Chapter 3

Information

Systems in the
Enterprise

Business Processes and Information Systems

Business processes:
Is a set of logically related activities for accomplishing a specific business results. Manner in which work is organized, coordinated, and focused to produce a valuable product or service Unique ways to coordinate work, information, and knowledge Ways in which management chooses to coordinate work Concrete work flows of material, information, and knowledgesets of activities Performance of a firm depends on how well the business processes are designed and coordinated

Examples of Business Processes Manufacturing and production: Assembling product, checking quality, producing bills of materials Sales and marketing: Identifying customers, creating customer awareness, selling
Table 2.6

Examples of Business Processes (Continued)

Finance & accounting: Paying creditors, creating financial statements, managing cash accounts Human resources: Hiring employees, evaluating performance, enrolling employees in benefits plans
Table 2.6 continued

Functional area
Manu& Pro

Business process
Assembling the product, checking for quality, producing bills of materials Identifying the customers, making customers aware of the product Paying creditors, creating financial statements Hiring employees, evaluating employees job performance

Sales & Mktg

Fin and accounting Human resources

Business Processes and Information Systems Cross-Functional Business Processes: cross boundary between sales, marketing, manufacturing, and research and development Group employees from different functional specialties to complete a piece of work Example: Order Fulfillment Process

The Order Fulfillment Process

Figure 2-12

Business Processes and Information Systems Purpose of IS is to enable highly efficient business processes Information systems help organizations achieve great efficiencies by automating parts of processes IS also contributes to completely rethinking processes.

HOW INFORMATION TECHNOLOGY ENHANCES BUSINESS PROCESSES: EFFICIENCY AND TRANSFORMATION

Information systems enhance business processes in two ways: Increasing the efficiency of existing processes. Enabling entirely new processes that are capable of transforming the business.

 Analyzing the customer request for service process ,how many steps involved ,how many people involved, how much it costs.

Traditional Silo View of Information Systems Within the business: There are functions, each having its uses of information systems Outside the organizations boundaries: There are customers and vendors Functions tend to work in isolation

Traditional View of Systems

Figure 2-14

Systems for Enterprise-Wide Process Integration Enterprise applications: Designed to support organization-wide process coordination and integration

Systems for Enterprise-Wide Process Integration (Continued) Consist of : Enterprise systems Supply chain management systems Customer relationship management systems Knowledge management systems All these enterprise applications integrates a related set of functions and business processes to enhance the performance of the organization as a whole.

Information Islands

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications

Enterprise Application Architecture

Figure 2-13

Enterprise Systems

Enterprise systems, also known as enterprise resource planning (ERP) systems, provide a single information system for organization-wide coordination and integration of key business processes.
Information that was previously fragmented in different systems can seamlessly flow throughout the firm so that it can be shared by business processes in manufacturing, accounting, human resources, and other areas.

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications

Enterprise Systems

Figure 2-15

Management Information Systems

ENTERPRISE SYSTEMS

What Are Enterprise Systems?

Enterprise System Architecture

Figure 11-1

How Enterprise Systems Work Enterprise Systems: Enterprise Resource Planning (ERP) systems

Interdependent software modules with a common central database that support basic internal business processes for finance and accounting, human resources, manufacturing and production, and sales and marketing

How Enterprise Systems Work (Continued) Enterprise Systems: (Continued) Enables data to be used by multiple functions and business processes for precise organizational coordination and control. Serves as a cross-functional enterprise backbone that integrates & automates many internal business processes and information systems Helps companies gain the efficiency, agility, & responsiveness needed to succeed today

 Gives a company an integrated real-time view of its core business processes ERP software suites typically consist of integrated modules of Manufacturing Distribution Sales Accounting Human Resource Management

REASONS FOR THE GROWTH OF ERP MARKET

To enable improved business performance
Cycle time reduction Inventory reduction Order fulfillment improvement

To support business growth requirements

New product/product lines, new customers Global requirements including multiple languages and currencies

Contd
To provide flexible, integrated, real time decision support To take advantage of untapped midmarket

Selection of ERP
ERP procurement & successful implementation are very costly affairs Implementation involves risk, risk is due to changes, benefits are not immediate Investment ? Is a strategic decision- long term decision, difficult to get reversed

