Management Info Systems Test 3

Benefits of ERP systems

1.Organizational flexibility and agility: As you have seen, ERP systems break down many former departmental and functional silos of business processes, information systems, and information resources. In this way, they make organizations more flexible, agile, and adaptive. The organizations can therefore respond quickly to changing business conditions and capitalize on new business opportunities. 2.Decision support: ERP systems provide essential information on business performance across functional areas. This information significantly improves managers' ability to make better, more timely decisions. 3.Quality and efficiency: ERP systems integrate and improve an organization's business processes, generating significant improvements in the quality of production, distribution, and customer service.

Supply Chain Management basic components

1.Plan: Planning is the strategic component of SCM. Organizations must have a strategy for managing all the resources that are involved in meeting customer demand for their product or service. Planning involves developing a set of metrics (measurable deliverables) to monitor the organization's supply chain to ensure that it is efficient and it delivers high quality and value to customers for the lowest cost. 2.Source: In the sourcing component, organizations choose suppliers to deliver the goods and services they need to create their product or service. Supply chain managers develop pricing, delivery, and payment processes with suppliers, and they create metrics to monitor and improve their relationships with their suppliers. They also develop processes for managing their goods and services inventory, including receiving and verifying shipments, transferring the shipped materials to manufacturing facilities, and authorizing supplier payments. 3.Make: This is the manufacturing component. Supply chain managers schedule the activities necessary for production, testing, packaging, and preparation for delivery. This component is the most metric-intensive part of the supply chain, in which organizations measure quality levels, production output, and worker productivity. 4.Deliver: This component, often referred to as logistics, is in which organizations coordinate the receipt of customer orders, develop a network of warehouses, select carriers to transport their products to their customers, and create an invoicing system to receive payments. 5.Return: Supply chain managers must create a responsive and flexible network for receiving defective, returned, or excess products back from their customers, as well as for supporting customers who have problems with delivered products.

Pull model (make-to-order)

A business model in which the production process begins with a customer order and companies make only what customers want, a process closely aligned with mass customization.

Push model (make-to-stock)

A business model in which the production process begins with a forecast, which predicts the products that customers will want as well as the quantity of each product. The company then produces the amount of products in the forecast, typically by using mass production, and sells, or "pushes," those products to consumers.

Supply Chain

A supply chain is the flow of materials, information, money, and services from raw material suppliers, through factories and warehouses, to the end customers. A supply chain also includes the organizations and processes that create and deliver products, information, and services to the end customers.

On Demand CRM systems

An on-demand CRM system is one that is hosted by an external vendor in the vendor's data center. This arrangement spares the organization the costs associated with purchasing the system. Because the vendor creates and maintains the system, the organization's employees also need to know how to access it and use it. The concept of on-demand is also known as utility computing or software-as-a-service

open-source CRM system

CRM software whose source code is available to developers and users

analytical CRM system

CRM system that analyzes customer behavior and perceptions in order to provide actionable business intelligence

Extended ERP Modules

Customer Relationship Management. (Discussed in detail in Chapter 11.) These modules support all aspects of a customer's relationship with the organization. They help the organization to increase customer loyalty and retention, and thus improve its profitability. They also provide an integrated view of customer data and interactions, helping organizations to be more responsive to customer needs. Supply Chain Management. (Discussed in detail in Chapter 11.) These modules manage the information flows between and among stages in a supply chain to maximize supply chain efficiency and effectiveness. They help organizations plan, schedule, control, and optimize the supply chain from the acquisition of raw materials to the receipt of finished goods by customers. Business Intelligence. (Discussed in detail in Chapter 12.) These modules collect information used throughout the organization, organize it, and apply analytical tools to assist managers with decision making. E-Business. (Discussed in detail in Chapter 7.) Customers and suppliers demand access to ERP information, including order status, inventory levels, and invoice reconciliation. Furthermore, they want this information in a simplified format that can be accessed on the web. As a result, these modules provide two channels of access into ERP system information—one channel for customers (B2C) and one for suppliers and partners (B2B).

