Enterprise Applications
Achieving
Operational Excellence &
Customer Intimacy
• Tasty Baking
– Pre-wrapped single-portion treats
• Cupcakes
• Snack pies
• Cookies
• donuts
• $170 million in sales in 2007
Through 15,500 convenience stores & supermarkets
– Market share & sales dropping
– Profitability at all-time low
– Technically challenged, inflexible
manufacturing
– No timely info for
• Tracking manufacturing outputs
• Warehouse shipments
– Challenges
• Shipments were missed
• Excess inventory had to be sold at a discount
• Operating costs rose
• Sales info come from its network of sales
distribution
– Solution
• Install enterprise system using SAP
– Consultants from SAP & Deloitte
– Microsoft SQL server database
• Changes in its business processes to take
maximum advantages of SAP capabilities
• Benefits
– Reduced
• Inventory write-downs by 60%
• Price markdown by 40%
– Customer satisfaction has increased
• Lower return rates
• Higher order fill rates
Enterprise systems
Supply chain management systems
Customer relationship management
systems
Enterprise applications
– New opportunities & challenges
Enterprise systems
• Enterprise resources planning, ERP
Chapter 2
– A suite of integrated software modules
– A common central database
• Data are collected from all
– Divisions and departments in a firm
– Key business process
• Made data immediately available to all
– Divisions and departments in a firm
– Key business process
鼎新 Workflow ERP
• Sales rep
– Place an order for tire rims
• The system verify
– Customer’s credit limit
– Schedule the shipment
– Identify the best shipping route
If inventory is insufficient
• The system schedules the manufacturing
• Enterprise software
– Built around thousands of predefined
business processes
• Best practice 典範作業
– Most successful solutions or problem solving method
• Sources of best practices
– Consulting firms
– Enterprise software firms
Hire a consulting firm or enterprise software firm
Obtain the knowledge base of best practice
=
– Implementation
• Select the functions
– Finance & account, …
• Map
– Their business processes
– Predefined business processes of software supported
• Configuration tables
– Tailor software to business processes
» ABC accounting, standard cost accounting
• If software does not support the way the
organization does business
– Rewrite software
» Software is complex
» Expensive customization
» Degrade system performance
– Company changes the way they work
– Major ERP vendors
• SAP
• Oracle
鼎新電腦
• Business value of enterprise systems
– Increase operation efficiency
– Provide firm-wide information
• Make better decision
– Enforce standard practices and data
• Everyone does business the same way
– Ex: Coca-cola (SAP)
» Standardize business process in 200 countries
» Leverage its world-wide buying power
– Respond rapidly to customer requests
• Integrate data
– orders, manufacturing, …
– Evaluate overall organizational performance
• Analytical tools
Enterprise systems
Supply chain management systems
Customer relationship management
systems
Enterprise applications
– New opportunities & challenges
• Supply chain
– Network of organizations and business
processes
• Procuring raw materials
• Transforming materials into
– Components
– Finish products
• Distribute to customers
Design, market,
& sell
Shanks
Heels
• Information & supply chain management
– Inefficiencies in the supply chain
• Part shortage
• Underutilized plant capacity
• Excessive finished goods inventory
• High transportation cost
Caused by inaccurate or untimely information
– Manufacturer has perfect information
• Exactly how many units
• When
customers wanted
Make Just-in-time strategy possible
– Uncertainty arise in supply chains
• Uncertain product demand
• Late shipments from suppliers
• Defective parts or raw materials
• Production process breakdown
– Solutions
• Build more inventory
– On product that manufacturer thinks customer need
• Safety stock
– Inventory cost vs. low fill rate cost
– Bullwhip effect
– 長鞭效應、啤酒遊戲 (beer game)
• Information about the demand for a product
– Get distorted
» As it pass from one entity to the next
» Across the supply chain
• These changes ripple throughout the supply chain
– Magnifying
– Creating excess inventory
– P&G
• Pampers disposal diapers
– Offer aggressive price promotion
• Customer purchases are fairly stable
• Order from distributors will spike
– The bullwhip is tamed
• By reduce uncertainty
• Accurate & up-to-date info
• Supply chain management applications
– Supply chain planning
• Generate demand forecasts
– Demand planning
» How much product a business needs to make
to satisfy all its customers’ demand
• Develop sourcing and manufacturing plans
– How much to manufacture in a given period
– Establish inventory level
– Determine where to store finished goods
• Example
– A large customer
» place a large order than usual or
» change the order on short notice
– Create a widespread impact
» additional material
» different mix of raw materials
Supply chain planning software
» makes the necessary adjustments
» shares the info about all changes
– Supply chain execution
• Manage the flow of products
» Thru distribution centers and warehouse
– Ensure that products are delivered
» to the right locations
» In the most efficient manner
• Functions
– Track goods
– Manage material, warehouse, transportation
– Financial information
– Major vendors
• Manugistics
• i2
• SAP
• Oracle
• Global SCM & the Internet
Before Internet
– Difficulties to make info flow
• Internal supply chain
– ERP
• External supply chain
– Incompatible technology platform
Internet Technology
– Intranet
– Extranet
• Improve coordination among supply chain
– Benefits
• Instantly communication
• Up-to-date info
– Example
• Customer can tap into supplier’s system
– 台積電 虛擬工廠 TSMC/Virtue company
• Global supply chain issues
– Additional costs of offshore manufacturing
• Transportation
• Inventory
– The need for a larger buffer of safety stock
• Local taxes
• Fees
