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 CHAPTER 12 : 

INTEGRATING THE ORGANIZATION FROM END TO END- ENTERPRISE RESOURCE PLANNING

12.1) Enterprise Resource Planning (ERP)

·        It serves as the organization’s backbone in providing fundamental decision making support.

·         It enables people in different business areas to communicate.

·         ERP system helps an organization to obtain operational efficiencies, lower costs, improve supplier and customer relations, and increase revenues and market share.

·         The heart of an ERP system is a central database that collects information from and feeds information into all the ERP system’s individual application components (called modules), supporting diverse business function such as accounting, manufacturing, marketing, and human resources.

·         ERP automates business processes such as order fulfillment- taking an order from a customer, shipping the purchase, and then billing for it.

o   Bringing the Organization Together

·        ERP enables employees across the organization to share information across a single, centralized database.

·        With extended portal capabilities, an organization can also involve its suppliers and customers to participate in the workflow process, allowing ERP to penetrate the entire value chain, and help the organization achieve greater operational efficiency.

o   The Evolution of ERP

·        Although ERP solutions were developed to deliver automation across multiple units of an organization, to help facilitate the manufacturing process and address issues such as raw materials, inventory, order entry, and distribution, ERP was unable to extend to other functional areas of the company such as sales, marketing, and shipping. It could not tie to any CRM capabilities that would allow organizations to capture customer-specific information, nor did it work with websites or portals used for customer service or order fulfillment.

o   Integrating SCM, CRM, and ERP

·        Integration of SCM, CRM, and ERP is the key to success for many companies.  Integration allows the unlocking of information to make it available to any user, anywhere, anytime.

·        2 main competitors in ERP market:

1.    Oracle

2.    Sap

12.2)  Primary Users and Business Benefits of Strategic Initiatives.

Integration Tools

·        An integrated enterprise infuses support areas, such as finance and human resources, with a strong customer orientation.

·         Integration are achieved using:

·        Middleware- several different types of software that sit in the middle of and provide connectivity between two or more software applications. It translates information between disparate systems

o   Enterprise application integration (EAI) middleware

·        represents a new approach to middleware by packaging together commonly used functionality, such as providing prebuilt links to popular enterprise applications, which reduces the time necessary to develop solutions that integrate applications from multiple vendors.

 12.3) Integration between SCM, CRM, and ERP Applications.

·        ·Companies run on independent applications, such as SCM, CRM, and ERP. If one application performs poorly, the entire customer value delivery system is affected.

o   Enterprise Resource Planning’s Explosive Growth:

·        Reasons of ERP being proven to be such a powerful force:

§  ERP is a logical solution to the mess of incompatible applications that had sprung up  in most businesses.

§  ERP addresses the need for global information sharing and reporting.

§  ERP is used to avoid the pain and expense of fixing legacy systems

·        To qualify as a true ERP solution, the system not only must integrate various organization processes, but also must be:

§  Flexible- an ERP system should be flexible in order to respond to the changing needs of an enterprise.

§  Modular and open- an ERP system has to have open system architecture, meaning that any module can be interfaced with or detached whenever required without affecting the other modules. The system should support multiple hardware platforms for organizations that have a heterogeneous collection of systems. It must also support third- party add-on components.

§  Comprehensive- an ERP system should be able to support a variety of organizational functions and must be suitable for a wide range of business organizations.

§  Beyond the company- an ERP system must not be confined to organizational boundaries but rather support online connectivity to business partners or customers.

o   Everyone involved in sourcing, producing, delivering the company’s product works with the same information, which eliminates redundancies, cuts wasted time, and removes misinformation.

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CHAPTER 11: BUILDING A CUSTOMER - CENTRIC ORGANIZATION - CUSTOMER RELATIONSHIP MANAGEMENT

11.1) Customer Relationship Management (CRM)

Ø  CRM is a business philosophy based on the premise that those organizations that understand the needs of individual customers are best positioned to achieve sustainable competitive advantage in the future.

Ø  A customer strategy starts with understanding who the company's customers are and how the company can meet strategic goals.

Ø  As the business world increasingly shifts from product focus to customer focus, most organizations recognize the treating existing customers well is the best source of profitable and sustainable revenue growth in the age of e-business, however, an organization is challenged more than ever before to truly satisfy its customers.

