CHAPTER 12 INTEGRATING THE ORGANIZATION FROM END TO END- ENTERPRISE RESOURCE PLANNING

Enterprise Resource Planning (ERP)-It serves as the organization’s backbone in providing fundamental decision making support.

-It enables people in different business areas to communicate. 

-ERP system helps an organization to obtain operational efficiencies, lower costs, improve supplier and customer relations, and increase revenues and market share.

-The heart of an ERP system is a central database that collects information from and feeds information into all the ERP system’s individual application components (called modules), supporting diverse business function such as accounting, manufacturing, marketing, and human resources. 

-ERP automates business processes such as order fulfillment- taking an order from a customer, shipping the purchase, and then billing for it.
ERP Integration Data Flow 
ERP Process Flow

Bringing the Organization Together 

-ERP enables employees across the organization to share information across a single, centralized database.

-With extended portal capabilities, an organization can also involve its suppliers and customers to participate in the workflow process, allowing ERP to penetrate the entire value chain, and help the organization achieve greater operational efficiency.


Organization before ERP 
ERP- Bringing the Organization Together 


The Evolution of ERP 

-Although ERP solutions were developed to deliver automation across multiple units of an organization, to help facilitate the manufacturing process and address issues such as raw materials, inventory, order entry, and distribution, ERP was unable to extend to other functional areas of the company such as sales, marketing, and shipping. 

-It could not tie to any CRM capabilities that would allow organizations to capture customer-specific information, nor did it work with websites or portals used for customer service or order fulfillment.


Integrating SCM, CRM, and ERP

Integration of SCM, CRM, and ERP is the key to success for many companies. Integration allows the unlocking of information to make it available to any user, anywhere, anytime. 2 main competitors in ERP market:
1. Oracle 
2. Sap


Primary Users and Business Benefits of Strategic Initiatives.
Integration Tools

-An integrated enterprise infuses support areas, such as finance and human resources, with a strong customer orientation. 

-Integration are achieved using: * Middleware- several different types of software that sit in the middle of and provide 
connectivity between two or more software applications. It translates information between 
disparate systems.
* Enterprise application integration (EAI) middleware- represents a new approach to middleware 
by packaging together commonly used functionality, such as providing prebuilt links to popular 
enterprise applications, which reduces the time necessary to develop solutions that integrate 
applications from multiple vendors.


Integration between SCM, CRM, and ERP Applications

-Companies run on independent applications, such as SCM, CRM, and ERP. If one application performs poorly, the entire customer value delivery system is affected.


Enterprise Resource Planning’s Explosive Growth:
Reasons of ERP being proven to be such a powerful force:



-ERP is a logical solution to the mess of incompatible applications that had sprung up in most businesses. 
-ERP addresses the need for global information sharing and reporting.
-ERP is used to avoid the pain and expense of fixing legacy systems


 To qualify as a true ERP solution, the system not only must integrate various organization processes, but also must be:


-Flexible- an ERP system should be flexible in order to respond to the changing needs of an enterprise. 

-Modular and open- an ERP system has to have open system architecture, meaning that any module can be interfaced with or detached whenever required without affecting the other modules. The system should support multiple hardware platforms for organizations that have a heterogeneous collection of systems. It must also support third- party add-on components. 

-Comprehensive- an ERP system should be able to support a variety of organizational functions and must be suitable for a wide range of business organizations. 

-Beyond the company- an ERP system must not be confined to organizational boundaries but rather support online connectivity to business partners or customers.

-Everyone involved in sourcing, producing, delivering the company’s product works with the same information, which eliminates redundancies, cuts wasted time, and removes misinformation.

CHAPTER 11 Building a Customer-Centric Organization - Customer Relationship Management

Customer Relationship Management (CRM)

CRM is a business philosophy based on the premise that those organizations that understand the needs of individual customers are best positioned to achieve sustainable competitive advantage in the future.

- A customer strategy starts with understanding who the company's customers are and how the company can meet strategic goals.

- As the business world increasingly shifts from product focus to customer focus, most organizations recognize the treating existing customers well is the best source of profitable and sustainable revenue growth in the age of e-business, however, an organization is challenged more than ever before to truly satisfy its customers.

Recently, Frequency, and Monetary Value

An organization can find its most valuable customers by using a formula that industry insiders call RFM-recency, frequency, and monetary value. In other words, an organization must track:

- How recently a customer purchased items (recently)

- How frequently a customer purchases an item (frequently

- How much a customer spends on each purchase (monetary value)

The evolution of CRM

Knowing the customer, especially knowing the profitability of individual customers, is highly lucrative in the financial service industry.

There are three phases in the evolution of CRM:

1.                               CRM Reporting technology help organizations identify their customers across other applicants

2.                               CRM analysis technology helps organizations segment their customers into categories such as best and worst customers.

