IE-401 MANAGEMENT
INFORMATION SYSTEM (MIS)
Lecture-11 Enterprise Systems
Dr. Sikandar Bilal Khattak
Department of Industrial Engineering
University of Engineering and Technology Peshawar, Pakistan
This Lecture
■ Enterprise Systems
■ Enterprise Software
■ Supply Chain Management Systems
■ Customer Relationship Management Systems
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Enterprise Systems
■ Based on suite of integrated software modules and
common central database
■ Integrate information from across company’s divisions,
departments, key business processes in the four functional
areas
■ Updated information made available to all business
processes
■ Generate enterprise-wide data for management analyses
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How Enterprise Systems Work
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Enterprise Software
■ Built around thousands of predefined business processes that reflect best in
industry practices
■ Companies map business processes to enterprise system’s processes for desired
functions
■ Configuration tables allow tailoring of system
■ System software can be rewritten in part,
– but may degrade performance and process integration
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Business Processes
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Business Value of Enterprise System
■ Increasing operational efficiency
■ Helping respond to customer requests rapidly
■ Producing, procuring, shipping right amounts
■ Enforcing standard practices and data throughout company
■ Providing firm-wide information to help managers make better decisions
■ Allowing senior management to easily find out at any moment how a particular
organizational unit is performing or to determine which products are most or
least profitable
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SUPPLY CHAIN
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Supply Chain Management
■ Network of organizations and business processes for:
– Procuring raw materials
– Transforming them into intermediate and finished products
– Distributing finished products to customers
■ Includes secondary and tertiary suppliers
■ Upstream portion
– Suppliers
■ Downstream portion
– Distributors
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Supply Chain Management
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Information and Supply Chain Management
■ Inefficiencies in the supply chain, such as parts shortages, underused plant
capacity, excessive finished goods inventory, or high transportation costs, are
caused by inaccurate or untimely information.
■ For example, manufacturers may keep too many parts in inventory because
they do not know exactly when they will receive their next shipments from
their suppliers.
■ Suppliers may order too few raw materials because they do not have
precise information on demand.
■ These supply chain inefficiencies waste as much as 25 percent of a
company’s operating costs.
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Information and Supply Chain Management
Just in Time Strategy
■ If a manufacturer had perfect information about exactly how many
units of product customers wanted, when they wanted them, and
when they could be produced, it would be possible to implement a
highly efficient just-in-time strategy.
■ Components would arrive exactly at the moment they were needed,
and finished goods would be shipped as they left the assembly
line.
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Information and Supply Chain Management
Safety Stock
■ In a supply chain, however, uncertainties arise because many events cannot be
foreseen—uncertain product demand, late shipments from suppliers, defective
parts or raw materials, or production process breakdowns.
■ To satisfy customers, manufacturers often deal with such uncertainties and
unforeseen events by keeping more material or products in inventory than they
think they may actually need.
■ The safety stock acts as a buffer for the lack of flexibility in the supply chain.
■ Although excess inventory is expensive, low fill rates are also costly because
business may be lost from canceled orders.
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Information and Supply Chain Management
Bullwhip Effect
■ One recurring problem in supply chain management is the bullwhip effect, in which
information about the demand for a product gets distorted as it passes from
one entity to the next across the supply chain.
■ A slight rise in demand for an item might cause different members in the
supply chain—distributors, manufacturers, suppliers, secondary suppliers
(suppliers’ suppliers), and tertiary suppliers (suppliers’ suppliers’ suppliers)—to
stockpile inventory so each has enough just in case.
■ These changes ripple throughout the supply chain, magnifying what started out
as a small change from planned orders and creating excess inventory, production,
warehousing, and shipping costs.
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Supply Chain Management Software
■ Supply chain software is classified as
– either software to help businesses plan their supply chains
(supply chain planning)
– or software to help them execute the supply chain steps (supply
chain execution).
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Supply Chain Management Software
Supply Chain Planning Systems
■ Supply chain planning systems enable the firm to model its existing supply chain, generate
demand forecasts for products, and develop optimal sourcing and manufacturing plans.
■ Such systems help companies make better decisions, such as determining
– how much of a specific product to manufacture in a given time period;
– establishing inventory levels for raw materials, intermediate products, and finished goods;
– determining where to store finished goods;
– identifying the transportation mode to use for product delivery.
■ One of the most important—and complex—supply chain planning functions is demand planning,
– which determines how much product a business needs to make to satisfy all its
customers’ demands.
