ENGL 2131Fall 2018Dr. RogersTopic for Critical Essay 2, du.docx

ENGL 2131
Fall 2018
Dr. Rogers
Topic for Critical Essay 2, due in D2L by 11:59 P.M. November
1st.
1. John Winthrop's "Model of Christian Charity," and the
Declaration of Independence both function as early American
articulations of shared values. How do these documents
compare to one another? How did American values change over
the course of 150 years? What does the Declaration, an
eighteenth-century text, have in common with the Puritan
documents?
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Contents
Chapter 11
Managing Project Risk
Project managers must be prepared to deal with adversity.
Planning for events that can delay a project,
decrease its quality, or increase its budget is a necessary part of
project planning.
11.1 Defining Risk
LEARNING OBJECTIVES

1. Define project risk.
2. Define the difference between known and
unknown risks.
3. Describe the difference between the business risk of
the organizaDon and project risk.
Risk is the possibility of loss or injury.Merriam-Webster
Online, s.v. “risk,” http://www.merriam-
webster.com/dictionary/Risk (accessed August 21, 2009).Project
risk is an uncertain event or
condition that, if it occurs, has an effect on at least one project
objective.Project Management Institute,
Inc., A Guide to the Project Management Body of Knowledge
(PMBOK Guide), 4th ed. (Newtown
Square, PA: Project Management Institute, Inc., 2008), 273.Risk
management focuses on identifying
and assessing the risks to the project and managing those risks
to minimize the impact on the project.
There are no risk-free projects because there is an infinite
number of events that can have a negative
effect on the project. Risk management is not about eliminating
risk but about identifying, assessing,
and managing risk.
Tzvi Raz, Aaron Shenhar, and Dov DvirTzvi Raz, Aaron J.
Shenhar, and Dov Dvir, “Risk Management,

Project Success, and Technological Uncertainty,” R&D
Management 32 (2002): 101–12. studied the
risk management practices on one hundred projects in a variety
of industries. The results of this study
suggested the following about risk management practices:
Risk management is not widely used.
https://saylordotorg.github.io/text_project-management-from-
simple-to-complex-v1.1/s12-managing-project-quality.html
simple-to-complex-v1.1/s14-project-procurement-and-
closur.html
closur.html
simple-to-complex-v1.1/index.html
http://www.merriam-webster.com/dictionary/Risk
The projects that were most likely to have a risk management
plan were those that were perceived
to be high risk.
When risk management practices were applied to projects, they
appeared to be positively related to

the success of the project.
The risk management approach influenced the meeting of
project schedules and cost goals but
exerted less influence on project product quality.
Good risk management increases the likelihood of a successful
project.
Risk deals with the uncertainty of events that could affect the
project. Some potential negative project
events have a high likelihood of occurring on specific projects.
Examples are as follows:
Safety risks are common on construction projects.
Changes in the value of local currency during a project affect
purchasing power and budgets on
projects with large international components.
Projects that depend on good weather, such as road construction
or coastal projects, face risk of
delays due to exceptionally wet or windy weather.
These are examples of known risks. Known risks are events that
have been identified and analyzed for
which advanced planning is possible. Other risks are unknown
or unforeseen.
Terrorist ADack

On September 11, 2001, project team members were flying from
various locations to a project
review meeting in South Carolina when all flights were
cancelled because of the attacks on the
World Trade Center. Members of the leadership team could not
make the meeting or return to their
home base, and progress on the project, like many projects that
day, was delayed.
Sudden Family Death
Just before a project meeting in Texas, the engineering lead
received word that his father had died
in the middle of the night. The team delayed making decisions
on some critical engineering events
without the knowledge and judgment of the engineering
manager.
Whole Crew Fails Drug Test
On a project in Texas, the entire twelve-member masonry crew
failed the drug screening test even
though they had been told that drug screening was required on
the project.
These events were unforeseen by the project team, and in all
three cases the projects experienced

schedule delays and additional costs.
Project risks are separate from the organizational risks that are
associated with the business
purpose of the project.
A project was chartered to design and construct a copper mine
at a cost not to exceed $1.2 billion. If a
project is completed on time, within budget, and meets all
quality specifications, the project is
successful. If the price of copper drops below the profit
threshold for the company, the organizational
goals of the project may not be achieved. The price of copper is
an organizational or business risk. The
copper mining company authorized the project based on
assumptions about the future price of copper.
The price of copper is not a project risk on this project.
KEY TAKEAWAYS
Project risk is the possible outcome that planned
events on the project will not occur as
planned or
that unplannedevents will occur that will have a
negaDve impact on the project.
Known risks can be idenDfied before they occur,
while unknown risks are unforeseen.

OrganizaDonal risks are associatedwith the business purpose
of the project and assumed by the
client when deciding to do the project.
EXERCISES
1. According to PMI, project risk is a(n)
___________ event or condiDon that, if it
occurs, has an effect
on at least one project objecDve.
2. A risk such as the future market priceof a
commodity is an example of a(n) _________
risk.
3. Define risk in your own words.
4. Give an example of a known risk and an
unknown risk that are different from those in
the text.
5. Describe the difference between organizaDonal risk
and project risk in your own words and give an
example of each that is not used in the text.
Planning for Known and Unknown Risks
Consider a trip that you might be planning.
Describe at least five risks that are associatedwith
taking the

trip.
11.2 Risk Management Process
LEARNING OBJECTIVES
1. IdenDfy the major elements in managing project
risk.
2. Describe the processes for idenDfying project
risk.
3. Describe the processes for evaluaDng risk.
4. Describe the processes for miDgaDng risk.
Managing risks on projects is a process that includes risk
assessment and a mitigation strategy for those
risks. Risk assessment includes both the identification of
potential risk and the evaluation of the
potential impact of the risk. A risk mitigation plan is designed
to eliminate or minimize the impact
of the risk events—occurrences that have a negative impact on
the project. Identifying risk is both a
creative and a disciplined process. The creative process includes
brainstorming sessions where the team
is asked to create a list of everything that could go wrong. All
ideas are welcome at this stage with the
evaluation of the ideas coming later.

Risk IdenQficaQon
A more disciplined process involves using checklists of
potential risks and evaluating the likelihood that
those events might happen on the project. Some companies and
industries developed risk checklists
based on experience from past projects. The Construction
Industry InstituteConstruction Industry
Institute Cost/Schedule Task Force, Management of Project
Risks and Uncertainties (Austin, TX:
Construction Industry Institute, 1989). developed a detailed
checklist of potential risks based on the
experience of several large construction companies executing
major construction projects. These
checklists can be helpful to the project manager and project
team in identifying both specific risks on
the checklist and expanding the thinking of the team. The past
experience of the project team, project
experience within the company, and experts in the industry can
be valuable sources for identifying
potential risk on a project.
Identifying the sources of risk by category is another method
for exploring potential risk on a project.