ERP SELECTION
Vendor Evaluation
Factors
1. 2. 3. 4. 5. Business strength of the vendor Product share in total business of the vendor R & D investment in the product Future plans of the vendor Market reach & resource strength of the vendor

ERP Market and

ERP Market and vendors Vendor

Top 10 ERP vendors by Revenue Share:

ERP Market and vendors 2006 total

SAP
Founded in 1972, SAP is the largest European software enterprise, headquartered in Walldorf, Germany. SAP is an acronym for Systems, Applications And Products in Data Processing. It is the largest ERP solution software provider in terms of revenue. SAP products focus on ERP systems. Its main product is SAP R/3. R stands for real-time data processing, and the number 3 relates to the three-tier application architecture of its database, application server and client. There are over 91,500 SAP installations at more than 28,000 companies. Over 12 million people in more than 120 countries use SAP products.

Example of ERP

ERP Market and vendors modules (SAP)

BAAN

ERP Market and vendors

Baan was a vendor of popular enterprise resource planning (ERP) software that is now owned by Infor Global Solutions The Baan Corporation was created by Jan Baan in 1978 in Barneveld, Netherlands, to provide financial and administrative consulting services Upon acquiring the Baan software, SSA renamed Baan as SSA ERP In May 2006, SSA was acquired by Infor Global Solutions of Atlanta. Baan is still one of the best ERP product for discrete manufacturing industries, especially for Make to Order and Engineering to order market. Nowadays, still thousands of manufacturers are running on Baan software, including Boeing, Ferrari

The Sage Group

ERP Market and vendors

The Sage Group plc is a UK based supplier of accounting, payroll, CRM and business management software (including manufacturing and construction-specific ranges) as well as related services to small and medium-sized enterprises The company is focusing on Vertical market software and has recently purchased several industry-focused groups.

Microsoft Dynamics

ERP Market and vendors

Is a line of software for business made by Microsoft Microsoft Dynamics AX is Microsofts flagship enterprise resource planning software system. Microsoft Retail Management System: (RMS) is an electronic point-of-sale (EPOS) software solution for retailers. Microsoft Dynamics GP is a mid-market business accounting software package that runs on top of a Microsoft SQL Server database. Microsoft Dynamics NAV: The product is part of the Microsoft Dynamics family, and intended to assist with finance, manufacturing, customer relationship management, supply chains, analytics and electronic commerce for small and medium-sized enterprises.

Microsoft Dynamics SL : Microsoft Dynamics SL provides businesses functionality in finance, project accounting, manufacturing, field service, supply chains, analytics, and electronic commerce and is primarily targeted for Small and Medium-sized Enterprises.

QAD

ERP Market and vendors

QAD produces Enterprise Resource Planning software. The software is targeted to 6 main industries: Automotive, Consumer Products, Electronics, Food and Beverage, Industrial Products, and Life Sciences. QAD Enterprise Application provides single-site companies and multinational organizations with a fully integrated, core enterprise solution.

ERP Market and Vendors

ERP Market and vendors

Indian ERP Market

03rd Aug, 2007
Company Revenue (Rs crore)

SAP Oracle Tally

415 195 98

Microsoft
Ramco 3i Infotech SSA Global (Infor)

59
54 37 29

QAD
Intentia Cognos Others Total

18
8 5 138 1,056

Source: DQ estimates CyberMedia

Contd
Technology evaluation
Client server architecture & its implementation two tier or three tier Front end tools & back end data based management system tools for the data, process & presentation management Interface mechanism; data transfer, real time access Use of case tools, screen generators, report writers & screen painter

Contd
Technology evaluation (contd)
Support system technologies like bar coding, EDI, imaging, communication & network Downloading to PC based package, MSoffice, etc Hardware - Software configuration management

Difficulty in selecting ERP

Selection is difficult by an internal, better to approach the external consultants ERP package may be cheaper, but may not fulfill the requirement Some take a lot of time in implementation Validated information on the vendor Objective of the organization may not be clear

ERP IMPLEMENTATION
Typical costs of implementing a new ERP System
15% 15% Training & Change Management Re-engineering

Software

12%

15%

Hardware 43% Data conversions

Methodologies
The Big Bang Modular Implementation Process-Oriented Implementation

ERP implementation issues

Technical and Business issues:
Implementation effort will be bigger than ever talked about or even imagined. We are yet to hear from an organization who have implemented ahead of schedule and under budget. Users need to become more computer literate. The word "Enterprise" in ERP means that whatever happens in one area has a ripple effect in other areas. Understanding the implications of actions of one area, on other areas of the company, is not something that happens overnight. Data integrity becomes critical.

