1. Information Systems Today: Managing in the Digital World – Dr. Ali Zolait 8-1 8 Chapter Building Organizational Partnerships Using Enterprise Information Systems “If the Internet turns out not to be the future of computing, we’re toast.” Larry Ellison, Founder and CEO, Oracle Corporation

2. 8-2 Learning Objectives Information Systems Today: Managing in the Digital World – Dr. Ali Zolait

3. 8-3 Learning Objectives

4. 8-4 Enterprise Systems Problem: o Information systems growing over time o Lack of integration Different computing platforms Difficult to integrate Data must be reentered from one system to another Same pieces of data stored in several versions

5. 8-5 Legacy System Approach

6. 8-6 Enterprise System Approach

7. Information Systems Today: Managing in the Digital World 8-7 Supporting Business Activities Internally focused systems o Support functional areas, business processes and decision- making within an organization o New information (value) is added at every step Information Systems

8. 8-8 Externally Focused Systems Coordinate business activities with customers, suppliers, business partners and others who operate outside the organization Interorganizational systems o Streamline the flow of information between companies

9. Information Systems Today: Managing in the Digital World 8-9 Internally Focused Application: Value Chain Flow of information through a set of business activities o Core activities – functional areas that process inputs and produce outputs o Support activities – enable core activities to take place

10. 8-10 Core Activities Inbound logistics activities Receiving and stocking raw materials, parts and products Cisco – delivery of electronic components from suppliers Operations and manufacturing activities Order processing and/or manufacturing of end products Dell – component parts assembled to make products Outbound logistics activities Distribution of end products Amazon.com – delivery of books to customers

11. Information Systems Today: Managing in the Digital World 8-11 Core Activities (II) Marketing and Sales activities Presale marketing activities (e.g., creating marketing brochures) Amtrak – use of IS to update prices and schedules Customer service activities Postsale activities HP – downloads related to purchased products

12. Information Systems Today: Managing in the Digital World 8-12 Support Activities Administrative activities Support of day-to-day operations (for all functional areas) Infrastructure activities Implement hardware and software needed Human resource activities Employee management

13. Information Systems Today: Managing in the Digital World 8-13 Support Activities Technology development activities Design and development of applications to support the primary activities Procurement activities Purchasing of goods and services (inputs into the primary activities)

14. Information Systems Today: Managing in the Digital World 8-14 Externally Focused Applications – Value System Flow of Information can be streamlined outside organizational boundaries Coordination of multiple value chains Value System

15. 8-15 Externally Focused Applications – Value System Information Flows in a Value System o Upstream information flow – information received from another company o Downstream information flow – information produced by a company and sent to another organization

16. Information Systems Today: Managing in the Digital World 8-16 The Rise of Enterprise Systems Software programs have two forms: 1. Packaged applications o Written by third-party vendors o Used by many different organizations o Useful for standardized, repetitive tasks o Cost effective o E.g., Microsoft Money and Quicken

17. Information Systems Today: Managing in the Digital World 8-17 The Rise of Enterprise Systems 2. Custom applications o Developed exclusively for a specific organization o Designed for particular business needs o Higher development costs

18. 8-18 Evolution of Enterprise Systems Enterprise systems o Organizations start with stand- alone applications o Legacy systems

19. Information Systems Today: Managing in the Digital World 8-19 Legacy Systems Each department has its own system o Infrastructure specific o Inefficient processes o Potential for inaccuracies

20. 8-20 The Need for Integrated Enterprise Systems Advantages of integrated systems o Centralized point of access Conversion needed Enterprise Resource Planning (ERP) vendors offer different modules o Components that can be selectively implemented o E.g., modules of mySAP business suite

21. 8-21 Vanilla Versus Customized Software Vanilla version o Modules the version comes with out of the box o Certain processes might not be supported Customization o Additional software or changes to vanilla version o Always needs to be updated with new versions of vanilla

22. 8-22 Best Practices-Based Software Most ERP vendors build best practices into their ERP systems o Identify business processes in need of change o Future updates are smoother if businesses change their business processes to fit with ERP systems Is following the best practices always the best strategy? o If companies have competitive advantage from unique business processes

23. 8-23 Learning Objectives

24. 8-24 Business Process Management Systematic and structured improvement approach o All or part of organization is involved o Rethinking and redesign of business processes Became popular in 1990s IS seen as key enabler for radical change Process intended to be cross-functional

25. 8-25 BPM Steps 1.Develop a vision for the organization (specify business objectives) 2.Identify critical processes that are to be redesigned 3.Understand and measure existing processes as a baseline 4.Identify ways IS can be used for improvement 5.Design and implement a prototype of the new processes

