Information Technology: Strategic Decision Making For Managers     Henry C. Lucas Jr. John Wiley & Sons, Inc Dinesh Mircha...
Copyright 2004 John Wiley & Sons, Inc. <ul><li>All rights reserved. Reproduction or translation of this work beyond that p...
Chapter 17 Business Process: Examples from ERP and CRM
Benefits of Enterprise Resource Planning Systems <ul><li>Provide efficient processing  </li></ul><ul><ul><li>measured by i...
Benefits of Customer Relationship Management (CRM) Systems <ul><li>Improved customer relations leading to repeat business ...
Measures of the Contribution of ERP Systems <ul><li>Transactions processed per employee  </li></ul><ul><li>Cycle time redu...
Measures of the Contribution of CRM Systems <ul><li>Customer satisfaction </li></ul><ul><li>Customer retention (amount of ...
Understanding Business Processes <ul><li>Business Process Reengineering </li></ul><ul><ul><li>“…  the fundamental rethinki...
Reengineering <ul><li>Fundamental </li></ul><ul><ul><li>Why does the firm do things a certain way? </li></ul></ul><ul><li>...
What is a Process? <ul><li>A process is like a system </li></ul><ul><ul><li>it begins with some inputs, involves processin...
An Example of A Process at Merrill Lynch  <ul><li>The customer brings documents to a branch office </li></ul><ul><li>The b...
The Original System
The Original System
The Original System
The New System
The New System
The New System
Impact of the New System   <ul><li>Reduction of occupancy from two locations to one </li></ul><ul><li>Reduction in deposit...
Execution of Business Process Reengineering/Redesign   <ul><li>Technological leveling </li></ul><ul><li>Production automat...
Improving Processes <ul><li>Questions to ask include </li></ul><ul><ul><li>What are our key business processes? </li></ul>...
Enterprise Resource Planning Systems <ul><li>ERP packages are integrated and provide consistent interfaces </li></ul><ul><...
Customer Catalog Order XML EDI Fax Order Processing Manufacturing Master Production Schedule Materials Requirements Planni...
Customer Catalog Order XML EDI Fax Order Processing Manufacturing Master Production Schedule Materials Requirements Planni...
Customer Catalog Order XML EDI Fax Order Processing Manufacturing Master Production Schedule Materials Requirements Planni...
Customer Catalog Order XML EDI Fax Order Processing Manufacturing Master Production Schedule Materials Requirements Planni...
Customer Catalog Order XML EDI Fax Order Processing Manufacturing Master Production Schedule Materials Requirements Planni...
Customer Catalog Order XML EDI Fax Order Processing Manufacturing Master Production Schedule Materials Requirements Planni...
Customer Catalog Order XML EDI Fax Order Processing Manufacturing Master Production Schedule Materials Requirements Planni...
Customer Catalog Order XML EDI Fax Order Processing Manufacturing Master Production Schedule Materials Requirements Planni...
Customer Catalog Order XML EDI Fax Order Processing Manufacturing Master Production Schedule Materials Requirements Planni...
Detail and Complexity of ERP Packages <ul><li>Package vendors  </li></ul><ul><ul><li>customize the package for various ind...
The Implementation Challenge <ul><li>Failed ERP implementations </li></ul><ul><ul><li>Hershey’s chocolates, Nike, Whirlpoo...
Customer Relationship Management Software <ul><li>Help create a highly personalized relationship with each customer leadin...
Summary <ul><li>Improved business processes improve efficiency and reduce costs </li></ul><ul><li>CRM applications can inc...