– Foreign government regulation
– Cultural difference
• Demand-driven supply chains
– From push to pull manufacturing
– Efficient customer response (ECR)
– Push-based model
• Build-to-stock
– Based on forecast
– Products are pushed to customers
– Pull-based model
• Demand-driven model
• Build-to-order
– Orders or purchases trigger events
» Transactions to produce and deliver only what
customers have ordered
• Walmart
– Continuous replenishment system
• Dell computer
– Build-to-order
– Internet technology
• Change supply chain information movement
– From sequential
– To concurrent
» Information flow in many directions simultaneously
Members of supply chain can adjust to changes
immediately
• Business value of SCM systems
– Streamline processes
– More accurate information
– Match supply to demand
– Reduce inventory levels
– Improve delivery service
– Reduce cost
優化、暢流
Enterprise systems
Supply chain management systems
Customer relationship management
systems
Enterprise applications
– New opportunities & challenges
Innovation-based competitiveness is short-lived
Enduring competitive strength may be their relationship
with customers
– Info nurture strong, long-lasting relationship
• Exactly who your customers are
• How to contact them
• Whether they are costly to service and sell to
• What kind of products or services they are
interested in
• How much they spend on your products
– Small-town store
• Small business owners
– Know their customers
» Personal
» Face-to-face
• Large business
– Impossible to “know your customers”
» Too many customers
» Too many ways to interact with customers
over the web, phone, fax, face-to-face
difficult to integrate info from all sources
• Customer relationship management
– Capture and integrate customer data
• from all over the organization
– Consolidate data
– Analyze the data
– Distribute the results
• to various systems and customer touch points
– Touch points
• Contact points
• Methods of interaction with the customer
– Phone
– Email
– Customer service desk
– Conventional mail
– Web site
– Wireless device
– Retail store
– CRM software
• A single enterprise view of customers
– Regardless of touch point
• Analytical tools
– Customers’ lifetime value
– Loyal customers
– Most profitable customers
– Most frequently asked questions
– Customer’s preferences
• CRM software
– Niche tools
• Personalizing web sites for specific customers
– Large-scale enterprise applications
• Capture many interactions with customers
• Link to other enterprise systems
– SCM
• CRM software
– Partner relationship management
• Enhance collaboration between a company and its
selling partners
– Company does not sell directly to customers
» Via distributors and retailers
• Distribute
– Leads
– Data about customers
• Integrate
– Lead generation, pricing, promotions, availability
• CRM software
– Employee relationship management
• Setting objectives
• Employee performance management
• Performance-based compensation
• Employee training
– Major CRM vendors
• Siebel systems
• Clarify
•
• Sales force automation
– Focus sales efforts on the most profitable
customers
• Sales prospect
• Product info
• Product configuration
• Quote generation
• Forecast
• Territory management
• Customer Service
– Increase efficiency
• Call centers
• Help desks
• Customer support staff
– Capabilities
• Assign & manage customer service requests
– Route calls to the correct service person
• Consistent and accurate info
– Handle more calls
– Shorten the duration of calls
• Web-based self service
• Marketing
– Direct-marketing campaigns
• Capture prospect
• Provide product & service info
• Qualify leads
• Scheduling & tracking mails & emails
– Cross selling
• Marketing of complementary products
Customer loyalty management process map
• Operational & Analytical CRM
– Operational CRM
• Customer-facing application
– Sales force automation
– Call center
– Customer service support
– Marketing automation
– Analytical CRM
• Analyze customer data
– Data warehousing
» Consolidate data from
operational CRM
customer touch points
» OLAP, online analytical processing
» Data mining
• Outputs
– Identify buying pattern
– Create segments
– Pinpoint profitable and unprofitable customers
• Outputs
– Customer lifetime value
» Revenue produced by a specific customer
» The expense incurred in acquiring and servicing that
customer
» Expect life of the relationship between the company
and the customer.
• Business values of CRM
– Increase customer satisfaction
– Reduced direct marketing costs
– Lower cost for customer acquisition and
retention
– Increase sale revenue
– More effective marketing
Enterprise systems
Supply chain management systems
Customer relationship management
systems
Enterprise applications
– New opportunities & challenges
• Enterprise systems
– Powerful instruments for
• Achieving operational excellence
• Enhancing decision making
– Powerful in
• Changing the way the organization works
Challenging to implement
• Challenges of enterprise applications
• Complex software
• Expensive to purchase and implement
– Software
– Database tools
– Consulting fee
– Personnel cost, training
– hardware
• Fundamental changes in the way the business
operates
– Best practices
– Employee must accept
» new job function & responsibility
» New set of work activities
• Implementation create enormous operation
problems
– K-Mart, i2,
» did not work with promotion-driven business model
– Hersey, SAP
» Shipment ran 2 weeks late
• Best practice is not compatible with unique
business process
• Switching cost
• Organization-wide definition of data
– 就源輸入
• Next generation enterprise software
– More flexible, web-enabled, and capable of
integration with other systems
– Integrated platform
• Integrate multiple application
• From multiple business
• Deliver seamless experience
– Customer
– Employee
– Business partner
Order-to-cash service
Interactive session
(Minicase)
– Technology
• Procter & Gamble tries to optimize inventory
•
– Organization
• Chase card service
• P. 384