■ JDA Software, SAP, and Oracle all offer supply chain management solutions.
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Supply Chain Management Software
Supply Chain Execution Systems
■ Supply chain execution systems manage the flow of products through distribution centers and
warehouses to ensure that products are delivered to the right locations in the most efficient
manner.
■ They track the physical status of goods, the management of materials, warehouse and
transportation operations, and financial information involving all parties.
■ An example is the Warehouse Management System (WMS) that Haworth Incorporated uses.
– Haworth is a world-leading manufacturer and designer of office furniture, with distribution centers
in four states.
– The WMS tracks and controls the flow of finished goods from Haworth’s distribution centers
to its customers. Acting on shipping plans for customer orders, the WMS directs the
movement of goods based on immediate conditions for space, equipment, inventory, and
personnel.
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Global Supply Chains and Internet
■ Before the Internet, supply chain coordination was hampered by the difficulties of making information flow
smoothly among disparate internal supply chain systems for purchasing, materials management,
manufacturing, and distribution.
■ It was also difficult to share information with external supply chain partners because the systems of
suppliers, distributors, or logistics providers were based on incompatible technology platforms and
standards.
■ Enterprise and supply chain management systems enhanced with Internet technology supply some of this
integration.
■ A manager uses a web interface to tap into suppliers’ systems to determine whether inventory and
production capabilities match demand for the firm’s products.
■ Business partners use web-based supply chain management tools to collaborate online on forecasts.
■ Sales representatives access suppliers’ production schedules and logistics information to monitor
customers’ order status.
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Global Supply Chains and Internet
Issues
■ More and more companies are entering international markets, outsourcing manufacturing
operations, and obtaining supplies from other countries as well as selling abroad.
■ Their supply chains extend across multiple countries and regions.
■ Global supply chains typically span greater geographic distances and time differences
than domestic supply chains and have participants from a number of countries.
■ Performance standards may vary from region to region or from nation to nation.
■ Supply chain management may need to reflect foreign government regulations and
cultural differences.
■ The Internet helps companies manage many aspects of their global supply chains,
including sourcing, transportation, communications, and international finance.
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Demand Driven Supply Chain
Push Based Model
■ In a push-based model, production master schedules are based on
forecasts or best guesses of demand for products, and products are
pushed to customers.
■ With new flows of information made possible by web-based tools,
supply chain management more easily follows a pull-based model.
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Demand Driven Supply Chain
Pull Based Model
■ In a pull-based model, also known as a demand-driven or build-to-order model,
actual customer orders or purchases trigger events in the supply chain.
■ Transactions to produce and deliver only what customers have ordered move up
the supply chain from retailers to distributors to manufacturers and eventually to
suppliers.
■ Only products to fulfill these orders move back down the supply chain to the
retailer.
■ Manufacturers use only actual order demand information to drive their production
schedules and the procurement of components or raw materials, as illustrated in
Figure 9.4.
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Demand Driven Supply Chain
Push vs Pull Supply Chain Models
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Emerging Internet Driven Supply Chain
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Business Value of Supply Chain Management
■ Matching supply to demand and reducing inventory levels
■ Improving delivery service and speeding product time to market
■ Using assets more effectively
■ Increasing sales by assuring availability of products
■ Increased profitability
– Supply chain costs can approach 75% of total operating budgets
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CUSTOMER
RELATIONSHIP
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Customer Relationship Management System
■ Capture, consolidate, analyze customer data and
distribute results to various systems and customer
touch points (contact points) across enterprise
■ Provide single enterprise view of customers
■ Provide customers single view of enterprise at
touch points
■ Provide analytical tools for determining value,
loyalty, profitability of customers
– Assist in acquiring new customers, providing
better service and support to customers,
customize offerings to customer
preferences, provide ongoing value to retain
profitable customers
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Customer Relationship Management Software
■ Commercial CRM software packages range from niche tools that
perform limited functions, such as personalizing websites for specific
customers, to large-scale enterprise applications that capture myriad
interactions with customers, analyze them with sophisticated reporting
tools, and link to other major enterprise applications, such as supply
chain management and enterprise systems.
■ The more comprehensive CRM packages contain modules for
– partner relationship management (PRM)
– employee relationship management (ERM).
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Customer Relationship Management Software
Partner Relationship Management (PRM)
■ PRM uses many of the same data, tools, and systems as customer relationship
management to enhance collaboration between a company and its selling
partners.
■ If a company does not sell directly to customers but rather works through
distributors or retailers, PRM helps these channels sell to customers directly.
