1. Copyright 2010 John Wiley & Sons, Inc.
Turban and Volonino
Chapter 10 Enterprise Systems: Supply Chains, ERP, CRM & KM Information Technology for Management Improving Performance in the Digital Economy 7th edition John Wiley & Sons, Inc. Slides contributed by Dr. Sandra Reid Chair, Graduate School of Business & Professor, Technology Dallas Baptist University
Copyright 2010 John Wiley & Sons, Inc.

2. Copyright 2010 John Wiley & Sons, Inc.
Chapter Outline
Essentials of Enterprise Systems and Supply Chains
Supply Chain Management and Its Business Value
Enterprise Resource Planning (ERP) Systems
Customer Relationship Management (CRM)
Knowledge Management and IT
Copyright 2010 John Wiley & Sons, Inc.

3. Copyright 2010 John Wiley & Sons, Inc.
Learning Objectives
Understand the essentials of enterprise systems and computerized supply chain management.
Describe some major problems of implementing supply chains and some innovative solutions.
Describe the need for integrated software and how ERP does it.
Describe CRM and its support by IT.
Describe KM and its relationship to IT.
Copyright 2010 John Wiley & Sons, Inc.

4. Copyright 2010 John Wiley & Sons, Inc.
10.1 Essentials of Enterprise Systems and Supply Chains
Copyright 2010 John Wiley & Sons, Inc.

5. Enterprise systems Enterprise Resource Planning (ERP) systems
Customer Relationship Management (CRM) systems
Knowledge Management (KM) systems
Business Process Management (BPM) systems
Materials Requirement Planning (MRP) systems
Product Lifecycle Management (PLM) systems …

6. Copyright 2010 John Wiley & Sons, Inc.
Task students to bring examples of applications in each category.
DSS – purpose is to support decision making throughout the enterprise, frequently with the help of a data warehouse.
KM – object is to support knowledge creation, storage, maintenance & distribution throughout enterprise.
Intelligent Systems – include a knowledge component, such as expert system or neural network.
BI – computer-based decision analysis usually done online by managers & staff. Includes forecasting, analyzing alternatives, &
evaluating risk & performance.
SCM – efficient management of supply chain end-to-end processes that start with the design of product or service & end when sold,
consumed, or used by the end customer. Some activities include inventory management, materials acquisition, & transformation
of raw materials into finished goods, shipping, & transportation. Goal is to reduce uncertainty, variability & risks; increase control
in the supply chain, thereby positively affecting inventory levels, cycle time, business processes & customer service. Benefits
contribute to increased profitability & competitiveness.
Overview of enterprise system. (Source: Prepared by E. Turban and D. Amoroso.)
Copyright 2010 John Wiley & Sons, Inc.

7. Copyright 2010 John Wiley & Sons, Inc.
Describe business functions related to supply chain systems. (Inventory management, materials acquisition, transformation of raw
materials into finished goods, shipping & transportation.)
The structure of a typical supply chain. (Source: Drawn by E. Turban.)
Copyright 2010 John Wiley & Sons, Inc.

8. Supply Chain Problems
Adding value along the chain is essential for competitiveness, however, problems exist especially in complex or long chains and in cases where many business partners are involved. These problems are due to uncertainties and the need to coordinate several activities, internal units, and business partners.
Demand forecasts are a major source of uncertainties
Competition
Prices
Weather conditions
Technological development
Customer confidence
Uncertainties exist in delivery times
Machine failures
Road conditions
Shipments
Quality problems may also create production delays

9. Supply Chain Problems (Continued)
The bullwhip effect refers to erratic shifts in orders up and down the supply chain because of poor demand forecasting, price fluctuation, order batching, and rationing within the chain.
Even slight demand uncertainties and variability become magnified if each distinct entity, on the chain, makes ordering and inventory decisions with respect to its own interest above those of the chain.
Distorted information can lead to tremendous inefficiencies, excessive inventories, poor customer service, lost revenues, ineffective shipments, and missed production schedules.
A common way to solve the bullwhip problem is by sharing information along the supply chain through EDI, extranets, and groupware technologies. For example employing a vendor-managed inventory (VMI) strategy, the vendor monitors inventory levels and when it falls below the threshold for each product this automatically triggers an immediate shipment.

