Chapter 7
Enterprise-Wide
Information
Systems
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System Categories
Enterprise-wide Systems
aka Enterprise Systems, are systems that allow
companies to integrate information across
operations on a company-wide basis
Interorganizational Systems (IOS)
Systems that communicate across organizational
boundaries who’s goal is to streamline
information flow from one company to another
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Enterprise Systems – Within the Organization
Example – Order Process and Information Flow
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Interorganizational Systems – Across Organizations
Example – Order Process and Information Flow
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The Value Chain –Internally Focused
Used to identify the flow of information through a set of
business activities. It identifies two types of activities,
primary and support
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The Value Chain - Primary Activities
Functional areas within an organization that process
inputs and produce outputs. These activities may vary
widely based on the unique requirements of a
company’s industry
Primary Activities include:
• Inbound Logistics – receiving and stocking raw
materials, parts, products
• Operations/Manufacturing – processing orders and
raw materials into finished product
• Outbound Logistics – distribution of the finished
product to customers
• Marketing and Sales – creating demand for the product
(pre-sales activities)
• Customer Service – providing support for the product
or customer (post-sales activities)
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The Value Chain - Support Activities
Support activities are business activities that enable
Primary Activities These activities can be unique by
industry but are generally more typical across industries
Support Activities include:
• Infrastructure – hardware and software that must be
implemented to support applications for primary activities
• Human Resources – employee management activities:
hiring, interview scheduling, and benefits management
• Technology Development – the design and development
of applications that support the organization
• Procurement – purchase of goods or services that are
required as inputs to primary activities
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A Value System – Externally Focused
• A connection of value chains across organizations
• Allows the flow of information between organizations
to support business activities
• Upstream flow is information received from another
organization (i.e. from company A to Company B above)
• Downstream Flow is information sent to another
organization (i.e. from Company B to Company C above)
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Options for Enterprise Systems – Packaged vs. Custom
Packaged Applications
“Off the Shelf” computer applications purchased from a
vendor or the company that created the system (i.e.
Quicken or MS Money for financial applications)
Packaged Key Characteristics
• Best Use - standardized, repetitive tasks
• Cost Effectiveness – lower cost because vendors can
create once and then sell many copies to others
• Organizational Fit – may not be well suited for tasks
that are unique to a particular business or industry
• Maintenance – the vendor makes the changes and
then sends the updates to its customer on a periodic
basis. The customer does not control this schedule
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Options for Enterprise Systems – Packaged vs. Custom
Custom Applications
“Custom-built” computer applications created by the
organization or a third party (e.g. a consulting organization)
Custom Key Characteristics
• Best Use - unique business process to an organization
• Cost Effectiveness – much higher cost due to the onetime creation of the applications
• Organizational Fit – excellent as they are designed to fit
a specific business process
• Maintenance – all changes are created and implemented
by the organization using the application
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Enterprise System Evolution
System Evolution
System Types
Standalone Systems
Integrated Systems
(Intraorganizational)
Integrated Systems
(Interorganizational)
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Enterprise Systems – Stand-alone or Legacy
Stand Alone (Legacy) Systems
A single system or groups of systems, designed to each
support one or a few business functions (e.g. accounting
system or a manufacturing system, etc.)
Stand Alone (Legacy) Systems
• Little or no integration with other organizational
systems. If integration exists, it is usually in batch (i.e.
the accounting system gets updates from manufacturing
system once a day or week
• Organizational fit may be better than integrated
packages due to the focus on one function and that
they have been highly modified over time
• Customization and the age of these systems make
them difficult to support due to the complexity, use of
older or obscure languages, etc.
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Enterprise Systems - Legacy System Example
Legacy (stand-alone) Systems – information is not
readily shared between systems (i.e. Inbound Logistics
inventory information shared with Operations)
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Enterprise Resource Planning
Integrated Packages (Enterprise Resource Planning)
Richly functional systems designed to support many
organizational functions (e.g. accounting and finance)
ERP Key Characteristics
• Internally focused systems designed to support the internal
operations of the organization
• Highly integrated systems sharing a common data
warehouse for information sharing across functions, using
real-time updates
• Organizational fit may be less for individual departments
but the integrated sharing of information usually outweighs
these issues
• Usually packaged applications supported by the vendor
utilizing a common user interface
• Customization is discouraged but these systems have the
flexibility to support other outside applications using the
common data repository and interfaces
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Enterprise Systems – Integrated System Example
Integrated Systems – Information is stored in a
single data repository and can be accessed and
updated by all functional systems (e.g. Operations)
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Choosing an ERP System - Issues
ERP Systems are:
• Supplied by multiple vendors including SAP,
Baan, Oracle, etc., with each having their own
unique features and structures
• Packaged systems that are following a one sizefits all strategy which means they may not
support all functions as well as a custom system
• Similar but are also different. They should be
selected based on factors including control,
business requirements, and best practices
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Choosing an ERP System – Selection Factors
Control refers to where the power lies related to
computing and decision support systems (centralized vs.
decentralized) in selecting systems, developing policies
and procedures, etc. (who will decide?)
