311Chapter8

Slide1 : Information Systems Today: Managing in the Digital World 8-1 8 Chapter Building Organizational Partnerships Using Enterprise Information Systems “If the Internet turns out not to be the future of computing, we’re toast.” Larry Ellison, Founder and CEO, Oracle Corporation


Learning Objectives : Information Systems Today: Managing in the Digital World 8-2 Learning Objectives


Learning Objectives : Information Systems Today: Managing in the Digital World 8-3 Learning Objectives


Enterprise Systems : Information Systems Today: Managing in the Digital World 8-4 Enterprise Systems Problem: Information systems growing over time Lack of integration Different computing platforms Difficult to integrate Data must be reentered from one system to another Same pieces of data stored in several versions


Legacy System Approach : Information Systems Today: Managing in the Digital World 8-5 Legacy System Approach


Enterprise System Approach : Information Systems Today: Managing in the Digital World 8-6 Enterprise System Approach


Supporting Business Activities : Information Systems Today: Managing in the Digital World 8-7 Supporting Business Activities Internally focused systems Support functional areas, business processes and decision-making within an organization New information (value) is added at every step


Externally Focused Systems : Information Systems Today: Managing in the Digital World 8-8 Externally Focused Systems Coordinate business activities with customers, suppliers, business partners and others who operate outside the organization Interorganizational systems Streamline the flow of information between companies


Internally Focused Systems: Value Chain : Information Systems Today: Managing in the Digital World 8-9 Internally Focused Systems: Value Chain Flow of information through a set of business activities Core activities – functional areas that process inputs and produce outputs Support activities – enable core activities to take place


Core Activities : Information Systems Today: Managing in the Digital World 8-10 Core Activities Inbound logistics activities Receiving and stocking raw materials, parts and products Cisco – delivery of electronic components from suppliers Operations and manufacturing activities Order processing and/or manufacturing of end products Dell – component parts assembled to make products Outbound logistics activities Distribution of end products Amazon.com – delivery of books to customers


Core Activities (II) : Information Systems Today: Managing in the Digital World 8-11 Core Activities (II) Marketing and Sales activities Presale marketing activities (e.g., creating marketing brochures) Amtrak – use of IS to update prices and schedules Customer service activities Postsale activities HP – downloads related to purchased products


Support Activities : Information Systems Today: Managing in the Digital World 8-12 Support Activities Administrative activities Support of day-to-day operations (for all functional areas) Infrastructure activities Implement hardware and software needed Human resource activities Employee management


Support Activities : Information Systems Today: Managing in the Digital World 8-13 Support Activities Technology development activities Design and development of applications to support the primary activities Procurement activities Purchasing of goods and services (inputs into the primary activities)


Externally Focused Applications – Value System : Information Systems Today: Managing in the Digital World 8-14 Externally Focused Applications – Value System Coordination of multiple value chains


Externally Focused Applications – Value System : Information Systems Today: Managing in the Digital World 8-15 Externally Focused Applications – Value System Information Flows in a Value System Upstream information flow – information received from another company Downstream information flow – information produced by a company and sent to another organization


The Rise of Enterprise Systems : Information Systems Today: Managing in the Digital World 8-16 The Rise of Enterprise Systems Packaged applications Written by third-party vendors Used by many different organizations Useful for standardized, repetitive tasks Cost effective E.g., Microsoft Money and Quicken


The Rise of Enterprise Systems : Information Systems Today: Managing in the Digital World 8-17 The Rise of Enterprise Systems Custom applications Developed exclusively for a specific organization Designed for particular business needs Higher development costs


Evolution of Enterprise Systems : Information Systems Today: Managing in the Digital World 8-18 Evolution of Enterprise Systems Enterprise systems Organizations start with stand-alone applications Legacy systems


Legacy Systems : Information Systems Today: Managing in the Digital World 8-19 Legacy Systems Each department has its own system Infrastructure specific Inefficient processes Potential for inaccuracies