10. Supply Chain Solutions
Information sharing among supply chain partners (c-commerce) sometimes referred to as the collaboration supply chain is one method to overcome problems in the flow. Others are:
Optimal Inventory Levels
Supply Chain Coordination and Collaboration
Supply Chain Teams
Performance Measurement and Metrics
Various IT-Assisted Solutions
wireless technology
optimal shipping plans
strategic partnerships with suppliers
just-in-time

11. Copyright 2010 John Wiley & Sons, Inc.
In what significant ways has the internet technology changed supply chain management? EDI, just-in-time inventory maintenance & processes;
sharing of costs, responsibilities by partners with the organizations rather than solely by the organization.
Digital supply chains. (Source: Intel, “Building the Digital Supply Chain: An Intel Perspective,” Intel Solutions White Paper, January 2005, Figure 5, p. 9.)
Copyright 2010 John Wiley & Sons, Inc.

12. E-Business Systems & Supply Chains
Better cost performance from improved productivity & lower costs.
Enhanced customer service from improved quality of service.
Improved process capabilities from online business quality consistency.
Higher productivity & dependability from increased control of material flows along the supply chain.
Shortened cycle times due to fewer delays & higher speed.
Greater flexibility in planning & replanning.
Shorten the supply chain itself.
Smooth the related production processes.
Collaborative Planning, Forecasting and Replenishment (CPFR)
Vendor-managed Inventory (VMI)
Internal or External Integration
Copyright 2010 John Wiley & Sons, Inc.

13. E-Business and Supply Chains (Continued)
A major role of EC is to facilitate buying and selling along all segments of the supply chain.
Upstream Activities improve the upstream supply chain through e-procurement
Internal Supply Activities from entering purchase orders, to recording sales, to order fulfillment, to tracking shipments, are usually conducted over a corporate intranet
Downstream Activities enhance the activity downstream activities by providing online ordering
Vertical exchanges combine upstream and downstream EC supply chain activities. These B2B exchanges, provide a medium where buyers and sellers can meet.

14. Copyright 2010 John Wiley & Sons, Inc.
Business Value of SCM
Effective transformation of raw materials into goods and/or services.
Reduce uncertainty & risk.
Improved collaboration to decrease inventory levels & cycle time.
Improved processes & customer service.
Increased profitability & competitiveness.
Copyright 2010 John Wiley & Sons, Inc.

15. Copyright 2010 John Wiley & Sons, Inc.
10.3 Enterprise Resource Planning (ERP) Systems
Copyright 2010 John Wiley & Sons, Inc.

16. Copyright 2010 John Wiley & Sons, Inc.
What is ERP?
Software integrates planning, management & use of all resources in entire enterprise.
Comprises sets of applications that automate back-end operations (financial, inventory management & scheduling).
Modules for cost control, accounts payable/receivable, treasury management & fixed assets.
Benefits range from increased efficiency to improved quality, productivity & profitability.
Copyright 2010 John Wiley & Sons, Inc.

17. Copyright 2010 John Wiley & Sons, Inc.
Informational slide. Used to manage resources. Representative ERP application modules are shown in this figure.
According to wikipedia.org:
An application service provider (ASP) is a business that provides computer-based services to customers over a network. Software offered using an ASP model is also sometimes called On-demand software or software as a service.
Discuss advantages of integrated ERP such as SAP. The major objective of ERP is to integrate all departments & functional information flows
across a company onto a single computer system that can serve all of the enterprise’s needs.
SAP is already developed & can be adapted to almost any organizational systems. Quicker & generally less expensive than creating one
in-house. Another alternative is to lease applications
ERR application modules. (Source: Prepared by D. Amoroso.)
Copyright 2010 John Wiley & Sons, Inc.

18. Copyright 2010 John Wiley & Sons, Inc.
ERP – Lease or Buy?
Self-develop an integrated system, either linking together existing functional packages or by programming a new custom-built system.
Purchase commercially available product (often quicker &/or less expensive). Leading vendor is SAP. Oracle & Computer Associates also make similar products.
Lease from application service providers (ASP) to get the best modules of different vendors.
Lease will typically be least expensive option making it more affordable by even small firms.
Discuss the pros & cons necessary to lease or buy decision making. Typically, least expensive option is to lease; upgrades are often
quicker/easier/less expensive. A system might be so complex that adapting an existing product to tailor to existing needs through
purchase is the best alternative. Each situation must be evaluated using traditional models & analytical tools such as ROI, ROA, NPV
before final decision is made.
Copyright 2010 John Wiley & Sons, Inc.

