1. STRATEGIC DECISION MAKING Revving Up Sales at Harley-Davidson
CHAPTER 2
STRATEGIC DECISION MAKING
Opening Case
Revving Up Sales at Harley-Davidson

2. Chapter Two Overview SECTION 2.1 - DECISION-MAKING SYSTEMS
Transaction Processing Systems
Decision Support Systems
Executive Information Systems
SECTION ENTERPRISE SYSTEMS
Enterprise Systems
Supply Chain Management
Customer Relationship Management
Business Process Reengineering
Enterprise Resource Planning

3. Chapter Two Overview
Decision-enabling, problem-solving, and opportunity-seizing systems

4. DECISION-MAKING SYSTEMS
SECTION 2.1
DECISION-MAKING SYSTEMS

5. LEARNING OUTCOMES
Explain the difference between transactional information and analytical information. Be sure to provide an example of each
Define TPS, DSS, and EIS and explain how an organization can use these systems to make decisions and gain competitive advantages
Describe the three quantitative models typically used by decision support systems

6. LEARNING OUTCOMES
Describe the relationship between digital dashboards and executive information systems
Identify the four types of artificial intelligence systems

7. DECISION MAKING
Reasons for the growth of decision-making information systems
People need to analyze large amounts of information
People must make decisions quickly
People must apply sophisticated analysis techniques, such as modeling and forecasting, to make good decisions
People must protect the corporate asset of organizational information

8. DECISION MAKING
Model – a simplified representation or abstraction of reality
IT systems in
an enterprise

9. TRANSACTION PROCESSING SYSTEMS
Moving up through the organizational pyramid users move from requiring transactional information to analytical information

10. TRANSACTION PROCESSING SYSTEMS
Transaction processing system (TPS) - the basic business system that serves the operational level (analysts) in an organization
Online transaction processing (OLTP) – the capturing of transaction and event information using technology to (1) process the information according to defined business rules, (2) store the information, (3) update existing information to reflect the new information
Online analytical processing (OLAP) – the manipulation of information to create business intelligence in support of strategic decision making

11. DECISION SUPPORT SYSTEMS
Decision support system (DSS) – models information to support managers and business professionals during the decision-making process
Three quantitative models used by DSSs include:
Sensitivity analysis – the study of the impact that changes in one (or more) parts of the model have on other parts of the model
What-if analysis – checks the impact of a change in an assumption on the proposed solution
Goal-seeking analysis – finds the inputs necessary to achieve a goal such as a desired level of output

12. DECISION SUPPORT SYSTEMS
What-if analysis

13. DECISION SUPPORT SYSTEMS
Goal-seeking analysis

14. DECISION SUPPORT SYSTEMS
Interaction between a TPS and a DSS

15. EXECUTIVE INFORMATION SYSTEMS
Executive information system (EIS) – a specialized DSS that supports senior level executives within the organization
Most EISs offering the following capabilities:
Consolidation – involves the aggregation of information and features simple roll-ups to complex groupings of interrelated information
Drill-down – enables users to get details, and details of details, of information
Slice-and-dice – looks at information from different perspectives

16. EXECUTIVE INFORMATION SYSTEMS
Interaction between a TPS and an EIS

17. Digital Dashboards
Digital dashboard – integrates information from multiple components and presents it in a unified display

18. Artificial Intelligence (AI)
Intelligent system – various commercial applications of artificial intelligence
Artificial intelligence (AI) – simulates human intelligence such as the ability to reason and learn

19. Artificial Intelligence (AI)
The ultimate goal of AI is the ability to build a system that can mimic human intelligence

20. Artificial Intelligence (AI)
Four most common categories of AI include:
Expert system – computerized advisory programs that imitate the reasoning processes of experts in solving difficult problems
Neural Network – attempts to emulate the way the human brain works
Fuzzy logic – a mathematical method of handling imprecise or subjective information

21. Artificial Intelligence (AI)
Four most common categories of AI include:
Genetic algorithm – an artificial intelligent system that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem
Intelligent agent – special-purposed knowledge-based information system that accomplishes specific tasks on behalf of its users

22. Data Mining
Data-mining systems sift instantly through information to uncover patterns and relationships
Data-mining systems include many forms of AI such as neural networks and expert systems

23. OPENING CASE QUESTIONS Revving Up Sales at Harley-Davidson
How does Talon help Harley-Davidson employees improve their decision-making capabilities?
Identify a few key metrics a Harley-Davidson marketing executive might want to monitor on a digital dashboard
How can Harley-Davidson benefit from using decision support systems in its business

24. SECTION 2.2
ENTERPRISE SYSTEMS

25. LEARNING OUTCOMES
Describe the four basic components of supply chain management
Explain customer relationship management and the benefits it can provide an organization
Define enterprise resource planning and explain its importance to an organization
Identify how an organization can use business process reengineering to improve its business

26. ENTERPRISE SYSTEMS
Organizations can undertake high-profile strategic initiatives including:
Supply chain management (SCM)
Customer relationship management (CRM)
Business process reengineering (BPR)
Enterprise resource planning (ERP)

27. SUPPLY CHAIN MANAGEMENT
Supply Chain Management (SCM) – involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability

