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8 Enterprise Business Systems

I. CHAPTER OVERVIEW

Foundation Concepts: Enterprise e-Business Systems outlines the goals and components of customer relationship

management, enterprise resource planning, and supply chain management, and discusses the benefits and challenges

of these major enterprise e-business applications.

Section I: Customer Relationship Management: The Business Focus

Section II: Enterprise Resource Planning: The Business Backbone

Section III: Supply Chain Management: The Business Network

II. LEARNING OBJECTIVES

Learning Objectives

1. Identify and give examples to illustrate the following aspects of customer relationship management,enterprise resource management, and supply chain management systems:

a. Business processes supported

b. Customer and business value provided

c. Potential challenges and trends

O’Brien, Management Information Systems, 7/eIM - Chapter 8 pg. 1

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III. TEACHING SUGGESTIONS

The purpose of this chapter is to give students an understanding of the use of information systems to support the major

functional areas in business. Figure 8.2 discusses five major application clusters in customer relationship management.

Figure 8.4 illustrates how CRM supports the three phases of the relationship between a business and its customers.

Figure 8.5 outlines four types or categories of CRM that are being implemented by many companies today andsummarizes their benefits to a business.

Figure 8.7 presents the major application components of an ERP system. Figure 8.10 illustrates the relative size and

types of costs of implementing an ERP system in a company. Figure 8.11 discusses the four major developments and

trends that are evolving in ERP applications.

Figure 8.14 outlines the Internet technologies and supply chain management software that can help companies

reengineer and integrate the functional processes in the supply chain life cycle. Figure 8.16 can be used to discuss

with students how SCM helps us understand the role and activities of SCM in business. For example, it can be used to

raise discussions on how Internet technologies and supply chain management software can help a company to

reengineer and integrate the functional processes in the supply chain life cycle. Figure 8.19 illustrates the trends in the

use of supply chain management today as three possible states in a company’s implementation of SCM systems.


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IV: LECTURE NOTES

Section I: Customer Relationship Management: The Business Focus

Introduction

Customer-focused business is one of the top business strategies that can be supported by information technology.

Many companies are implementing customer relationship management (CRM) business initiatives and information

systems as part of a customer-focused or customer centric strategy to improve their chances for success in today’s

competitive business environment.

Analyzing Mitsubishi Motor Sales

We can learn a lot from this case about the many ways companies are implementing customer relationship management

systems. Take a few minutes to read it, and we will discuss it (See Mitsubishi Motor Sales: Implementing Customer

Relationship Management Systems in Section IX).

What is CRM? : [Figure 8.2]

• CRM is described as a cross-functional e-business application that integrates and automates many

customer-serving processes in sales, direct marketing, accounting and order management, and customer service

and support.

• CRM systems create an IT framework that integrates all the functional processes with the rest of a company’s

business operations.

• CRM systems consist of a family of software modules that perform the business activities involved in such front

office processes.

• CRM software provides the tools that enable a business and its employees to provide fast, convenient, dependable,

and consistent service to its customers.

Contract and Account Management

CRM software helps sales, marketing, and service professionals capture and track relevant data about every past and

planned contact with prospects and customers, as well as other business and life cycle events of customers.

Sales

CRM software tracks customer contacts and other business and life cycle events of customers for cross-selling and

up-selling.

Marketing and Fulfilment

CRM software can automate tasks such as qualifying leads, managing responses, scheduling sales contacts, and

providing information to prospects and customers.

Customer Service and Support

CRM helps customer service managers quickly create, assign, and manage service requests. Help desk software assists

customer service reps in helping customers whom are having problems with a product or service, by providing relevantservice data and suggestions for resolving problems.

Retention and Loyalty Programs

• It costs six times more to sell to a new customer than to sell to an existing one.

• A typical dissatisfied customer will tell eight to ten people about his or her experience.

• A company can boost its profits 85 percent by increasing its annual customer retention by only 5 percent.

• The odds of selling a product to a new customer are 15 percent, whereas the odds of selling a product to an existing

customer are 50 percent.


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• Seventy percent of complaining customers will do business with the company again if it quickly takes care of a

service snafu.

• More than 90 percent of existing companies don’t have the necessary sales and service integration to support

e-commerce.

Examples of business benefits of customer relationship management include:

•

CRM allows a business to identify and target their best customers; those who are the most profitable to thebusiness, so they can be retained as lifelong customers for greater and more profitable services.

• CRM enables real-time customization and personalization of products and services based on customer wants,

needs, buying habits, and life cycles.

• CRM can keep track of when a customer contacts the company, regardless of the contact point.

• CRM enables a company to provide a consistent customer experience and superior service and support across all

the contact points a customer chooses.

The Three Phases of CRM: [Figure 8.4]

CRM can be viewed as an integrated system of Web-enabled software tools and databases accomplishing a variety of

customer-focused business processes that support the three phases of the relationship between a business and its

customers.• Acquire – a business relies on CRM software tools and databases to help it acquire new customers by doing a

superior job of contract management, sales prospecting, selling, direct marketing, and fulfilment.

o The goal of these CRM functions is to help customers perceive the value of a superior product

offered by an outstanding company.

• Enhance – Web-enabled CRM account management and customer service and support tools help keep customers

happy by supporting superior service from a responsive networked team of sales and service specialists and

business partners. CRM sales force automation and direct marketing and fulfilment tools help company’s

cross-sell and up-sell to their customers, thus increasing their profitability to the business.

o The value perceived by customers is the convenience of one-stop shopping at attractive prices.

