Information Systems Today: Managing in the Digital World 8 COIS11011 WEEK 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 Information Systems Today: Managing in the Digital World

Information Systems Today: Managing in the Digital World Learning Objectives Information Systems Today: Managing in the Digital World

Information Systems Today: Managing in the Digital World Learning Objectives Information Systems Today: Managing in the Digital World

Information Systems Today: Managing in the Digital World Enterprise Systems Problem: Information systems growing over time 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 Information Systems Today: Managing in the Digital World

Legacy System Approach Information Systems Today: Managing in the Digital World

Enterprise System Approach Information Systems Today: Managing in the Digital World

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

Externally Focused Systems Coordinate business activities with customers, suppliers, business partners and others who operate outside the organization Interorganizational systems Streamline the flow of information between companies Information Systems Today: Managing in the Digital World

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

Information Systems Today: Managing in the Digital World 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 Information Systems Today: Managing in the Digital World

Information Systems Today: Managing in the Digital World 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 Information Systems Today: Managing in the Digital World

Information Systems Today: Managing in the Digital World 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 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) Information Systems Today: Managing in the Digital World

Externally Focused Applications – Value System Coordination of multiple value chains Information Systems Today: Managing in the Digital World

Externally Focused Applications – Value System Information Flows in a Value System Upstream information flow – information received from another company Downstream information flow – information produced by the company and sent to another organization Information Systems Today: Managing in the Digital World

How Enterprise Systems evolved Start with packaged applications: Written by third-party vendors Used by many different organizations Useful for standardized, repetitive tasks Cost effective E.g., Microsoft Money and Quicken, suitable for individual, stand-alone use Information Systems Today: Managing in the Digital World

How Enterprise Systems evolved cont. Packaged applications are limited Hence custom applications: Developed exclusively for a specific organization Designed for particular business needs Higher development costs Information Systems Today: Managing in the Digital World

Evolution of Enterprise Systems Packaged & Custom applications: Organizations start with stand-alone applications Legacy systems Information Systems Today: Managing in the Digital World

Legacy Systems lack integration Each department has its own system Infrastructure specific Inefficient processes Potential for inaccuracies Information Systems Today: Managing in the Digital World

The Need for Integrated Enterprise Systems (ES’s) Advantages of integrated systems Centralized point of access Conversion needed Enterprise Resource Planning (ERP) vendors offer different modules Components that can be selectively implemented E.g., modules of mySAP business suite Information Systems Today: Managing in the Digital World

Vanilla Versus Customized ES’s Vanilla version Modules the version comes with out of the box Certain processes might not be supported Customization Additional software or changes to vanilla version Always needs to be updated with new versions of vanilla Information Systems Today: Managing in the Digital World

Best Practices-Based Software Most ERP vendors build best practices into their ERP systems Identify business processes in need of change Future updates are smoother if businesses change their business processes to fit with ERP systems Is following best practices always the best strategy? If companies have competitive advantage from unique business processes Information Systems Today: Managing in the Digital World

Information Systems Today: Managing in the Digital World Learning Objectives WE NOW LOOK AT ERP, CRM & SCM IN MORE DETAIL Information Systems Today: Managing in the Digital World

Enterprise Resource Planning Data warehouse Large, centralized data repository Single place for data storage and access Information Systems Today: Managing in the Digital World

Information Systems Today: Managing in the Digital World Choosing an ERP System Control Centralized control vs. control within specific business units Level of detail provided to management Consistency of policies and procedures Business requirements Selection of modules Core and extended components Information Systems Today: Managing in the Digital World

Core and Extended ERP Components Core components – support primary internal activities Extended components – support primary external activities Information Systems Today: Managing in the Digital World

Information Systems Today: Managing in the Digital World ERP Limitations ERP falls short in communicating across organizational boundaries Not well suited for managing value system activities Other systems can work with ERP to provide these capabilities Information Systems Today: Managing in the Digital World

Information Systems Today: Managing in the Digital World Learning Objectives Information Systems Today: Managing in the Digital World

Customer Relationship Management Information Systems Today: Managing in the Digital World

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

Information Systems Today: Managing in the Digital World Key Benefits of CRM Enables 24/7/365 operations Individualized service Improved information Speeds up problem identification/resolution Speeds up processes Improved integration Improved product development Improved planning Information Systems Today: Managing in the Digital World

Developing a CRM Strategy More than just software purchase and installation Enterprise-wide changes Information Systems Today: Managing in the Digital World

Policy and Business Process Changes Policies and procedures need to reflect customer-focused culture Information Systems Today: Managing in the Digital World

Customer Service Changes Customer-focused measures of quality Process changes to enhance customer experience Information Systems Today: Managing in the Digital World