Descripitive Analytics

Descriptive analytics are the first step in data reduction. Descriptive analytics summarize what has happened in the past and allow decision makers to learn from past behaviors. Descriptive analytics are useful to produce information such as total stock in inventory, average dollars spent per customer, and year-over-year change in sales. Common examples of descriptive analytics are reports that provide historical insights regarding an organization's production, financials, operations, sales, finance, inventory, and customers.

Core ERP Modules

Financial Management. These modules support accounting, financial reporting, performance management, and corporate governance. They manage accounting data and financial processes such as general ledger, accounts payable, accounts receivable, fixed assets, cash management and forecasting, product-cost accounting, cost-center accounting, asset accounting, tax accounting, credit management, budgeting, and asset management. Operations Management. These modules manage the various aspects of production planning and execution such as demand forecasting, procurement, inventory management, materials purchasing, shipping, production planning, production scheduling, materials requirements planning, quality control, distribution, transportation, and plant and equipment maintenance. Human Resource Management. These modules support personnel administration (including workforce planning, employee recruitment, assignment tracking, personnel planning and development, and performance management and reviews), time accounting, payroll, compensation, benefits accounting, and regulatory requirements.

Material Flows of Supply Chain

Material flows are the physical products, raw materials, supplies, and so forth that flow along the chain. M

operational CRM system

Operational CRM systems support front-office business processes. Front-office processes are those that directly interact with customers; that is, sales, marketing, and service. The two major components of operational CRM systems are customer-facing applications and customer-touching applications (discussed further on). Operational CRM systems provide the following benefits: •Efficient, personalized marketing, sales, and service •A 360° view of each customer •The ability of sales and service employees to access a complete history of customer interaction with the organization, regardless of the touch point

Customer Touch Points

Organizations must recognize the numerous and diverse interactions they have with their customers. These interactions are referred to as customer touch points. Traditional customer touch points include telephone contact, direct mailings, and actual physical interactions with customers during their visits to a store. e-mail, websites, and communications through smartphones

Customer Churn

Over time all organizations inevitably lose a certain percentage of customers, a process called customer churn. The optimal result of the organization's CRM efforts is to maximize the number of high-value repeat customers while minimizing customer churn.

Predictive Analytics

Predictive analytics examine recent and historical data to detect patterns and predict future outcomes and trends. Predictive analytics provide estimates about the likelihood of a future outcome. The purpose of predictive analytics is not to tell decision makers what will happen in the future. Predictive analytics can only forecast what might happen in the future, based on probabilities. For example, predictive analytics applications forecast customer behavior and purchasing patterns, identify trends in sales activities, and forecast demand for inputs from suppliers.

Prescriptive Analytics

Prescriptive analytics go beyond descriptive and predictive models by recommending one or more courses of action and showing the likely outcome of each decision. Predictive analytics do not predict one possible future, but rather multiple future outcomes based on the decision maker's actions. Prescriptive analytics attempt to quantify the effect of future decisions in order to advise on possible outcomes before the decisions are actually made. Some companies are successfully using prescriptive analytics to optimize production, scheduling, and inventory along the supply chain to make sure that they deliver the right products at the right time so they can best optimize the customer's experience.alytics. Statistical procedures include optimization, simulation, and decision trees.

semistructured decisions

Semistructured decisions require a combination of standard solution procedures and individual judgment.