Business Requirements refers to the system’s
capabilities and how they meet organizational needs
through the use of software modules or groups of
business functionality (what do you need?)
Best Practices refers to the degree to which the
software incorporates industry standard methods
for doing business which can cause a need for
significant business processes reengineering
(how much change is required?)
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ERP Capabilities – SAP Example
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ERP and Business Process Reengineering
Business Process Reengineering
A systematic, structured improvement approach by
all or part of an organization whereby people critically
examine, rethink, and redesign business processes in
order to achieve dramatic improvements in one or more
performance measures (e.g. quality, cycle time, cost)
Hammer and Champy, (“Reenginerring the Corporation”)
“The radical redesign of an organization was sometimes
necessary in order to lower costs and increase quality
and that the information technology was the key enabler
for that radical change”
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Business Process Reengineering
Steps in Business Process Reengineering
• Develop a vision for the organization that specifies
business objectives (e.g. reduced costs, shortend time
to market, improved quality, etc.)
• Identify critical processes that are to be redesigned
• Understand and measure the existing processes as a
baseline for future improvements
• Identify ways that information technology can be used
to improve processes
• Design and implement a prototype of the new
process(es)
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BPR Today – Observations and Research
Many large failures exist in large scale Business Process
Reengineering implementations. To be successful and
organizations must have:
• Senior management support
• A shared organizational vision
• Realistic expectations of outcomes
• Participants empowered to reengineer
• The right people participating
• Sound management practices
• Appropriate funding
BPR failures can be tracked back to the lack of one
or more of these factors in implementation!
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BPR Today – Observations and Research
Large bodies of research are available on the role of BRP
and BPR implementations. Some of this research has
come to the following conclusions:
• Reengineering and related organizational issues are as
important as the technical implementation issues
(Kumar and Van Hellersberg, 2000; Markus and Tanis, 2000)
• Managers in many cases must choose between
making the ERP system fit the organization or the
organization fit the ERP system (Soh, Sia, Tay-Yoh, 2000)
• For an ERP system to help transform the organization
and gain new competitive capabilities, a full
organizational and operational change is required
(Willcocks and Sykes, 2000)
• In order to be successful, manager must first
transform the organization and then implement the
ERP system
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Enterprise Systems – Integrated (Interorganizational)
Integrated Packages
Richly functional systems designed to support externally
focused functions (Upstream – Supply Chain Management
and Downstream – Customer Relationship Management)
Integrated Packages
• Highly integrated with internal systems (ERP)
through the use of interfaces and specialty software
• Organizational fit for these systems is very high as
they are highly specific to the function they support
• These are usually packaged applications that are
supplied and supported by the ERP vendor or other
third party system integrators
• Customization or modifications are also discouraged
to minimize support cost but the applications are highly
tailorable with configuration options
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Customer Relationship Management
Objective
Applications that help organizations attract new business
and attract and encourage repeat business
Functions
There are two primary functions in CRM systems:
• Sales – tools designed to assist in presales activities
such as marketing and prospecting (e.g. Sales Force
Automation)
• Service – tools that help with the post-sales aspects of
the business (e.g. call center technology, analytics)
Sources
There are two primary sources of CRM systems:
• CRM Software Vendors – Siebel, FirePond, Onyx, E.Piphany
• ERP Vendors – SAP, Baan, Oracle, etc.
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Sales Support – Sales Force Automation (SFA)
Sales Force Automation provides salespeople and sales
managers with computerized support tools to assist in daily routines
Example: Siebel SFA displays multiple functions including: sales,
quota & forecast by sales person; messages; appointments
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Supply Chain Management
Objective
Applications that accelerate product development and
reduce cost associated with procuring raw materials,
components, and services from its suppliers
• Supply Chain – the suppliers that an organization
purchases from directly
• Supply Network – the suppliers that an organization
purchases from directly and its suppliers
Sources
There are two primary sources of SCM systems. These
systems are built to tightly integrate with ERP systems
• SCM Software Vendors – Agile, Ariba, I2, Manugistics,
Commerce One, etc.
