Management Information Systems:
Managing the Digital Firm
Sixteenth Edition • Global Edition
Chapter 9
ACHIEVING OPERATIONAL
EXCELLENCE AND CUSTOMER
INTIMACY: ENTERPRISE
APPLICATIONS
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CHA P T
Achieving Operational Excellence and Customer Intimacy:
9 Enterprise Applications
ER
LEARNING OBJECTIVES CHAPTER C A SES
After reading this chapter, you will be able to Avon Beautifies Its Supply Chain
answer the following questions: Soma Bay Prospers with ERP in the Cloud
1 How do enterprise systems help Kenya Airways Flies Hig h with C ustomer
businesses achieve operational Relationship Management
excellence? Clemens Food Group D elivers with N ew
Enterprise Applications
2 How do supply chain management
systems coordinate planning, production,
and logistics with suppliers?
VIDEO C A SES
3 How do customer relationship
management systems help firms
achieve customer intimacy? Life Time Fitness Gets in Shape with
4 What are the challenges that enterprise Salesforce CRM
applications pose, and how are enterprise Instructional Video:
applications taking advantage of new GS MS Protects Patients by Serializing Every Bottle
technologies? of Drugs
5 How will MIS help my career?
MyLab MIS
Discussion Questions: 9-5, 9-6, 9-7; Hands-on MIS Projects: 9-8, 9-9, 9-10, 9-11;
Writing Assignments: 9-17, 9-18; eText with Conceptual Animations
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Enterprise Application Architecture
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Enterprise Systems
• Enterprise Systems
– Also called “enterprise resource planning (ERP)
systems”
– Suite of integrated software modules and a
common central database
– Collects data from many divisions of firm for use in
nearly all of firm’s internal business activities
– Information entered in one process is immediately
available for other processes
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What is ERP?
Facilitates business,
The backbone of
supplier, and customer
business processes
information flows
A cross-functional
enterprise system
Supports basic An integrated
internal business suite of software
processes modules
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Enterprise Systems
• Enterprise Software
– Built around thousands of predefined business processes that reflect best
practices
• Finance/accounting: General ledger, accounts payable, etc.
• Human resources: Personnel administration, payroll, etc.
• Manufacturing/production: Purchasing, shipping, etc.
• Sales/marketing: Order processing, billing, sales planning, etc.
– To implement, firms:
• Select functions of system they wish to use
• Map business processes to software processes
– Use software’s configuration tables for customizing
* why it is typically best to perform only minimal changes to enterprise software, and instead,
change the way the firm works in order to conform to the software’s business processes.
Because there is one company, one database
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Enterprise Systems
HOW ENTERPRISE
SYSTEMS WORK
Enterprise systems feature a
set of integrated software
modules and a central
database that enables data to
be shared by many different
business processes and
functional areas throughout the
enterprise.
FIGURE 9-1
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Enterprise Systems
• Business value of enterprise systems
– Increase operational efficiency
– Provide firm wide information to support decision
making
– Enable rapid responses to customer requests for
information or products
– Include analytical tools to evaluate overall
organizational performance
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Supply Chain Management Systems
• Supply chain:
– Network of organizations and processes for:
Procuring raw materials
Transforming them into products
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
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Supply Chain Management Systems
NIKE’S SUPPLY CHAIN
FIGURE 9-2 This figure illustrates the major entities in Nike’s supply chain and the flow of information upstream and downstream to coordinate
the activities involved in buying, making, and moving a product. Shown here is a simplified supply chain, with the upstream portion
focusing only on the suppliers for sneakers and sneaker soles.
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Supply Chain Management Systems
• Information and supply chain management
– Inefficiencies cut into a company’s operating costs
Can waste up to 25% of operating expenses
– Just-in-time strategy:
Components arrive as they are needed
Finished goods shipped after leaving assembly line
– Safety stock
Buffer for lack of flexibility in supply chain
– Bullwhip effect
Information about product demand gets distorted as it
passes from one entity to next across supply chain
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Supply Chain Management Systems
THE BULLWHIP EFFECT
FIGURE 9-3 Inaccurate information can cause minor fluctuations in demand for a product to be amplified as one moves further back in the
supply chain. Minor fluctuations in retail sales for a product can create excess inventory for distributors, manufacturers, and
suppliers.
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Supply Chain Management Systems
• Supply chain management software
– Supply chain planning systems
Model existing supply chain
Demand planning
Optimize sourcing, manufacturing plans
Establish inventory levels
Identifying transportation modes
– Supply chain execution systems
Manage flow of products through distribution centers
and warehouses
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I NTERA CTI VE S E S S I O N MANAGEMENT
Soma Bay Prospers with ERP in the Cloud
CASE STUDY QUESTIONS
[Link] and describe the problem discussed in this case. What
management, organization, and technology factors contributed
to the problem?
[Link] was an ERP system required for a solution? How did
having a cloud-based ERP system con- tribute to the solution?
[Link] were the business benefits of Soma Bay’s new enterprise
system? How did it change decision making and the way the
company operated?
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Supply Chain Management Systems
• Global supply chain issues
– Global supply chains typically span greater geographic
distances and time differences
– More complex pricing issues (local taxes,
transportation, etc.)