The computer cannot make human judgments.

Corporate Culture Most managers who have been through an ERP implementation, tells, is the biggest impact is on "Corporate Culture". It is always underestimated and never overestimated. Corporate Culture is a combination of two things. The type of people who are employed by a company. Their personal values, skills, habits etc. The way the organization works. The focus, decision making process, attitude to staff, stability, etc.

Change Management
Change Management is about setting expectations that lessen the pain of change. People involved in a change expect to go from A to B. Perhaps where they are actually going is to C. Change Management is about getting them used to the idea that C is the real destination.

Other experience:
A survey of organizations that have implemented ERP's was carried out recently. It identified 9 Common issues for ERP implementation". Change Management and Training To BPR or not to BPR Planning

Estimating IT skills
Project Management

Other experience: Continued..

Technology Trials Executive Buy-in Estimating Resources Software Evaluation

Critical success factors for ERP implementation

Status of legacy systems Impact of new ERP system on their business processes Whether all the business processes are well defined and could be delivered thro ERP system Whether to go for a complete integrated system or to implement any one ERP module for the time being Duration of the ERP project and expected service from the ERP system to the customers. Level of cooperation from the top management throughout the project. Resource availability Project scheduling and Change management.

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications

Benefits of Enterprise Systems

Help to unify the firms structure and organization: One organization

Management: Firm wide knowledge-based management processes Technology: Unified platform Business: More efficient operations & customerdriven business processes

Benefits (conti) Quality and efficiency---Helps improve the quality and efficiency of customer service, production, & distribution by creating a framework for integrating and improving internal business processes Decreased Costs---Reductions in transaction processing costs and hardware, software, and IT support staff Decision support---Provides cross-functional information on business performance to assist managers in making better decisions Enterprise agility----Results in more flexible organizational structures, managerial responsibilities, and work roles

BENEFITS OF ERP
Business integration Flexibility Better Analysis & planning capabilities Use of latest technology Better management of resources reducing the cost Customer satisfaction increase due to shorter delivery cycle Business operations transparency between business partners & customers

Contd
Intelligent ERP download the decision making at lower level, releasing the burden on the middle management Due to the support technologies like EDI, E-mail, office automation, paperless office is a new possibility as communication is faster and systems get connected directly

Contd
The ERP scope can be enlarged through the Internet/Intranet access, making the ERP sensitive to the latest events in the business, market & technology

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications

Challenges of Enterprise Systems

Difficult to build: Require fundamental changes in the way the business operates
Technology: Require complex pieces of software and large investments of time, money, and expertise

Causes of ERP failures Underestimating the complexity of the planning, development, and training required Failure to involve affected employees in the planning & development phases and change management programs Trying to do too much, too fast Insufficient training Believing everything the software vendors and/or consultants say

Potential risks
Difficult to implement Inflexible Where to buy What to buy How to implement

Hidden cost
Training Integration and testing Data conversion Data analysis Implementation

Colgate took 1 to 5 days to acquire an order,2 days to process the order Now, order acquisition and processing takes 4 hrs Distribution planning and picking used to take 4 days-------now it is 14 hrs Order to delivery time has been cut in half

On time deliveries used to occur only 91.5 percent of time and order delivered correctly 97.5 percent of the time------now 97.5 and 99% respectively Inventories have dropped by one-third Total delivered cost per case has been reduced nearly10 percent

The Supply Chain Supply chain: Network of organizations and business processes for procuring raw materials, transforming into products, and distributing them to customers A cross-functional inter enterprise system that uses IT to help support & manage the links between some of companys key business processes and those of its suppliers, customers, & business partners. Materials, information, and payments flow through the supply chain in both directions.

Goal is to create a fast, efficient, & low-cost network of business relationships.