• Retain – CRM analytical software and databases help a company proactively identify and reward its most loyal

and profitable customers to retain and expend their business via targeted marketing and relationship marketingprograms.

o The value perceived by customers is of a rewarding personalized business relationship with “their

company”.

Benefits and Challenges of CRM

• CRM allows a business to identify and target their best customers; those who are the most profitable to the

business, so they can be retained as lifelong customers for greater and more profitable services.

• CRM enables real-time customization and personalization of products and services based on customer wants,

needs, buying habits, and life cycles.

• CRM can keep track of when a customer contacts the company, regardless of the contact point.

• CRM enables a company to provide a consistent customer experience and superior service and support across allthe contact points a customer chooses.

CRM Failures:

• Major reason for the failure of CRM systems is the lack of understanding and preparation.

Trends in CRM: [Figure 8.5]


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Four types or categories of CRM that are being implemented by many companies today include:

• Operational CRM – most businesses start out with operational CRM systems such as sales force automation and

customer service centers.

• Analytical CRM – analytical CRM applications are implemented using several analytical marketing tools, such as

data mining, to extract vital data about customers and prospects for targeted marketing campaigns.

• Collaborative CRM – CRM systems to involve business partners as well as customers in collaborative customer

service.

• Portal-based CRM – Internet, intranet, and extranet Web-based CRM portals as a common gateway for various

levels of access to all customer information, as well as operational, analytical, and collaborative CRM tools for

customers, employees, and business partners.

Increasingly, businesses are moving to collaborative CRM systems, to involve business partners as well as customers

in collaborative customer services. This includes systems for customer self-service and feedback, as well as partner

relationship management (PRM) systems.


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IV: LECTURE NOTES (con’t)

Section II: Enterprise Resource Planning: The Business Backbone

Introduction

Enterprise resource planning (ERP) systems serve as a cross-functional enterprise backbone that integrates and

automates many internal business processes and information systems within the manufacturing, logistics, distribution,

accounting, finance, and human resource functions of a company.

Analyzing Agilent Technologies and Russ Berrie

We can learn a lot about the major challenges businesses face when implementing ERO systems from this case. Take

a few minutes to read it, and we will discuss it (See Agilent Technologies and Russ Berrie: Challenges of

Implementing ERP Systems in Section IX).

What is ERP?: [Figure 8.7]

Enterprise resource planning (ERP) is a cross-functional enterprise system that serves as a framework to integrateand automate many of the business processes that must be accomplished within the manufacturing, logistics,

distribution, accounting, finance, and human resources functions of a business. Characteristics of ERP software

include:

• ERP software is a family of software modules that supports the business activities involved in vital back-office

processes.

• ERP gives a company an integrated real-time view of its core business processes.

• ERP systems track business resources, and the status of commitments made by the business no matter what

department has entered the data into the system.

• ERP software suites typically consist of integrated modules of manufacturing, distribution, sales, accounting, and

human resource applications.

Benefits and Challenges of ERP

• Quality and efficiency – ERP creates a framework for integrating and improving a company’s internal business

processes that results in significant improvements in the quality and efficiency of customer service, production,

and distribution.

• Decreased costs – many companies report significant reductions in transaction processing costs and hardware,

software, and IT support staff compared to the non-integrated legacy systems that were replaced by their new ERP

systems.

• Decision support – ERP provides vital cross-functional information on business performance quickly to

managers to significantly improve their ability to make better decisions in a timely manner across the entire

business enterprise.

• Enterprise agility – ERP can be used in breaking down many former departmental and functional walls, which

results in more flexible organizational structures, managerial responsibility, and work roles. The result is a more

agile and adaptive organization and workforce that can more easily capitalize on new business opportunities.

The Cost of ERP: [Figure 8.10]


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• Costs and risks involved in implementing ERP are considerable.

• Hardware and software costs are a small part of the total costs. The costs of developing new business processes

(reengineering) and preparing employees for the new system (training and change management) make up the bulk

of implementing a new ERP system.

• Converting data from previous legacy systems to the new cross-functional ERP system is another major category

of ERP implementation costs.

Causes of ERP Failures:

• Business managers and IT professionals underestimate the complexity of the planning, development, and training

that are needed to prepare for a new ERP system that would radically change their business processes and

information systems.

• Failure to involve affected employees in the planning and development phases and change management programs

• Trying to do too much too fast in the conversion process.

• Insufficient training in the new work tasks required by the ERP system.

• Failure to do enough data conversion and testing.

• Overreliance by company or IT management on claims of ERP software vendors or the assistance of prestigious

consulting firms hired to lead the implementation.

Trends in ERP: [Figure 8.11]

Four major developments and trends that are evolving in ERP applications include:

• ERP software packages are gradually being modified into more flexible products.

• In relation to the growth of the Internet and corporate intranets and extranets prompted software companies to use

Internet technologies to build Web interfaces and network capabilities into ERP systems.

• Development of interenterprise ERP systems that provide Web-enabled links between key business systems of a

company and its customers, suppliers, distributors, and others.

• ERP software companies have developed modular, Web-enabled software suites that integrate ERO, customer

relationship management, supply chain management, procurement, decision support, enterprise portals, and other

business applications and functions.