11.2) Recently, Frequency, and Monetary Value

•     An organization can find its most valuable customers by using a formula that industry insiders call RFM-regency, frequency, and monetary value. In other words, an organization must track:

- How recently a customer purchased items (recently)

- How frequently a customer purchases an item (frequently

- How much a customer spends on each purchase (monetary value)

Ø  The evolution of CRM

• ·         Knowing the customer, especially knowing the profitability of individual customers, is highly lucrative in the financial service industry.

• ·         There are three phases in the evolution of CRM:

1.    CRM Reporting technology help organizations identify their customers across other applicants

2.   CRM analysis technology helps organizations segment their customers into categories such as best and worst customers.

3. CRM predicts technological help organizations make predictions regarding customer behavior such as which customers are at risk of leaving.

Ø  The Ugly Side of CRM: Why CRM Matters More Now than Ever Before

• ·         Now companies have no choice as the power of the customer grows exponentially as the internet grows. In every case, customers have become an integral part of the action as a member of the aggregated, interactive, self-organizing, auto-entertaining audience on businesses. However, this should no be a surprise, since it was the customers’ crazy passion and hobbies and obsessions-that build up the web in the first place.

Ø  Customer Relationship Management's Explosive Growth

• ·         When customers buy on Internet, they see, and they steer, entire value chains.

• ·         Customer web interaction become conversations, interactive dialogs with shared knowledge, not just business transaction. Web- based customer care can actually become the focal point of customer relationship management and provide breakthrough benefits for both the enterprise and its customers, substantially reducing costs while improving service.

• ·         Current users allow allocating 20 percent of their IT budget to CRM solutions.

Ø  Using Analytical CRM to Enhance Decisions

• ·         The two components of a CRM strategy are:

        - Operational CRM supports traditional transactional processing for day-to-day front-office operations or systems that deal directly with the customers.

        - Analytical CRM supports back-office operations and strategic analysis and includes all systems that do not deal directly with the customers.

The primary difference between operational CRM and analytical CRM in the direct interaction between the organization and its customers.

       -Personalization occurs when a website can know enough about a person's likes and dislikes that it can fashion offers that are more likely to appeal to that person. Many organizations are now utilizing CRM to create customer rules and templates that marketers can use to personalize customer messages.

Ø  Customer Relationship Management Success Factor

• ·         CRM solutions make organizational business processes more intelligent. This is achieved by understanding customer behavior and preferences, then realigning product and service offering and related communications to make sure they are synchronized with customer needs and preferences. If an organization is implementing a CRM system, it should study the industry best practices to help ensure a successful implementation.

• ·         Using he analytical capabilities of CRM can help a company Anticipate customer need and proactively serve customers in way that build relationship, create loyalty, and enhance bottom lines.

Chapter 10: Extending the Organization- Supply Chain Management (SCM)

10.1) BASICS OF SUPPLY CHAIN

     Supply chain: consists of all parties involved, directly or indirectly in the procurement of a product or raw material.

     Supply Chain Management:  the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability

The supply chain has three main links:

1.       Materials flow from suppliers and their "upstream" suppliers at all levels

2.   Transformation of materials into semi-finished products, or the organization’s own production processes

3.      Distribution of products to customers and their downstream customers at all levels

10.2) INFORMATION TECHNOLOGY’S ROLE IN THE SUPPLY CHAIN

    Information technology’s primary role in SCM is creating the integration or tight process and information linkages between functions within a firm such as marketing, sales, finance, manufacturing, and distribution – and between firms, which allow the smooth, synchronized flow of both information and product between customers, suppliers and transportation providers across the supply chain.

The five basic supply chain management components:

1.      Plan	·         It is the strategic portion of supply chain management. ·         A company must have a plan for managing all the resources that go toward meeting customer demand for products/ services. ·         A big piece of planning is developing a set of metrics to monitor the supply chain so that it is efficient, less cost and deliver high quality and value to customer.
2.      Source	·         Companies must carefully choose reliable suppliers that will deliver goods and services required for making products. ·          Companies must also develop a set of pricing, delivery and payment processes with suppliers and create metrics for monitoring and improving the relationship.
3.      Make	·         This is step where companies manufacture their products/ services. ·         This can include scheduling that activity necessary for production, testing, packaging and preparing for delivery. ·         This is by far the most metric-intensive portion of the supply chain, measuring quality levels, and production output and worker productivity.
4.      Delivery	·         This step is commonly referred as logistics. ·         Logistics: the set of processes that plans for and control the efficient and effective transportation and storage of supplies from suppliers to customers. ·         During this step, the companies must be able to receive orders from customers, fulfill orders via a network of warehouse, pick transportation companies to deliver the products and implement a billing and invoicing system to facilitate payments.
5.      Return	·         It is the most problematic steps. ·         The companies must create a network for receiving detective and excess products and support customers who have problems will deliver products.