The Need for Integrated Enterprise Systems : Information Systems Today: Managing in the Digital World 8-20 The Need for Integrated Enterprise Systems Advantages of integrated systems Centralized point of access Conversion needed Enterprise Resource Planning (ERP) vendors offer different modules Components that can be selectively implemented E.g., modules of mySAP business suite


Vanilla Versus Customized Software : Information Systems Today: Managing in the Digital World 8-21 Vanilla Versus Customized Software Vanilla version Modules the version comes with out of the box Certain processes might not be supported Customization Additional software or changes to vanilla version Always needs to be updated with new versions of vanilla


Best Practices-Based Software : Information Systems Today: Managing in the Digital World 8-22 Best Practices-Based Software Most ERP vendors build best practices into their ERP systems Identify business processes in need of change Future updates are smoother if businesses change their business processes to fit with ERP systems Is following the best practices always the best strategy? If companies have competitive advantage from unique business processes


Learning Objectives : Information Systems Today: Managing in the Digital World 8-23 Learning Objectives


Business Process Management : Information Systems Today: Managing in the Digital World 8-24 Business Process Management Systematic and structured improvement approach All or part of organization is involved Rethinking and redesign of business processes Became popular in 1990s IS seen as key enabler for radical change Process intended to be cross-functional


BPM Steps : Information Systems Today: Managing in the Digital World 8-25 BPM Steps Develop a vision for the organization (specify business objectives) Identify critical processes that are to be redesigned Understand and measure existing processes as a baseline Identify ways IS can be used for improvement Design and implement a prototype of the new processes


Conditions Leading to a Successful BPM : Information Systems Today: Managing in the Digital World 8-26 Conditions Leading to a Successful BPM Support by senior management Shared vision by all organizational members Realistic expectations Participants empowered to make changes The right people participating Sound management practices Appropriate funding


Enterprise Resource Planning : Information Systems Today: Managing in the Digital World 8-27 Enterprise Resource Planning Data warehouse Large, centralized data repository Single place for data storage and access


Choosing an ERP System : Information Systems Today: Managing in the Digital World 8-28 Choosing an ERP System Control Centralized control vs. control within specific business units Level of detail provided to management Consistency of policies and procedures Business requirements Selection of modules Core and extended components


Core and Extended ERP Components : Information Systems Today: Managing in the Digital World 8-29 Core and Extended ERP Components Core components – support primary internal activities Extended components – support primary external activities


ERP Limitations : Information Systems Today: Managing in the Digital World 8-30 ERP Limitations ERP falls short in communicating across organizational boundaries Not well suited for managing value system activities Other systems can work with ERP to provide these capabilities


Learning Objectives : Information Systems Today: Managing in the Digital World 8-31 Learning Objectives


Customer Relationship Management : Information Systems Today: Managing in the Digital World 8-32 Customer Relationship Management


Customer Relationship Management : Information Systems Today: Managing in the Digital World 8-33 Customer Relationship Management Web has changed the business Customers have the power Transactions vs. relationships Keeping customers satisfied is key CRM Corporate-level strategy Concentrates on the downstream information flow To attract potential customers Creation of customer loyalty Managers need to be able to monitor and analyze factors driving customer satisfaction


Key Benefits of CRM : Information Systems Today: Managing in the Digital World 8-34 Key Benefits of CRM Enables 24/7/365 operations Individualized service Improved information Speeds up problem identification/resolution Speeds up processes Improved integration Improved product development Improved planning


Developing a CRM Strategy : Information Systems Today: Managing in the Digital World 8-35 Developing a CRM Strategy More than just software purchase and installation Enterprise-wide changes


Policy and Business Process Changes : Information Systems Today: Managing in the Digital World 8-36 Policy and Business Process Changes Policies and procedures need to reflect customer-focused culture


Customer Service Changes : Information Systems Today: Managing in the Digital World 8-37 Customer Service Changes Customer-focused measures of quality Process changes to enhance customer experience