19. ERP Implementation Issues
ERP vendor and product selection
Matching commercial software with organizational processes
Installing ERP modules
Software complexity ..

20. Copyright 2010 John Wiley & Sons, Inc.
10.4 Customer Relationship Management (CRM)
According to wikipedia:
Customer relationship management (CRM) consists of the processes a company uses to track and organize its contacts with its current and prospective customers. CRM software is used to support these processes; information about customers and customer interactions can be entered, stored and accessed by employees in different company departments. Typical CRM goals are to improve services provided to customers, and to use customer contact information for targeted marketing.
According to our text - CRM is an enterprisewide effort to acquire & retain profitable customers.
Copyright 2010 John Wiley & Sons, Inc.

21. Copyright 2010 John Wiley & Sons, Inc.
CRM is inter-disciplinary so various definitions will apply & add to confusion as to what CRM actually “is.”
Discuss for better understanding the marketing, management, operational perspectives addressing commonalities & where they diverge.
Core concept that recognizes customers are the core of the business & that the company’s success depends on effectively managing
relationships with them.
CRM is a business strategy to select & manage customers to optimize long-term value. Requires a customer-centric philosophy &
culture to support the philosophy effectively corporate-wide.
All decision are made thru & keeping in mind that the strategy is customer-centric, customer focused. Customers are treated
differently because they have different needs & different value to the firm.
CRM applications. (Source: Patricia Seybold Group, An Executive’s Guide to CRM, March 21, 2002.)
Copyright 2010 John Wiley & Sons, Inc.

22. Copyright 2010 John Wiley & Sons, Inc.
CRM Business Strategy
Customers are the core of the business.
Success depends upon company effectively managing relationships with customers.
It is a business strategy to select & manage customers to optimize long-term value.
Requires a customer-centric business philosophy & culture to support effective marketing, sales & services processes.
Idea is simple – treat different customers differently as their needs are different & their value to the company may be different.
Firms must be able to change how its products are configured or its service is delivered, based on needs of individual customers.
CRM can create high customer loyalty. Involvement of all departments is critical.
Copyright 2010 John Wiley & Sons, Inc.

23. Classification of CRM Applications
Customer-facing – include all areas where customers interact with company (call centers, help desks, sales force automation).
Customer-touching – customers interact with the applications (self-service, campaign management, general purpose e-business applications).
Customer-centric intelligence – analyze results of operational processing & use results to improve CRM applications.
Online networking – methods that provide the opportunity to build personal relationships (chat rooms & discussion lists).
Copyright 2010 John Wiley & Sons, Inc.

24. Customer Relationship Management (eCRM)
CRM has been practiced manually by corporations for generations. However, Ecrm (electronic CRM) started in the mid-1990’s ,when customers began using Web browsers, the Internet, and other electronic touch points.
We can differentiate three levels of e-CRM:
Foundational service. This includes the minimum necessary services such as Website responsiveness (e.g., how quickly and accurately the service is provided), site effectiveness, and order fulfillment.
Customer-centered services. These services include order tracking, product configuration and customization, and security/trust. These are the services that matter the most to customers.
Value-added services. These are extra services such as online auctions and online training and education.

25. Customer Relationship Management CRM Activities
Customer Service on the Web
Search and Comparison Capabilities
Free Products and Services
Technical and Other Information and Service
Allowing Customers to Order Products and Services Online
Letting Customers Track Accounts or Order Status
Loyalty Programs
Tools for Customer Service
Personalized Web Pages
FAQs
Chat Rooms
and Automated Response
Call Centers
Troubleshooting Tools
Wireless CRM

26. Issues Related to CRM Failures
Difficulty in measuring intangible benefits.
Failure to identify & focus on specific business problems that the CRM can solve.
Lack of active senior management sponsorship.
Poor user acceptance.
Trying to automate poorly defined business process.
How would you avoid each of these issues?
Establish measurement tool for intangible benefits such as satisfaction – what promotes satisfaction, then measure how we are doing to
the goal.
Use CRM report modules to determine needs & wants versus current offerings. What can be modified to better fit customers’ expectations?
Sell senior management on the benefits such as improved profitability & performance.
Communicate to users what is “in it for them.” Such as improved customer service & higher profitability. Greater employment stability.
Involve users.
Copyright 2010 John Wiley & Sons, Inc.

