Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin CHAPTER EIGHT ENTERPRISE APPLICATIONS: BUSINESS COMMUNICATIONS CHAPTER EIGHT ENTERPRISE APPLICATIONS: BUSINESS COMMUNICATIONS

8-2 BUILDING A CONNECTED CORPORATION THROUGH INTEGRATIONS  Integration – Allows separate systems to communicate directly with each other,  eliminating the need for manual entry into multiple systems  dramatically increases quality of information & info sharing  Integration methods: Forward and backward integration (Fig 8.1) Build a central repository (Fig 8.2)

8-3 Forward and backward customer info integration

8-4 Integrating customer info among databases

8-5 SUPPLY CHAIN MANAGEMENT (SCM)  Five basic supply chain activities

8-6 SUPPLY CHAIN MANAGEMENT  Supply Chain Management (SCM) – The management of information flows between and among activities in a supply chain to maximize total supply chain effectiveness and profitability

8-7 SUPPLY CHAIN MANAGEMENT

8-8 SUPPLY CHAIN MANAGEMENT

8-9 THE BENEFITS OF SCM: IMPROVED VISIBILITY  Supply chain visibility – The ability to view all areas up and down the supply chain in real time  Supply chain planning system – Uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain while reducing inventory  Supply chain execution system – Automates the different activities of the supply chain  Bullwhip effect – Occurs when distorted product demand information ripples from one partner to the next throughout the supply chain

8-10 THE BENEFITS OF SCM: IMPROVED PROFITABILITY  Companies can respond faster and more effectively to consumer demands through supply chain enhances  Demand planning system – Generates demand forecasts using statistical tools and forecasting techniques, so companies can respond faster and more effectively to consumer demands through supply chain enhancements

8-11 THE CHALLENGES OF SCM  Primary challenges include Cost – An SCM system can cost millions of dollars for the software and millions more for help implementing the system Complexity - The move towards globalization is increasing complexity in the supply chain

8-12 CUSTOMER RELATIONSHIP MANAGEMENT  Customer relationship management (CRM) – Involves managing all aspects of a customer’s relationship with an organization to increase customer loyalty and retention and an organization's profitability  Many organizations, such as Charles Schwab and Kaiser Permanente, have obtained great success through the implementation of CRM systems

8-13 Customer Intimacy? Your customer You Your competition Your problem 13

8-14 The Need for CRM  It costs six times more to sell to a new customer than to sell to an existing one.  A typical dissatisfied customer will tell 8-10 people.  By increasing the customer retention rate by 5%, profits could increase by 85%.  Odds of selling to new customers = 15%, compared to the odds of selling to existing customers (50%)  70% of complaining customers will remain loyal if their problem is solved 14

8-15 Defining CRM (Rainer’s textbook)  Customer relationship management (CRM) is an organizational strategy that is customer-focused and customer-driven. Tenets of CRM One-to-one relationship between a customer and a seller. “Treat different customers differently.” Keep profitable customers and maximize lifetime revenue from them. 15

8-16 THE BENEFITS OF CRM  Organizations can find their most valuable customers through “RFM” - Recently, Frequency, and Monetary value How recently a customer purchased items How frequently a customer purchased items The monetary value of each customer purchase

8-17 EVOLUTION OF CRM

8-18 OPERATIONAL AND ANALYTICAL CRM  Operational CRM – Supports traditional transactional processing for day-to-day front-office operations or systems that deal directly with the customers  Analytical CRM – Supports back- office operations and strategic analysis and includes all systems that do not deal directly with the customers

8-19 Operational CRM - Sales

8-20 ENTERPRISE RESOURCE PLANNING  Enterprise resource planning – Integrates all departments and functions throughout an organization into a single IT system (or integrated set of IT systems) so that employees can make enterprisewide decisions by viewing enterprisewide information on all business operations

8-21 Purpose of ERP (Rainer’s textbook) The major objective of ERP systems is to tightly integrate the functional areas of the organization and to enable seamless information flows across the functional areas. Tight integration means that changes in one functional area …

8-22 Problems with information silos

8-23 THE BENEFITS OF ERP

8-24 CORE ERP COMPONENTS  Three most common core ERP components 1.Accounting and finance 2.Production and materials management 3.Human resource

8-25 ERP Systems

8-26 SAP Modules

8-27 THE CHALLENGE OF ERP  ERP systems contain multiple complex components that are not only expensive to purchase, but also expensive to implement  Costs include Software expenses Hardware expenses Consulting fees Training fees

8-28 THE FUTURE OF ENTERPRISE SYSTEMS: INTEGRATING SCM, CRM, AND ERP