• ERP Vendors – SAP, Baan, Oracle, etc
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SCM – Example of a Supply Network
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SCM Application Functions
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SCM Application Functions 2nd Half
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Supply Chain Management Benefits
Supply Chain Management applications can help
organizations to gain competitive advantage and provide
substantial payback in several ways by:
• Streamlining workflow and increasing employee
productivity (i.e. efficiently managing business travel,
time, and expenses by collaborating with suppliers in
realtime)
• Accelerating product development (i.e. enabled by
the ability of organizations to swiftly react to market
conditions)
• Streamlining cost and creating efficiencies across the
supply network (i.e., supporting contract negotiation
and measuring effectiveness of those agreements)
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ESSENTIALS OF ENTERPRISE SYSTEMS AND SUPPLY CHAINS
ERP and Supply Chains
ERP or enterprise systems control all major business
processes with a single software architecture in real time.
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It is comprised of a set of applications that automate routine
back-end operations:
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It includes front-end operations such as:
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such as financial management
inventory management
Scheduling
order fulfillment
cost control
accounts payable and receivable,
POS
Field Sales
Service
It also increases efficiency, improves quality, productivity, and
profitability.
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ESSENTIALS OF ENTERPRISE SYSTEMS AND SUPPLY CHAINS
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Supply Chain
Supply chain refers to the flow of materials, information,
payments, and services from raw material suppliers, through
factories and warehouses (Value Chain), to the final consumer
(Demand Chain). It includes tasks such as purchasing, payment
flow, materials handling, production planning & control, logistics
& warehousing, inventory control, and distribution. When it is
managed electronically it is referred to as an e-supply chain.
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Supply Chain Flows
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Materials flows are all physical products, new materials, and
supplies that flow along the chain.
Information flows relates to all data associated with demand,
shipments, orders, returns and schedules.
Financial flows include all transfers of money, payments, credit
card information, payment schedules, e-payments and creditrelated data.
Supply Chains contribute to increased profitability and competitiveness
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Supply Chain
Automotive Supply Chain
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Supply Chains Components
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The supply chain involves three segments:
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Upstream, where sourcing or procurement from
external suppliers occur
Internal, where packaging, assembly, or
manufacturing take place
Downstream, where distribution or dispersal
take place, frequently by external distributors.
It also includes the movement of
information and money and the procedures
that support the movement of a product or
a service.
Organizations and individuals are also part
of the chain.
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Supply Chains Classifications
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There are several major types of supply chain
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Integrated make-to-stock
Continuous replenishment
Build-to-order
Channel assembly.
“Supply” Chain
Value Chain
Demand Chain
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Supply Chain Problems
Adding value along the chain is essential for competitiveness, however
problems exist especially in complex or long chains and in cases where
many business partners are involved. These problems are due to
uncertainties and the need to coordinate several activities, internal units,
and business partners.
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Demand forecasts are a major source of uncertainties
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Uncertainties exist in delivery times
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Competition
Prices
Weather conditions
Technological development
Customer confidence
Machine failures
Road conditions
Shipments
Quality problems may also create production delays
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Supply Chain Problems
continued
The bullwhip effect refers to erratic shifts in orders up and down
the supply chain because of poor demand forecasting,
price fluctuation, order batching, and rationing within the chain.
Even slight demand uncertainties and variability become magnified
if each distinct entity, on the chain, makes ordering and inventory
decisions with respect to its own interest above those of the chain.
Distorted information can lead to tremendous inefficiencies,
excessive inventories, poor customer service, lost revenues,
ineffective shipments, and missed production schedules.
A common way to solve the bullwhip problem is by sharing
information along the supply chain through EDI, extranets, and
groupware technologies. For example employing a vendormanaged inventory (VMI) strategy, the vendor monitors
inventory levels and when it falls below the threshold for each
product this automatically triggers an immediate shipment.
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Supply Chain Solutions
Information sharing among supply chain partners (c-commerce)
sometimes referred to as the collaboration supply chain is one
method to overcome problems in the flow. Others are:
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Optimal Inventory Levels
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Supply Chain Coordination and Collaboration
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Supply Chain Teams
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Performance Measurement and Metrics
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Various IT-Assisted Solutions
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wireless technology
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optimal shipping plans
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strategic partnerships with suppliers
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just-in-time
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Supply Chain Solutions
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Supply Chain Collaboration Management
Every company that has business partners has to manage the
relationships with them. Information needs to flow between the firms
and constantly updated and shared.
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Manual methods include; phone, fax, and mail
EDI is typically used by large corporations
EC PRM functions include:
partner
profiles
partner communications
lead management (of clients)
targeted information distribution
connecting the extended enterprise
partner planning
centralized forecasting
group planning
e-mail
price lists
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Supply Chain Management
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Global Supply Chains
Supply chains that involve suppliers and/or customers in other
countries are referred to as global supply chains.
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Companies go global (disperse the value chain) for a variety of
reasons.
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lower costs of materials, products, services and labor
availability of products that are unavailable domestically
the firm's global strategy
technology available in other countries
high quality of products
intensification of global competition
the need to develop a foreign presence to increase sales
fulfillment of counter trade.
