McGraw-Hill/Irwin Copyright © 2008, The McGraw-Hill Companies, Inc. All rights reserved.

Enterprise Business Systems

Chapter

8

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• Identify and give examples to illustrate the following aspects of customer relationship, enterprise research, and supply chain management systems• Business processes supported• Customer and business value provided• Potential challenges and trends

Learning Objectives

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Customer Relationship Management

• A customer-centric focus• Customer relationships have become a company’s

most valued asset• Every company’s strategy should be to

find and retain the most profitable customers possible

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Case 1: Business Benefits of CRM

• Forex Capital Markets trades $20 billion worth of currency per month• 12,000 clients in 70 countries

• Tracking sales leads and prospects• Began with Excel spreadsheets• Switched to Access database• Volume forced move to CRM system

• Access controlled through data security and information sharing privileges

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Case 1: Business Benefits of CRM

• Wyse Technology• World leader in thin-client computing• Revenues in excess of $180 million• Doubled sales within 12 months of installing

CRM system• No additional staff needed

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Case Study Questions

• Why can’t Microsoft Excel spreadsheets and Access database software handle the customer relationship needs of companies like FXCM?• What functions do CRM systems like Salesforce

provide to a company that these software packages do not?

• What business benefits has the Salesforce CRM system provided to FXCM?• To Wyse Technology?

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Case Study Questions

• Salesforce.com is an example of an ASP (application service provider), which was discussed in Chapter 4.• What benefits do you see in this case for that

method of providing a CRM system to a company versus installing a CRM software package?

• What disadvantages might arise?• Which method would you prefer?

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What is CRM?

• Managing the full range of the customer relationship involves• Providing customer-facing employees with a

single, complete view of every customer at every touch point and across all channels

• Providing the customer with a single, complete view of the company and its extended channels

• CRM uses IT to create a cross-functional enterprise system that integrates and automates many of the customer-serving processes

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Application Clusters in CRM

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Contact and Account Management

• CRM helps sales, marketing, and service professionals capture and track relevant data about• Every past and planned contact with prospects

and customers• Other business and life cycle events of customers

• Data are captured through customer touchpoints• Telephone, fax, e-mail• Websites, retail stores, kiosks• Personal contact

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Sales

• A CRM system provides sales reps with the tools and data resources they need to• Support and manage their sales activities• Optimize cross- and up-selling

• CRM also provides the means to check on a customer’s account status and history before scheduling a sales call

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Marketing and Fulfillment

• CRM systems help with direct marketing campaigns by automatic such tasks as• Qualifying leads for targeted marketing• Scheduling and tracking mailings• Capturing and managing responses• Analyzing the business value of the campaign• Fulfilling responses and requests

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Customer Service and Support

• A CRM system gives service reps real-time access to the same database used by sales and marketing• Requests for service are created, assigned,

and managed• Call center software routes calls to agents• Help desk software provides service data

and suggestions for solving problems

• Web-based self-service enables customers to access personalized support information

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Retention and Loyalty Programs

• It costs 6 times more to sell to a new customer• An unhappy customer will tell 8-10 others• Boosting customer retention by 5 percent can

boost profits by 85 percent• The odds of selling to an existing customer are

50 percent; a new one 15 percent• About 70 percent of customers will do business

with the company again if a problem is quickly taken care of

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Retention and Loyalty Programs

• Enhancing and optimizing customer retention and loyalty is a primary objective of CRM• Identify, reward, and market to the most loyal

and profitable customers• Evaluate targeted marketing and relationship

programs

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The Three Phases of CRM

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Benefits of CRM

• Benefits of CRM• Identify and target the best customers• Real-time customization and personalization

of products and services• Track when and how a customer contacts

the company• Provide a consistent customer experience• Provide superior service and support across

all customer contact points

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CRM Failures

• Business benefits of CRM are not guaranteed• 50 percent of CRM projects did not produce

promised results• 20 percent damaged customer relationships

• Reasons for failure• Lack of understanding and preparation• Not solving business process problems first• No participation on part of business stakeholders

involved

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Trends in CRM

• Operational CRM• Supports customer interaction with greater

convenience through a variety of channels• Synchronizes customer interactions consistently

across all channels• Makes the company easier to do business with

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Trends in CRM

• Analytical CRM• Extracts in-depth customer history, preferences,

and profitability from databases• Allows prediction of customer value

and behavior• Allows forecast of demand• Helps tailor information and offers to

customer needs

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Trends in CRM

• Collaborative CRM• Easy collaboration with customers,

suppliers, and partners• Improves efficiency and integration

throughout supply chain• Greater responsiveness to customer needs

through outside sourcing of products and services

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Trends in CRM

• Portal-based CRM• Provides users with tools and information

that fit their needs• Empowers employees to respond to

customer demands more quickly• Helps reps become truly customer-faced• Provides instant access to all internal and

external customer information

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ERP: The Business Backbone

• ERP is a cross-functional enterprise backbone that integrates and automates processes within• Manufacturing• Logistics• Distribution• Accounting• Finance• Human resources

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Case 2: Business Value of ERP

• Autosystems produces headlamps for major automobile manufacturers• Until a few years ago, the manufacturing

process was managed with paper documents• An ERP system was installed, but did not

extend to the shop floor• Significant research was done before

deciding to add the shop floor reporting module

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Case 2: Business Value of ERP

• Installing PCs and ERP software on the shop floor allows Autosystems to• Enter timely, accurate information• Plan more efficiently• Make production changes in order to avoid

labor or scrap problems• Discuss these issues with employees while they

are still current and meaningful

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Case Study Questions

• Why did Autosystems decide to install the ActivEntry system?• Why did they feel it necessary to integrate

it with their TRANS4M ERP system?

