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
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Chapter Outline
10.1 Essentials of Enterprise Systems and Supply Chains
10.2 Supply Chain Management and Its Business Value
10.3 Enterprise Resource Planning (ERP) Systems
10.4 Customer Relationship Management (CRM)
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3. Chapter Outline (cont’d)
10.5 Knowledge Management and IT
10.6 Managerial Issues
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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.
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Figure IT 7eU provides opportunity to discuss overview of IT’s role in corporate strategy setting and its intricate importance to performance as business solutions and the resulting profitability. Throughout the “semester” student learning will be evolving surrounding this chart making it good to begin by going back to it to integrate learning.
Figure IT7eU
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Problems – Running out of gasoline at individual pumps; tanks full & aborted delivery. Supply issues are serious.
Solution – Move to demand driven. Electronic monitors in pumps. Real-time oil levels transmitted to corporate DSS-based controls. ERP transmits levels from all major customers.
Results – Improved decision making all levels. Increased profit. Increased responsiveness & efficiency overall. Less inventory.
Click image for homepage.
According to wikipedia:
A supply chain or logistics network is the system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer.
Decision Support Systems (DSS) are a specific class of computerized information systems that supports business and organizational decision-making activities. A properly-designed DSS is an interactive software-based system intended to help decision makers compile useful information from raw data, documents, personal knowledge, and/or business models to identify and solve problems and make decisions.
Enterprise resource planning (ERP) is an enterprise-wide information system designed to coordinate all the resources, information, and activities needed to complete business processes such as order fulfillment or billing.[
Discuss the competitive necessity for effective supply channels. How might organizations use incentives to collaborate effectively upline & downline? All partners might share in benefits initiated by all. If an organization can increase efficiency, reduce cost through their supply chain, they may have
Competitive advantage…Wal-Mart is a good example.
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10.1 Essentials of Enterprise Systems and Supply Chains
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8. Enterprisewide Systems
ERP - designed to coordinate all the resources, information, and activities needed to complete business processes such as order fulfillment or billing.
Extended ERP – also supports business partners, & most common form.
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.
Click hot links to wikipedia.org for more.
Discuss examples & uses of each. How are each important to achievement of corporate goals?
Manufacturing has need for raw materials but maintaining, counting, ordering inventory is laborious & can be inaccurate; stock-outs
may occur; payment for orders may be outside good business practices (such as within time for cash discount). Utilizing the
common functions within most ERP, inventory levels are monitored electronically thru the use of RFID technology, orders occur
as needed, invoices are generated, payment occurs automatically based upon established payment terms, and shipments are made automatically
so that production schedules can continue as predetermined without interruption.
CRM software is used for collecting customer data so that data mining can be performed to determine current & future need trends. Utilizing
the software, specials can be pushed to appropriate customers only; credit terms can be predetermined & monitored for effectiveness. CRM
helps representatives to know & maintain relationships with customers about what is most relevant to the customer & to the organization.
All of these systems allow for KM processes to be used effectively by making the data available to those with a need to know.
Source: wikipedia.org
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9. Enterprisewide Systems – cont’d
Knowledge Management Systems (KM) - refers to a (generally IT based) system for managing knowledge in organizations, supporting creation, capture, storage and dissemination of information.
Business Process Management (BPM) - is a field of management focused on aligning organizations with the wants and needs of clients. It is a holistic management approach that promotes business effectiveness and efficiency while striving for innovation, flexibility and integration with technology.
Click hot links for more.
What are the pros & cons associated with implementing KM systems? What recommendations do you have for management to
increase KM implementation success? Employees must be given incentive for their knowledge to participate in KM. KM systems
Will break down silos & allow for the knowledge to be managed effectively & efficiently; access is key.
Source: wikipedia.org
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10. Enterprisewide Systems – cont’d
Supply Chain Management (SCM) - is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers.
Materials Requirement Planning (MRP) - is a software based production planning and inventory control system used to manage manufacturing processes.
Click hot links for more.
Discuss how SCM can be a competitive advantage for organizations when used most effectively.
What is the main goal of SCM? To reduce uncertainty, variability, & risks; to increase control in the supply chain to improve
inventory levels, cycle time, business processes & customer service to increase profitability & competitiveness. Efficient &
effective supply chains are critical to survival of most organizations; heavily dependent upon IS.
What are some examples of successful supply chain partnerships? Consider Wal-Mart.
Source: wikipedia.org
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11. Enterprisewide Systems – cont’d
Decision Support Systems (DSS) - are a specific class of computerized information systems that supports business and organizational decision-making activities.