27. Copyright 2010 John Wiley & Sons, Inc.
Business Value of CRM
Increase in staff productivity.
Cost avoidance.
Increased revenue.
Margin increases.
Reduced inventory costs.
Increased customer satisfaction.
Copyright 2010 John Wiley & Sons, Inc.

28. Copyright 2010 John Wiley & Sons, Inc.
Risks of e-CRM
Taking on more than can be delivered.
Getting over budget & behind schedule.
Poor user adoption.
Expensive maintenance & support.
Isolation.
Garbage in-garbage out.
Failure to measure success.
Discuss methods & measures to avoid each.
Set realistic goals & expectations. Underestimate benefits & overestimate impact/cost.
Involve users at all steps.
Evaluate costs & benefits up front using traditional analytical tools such as ROI, ROA, NPV.
Measure periodically & often. Establish comparative baseline upfront.
Copyright 2010 John Wiley & Sons, Inc.

29. Copyright 2010 John Wiley & Sons, Inc.
10.5 Knowledge Management and IT
Knowledge management (KM) is a process that helps organizations identify, select, organize, disseminate, and transfer important information & expertise that
are part of the organization’s memory & that typically reside within the organization in an unstructured manner.
Copyright 2010 John Wiley & Sons, Inc.

30. Copyright 2010 John Wiley & Sons, Inc.
Informational slide. In the information technology context, knowledge is very distinct from data & information. Whereas data are
a collection of facts, measurements, & statistics, information is organized or processed data that are timely & accurate. Knowledge
is information that is contextual, relevant, & actionable.
Data, information, and knowledge.
Copyright 2010 John Wiley & Sons, Inc.

31. Knowledge as Corporate Asset – Intellectual Capital
Knowledge has the following characteristics that differentiates it from an organization’s other assets
Extraordinary leverage and increasing returns. Knowledge is not subject to diminishing returns. When it is used, it is not consumed. Its consumers can add to it, thus increasing its value.
Fragmentation, leakage, and the need to refresh. As knowledge grows, it branches and fragments. Knowledge is dynamic; it is information in action. Thus, an organization must continually refresh its knowledge base to maintain it as a source of competitive advantage.
Uncertain value. It is difficult to estimate the impact of an investment in knowledge. There are too many intangible aspects.
Uncertain value of sharing. Similarly, it is difficult to estimate the value of sharing the knowledge, or even who will benefit most.
Rooted in time.
Knowledge as a form of capital, must be exchangeable among persons, and it must be able to grow.

32. Types of knowledge
Tacit: Knowlegde is rooted in actions, experience and involvement into a specific context
Cognitive tacit (mental models)
Technical tacit (e.g. surgery skills)
Explicit: Articulated, generalized knowledge

33. Explicit knowledge
Explicit knowledge has been codified (documented) in a form that can be distributed to others or transformed into a process or strategy without requiring interpersonal interaction.
Explicit knowledge (or leaky knowledge) deals with objective, rational, and technical knowledge
Data
Policies
Procedures
Software
Documents
Products
Strategies
Goals
Mission
Core competencies
The more that knowledge is made explicit, the more economically it can be transferred.

34. Tacit knowledge Tacit knowledge is the cumulative store
Tacit knowledge is usually in the domain of subjective, cognitive, and experiential learning; it is highly personal and difficult to formalize. It is also referred to as embedded knowledge since it is usually either localized within the brain of an individual or embedded in the group interactions within a department or business unit.
Tacit knowledge is the cumulative store
of the corporate experiences
Mental maps
Insights
Acumen
Expertise
Know-how
Trade secrets
Skill sets
Learning of an organization
The organizational culture
Tacit knowledge is generally slow and costly to transfer and can be plagued by ambiguity. It is also called sticky knowledge.

