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Terms you need to know: ERP, CRM, SCM, BI and have a general understanding of what these systems do, their benefits
and challenges. Know to about the business benefits of IT and the types of industries that are focused on improving
their customer service.
In this reading we will learn about Enterprise Resource Planning Systems (ERPs) and the add-on components of
Customer Relationship Management Systems (CRM), Supply Chain Management Systems (SCM) and Business
Intelligence Systems (BI). It is frequently expected by employers that hire MIS and other technology savvy students that
job candidates understand these technologies. This reading is just a high level overview of what these systems are and
what they can do for companies, you will learn more about them in later courses.
Customer Service is a major concern for todays companies. The Internet has created more knowledgeable consumers
many of whom are very price sensitive. This is particularly true with products that are very similar (i.e. are not easily
differentiated) such as books, electronics, toys, etc. One paperback copy of The Hunger Games is no different from
another paperback copy of the book so where you buy it at Amazon.com, or Barnes & Noble, or Wal-mart - makes no
difference in product quality. What can vary between book sellers is price or service. Search engines, such as Google,
and price comparison tools take the effort out of determining which store has the best price so competition on price is
difficult for todays businesses. Thus the main way for companies to differentiate themselves to consumers is through
customer service. If you like the service Frys Electronics provides over the service provided by Amazon.com you may
well choose to make your purchase at Frys even if it costs a bit more than would the purchase at Amazon.com. This is
why customer service is such a big deal in todays competitive markets and why new IT solutions supporting customer
service are sought. Some tools that can improve customer service are ERPs and CRMs and less directly, SCM and BI.
Application software can support many different business processes across the company. For example:
Business Process
Functional Applications
Customer Management
Sales forecasting
Product and Brand management
Account tracking
Customer Service
Human Resources
Assessment
Development
HR Planning
General Ledger
Accounting
AR & AP
Cash Management
Cost Accounting
Forecasting and Planning
Inventory (raw finished goods)
Logistics (Inbound & Outbound)
Manufacturing &
Operations
Supplier Management
Manufacturing Planning (MRP)
Real-time scheduling
Order management
ERP
Wailgum, Thomas (2007). ERP Definition and Solutions, A CIO.com Tutorial,
http://www.cio.com/article/40323/ERP_Definition_and_Solutions#erp, Accessed 10/12/2013.
ERP Defined
Enterprise resource planning software, or ERP, doesnt live up to its acronym. Forget about planningit doesnt do
much of thatand forget about resource, a throwaway term. But remember the enterprise part. This is ERPs true
ambition. It attempts to integrate all departments and functions across a company onto a single computer system that
can serve all those different departments particular needs.
That is a tall order, building a single software program that serves the needs of people in finance as well as it does the
people in human resources and in the warehouse. Each of those departments typically has its own computer system
optimized for the particular ways that the department does its work. But ERP combines them all together into a single,
integrated software program that runs off a single database so that the various departments can more easily share
information and communicate with each other.
That integrated approach can have a tremendous payback if companies install the software correctly.
Take a customer order, for example. Typically, when a customer places an order, that order begins a mostly paper-based
journey from in-basket to in-basket around the company, often being keyed and rekeyed into different departments
computer systems along the way. All that lounging around in in-baskets causes delays and lost orders, and all the keying
into different computer systems invites errors. Meanwhile, no one in the company truly knows what the status of the
order is at any given point because there is no way for the finance department, for example, to get into the warehouses
computer system to see whether the item has been shipped. "Youll have to call the warehouse" is the familiar refrain
heard by frustrated customers.
ERP vanquishes the old standalone computer systems in finance, HR, manufacturing and the warehouse, and replaces
them with a single unified software program divided into software modules that roughly approximate the old
standalone systems. Finance, manufacturing and the warehouse all still get their own software, except now the software
is linked together so that someone in finance can look into the warehouse software to see if an order has been shipped.
Most vendors ERP software is flexible enough that you can install some modules without buying the whole package.
Many companies, for example, will just install an ERP finance or HR module and leave the rest of the functions for
another day.
ERPs are large, complex systems that are notoriously hard and costly to implement. The cost varies
widelyfrom 100,000 for small companies to 300 million for large companies (ex. Nestle)
Despite many improvements in the software, failed ERP implementations are still far too common
According to Gartner, the average failure rate for an ERP project is 66 percent. With those results, it is
no wonder that some organizations view ERP as a necessary, strategic evil. The key word here though
is necessary.
Many companies strive to make good financial decisions by making smart investments. The best way to
ensure a good investment in ERP is to understand why failure occurs and how to avoid it.
The first challenge is that ERP comes in many flavors. Its main purpose is to provide support and automation
to a business process. The business world has many different business models with many ERP products
available that serve them. Companies must find the right fit before it purchases an ERP system. Why Is ERP So
Hard To Implement? 80% of problems with ERP implementations are organizational, only 20% are technical (Accenture).