Employee Training Changes Employees from all business areas must value customer service and satisfaction Information Systems Today: Managing in the Digital World

Data Collection, Analysis and Sharing Changes All aspects of customer experience must be tracked, analyzed and shared Consider ethical concerns Information Systems Today: Managing in the Digital World

Information Systems Today: Managing in the Digital World Architecture of a CRM Information Systems Today: Managing in the Digital World

Information Systems Today: Managing in the Digital World Operational CRM Systems for customer interaction and service Personalized and efficient customer service Access to complete information about customer Information Systems Today: Managing in the Digital World

Sales Force Automation Component of operational CRM Primary goals Identification of potential customers Streamlining of selling processes Improvement of managerial information Information Systems Today: Managing in the Digital World

Sales Force Automation Supports day-to-day sales activities Order processing and tracking Contact development, assignment and management Customer history preferences Sales forecasting and performance analysis Sales administration Information Systems Today: Managing in the Digital World

Advantages of Sales Force Management Systems for Sales Personnel Information Systems Today: Managing in the Digital World

Advantages of Sales Force Management Systems for Sales Managers Information Systems Today: Managing in the Digital World

Examples of Sales Measures Tracked by SFA Revenue per sales person, per territory, or as a percentage of sales quota Margins by product category, customer segment, or customer Number of calls per day, time spent per contract, revenue per call, cost per call, ratio of orders to calls Number of lost customers per period or cost of customer acquisition Information Systems Today: Managing in the Digital World

SFA Provides Improved Understanding of Market Conditions Improved understanding of markets, segments and customers Improved understanding of competitors Enhanced understanding of organization’s strengths and weaknesses Better understanding of economic structure of the industry Enhanced product development Improved strategy development and coordination with the sales function Information Systems Today: Managing in the Digital World

Customer Service and Support Second component of operational CRM Automation of traditional “help desk” services Customer interaction center (CIC) Multiple communication channels Customer service anytime, anywhere through any communication channel Low support cost Information Systems Today: Managing in the Digital World

Enterprise Marketing Automation Third component of an operational CRM Comprehensive view of the competitive environment Common factors tracked by EMS Economic Governmental and public policy Technology and infrastructure Ecology Cultural Suppliers Information Systems Today: Managing in the Digital World

Information Systems Today: Managing in the Digital World Analytical CRM Analysis of customer behavior and perceptions Customized marketing Up-selling Retaining customers Key technologies used to create predictive models Data mining Decision support systems Continuous data collection and analysis is necessary Information Systems Today: Managing in the Digital World

Customer Focused Business Processes Addressed by Analytical CRM Marketing campaign management and analysis Customer campaign customization Customer communication optimization Customer segmentation and sales coverage optimization Pricing optimization and risk assessment and management Information Systems Today: Managing in the Digital World

Customer Focused Business Processes Addressed by Analytical CRM cont. Price, quality and satisfaction analysis of competitors Customer acquisition and retention analysis Customer satisfaction and management Product usage, life cycle analysis, and product development Product and service quality tracking and management Information Systems Today: Managing in the Digital World

Information Systems Today: Managing in the Digital World Collaborative CRM Effective communication with the customer from the entire organization CIC is the key Collaborative CRM enhances communication Greater customer focus Understanding of historical and current needs Lower communication barriers Communication preferences of the customer considered Increased information integration Customer information shared across the organization Information Systems Today: Managing in the Digital World

Ethical Concerns with CRM Can personalization get too personal? Information Systems Today: Managing in the Digital World

Information Systems Today: Managing in the Digital World Learning Objectives Information Systems Today: Managing in the Digital World

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

Information Systems Today: Managing in the Digital World Supply Network Information Systems Today: Managing in the Digital World

Functions That Optimize the Supply Network (SCM Modules) Supply chain collaboration Collaborative design Collaborative fulfillment Collaborative demand and supply planning Collaborative procurement Production planning Supply chain event management Supply chain exchange Supply chain performance management Information Systems Today: Managing in the Digital World

Information Systems Today: Managing in the Digital World SCM architecture SCM modules support two functions Supply chain planning - development of resource plans to support production Supply chain execution - execution of supply chain planning EXPLAIN HOW TO READ THESE DIAGRAMS Information Systems Today: Managing in the Digital World

Information Systems Today: Managing in the Digital World Supply Chain Planning Four types of plans are developed Demand planning and forecasting Examination of historic data Distribution planning Delivering products to consumers Warehousing, delivering, invoicing and payment collection Production scheduling Coordination of activities needed to create the product/service Optimization of the use of materials, equipment and labor Procurement planning Development of inventory estimates Information Systems Today: Managing in the Digital World

Supply Chain Execution Management of three key elements Product flow Flow of product from supplier to consumer Automation of product returns Information flow Complete removal of paper documents Access to current information at all times Financial flow Automatic flow of payments Information Systems Today: Managing in the Digital World