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications

Supply Chain Management (SCM)

Close linkage and coordination of activities involved in buying, making, and moving a product
Integrates supplier, manufacturer, distributor customer Reduces time, redundant effort, and inventory costs

Network of organizations and business processes

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications

Supply Chain Management (SCM)

Helps in procurement of materials, transformation of raw materials into intermediate and finished products Helps in distribution of the finished products to customers Includes reverse logistics - returned items flow in the reverse direction from the buyer back to the seller Coordination of business processes to speed information, product, and fund flows up and down a supply chain to reduce time, redundant effort, and inventory costs

SUPPLY CHAIN MANAGEMENT SYSTEMS

A Supply Chain

Figure 11-3

Supply Chain Processes SCOR (Chain Operations Reference Model)-cross industry process reference model for SCM. Defines a common set of SC processes to help companies better understand SCM issues and set goals for SC improvement. identifies five major supply chain processes: Plan: Balancing demand and supply to meet sourcing, production, and delivery requirements Source: Procurement of goods and services needed to create a product or service

SUPPLY CHAIN MANAGEMENT SYSTEMS

Supply Chain Processes (Continued)

Make: Processes that transform a product into a finished state Deliver: Processes to manage order transportation and distribution
Return: Processes associated with product returns and post delivery customer support

SUPPLY CHAIN MANAGEMENT SYSTEMS

Supply Chain Processes (Continued)

Logistics: Planning and control of all factors that have an impact on the supply chain

SUPPLY CHAIN MANAGEMENT SYSTEMS

Key Supply Chain Management Processes

Figure 11-4

BUSINESS PROCESS IN SUPPLY CHAIN LIFE CYCLE

Role of SCM

SUPPLY CHAIN MANAGEMENT SYSTEMS

Information and Supply Chain Management Inaccurate or untimely information causes inefficiencies in supply chain, such as shortages, excessive inventory

Just-in-time strategy :
Scheduling system for minimizing inventory by having components arrive exactly at the moment they are needed and finished goods shipped as soon as they leave the assembly line

SUPPLY CHAIN MANAGEMENT SYSTEMS

Information and Supply Chain Management (Continued) Bullwhip effect: Distortion of information about the demand for a

product as it passes from one entity to the next across

the supply chain

SUPPLY CHAIN MANAGEMENT SYSTEMS

The Bullwhip Effect

Figure 11-5

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications

Information from Supply Chain Management Systems helps firms: Decide when and what to produce, store, and move Rapidly communicate orders Track the status of orders Check inventory availability and monitor inventory levels

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications

Information from Supply Chain Management Systems helps firms: (Continued) Decide when and what to produce ,store and move Reduce inventory, transportation, and warehousing costs Track shipments Plan production based on actual customer demand Rapidly communicate changes in product design

SUPPLY CHAIN MANAGEMENT SYSTEMS

Supply Chain Management Applications Supply chain management systems: Automate flow of information between company and supply chain partners

Supply chain planning systems: Generate demand forecasts for a product (demand planning) and help develop sourcing and manufacturing plans for that product

SUPPLY CHAIN MANAGEMENT SYSTEMS

Supply Chain Management Applications (Continued) Supply chain execution systems: Manage the flow of products through distribution centers and warehouses to ensure that products are delivered to the right locations in the most efficient manner

SUPPLY CHAIN MANAGEMENT SYSTEMS

Supply Chain Performance Measurement Metrics for measuring supply chain performance: Fill rate (the ability to fill orders by the due date) Average time from order to delivery The number of days of supply in inventory Forecast accuracy The cycle time for sourcing and making a product

SUPPLY CHAIN MANAGEMENT SYSTEMS

Supply Chain Management and the Internet

Intranets and Extranets for Supply Chain Management

Figure 11-6

SUPPLY CHAIN MANAGEMENT SYSTEMS

Internet-based supply chain management applications:

Provide standard set of tools

Facilitate global supply chains

Reduce costs
Enable efficient customer response Allow concurrent supply chains

SUPPLY CHAIN MANAGEMENT SYSTEMS

Push-based model:
Production master schedules based on forecasts of demand for products, and products are pushed to customers Pull-based model: Supply chain driven by actual customer orders or

purchases

SUPPLY CHAIN MANAGEMENT SYSTEMS

Push- versus Pull-Based Supply Chain Models

Figure 11-7

SUPPLY CHAIN MANAGEMENT SYSTEMS

The Future Internet-Driven Supply Chain

Figure 11-8

SUPPLY CHAIN MANAGEMENT SYSTEMS

Business Value of Supply Chain Management Systems Improved customer service and responsiveness