Some examples of categories for potential risks include the
following:
Technical
Cost
Schedule
Client
Contractual
Weather
Financial
Political
Environmental
People
The people category can be subdivided into risks associated
with the people. Examples of people risks
include the risk of not finding the skills needed to execute the
project or the sudden unavailability of
key people on the project. David HillsonDavid Hillson, “Using
a Risk Breakdown Structure in Project
Management,” Journal of Facilities Management 2, no. 1
(2003): 85–97. uses the same framework as
the work breakdown structure (WBS) for developing a risk

breakdown structure (RBS). A risk
breakdown structure organizes the risks that have been
identified into categories using a table with
increasing levels of detail to the right.
Risks in John’s Move
In John’s move, John makes a list of things that might go wrong
with his project and uses his work
breakdown structure as a guide. A partial list for the planning
portion of the RBS is shown below.
Figure 11.1
Risk Breakdown Structure (RBS)
The result is a more obvious understanding of where risks are
most concentrated. Hillson’s approach
helps the project team identify known risks but can be
restrictive and less creative in identifying
unknown risks and risks not easily found inside the work
breakdown structure.
Risk EvaluaQon
After the potential risks have been identified, the project team
then evaluates the risk based on the
probability that the risk event will occur and the potential loss

associated with the event. Not all risks
are equal. Some risk events are more likely to happen than
others, and the cost of a risk event can vary
greatly. Evaluating the risk for probability of occurrence and
the severity or the potential loss to the
project is the next step in the risk management process.
The Construction Industry Institute conducted a study of large
construction project risk evaluation and
categorized risk according to the potential impact of project
costs. High-impact risk consisted of risks
that could increase the project costs by 5 percent of the
conceptual budget or 2 percent of the detailed
budget. Only thirty potential risk events met these criteria.
These were the critical few potential risk
events that the project management team focused on when
developing a project risk mitigation or
management plan. Risk evaluation is about developing an
understanding of which potential risks have
the greatest possibility of occurring and can have the greatest
negative impact on the project. These
become the critical few.
Figure 11.2 Risk and Impact

There is a positive correlation—both increase or decrease
together—between project risk and project
complexity. A project with new and emerging technology will
have a high-complexity rating and a
correspondingly high risk. The project management team will
assign the appropriate resources to the
technology managers to assure the accomplishment of project
goals. The more complex the technology,
the more resources the technology manager typically needs to
meet project goals, and each of those
resources could face unexpected problems.
Risk evaluation often occurs in a workshop setting. Building on
the identification of the risks, each risk
event is analyzed to determine the likelihood of occurring and
the potential cost if it did occur. The
likelihood and impact are both rated as high, medium, or low. A
risk mitigation plan addresses the
items that have high ratings on both factors—likelihood and
impact.
Risk Analysis of Equipment Delivery
For example, a project team analyzed the risk of some important
equipment not arriving to the

project on time. The team identified three pieces of equipment
that were critical to the project and
would significantly increase the costs of the project if they were
late in arriving. One of the vendors,
who was selected to deliver an important piece of equipment,
had a history of being late on other
projects. The vendor was good and often took on more work
than it could deliver on time. This risk
event (the identified equipment arriving late) was rated as high
likelihood with a high impact. The
other two pieces of equipment were potentially a high impact on
the project but with a low
probably of occurring.
Not all project mangers conduct a formal risk assessment on the
project. There are barriers to
identifying risks. David Parker and Alison MobeyDavid Parker
and Alison Mobey, “Action Research to
Explore Perceptions of Risk in Project Management,”
International Journal of Productivity and
Performance Management 53, no. 1 (2004): 18–32. found in a
phenomenological study of project
managers that there was a low understanding of the tools and
benefits of a structured analysis of

project risks. The lack of formal risk management tools was
seen as a barrier to implementing a risk
management program. The level of investment in formal risk
management was also associated with
managerial psychological dimensions.
Some project managers are more proactive and will develop
elaborate risk management programs for
their projects. Other managers are reactive and are more
confident in their ability to handle
unexpected events without prior planning, while some managers
are risk averse and prefer to be
optimistic and not consider risks or to avoid taking risks
whenever possible.
On projects with a low complexity profile, the project manager
may informally track items that may be
considered risk items. On more complex projects, the project
management team may develop a list of
items perceived to be higher risk and track them during project
reviews. On projects with greater
complexity, the process for evaluating risk is more formal with
a risk assessment meeting or series of
meetings during the life of the project to assess risks at
different phases of the project. On highly

complex projects, an outside expert may be included in the risk
assessment process, and the risk
assessment plan may take a more prominent place in the project
execution plan.
On complex projects, statistical models are sometimes used to
evaluate risk because there are too many
different possible combinations of risks to calculate them one at
a time. One example of the statistical
model used on projects is the Monte Carlo simulation, which
simulates a possible range of
outcomes by trying many different combinations of risks based
on their likelihood. The output from a
Monte Carlo simulation provides the project team with the
probability of an event occurring within a
range and for combinations of events. For example, the typical
output from a Monte Carol simulation
may reflect that there is a 10 percent chance that one of the
three important pieces of equipment will be
late and that the weather will also be unusually bad after the
equipment arrives.
Risk MiQgaQon
After the risk has been identified and evaluated, the project
team develops a risk mitigation plan, which

is a plan to reduce the impact of an unexpected event. The
project team mitigates risks in the following
ways:
Risk avoidance
Risk sharing
Risk reduction
Risk transfer
Each of these mitigation techniques can be an effective tool in
reducing individual risks and the risk
profile of the project. The risk mitigation plan captures the risk
mitigation approach for each identified
risk event and the actions the project management team will
take to reduce or eliminate the risk.
Risk Avoidance
Risk avoidance usually involves developing an alternative
strategy that has a higher probability of
success but usually at a higher cost associated with
accomplishing a project task. A common risk
avoidance technique is to use proven and existing technologies
rather than adopt new techniques, even
though the new techniques may show promise of better
performance or lower costs. A project team may

choose a vendor with a proven track record over a new vendor
that is providing significant price
incentives to avoid the risk of working with a new vendor. The
project team that requires drug testing
for team members is practicing risk avoidance by avoiding
damage done by someone under the
influence of drugs.
Risk Sharing
Risk sharing involves partnering with others to share
responsibility for the risk activities. Many
organizations that work on international projects will reduce
political, legal, labor, and others risk types
associated with international projects by developing a joint
venture with a company located in that
country. Partnering with another company to share the risk
associated with a portion of the project is
advantageous when the other company has expertise and
experience the project team does not have. If
the risk event does occur, then the partnering company absorbs
some or all of the negative impact of
the event. The company will also derive some of the profit or
benefit gained by a successful project.

Risk Sharing on Pipeline in Peru
One example of risk sharing is a large United States
construction firm that won a contract to build a
pipeline in Peru. The company partnered with a construction
company in Peru with a reputation
for performing on time. The Peruvian company brought local
expertise and the U.S. company
contributed the latest construction methods. If the project had
not successfully completed on time,
both companies would have received less profit, but the project
was successful and both companies
met profit targets.
Risk ReducQon
Risk reduction is an investment of funds to reduce the risk on a
project. On international projects,
companies will often purchase the guarantee of a currency rate
to reduce the risk associated with
fluctuations in the currency exchange rate. A project manager
may hire an expert to review the
technical plans or the cost estimate on a project to increase the
confidence in that plan and reduce the
project risk. Assigning highly skilled project personnel to
manage the high-risk activities is another risk

reduction method. Experts managing a high-risk activity can
often predict problems and find solutions
that prevent the activities from having a negative impact on the
project. Some companies reduce risk by
forbidding key executives or technology experts to ride on the
same airplane.
Risk Transfer
Risk transfer is a risk reduction method that shifts the risk from
the project to another party. The
purchase of insurance on certain items is a risk transfer method.
The risk is transferred from the
project to the insurance company. A construction project in the
Caribbean may purchase hurricane
insurance that would cover the cost of a hurricane damaging the
construction site. The purchase of
insurance is usually in areas outside the control of the project
team. Weather, political unrest, and labor
strikes are examples of events that can significantly impact the
project and that are outside the control
of the project team.
ConQngency Plan
The project risk plan balances the investment of the mitigation

