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Chapter

Enterprise Business Systems

McGraw-Hill/Irwin

Copyright 2009 by The McGraw-Hill Companies, Inc. All rights

Learning Objectives

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
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Customer Relationship Management

A customer-centric focus
Customer relationships have become
a companys most valued asset
Every companys strategy should be
to
find and retain the most profitable
customers possible

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Case 1: NetSuite Inc., Berlin Packaging,


Churchill Downs, and Others

CRM software enables sales and marketing professionals to


increase sales revenue by providing more and better services
to customers and prospects.
Many CRM implementations have failed because of the
difficulty data migration from old disparate systems to new
system.

CRM implementation is lot easier to do early in a companys


history than it is later.
Companies need to make sure data are in order before they
launch any major CRM initiative.
Without accurate, complete, and comprehensive data, any
CRM effort will be less than optimal

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Case Study Questions


1. What are the business benefits of CRM implementations
for organizations such as Berlin Packaging and Churchill
Downs? What other uses of CRM would you
recommend to the latter? Provide several alternatives.
2. Do you agree with the idea that smaller organizations
are better positioned to be more effective users of CRM
than larger ones? Why or why not? Justify your answer.
3. One of the main issues noted in the case is the
importance of good data for the success of CRM
implementations. We discussed many of these in
Chapter 5, when we compared the file processing and
database

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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 customers 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: IT Leaders, Vertex Distribution, and


Prevention Partners
ERP systems have become the vital business software
backbone to many companies that just cannot live
without them anymore.
According to Gregor Bailar, former CIO of Capital One,
the most exciting emerging technology for enterprises
in the next three to five years is Open source ERP.
Many small to medium size companies are finding the
licensing fee for commercial ERP systems to be very
high and are looking for open source ERP systems.
Some of the companies are spending the money they
are saving from the license fees on customizing the
package as per their needs.
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Case Study Questions


1. The case highlights differences in adoption of open
source ERP systems between small or medium and
large companies. What are the main reasons behind
these differences? Do you think it is only a matter of
cost? Justify your answer.
2. Enterprise resource planning systems are clearly the
backbone of the modern enterprise. How comfortable
would you feel about recommending the adoption of
an open-source package to perform these functions,
and why? What kinds of resistance, if any, would you
expect to find about your proposal?
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Case Study Questions

3. Do you agree with the rationale


stated by some of the CIOs in this
case that if ERP systems need to
be customized anyway, starting
with an open-source package may
make more sense than with a
commercial one? Why or why
not? Justify your answer.
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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: Perdue Farms and Others


Every year even the best companies are challenged
by the pressure placed on their supply chain during
the holiday season.
According to Brian Tomlin The holiday season is a
difficult time for manufacturers and retailers
because theyre making educated guesses and
bets on what demand is going to be, and theyre not
going to get it right every single time.
Delivering the right number of products to the right
customers at the right time has become very
important for businesses and they are turning to
forecasting and supply chain management tools.
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Case Study Questions


1. What are the key factors that determine the
success or failure of supply chains during the
holiday season? Which of these are or could be
under the control of companies, and which are
inherent in the end consumer business? Provide
several examples.
2. Consider the increasing use of gift cards in lieu of
gifts during the holiday season. What effects does
this new practice introduce into demand planning
and supply chain management? Consider the fact
that virtually nothing is known about the recipients
of gift cards.
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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


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 ecommerce 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: Autosystems: The Business


Value of a Successful 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 4: Autosystems: The Business


Value of a Successful 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


1. Why did Autosystems decide to install the
ActivEntry system? Why did they feel it
necessary to integrate it with their TRANS4M
ERP system?
2. Which three business benefits of the use of
ActivEntry provided the most business value?
3. What changes are already being planned to
improve the use of ActivEntry? What other
improvements should the company consider?
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