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Section III: Supply Chain Management: The Business Network

Introduction

Fundamentally, supply chain management helps a company get the right products to the right place at the right time, in

the proper quantity and at an acceptable cost. The goal of SCM is to efficiently manage this process by forecasting

demand; controlling inventory; enhancing the network of business relationships a company has with customers,

suppliers, distributors, and others; and receiving feedback on the status of every link in the supply chain. To achieve

this goal, many companies today are turning to Internet technologies to Web-enable their supply chain processes,

decision-making, and information flows.

Analyzing TaylorMade Golf and HON Industries

We can learn a lot about how Internet technologies are radically transforming and improving the supply chains of

e-business enterprises from this case. Take a few minutes to read it, and we will discuss it (See TaylorMade Golf and

HON Industries: The Business Value of Supply Chain Management in Section IX).

What is SCM?: [Figure 8.14]

Supply chain management is a cross-functional interenterprise system that uses information technology to help

support and manage the links between some of a company’s key business processes and those of its suppliers,

customers, and business partners. The goal of SCM is to create a fast, efficient, and low-cost network of business

relationships, or supply chain, to get a company’s products from concept to market.

According to the Advanced Management Council, supply chain management has three business objectives:

• Get the right product to the right place at the least cost.

• Keep inventory as low as possible and still offers superior customer service.

• Reduce cycle times. Supply chain management seeks to simplify and accelerate operations that deal with how

customer orders are processed through the system and ultimately filled, as well as how raw materials are acquired

and delivered for manufacturing processes.

Electronic Data Interchange

Electronic data interchange (EDI) involves the electronic exchange of business transaction documents over the

Internet and other networks between supply chain trading partners (organizations and their customers and suppliers).

Data representing a variety of business transaction documents are electronically exchanged between computers using

standard document message formats. Characteristics of EDI software include:

• EDI software is used to convert a company’s own document formats into standardized EDI formats as specified

by various industry and international protocols.

• Formatted transaction data are transmitted over network links directly between computers, without paper

documents or human intervention.

• Besides direct network links between the computers of trading partners, third-party services are widely used.• EDI eliminates the printing, mailing, checking, and handling by employees of numerous multiple-copy forms of

business documents.

Benefits of the business use of EDI include:

• Reduction in paper, postage, and labor costs

• Faster flow of transactions as formatted transaction data are transmitted over network links directly between

computers, without paper documents or human intervention.

• Reductions in errors


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• Increases in productivity

• Support of just-in-time (JIT) inventory policies

• Reductions in inventory levels

• Value-added network companies offer a variety of EDI services. They can offer secure, lower cost EDI services

over the Internet.

• Smaller businesses can now afford the costs of EDI services.

The Role of SCM: [Figure 8.16]

SCM supports the objectives of the top three management levels of an organization (strategic, tactical, and operational).

The role of information technology in SCM is to support these objectives with interenterprise information systems that

produce many of the outcomes a business needs to effectively manage its supply chain.

Benefits and Challenges of SCM

Major business benefits that are possible with effective supply chain management systems include:

• Faster, more accurate order processing, reductions in inventory levels, quicker time to market, lower transaction

and materials costs, and strategic relationships with suppliers.

• Companies can achieve agility and responsiveness in meeting the demands of their customers and the needs of

their business partners.

Major business challenges include:

• Lack of proper demand planning knowledge, tools, and guidelines is a major source of SCM failure.

• Inaccurate or overoptimistic demand forecasts will cause major production, inventory, and other business

problems, no matter how efficient the rest of the supply chain management process is constructed.

• Inaccurate production, inventory, and other business data provided by a company’s other information systems are

frequent causes of SCM problems.

• Lack of adequate collaboration among marketing, production, and inventory management departments within a

company, and with suppliers, distributors, and others.

•

SCM software tools are considered to be immature, incomplete, and hard to implement by many companies whoare installing SCM systems.

Trends in SCM: [Figure 8.19]

Three possible stages in a company’s implementation of SCM systems.

• First stage – a company concentrates on making improvements to its internal supply chain process and its external

processes and relationships with suppliers and customers.

• Second stage – a company accomplishes substantial supply chain management applications by using selected

SCM software programs internally, as well as externally via intranet and extranet links among suppliers,

distributors, customers, and other trading partners.

• Third stage – company begins to develop and implement cutting-edge collaborative supply chain management

applications using advance SCM software, full-service extranets links, and private and public e-commerceexchanges.


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Summary

● Customer Relationship Management: The Business Focus. Customer relationship management is a

cross-functional enterprise system that integrate and automates many of the customer-serving processes in sales,marketing, and customer services that interact with a company’s customers. CRM systems use information technology

to support the many companies who are reorienting themselves into customer-focused businesses as a top business

strategy. The major application components of CRM include contact and account management, sales, marketing and

fulfillment, customer service and support, and retention and loyalty programs, all aimed at helping a company acquire,

enhance, and retain profitable relationships with its customers as a primary business goal. However, many companies

have found CRM systems difficult to implement properly due to lack of adequate understanding and preparation by

management and affected employees. Finally, many companies are moving toward collaborative CRM systems that

support the collaboration of employees, business partners, and the customers themselves in enhancing profitable

customer relationships.