against the benefit for the project. The
project team often develops an alternative method for
accomplishing a project goal when a risk event
has been identified that may frustrate the accomplishment of
that goal. These plans are called
contingency plans. The risk of a truck drivers strike may be
mitigated with a contingency plan that uses
a train to transport the needed equipment for the project. If a
critical piece of equipment is late, the
impact on the schedule can be mitigated by making changes to
the schedule to accommodate a late
equipment delivery.
Roof LeV Unfinished for Late Equipment
On one project, the project team left a section of a roof
unfinished to allow the installation of
equipment after the building was done and the roof installed.
The equipment was late, and the
project would have been delayed if the building was not
completed. The project team left a section
of the roof unfinished to allow the equipment to be placed in the
building with the use of a crane.
The roof was then completed, and the project finished on time.
In this example, the equipment arriving on time to meet the

project schedule was considered a high
risk. One option was to delay the end of the project. The team
developed a contingency plan to
install the roof in two phases to allow the installation of the
equipment, if it was late. The
contingency plan was more expensive and contingency funds
were placed in the budget to cover the
possibility that the equipment would be late.
Contingency funds are funds set aside by the project team to
address unforeseen events that cause the
project costs to increase. Projects with a high-risk profile will
typically have a large contingency budget.
Although the amount of contingency allocated in the project
budget is a function of the risks identified
in the risk analysis process, contingency is typically managed as
one line item in the project budget.
Some project managers allocate the contingency budget to the
items in the budget that have high risk
rather than developing one line item in the budget for
contingencies. This approach allows the project
team to track the use of contingency against the risk plan. This
approach also allocates the

responsibility to manage the risk budget to the managers
responsible for those line items. The
availability of contingency funds in the line item budget may
also increase the use of contingency funds
to solve problems rather than finding alternative, less costly
solutions. Most project managers,
especially on more complex projects, will manage contingency
funds at the project level, with approval
of the project manager required before contingency funds can be
used.
KEY TAKEAWAYS
Risk management is a creaDve process that
involves idenDfying, evaluaDng, and miDgaDng
the
impact of the risk event.
Risk management can be very formal, with defined
work processes,or informal, with no defined
processes or methods. Formal risk evaluaDon
includes the use of checklists, brainstorming,
and
expert input. A risk breakdown structure (RBS)
can follow the work breakdown structure (WBS)
to
idenDfy risk by acDvity.

Risk evaluaDon prioriDzes the idenDfied risks by
the likelihood and the potenDal impact if the
event
happens.
Risk miDgaDon is the development and deployment
of a plan to avoid, transfer, share, and
reduce
project risk. ConDngency planning is the development
of alternaDve plans to respond to the
occurrence of a risk event.
EXERCISES
1. A risk ___________ plans eliminatesor
minimizesthe impact of risk events.
2. Risk management is a creaDve process
that involves idenDfying, evaluaDng, and
__________ the
impact of risk events
3. A process for risk assessment that is parallel
to the WBSis a _________ _______
_______ (three
words).
4. Choose a project risk that could be related
to the John’s move example that is not

described in the
text and describe a miDgaDon plan for that risk.
You may choose from any part of the John’s
move
example that has been described in previous chapters.
5. If you are planning a partyat your residence,
list threeproject risks and rate each of them for
their
potenDal impact and likelihood. Use high,medium,
and low.
6. Describe the similariDes and differences
between risk transfer and risk sharing.
Risk Management
Assume that you are involved in planning a
wedding. What are threerisks that might affect
the
ceremony or recepDon,and how would you miDgate
the impact of those risks? For example, if
you are
planning an outdoor wedding, describe the backup
plan in case of rain.
11.3 Project Risk by Phases
LEARNING OBJECTIVES
1. Describe the elements of risk management during

the iniDaDon phase.
the planning phase.
the execuDon phase.
the closeout phase.
Project risk is dealt with in different ways depending on the
phase of the project.
IniQaQon Phase
Risk is associated with things that are unknown. More things
are unknown at the beginning of a
project, but risk must be considered in the initiation phase and
weighed against the potential benefit of
the project’s success in order to decide if the project should be
chosen.
Risks by Phase in John’s Move
In the initiation phase of John’s move, John considers the risk
of events that could affect the whole
project. He identifies the following risks during the initiation
phase that might have a high impact
and rates the likelihood of their happening from low to high.

1. His new employer might change his mind and take back the
job offer after he’s given notice at
his old job: Low.
2. The current tenants of his apartment might not move out in
time for him to move in by the first
day of work at the new job: Medium.
3. The movers might lose his furniture: Low.
4. The movers might be more than a week late delivering his
furniture: Medium.
5. He might get in an accident driving from Chicago to Atlanta
and miss starting his job: Low.
John considers how to mitigate each of the risks.
1. During his job hunt, John had more than one offer, and he is
confident that he could get
another job, but he might lose deposit money on the apartment
and the mover. He would also
lose wages during the time it took to find the other job. To
mitigate the risk of his new
employer changing his mind, John makes sure that he keeps his
relationships with his alternate
employers cordial and writes to each of them thanking for their
consideration in his recent

interviews.
2. John checks the market in Atlanta to determine the weekly
cost and availability of extended-
stay motels.
3. John checks the mover’s contract to confirm that they carry
insurance against lost items, but
they require the owner to provide a detailed list with value
estimates and they limit the
maximum total value. John decides to go through his apartment
with his digital camera and
take pictures of all of his possessions that will be shipped by
truck and to keep the camera with
him during the move so he has a visual record and won’t have to
rely on his memory to make a
list. He seals and numbers the boxes so he can tell if a box is
missing.
4. If the movers are late, John can use his research on extended-
stay motels to calculate how
much it would cost. He checks the moving company’s contract
to see if they compensate the
owner for late delivery, and he finds that they do not.
5. John checks the estimated driving time from Chicago to
Atlanta using an Internet mapping

service and gets an estimate of eleven hours of driving time. He
decides that it would be too
risky to attempt to make the drive by himself in one day,
especially if he didn’t leave until after
the truck was packed. John plans to spend one night on the road
in a motel to reduce the risk of
an accident caused by driving while too tired.
John concludes that the high-impact risks can be mitigated and
the costs from the mitigation
would be acceptable in order to get a new job.
Planning Phase
Once the project is approved and it moves into the planning
stage, risks are identified with each major
group of activities. A risk breakdown structure (RBS) can be
used to identify increasing levels of
detailed risk analysis.
Risk Breakdown Structure for John’s Move
John decides to ask Dion and Carlita for their help during their
first planning meeting to identify
risks, rate their impact and likelihood, and suggest mitigation
plans. They concentrate on the

packing phase of the move. They fill out a table of risks, as
shown below.
Figure 11.5
Risk Breakdown Structure (RBS) for Packing John’s Apartment
ExecuQonPhase
As the project progresses and more information becomes
available to the project team, the total risk on
the project typically reduces, as activities are performed without
loss. The risk plan needs to be updated
with new information and risks checked off that are related to
activities that have been performed.
Understanding where the risks occur on the project is important
information for managing the
contingency budget and managing cash reserves. Most
organizations develop a plan for financing the
project from existing organizational resources, including
financing the project through a variety of
financial instruments. In most cases, there is a cost to the
organization to keep these funds available to
the project, including the contingency budget. As the risks
decrease over the length of the project, if the
contingency is not used, then the funds set aside by the