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  1. 1. Information Technology: Strategic Decision Making For Managers Henry C. Lucas Jr. John Wiley & Sons, Inc Dinesh Mirchandani University of Missouri – St. Louis
  2. 2. Copyright 2004 John Wiley & Sons, Inc. <ul><li>All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein. </li></ul>
  3. 3. Chapter 17 Business Process: Examples from ERP and CRM
  4. 4. Benefits of Enterprise Resource Planning Systems <ul><li>Provide efficient processing </li></ul><ul><ul><li>measured by indicators like the number of transactions per employee, cycle time reductions and supply chain efficiency </li></ul></ul><ul><li>Provide a level of process standardization </li></ul><ul><ul><li>leads to efficiencies for companies with many different locations </li></ul></ul><ul><li>Provide a platform for the development of new systems </li></ul><ul><ul><li>ERP gives management an option for the future </li></ul></ul>
  5. 5. Benefits of Customer Relationship Management (CRM) Systems <ul><li>Improved customer relations leading to repeat business </li></ul><ul><li>Reduced costs for acquiring a customer </li></ul><ul><li>Reduced costs per customer service call </li></ul><ul><li>Greater customer satisfaction </li></ul><ul><li>Opportunities for cross-selling and for additional business from an existing customer </li></ul><ul><li>Increased revenue </li></ul>
  6. 6. Measures of the Contribution of ERP Systems <ul><li>Transactions processed per employee </li></ul><ul><li>Cycle time reduction in the production of goods or services and the development of new products </li></ul><ul><li>As an option for other applications </li></ul>
  7. 7. Measures of the Contribution of CRM Systems <ul><li>Customer satisfaction </li></ul><ul><li>Customer retention (amount of repeat business) </li></ul><ul><li>Cost of acquiring a customer </li></ul><ul><li>Cost per sales call </li></ul><ul><li>Cost to process a customer support interaction </li></ul>
  8. 8. Understanding Business Processes <ul><li>Business Process Reengineering </li></ul><ul><ul><li>“… the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed (Hammer and Champy, 1993).” </li></ul></ul>
  9. 9. Reengineering <ul><li>Fundamental </li></ul><ul><ul><li>Why does the firm do things a certain way? </li></ul></ul><ul><li>Radical </li></ul><ul><ul><li>reinvention as opposed to making superficial changes or minor enhancements </li></ul></ul><ul><li>Dramatic </li></ul><ul><ul><li>focuses on achieving quantum leaps in performance </li></ul></ul><ul><li>Processes </li></ul><ul><ul><li>a collection of activities that takes one or more kinds of inputs and produces some output of value </li></ul></ul>
  10. 10. What is a Process? <ul><li>A process is like a system </li></ul><ul><ul><li>it begins with some inputs, involves processing, and ends with an objective accomplished (e.g., order fulfillment) </li></ul></ul><ul><li>A process may </li></ul><ul><ul><li>extend across many organization boundaries </li></ul></ul><ul><ul><li>involve a large number of individuals </li></ul></ul><ul><ul><li>require many decisions and actions along the way </li></ul></ul>
  11. 11. An Example of A Process at Merrill Lynch <ul><li>The customer brings documents to a branch office </li></ul><ul><li>The branch does preliminary processing </li></ul><ul><li>Certificates are sent to a processing center </li></ul><ul><li>The center verifies and checks the certificates </li></ul><ul><li>The center processes certificates </li></ul><ul><li>The center posts data to the customer's account </li></ul>
  12. 12. The Original System
  13. 13. The Original System
  14. 14. The Original System
  15. 15. The New System
  16. 16. The New System
  17. 17. The New System
  18. 18. Impact of the New System <ul><li>Reduction of occupancy from two locations to one </li></ul><ul><li>Reduction in depository fees </li></ul><ul><li>Interest savings on receivables </li></ul><ul><li>Reduction of microfilm costs </li></ul><ul><li>Savings in security services </li></ul><ul><li>Reduction in staff </li></ul>
  19. 19. Execution of Business Process Reengineering/Redesign <ul><li>Technological leveling </li></ul><ul><li>Production automation </li></ul><ul><li>Electronic workflows </li></ul>