– Foreign government regulations
• Internet helps companies manage many aspects of
global supply chains
– Sourcing, transportation, communications,
international finance
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Supply Chain Management Systems
• Supply chain management systems
– Push-based model (build-to-stock)
Schedules based on best guesses of demand
– Pull-based model (demand-driven)
Customer orders trigger events in supply chain
– Sequential supply chains
Information and materials flow sequentially from
company to company
– Concurrent supply chains
Information flows in many directions simultaneously
among members of a supply chain network
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Supply Chain Management Systems
THE BULLWHIP EFFECT
FIGURE 9-4 The difference between push- and pull-based models is summarized by the slogan, “Make what we
sell, not sell what we make.”
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Supply Chain Management Systems
• Business value of SCM 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
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Supply Chain Management Systems
THE FUTURE
INTERNET-DRIVEN
SUPPLY CHAIN
The future Internet-driven
supply chain operates like a
digital logistics nervous
system. It provides
multidirectional communication
among firms, networks of firms,
and e-marketplaces so that
entire networks of supply chain
partners can immediately
adjust inventories, orders, and
capacities.
FIGURE 9-5
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Customer Relationship Management Systems
• Knowing the customer
– In large businesses, too many customers and too
many ways customers interact with firm
• Customer relationship management (CRM) systems
– Capture and integrate customer data from all over the
organization
– Consolidate and analyze customer data
– Distribute customer information to various systems
and customer touch points across enterprise
– Provide single enterprise view of customers
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Customer Relationship Management Systems
CUSTOMER
RELATIONSHIP
MANAGEMENT
(CRM)
CRM systems examine
customers from a multifaceted
perspective. These systems
use a set of integrated
applications to address all
aspects of the customer
relationship, including
customer service, sales, and
marketing.
FIGURE 9-6
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Customer Relationship Management Systems
• CRM software
– CRM packages range from niche tools to large-scale
enterprise applications
– More comprehensive have modules for:
Partner relationship management (PRM)
– Integrating lead generation, pricing, promotions, order
configurations, and availability
– Tools to assess partners’ performances
Employee relationship management (ERM)
– E.g. Setting objectives, employee performance management,
performance-based compensation, employee training
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Customer Relationship Management Systems
• CRM packages typically include tools for:
– Sales force automation (SFA)
E.g. sales prospect and contact information, and sales
quote generation capabilities
– Customer service
E.g. assigning and managing customer service requests;
Web-based self-service capabilities
– Marketing
E.g. capturing prospect and customer data, scheduling
and tracking direct-marketing mailings or e-mail
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Customer Relationship Management Systems
HOW CRM
SYSTEMS
SUPPORT
MARKETING
Customer relationship
management software
provides a single point for
users to manage and
evaluate marketing
campaigns across multiple
channels, including e-mail,
direct mail, telephone, the
Web, and wireless messages.
FIGURE 9-7
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Customer Relationship Management Systems
CRM SOFTWARE
CAPABILITIES
The major CRM software
products support business
processes in sales, service, and
marketing, integrating customer
information from many different
sources. Included are support for
both the operational and
analytical aspects of CRM.
FIGURE 9-8
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Customer Relationship Management Systems
CUSTOMER LOYALTY MANAGEMENT PROCESS MAP
FIGURE 9-9 This process map shows how a best practice for promoting customer loyalty through customer service would be modeled
by customer relationship management software. The CRM software helps firms identify high-value customers for
preferential treatment.
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
The min tow types of CRM software:
• Operational CRM: include
– Customer-facing applications
• E.g. tools for sales force automation, call center and customer service support,
and marketing automation
• Analytical CRM: include application that
– Analyze customer data output from operational CRM applications
– Based on data warehouses populated by operational CRM systems and custome
touch points
• Customer lifetime value (CLTV) :it 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 the relationship between
the customer and the company.)
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Customer Relationship Management Systems
• Business value of CRM
– Increased customer satisfaction
– Reduced direct-marketing costs
– More effective marketing
– Lower costs for customer acquisition/retention
– Increased sales revenue
– Reduce churn rate
Number of customers who stop using or purchasing
products or services from a company.
Indicator of growth or decline of firm’s customer base
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Enterprise Applications: New Opportunities and Challenges
• Highly expensive to purchase and implement
– $3.5 million to over $12 million
• Technological changes
• Business process changes
• Organizational changes
• Switching costs, dependence on software vendors
• Data standardization, management, cleansing
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
Enterprise Applications: New Opportunities and Challenges
• Next-generation enterprise applications
– Move is to make applications more flexible, Web-
enabled, integrated with other systems
– Enterprise suites (enterprise solutions)
Software to enable CRM, SCM, and enterprise systems
work together and with suppliers and client systems
Utilize Web services, SOA
– Open source & on-demand solutions
– Mobile compatible; Web 2.0 capabilities
– Complementary analytics products
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Management Information Systems
CHAPTER 9: ACHIEVING OPERATIONAL EXCELLENCE AND
CUSTOMER INTIMACY: ENTERPRISE APPLICATIONS
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