10.3) Factors driving supply chain management

11.   VISIBILITY

·        Supply Chain Visibility: the ability to view all areas up and down the supply chain. Changing supply chains requires a comprehensive strategy buoyed by information technology. Organizations can use technology tools that help them integrate upstream and downstream, with both customers and suppliers.

·         The bullwhip effect occurs when distorted product demand information passes from one entity to the next throughout the supply chain.

  2.  CUSTOMER BEHAVIOR

·     The behavior of customers has changed the way businesses complete. Customers will leave if a company does not continually meet their expectations. They are more demanding because they have information readily available, they know exactly what they want, and they know when and how they want it.

·        Demand planning software generates demand forecasts using statistical tools and forecasting techniques.

·      Companies can respond faster and more effectively to consumer demands through supply chain enhancements such as demand planning software.

·       Once an organization understands customer demand and its effect on the supply chain it can begin to estimate the impact that its supply chain will have on its customers and ultimately the organization’s performance.

  3.  COMPETITION

SCM software can be dividing into:

                    i.            Supply chain planning (SCP) software uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain while reducing inventory. SCP depends entirely on information for its accuracy.

         ii.      Supply chain execution (SCE) software automates the different steps and stages of the supply chain. This could be as simple as electronically routing orders from a manufacturer to a supplier.

v  Both of the will increase a company’s ability to compete

  4.   SPEED

·    These systems raise the accuracy, frequency and speed of communication between suppliers and customers, as well as between internal users.

·   Another aspect of speed is the company’s ability to satisfy continually changing customer requirements efficiently, accurately and quickly

·         Timely and accurate information is more critical to business than ever before.

10.4) SUPPLY CHAIN MANAGEMENT SUCCESS FACTORS

·     To succeed in today’s competitive markets, companies must align their supply chain with the demands of the markets they serve.

·      Supply chain performance is now a distinct competitive advantage for companies proficient in the SCM area.

The following are keys to SCM success:

    i.        MAKE THE SALE TO SUPPLIERS

The hardest part of any SCM system is its complexity because a large part of the system extends beyond the company’s walls. Not only will the people in the organization need to change the way they work, but also the people from each supplier that is added to the network must change. Be sure suppliers are on board with the benefits that the SCM system will provide.

  ii.        WEAN EMPLOYEES OFF TRADITIONAL BUSINESS PRACTICES

Operations people typically deal with phone calls, faxes and orders scrawled on paper and will most likely want to keep it that way. Unfortunately, an organization cannot disconnect the telephones and fax machines just because it is implementing a supply chain management system. If the organization cannot convince people that using the software will be worth their time, they will easily find ways to work around it, which will quickly decrease the changes of success for the SCM system.

iii.        ENSURE THE SCM SYSTEM SUPPORTS THE ORGANIZATION GOALS

It is important to select SCM software that gives organizations an advantage in the areas most crucial to their business success. If the organizational goals support highly efficient strategies, be sure the supply chain design has the same goals.

 iv.   DEPLOY IN INCREMENTAL PHASE AND MEASURE AND COMMUNICATE SUCCESS

Design the development of the SCM system in incremental phases. For instance, instead of installing a complete supply chain management system across the company and all suppliers at once, start by getting it working with a few key suppliers, and then move on to the other suppliers. Along the way, make sure each step is adding value through improvements in the supply chain’s performance. While a big-picture perspective is vital to SCM success, the incremental approach means the SCM system should be implemented in digestible bites and also measured for success one step at a time.

    v.        BE FUTURE ORIENTED

The supply chain design must anticipate the future state of the business. Because the SCM system likely will last for many more years than originally planned, managers need to explore how flexible the systems will be when (not if) changes are required in the future. The key is to be certain that the software will meet future needs, not only current needs.