organization can be used for other purposes.
To determine the amount of contingency that can be released,
the project team will conduct another
risk evaluation and determine the amount of risk remaining on
the project. If the risk profile is lower,
the project team may release contingency funds back to the
parent organization. If additional risks are
uncovered, a new mitigation plan is developed including the
possible addition of contingency funds.
Closeout Phase
During the closeout phase, agreements for risk sharing and risk
transfer need to be concluded and the
risk breakdown structure examined to be sure all the risk events
have been avoided or mitigated. The
final estimate of loss due to risk can be made and recorded as
part of the project documentation. If a
Monte Carlo simulation was done, the result can be compared to
the predicted result.
Risk Closeout on John’s Move
To close out the risk mitigation plan for John’s move, John
examines the risk breakdown structure
and risk mitigation plan for items that need to be finalized. He
makes a checklist to be sure all the

risk mitigation plans are completed, as shown below.
Figure 11.6
Closeout of Risk Mitigation Plan for John’s Move
Risk is not allocated evenly over the life of the project. On
projects with a high degree of new
technology, the majority of the risks may be in the early phases
of the project. On projects with a large
equipment budget, the largest amount of risk may be during the
procurement of the equipment. On
global projects with a large amount of political risk, the highest
portion of risk may be toward the end of
the project.
KEY TAKEAWAYS
During the iniDaDon phase, risks are idenDfied that
could threaten the viability of the project.
MiDgaDon opDons are considered to see if
they would be sufficient to protect the project.
During the planning phase, risks are idenDfied and
analyzed for each acDvity group in a risk
breakdown structure, and miDgaDon is planned
for each risk

During the execuDon phase, risks are checked off as
acDviDes are completedor miDgaDon is
performedif loss does occur. New risks are idenDfied
and added to the plan.
During the closeout phase, insurance contracts are
cancelled and partnerships terminated. A
summary of actual costsassociatedwith risks are
compared with iniDal esDmates to refine
esDmaDng capabiliDes. The successes and failures of
the risk management plan are summarized and
saved with the project documentaDon to add to
the company’s corporate knowledge.
EXERCISES
1. High-riskevents that require expensive miDgaDon
opDons threaten the choice of the project
during
the _________ phase.
2. A risk breakdown structure is developed during
the _______ phase.
3. Risk transfers and risk sharing arrangements
are terminated during the ___________ phase.
4. If you plan an outdoor wedding, what is a
risk that would threaten the project in the

iniDaDon phase
and a miDgaDon plan that would allow the
project to proceed?
5. In your own words, describe risk management
during the planning phase.
6. In your own words, describe risk management
during the closeout phase?
Risk Assessment
Recall a project that you considered at one
Dme but decided against during the iniDaDon
phase because
the risks were too greator the miDgaDon plan was
insufficient to proceed. Describe the project,
the
risks, the miDgaDon plan, and why you chose
not to go forward.
11.4 Project Risk and the Project Complexity Profile
LEARNING OBJECTIVE
1. IdenDfy the relaDonship between project risk
and external, internal, technical, and environmental
complexity.
Risk seems to have a positive correlation to complexity. High-
risk projects are in most cases highly

complex. The process of conducting a risk analysis focuses on
understanding what can go wrong and
the likelihood that it will go wrong. The project team then
develops a project mitigation plan that
addresses the items that were identified as high risk. The
complexity analysis explores the project from
the perspective of what elements on the project add to project
complexity. The result of this analysis is
the information needed by the project leadership to develop an
appropriate execution plan. This
execution plan also contains the risk management plan.
Although increased complexity on a project increases the
project risk profile, risk is only one
component of the complexity profile, and the manageability of
the risk is also reflected in the
complexity level of the project. For example, the organizational
component of the project may be
extremely complex with decision making shared among several
independent clients. The project
management team will develop an execution plan that includes
developing and maintaining alignment
among the various clients. Although the organizational risk of
the project decreases with the
development of the execution plan, the organizational approach

of the client did not change the
complexity level of the project. If the Darnall-Preston
Complexity Index (DPCI) is used to rate the
project, high ratings in each category carry their own types of
increased risks.
External Complexity
Projects that have a high score in the external complexity
category in the DPCI are larger and longer
than usual for the project management group and the project
manager and the available resources are
lacking. Due to lack of experience on this size project, unknown
risks are significant. The inadequacy of
resources will cause risks that are more predictable.
Internal Complexity
Projects with high scores for internal complexity have risks to
the budget, schedule, and quality due to
organizational complexity and changes of scope due to lack of
clarity in project and scope statements.
Technological Complexity
High scores in technological complexity are associated with
high levels of risk due to unknown flaws in

the technology and lack of familiarity with it. These problems
result in risks to the schedule, budget,
and quality.
Environmental Complexity
Environmental complexity includes legal, cultural, political, and
ecological factors. High scores for
complexity in this category imply high risks for delay and
expensive resolution to lawsuits, public
opposition, changes for political considerations, and unforeseen
ecological impacts.
KEY TAKEAWAYS
There is a posiDve correlaDon between the
complexity of a project and the risk.
Increased levels of
complexity imply more people, newer
technologies, and increased internal and external
unknown
factors.
High scores for external complexity imply high
risks to the schedule, budget, and quality due to
unknown factors and limited resources.
High scores for internal complexity imply high
risks to the budget, schedule, and quality due to

organizaDonal complexity and changes of scope
due to lack of clarity in project and scope
statements.
High scores for technological complexity imply
high risks to the budget, schedule, and quality
due to
unknown flaws in the technology and lack of
familiarity with it.
Environmental complexity includes legal, cultural,
poliDcal, and ecologicalissues. High scores for
complexity in this category imply high risks for
delay and expensive resoluDonto lawsuits, public
opposiDon, changes for poliDcal consideraDons, and
unforeseen ecologicalimpacts.
EXERCISES
1. There seems to be a ______ correlaDon
between project complexity and risk.
2. One complexity category that is likely to
have high risks due to unknown causes is
_______, due to
lack of experience with the size of project.
3. How does a high degree of complexity in
a project’s environment affect the level of

risk?
Environmental Risks
IdenDfy a project with which you are familiar or
one that has been in the news recently where
the
external environmental complexity caused increased
costsor delays. Describe the impact of the
risk, and
the miDgaDon and its effecDveness. If the
miDgaDon was ineffecDve, describe how you
might have
prepared a different miDgaDon plan.
11.5 Exercises
Exercises at the end of the chapter are designed to strengthen
your understanding and retention of the
information recently acquired in the chapter.
ESSAY QUESTIONS
Write several paragraphs to provide more in-
depth analysis and consideraDon when answering
the
following quesDons.
1. Choose a simple project with which you
are familiar and describe a risk that is typical
of each phase

of the project and a miDgaDon plan for those
four risks.
2. Assume that you are considering the purchase of
a house. What are examples of each of
the four
types of risk miDgaDon that are associatedwith
buying a house? Explain your choice of
each
example and relate it to the definiDon of each
type of risk miDgaDon.
3. Assume that you are working on a complex
project to add a wing to a hospital that is
next to a
natural wetland. Using the four categories of the
Darnall-Preston Complexity Index, idenDfy a
high-
impact risk and explain your choice.
DISCUSSION
The exercises in this secDon are designed to
promote exchange of informaDon among
students in the
classroom or in an online discussion. The
exercises are more open ended, which means
that what you

find might be completely different from what your
classmates find, and you can all benefit by
sharing
what you have learned.
1. Choose a situaDon with which you are
familiar where a risk event occurred that
had a high impact
on a project causing it to exceed the
conDngency allowances in the schedule or
budget. Do you think
this event was an unknown or known risk? What
addiDonalmiDgaDon efforts (if any) should be
used
on a similar project in the future? Consider
situaDons described by your classmates and
contribute
ideasfor miDgaDon of events in their projects.
2. Consider your personal health. What are two
examples of known risks and a miDgaDon
plan for
those two risks? Describe your miDgaDon plan
for unknown risks. Consider the risks and plans
described by your classmates and make suggesDons
for othermiDgaDon opDons.
11.6 Web Exercise