26. 8-26 Conditions Leading to a Successful BPM Support by senior management Shared vision by all organizational members Realistic expectations Participants empowered to make changes The right people participating Sound management practices Appropriate funding

27. 8-27 Enterprise Resource Planning Data warehouse o Large, centralized data repository o Single place for data storage and access o Misnomers

28. 8-28 Choosing an ERP System Among the most factors in ERP selection 1. ERP Control o Centralized control vs. control within specific business units o Level of detail provided to management o Consistency of policies and procedures 2. ERP Business requirements o Selection of modules Core and extended components

29. 8-29 Core and Extended ERP Components Core components – support primary internal activities Extended components – support primary external activities

30. 8-30 ERP Limitations ERP falls short in communicating across organizational boundaries Not well suited for managing value system activities o Other systems can work with ERP to provide these capabilities

31. 8-31 Learning Objectives

32. 8-32 Customer Relationship Management

33. 8-33 Customer Relationship Management Web has changed the business o Customers have the power o Transactions vs. relationships o Keeping customers satisfied is key CRM o Corporate-level strategy o Concentrates on the downstream information flow To attract potential customers Creation of customer loyalty o Managers need to be able to monitor and analyze factors driving customer satisfaction

34. 8-34 Key Benefits of CRM 1.Enables 24/7/365 operations 2.Individualized service 3.Improved information 4.Speeds up problem identification/resolution 5.Speeds up processes 6.Improved integration 7.Improved product development 8.Improved planning

35. 8-35 Developing a CRM Strategy More than just software purchase and installation Must include enterprise-wide changes

36. 8-36 Policy and Business Process Changes Policies and procedures need to reflect customer- focused culture Developing a CRM Strategy

37. 8-37 Customer Service Changes Customer-focused measures of quality Process changes to enhance customer experience Developing a CRM Strategy

38. 8-38 Employee Training Changes Employees from all business areas must have a consistent focus that values customer service and satisfaction Developing a CRM Strategy

39. 8-39 Data Collection, Analysis and Sharing Changes All aspects of customer experience must be tracked, analyzed and shared Consider ethical concerns Developing a CRM Strategy

40. 8-40 Architecture of a CRM

41. 8-41 1).Operational CRM( Front Office Systems) Include systems for customer interaction and service o Personalized and efficient customer service o Access to complete information about customer Architecture of a CRM

42. 8-42 Sales Force Automation Component of operational CRM Primary goals o Identification of potential customers o Streamlining of selling processes o Improvement of managerial information Architecture of a CRM ( Front Office Systems)

43. 8-43 Sales Force Automation Supports day-to-day sales activities o Order processing and tracking o Contact development, assignment and management o Customer history preferences o Sales forecasting and performance analysis o Sales administration Architecture of a CRM ( Front Office Systems)

44. Information Systems Today: Managing in the Digital World 8-44 Advantages of Sales Force Management Systems for Sales Personnel Architecture of a CRM ( Front Office Systems)

45. 8-45 Advantages of Sales Force Management Systems for Sales Managers Architecture of a CRM ( Front Office Systems)

46. 8-46 Sales performance Measures Tracked by SFA Example : 1. Revenue per sales person, per territory, or as a percentage of sales quota 2. Margins by product category, customer segment, or customer 3. Number of calls per day, time spent per contract, revenue per call, cost per call, ratio of orders to calls 4. Number of lost customers per period or cost of customer acquisition Architecture of a CRM ( Front Office Systems)

47. 8-47 SFA Provides Improved Understanding of Market Conditions 1. Improved understanding of markets, segments and customers 2. Improved understanding of competitors 3. Enhanced understanding of organization’s strengths and weaknesses 4. Better understanding of economic structure of the industry 5. Enhanced product development 6. Improved strategy development and coordination with the sales function Architecture of a CRM ( Front Office Systems)

48. 8-48 Customer Service and Support Second component of operational CRM Automation of traditional “help desk” services Customer interaction center (CIC) o Multiple communication channels o Customer service anytime, anywhere through any communication channel o Low support cost Architecture of a CRM ( Front Office Systems)

49. 8-49 Enterprise Marketing Automation Third component of an operational CRM Comprehensive view of the competitive environment Common factors tracked by EMA o Economic o Governmental and public policy o Technology and infrastructure o Ecology o Cultural o Suppliers Architecture of a CRM ( Front Office Systems)