Cost reduction
Cash utilization

 Benefits
Can provide faster, more accurate order processing, reductions in inventory levels, quicker time to market, lower transaction and materials costs, & strategic relationships with suppliers

Challenges

PROBLEMS
A lack of proper demand planning knowledge Inaccurate or overoptimistic demand forecast Lack of adequate collaboration among marketing, production & inventory management departments within a company & with suppliers, distributors & others Even the software of SCM is immature, incomplete & hard to implement

(Trends) STAGES IN THE USE OF SCM

CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS

Customer Relationship Management and Partner Relationship Management Customer Relationship Management (CRM): Business and technology discipline for managing customer relationships to optimize revenue, profitability, customer satisfaction, and customer

retention

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications

Customer Relationship Management (CRM) Focuses on coordinating all of the business process surrounding the firms interactions with its customers in sales, marketing and service to optimize revenue, customer satisfaction and customer retention. Manages all ways used by firms to deal with existing and potential new customers Business and technology discipline Uses information system to coordinate entire business processes of a firm

Customer Relationship Management (CRM) (Continued) Provides end- to- end customer care Provides a unified view of customer across the company Consolidates customer data from multiple sources and provides analytical tools for answering questions like what is the value of a particular customer to the firm over his or her lifetime Helps by integrating the processes and consolidating customer information from multiple information channels-telephone ,e-mail etc

CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS

Customer Relationship Management Applications CRM systems: Capture and integrate customer data from all over the organization Consolidate and analyze the data Distribute results to various systems and customer touch points across the enterprise

CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS

Customer Relationship Management Applications (Continued)

Touch point: A method of interaction with a customer, such as telephone, e-mail, customer service desk,

conventional mail, Web site, or retail store

CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS

Customer Relationship Management (CRM) Software

Can range from niche tools to large-scale enterprise applications Can link to other major enterprise applications, such as supply chain management

CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS

Customer Relationship Management (CRM) Software (Continued) Typically include capabilities for o Sales Force Automation (SFA) o Customer service

o Marketing

CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS

CRM Software Capabilities

Figure 11-9

CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS

Customer Loyalty Management Process Map

Figure 11-10

CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS

Operational and Analytical CRM Operational CRM: Customer-facing applications, such as sales force automation, call center and customer service support, and marketing automation Examples: Campaign management, e-marketing, account and contact management, lead management, telemarketing, teleselling, eselling, field sales

CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS

Analytical CRM: Applications that analyze customer data generated by operational CRM applications to provide information for improving business performance Examples: Develop customer segmentation strategies and customer profiles; analyze customer or product profitability; identify trends in sales length cycle; analyze leads generated and conversion rates

CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS

Analytical CRM Data Warehouse

Figure 11-11

CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS

Business Value of Customer Relationship Management Systems Increased customer satisfaction

More effective marketing and reduced direct marketing costs

Lower costs for customer acquisition and retention

CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS

Business Value of Customer Relationship Management Systems (Continued) Increased revenue from identifying most profitable customers and segments for marketing, crossselling, up-selling Reduce churn rate: Number of customers who stop using or purchasing products or services from a company

CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS

The Importance of CRM Performance Measurement

Successful CRM implementations require that financial and operation goals, and metric for evaluation, are clearly defined at outset of project
Metrics for CRM may include: Cost per lead Cost per sale

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications

Customer Relationship Management (CRM)

Figure 2-17

Knowledge Management Systems Collects relevant knowledge and make it available

wherever and whenever it is needed

Support business processes and management decisions

Also link the firm to external sources of knowledge

Support processes for acquiring, storing,

distributing, and applying knowledge for creating new knowledge and integrating it into the organization

 Support processes for acquiring ,storing,

distributing and applying knowledge, as well as processes for creating new knowledge and integrating it into the organisation. Include enterprise wide systems for managing and distributing documents ,graphics and other digital graphics for creating corporate knowledge directories of employees with special areas of expertise, office systems for distributing knowledge and information.

 KM applications are expert systems that codify the knowledge of experts in information systems that can be used by other members of the organisation and tools for knowledge discovery that recognise patterns and important relationships in large pools of data.

MANAGEMENT OPPORTUNITIES, CHALLENGES, AND SOLUTIONS

MANAGEMENT OPPORTUNITIES, CHALLENGES, AND SOLUTIONS