LEARNING OBJECTIVE
1. Describe the benefits of esDmaDng risk using
a Monte Carlo simulaDon.
Monte Carlo Risk SimulaQons
Planning for risks is a form of betting on the future. An
accomplished gambler knows the odds of
drawing a certain combination of cards in a poker hand or of a
ball landing on a number at a roulette
wheel. If a project has several risk factors, they are not likely to
all occur on the same project, but it is
important to know the odds of that happening and to compare
them to the potential profit of the
project. If several risks do materialize on the same project, it
might cause the company to lose money
on the project, and senior management must decide if the
benefit is worth the risk.
Computers can generate random numbers that can be used to
simulate the likelihood of combinations
of risk factors occurring and the impact on the project’s
profitability. These simulations calculate odds
like those a gambler would use before placing a bet, and the
process is named after a famous gambling

center in Europe.
To use a Monte Carlo simulation, you have to decide how the
frequency of occurrences is distributed.
Three types of distributions are most common: normal, skewed,
and equal. If they are governed by the
central limits principle, the occurrences will have a normal
distribution.
Figure 11.7 Normal Distribution
If the likely frequency of occurrences of a risk factor is more
likely to be distributed to either side of the
middle of the range, it is a skewed distribution.
Figure 11.8 Skewed Distribution
If the likelihood of occurrence is evenly distributed across the
range where each possibility has the
same odds of occurring, it is an equal distribution.
Figure 11.9 Equal Distribution
A computer can choose numbers for each risk factor that
represent a possible outcome for that risk on
the project according to its distribution. Those numbers are fed
into a spreadsheet that determines the

effect on the project and its costs. This process is repeated
thousands of times, and the result of each
iteration—repeated process—is stored in a table of possible
outcomes. This table is summarized in a
histogram that shows how many of the iterations produced
profit (or loss) in each range (bin).
The outcome of a Monte Carlo simulation gives managers an
idea of how much the project could make
or lose and the odds of that happening. Monte Carlo simulations
are often used to predict the likelihood
of a new product making a profit or loss. The same methods can
be applied to predicting the profit or
loss on a project.
Learn More about Monte Carlo SimulaQons
Complete the exercise by following these instructions:
1. Open a blank document in a word processing program and
then save the document as
Ch11MonteCarloStudentName.doc. Leave the document open.
2. Start a web browser and then to go to A Practical Guide to
Monte Carlo Simulations at
http://www.vertex42.com/ExcelArticles/mc/MonteCarloSimulati
on.html.

3. Read the first screen to review the concepts.
4. Near the bottom of the first screen, click the arrow labeled
Sales Forecast Example, as shown in
Figure 11.10 "Next Page Button".
Figure 11.10 Next Page
Button
Source: Courtesy of
www.vertex42.com.
5. Scroll down past the advertisements and begin reading at
Step 1. Capture a screen that shows Step 1
and paste it into Ch11MonteCarloStudentName.doc.
6. Read the explanation of how to create a model.
7. Use the Next button at the bottom of the screen to go to step
2, Generating Random Inputs.
8. Read steps 2, 3, and 4 on this screen.
9. Continue reading and advancing screens until you get to the
histogram as shown in Figure 11.11
"Estimated Loss or Profit".
Figure 11.11 Estimated Loss or Profit
http://www.vertex42.com/ExcelArticles/mc/MonteCarloSimulati

on.html
http://www.vertex42.com/
Source: Adapted from Wittwer, J.W., "Creating a Histogram In
Excel" from www.vertex42.com, June 1, 2004,
http://vertex42.com/ExcelArticles/mc/Histogram.html.
10. The green line is the cumulative probability. The red lines
are intended to help you find the 5
percent and 95 percent probability points on the green line.
11. Capture this screen and paste it into
Ch11MonteCarloStudentName.doc.
12. Refer to Figure 11.11 "Estimated Loss or Profit". Notice a
spot on the green line is circled. According
to the horizontal scale, this is the spot on the cumulative
percentage line that marks the difference
between negative and positive income for the project. In the
word processing document, below the
last screen capture, describe how you would use this chart to
predict the percentage chance that
this project will lose money. Leave the document open.
Learn about Using Dedicated Monte Carlo
SimulaQon SoVware
Complete the exercise by following these instructions:

1. Use your web browser to go to Monte Carlo Simulation
Tutorial at
http://www.solver.com/simulation/monte-carlo-
simulation/tutorial.htm.
2. Read each of the first seven screens. Capture screens where
indicated in the following list and paste
them into Ch11MonteCarloStudentName.doc:
Introduction (Capture the section titled The Flawed Average
Model.)
Introducing Uncertainty
Introducing Uncertainty (cont.)
Uncertain Functions and Statistics
Using Interactive Simulation (Capture the table near the
bottom.)
Viewing the Full Range of Profit Outcomes
Focusing on Profitable Outcomes (Capture the simulation
results histogram at the bottom of
the screen.)
3. The authors make the case that a simple average of the risks
produces an estimate that is too high.
If they run a thousand combinations of risk outcomes, they
predict a lower profit and a certain

likelihood of losing money. In the word processing document,
below the last screen capture, review
the screens and answer the following questions:
What does a simple average model predict for a net profit?
http://www.vertex42.com/
http://www.solver.com/simulation/monte-carlo-
simulation/tutorial.htm
Previous Chapter Next Chapter
What does the simulation predict is the “True Average” profit?
If most of the risk factors occur, how much money could the
project lose?
Analysis
1. At the bottom of Ch11MonteCarloStudentName.doc, write
between one hundred and two hundred
words to describe the benefits of estimating risk using a Monte
Carlo simulation versus a simple
average of the risks. Use specific references to the assigned
reading in the text and in the web pages
in the previous two parts of this exercise.
2. Review your work and use the following rubric to determine
its adequacy:
Element Best Adequate Poor

File name Ch11MonteCarloStudentName.doc
.docx
version
Student
name not
included
Describe the
benefits of
estimating
risk using a
Monte Carlo
simulation
Two screen captures plus a description of how
the chart is used to estimate the percentage
chance of losing money; three screen captures
and answers to the three questions;
description of the benefits of a Monte Carlo
simulation

Same as
Best
Missing
screens;
inaccurate
estimates;
incorrect
answers to
the three
questions;
description
without
specific
references
3. Save the file and submit it as directed by the instructor.
Table of Contents

closur.html
closur.html
IT Homework.docx
Discussion Points: (Minimum 300 words total)
1. What is the difference between customer relationship
management, supplier relationship management, and employee
relationship management? Give a specific example of each one.
2. In regards to the organization or company you have chosen to
analyze this semester, what types of enterprise applications are
they currently using and how are they using them? What other
enterprise applications might you recommend for your
organization, and why?
Use attached PDF for this discussion
Citation:
Baltzan, Paige (2011). ITMG498 IT Management Senior
Seminar: Business Driven Information Systems (3rd edition also
custom) - E-book links provided inside the classroom. McGraw-