● Enterprise Resource Planning: The Business Backbone. Enterprise resource planning is a cross-functional

enterprise system that integrated and automates many of the internal business processes of a company, particularly

those within the manufacturing, logistics, distribution, accounting, finance, and human resource functions of the

business. Thus, ERP serves as the vital backbone information system of the enterprise, helping a company achieve the

efficiency, agility, and responsiveness required to succeed in a dynamic business environment. ERP software typically

consists of integrated modules that give a company a real-time cross-functional view of its core business processes,

such as production, order processing, and sales, and its resources, such as cash, raw materials, production capacity, and

people. However, properly implementing ERP systems is a difficult and costly process that has caused serious

business loses for some companies, who underestimated the planning, development, and training that were necessary

to reengineer their business processes to accommodate their new ERP systems. However, continuing developments in

ERP software, including Web-enables modules and e-business software suites, have made ERP more flexible and

user-friendly, as well as extending it outward to a company’s business partners.

● Supply Chain Management: The Business Network. Supply chain management is a cross-functional

inter-enterprise system that integrated and automates the network of business processes and relationships between a

company and its suppliers, customers, distributors, and other business partners. The goal of SCM is to help a company

achieve agility and responsiveness in meeting the demands of their customers and needs of their suppliers, by enablingit to design, build, and sell its products using a fast, efficient, and low cost network of business partners, processes, and

relationships, or supply chain. SCM is frequently subdivided into supply chain planning applications, such as demand

and supply forecasting, and supply chain execution, such as inventory management, logistics management, and

warehouse management. Developing effective supply chain systems and achieving the business goals of SCM has

proven to be a complex and difficult challenge for many firms. But SCM continues to be a major concern and top

e-business initiative as companies increase their use of Internet technologies to enhance integration and collaboration

with their business partners, and improve the operational efficiency and business effectiveness of their supply chains.


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V. KEY TERMS AND CONCEPTS - DEFINED

Customer Relationship Management (250):

CRM is described as a cross-functional e-business application that integrates and automates many customer-serving

processes in sales, direct marketing, accounting and order management, and customer service and support.

CRM: Application Components (250):

Components of CRM include: marketing and fulfilment, customer service and support, retention and loyalty programs,

contact and account management, and sales (cross-sell and up-sell).

CRM: Business Benefits (254):

Acquiring, enhancing, and retaining profitable relationships with customers.

CRM: Challenges (254):

Resistance from sales and customer service professionals who were not adequately involved in the development of the

system.

CRM: Trends (255):

Toward Web portals and collaborative systems involving business partners as well as customers to coordinate salesand service across all marketing channels.

e-Business Suites (265):

An integrated system of software modules for customer relationship management, enterprise resource planning, supply

chain management, and other business applications.

Electronic Data Interchange (270):

The automatic electronic exchange of business documents between the computers of different organizations.

Enterprise Resource Planning (258):

Using integrated cross-functional software to reengineer, manufacturing, distribution, finance, human resources and

other basic business processes of a company to improve its efficiency, agility, and profitability.

ERP: Application Components (258):

Applications components include: production planning, integrated logistics, accounting and finance, human resources,

sales distribution and order management.

ERP: Business Benefits (262):

Improvements in the quality, efficiency, cost, and management of internal business processes.

ERP: Challenges (262):

Failure of order processing and inventory accounting systems that had been reengineered to accommodate a new

cross-functional system.

ERP: Trends (264):

Towards more flexible, user-friendly, Web-enabled software, integrated into e-business software suites.

Supply Chain (269):

The network of business processes and interrelationships among businesses that are needed to build, sell, and deliver

a product to its final customer.

Supply Chain Management (269):

Integrating management practices and information technology to optimize information and product flows among the

processes and business partners within a supply chain.


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SCM: Application Components (269):

Includes demand forecasting, inventory management, logistics management, and warehouse management systems.

SCM: Business Benefits (274):

Development of a fast, efficient, and low cost network of business partners to get products from concept to market.

SCM: Challenges (274):A lack of adequate demand planning knowledge, tools, and guidelines can cause major overproduction and excess

inventory problems.

SCM: Trends (275):

Toward the use of Internet technologies to integrate and enhance collaboration with a company’s network of business

partners.


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VI. REVIEW QUIZ - Match one of the key terms and concepts

1 1 Customer relationship management 10 1c CRM - Challenges

2 4 Enterprise resource planning 11 4c ERP – Challenges

3 6 Supply chain management 12 6c SCM – Challenges

4 1a CRM – Application components 13 1d CRM – Trends5 4a ERP – Application components 14 4d ERP – Trends

6 6a SCM – Application components 15 6d SCM – Trends

7 1b CRM – Business benefits 16 2 E-business suites

8 4b ERP – Business benefits 17 3 Electronic data interchange

9 6b SCM – Business benefits 18 5 Supply chain


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VII. ANSWERS TO DISCUSSION QUESTIONS

1. Should every company become a customer-focused business? Why or why not?

It is a well-known fact that to survive in today’s competitive environment, companies have no choice but to be

become customer-focused. No longer can companies expect to rely on traditional methods of buying and selling

of their products to suppliers, intermediaries or channel members. The channels have changed, and companies

are closer to the consumer who is the actual user of the product. Technology is increasingly being used in the

marketplace (marketspace) to reach these consumers and businesses have come to realize that the relationships

that they build with these consumers are their most valuable assets. Today’s consumers can quickly change

from one company’s product offering to other companies with a click of a mouse. As such, a customer-focused

business is one that will more likely have a competitive advantage. A customer-focused business strategy is not

a matter of choice - rather it is a matter of necessity, and technology makes this possible. CRM allows a

business to identify and target their best customers, those who are the most profitable to the business, so they

can be retained as lifelong customers for greater and more profitable services. It makes possible real-time

customisation and personalization of products and services based on customer wants, needs, buying habits, and

life cycles. CRM can also keep track of when a customer contacts the company, regardless of the contact point.And CRM systems can enable a company to provide a consistent customer experience and superior service and

support across all the contact points a customer chooses. These benefits provide strategic business value to a

company and major customer value to its customers.