Intelligent Systems – expert systems such as KM.
Business Intelligence (BI) - Common functions of business intelligence applications are reporting, OLAP, analytics, data mining, business performance management, benchmarks, text mining, and predictive analytics.
Click hot links for more.
Compare the strengths and weaknesses of DSS when used at the operational, tactical, & executive levels.
Operational level DSS are most effective because there can be clearly defined criteria for decisions such as operational elements to do
with covering shifts for employees on leave – at what level of volume should they be replaced i.e. airport operations agents handling
passengers on a slow versus peak volume day. Manning models can make these decisions quickly, effectively & efficiently.
Tactical level may have to do with capital investment strategies such as evaluating ROI, ROA, NPV of projects. The criteria for decisions
can at least be defined although there may be plenty of room for adjustment & over-ride of the decision to do with “what if” situations.
Executive DSS have the least defined criteria; there may not be any criteria available for the decisions facing most executives have to
do with the future that is not clearly defined; decisions have to do with what would the competition do given certain actions taken, etc.
Source: wikipedia.org
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Figure 10.1
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.)
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Figure 10.2
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.)
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Figure 10.3
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.)
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Deployed integrated enterprise system structured around supply chain, financial management, ERP, & CRM.
Automated sales force.
Campaign management tools to improve marketing effectiveness.
Click image for hot link to home page.
Discussing article, students should notice successful implementation by IT personnel of:
SCM, CRM, financial applications, KM systems. Implemented new tools for sales force to
improve customer service; market intelligence, & establishment of an e-business presence.
Deployed PeopleSoft applications such as purchasing, general ledger, accounts payable & HR.
Note: See article for more: Brewing Good Business
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10.2 Supply Chain Management and Its Business Value
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17. Managing Collaboration
Inventory management require coordination of all activities & links in supply chain.
Goods move smoothly & on time from supplier to manufacturer to distributor to customer.
Partner collaboration is key success factor.
Sharing of information, upline & downline is essential.
Consider the tutorial as an in-class activity with this slide.
Take this tutorial from cio.com : Supply Chain Management Definition and Solutions
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18. Collaborative Planning
Designed to synchronize production & distribution plans & product flows.
Optimize resource utilization over expanded capacity base.
Increase customer responsiveness.
Reduce inventories.
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Figure 10.4
Discuss importance of each major area in terms of contribution to effective supply chain management.
An organization must be able to increase & decrease supply with changes in demand to effectively manage organization goals & objectives.
Effective SCM makes this possible. Partner contracts for JIT so that stockouts don’t occur is critical. Extranets utilizing Internet technology
are an important component; EDI capabilities.
Execution effectively means that all components are engaged successfully.
Analysis – all areas must be privy to “need to know” information allowing for monitoring & changes as appropriate. This capability also
allows for integration of improvement processes.
Strategy & Planning involves establishing governance contracts with suppliers at all levels; setting performance standards & effective
communication of goals & objectives at all levels.
CPFR model. (Source: VICS.org, “Collaborative Planning, Forecasting, and Replenishment (CPFR): An Overview,” May 18, 2004, Figure 1, p.6.)
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20. Vendor Managed Inventory
Automatic information sharing.
Reduces warehousing costs for suppliers.
Inventory levels are monitored for trigger level for immediate shipment as needed.
Efficient manufacturing schedules.
All participants should share in benefits of efficiencies of scale.
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21. 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.
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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.
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23. Successful Supply Chain Management
Click images for hot links to home pages.
Task students to research others.
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10.3 Enterprise Resource Planning (ERP) Systems
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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.
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Continuously seeks to streamline its supply chain operations.
Must accelerate new product development.
Devises ways to offer customers greater choice of better products at lower cost.
ERP allowed company to access more timely & accurate data & reduce cost.
For Further Exploration from IT At Work, 10.3:
What is the role of the ERP for Colgate-Palmolive?
Who are the major beneficiaries of new system?
How is the SCM being improved?
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27. Successful ERP Implementations
Click images for hot links to home pages. These are examples in the text of successful ERP implementations.
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Figure 10.5
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.)
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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.
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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.
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Figure 10.6
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.)
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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.
Check out this tutorial at cio.com for more: Customer Relationship Management
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33. 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).
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Levels & Types of e-CRM
Foundational service – minimum necessary services such as web site responsiveness.
Customer-centered services – order tracking, product configuration/customization & security/trust. Services that matter the most to customers. Primarily on the web.
Value-added services – extra such as online auctions, online training & education.