3.                               CRM predicts technological help organizations make predictions regarding customer behavior such as which customers are at risk of leaving.

Using Analytical CRM to Enhance Decisions

The two components of a CRM strategy are:

- 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.

The primary difference between operational CRM and analytical CRM in the direct interaction between the organization and its customers.

-Personalization occurs when a website can know enough about a person's likes and dislikes that it can fashion offers that are more likely to appeal to that person. Many organizations are now utilizing CRM to create customer rules and templates that marketers can use to personalize customer messages.

CUSTOMER RELATIONSHIP MANAGEMENT SUCCESS FACTORS

CRM success factors include;

  Ø  Clearly communicate the CRM strategy

  Ø  Define information needs and flows

  Ø  Build an integrated view of the customer

  Ø  Implement in iterations

  Ø Scalability for organizational growth 

CHAPTER 10: EXTENDING THE ORGANIZATION - SUPPLY CHAIN MANAGEMENT

·          Supply chain 

      Consists of all parties involved directly or indirectly. In procurement of a product or raw material

·         

       Supply chain management (SCM) 

       Involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability

·         

        The supply chain has 3 main links :

       o   Materials flow from suppliers and their upstream suppliers at all levels 

   o   Transformation of materials into semi-finished and finished products

           organization’s own production processes

   o   Distribution of products to customers and their downstream customers at all levels

·      

              The five basic supply chain management activities:

       o   PLAN – prepare to manage all resources required to meet demand

       o   SOURCE- build relationship with suppliers to procure raw materials

       o   MAKE- manufacture products and create production schedule 

   o   DELIVER- plans for transportation of goods to customers

       o   RETURN- support customers and product returns

·         

       Factors driving supply chain management:

      o   Visibility: supply chain visibility is the ability to view all areas up and down the supply chain. Organizations can use technology tools that help them integrate upstream and downstream with both customers and suppliers.The bullwhip effect occurs when distorted product demand information passes from one entity to the next throughout the supply chain

      

   o   Consumer behavior: behavior customers have changed the way businesses compete. Customers will leave if a company does not continually meet their expectations. Demand planning software generates demand forecasts using statistical tools and forecasting techniques. Companies can respond faster and more effectively to consumer demands through supply chain enhancement such as demand planning software

      

   o   Competition: supply chain planning (SCP) software uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain while reducing inventory. Supply chain execution (SCE) software automates the different steps and stages of the supply chain. This could be as simple as electronically routing orders from a manufacturer to a supplier  

      

   o   Speed: competition has focused on speed. New forms of servers, telecommunications, wireless applications and software are enabling companies to perform activities that were once never thought possible. These systems raise the accuracy, frequency and speed of communication between suppliers and customers as well as between internal users

·           

Factors fostering supply chain speed

1.       Pleasing customers has become something of a corporate obsession. Serving the customer in the best, most efficient, and most effective manner has become critical and information about issues such as order status, product availability, delivery schedule, and invoices has become a necessary part of the total customer service experience

2.       Information is crucial to managers’ abilities to reduce inventory and human resource requirements to a competitive level

3.       Information flows are essential to strategic planning for and development of resources

·        

7 principles of supply chain management

1.       Segment customers by service need, regardless of industry and then tailor service to those particular segments

2.       Customize the logistics network and focus intensively on the service requirements and on the profitability of the preidentified customer segments

3.       Listen to signals of market demand and plan accordingly. Planning must span the entire chain to detect signals of changing demand

4.       Differentiate products closer to the customer, since companies can no longer afford to hold inventory to compensate for poor demand forecasting

5.       Strategically manage source of supply by working with key suppliers to reduce overall costs of owning materials and service

6.       Develop and supply chain information technology strategy that supports different levels of decision making and provides a clear view (visibility) of the of products, service and information

7.       Adopt performance evaluation measure that apply to every link in the supply chain and measure true profitability at every stage

·        

Companies using supply chain to drive operating

Dell                             : business grows 17 % per year with a $40 billion revenue base

Nokia                          : supply chain best practices are turning ideas into profitable business

Procter & gamble     : consumer driven supply chain is the defining architecture for large consumer                                       companies. Best practices in product innovation and supply chain effectiveness                                       are tops

IBM                              : hardware supply chain product development processes overhauled to the tune                                        of 70% better, faster and chain

Wal-mart stores        :everyday low prices define the customer demand driving Wal mart’s partner                                        integratred supply chain

CHAPTER 9: ENABLING THE ORGANIZATIONS - DECISION MAKING

Organizational information

ü Employees must be able to obtain and analyze to many different levels, formats and granu larities of organizational information to make decision

ü Successfully collecting, compiling, sorting and analyzing information can provide tremendous insight into how an organization is performing

The value of timely information

ü Timeliness is an aspect of information that depends on the situation :

