Achieving Operational Excellence Enterprise Applications Business Information Systems Laudon & Laudon Ch.8 (P.266)

Enterprise systems The Supply Chain Customer Relationship Management (CRM)

Enterprise systems What Are Enterprise Systems? –Based on integrated software modules and a common central database help companies integrate information from many different parts of business, forge closer ties with customers and coordinates firms activities with suppliers.

Business Value of Enterprise Systems –Increase operational efficiency –Support decision making and rapid responses to customer requests –Include analytical tools to evaluate overall performance

How Enterprise Systems Work

The Supply Chain A network of organizations and processes for procuring raw materials, transforming them into products, and distributing the products 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

Nike’s Supply Chain

Information and Supply Chain Management Inefficiencies ( parts shortage, underutilized plant capacity, excessive inventory, transportation costs) Perfect Information  Just-in-time strategy Uncertainties  Buffer  Safety stock Bullwhip effect: information about the demand for a product gets distorted as it pass from one entity to the next across the supply chain.

Supply Chain Management Applications Supply chain planning systems –Enable the firm to model its existing supply chain, generate demand forecasts for products and provide optimal sourcing and manufacturing plans. Ex. Establishing inventory level for raw material, where to store finished goods, how much to produce in a given time. Supply chain execution systems: –manage the flow of products through distribution centers and warehouses, Track the physical status of goods, management of material, warehouse and transportation operations. –Software vendors: SAP, Oracle-PeopleSoft

Supply Chain Management and the Internet Intranets: To improve coordination among their internal supply chain processes Extranets: To coordinate supply chain shared with their business partners Demand-driven supply chains –Push-based model –Pull-based model

Push- Versus Pull-Based Supply Chain Models The difference between push- and pull-based models is summarized by the slogan “Make what we sell, not sell what we make.”

Business Value of Supply Chain Management Systems

Match supply to demand Reduce inventory levels Improve delivery service Speed product time to market Use assets more effectively Reduced supply chain costs lead to increased profitability Increased sales

What Is Customer Relationship Management? Capture and integrate customer data from all over the organization, consolidate date, analyze the data and distribute the results to various systems. –Knowing the customer –Touch points –Customize the offering more precisely by answering the questions. Who are our loyal customers? Customers’ lifetime value? Who are our most profitable customers? What do these profitable customers want to buy?

Customer Relationship Management (CRM) CRM systems range from niche tools that perform limited functions such as personalizing Web sites for specific customers, to large scale enterprise applications that interact with customers analyze them and link the information to other enterprise applications such as supply chain management.

CRM Software CRM packages are available with a wide spectrum of functions –Partner relationship management (PRM) uses many of the same data, tools and systems as customer relationship management to enhance collaboration between a company and its selling partners –Employee relationship management (ERM) Deals with employee issues that are closely related to CRM, such as setting objectives, employee performance management, employee training

CRM Software –Sales force automation (SFA) Help sales staff increase their productivity by focusing sales efforts on the most profitable customers, it provides sales prospect, contact information, and product information. It can assemble information about a particular customer’s past purchase to help the salesperson make personalized recommendations. –Customer service: provide information and tools to increase the efficiency of call centers, help desks and customer support staff. –Marketing : it directs marketing campaigns by providing capabilities for capturing prospect and customer data, for providing product and service information, for qualifying leads for targeted marketing.

Operational and Analytical CRM Operational: customer-facing applications such as sales force automation, call center and customer service support, and marketing automation Analytical: applications that analyze customer data output from operational CRM applications based on data warehouses populated by operational CRM systems and customer touch points –Customer lifetime value (CLTV): is based on the relationship between the revenue produced by a specific customer, the expenses incurred in acquiring and servicing that customer and the expected life of that relationship.

Business Value of Customer Relationship Management Business benefits: –Increased customer satisfaction –Reduced direct-marketing costs –More effective marketing –Lower costs for customer acquisition/retention –Increased sales revenue Churn rate: measures the number of customers who stop using or purchasing products or services from a company.

Challenges and Opportunities Technology changes Business process changes Organizational changes Switching costs Data management