Problems often stem from firms:
underestimating the complexity of the planning, development, and training people need
trying to do too much, too fast
believing everything the software vendors and/or consultants say
dismal attempts at Change Management
failure to involve the soon-to-be-disrupted employees in the planning & development phases
seeing an ERP project as an IS project not as an organization-wide strategy
providing services and products that are exactly what your customers want
CRM Summary:
CRM is not just a technology, but a strategy that an organization must embrace on an enterprise-wide level - although
CRM has many technical components, it is actually a process and business goal simply enhanced by technology. To use
CRM effectively, organizations must first decide that they want to build strong customer relationships and then they
determine how IT can support their goals
CRM is particularly helpful for sales personnel. Sales departments were the first to begin developing CRM systems with
sales force automation a system that automatically tracks all of the steps in the sales process. Such a process is
illustrated below:
CRM can also provide graphical representations of trends, customers, sales projections and product research through
dashboards such as the one below from salesforce.com.
Salesforce.com CRM -1.28% is the worlds leading CRM software vendor with 14% market share in 2012 ($2.5B
in sales)
SAP (12.9%, $2.3B in sales)
Oracle ORCL NaN% (11.1%, 2.01B in sales)
Microsoft MSFT -1.59% (6.3%, $1.1B in sales)
IBM IBM -0.59% (3.6%, $649M in sales) and all others. The top ten vendors worldwide generated $10.9B in
sales alone in 2012.
spreadsheets spread out all over the place), but it can be nightmarish to try to get that information flowing on a fast, reliable
basis from all the areas of the company. ERP is the battering ram that integrates all that information in a single application,
and SCM applications benefit from having a single major source to go to for up-to-date information. Most CIOs who have tried
to install SCM applications say they are glad they did ERP first. They call the ERP projects "putting your information house in
order." Of course, ERP is expensive and difficult, so you may want to explore ways to feed your SCM applications the
information they need without doing ERP first. These days, most ERP vendors have SCM modules, so doing an ERP project may
be a way to kill two birds with one stone. In addition, the rise and importance of CRM systems inside companies today puts
even more pressure on a company to integrate all of its enterprisewide software packages. Companies will need to decide if
these products meet their needs or if they need a more specialized system.
Applications that simply automate the logistics aspects of SCM are less dependent upon gathering information from around
the company, so they tend to be independent of the ERP decision. But chances are, companies will need to have these
applications communicate with ERP in some fashion. It's important to pay attention to the software's ability to integrate with
the Internet and with ERP applications because the Internet will drive demand for integrated information. For example, if a
company wants to build a private website for communicating with their customers and suppliers, the company will want to
pull information from ERP and supply chain applications together to present updated information about orders, payments,
manufacturing status and delivery.
On average, companies that employ SCM well deliver 17% better fulfillment, hold 15% less inventory, and have 65% the
cash-to-cash cycle time. Some companies save up to 8% of revenue in total supply chain costs
Business Intelligence
Mulcahy, Ryan, (2007). Business Intelligence Definition and Solutions, A CIO.com Tutorial,
One crucial component of BIbusiness analyticsis quietly essential to the success of companies in a wide range of
industries, and more famously essential to the success of professional sports teams such as the Boston Red Sox, Oakland
As and New England Patriots.
With an analytical approach, the Patriots managed to win the Super Bowl three times in four years. The team uses data
and analytical models extensively, both on and off the field. In-depth analytics help the team select players and stay
below the NFL salary cap. Patriots coaches and players are renowned for their extensive study of game film and
statistics, and Coach Bill Belichick reads articles by academic economists on statistical probabilities of football outcomes.
Off the field, the team uses detailed analytics to assess and improve the "total fan experience." At every home game, for
example, 20 to 25 people have specific assignments to make quantitative measurements of the stadium food, parking,
personnel, bathroom cleanliness and other factors.
In retail, Wal-Mart uses vast amounts of data and category analysis to dominate the industry. Harrahs has changed the
basis of competition in gaming from building mega-casinos to analytics around customer loyalty and service. Amazon
and Yahoo aren't just e-commerce sites; they are extremely analytical and follow a "test and learn" approach to business
changes. Capital One runs more than 30,000 experiments a year to identify desirable customers and price credit card
offers.
saving the city $2 million during three years. Likewise, with the help of BI tools, Toyota realized it had been double-paying its
shippers to the tune of $812,000 in 2000. Companies that use BI to uncover flawed business processes are in a much better
position to successfully compete than companies that use BI merely to monitor what's happening.
BI Summary
BI enables business users to receive data for analysis that is:
Reliable
Consistent
Understandable
Easily manipulated
BI Helps a firm know where it has been, where, it is now and where will it be in the near future. An example analysis a BI
system can provide is association detection. Association Detection reveals the degree to which variables are related and
the nature and frequency of these relationships in the information. Maytag uses association detection to ensure that
each generation of appliances is better than the previous generation. Maytags warranty analysis tool automatically
detects potential issues, provides quick and easy access to reports, and performs multidimensional analysis on all
warranty information
Another BI technique is Market Basket Analysis which can detect customers buying behavior and predict future
behavior by identifying affinities among customers choices of products and services