Allows forecast of demand
• Helps tailor information and offers to
customer needs
1-21
Trends in CRM
• Collaborative CRM
• Easy collaboration with customers,
suppliers, and partners
• Improves efficiency and integration
throughout supply chain
• Greater responsiveness to customer needs through
outside sourcing of products
and services
1-22
Trends in CRM
• Portal-based CRM
• Provides users with tools and information
that fit their needs
• Empowers employees to respond to
customer demands more quickly
• Helps reps become truly customer-faced
• Provides instant access to all internal and
external customer information
1-23
ERP: The Business Backbone
• ERP is a cross-functional enterprise backbone
that integrates and automates processes within
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Manufacturing
Logistics
Distribution
Accounting
Finance
Human resources
1-24
Case 2: Business Value of ERP
• Autosystems produces headlamps for
major automobile manufacturers
• Until a few years ago, the manufacturing
process was managed with paper documents
• An ERP system was installed, but did not
extend to the shop floor
• Significant research was done before
deciding to add the shop floor reporting module
1-25
Case 2: Business Value of ERP
• Installing PCs and ERP software on the shop
floor allows Autosystems to
• Enter timely, accurate information
• Plan more efficiently
• Make production changes in order to avoid
labor or scrap problems
• Discuss these issues with employees while they
are still current and meaningful
1-26
Case Study Questions
• Why did Autosystems decide to install the
ActivEntry system?
• Why did they feel it necessary to integrate
it with their TRANS4M ERP system?
• Which three business benefits of the use of
ActivEntry provided the most business value?
• What changes are already being planned to
improve the use of ActivEntry?
• What other improvements should the
company consider?
1-27
What is ERP?
• Enterprise resource planning is a crossfunctional enterprise system
• An integrated suite of software modules
• Supports basic internal business processes
• Facilitates business, supplier, and customer
information flows
1-28
ERP Application Components
1-29
ERP Process and Information Flows
1-30
Benefits and Challenges of ERP
• ERP Business Benefits
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•
•
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Quality and efficiency
Decreased costs
Decision support
Enterprise agility
• ERP Costs
• Risks and costs are considerable
• Hardware and software are a small part
of total costs
• Failure can cripple or kill a business
1-31
Costs of Implementing a New ERP
1-32
Causes of ERP Failures
• Most common causes of ERP failure
• Under-estimating the complexity of planning,
development, training
• Failure to involve affected employees in
planning and development
• Trying to do too much too fast
• Insufficient training
• Insufficient data conversion and testing
• Over-reliance on ERP vendor or consultants
1-33
Trends in ERP
1-34
Supply Chain Management (SCM)
• Fundamentally, supply chain management
helps a company
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Get the right products
To the right place
At the right time
In the proper quantity
At an acceptable cost
1-35
Goals of SCM
• The goal of SCM is to efficiently
• Forecast demand
• Control inventory
• Enhance relationships with customers, suppliers,
distributors, and others
• Receive feedback on the status of every link in
the supply chain
1-36
Case 3: Applying Lean Logistics to SCM
• The Tesco supermarket chain is a pioneer in
retailing
• Used SCM to overcome disadvantage of
weak supplier leverage and expensive logistics
• Changed product distribution methods to
reduce labor costs and inventory levels
• Got suppliers to ship in smaller quantities,
preconfigured for sales display
• Reduced total product “touches” from 150 to 50
• Reduced throughput time from 20 days to 5
1-37
Case Study Questions
• What key insights of Tesco’s SCM direction
Graham Booth helped revolutionize Tesco’s
supply chain and range of retail store formats?
• Can these insights be applied to any kind of retail
business?
• How did Dan Jones and the Cardiff Business
School of Wales demonstrate the inefficiencies
of the Tesco and Britvic supply chains?
• Can this methodology be applied to the supply
chain of any kind of business?
1-38
Case Study Questions
• What are the major business and competitive
benefits gained by Tesco as the result of its
supply chain initiatives?
• Can other retail chains and retail stores
achieve some or all of the same results?
• Defend your position with examples of
actual retail chains and stores you know.
1-39
What is a Supply Chain?
• The interrelationships
• With suppliers, customers, distributors, and
other businesses
• Needed to design, build, and sell a product
• Each supply chain process should add value to
the products or services a company produces
• Frequently called a value chain
1-40
Supply Chain Life Cycle
1-41
Electronic Data Interchange
• EDI
• One of the earliest uses of information technology
for supply chain management
• The electronic exchange of business transaction
documents between supply chain trading partners
• The almost complete automation of an ecommerce supply chain process
• Many transactions occur over the Internet, using
secure virtual private networks
1-42
Typical EDI Activities
1-43
Roles and Activities of SCM in Business
1-44
Planning & Execution Functions of SCM
• Planning
• Supply chain design
• Collaborative demand and supply planning
• Execution
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Materials management
Collaborative manufacturing
Collaborative fulfillment
Supply chain event management
Supply chain performance management
1-45
Benefits and Challenges of SCM
• Key Benefits
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Faster, more accurate order processing
Reductions in inventory levels
Quicker times to market
Lower transaction and materials costs
Strategic relationships with supplier
1-46
Goals and Objectives of SCM
1-47
Benefits and Challenges of SCM
• Key Challenges
• Lack of demand planning knowledge, tools,
and guidelines
• Inaccurate data provided by other information
systems
• Lack of collaboration among marketing,
production, and inventory management
• SCM tools are immature, incomplete, and
hard to implement
1-48
Trends in SCM
1-49
Case 4: Consequences of ERP Failure
• The goal Agilent Technologies Inc. specializes in
measurement and technology
• Its goal is to enable customers to speed
their time to market
• Achieve volume production
• Obtain high-quality precision manufacturing
• Consequences of a new ERP system
• One year to stabilize system
• $105 million in lost revenue
• $70 million in lost profits
1-50
Case 4: Consequences of ERP Failure
• Lessons Learned
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Disruptions can be more extensive than expected
Enterprise resource planning is very complex
ERP implementations are more than software
People, process, policies, the company’s culture
should all be taken into consideration
• According to Enterprise Applications Consulting
• 99 percent of rollout fiascoes are caused by
management’s inability to spec requirements, and
the implementer’s inability to implement specs
1-51
Case 4: Consequences of ERP Failure
• Russ Berrie and Company
• First ERP implementation attempt took
three years and cost $10.3 million
• Litigation is pending between Russ Berrie
and SAP
• Second attempt
• Uses new applications
• Is being implement department by department
• Uses stand-alone systems
1-52
Case Study Questions
• What are the main reasons companies experience
failures in implementing ERP systems?
• What are several key things companies should
do to avoid ERP systems failures?
• Why do you think ERP system in particular are
often cited as examples of failures in IT systems
development, implementation, or management?
1-53