35. How is tacit knowledge transferred?
Through associations, apprenticeships, conversations, social and interpersonal interactions or even through simulations.

37. Knowledge management
The goal of knowledge management is for an organization to be aware of individual and collective knowledge so that it may make the most effective use of the knowledge it has.
Firms recognize the need to integrate both explicit and tacit knowledge into a formal information systems - Knowledge Management System (KMS)

38. Why create a KMS?
“We have people scattered around the world that need information to do their job effectively”
Many companies suffer significant setback from loosing key staff.
“Most of the knowledge needed by organizations exists inside them”

39. Copyright 2010 John Wiley & Sons, Inc.
Informational slide. Functioning knowledge management system follows six steps in a cycle; these steps are presented in the figure.
The reason it is cyclical is that knowledge is dynamically refined over time. It is never complete, because over time, the environment
changes & knowledge must be updated to reflect the changes.
The knowledge management system cycle.
Copyright 2010 John Wiley & Sons, Inc.

40. Knowledge Creation
Knowledge creation or knowledge acquisition is the generation of new insights, ideas, or routines.
Socialization mode refers to the conversion of tacit knowledge to new tacit knowledge through social interactions and shared experience.
Combination mode refers to the creation of new explicit knowledge by merging, categorizing, reclassifying, and synthesizing existing explicit knowledge
Externalization refers to converting tacit knowledge to new explicit knowledge
Internalization refers to the creation of new tacit knowledge from explicit knowledge.
Knowledge seeking is the search for and use of internal organizational knowledge.

41. Knowledge sharing
Knowledge sharing is the exchange of ideas, insights, solutions, experiences to another individuals via knowledge transfer computer systems or other non-IS methods.
Knowledge: organizational resource or individual competitive weapon?

42. Knowledge Management – Information Technology
Knowledge management is more than a technology or product, it is a methodology applied to business practices. However, information technology is crucial to the success of knowledge management systems.
Components of Knowledge Management Systems:
Communication technologies allow users to access needed knowledge and to communicate with each other.
Collaboration technologies provide the means to perform group work.
Storage and retrieval technologies (database management systems) to store and manage knowledge.

43. Knowledge Management – Supporting Technologies
Technologies enable advanced functionality in knowledge management systems and form the base for future innovations.
Artificial Intelligence (AI methods: expert systems, neural networks, fuzzy logic, genetic algorithms, etc.)
Intelligent agents are software systems that learn how users work and provide assistance in their daily tasks.
Knowledge Discovery in Databases (KDD) is a process used to search for and extract useful information from volumes of documents and data.
Data mining the process of searching for previously unknown information or relationships in large databases, is ideal for extracting knowledge from databases, documents, , etc.
Model warehouses & model marts extend the role of data mining and knowledge discovery by acting as repositories of knowledge created from prior knowledge-discovery operations
Extensible Markup Language (XML) enables standardized representations of data structures, so that data can be processed appropriately by heterogeneous systems without case-by-case programming.

44. Knowledge Management – IT Products
Technology tools that support knowledge management are called knowware.
Most knowledge management software packages include one or more of the following tools:
collaborative computing tools
knowledge servers
enterprise knowledge portals
electronic document management systems
knowledge harvesting tools
search engines
knowledge management suites.

45. Copyright 2010 John Wiley & Sons, Inc.
Expert location systems (ELSs) are interactive computerized systems that help employees find & connect with colleagues who possess the
expertise required for specific problems – whether they are across the country or across the room – in order to solve specific, critical
business problems in seconds.
Made by companies such as AskMe Corp.
Expert location system of AskMe Corp. (Source: Drawn by E. Turban.)
Copyright 2010 John Wiley & Sons, Inc.

46. Causes of KM failure
It is estimated that KM failure rates range from 50 to 70 percent.
Reasons:
Too much information, or not easily searchable information
Failure in capturing and categorizing knowledge
Over-management deprives Communities of practice of their creativity
Lack of incentives for users
Overemphasis on technology

47. Potential drawbacks
Reuse of existing knowledge may prohibit a company from adapting to changes in its environment.

48. Managerial issues Personnel layoffs Degree of integration Role of IT
Organizational adaptability
Implementation choices in the face of quickly changing tecnology