  20. 20. Improving Processes <ul><li>Questions to ask include </li></ul><ul><ul><li>What are our key business processes? </li></ul></ul><ul><ul><li>Do we have to execute this process at all? </li></ul></ul><ul><ul><li>What totally new ways, taking advantage of information technology, exist to perform this process? </li></ul></ul><ul><ul><li>What does redesigning a process imply for the structure of the organization? </li></ul></ul><ul><ul><li>How can we use IT design variables in conjunction with process redesign to change the structure of the organization? </li></ul></ul>
  21. 21. Enterprise Resource Planning Systems <ul><li>ERP packages are integrated and provide consistent interfaces </li></ul><ul><ul><li>Include modules that encompass the processing for major subsystems like order processing, manufacturing, accounts receivable, general ledger, human resources, production planning, etc. </li></ul></ul><ul><li>Before the advent of ERP systems, companies developed applications for different functions </li></ul><ul><li>Major ERP package vendors include SAP and Oracle </li></ul>
  22. 22. Customer Catalog Order XML EDI Fax Order Processing Manufacturing Master Production Schedule Materials Requirements Planning Purchasing Purchase Vendor Order Invoice Goods (materials) Inventory (Warehouse) Shipment Accounts Payable Payment Invoice Sales Reporting General Ledger Orders Manufacturing Backlog Work in process Shipments Finished goods Cost buildup Accounts Payable Accounts Receivable Sales Payment Accounts Receivable 1. 2. <ul><li>Item in stock, ship from inventory </li></ul><ul><li>Out of stock, manufacture and ship </li></ul>Enterprise Resources Planning: A Schematic of a Firm’s Transactions Processing
  23. 23. Customer Catalog Order XML EDI Fax Order Processing Manufacturing Master Production Schedule Materials Requirements Planning Purchasing Purchase Vendor Order Invoice Goods (materials) Inventory (Warehouse) Shipment Accounts Payable Payment Invoice Sales Reporting General Ledger Orders Manufacturing Backlog Work in process Shipments Finished goods Cost buildup Accounts Payable Accounts Receivable Sales Payment Accounts Receivable 1. 2. <ul><li>Item in stock, ship from inventory </li></ul><ul><li>Out of stock, manufacture and ship </li></ul>Enterprise Resources Planning: A Schematic of a Firm’s Transactions Processing Customer orders via Internet EDI, Fax, phone
  24. 24. Customer Catalog Order XML EDI Fax Order Processing Manufacturing Master Production Schedule Materials Requirements Planning Purchasing Purchase Vendor Order Invoice Goods (materials) Inventory (Warehouse) Shipment Accounts Payable Payment Invoice Sales Reporting General Ledger Orders Manufacturing Backlog Work in process Shipments Finished goods Cost buildup Accounts Payable Accounts Receivable Sales Payment Accounts Receivable 1. 2. <ul><li>Item in stock, ship from inventory </li></ul><ul><li>Out of stock, manufacture and ship </li></ul>Enterprise Resources Planning: A Schematic of a Firm’s Transactions Processing Enter order Retrieve customer data from DB Check credit Check inventory
  25. 25. Customer Catalog Order XML EDI Fax Order Processing Manufacturing Master Production Schedule Materials Requirements Planning Purchasing Purchase Vendor Order Invoice Goods (materials) Inventory (Warehouse) Shipment Accounts Payable Payment Invoice Sales Reporting General Ledger Orders Manufacturing Backlog Work in process Shipments Finished goods Cost buildup Accounts Payable Accounts Receivable Sales Payment Accounts Receivable 1. 2. <ul><li>Item in stock, ship from inventory </li></ul><ul><li>Out of stock, manufacture and ship </li></ul>Enterprise Resources Planning: A Schematic of a Firm’s Transactions Processing Item in inventory Shipping notice to warehouse
  26. 26. Customer Catalog Order XML EDI Fax Order Processing Manufacturing Master Production Schedule Materials Requirements Planning Purchasing Purchase Vendor Order Invoice Goods (materials) Inventory (Warehouse) Shipment Accounts Payable Payment Invoice Sales Reporting General Ledger Orders Manufacturing Backlog Work in process Shipments Finished goods Cost buildup Accounts Payable Accounts Receivable Sales Payment Accounts Receivable 1. 2. <ul><li>Item in stock, ship from inventory </li></ul><ul><li>Out of stock, manufacture and ship </li></ul>Enterprise Resources Planning: A Schematic of a Firm’s Transactions Processing Warehouse generates picking list Pick and ship order System updates A/R