2. Why would systems that enhance a company’s relationships with customers have such a high rate of

failure?

Customer relationships management systems are very complex systems to develop. Many failures happen when

firms try to create a cross-functional enterprise system that will integrate and data from a wide array of

departments into one system. For example, integrating data from sales, marketing, manufacturing, customer

service etc. is a daunting task. e enterprise. Organizations view cross-functional enterprise systems as a

strategic way to use IT to share information resources and improve the efficiency and effectiveness of business

processes, thus helping an e-business attain its strategic objectives. Building such seamless CRM systems toenable employees to see a “total picture” of a customer is difficult. Research shows that the major reason for

high failure rates is lack of understanding and preparation. For example, many CRM projects are implemented

without the proper participation of the business stakeholders involved – both employees and customers are not

prepared for the new processes or challenges that are part of a new CRM implementation.

3. Refer to the Real World Case on Mitsubishi Motor Sales in the chapter. Why have many CRM

systems failed to provide promised benefits like those generated by Mitsubishi systems?

Many CRM systems fail to provide the expected benefits like those realized by Mitsubishi’s system simply

because of poor planning. Many companies are under the impression that all they have to do is to implement a

CRM system and the benefits will come. This could not be farther from the truth. Mitsubishi put a lot of

research and planning into this project in its initial stages. Rather than going with one massive integrated system,

they installed CRM software components and slowly phased in the development approach so employees couldbe thoroughly trained on each new application.

4. How could some of the spectacular failures of ERP systems have been avoided?

In answering this question, students could first start out by stating the most common causes of failed systems,

then make suggestions as to how to avoid them such as knowing what you want the system to do, involve people,

understand change management, hire consultants with proven track records, conduct extensive conversion and

data testing etc.


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Failures of ERP systems as stated in the text include: Business managers and IT professionals have been the

major cause of ERP failures. The reason given is that these individuals underestimate the complexity of the

planning, development, and training that are needed to prepare for a new ERP system that would radically

change their business processes and information systems. Failure to involve affected employees in the planning

and development phases and change management programs, or trying to do too much too fast in the conversion

process, are also typical causes of failed ERP projects. Insufficient training in the new work tasks required by

the ERP system, and failure to do enough data conversion and testing, are other causes of failure. In other cases,ERP failures are also due to overreliance by company or IT management on the claims of ERP software vendors

or the assistance of prestigious consulting firms hired to lead the implementation.

5. Should companies continue to use EDI systems? Why or why not?

1) Certainly companies should continue to use EDI systems that are in operation through their organizations.

These systems were the earliest uses of information technology for supply chain management, and they involve

the electronic exchange of business transaction documents over the Internet and other networks between supply

chain trading partners. Typically, EDI software is used to convert a company’s own document formats into

standardized EDI formats as specified by various industry and international protocols. Thus, EDI is an example

of the almost complete automation of an e-commerce supply chain process. EDI is still a popular

data-transmission format among major trading partners, primarily to automate repetitive transactions. It will

continue to be used for years to come basically because these systems are doing exactly what they were

originally designed to do and they are still meeting the needs of many firms.

6. Refer to the Real World Case on Agilent Technoliges and Russ Berrie in the chapter. What do you

think caused the major failure of Agilent’s ERP implementation? Explain your reasons for their

failure, and why they did not act to avoid the reasons you specify.

Agilent Technologies: Faced a major problem of migrating as many as 2,200 legacy applications over to the

Oracle format. The company does not appear to have prepared for the extensive work required to convert their

legacy systems. In essence, it appears that Agilent did not realize the “very complex nature of the enterprise

resource planning and implementation” was going to be. Agilent appears to have been under the impression that

developing and implementing a new ERP system was as simple as installing the software packages. They did

not realize that in actual fact, ERP systems require a fundamental transformation of a company’s business

processes. People, processes, policies, the company’s culture are all factors that should be taken into

consideration when implementing a major enterprise system.

Russ Berrie and Co: Russ Berrie and Co. made the decision to move their legacy business systems over to a

suite of enterprise resource planning software, customer relationship management, and financial applications.

Their goal was to phase the new project in over phases lasting 18 months. Their implementation process was to

install the applications one department at a time, starting with a stand-alone implementation in purchasing. For

Russ Berrie and Co., their thoughts were to mitigate implementation risk by taking a phased in-approach.

7. How can the problem of overenthusiastic demand forecasts in supply chain planning be avoided?

Implementing collaborative SCM systems is a very complex undertaking. A lack of proper demand planning

knowledge, tools, and guidelines are stated as major sources of SCM failure. Inaccurate and overenthusiastic

demand forecasts will cause major production, inventory, and other business problems, no matter how efficient

the rest of the supply chain management process is constructed. Inaccurate production, inventory, and otherbusiness data provided by a company’s other information systems are a frequent cause of SCM problems. Any

lack of adequate collaboration among marketing, production, and inventory management departments within a

company, and with suppliers, distributors, and others, will sabotage any SCM system. Even the SCM software

tools themselves are considered to be immature, incomplete, and hard to implement by many companies who are

installing SCM systems.

