1. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 9-1 Chapter 8 Building Organizational Partnerships Using Enterprise Information Systems We have this beautiful, elegant, high-I.Q. part of our business that we have been working hard on for many years.” Jeff Bezos, Founder and CEO of Amazon.com We have this beautiful, elegant, high-I.Q. part of our business that we have been working hard on for many years.” Jeff Bezos, Founder and CEO of Amazon.com

2. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Enterprise Systems 9-2 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

3. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Legacy System Approach 9-3

4. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Enterprise System Approach 9-4

5. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Internally focused systems 9-5  Support functional areas, business processes, and decision making within an organization  New information (value) is added at every step

6. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Externally Focused Systems 9-6 Coordinate business activities with customers, suppliers, business partners, and others who operate outside the organization Interorganizational systems  Streamline the flow of information between companies

7. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Internally Focused Systems: Value Chain 9-7 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

8. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Core Activities 9-8 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

9. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Core Activities (cont’d) 9-9 Marketing and Sales activities  Presale marketing activities (e.g., creating marketing brochures)  Amtrak—use of IS to update prices and schedules Customer service activities  Post-sale activities  HP—downloads related to purchased products

10. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Support Activities 9-10 Administrative activities  Support of day-to-day operations (for all functional areas) Infrastructure activities  Implement hardware and software needed Human resource activities  Employee management

11. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Support Activities (cont’d) 9-11 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)

12. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Externally Focused Applications—Value System 9-12 Coordination of multiple value chains

13. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Externally Focused Applications—Value System (cont’d) 9-13 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

14. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 The Rise of Enterprise Systems 9-14 Packaged applications  Written by third-party vendors  Used by many different organizations  Useful for standardized, repetitive tasks  Cost effective  Examples: Microsoft Money and Quicken

15. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 The Rise of Enterprise Systems (cont’d) 9-15 Custom applications  Developed exclusively for a specific organization  Designed for particular business needs  Higher development costs

16. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Evolution of Enterprise Systems 9-16 Enterprise systems  Organizations start with stand-alone applications  Legacy systems

17. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Legacy Systems 9-17 Each department has its own system  Infrastructure specific  Inefficient processes  Potential for inaccuracies

18. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 The Need for Integrated Enterprise Systems 9-18 Advantages of integrated systems  Centralized point of access  Conversion needed Enterprise Resource Planning (ERP) vendors offer different modules  Components that can be selectively implemented  Example: Modules of mySAP business suite

19. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Vanilla Versus Customized Software 9-19 Vanilla version  Features and modules that an enterprise system 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

20. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Best Practices-Based Software 9-20 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

21. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Business Process Management (BPM) 9-21 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

22. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 BPM Steps 9-22 1.Develop a vision for the organization (specify business objectives) 2.Identify critical processes that are to be redesigned 3.Understand and measure existing processes as a baseline 4.Identify ways IS can be used for improvement 5.Design and implement a prototype of the new processes

23. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Conditions Leading to a Successful BPM 9-23 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

24. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Enterprise Resource Planning (ERP) 9-24 Data warehouse  Large, centralized data repository  Single place for data storage and access

25. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Choosing an ERP System 9-25 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

26. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Core and Extended ERP Components 9-26 Core components—support primary internal activities Extended components—support primary external activities

27. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 ERP Limitations 9-27 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

28. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Customer Relationship Management (CRM) 9-28

29. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Customer Relationship Management(CRM) (cont’d) 9-29 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

30. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Key Benefits of CRM 9-30 1.Enables 24/7/365 operation 2.Individualized service 3.Improved information 4.Speeds problem identification/resolution 5.Speeds processes 6.Improved integration 7.Improved product development 8.Improved planning

31. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Developing a CRM Strategy 9-31 More than just software purchase and installation Enterprise-wide changes

32. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Policy and Business Process Changes 9-32 Policies and procedures need to reflect customer- focused culture

33. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Customer Service Changes 9-33 Customer-focused measures of quality Process changes to enhance customer experience

34. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Employee Training Changes 9-34 Employees from all business areas must value customer service and satisfaction

35. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Data Collection, Analysis, and Sharing Changes 9-35 All aspects of customer experience must be tracked, analyzed, and shared Consider ethical concerns

36. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Architecture of a CRM 9-36

37. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Operational CRM 9-37 Systems for customer interaction and service  Personalized and efficient customer service  Access to complete information about customer

38. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Sales Force Automation 9-38 Component of operational CRM Primary goals  Identification of potential customers  Streamlining of selling processes  Improvement of managerial information

39. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Sales Force Automation (cont’d) 9-39 Supports day-to-day sales activities:  Order processing and tracking  Account and contact management  Opportunity management  Sales management  Territory management  Customer history, preferences, (product and communication), and management  Sales forecasting and performance analysis

40. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Advantages of Sales Force Management Systems for Sales Personnel 9-40

41. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Advantages of Sales Force Management Systems for Sales Managers 9-41

42. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Examples of Sales Measures Tracked by SFA 9-42 1. Revenue per sales person, per territory, or as a percentage of sales quota 2. Margins by product category, customer segment, or customer 3. Number of calls per day, time spent per contract, revenue per call, cost per call, ratio of orders to calls 4. Number of lost customers per period or cost of customer acquisition

43. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 SFA Provides Improved Understanding of Market Conditions 9-43 1. Improved understanding of markets, segments and customers 2. Improved understanding of competitors 3. Enhanced understanding of organization’s strengths and weaknesses 4. Better understanding of economic structure of the industry 5. Enhanced product development 6. Improved strategy development and coordination with the sales function

44. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Customer Service and Support (CSS) 9-44 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

45. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Enterprise Marketing Management (EMM) 9-45 Third component of an operational CRM Make sure right messages are sent by the right channels Customer lists need to be managed carefully Individualized attention to each potential customer Extensive analytical capabilities

46. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Analytical CRM 9-46 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

47. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Customer Focused Business Processes Addressed by Analytical CRM 9-47 1. Marketing campaign management and analysis 2. Customer campaign customization 3. Customer communication optimization 4. Customer segmentation and sales coverage optimization 5. Pricing optimization and risk assessment and management

48. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Customer Focused Business Processes Addressed by Analytical CRM (cont’d) 9-48 6. Price, quality, and satisfaction analysis of competitors 7. Customer acquisition and retention analysis 8. Customer satisfaction and complaint management 9. Product usage, life-cycle analysis, and product development 10. Product and service quality tracking and management

49. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Collaborative CRM 9-49 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

50. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Ethical Concerns with CRM 9-50 Can personalization get too personal?

51. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Supply Chain Management 9-51 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

52. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Supply Network 9-52

53. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Functions That Optimize the Supply Network (SCM Modules) 9-53 1. Supply chain collaboration 2. Collaborative design 3. Collaborative fulfillment 4. Collaborative demand and supply planning 5. Collaborative procurement 6. Production planning 7. Supply chain event management 8. Supply chain exchange 9. Supply chain performance management

54. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 SCM architecture 9-54 SCM modules support two functions  Supply chain planning— development of resource plans to support production  Supply chain execution— execution of supply chain planning

55. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Supply Chain Planning (SCP) 9-55 Four types of plans are developed: 1. Demand planning and forecasting o Examination of historic data 2. Distribution planning o Delivering products to consumers o Warehousing, delivering, invoicing, and payment collection 3. Production scheduling o Coordination of activities needed to create the product/service o Optimization of the use of materials, equipment, and labor 4. Procurement planning o Development of inventory estimates

56. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Supply Chain Execution (SCE) 9-56 Management of three key elements 1. Product flow o Flow of product from supplier to consumer o Automation of product returns 2. Information flow o Complete removal of paper documents o Access to current information at all times 3. Financial flow o Automatic flow of payments

57. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Developing an SCM Strategy 9-57 SCM efficiency and effectiveness need to be balanced  Efficiency— cost minimization  Effectiveness— customer service maximization

58. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Emerging SCM Trends 9-58 Enterprise portals—B2B marketplace  Access point to proprietary information  Productivity gains and cost savings Distribution portals o Products from single supplier to many buyers Procurement portals o Procurement of products between single buyer and multiple suppliers

59. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Example: Distribution Portal 9-59 Automation of business processes between supplier and multiple customers  Before transaction  During transaction  After transaction Trading exchanges  Equilibrium between buyers and sellers  Vertical markets Source: http://www.dell.com

60. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Procurement Portal 9-60 Automation of business processes between a buyer and multiple suppliers

61. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Trading Exchanges 9-61 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)

62. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Key Technologies for Enhancing SCM 9-62 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

63. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Radio Frequency Identification (RFID) 9-63 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—range of hundreds of feet Source: MERO AG.

64. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 Use of RFID in Supply Chain Management 9-64 Pallet of inventory processed through an RFID gate Source: MERO AG.

65. IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 6/22/2016 The Formula for Enterprise System Success 9-65 1.Secure executive sponsorship  Most failures due to lack of top-level management support 2.Get help from outside experts  Consultants are specifically trained  Implementation tends to happen faster 3.Thoroughly train users  Most overlooked, underestimated, and poorly budgeted expense  Training can prevent dissatisfaction 4.Take a multidisciplinary approach to implementations  Include end users from all functional areas in the implementation 5.Look beyond ERP