Hill. ISBN: 1121371469/9781121371460
__MACOSX/._IT Homework.docx
IT.pdf
Confirming Pages
8
What’s in IT for me?
This chapter introduces high-profile strategic initiatives an
organization can undertake to help it gain competi-
tive advantages and business efficiencies—supply chain
management, customer relationship management, and
enterprise resource planning. At the simplest level,
organizations implement enterprise systems to gain efficiency
in business processes, effectiveness in supply chains, and an
overall understanding of customer needs and behav-
iors. Successful organizations recognize the competitive
advantage of maintaining healthy relationships with
employees, customers, suppliers, and partners. Doing so has a
direct and positive effect on revenue and greatly
adds to a company’s profitability.
You, as a business student, must understand the critical
relationship your business will have with its employees,
customers, suppliers, and partners. You must also understand
how to analyze your organizational data to ensure
you are not just meeting but exceeding expectations. Enterprises
are technologically empowered as never before
to reach their goals of integrating, analyzing, and making
intelligent business decisions.

■ C u s to m e r R e l a t i o n s h i p
M a n a ge m e n t
■ T h e B e n e f i t s o f C R M
■ T h e C h a l l e n ge s o f C R M
■ T h e Fu tu re o f C R M
■ E n te rp ri s e R e s o u rc e P l a n n i n g
■ T h e B e n e f i t s o f E R P
■ T h e C h a l l e n ge s o f E R P
■ T h e Fu tu re o f E n te rp ri s e
Sy s te m s : I n te g ra t i n g S C M ,
C R M , a n d E R P
■ B u i l d i n g a C o n n e c te d
C o rp o ra t i o n t h ro u g h
I n te g ra t i o n s
■ S u p p l y C h a i n M a n a ge m e n t
■ T h e B e n e f i t s o f S C M
■ T h e C h a l l e n ge s o f S C M
■ T h e Fu tu re o f S C M
SECTION 8.2
Customer Relationship
Management and Enterprise
Resource Planning

SECTION 8.1
Enterprise Systems and
Supply Chain Management
C
H
A
P
T
E
R
O
U
T
L
IN
E
Enterprise Applications:
Business Communications
C H A P T E R
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287Enterprise MIS Module 3
Zappos Is Passionate for Customers
Tony Hsieh’s first entrepreneurial effort began at the age of 12
when he started his
own custom button business. Realizing the importance of
advertising, Hsieh began
marketing his business to other kids through directories, and
soon his profits soared
to a few hundred dollars a month. Throughout his adolescence,
Hsieh started sev-
eral businesses, and by the time he was in college he was
making money selling
pizzas out of his Harvard dorm room. Another entrepreneurial
student, Alfred Lin,
bought pizzas from Hsieh and resold them by the slice, making
a nice profit. Hsieh
and Lin quickly became friends.
After Harvard, Hsieh founded LinkExchange in 1996, a
company that helped small
businesses exchange banner ads. A mere two years later Hsieh,
sold LinkExchange
to Microsoft for $265 million. Using the profits from the sale,
Hsieh and Lin formed a
venture capital company that invested in start-up businesses.
One investment that
caught their attention was Zappos, an online etailer of shoes.
Both entrepreneurs
viewed the $40 billion shoe market as an opportunity they could
not miss, and in 2000
Hsieh took over as Zappos’ CEO with Lin as his chief financial
officer.

Today, Zappos is leading its market and offering an enormous
selection of more than
90,000 styles of handbags, clothing, and accessories for more
than 500 brands. One
reason for Zappos’ incredible success was Hsieh’s decision to
use the advertising
and marketing budget for customer service, a tactic that would
not have worked
before the Internet. Zappos’ passionate customer service
strategy encourages cus-
tomers to order as many sizes and styles of products as they
want, ships them for
free, and offers free return shipping. Zappos encourages
customer communication,
and its call center receives more than 5,000 calls a day with the
longest call to date
lasting more than four hours.
Zappos’ extensive inventory is stored in a warehouse in
Kentucky right next to
a UPS shipping center. Only available stock is listed on the
website, and orders as
late as 11 p.m. are still guaranteed next-day delivery. To
facilitate supplier and part-
ner relationships, Zappos built an extranet that provides its
vendors with all kinds
of product information, such as items sold, times sold, price,
customer, and so on.
Armed with these kinds of details, suppliers can quickly change
manufacturing
schedules to meet demand.
Zappos Culture
Along with valuing its partners and suppliers, Zappos also

places a great deal of
value on its employee relationships. Zappos employees have
fun, and walking
opening case study
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288 Chapter 8 Enterprise Applications: Business
Communications
through the offices you will see all kinds of things not normally
seen in business
environments—bottle-cap pyramids, cotton-candy machines,
and bouncing balls.
Building loyal employee relationships is a critical success
factor at Zappos, and to
facilitate this relationship the corporate headquarters are
located in the same build-
ing as the call center (where most employees work) in Las
Vegas. All employees
receive 100 percent company-paid health insurance along with a
daily free lunch.
Of course, the Zappos culture does not work for everyone, and
the company pays
to find the right employees through “The Offer,” which extends
to new employees the
option of quitting and receiving payment for time worked plus
an additional $1,000
bonus. Why the $1,000 bonus for quitting? Zappos management

believes that is a
small price to pay to find those employees who do not have the
sense of commitment
Zappos requires. Less than 10 percent of new hires take The
Offer.
Zappos’ unique culture stresses the following:
1. Delivering WOW through service.
2. Embracing and driving change.
3. Creating fun and a little weirdness.
4. Being adventurous, creative, and open-minded.
5. Pursuing growth and learning.
6. Building open and honest relationships with
communication.
7. Building a positive team and family spirit.
8. Doing more with less.
9. Being passionate and determined.
10. Being humble.
Zappos’ Sale to Amazon
Amazon.com purchased Zappos for $880 million in 2009.
Zappos employees shared
$40 million in cash and stock, and the Zappos management team
remained in place.
Having access to Amazon’s world-class warehouses and supply

chain is sure to
catapult Zappos’ revenues, though many wonder whether the
Zappos culture will
remain. It’ll be interesting to watch! 1
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section 8.1 SUPPLY CHAIN MANAGEMENT
L E A R N I N G O U T C O M E S
8.1. Explain integrations and the role they play in connecting a
corporation.
8.2 Describe supply chain management and its role in
supporting business operations.
8.3. Identify the benefits and challenges of SCM along with its
future.
BUILDING A CONNECTED CORPORATION
THROUGH INTEGRATIONS
Until the 1990s, each department in the United Kingdom’s
Ministry of Defense and Army
headquarters had its own information system, and each system
had its own database.
Sharing information was difficult, requiring employees to
manually input the same infor-
mation into different systems multiple times. Often,