■ It provides a company and its selling partners with the ability to trade
information and distribute leads and data about customers, integrating lead
generation, pricing, promotions, order configurations, and availability.
■ It also provides a firm with tools to assess its partners’ performances so it can
make sure its best partners receive the support they need to close more business.
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Customer Relationship Management Software
Employee Relationship Management (ERM)
■ ERM software deals with employee issues that are closely related to
CRM, such as setting objectives, employee performance management,
performance based compensation, and employee training.
■ Major CRM application software vendors include Oracle, SAP,
Salesforce.com, and Microsoft Dynamics CRM.
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CRM Software Capabilities
Sales Force Automation
■ Enable focusing efforts on most profitable customers
■ Enables sharing customer and prospect information
■ Helps reduce cost per sale and cost of acquiring, retaining
customers
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CRM Software Capabilities
Customer Service
■ Customer service modules in CRM systems provide information and
tools to increase the efficiency of call centers, help desks, and
customer support staff.
■ They have capabilities for assigning and managing customer
service requests.
■ One such capability is an appointment or advice telephone line.
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CRM Software Capabilities
Marketing
■ Capturing prospect and customer data,
■ Providing product and service information
■ Qualifying leads for targeted marketing
■ Scheduling and tracking direct-marketing mailings or e-
mail
■ Marketing modules also include tools for analyzing
marketing and customer data, identifying profitable and
unprofitable customers, designing products and services to
satisfy specific customer needs and interests, and
identifying opportunities for cross-selling.
■ Cross-selling is the marketing of complementary
products to customers. (For example, in financial services,
a customer with a checking account might be sold a money
market account or a home improvement loan.)
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CRM Software Capabilities
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Customer Loyalty Management Process Map
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Operational CRM
■ Simplifying customer interaction
■ Operational CRM includes customer-facing applications, such as
tools for sales force automation, call center and customer service
support, and marketing automation.
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Analytical CRM
■ Analytical CRM includes applications
that analyze customer data generated by
operational CRM applications to provide
information for improving business
performance.
■ Analytical CRM applications are based
on data from operational CRM systems,
customer touch points, and other sources
that have been organized in data
warehouses or analytic platforms for use in
online analytical processing (OLAP), data
mining, and other data analysis techniques.
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Customer Lifetime Value
■ 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,
– the expected life of the relationship between the customer and the
company.
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Business Value of CRM Systems
■ Increased customer satisfaction
■ Reduced direct marketing costs
■ More effective marketing
■ Lower costs for customer acquisition and retention
■ Increased sales revenue
– By identifying profitable customers and segments for focused marketing and
cross-selling
■ Reduced churn rate (number of customers who stop using or purchasing products or
services)
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Enterprise Application Challenges
■ Expensive to purchase and implement
– Total implementation cost may be four to five times of cost of software
■ Deep-seated technological change
■ Fundamental changes to organization, business processes
– New functions and responsibilities for employees
– SCM systems require business process change for multiple organizations
■ Introduce “switching costs”, dependency on enterprise software vendor
■ Require understanding firm’s data and cleansing data
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Next Generation Enterprise Applications
■ Next-generation enterprise applications also include cloud solutions as
well as more functionality available on mobile platforms.
■ Large enterprise software vendors such as SAP, Oracle, Microsoft, and
Epicor now feature cloud versions of their flagship ERP systems and
also cloud-based products for small and medium-sized businesses (as
described earlier in the Interactive Session on Management).
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Social CRM
■ Social CRM tools enable a business to connect customer
conversations and relationships from social networking sites to
CRM processes.
■ The leading CRM vendors now offer such tools to link data from social
networks to their CRM software.
■ SAP, Salesforce.com, and Oracle CRM products now feature
technology to monitor, track, and analyze social media activity on
Facebook, LinkedIn, Twitter, YouTube, and other sites.
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Business Intelligence in Enterprise Applications
■ Enterprise application vendors have added business intelligence
features to help managers obtain more meaningful information from
the massive amounts of data these systems generate, including
data from the Internet of Things (IoT).
■ SAP now makes it possible for its enterprise applications to use HANA
in-memory computing technology so that they are capable of much
more rapid and complex data analysis.
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References
■ Chapter 9, Management Information Systems By K.C. Laudon, J.P.
Laudon, 17th Edition
■ Chapter 9, Management Information Systems By K.C. Laudon, J.P.
Laudon, 12th Edition
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Thank You
Any Questions?
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