Given this information, students will provide suggestions to correct the problem of overenthusiastic demand

forecasts by make suggestions such as ensuring that systems currently in place are capturing real-time and


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correct data. Also, getting everyone on board of the project early so that problems can be identified before

implementation. Conversion, testing, training, etc should be carefully conducted to correct problems.

8. What challenges do you see for a company that wants to implement collaborative SCM systems? How

would you meet such challenges?

Creating a real-time SCM infrastructure is a daunting and ongoing issue and quite often, a point of failure. Asstated in the text, one of the chief reasons of the failure of SCM systems is that the planning, selection, and

implementation of SCM solutions is becoming even more complex as the pace of technological change

accelerates and the number of company’s partners increases.

9. Refer to the Real World Case on TaylorMade Golf and HON Industries in the chapter. What re

several ways a small business could use supply chain management to improve the efficiency and

business value of its supply chain? Give several examples to illustrate your answer.

As outlined in the text, SCM can provide companies with key business benefits such as faster, more accurate

order processing, reductions in inventory levels, quicker time to market, lower transaction and material costs,

and strategic relationships with their suppliers. All of these benefits of SCM are aimed at helping a company

achieve agility and responsiveness in meeting the demands of their customers and the needs of their business

partners. These benefits should be no different for a small company than they are for a larger firm. A small

business can make effective use of technology to realize many of the same benefits that larger firms are realizing.

Small businesses are concerned with offering their products to the widest audience possible through the most

effective channel. SCM can help them identify their best customers, and providing them with the products they

want the most, and to give them the best customer service possible.

10. Should companies install e-business software suites or “best of breed” e-business software companies?

Why?

e-business suites are defined as an integrated system of software modules for customer relationship

management, enterprise resource planning, supply chain management, and other business applications. The

major ERP software companies have developed modular, Web-enabled software suites that integrate ERP,

CRM, SCM, procurement, decision support, enterprise portals, and other business applications and functions.

The goal of these software suites is to enable companies to run most of their business using one Web-enabled

system of integrated software and databases, instead of a variety of separate e-business applications. Theanswer to this question could go either way. For companies that know what they are doing, and how to use these

suites they integration of is probably a good move as they should operate seamlessly without any major

problems. However, for companies who really don’t know how to operate any of these components, this is no

magic cure or recipe to their problems. In fact, for these companies it may cause even major problems as they

will be ill prepared for such a challenge.


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VIII. ANSWERS TO ANALYSIS EXERCISES

1. NetSuite's NetSuite1

a. Identify and explore NetSuite's components that relate to your business major.

By major - (note, a detailed list can be found here: http://www.netsuite.com/portal/products/netsuite/featurelist.shtml)

Human Resources: employee management, payroll

Sales/Marketing: business intelligence, sales force automation, marketing automation, web store, web site,

customer center

Accounting/Finance: financials, time & billing

Operations/Management: order fulfillment, real-time dashboards, partner relationship management

Supply Chain Management: inventory management, UPS OnLine tools

Information Management: customization

b. Click on the "customers" link on NetSuite's home page and select a customer in an industry that interests

you (or one assigned by your instructor). Watch the customer's video. What motivated the customer to

implement NetSuite? What benefits did they emphasize?

Students answers will vary by customer chosen. Here is a sample answer for "Novak Conversions." Novak's

existing system could not handle the business complexities that were crucial to its success. The client also noted

insufficient accessibility and security as motivating factors for change. Novak emphasized the following benefits:

customizable for complex products, data security, better customer service and relations, faster access to

management information, fast, inexpensive, and seamless customer orders, and improved customer self-service.

c. Would you recommend this suite to a small business owner? Why or why not?

Students answers will vary. Many will simply recommend this product given the information provided on thewebsite. However, instructors should emphasize three important aspects to this type of recommendation. As a

minimum, the marginal benefit of the new system should exceed the marginal cost. That is, if a business is doing

well and won't benefit from a new system, why spend the time and money on it? Second, the small business

should consider more choices than to "buy NetSuite" or "do nothing." Other vendors offer competing products,

so product recommendations should take this information into consideration as well. Lastly, small businesses

should consider whether or not this type of investment is appropriate at this time. Perhaps they might have other

projects should take priority over this type of project because these other projects will provide a larger return than

even the best ERP/CRM/e-commerce software solution.

1 Note that this is an updated version of Exercise #1


http://www.netsuite.com/portal/products/netsuite/featurelist.shtml

http://www.netsuite.com/portal/products/netsuite/featurelist.shtml

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2. Collaborative CRM

a. How do these property transactions differ from routine supply-chain transactions?

Each property transaction is unique and requires a team effort to produce.

b. What advantage does the real estate company and the law firm gain by adopting their client'stechnology platform (Lotus Notes/Domino)?

While the client can better monitor their vendor's performance, the vendor has the ability to measure the value

they provide. The more closely these external parties integrate with their client, the higher the switching costs will

be for the client. That is, they stand a better chance of keeping their client over the long run.

c. Find a Lotus Notes/Domino product review on the web, read it, and report your findings to the class.

Your presentation should answer the following questions. Who provided the review? What is the

reviewer's relationship to the product? What did the reviewer like? What did the reviewer dislike? What

competitors were mentioned in the review? How did Lotus Notes/Domino compare?