Developing an SCM Strategy SCM efficiency and effectiveness need to be balanced Efficiency – cost minimization Effectiveness – customer service maximization Information Systems Today: Managing in the Digital World

Information Systems Today: Managing in the Digital World Emerging SCM Trends Enterprise portals – B2B marketplace Access point to proprietary information Productivity gains and cost savings Distribution portals Products from single supplier to many buyers Procurement portals Procurement of products between single buyer and multiple suppliers Information Systems Today: Managing in the Digital World

Example: Distribution Portal Automation of business processes between supplier and multiple customers Before transaction During transaction After transaction Trading exchanges Equilibrium between buyers and sellers Vertical markets Information Systems Today: Managing in the Digital World

Example: Procurement Portal Automation of business processes between a buyer and multiple suppliers Information Systems Today: Managing in the Digital World

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

Key Technologies for Enhancing SCM Extensible Markup Language (XML) Specifies rules for tagging elements Specifies how information should be interpreted and used Customizable XML variations Extensible Business Reporting Language (XBRL) Publishing of financial information Information Systems Today: Managing in the Digital World

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 Passive tags – range of few feet Active tags – hundreds of feet Information Systems Today: Managing in the Digital World

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

Information Systems Today: Managing in the Digital World Learning Objectives Information Systems Today: Managing in the Digital World

The Formula for Enterprise System Success Secure executive sponsorship Most failures due to lack of top-level management support Get help from outside experts Consultants are specifically trained Implementation tends to happen faster Thoroughly train users Most overlooked, underestimated and poorly budgeted expense Training can prevent dissatisfaction Take a multidisciplinary approach to implementations Include end users from all functional areas in the implementation Information Systems Today: Managing in the Digital World

End of Chapter Content OPTIONAL: DISCUSS OR SHOW THE FOLLOWING SLIDES IF TIME PERMITS

Opening Case: CRM and Major League Baseball Major League Baseball Advanced Media (MLBAM) Services MLB.com (since 2001) Focus on the customer Services Team merchandise Live audio and video 1 million subscribers $12-16 million revenue/year Fantasy baseball Mobile content for cell phones Game tickets for all 30 MLB teams All services very successful Information Systems Today: Managing in the Digital World

Outsourcing Your McDonald’s Order McDonald’s – One of America’s success stories Founded in 1948 in San Bernardino, California $20 billion business 31,000 locations Outsourcing the drive-through All stores already had an Internet connection Orders processed overseas Entered into the queuing system Food quality remains the same Information Systems Today: Managing in the Digital World

Larry Ellison, Founder and CEO, Oracle Corporation Referred to as “the other software billionaire” Oracle second to Microsoft in software sales “If the Internet turns out not to be the future of computing, we’re toast,” Ellison said early in his career Information Systems Today: Managing in the Digital World

Information Systems Today: Managing in the Digital World Misusing CRM Data 2000 10,000 pounds of meat potentially infected with mad cow disease distributed in Washington State QFC grocery chain sued for not informing customers of a recall 2004 Albertsons’ misused CRM data Pharmaceutical companies paid Albertson’s to ask their customers to switch to more expensive drugs Privacy Rights Clearinghouse sued Albertsons Information Systems Today: Managing in the Digital World

Targeting or Discriminating? Ethical Pitfalls of CRM CRM can be called a marketer’s dream Getting to know customers Maximizing the benefits gained from customers Customer segmentation Target marketing Companies need to develop ethical principles of CRM use Establish how data will be used Inform customers about the use of data Refrain from stepping over the ethical/unethical line Information Systems Today: Managing in the Digital World

Three-Dimensional Fabrication Fabbing – three-dimensional (3D) printing 2 printer heads First lays down a fine powder Second head is a gluing agent With each pass of the heads one layer of the model is done Prototype made in hours vs. days Fast production of prototypes that are 3-D Usable With moving parts Hewlett-Packard (HP) – leader 3-D HP printers now available for $1,000 Information Systems Today: Managing in the Digital World

Information Systems Today: Managing in the Digital World RFID on the Rise Market for RFID is exploding Expected growth from $2.7 billion (2006) to $12.3 billion (2010) Supply chain elements will account for majority of the growth Information Systems Today: Managing in the Digital World

The Comics Industry: Digital Distribution to the Rescue 1998 – Marvel Comics goes bankrupt The largest player in the industry Creator of 5,000 comic book characters Other smaller companies were no longer in business Transition to big screen and digital media saved the comics Marvel.com 30 older comics online 82% of users also buy in the stores Japanese companies deliver comics to cell phones $400 million yearly revenues Information Systems Today: Managing in the Digital World