  27. 27. Customer Catalog Order XML EDI Fax Order Processing Manufacturing Master Production Schedule Materials Requirements Planning Purchasing Purchase Vendor Order Invoice Goods (materials) Inventory (Warehouse) Shipment Accounts Payable Payment Invoice Sales Reporting General Ledger Orders Manufacturing Backlog Work in process Shipments Finished goods Cost buildup Accounts Payable Accounts Receivable Sales Payment Accounts Receivable 1. 2. <ul><li>Item in stock, ship from inventory </li></ul><ul><li>Out of stock, manufacture and ship </li></ul>Enterprise Resources Planning: A Schematic of a Firm’s Transactions Processing AR sends invoice to customer Post payment from customer Update customer credit limit
  28. 28. Customer Catalog Order XML EDI Fax Order Processing Manufacturing Master Production Schedule Materials Requirements Planning Purchasing Purchase Vendor Order Invoice Goods (materials) Inventory (Warehouse) Shipment Accounts Payable Payment Invoice Sales Reporting General Ledger Orders Manufacturing Backlog Work in process Shipments Finished goods Cost buildup Accounts Payable Accounts Receivable Sales Payment Accounts Receivable 1. 2. <ul><li>Item in stock, ship from inventory </li></ul><ul><li>Out of stock, manufacture and ship </li></ul>Enterprise Resources Planning: A Schematic of a Firm’s Transactions Processing MRP determines materials needed Generate purchase order and transmit Vendor ships goods Enter receipt of goods Item not in stock Compute available to promise Submit to production planning system
  29. 29. Customer Catalog Order XML EDI Fax Order Processing Manufacturing Master Production Schedule Materials Requirements Planning Purchasing Purchase Vendor Order Invoice Goods (materials) Inventory (Warehouse) Shipment Accounts Payable Payment Invoice Sales Reporting General Ledger Orders Manufacturing Backlog Work in process Shipments Finished goods Cost buildup Accounts Payable Accounts Receivable Sales Payment Accounts Receivable 1. 2. <ul><li>Item in stock, ship from inventory </li></ul><ul><li>Out of stock, manufacture and ship </li></ul>Enterprise Resources Planning: A Schematic of a Firm’s Transactions Processing Vendor sends invoice Enter invoice Update A/P Send payment to vendor
  30. 30. Customer Catalog Order XML EDI Fax Order Processing Manufacturing Master Production Schedule Materials Requirements Planning Purchasing Purchase Vendor Order Invoice Goods (materials) Inventory (Warehouse) Shipment Accounts Payable Payment Invoice Sales Reporting General Ledger Orders Manufacturing Backlog Work in process Shipments Finished goods Cost buildup Accounts Payable Accounts Receivable Sales Payment Accounts Receivable 1. 2. <ul><li>Item in stock, ship from inventory </li></ul><ul><li>Out of stock, manufacture and ship </li></ul>Enterprise Resources Planning: A Schematic of a Firm’s Transactions Processing Manufacturing makes product Control systems tracks production Product shipped directly to customer or placed in inventory for later shipment Shipping-payments cycle same as for item sent from inventory
  31. 31. Detail and Complexity of ERP Packages <ul><li>Package vendors </li></ul><ul><ul><li>customize the package for various industries or assemble different building blocks for industries </li></ul></ul><ul><ul><li>include a lot of options in the software </li></ul></ul><ul><ul><li>allow custom coding </li></ul></ul><ul><ul><ul><li>However suggest changes to the firm’s business procedures before changing the package </li></ul></ul></ul>
  32. 32. The Implementation Challenge <ul><li>Failed ERP implementations </li></ul><ul><ul><li>Hershey’s chocolates, Nike, Whirlpool </li></ul></ul><ul><li>Strategies for successful implementation </li></ul><ul><ul><li>utilize significant consultant help </li></ul></ul><ul><ul><li>convince employees to change their procedures </li></ul></ul><ul><ul><li>carefully decide whether to change business processes to match the software or utilize configuration and enhancements to the software to match current business processes </li></ul></ul>
  33. 33. Customer Relationship Management Software <ul><li>Help create a highly personalized relationship with each customer leading to greater customer satisfaction and a stronger, more profitable business relationship </li></ul><ul><ul><li>Personalized recommendations, collaborative filtering, etc. </li></ul></ul><ul><ul><ul><li>Popular CRM software include Siebel and Salesforce.com </li></ul></ul></ul>
  34. 34. Summary <ul><li>Improved business processes improve efficiency and reduce costs </li></ul><ul><li>CRM applications can increase revenue </li></ul><ul><li>Major ERP or CRM packages have options components in addition to the immediate benefits they provide </li></ul>
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