Limitations of ERP systems

The business processes in ERP software are often predefined by the best practices that the ERP vendor has developed. Best practices are the most successful solutions or problem-solving methods for achieving a business objective. As a result, companies may need to change their existing business processes to fit the predefined business processes incorporated into the ERP software. For companies with well-established procedures, this requirement can create serious problems, especially if employees do not want to abandon their old ways of working and therefore resist the changes. •At the same time, however, an ERP implementation can provide an opportunity to improve and in some cases completely redesign inefficient, ineffective, or outdated procedures. In fact, many companies benefit from implementing best practices for their accounting, finance, and human resource processes, as well as other support activities that companies do not consider a source of competitive advantage. Recall from Chapter 2, however, that different companies organize their value chains in different configurations to transform inputs into valuable outputs and achieve competitive advantages. Therefore, although the vendor's best practices, by definition, are appropriate for most organizations, they might not be the "best" one for your company if they change those processes that give you a competitive advantage. •ERP systems can be extremely complex, expensive, and time consuming to implement. (We discuss the implementation of ERP systems in detail in the next section.) In fact, the costs and risks of failure in implementing a new ERP system are substantial. Quite a few companies have experienced costly ERP implementation failures. Specifically, they have suffered losses in revenue, profits, and market share when core business processes and information systems failed or did not work properly. In many cases, orders and shipments were lost, inventory changes were not recorded correctly, and unreliable inventory levels caused major stock outs. Companies such as Hershey Foods, Nike, A-DEC, and Connecticut General sustained losses in amounts up to hundreds of millions of dollars. In the case of FoxMeyer Drugs, a $5 billion pharmaceutical wholesaler, the ERP implementation was so poorly executed that the company had to file for bankruptcy protection.

Customer Relationship Management (CRM)

The customer relationship has become even more impersonal with the rapid growth of the Internet and the World Wide Web. In today's hypercompetitive marketplace, customers are increasingly powerful; if they are dissatisfied with a product or a service from one organization, a competitor is often just one mouse click away. Furthermore, as more and more customers shop on the web, an enterprise does not even have the opportunity to make a good first impression in person. Customer relationship management returns to personal marketing. That is, rather than market to a mass of people or companies, businesses market to each customer individually. By employing this approach, businesses can use information about each customer—for example, previous purchases, needs, and wants—to create highly individualized offers that customers are more likely to accept. The CRM approach is designed to achieve customer intimacy. Customer relationship management is a customer-focused and customer-driven organizational strategy. That is, organizations concentrate on assessing customers' requirements for products and services and then providing a high-quality, responsive customer experience. CRM is not a process or a technology per se; rather, it is a customer-centric way of thinking and acting. The focus of modern organizations has shifted from conducting business transactions to managing customer relationships. In general, organizations recognize that customers are the core of a successful enterprise, and the success of the enterprise depends on effectively managing relationships with them. The CRM approach is enabled by information technology in the form of various systems and applications. However, CRM is not only about the software. Sometimes the problem with managing relationships is simply time and information. Old systems may contain the needed information, but this information may take too long to access and may not be usable across a variety of applications. The result is that companies have less time to spend with their customers.

Software as a Service (SaaS)

The system can be used from any location that has Internet access. Consequently, users can work from any location using online shared and centralized resources (data and databases). Users access the ERP system through a secure virtual private network (VPN) connection (discussed in Chapter 4) with the provider. 2.Companies using cloud-based ERP avoid the initial hardware and software expenses that are typical of on-premise implementations. For example, to run SAP on-premise, a company must purchase SAP software as well as a license to use SAP. The magnitude of this investment can hinder small- to medium-sized enterprises (SMEs) from adopting ERP. 3.Cloud-based ERP solutions are scalable, meaning it is possible to extend ERP support to new business processes and new business partners (e.g., suppliers) by purchasing new ERP modules