Students should discover that Lotus Notes/Domino systems are built on a proprietary "messaging" system. It is

cross-platform, integrates with the Web, and supports a variety of open development standards. A large number of

vendors provide both off the shelf and custom application development for this platform ranging in capabilities that

include workflow, contact management, CRM, e-commerce, KM, HR, SFA, ad-hoc "team spaces," and more. Lotus

Notes/Domino's primary competitors are Microsoft's Outlook/Exchange and Novell's Groupwise.

Here are a few sample reviews:

http://www.pcmag.com/article2/0,4149,1472351,00.asp

http://www.infoworld.com/article/03/11/26/47TCnotes_1.html






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4. The Future of Enterprise Systems

a. What does Oracle think it might gain from buying out PeopleSoft?

Oracle would like to acquire PeopleSoft's customer base and proprietary technology so it can build better systems

for a larger customer base.

b. Why does the Pombriant think Oracle should give up its quest for PeopleSoft?

In the event that Pombriant's article isn't available online, this exercise contains sufficient information to produce

the same answer. Pombriant believes that the enterprise system industry is rapidly approaching the point where

additional functionality may be entirely offset by the cost of the resulting increases in complexity. As a result,

Oracle may fail to efficiently integrate PeopleSoft's proprietary technology. Instead, Pombriant believes Oracle

should give serious consideration to fostering a paradigm shift that allows many vendors to provide components.

These components would presumably tap into Oracle's core systems much the way software applications are

written specifically for and take advantage of operating systems.

c. How does Pombriant's alternative model affect your thinking about enterprise systems acquisition for your

own (or future) organization?

Student's answers will vary. Risk-averse students may prefer solutions with a proven history. Other students may

opt for more forward-thinking vendors in hopes of acquiring a more sustainable and potentially lower cost

infrastructure. Neither approach is inherently wrong. However, organizational strategy and culture will play a

large role in determining the appropriate solution in a given instance.


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IX. ANSWERS TO REAL WORLD CASES

RWC 1: Mitsubishi Motor Sales: Implementing Customer Relationship Management Systems

1. What are the key application components of Mitsubishi’s CRM system? What is the business purpose of each

of them?

Key components and purpose:

• Call center software from Siebel Systems – consolidation of call centers and outsourcing of basic customer

calls

• Consolidated customer database

• Digital phone switch from Avaya – allows for flexible skills-based routing, to a live representative or an

interactive voice response unit

• Avaya IP Agent – listening to customer calls and monitoring agent activity and response

• Blue Pumpkin Software – workforce management system that permits forecasting of call center coverage

• NiceLog – recording and analyses of customer calls and agent response

2. What are the benefits to a business and its customers of a CRM system like Mitsubishi’s?

For the company benefits arise from several sources:

• Cost savings from improved and consolidated call centers

• Knowledge about customers and their needs and problems, gained from the ability to listen to and analyze

customer calls (both live and the ones that end up in an IVR)

• Provide greater opportunities to pitch new products or services

• Reduce turnover in customer service representatives

For the customer:

• Reduction in the number of contact points with the company – one single number to call

• More accurate routing of calls to address their needs• Better trained service representatives who are flexible to provide answers to different issues

3. Do you approve of Mitsubishi’s approach to acquiring and installing its CRM system? Why or why not?

4. There are two basic approaches to the acquisition and implementation of large-scale integrated systems. One is to

purchase a suite from one (or a very small number) vendor, with components that work out fine together in a

coherent way, and less integration issues, albeit each component might not be the best of its kind. The other strategy

is to acquire the best-of-breed module for each function, and bear the weight of integrating them and developing

interfaces where needed. The case of Mitsubishi is an example of the latter. While in theory the outcome might be

a best-possible system, it also has its share of perils when it comes to implementation. The company was able to

address these issues by conducting a staged implementation, building on the success of the previous module. The

strategy was most appropriate for this case, however, it is not always feasible, because of time constraints and need

for change, to conduct such a long implementation.


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RWC 2: Agilent Technologies and Russ Berrie: Challenges of Implementing ERP Systems

1. What are the main reasons companies experience failures in implementing ERP systems?

Potential reasons could include:

•

Lack of top management commitment• Inadequate requirements definition

• Poor ERP package selection

• Inadequate resources

• Resistance to change / Lack of buy-in

• Miscalculation of time and effort required

• Misfit of application and business processes

• Unrealistic expectations of benefits and ROI

• Inadequate training and education

2. What are several key things companies should do to avoid ERP systems failure? Explain the reasons for your

proposals.

Possible actions could include:• Foster high employee involvement, ownership and buy-in

• Comprehensive and systematic approach that addresses all parts of the implementation

• Provide adequate resources

• Extensive education and training at all levels

• Understanding that ERP implementations are not about the technology package but rather the

transformation to all processes and way of doing business of the organization

3. What do you think ERP systems in particular are often cited as examples of failures in IT systems

development, implementation, or management?

There are many IT failures that go unnoticed by the general public, not usually the case with ERP implementations.

Probably the main reason for this focus is that, because of the sheer size of resources involved in these projects, and

the public announcements company make when deciding on doing them, expectations are very high. Accordingly,failures are very notable, usually ranging in the tens of millions of dollars burned in ERP implementations. This

magnitude makes them very visible to be pointed at as examples of what should not be done. In many cases, failed

implementations have very severe consequences for organizations that go beyond the direct amount of money

involved in the project, up to threatening its survival.