Employee Training Changes : Information Systems Today: Managing in the Digital World 8-38 Employee Training Changes Employees from all business areas must value customer service and satisfaction


Data Collection, Analysis and Sharing Changes : Information Systems Today: Managing in the Digital World 8-39 Data Collection, Analysis and Sharing Changes All aspects of customer experience must be tracked, analyzed and shared Consider ethical concerns


Architecture of a CRM : Information Systems Today: Managing in the Digital World 8-40 Architecture of a CRM


Operational CRM : Information Systems Today: Managing in the Digital World 8-41 Operational CRM Systems for customer interaction and service Personalized and efficient customer service Access to complete information about customer


Sales Force Automation : Information Systems Today: Managing in the Digital World 8-42 Sales Force Automation Component of operational CRM Primary goals Identification of potential customers Streamlining of selling processes Improvement of managerial information


Sales Force Automation : Information Systems Today: Managing in the Digital World 8-43 Sales Force Automation Supports day-to-day sales activities Order processing and tracking Contact development, assignment and management Customer history preferences Sales forecasting and performance analysis Sales administration


Advantages of Sales Force Management Systems for Sales Personnel : Information Systems Today: Managing in the Digital World 8-44 Advantages of Sales Force Management Systems for Sales Personnel


Advantages of Sales Force Management Systems for Sales Managers : Information Systems Today: Managing in the Digital World 8-45 Advantages of Sales Force Management Systems for Sales Managers


Examples of Sales Measures Tracked by SFA : Information Systems Today: Managing in the Digital World 8-46 Examples of Sales Measures Tracked by SFA Revenue per sales person, per territory, or as a percentage of sales quota Margins by product category, customer segment, or customer Number of calls per day, time spent per contract, revenue per call, cost per call, ratio of orders to calls Number of lost customers per period or cost of customer acquisition


SFA Provides Improved Understanding of Market Conditions : Information Systems Today: Managing in the Digital World 8-47 SFA Provides Improved Understanding of Market Conditions Improved understanding of markets, segments and customers Improved understanding of competitors Enhanced understanding of organization’s strengths and weaknesses Better understanding of economic structure of the industry Enhanced product development Improved strategy development and coordination with the sales function


Customer Service and Support : Information Systems Today: Managing in the Digital World 8-48 Customer Service and Support Second component of operational CRM Automation of traditional “help desk” services Customer interaction center (CIC) Multiple communication channels Customer service anytime, anywhere through any communication channel Low support cost


Enterprise Marketing Automation : Information Systems Today: Managing in the Digital World 8-49 Enterprise Marketing Automation Third component of an operational CRM Comprehensive view of the competitive environment Common factors tracked by EMS Economic Governmental and public policy Technology and infrastructure Ecology Cultural Suppliers


Analytical CRM : Information Systems Today: Managing in the Digital World 8-50 Analytical CRM Analysis of customer behavior and perceptions Customized marketing Up-selling Retaining customers Key technologies used to create predictive models Data mining Decision support systems Continuous data collection and analysis is necessary


Customer Focused Business Processes Addressed by Analytical CRM : Information Systems Today: Managing in the Digital World 8-51 Customer Focused Business Processes Addressed by Analytical CRM Marketing campaign management and analysis Customer campaign customization Customer communication optimization Customer segmentation and sales coverage optimization Pricing optimization and risk assessment and management


Customer Focused Business Processes Addressed by Analytical CRM : Information Systems Today: Managing in the Digital World 8-52 Customer Focused Business Processes Addressed by Analytical CRM Price, quality and satisfaction analysis of competitors Customer acquisition and retention analysis Customer satisfaction and management Product usage, life cycle analysis, and product development Product and service quality tracking and management


Collaborative CRM : Information Systems Today: Managing in the Digital World 8-53 Collaborative CRM Effective communication with the customer from the entire organization CIC is the key Collaborative CRM enhances communication Greater customer focus Understanding of historical and current needs Lower communication barriers Communication preferences of the customer considered Increased information integration Customer information shared across the organization


Ethical Concerns with CRM : Information Systems Today: Managing in the Digital World 8-54 Ethical Concerns with CRM Can personalization get too personal?