Global supply chains are usually longer than domestic ones, and
more complex. Therefore, additional uncertainties are likely.
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Computerized Supply Chains
The supply chain process is intertwined with the computerization of
its activities. People have wanted to automate the processes along
the chain to reduce cost, expedite processing, and reduce errors.
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Material requirements planning (MRP) essentially integrates
production, purchasing, and inventory management of
interrelated products.
Manufacturing resource planning (MRP II), enhanced MRP
methodology by adding labor requirements and financial planning.
Enterprise resource planning (ERP) further integrates the
transaction processing as well as other routine activities in the
entire enterprise.
Integrations continues along several paths
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functional areas
Combining transaction processing and decision support
Business intelligence
CRM software
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Computerized Supply Chains
Continued
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E-Commerce and Supply Chains
E-commerce is emerging as a superb tool for providing
solutions to problems along the supply chain. Many supply
chain activities, from taking customers' orders to procurement,
can be conducted electronically.
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E-commerce
can
digitize some products
can
replace all paper documents
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replace faxes and telephone calls with electronic messaging
Enhances
typically
collaboration and information sharing
shortens the supply chain and minimizes inventories
facilitates
customer service
introduces
efficiencies into buying and selling
enables
faster, cheaper, and better communication, collaboration, and
discovery of information
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E-Commerce and Supply Chains
A major role of EC is to facilitate buying and selling along all segments
of the supply chain.
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Upstream Activities improve the upstream supply chain
through e-procurement
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Internal Supply Activities from entering purchase orders, to
recording sales, to order fulfillment, to tracking shipments, are
usually conducted over a corporate intranet
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Downstream Activities enhance the activity downstream
activities by providing online ordering
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Vertical exchanges combine upstream and downstream EC
supply chain activities. These B2B exchanges, provide a medium
where buyers and sellers can meet.
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E-Commerce and Supply Chains
Continued
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Supply Chains Benefits
There are many benefits to integrating functional systems.
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Tangible benefits:
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Inventory reduction
Personnel reduction
Productivity improvement
Order management improvement
Financial-close cycle improvements
IT cost reduction
Procurement cost reduction
Cash management improvements
Revenue/profit increases
Transportation logistics cost reduction
Maintenance reduction
On-time delivery improvement.
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Supply Chains Benefits
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Continued
Intangible benefits:
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Information visibility
New/improved processes
Customer responsiveness
Standardization
Flexibility
Globalization
Business performance
Reduction in duplication of entries
controls and reconciliation are enhanced
rapid assimilation of data into the organization
Systems can be integrated internally and externally. Internal
integration refers to integration between applications inside a
company, whereas external integration refers to integration of
applications among business partners.
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Customer Relationship Management (CRM)
CRM recognizes that customers are the core of a business and that a
company’s success depends on effectively managing relationships with
them. It focuses on building long–term and sustainable customer
relationships that add value both for the customer and the company.
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Types of CRM
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Operational CRM
Analytical CRM
Collaborative CRM
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SCM – Example of SAP SCM Offering
SAP is the ERP market leader. They also offer SCM
applications whose capabilities including the following:
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Recommendations for Enterprise System Success
Secure Executive Sponsorship
The highest level support is required to obtain resources
and make and support difficult reengineering decisions
Get Help from Outside Experts
Implementation success is enabled by deep application
experience and access to supporting tools and methods
Thoroughly Train Users
Training in organization, business process, and application
functions is critical to success and must be reinforced
Take a Multidisciplinary Approach to Implementations
Enterprise systems span the entire organization and as
such require input and participation from all functions
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Customer Relationship Management (CRM)
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Customer Relationship Management (eCRM)
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CRM has been practiced manually by corporations for generations.
However, Ecrm (electronic CRM) started in the mid-1990’s ,when
customers began using Web browsers, the Internet and other electronic
touchpoints.
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THE SCOPE OF E-CRM. We can differentiate three levels of e-CRM:
• Foundational service. This includes the minimum necessary services such as
Web site responsiveness (e.g., how quickly and accurately the service is
provided), site effectiveness, and order fulfillment.
• Customer-centered services. These services include order tracking, product
configuration and customization, and security/trust. These are the services
that matter the most to customers.
• Value-added services. These are extra services such as online auctions and
online training and education.
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Customer Relationship Management CRM Activities
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Customer Service on the Web
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Search and Comparison Capabilities
Free Products and Services
Technical and Other Information and Service
Allowing Customers to Order Products and Services Online
Letting Customers Track Accounts or Order Status
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Tools for Customer Service
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Personalized Web Pages
FAQs
Chat Rooms
E-Mail and Automated Response
Call Centers
Troubleshooting Tools
Wireless CRM
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Evolution Is Continuing
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