• Which three business benefits of the use of ActivEntry provided the most business value?

• What changes are already being planned to improve the use of ActivEntry?• What other improvements should the

company consider?

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What is ERP?

• Enterprise resource planning is a cross-functional enterprise system • An integrated suite of software modules• Supports basic internal business processes• Facilitates business, supplier, and customer

information flows

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ERP Application Components

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ERP Process and Information Flows

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Benefits and Challenges of ERP

• ERP Business Benefits• Quality and efficiency• Decreased costs• Decision support• Enterprise agility

• ERP Costs• Risks and costs are considerable• Hardware and software are a small part

of total costs• Failure can cripple or kill a business

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Costs of Implementing a New ERP

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Causes of ERP Failures

• Most common causes of ERP failure• Under-estimating the complexity of planning,

development, training• Failure to involve affected employees in

planning and development• Trying to do too much too fast• Insufficient training• Insufficient data conversion and testing• Over-reliance on ERP vendor or consultants

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Trends in ERP

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Supply Chain Management (SCM)

• Fundamentally, supply chain management helps a company• Get the right products• To the right place• At the right time• In the proper quantity• At an acceptable cost

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Goals of SCM

• The goal of SCM is to efficiently• Forecast demand• Control inventory• Enhance relationships with customers, suppliers,

distributors, and others• Receive feedback on the status of every link in

the supply chain

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Case 3: Applying Lean Logistics to SCM

• The Tesco supermarket chain is a pioneer in retailing• Used SCM to overcome disadvantage of

weak supplier leverage and expensive logistics• Changed product distribution methods to

reduce labor costs and inventory levels• Got suppliers to ship in smaller quantities,

preconfigured for sales display• Reduced total product “touches” from 150 to 50• Reduced throughput time from 20 days to 5

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Case Study Questions

• What key insights of Tesco’s SCM direction Graham Booth helped revolutionize Tesco’s supply chain and range of retail store formats?• Can these insights be applied to any kind of retail

business?

• How did Dan Jones and the Cardiff Business School of Wales demonstrate the inefficiencies of the Tesco and Britvic supply chains?• Can this methodology be applied to the supply

chain of any kind of business?

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Case Study Questions

• What are the major business and competitive benefits gained by Tesco as the result of its supply chain initiatives?• Can other retail chains and retail stores

achieve some or all of the same results?• Defend your position with examples of

actual retail chains and stores you know.

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What is a Supply Chain?

• The interrelationships• With suppliers, customers, distributors, and

other businesses • Needed to design, build, and sell a product

• Each supply chain process should add value to the products or services a company produces• Frequently called a value chain

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Supply Chain Life Cycle

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Electronic Data Interchange

• EDI• One of the earliest uses of information

technology for supply chain management• The electronic exchange of business transaction

documents between supply chain trading partners• The almost complete automation of an e-

commerce supply chain process • Many transactions occur over the Internet, using

secure virtual private networks

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Typical EDI Activities

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Roles and Activities of SCM in Business

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Planning & Execution Functions of SCM

• Planning• Supply chain design• Collaborative demand and supply planning

• Execution• Materials management• Collaborative manufacturing• Collaborative fulfillment• Supply chain event management• Supply chain performance management

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Benefits and Challenges of SCM

• Key Benefits• Faster, more accurate order processing• Reductions in inventory levels• Quicker times to market• Lower transaction and materials costs• Strategic relationships with supplier

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Goals and Objectives of SCM

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Benefits and Challenges of SCM

• Key Challenges• Lack of demand planning knowledge, tools,

and guidelines• Inaccurate data provided by other information

systems• Lack of collaboration among marketing,

production, and inventory management• SCM tools are immature, incomplete, and

hard to implement

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Trends in SCM

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Case 4: Consequences of ERP Failure

• The goal Agilent Technologies Inc. specializes in measurement and technology• Its goal is to enable customers to speed

their time to market• Achieve volume production• Obtain high-quality precision manufacturing

• Consequences of a new ERP system• One year to stabilize system• $105 million in lost revenue• $70 million in lost profits

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Case 4: Consequences of ERP Failure

• Lessons Learned• Disruptions can be more extensive than expected• Enterprise resource planning is very complex• ERP implementations are more than software • People, process, policies, the company’s culture

should all be taken into consideration

• According to Enterprise Applications Consulting• 99 percent of rollout fiascoes are caused by

management’s inability to spec requirements, and the implementer’s inability to implement specs

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Case 4: Consequences of ERP Failure

• Russ Berrie and Company• First ERP implementation attempt took

three years and cost $10.3 million• Litigation is pending between Russ Berrie

and SAP

• Second attempt• Uses new applications• Is being implement department by department• Uses stand-alone systems

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Case Study Questions

• What are the main reasons companies experience failures in implementing ERP systems?

• What are several key things companies should do to avoid ERP systems failures?

• Why do you think ERP system in particular are often cited as examples of failures in IT systems development, implementation, or management?