28. SUPPLY CHAIN MANAGEMENT
Four basic components of supply chain management include:
Supply chain strategy – strategy for managing all resources to meet customer demand
Supply chain partner – partners throughout the supply chain that deliver finished products, raw materials, and services.
Supply chain operation – schedule for production activities
Supply chain logistics – product delivery process

29. SUPPLY CHAIN MANAGEMENT
Wal-Mart and Procter & Gamble (P&G) SCM

30. SUPPLY CHAIN MANAGEMENT
Effective and efficient SCM systems can enable an organization to:
Decrease the power of its buyers
Increase its own supplier power
Increase switching costs to reduce the threat of substitute products or services
Create entry barriers thereby reducing the threat of new entrants
Increase efficiencies while seeking a competitive advantage through cost leadership

31. SUPPLY CHAIN MANAGEMENT
Effective and efficient SCM systems effect on Porter’s Five Forces

32. CUSTOMER RELATIONSHIP MANAGEMENT
Customer relationship management (CRM) – involves managing all aspects of a customer’s relationship with an organization to increase customer loyalty and retention and an organization's profitability
Many organizations, such as Charles Schwab and Kaiser Permanente, have obtained great success through the implementation of CRM systems

33. CUSTOMER RELATIONSHIP MANAGEMENT
CRM is not just technology, but a strategy, process, and business goal that an organization must embrace on an enterprisewide level
CRM can enable an organization to:
Identify types of customers
Design individual customer marketing campaigns
Treat each customer as an individual
Understand customer buying behaviors

34. CUSTOMER RELATIONSHIP MANAGEMENT
CRM overview

35. BUSINESS PROCESS REENGINEERING
Business process – a standardized set of activities that accomplish a specific task, such as processing a customer’s order
Business process reengineering (BPR) – the analysis and redesign of workflow within and between enterprises
The purpose of BPR is to make all business processes best-in-class

36. BUSINESS PROCESS REENGINEERING
Reengineering the Corporation – by Michael Hammer and James Champy - recommends seven BPR principles

37. Finding Opportunity Using BPR
A company can improve the way it travels the road by moving from foot to horse and then horse to car
BPR looks at taking a different path, such as an airplane which ignore the road completely

38. Finding Opportunity Using BPR
Progressive Insurance mobile claims process

39. Finding Opportunity Using BPR
Types of change an organization can achieve, along with the magnitudes of change and the potential business benefit

40. ENTERPRISE RESOURCE PLANNING
Enterprise resource planning (ERP) – integrates all departments and functions throughout an organization into a single IT system so that employees can make decisions by viewing enterprisewide information on all business operations
Keyword in ERP is “enterprise”

41. ERP SOFTWARE ERP functions offered by all ERP vendors include:
Finance, accounting, sales, marketing, human resources, operations, and logistics
ERP vendors differentiate themselves by offering unique components including:
CRM, SCM, and BI
According to Gartner, the average failure rate for an ERP project is 66 percent

42. Finding The Right ERP Solution
Successful ERP projects share 3 attributes
Overall fit
Off the rack
Off the rack and tailored to fit
Custom made
Proper business analysis
Successful companies spend up to 10 percent of the project budget on a business analysis
Solid implementation plans
A plan is needed to monitor the quality, objectives, and timelines

43. OPENING CASE QUESTIONS Revving Up Sales at Harley-Davidson
Evaluate the HOG CRM strategy and recommend an additional benefit Harley-Davidson could provide to its HOG members to increase customer satisfaction
Describe how Harley-Davidson’s SCM system, Manugistics, could improve its business operations
Provide an illustration of Harley-Davidson’s SCM system including all upstream and downstream participants

44. CLOSING CASE ONE Consolidating Touchpoints for Saab
How has implementing a CRM system enabled Saab to gain a competitive advantage?
Estimate the potential impact to Saab’s business if it had not implemented a CRM system
What additional benefits could Saab receive from implementing a supply chain management system?

45. CLOSING CASE ONE Consolidating Touchpoints for Saab
Model Saab’s supply chain
How is Saab’s CRM implementation going to influence its SCM practices?

46. CLOSING CASE TWO Made-to-Order Businesses
What role does supply chain management and customer relationship management play in a mass customization business strategy?
How can Lands’ End use its CRM system to improve its business?
How can Nike use a CRM system to improve its customer relations?
Why is Nike’s supply chain management system critical to its Nike iD order fulfillment process?

47. CLOSING CASE TWO Made-to-Order Businesses
Choose one of the examples above and explain how an ERP system could help facilitate the mass customization effort
Choose one of the examples above and explain how the company is attempting to gain a competitive advantage with mass customization
Identify one other business that could benefit from the use of mass customization. Explain why this business would need customer relationship management and supply chain management systems to implement a mass customization business strategy

48. CLOSING CASE THREE Delta Airlines Plays Catch-Up
What business risks would Delta be taking if it decided not to catch up with industry leaders in using IT to gain a competitive advantage?
What competitive advantages can an airline gain by using DSS and EIS?
What other industries could potentially benefit from the use of yield management systems?

49. CLOSING CASE THREE Delta Airlines Plays Catch-Up
How can American and United use customer information to gain a competitive?
What types of metrics would Delta executives want to see in a digital dashboard?
How could Delta use supply chain management to improve its operations?