Learning Objectives : Information Systems Today: Managing in the Digital World 8-55 Learning Objectives


Supply Chain Management : Information Systems Today: Managing in the Digital World 8-56 Supply Chain Management Upstream activities Improvement of business processes spanning organizational boundaries Adopted by large organizations Collaboration with suppliers (supply network) Ability to compete more effectively in the market place Cost reduction Increased responsiveness to market demands Focus on upstream information flows Acceleration of product development Reduction of costs of raw materials procurement


Supply Network : Information Systems Today: Managing in the Digital World 8-57 Supply Network


Functions That Optimize the Supply Network (SCM Modules) : Information Systems Today: Managing in the Digital World 8-58 Functions That Optimize the Supply Network (SCM Modules) Supply chain collaboration Collaborative design Collaborative fulfillment Collaborative demand and supply planning Collaborative procurement Production planning Supply chain event management Supply chain exchange Supply chain performance management


SCM architecture : Information Systems Today: Managing in the Digital World 8-59 SCM architecture SCM modules support two functions Supply chain planning - development of resource plans to support production Supply chain execution - execution of supply chain planning


Supply Chain Planning : Information Systems Today: Managing in the Digital World 8-60 Supply Chain Planning Four types of plans are developed Demand planning and forecasting Examination of historic data Distribution planning Delivering products to consumers Warehousing, delivering, invoicing and payment collection Production scheduling Coordination of activities needed to create the product/service Optimization of the use of materials, equipment and labor Procurement planning Development of inventory estimates


Supply Chain Execution : Information Systems Today: Managing in the Digital World 8-61 Supply Chain Execution Management of three key elements Product flow Flow of product from supplier to consumer Automation of product returns Information flow Complete removal of paper documents Access to current information at all times Financial flow Automatic flow of payments


Developing an SCM Strategy : Information Systems Today: Managing in the Digital World 8-62 Developing an SCM Strategy SCM efficiency and effectiveness need to be balanced Efficiency – cost minimization Effectiveness – customer service maximization


Emerging SCM Trends : Information Systems Today: Managing in the Digital World 8-63 Emerging SCM Trends Enterprise portals – B2B marketplace Access point to proprietary information Productivity gains and cost savings Distribution portals Products from single supplier to many buyers Procurement portals Procurement of products between single buyer and multiple suppliers


Example: Distribution Portal : Information Systems Today: Managing in the Digital World 8-64 Example: Distribution Portal Automation of business processes between supplier and multiple customers Before transaction During transaction After transaction Trading exchanges Equilibrium between buyers and sellers Vertical markets


Example: Procurement Portal : Information Systems Today: Managing in the Digital World 8-65 Example: Procurement Portal Automation of business processes between a buyer and multiple suppliers


Trading Exchanges : Information Systems Today: Managing in the Digital World 8-66 Trading Exchanges Small companies don’t have funds for SCM Trading exchanges provide a solution Operated by third-party vendors Revenue model Commission for each transaction Usage and association fees Advertising Many buyers and many sellers can come together Popular trading exchanges www.scrapsite.com (steel) www.paperspace.com (paper) www.sciquest.com (medical equipment)


Key Technologies for Enhancing SCM : Information Systems Today: Managing in the Digital World 8-67 Key Technologies for Enhancing SCM Extensible Markup Language (XML) Specifies rules for tagging elements Specifies how information should be interpreted and used Customizable XML variations Extensible Business Reporting Language (XBRL) Publishing of financial information


Radio Frequency Identification : Information Systems Today: Managing in the Digital World 8-68 Radio Frequency Identification Replacement for standard bar codes Transceiver and antenna Diverse usage opportunities Line-of-sight reading not necessary RFID tags can contain more information than bar codes Scanning can be done from greater distance Passive tags – range of few feet Active tags – hundreds of feet


