Achieving Operational Excellence and Customer Intimacy: Enterprise Applications

Enterprise systems, also known as enterpirse resource planning (ERP) systems, which are based on a suite of integrated softwware modules and a common central database. The database collects data from many different divisions and departments in a firm, and from a large number of key business processes in manufacturing and production, finance and accounting, sales and marketing, and human resources, making the data available for applications that support nearly all of an organization's internal business activities.

Fig. How Enterprise System Works

Enterprise Software

Enterprise software is built around thousands of predefined business processes that reflect best practices. Companies implementing this software must first select the functions of the system they wish to use and then map their business processes to the predefined business processes in the software.

Business Value of Enterprise Systems

Enterprise systems provide value both by increasing operational efficiency and by providing firm-wide information to help managers make better decisions. Large companies with many operating units in different locations have used enterprise systems to enforce standard practices and data so that everyone does business the same way worldwide.

Supply Chain Management Systems

If you manage a small firm that makes a few products or sells a few services, chances are you will have a small number of suppliers.

The Supply Chain

A firm's supply chain is a network of organization and business processes for procuring raw materials, transforming these materials into intermediate and finished products, and distributing the finished products to customers.

Fig. Nike's Supply Chain

Information Systems and Supply Chain Management

If a manufacturer had perfect information about exactly how many units of product customers wanted, when they wanted them, and when they could be produced, it would be possible to implement highly efficient just-in-time strategy. One recurring problem in supply chain management is the bullwhip effect, in which information about the demand for a product gets distorted as it passes from one entity to the next across the supply chain.

Fig. The Bullwhip Effect

Supply Chain Management Software

Fig. Push- Versus Pull-Based Supply Chain Models

Supply chain software is classified as either software to help businesses plan their supply chains (supply chain planning) or software to help them execute the supply chain steps (supply chain execution). 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.

Global Supply Chains Issues

Global supply chains typically span greater geographic distances and time differences and domestic supply chains and have participants from a number of different countries. As goods are being sourced, produced, and shipped, communication is required among retailers, manufacturers, contractors, agents, and logistics providers. Logistics services offer Web-based software to give their customers a better view of their global supply chains. Customers are able to check a secure Web site to monitor inventory and shipments, helping them run their global supply chain more efficiently.

Demand-Driven Supply Chains: From Push to Pull Manufacturing and Efficient Customer Response

Earlier supply chain management systems were driven by a push-based model (also known as build-to-stock). In a push-based model, production master schedules are based on forecasts or best guesses of demand for products, and products are "pushed" to customers. In a pull-based model, also known as a demand-driven model or build-to-order, actual customer orders or purchases trigger events in the supply chain. Transactions to produce and deliver only what customers have ordered move up the supply chain from retailers to distributors to manufacturers and eventually to suppliers.

Business Value of Supply Chain Management Systems

Total supply chain costs represent the majority of operating expenses for many businesses and in some industries approach 75 percent of the total operating budget. Reducing supply chain costs may have a major impact on firm profitability.

Fig. The Future Internet-Driven Supply Chain

Customer Relationship Management Systems

You've probably heard phrases such as "the customer is always right" or "the customer comes first." Today theses words ring more true than ever. Because competitive advantage based on an innovative new product or service is often very short lived, companies are realizing that their only enduring competitive strength may be their relationships with their customers. Some say that the basis of competition has switched from who sells the most products and services to who m "own" the customer, and that customer relationships represent a firm's most valuable asset.

Fig. Customer Relationship Management (CRM)

Customer Relationship Management Software

Customer relationship management systems typically provide software and online tools for sales, customer service, and marketing. Partner relationship management (PRM) uses many of the same data, tools, and systems as customer relationship management to enhance collaboration between a company and its selling partners. Employee relationship management (ERM) software deals with employee issues that are closely related to CRM, such as setting objectives, employee performance, management, performance based compensation, and employee training.

Fig. CRM Software Capabilities

Fig. Customer Loyalty Management Process Map

Operational And Analytical CRM

Operational CRM includes customer-facing applications, such as tools for sales force automation, call center and customer-service support, and marketing automation. Analytical CRM includes applications that analyze customer data generated by operational CRM applications to provide information for improving business performance. Customer lifetime value (CLTV) is based on the relationship between the revenue produced by a specific customer, the expenses incurred in acquiring and servicing that customer, and the expected life of the relationship between the customer and the company. The churn rate measures the number of customers who stop using or purchasing products or services from a company. It is an important indicator of the growth or decline of a firm's customer base.

Fig. Analytical CRM Data Warehouse

Enterprise Applications: New Opportunities and Challenges

Many firms have implemented enterprise systems and systems for supply chain management and customer relationship because they are such powerful instruments for achieving operational excellence and enhancing decision making. But precisely because they are so powerful in changing the way the organization works, they are challenging to implement.

Enterprise Application Challenges

Enterprise application require not only deep-seated technological changes but also fundamental changes in the way the business operates. Companies must make sweeping changes to their business processes to work with the software. Companies adopting enterprise applications can also save time and money by keeping customizations to the minimum.

Next-Generation Enterprise Applications

Today, enterprise application vendors are delivering more value by becoming more flexible, Web-enabled, and capable of integration with other systems. SAP's next-generation enterprise applications are based on its enterprise service-oriented architecture. It incorporates service-oriented architecture (SOA) standards and uses its NetWeaver tool as an integration platform linking SAP's own applications and Web services developed by independent software vendors. The goal is to make enterprise applications easier to implement and manage. They are also offering complementary analytics products, such as SAP Business Objects and Oracle Business Intelligence Enterprise Edition.

Service Platforms

A service platform integrates multiple applications from multiple business functions, business units, or business partners to deliver a seamless experience for the customer, employee, manager, or business partner.

Summary

Enterprise software is based on a suite of integrated software modules and a common central database. The database collects data from and feeds the data into numerous applications that can support nearly all of an organization's internal business activities. Supply chain management systems automate the flow of information among members of the supply chain so they can use it to make better decisions about when and how much to purchase, produce, or ship. Customer relationship management (CRM) systems integrate and automate customer-facing processes in sales, marketing, and customer service, providing an enterprise-wide view of customers. Enterprise applications are difficult to implement. They require extensive organizational change, large new software investments, and careful assessment of how these systems will enhance organizational performance. Service platforms integrate data and processes from the various enterprise applications as well as from disparate legacy application to create new companies business processes.