On Premise Erp Implementation

The vanilla approach: In this approach, a company implements a standard ERP package, using the package's built-in configuration options. When the system is implemented in this way, it will deviate only minimally from the package's standardized settings. The vanilla approach can enable the company to perform the implementation more quickly. However, the extent to which the software is adapted to the organization's specific processes is limited. Fortunately, a vanilla implementation provides general functions that can support the firm's common business processes with relative ease, even if they are not a perfect fit for those processes. 2.The custom approach: In this approach, a company implements a more customized ERP system by developing new ERP functions designed specifically for that firm. Decisions concerning the ERP's degree of customization are specific to each organization. To use the custom approach, the organization must carefully analyze its existing business processes to develop a system that conforms to the organization's particular characteristics and processes. Customization is also expensive and risky because computer code must be written and updated every time a new version of the ERP software is released. Going further, if the customization does not perfectly match the organization's needs, then the system can be very difficult to use. 3.The best-of-breed approach: This approach combines the benefits of the vanilla and customized systems while avoiding the extensive costs and risks associated with complete customization. Companies that adopt this approach mix and match core ERP modules as well as other extended ERP modules from different software providers to best fit their unique internal processes and value chains. Thus, a company may choose several core ERP modules from an established vendor to take advantage of industry best practices—for example, for financial management and human resource management. At the same time, it may also choose specialized software to support its unique business processes—for example, for manufacturing, warehousing, and distribution. Sometimes companies arrive at the best of breed approach the hard way. For example, Dell wasted millions of dollars trying to customize an integrated ERP system from a major vendor to match its unique processes before it realized that a smaller, more flexible system that integrated well with other corporate applications was the answer.

unstructured decisions

These decisions are intended to deal with "fuzzy," complex problems for which there are no cut-and-dried solutions. An unstructured decision is one in which there is no standardized procedure for carrying out any of the three phases. In

Business Analytics Tool

They include Excel, multidimensional analysis (also called OLAP), data mining, and decision-support systems. BA also employs numerous statistical procedures, which include descriptive statistics, affinity analysis, linear, multiple, and logistic regression, as well as many others.

Batch Processing

Transaction processing system (TPS) that processes data in batches at fixed periodic intervals.

3 segments of supply chain

Upstream, where sourcing or procurement from external suppliers occurs. In this segment, supply chain managers select suppliers to deliver the goods and services the company needs to produce its product or service. Furthermore, SC managers develop the pricing, delivery, and payment processes between a company and its suppliers. Included here are processes for managing inventory, receiving and verifying shipments, transferring goods to manufacturing facilities, and authorizing payments to suppliers. 2.Internal, where packaging, assembly, or manufacturing takes place. SC managers schedule the activities necessary for production, testing, packaging, and preparing goods for delivery. They also monitor quality levels, production output, and worker productivity. 3.Downstream, where distribution takes place, frequently by external distributors.

Customer Lifetime Value (CLV)

a measure of a customer's worth (sales minus costs) to a business over one's lifetime;An organization's overall goal is to maximize the lifetime value of a customer, which is that customer's potential revenue stream over a number of years.

customer-facing CRM applications

an organization's sales, field service, and customer interaction center representatives interact directly with customers (salesforce automation, customer service and support, campaign management, and marketing)

ERP (enterprise resource planning) system

are designed to correct a lack of communication among the functional area IS. ERP systems resolve this problem by tightly integrating the functional area IS through a common database. For this reason, experts credit ERP systems with greatly increasing organizational productivity. ERP systems adopt a business process view of the overall organization to integrate the planning, management, and use of all of an organization's resources, employing a common software platform and database. The major objectives of ERP systems are to tightly integrate the functional areas of the organization and to enable information to flow seamlessly across them. Tight integration means that changes in one functional area are immediately reflected in all other pertinent functional areas. In essence, ERP systems provide the information necessary to control the business processes of the organization.

ERP II systems

are interorganizational ERP systems that provide web enabled links among a company's key business systems-- such as inventory and production-- and its customers, suppliers, distributors, and other relevant parties

OLTP (online transaction processing)

business transactions are processed online as soon as they occur. For example, when you pay for an item at a store, the system records the sale by reducing the inventory on hand by one unit, increasing sales figures for the item by one unit, and increasing the store's cash position by the amount you paid. The system performs these tasks in real time by means of online technologies.