Use of RFID in Supply Chain Management : Information Systems Today: Managing in the Digital World 8-69 Use of RFID in Supply Chain Management Pallet of inventory processed through an RFID gate


Learning Objectives : Information Systems Today: Managing in the Digital World 8-70 Learning Objectives


The Formula for Enterprise System Success : Information Systems Today: Managing in the Digital World 8-71 The Formula for Enterprise System Success Secure executive sponsorship Most failures due to lack of top-level management support Get help from outside experts Consultants are specifically trained Implementation tends to happen faster Thoroughly train users Most overlooked, underestimated and poorly budgeted expense Training can prevent dissatisfaction Take a multidisciplinary approach to implementations Include end users from all functional areas in the implementation


End of Chapter Content : End of Chapter Content


Opening Case: CRM and Major League Baseball : Information Systems Today: Managing in the Digital World 8-73 Opening Case: CRM and Major League Baseball Major League Baseball Advanced Media (MLBAM) Services MLB.com (since 2001) Focus on the customer Services Team merchandise Live audio and video 1 million subscribers $12-16 million revenue/year Fantasy baseball Mobile content for cell phones Game tickets for all 30 MLB teams All services very successful


Outsourcing Your McDonald’s Order : Information Systems Today: Managing in the Digital World 8-74 Outsourcing Your McDonald’s Order McDonald’s – One of America’s success stories Founded in 1948 in San Bernardino, California $20 billion business 31,000 locations Outsourcing the drive-through All stores already had an Internet connection Orders processed overseas Entered into the queuing system Food quality remains the same


Larry Ellison, Founder and CEO, Oracle Corporation : Information Systems Today: Managing in the Digital World 8-75 Larry Ellison, Founder and CEO, Oracle Corporation Referred to as “the other software billionaire” Oracle second to Microsoft in software sales “If the Internet turns out not to be the future of computing, we’re toast,” Ellison said early in his career


Misusing CRM Data : Information Systems Today: Managing in the Digital World 8-76 Misusing CRM Data 2000 10,000 pounds of meat potentially infected with mad cow disease distributed in Washington State QFC grocery chain sued for not informing customers of a recall 2004 Albertsons’ misused CRM data Pharmaceutical companies paid Albertson’s to ask their customers to switch to more expensive drugs Privacy Rights Clearinghouse sued Albertsons


Targeting or Discriminating? Ethical Pitfalls of CRM : Information Systems Today: Managing in the Digital World 8-77 Targeting or Discriminating? Ethical Pitfalls of CRM CRM can be called a marketer’s dream Getting to know customers Maximizing the benefits gained from customers Customer segmentation Target marketing Companies need to develop ethical principles of CRM use Establish how data will be used Inform customers about the use of data Refrain from stepping over the ethical/unethical line


Three-Dimensional Fabrication : Information Systems Today: Managing in the Digital World 8-78 Three-Dimensional Fabrication Fabbing – three-dimensional (3D) printing 2 printer heads First lays down a fine powder Second head is a gluing agent With each pass of the heads one layer of the model is done Prototype made in hours vs. days Fast production of prototypes that are 3-D Usable With moving parts Hewlett-Packard (HP) – leader 3-D HP printers now available for $1,000


RFID on the Rise : Information Systems Today: Managing in the Digital World 8-79 RFID on the Rise Market for RFID is exploding Expected growth from $2.7 billion (2006) to $12.3 billion (2010) Supply chain elements will account for majority of the growth


The Comics Industry: Digital Distribution to the Rescue : Information Systems Today: Managing in the Digital World 8-80 The Comics Industry: Digital Distribution to the Rescue 1998 – Marvel Comics goes bankrupt The largest player in the industry Creator of 5,000 comic book characters Other smaller companies were no longer in business Transition to big screen and digital media saved the comics Marvel.com 30 older comics online 82% of users also buy in the stores Japanese companies deliver comics to cell phones $400 million yearly revenues