Loyalty programs – recognize customers who repeatedly use services (products) offered.
According to wikipedia.org:
eCRM - activities to manage customer relationships by using the Internet, web browsers or other electronic touch points. The challenge hereby is to offer communication and information on the right topic, in the right amount, and at the right time that fits the customer’s specific needs.
Data mining is the process of extracting hidden patterns from data. As more data is gathered, with the amount of data doubling every three years,[1] data mining is becoming an increasingly important tool to transform this data into information.
Discuss importance to business of such loyalty programs as the airlines offering of frequent flyers programs, casinos use their clubs to reward frequent players.
Airlines loyalty programs such as Frequent Flyer Miles are important because travelers will select the airlines with the most lucrative programs for
future free travel – even with inconveniences in other, current travels. It helps the airlines to fill up their seats which adds to their profitability
and organizational health. In DFW area, American Airlines is the dominant carrier. However, they have route access to virtually the entire world
offering generally convenient flight opportunities along with frequent flyer program option. This loyalty is critical to their success, to protect
their capital & operational investments.
What is the role of data mining? To establish future trends of needs & wants of existing & prospective customers. To integrate planned
change management.
How is one-to-one relationship achieved in such systems? A company can determine what a customer may need based upon what the
current level of purchasing & spending is whereby giving the opportunity to promote a discount, related product/service, etc.,
directly to that customer through , letter, phone call, representative visit, etc.
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35. Tools for Customer Service
Personalized web pages used to record purchases & preferences.
FAQs commonly used for dealing with repetitive customer questions.
& automated response
Chat rooms
Live chat
Call centers
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Figure 10.7
What are managerial benefits associated with CRM systems? Ability to have one-to-one advertising. Build direct relationships with customers to
promote loyalty. Effective management of resources such as manpower available certain hours of preferred days.
What does data mining have to do with CRM? System to quickly find trends in buying patterns, changes, etc., for better decision making.
Traditional vs. mobile CRM.
Copyright 2010 John Wiley & Sons, Inc.

37. 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.
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Table 10.1
Informational slide. Managerial guidelines for implementing CRM & avoiding CRM failure are provided in this table.
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Business Value of CRM
Increase in staff productivity.
Cost avoidance.
Increased revenue.
Margin increases.
Reduced inventory costs.
Increased customer satisfaction.
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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.
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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.
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Figure 10.8
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.
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Knowledge
Information that is contextual, relevant & actionable.
Extraordinary leverage & increasing returns.
Fragmentation, leakage & the need to refresh.
Uncertain value.
Uncertain value of sharing.
Rooted in time.
Intellectual capital (intellectual assets) is another term used for knowledge; an implied financial value to knowledge.
Task students to bring examples of knowledge levels. For instance, airport manning model is an example of tacit knowledge.
According to wikipedia.org:
Tacit knowledge, people are not often aware of the knowledge they possess or how it can be valuable to others. Tacit knowledge is considered more valuable because it provides context for people, places, ideas, and experiences.
Explicit knowledge is knowledge that has been or can be articulated, codified, and stored in certain media. It can be readily transmitted to others.
Goal of knowledge management is for an organization to be aware of individual & collective knowledge so that it may make the most effective use of the knowledge it has.
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Problem – need to keep large employee base up-to-date & ahead of competitors & clients. Spread lessons learned so not to repeat mistakes.
Solution – implemented knowledge management system.
Results – early problems, however, initiated modifications to rate usefulness of knowledge.
For further exploration IT At Work, 10.6:
Why are consulting types of organizations so interested in KM? It gives them a framework from which to start instead of requiring
that they gather, summarize, & analyze the data. They are looking for better ways of doing business, new business, improved
business opportunities.
How can organizations deal with the knowledge overload? With categorization, organization & rating knowledge usefulness.
Is a reward system the best approach to participation? Yes. That what gets rewarded, gets done.
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Figure 10.9
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.
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Figure 10.10
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.)
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Figure 10.11
SimMAGIC is a product of HamStar of Taiwan. The company combines KM & e-learning. It uses the knowledge stored in corporate knowledge
bases to create learning modules that are shown in this figure.
KM and e-learning (SimMAGIC). (Source: Courtesy of HamStar Technology LTD.)
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10.6 Managerial Issues
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49. Major Managerial Issues
Ethical – responsibilities to employees as business needs change.
How much to integrate – risk.
Role of IT – support & strategic.
Organizational adaptability – software versus existing processes.
Going global – complicate existing processes.
Customer is king/queen – key success factor.
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