Customer-Touching Applications

customers who use these technologies interact directly with the applications themselves. For this reason, these applications are called customer-touching CRM applications or electronic CRM (e-CRM) applications. Customers typically can use these applications to help themselves. There are many types of e-CRM applications. Let's examine some of the major ones.

high-end CRM systems

designed for enterprises with few large customers

low-end CRM systems

designed for enterprises with many small customers

Social CRM systems

e use of social media technology and services to enable organizations to engage their customers in a collaborative conversation in order to provide mutually beneficial value in a trusted and transparent manner.

structured decisions

eal with routine and repetitive problems for which standard solutions exist, such as inventory control. In a structured decision, the first three phases of the decision process—intelligence, design, and choice—are laid out in a particular sequence, and the procedures for obtaining the best (or at least a good enough) solution are known. These types of decisions are candidates for decision automation.

data mining

efers to the process of searching for valuable business information in a large database, data warehouse, or data mart. Data mining can perform two basic operations: (1) identifying previously unknown patterns and (2) predicting trends and behaviors. The first operation is a descriptive analytics application and the second is a predictive analytics application.

Supply Chain Management (SCM)

improve the processes a company uses to acquire the raw materials it needs to produce a product or service and then deliver that product or service to its customers. That is, supply chain management is the process of planning, organizing, and optimizing the various activities performed along the supply chain.

Decision Making Process

intelligence phase, in which managers examine a situation and then identify and define the problem or opportunity. In the design phase, decision makers construct a model for addressing the situation. They perform this task by making assumptions that simplify reality and by expressing the relationships among all of the relevant variables. Managers then validate the model by using test data. Finally, decision makers set criteria for evaluating all of the potential solutions that are proposed. The choice phase involves selecting a solution or course of action that seems best suited to resolve the problem. This solution (the decision) is then implemented. Implementation is successful if the proposed solution solves the problem or seizes the opportunity. If the solution fails, then the process returns to the previous phases. Computer-based decision support assists managers in the decision-making process.

mobile CRM system

interactive system that enables an organization to conduct communications related to sales, marketing, and customer service activities through a mobile medium for the purpose of building and maintaining relationships with its customers. Simply put, mobile CRM systems involve interacting directly with consumers through portable devices such as smartphones

Financial Flows

involve money transfers, payments, credit card information and authorization, payment schedules, e-payments, and credit-related data.

Online Analytical Processing (OLAP)

me BA applications include online analytical processing, also referred to as multidimensional analysis, capabilities. OLAP involves "slicing and dicing" data stored in a dimensional format, "drilling down" in the data to greater detail, and "rolling up" the data to greater summarization (less detail).

Information Flows

nformation flows consist of data related to demand, shipments, orders, returns, and schedules, as well as changes in any of these data.

ad hoc reports; on demand reports

out-of-the routine reports; Ad hoc reports can also include requests for the following types of information: •Drill-down reports display a greater level of detail. For example, a manager might examine sales by region and decide to "drill down" by focusing specifically on sales by store and then by salesperson. •Key indicator reports summarize the performance of critical activities. For example, a chief financial officer might want to monitor cash flow and cash on hand. •Comparative reports compare, for example, the performances of different business units or of a single unit during different times.

routine reports

produced at scheduled intervals. They range from hourly quality control reports to daily reports on absenteeism rates. Although routine reports are extremely valuable to an organization, managers frequently need special information that is not included in these reports. At other times, they need the information that is normally included in routine reports, but at different times ("I need the report today, for the last three days, not for one week").

exception reports

reports that include only information that exceeds certain threshold standards

Transaction Processing System (TPS)

supports the monitoring, collection, storage, and processing of data from the organization's basic business transactions, each of which generates data. The TPS collects data continuously, typically in real time—that is, as soon as the data are generated—and it provides the input data for the corporate databases. The TPSs are critical to the success of any enterprise because they support core operations.

Data Consolidation

the organization's CRM systems must manage customer data effectively with modern interconnected systems built around a data warehouse to make all customer-related data available to every unit of the business. 360 view