management could not even com-
pile the information it needed to answer questions, solve
problems, and make decisions.
To combat this challenge the ministry integrated its systems, or
built connections
among its many databases. These connections or integrations
allow separate systems to
communicate directly with each other, eliminating the need for
manual entry into mul-
tiple systems. Building integrations allows the sharing of
information across databases
along with dramatically increasing its quality. The army can
now generate reports detail-
ing its state of readiness and other essential intelligence, tasks
that were nearly impos-
sible before the integrations.
Two common methods are used for integrating databases. The
first is to create for-
ward and backward integrations that link processes (and their
underlying databases)
in the value chain. A forward integration takes information
entered into a given sys-
tem and sends it automatically to all downstream systems and
processes. A backward
integration takes information entered into a given system and
sends it automatically
to all upstream systems and processes. Figure 8.1 demonstrates
how this method works
across the systems or processes of sales, order entry, order
fulfillment, and billing. In the
order entry system, for example, an employee can update the
customer’s information. Via
the integrations, that information is sent upstream to the sales
system and downstream

to the order fulfillment and billing systems. Ideally, an
organization wants to build both
forward and backward integrations, which provide the
flexibility to create, update, and
delete information in any of the systems. However, integrations
are expensive and difficult
to build and maintain, causing most organizations to invest in
forward integrations only.
The second integration method builds a central repository for a
particular type of
information. Figure 8.2 provides an example of customer
information integrated using
LO 8.1: Explain integrations and
the role they play in connecting a
corporation.
Forward integration of
customer information
Backward integration of
customer information
PB0092
Craig Schultz
PB0092
Craig Schultz
PB0092
Craig Schultz
PB0092
Craig Schultz

Sales System
Order Entry
System
Order Fulfillment
System Billing System
FIGURE 8.1
A Forward and Backward
Customer Information
Integration Example
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Chapter 8 Enterprise Applications: Business
Communications290
this method across four different systems in an organization.
Users can create, update,
and delete customer information only in the central customer
database. As users perform
these tasks, integrations automatically send the new and/or
updated customer informa-
tion to the other systems. The other systems limit users to read-
only access of the customer
information stored in them. Both integration methods do not
entirely eliminate informa-
tion redundancy, but they do ensure information consistency
among multiple systems.

Integration Tools
Enterprise systems provide enterprisewide support and data
access for a firm’s opera-
tions and business processes. These systems can manage
customer information across
the enterprise, letting you view everything your customer has
experienced from sales to
support. Enterprise systems are often available as a generic, but
highly customizable,
group of programs for business functions such as accounting,
manufacturing, and mar-
keting. Generally, the development tools for customization are
complex programming
tools that require specialist capabilities.
Enterprise application integration (EAI) connects the plans,
methods, and tools
aimed at integrating separate enterprise systems. A legacy
system is a current or existing
system that will become the base for upgrading or integrating
with a new system. EAI
reviews how legacy systems fit into the new shape of the firm’s
business processes and
devises ways to efficiently reuse what already exists while
adding new systems and data.
Integrations are achieved using middleware — several
different types of software that
sit between and provide connectivity for two or more software
applications. Middleware
translates information between disparate systems. Enterprise
application integration
(EAI) middleware takes a new approach to middleware by
packaging commonly used

applications together, reducing the time needed to integrate
applications from multiple
vendors. The remainder of this chapter covers the three
enterprise systems most organi-
zations use to integrate their disparate departments and separate
operational systems:
supply chain management (SCM), customer relationship
management, and enterprise
resource planning (see Figure 8.3 ).
SUPPLY CHAIN MANAGEMENT
The average company spends nearly half of every dollar it
earns on suppliers and raw
materials to manufacture products. It is not uncommon to hear
of critical success fac-
tors focusing on getting the right products, to the right place, at
the right time, at the
LO 8.2: Describe supply chain man-
agement and its role in supporting
business operations.
Sales System
Order Entry
System
Order Fulfillment
System
Customer Information
System
Billing System
PB0092

Craig Schultz
PB0092
Craig Schultz
PB0092
Craig Schultz
PB0092
Craig Schultz
PB0092
Craig Schultz
FIGURE 8.2
Integrating Customer
Information among
Databases
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Confirming Pages
right cost. For this reason, tools that can help a company source
raw materials, manufac-
ture products, and deliver finished goods to retailers and
customers are in high demand.
A supply chain consists of all parties involved, directly or
indirectly, in obtaining raw
materials or a product. Figure 8.4 highlights the five basic

supply chain activities a com-
pany undertakes to manufacture and distribute products. To
automate and enable
FIGURE 8.3
The Three Primary Enterprise
Systems
Supply Chain
Management
Customer
Relationship
Management Enterprise
Resource
Planning
PLAN
SOURCE
MAKE
DELIVER
RETURN
Prepare to manage
all resources required
to meet demand
Build relationships
with suppliers to
procure raw materials

Manufacture
products and create
production schedules
Plan for
transportation of
goods to customers
Support
customers and
product returns
FIGURE 8.4
The Five Basic Supply Chain
Activities
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Communications292
Suppliers’
Supplier Supplier
Upstream
Manufacturer Distributor Retailer Customer
Customers’Customer

Suppliers’
Supplier
Customers’
Customer
Suppliers’
Supplier
Customers’
Customer
Downstream
FIGURE 8.5
A Typical Supply Chain
sophisticated decision making in these critical areas, companies
are turning to systems
that provide demand forecasting, inventory control, and
information flows between
suppliers and customers.
Supply chain management (SCM) is the management of
information flows between
and among activities in a supply chain to maximize total supply
chain effectiveness and
corporate profitability. In the past, manufacturing efforts
focused primarily on quality
improvement efforts within the company; today these efforts
reach across the entire
supply chain, including customers, customers’ customers,
suppliers, and suppliers’ sup-
pliers. Today’s supply chain is an intricate network of business
partners linked through

communication channels and relationships. Supply chain
management systems man-
age and enhance these relationships with the primary goal of
creating a fast, efficient,
and low-cost network of business relationships that take
products from concept to
market. SCM systems create the integrations or tight process
and information linkages
between all participants in the supply chain. Supply chain
management performs three
main business processes (see Figure 8.5 ):
1. Materials flow from suppliers and their upstream suppliers
at all levels.
2. Materials are transformed into semifinished and finished
products—the organiza-
tion’s own production processes.
3. Products are distributed to customers and their downstream
customers at all levels.
Consider a customer purchasing a mountain bike from a dealer.
Dozens of steps are
required to complete this transaction from beginning to end.
The customer places an
order with the dealer. The dealer purchases the bike from the
manufacturer. The manu-
facturer purchases the raw materials required to make the bike
such as aluminum, rub-
ber tires, brakes, accessories, and packaging from different
suppliers. The raw materials
are stored in the manufacturer’s warehouse until a production
order requires the bike
to be built, at which time the finished product is sent to the
dealer or, in some cases,

directly to the customer. The supply chain for a bike
manufacturer includes all processes
and people required to fulfill the customer’s order (see
Figure 8.6 ).
Walmart and Procter & Gamble (P&G) have implemented a
successful SCM system
that links Walmart’s distribution centers directly to P&G’s
manufacturing centers (see
Figure 8.7 ). The customer generates order information by
purchasing a product from
Walmart. Walmart supplies the order information to its
warehouse or distributor. The
warehouse or distributor transfers the order information to
P&G, which provides pricing
and availability information to the store and replenishes the
product to the distributor.
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Payment is transferred electronically. Effective and efficient
supply chain management
systems can enable an organization to have these impacts on
Porter’s Five Forces Model 2 :
■ Decrease the power of its buyers.
■ Increase its supplier power.