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RWC 3: TaylorMade Golf and HON Industries: The Business Value of Supply Chain Management

1. How could moving business information systems with supplies and distributors to the Web result in such

dramatic business benefits as experiences by TaylorMade Golf?

While Web-based applications and systems enjoy some cost advantages and scalability that custom-designedapplications do not have, the benefits reaped by TaylorMade did not arise from cost savings in IT development. On

the contrary, they came from a streamlined supply chain that was improved all the way from forecasting to actual

manufacturing because of the ability to share data and customer demand with suppliers and distributors. By more

accurately estimating such that parameter, the company was able to cut down inventory, make a more efficient use

of manufacturing capacity, and increase turnover. The approach taken, Web-based systems, takes advantage of a

number of platform commonalities, but it would arguably be one of many ways to do what they did.

2. How does HON Industries’ new SCM system improve the efficiency of their supply chain?

Efficiency was improved by means of two different aspects of the chosen application. One focused on solving the

capacity and measurement issues that was creating with the transport and storage of goods and products. The other

focused on the routing of orders to be manufactured and shipped in the most efficient and cheaper way. Those two

aspects are highly interrelated. The outcome is seen in reduction of manufacturing and shipping costs, as well as

increased inventory turnover and carrying costs.

3. What other SCM initiative would you recommend that TaylorMade Golf or HON Industries implement to

improve their supply chain performance and business value? Explain the business value of your proposals.

Examples could include:

• Web-based self-customized club ordering with an agent that assists the customer based on past purchases

and ergonomic measures

• Expand the shipping and scheduling models to include orders containing products that would individually

be better assigned to different locations but, as a group to be shipped together, to a unique one

• Integrate product scheduling and routing with raw material and part forecasting for each manufacturing

location


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RWC 4: H-P, Eastman Chemical, and Others: The Benefits and Challenges of SCM Systems

1. Why can both large and small businesses cut costs and increase revenues by moving their supply chain online?

Use the companies in this case as examples.

The four companies illustrated in the case show large and medium-small companies partnering to improve thecombined supply chain: H-P with resin manufacturers, Eastman with raw materials producers, Advanced

International Multitech with TaylorMade and W.W. Grainger (www.FindMRO.com) with thousands of small part

suppliers. Companies of both sizes stand to gain from integrating supply chains. Large companies improve their

forecasting, procuring and manufacturing operations, while smaller companies gain a steady and stable outlet for

their products, as long as they can keep up with the technical challenges. In different ways, both types of companies

stand to benefit. Moving this integration online allows for more complex practices, such as linking together groups

of companies in different stages of the manufacturing process, which streamlines the process from basic materials to

final product to shipping.

2. What is the business value to Eastman Chemical and W.W. Grainger of their initiatives to help their

suppliers and customers do business online?

The increase in sales and reduction in time and cost that steam from supply chain integration is their main business

value. By streamlining the manufacturing and distribution process, reducing stocks and increasing turnover,

companies such as Eastman and W.W. Grainger can position themselves almost as intermediaries in the transaction,

linking suppliers and customers, with the minimum participation required to add value to the transaction (for

Eastman its proprietary manufacturing process, for W.W. Grainger the pooling of transactions in one site). For these

companies it is critical that as many of their suppliers as possible are onboard with these initiatives, even when that

means upgrading their technology themselves.

3. Why are many small suppliers reluctant to do business online with their large customers? What can de done

to encourage small suppliers online?

The reluctance probably comes from two sources. The first one is the perception that online supply chain integration

is complex and beyond their means, in terms of both knowledge and resources. The second source would be the

perception that integration favors only the largest link in the chain, and that it is aimed at gaining increased leverage

over the smaller partners, and thus reducing their margins and any bargaining power they have. Encouragement

could come from technical assistance to set up and operate their side of the technology (maybe even entering a

licensing agreement where the large partner operates it for a fee) and from incentives to adopt these new initiatives.

Possible ones could be reflect accomplishments in setting up and starting online integration, as well as phased out

ones during a number of periods from the beginning of the agreement.


http://www.findmro.com/

http://www.findmro.com/

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RWC 5: Wal-Mart and Mattel: Supply Chain Management Best Practices

1. Do you agree that Wal-Mart is “the best supply chain operator of all time?” Why or why not?

If not the best, it would be very hard to think of another one that comes even close. Wal-Mart has to be among the

very best in supply chain management because that is the foundation of their business. All of Wal-Mart’s operation

is based on high volume, extremely quick inventory turnover, and low prices (which come with low margins). Withthat business strategy, anything other than efficient supply chain management would not allow an organization to

make a profit, and profit is something Wal-Mart is very good at making.

2. What has Mattel learned from Wal-Mart? How well are they applying it to their own business? Explain your

evaluation.

The major lesson comes probably not from technical knowledge or skills, but rather from the concept that one

company, its customers, and suppliers, can all collaborate, and that collaboration will lead to benefits across the

board for all participants. Mattel is applying that concept to get their other retailers and distributors to share

information about customer demand and collaborate in reducing stocks in both supply chains.

3. What can other businesses learn from the experiences of Wal-Mart and Mattel that could improve their

supply chain performance? Use an example to illustrate your answer.

The best example that can be taken from the case in terms of successful initiatives other organizations may want to

apply is that high degree of buy-in Wal-Mart gets from its suppliers, because its practices benefit both of them, rather

than Wal-Mart alone. The lesson is that information sharing and process integration can result in benefits for both

companies, and that acting more as partners rather than two parties divvying up margins can have beneficial results.

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