-         Real-time information – immediate up-to-date information

-         Real-time system – provides real-time information in response to query requests

The value of quality information

ü Business decisions are only as good as the quality of the information used to make the decisions

ü You never want to find yourself using technology to help you make a bad decision faster

ü Characteristic of high-quality information include :

-         Accuracy

-         Completeness

-         Consistency

-         Uniqueness

-         Timeliness

Understanding the cost of poor information

ü The four primary sources of low quality information include :

I.            Online customers intentionally enter inaccurate information to protect their privacy

II.            Information from different systems have different entry standards and formats

III.            Call centre operators enter abbreviated or erroneous by accident or to save time

IV.            Third party and external information contains inconsistencies, inaccuracies and errors

ü Potential business effects resulting from low quality information include :

-         Inability to accurately track customers

-         Difficulty identifying valuable customers

-         Inability to identify selling opportunities

-         Marketing to nonexistent customers

-         Difficulty tracking revenue due to inaccurate invoices

-         Inability to build strong customer relationship

·        Understanding the benefits of good information

ü High quality information can significantly improve the chances of making a good decision

ü Good decision can directly impact an organization’s bottom line

DECISION MAKING

Reasons for the growth of decision making information systems

-people need to analyze large amounts of information

-people must take decision quickly

-people must apply sophisticated analysis techniques, such as modelling and foresting, to make good decisions

-people must protect the corporate asset of organizational information

MODEL

A simplified representation or abstraction of reality

IT SYSTEMS IN AN ENTERPRISE

EXECUTIVES - EXECUTIVE INFORMATION SYSTEM (EIS)

MANAGERS - DECISION SUPPORT SYSTEMS (DSS)

ANALYSIS – TRANSACTION PROCESSING SYSTEMS (TPS)

TRANSACTION PROCESSING SYSTEMS

-Moving up through the organizational pyramid users move from requiring transactional information to analytical information

-Transaction processing system – the basic business system that serves the operational level (analysts) in an organization

-Online transaction processing (OLTP) – the capturing of transaction and event information using technology to (1) process the information according to defined business rules, (2) store the information, (3) update existing information to reflect the new information

-Online analytical processing (OLAP) – the manipulation of information to create business intelligence in support of strategic decision making

DECISION SUPPORT SYSTEMS

-Decision support systems (DSS) – models information to support managers and business professionals during the decision-making process

-Three quantitative models used by DSSs include :

1. Sensitively analysis – the study of the impact that changes in one (or               more) parts of the model have on other parts of the model

2. What-if analysis – checks the impact of a change in an assumption on the proposed solution

3. Goal-seeking analysis – finds the inputs necessary to achieve a goal such as a desired level of output

EXECUTIVE INFORMATION SYSTEMS

-Executive information system (EIS) – a specialized DSS that supports senior level executives within the organization

-most EISs offering the following capabilities :

1.consolodation– involves the aggregation of intelligent system that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem

2.drill-down – enables, users to get details and details of details, of information

3.slice-and-dice – looks at information from different perspectives

ARTIFICIAL INTELLIGENCE

-INTELLIGENT SYSTEM – various commercial applications of artificial intelligence

-ARTIFICIAL INTELLIGENCE (AI) – Simulates human intelligence such as the ability to reason and learn

-advantages: can check info on competitor

-the ultimate goal of AI is the ability to build a system that can mimic human intelligence

-Four most common categories of AI include :

1. expert system – computerized advisory programs that imitate the reasoning processes of expert in solving difficult problems

2. neural network – attempts to emulate the way the human brain works

-fuzzy logic – a mathematical method of handling imprecise or      subjective information

3. genetic algorithm – an AI system that mimics the evolutionary, survival-if-the-fittest process to generate increasingly better solutions to a problem

4. intelligent agent – special-purposed-knowledge-based information system that accomplishes specific tasks on behalf of its users

DATA-MINING

-data-mining software includes many forms of AI such as neural networks and expert system

-common forms of data-mining analysis capabilities include:

1. cluster analysis

2. association detection

3. statistical analysis

CLUSTER ANALYSIS

-CLUSTER ANALYSIS – To divide an information set into mutually exclusive groups such that the members of each group are as possible to one another and the different groups are as far apart as possible

-CRM systems depend on cluster analysis to segment customer information and identify behavioral traits

ASSOCIATION DETECTION

-Association detection reveals the degree to which variables are related and the nature and frequency of these relationships in the information

-Market basket analysis such items as Web sites and checkout scanner information to detect customers’ buying behavior and predict future behaviour by identifying affinities among customers’ choices of products and services

STATISTICAL ANALYSIS

STATISTICAL ANALYSIS performs such functions as information correlations, distributions, calculations and variance analysis

- forecast– predictions made on the basis of time-series information

- time-series information – time-stamped information collected at a particular frequency