50. 8-50 2). Analytical CRM (Back Office Systems) Analysis of customer behavior and perceptions Customized marketing campaigns o Up-selling o Retaining customers Key technologies used to create predictive models o Data mining o Decision support systems Continuous data collection and analysis is necessary

51. 8-51 Customer Focused Business Processes Addressed by Analytical CRM 1. Marketing campaign management and analysis 2. Customer campaign customization 3. Customer communication optimization 4. Customer segmentation and sales coverage optimization 5. Pricing optimization and risk assessment and management Cont- Analytical CRM (Back Office Systems)

52. 8-52 Customer Focused Business Processes Addressed by Analytical CRM 6. Price, quality and satisfaction analysis of competitors 7. Customer acquisition and retention analysis 8. Customer satisfaction and management 9. Product usage, life cycle analysis, and product development 10. Product and service quality tracking and management Cont- Analytical CRM (Back Office Systems)

53. 8-53 3).Collaborative CRM Effective communication with the customer from the entire organization o CIC is the key Collaborative CRM enhances communication o Greater customer focus Understanding of historical and current needs o Lower communication barriers Communication preferences of the customer considered o Increased information integration Customer information shared across the organization

54. 8-54 Learning Objectives

55. 8-55 Supply Chain Management Upstream activities Improvement of business processes spanning organizational boundaries Adopted by large organizations Collaboration with suppliers (supply network) o Ability to compete more effectively in the market place o Cost reduction o Increased responsiveness to market demands Focus on upstream information flows o Acceleration of product development o Reduction of costs of raw materials procurement

56. 8-56 Supply Network

57. 8-57 Functions That Optimize the Supply Network (SCM Modules) 1. Supply chain collaboration 2. Collaborative design 3. Collaborative fulfillment 4. Collaborative demand and supply planning 5. Collaborative procurement 6. Production planning 7. Supply chain event management 8. Supply chain exchange 9. Supply chain performance management

58. 8-58 SCM architecture SCM modules support two functions o Supply chain planning - development of resource plans to support production o Supply chain execution - execution of supply chain planning

59. 8-59 Supply Chain Planning Four types of plans are developed 1. Demand planning and forecasting o Examination of historic data 2. Distribution planning o Delivering products to consumers o Warehousing, delivering, invoicing and payment collection 3. Production scheduling o Coordination of activities needed to create the product/service o Optimization of the use of materials, equipment and labor 4. Procurement planning o Development of inventory estimates

60. 8-60 Supply Chain Execution Management of three key elements 1. Product flow o Flow of product from supplier to consumer o Automation of product returns 2. Information flow o Complete removal of paper documents o Access to current information at all times 3. Financial flow o Automatic flow of payments

61. 8-61 Developing an SCM Strategy SCM efficiency and effectiveness need to be balanced o Efficiency – cost minimization o Effectiveness – customer service maximization

62. 8-62 Emerging SCM Trends Enterprise portals – B2B marketplace o Access point to proprietary information o Productivity gains and cost savings Distribution portals o Products from single supplier to many buyers Procurement portals o Procurement of products between single buyer and multiple suppliers

63. 8-63 Example: Distribution Portal Automation of business processes between supplier and multiple customers o Before transaction o During transaction o After transaction Trading exchanges o Equilibrium between buyers and sellers o Vertical markets

64. 8-64 Example: Procurement Portal Automation of business processes between a buyer and multiple suppliers

65. 8-65 Trading Exchanges Small companies don’t have funds for SCM Trading exchanges provide a solution o Operated by third-party vendors o Revenue model Commission for each transaction Usage and association fees Advertising o Many buyers and many sellers can come together o Popular trading exchanges www.scrapsite.com (steel) www.paperspace.com (paper) www.sciquest.com (medical equipment)

66. 8-66 Radio Frequency Identification Replacement for standard bar codes Transceiver and antenna Diverse usage opportunities Line-of-sight reading not necessary RFID tags can contain more information than bar codes Scanning can be done from greater distance o Passive tags – range of few feet o Active tags – hundreds of feet

67. Information Systems Today: Managing in the Digital World 8-67 Use of RFID in Supply Chain Management Pallet of inventory processed through an RFID gate

68. 8-68 Learning Objectives

69. 8-69 The Formula for Enterprise System Success 1.Secure executive sponsorship oMost failures due to lack of top-level management support 2.Get help from outside experts oConsultants are specifically trained oImplementation tends to happen faster 3.Thoroughly train users oMost overlooked, underestimated and poorly budgeted expense oTraining can prevent dissatisfaction 4.Take a multidisciplinary approach to implementations oInclude end users from all functional areas in the implementation