■ Increase buyers’ switching costs to reduce the threat of
substitute products or
services.
■ Create entry barriers to reduce the threat of new entrants.
■ Increase efficiencies while seeking a competitive advantage
through cost leadership
(see Figure 8.8 ).
FIGURE 8.6
Supply Chain for a Bike
Manufacturer
Distribution of
Finished Bikes
to Retailers
Bike
Production
Aluminum Manufacturer
Tire Manufacturer
Brake Manufacturer
Packaging Manufacturer
Bike Accessory
Manufacturers
CustomerRaw Materials
Storage

Retailer
Procter &
Gamble
Walmart
Warehouse
or Distributor
Indicates information flows for products,
pricing, scheduling, and availability
Paper
Manufacturer
Packaging
Supplier
Scented Oil
Manufacturer
Cocoa Oil
Manufacturer
Walmart
Store Customer
FIGURE 8.7
Supply Chain for a Product
Purchased from Walmart
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THE BENEFITS OF SCM
Better forecasts for tomorrow result in better preparedness
today. Technology advances
have significantly improved the ability to perform the five basic
supply chain activities
such as access to advanced modeling and simulation tools that
can combine informa-
tion from multiple sources to build forecasts that look days,
weeks, and months ahead. It
is now common, for instance, for suppliers to participate in
product development and for
retailers to contribute to marketing campaigns. Considerable
evidence shows that sup-
ply chain integration results in superior supply chain
capabilities, which drives a firm’s
profitability. Although firms have dreamed of integrating their
supply chains for a long
time, it is only recently that advances in MIS have brought
these dreams to life. Improved
visibility across the supply chain and increased profitability for
the firm are the primary
business benefits received when implementing supply chain
management systems.
Improved Visibility
Supply chain visibility is the ability to view all areas up
and down the supply chain in

real time. To react to demand, an organization needs to know all
customer events trig-
gered upstream and downstream and so must their suppliers and
their suppliers’ sup-
pliers. Without this information, supply chain participants are
blind to the supply and
demand needs occurring in the marketplace, a factor required to
implement successful
business strategies. To improve visibility across the supply
chain, firms can use supply
chain planning systems and supply chain execution systems.
Supply chain planning
systems use advanced mathematical algorithms to improve the
flow and efficiency of the
supply chain while reducing inventory. To yield accurate
results, however, supply chain
planning systems require information inputs that are correct and
up-to-date regarding
customers, orders, sales, manufacturing, and distribution
capabilities.
Ideally, the supply chain consists of multiple firms that
function as efficiently and
effectively as a single firm, with full information visibility.
Supply chain execution
systems ensure supply chain cohesion by automating the
different activities of the supply
chain. For example, a supply chain execution system might
electronically route orders
from a manufacturer to a supplier using electronic data
interchange (EDI), a standard
format for the electronic exchange of information between
supply chain participants.
Figure 8.9 details how supply chain planning and supply chain
execution systems inter-
act with the supply chain.

A good example of inventory issues that occur when a company
does not have a clear
vision of its entire supply chain is the bullwhip effect. The
bullwhip effect occurs when
distorted product-demand information ripples from one partner
to the next throughout
the supply chain. The misinformation regarding a slight rise in
demand for a product
could cause different members in the supply chain to stockpile
inventory. These changes
ripple throughout the supply chain, magnifying the issue and
creating excess inventory
and costs for all. For example, if a car dealership is having a
hard time moving a particu-
lar brand of car, it might offer significant discounts to try to
move the inventory. Without
this critical information, the car manufacturer might see a rise
in demand for this par-
ticular brand of car and increase production orders, not
realizing that the dealerships are
actually challenged with selling the inventory. Today,
integrated supply chains provide
LO 8.3: Identify the benefits and
challenges of SCM along with its
future.
FIGURE 8.8
Effective and Efficient Supply
Chain Management’s Effect
on Porter’s Five Forces
Decrease

Increase
Organization’s
Supply Chain
• Supplier power
• Buyer power
• Threat of substitute
products or services
• Threat of new
entrants
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managers with the visibility to see their suppliers’ and
customers’ supply chains, ensur-
ing that supply always meets demand.
Increased Profitability
Supply chain management systems can increase profitability
across an organization.
For example, a manufacturing plant manager might focus on
keeping the inventory of
Product A as low as possible, which will directly reduce the
manufacturing costs and
make the plant manager look great. However, the plant manager
and the business might

not realize that these savings are causing increased costs in
other areas, such as hav-
ing to pay more to procure raw materials for immediate
production needs or increas-
ing costs due to expedited shipping services. Only an end-to-
end view or an integrated
supply chain would uncover these issues, allowing a firm to
adjust business strategies to
increase profitability across the enterprise.
Customers are also more demanding than ever before. Because
information is so
readily available, they know exactly what they want, when they
want it, and how they
want it delivered. If your company can’t meet their demand, the
competition is simply a
mouse-click away. Couple supply chain complexity with today’s
demanding customers
and a firm’s costs can easily escalate out of control. Demand
planning systems gener-
ate demand forecasts using statistical tools and forecasting
techniques, so companies
can respond faster and more effectively to consumer demands
through supply chain
enhancements. Firms are implementing demand planning
systems to understand cus-
tomer demand and production capabilities so they can estimate
supply chain costs that
ultimately impact the firm’s performance and business
strategies. Innovative wireless
technologies, such as radio-frequency identification (RFID), are
also enabling compa-
nies to operate with improved speed and accuracy, ensuring that
they can satisfy con-
tinuously changing customer demands.

A supply chain is only as strong as its weakest link. Companies
use supply chain man-
agement metrics to measure the performance of supply chains to
quickly identify weak
links. A few of the common supply chain management metrics
include:
■ Back order: An unfilled customer order for a product that
is out of stock.
■ Inventory cycle time: The time it takes to manufacture a
product and deliver it
to the retailer.
■ Customer order cycle time: The agreed upon time between
the purchase of a
product and the delivery of the product.
■ Inventory turnover: The frequency of inventory
replacement.
Supply Chain Planning
Information Flows
Payment Flows
Supply Chain Execution
Supplier Manufacturer Distributor Retailer Customer
FIGURE 8.9
Supply Chain Planning’s and
Supply Chain Execution’s
Roles in the Supply Chain

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THE CHALLENGES OF SCM
The primary challenges associated with supply chain
management include costs and
complexity. Supply chain management systems can cost
millions of dollars for the
software and millions of dollars more for help with the
implementation. Just walk into
any manufacturing plant, distribution center, or factory floor
and you will witness
the complexity and costs associated with supply chain
management. Supply chains
cross entire organizations touching multiple departments and
spanning organiza-
tionwide business processes. Revamping just a single business
process can be difficult
for a company. Revamping all business processes that touch the
supply chain is an
incredibly difficult and complex task but is typically required
for the SCM system to
become effective. And, to top it all off, the supply chain reaches
beyond the borders of
the organization into partner, supplier, and customer domains,
adding another layer
of complexity for SCM. A lack of adequate collaboration among
marketing, sales, and

manufacturing within a company and suppliers, partners, and
distributors outside of a
company can easily sabotage SCM efforts sending the
multimillion-dollar investment
down the drain.
The move toward globalization is also increasing supply chain
complexity. As sup-
ply chains span geographical locations, issues such as time zone
differences, trans-
portation fees, cultural and language barriers, and exchange
rates all add additional
layers to the already complex supply chain. Government
relationships, taxes, and local
laws also tend to differ across global regions, creating more
confusion and issues in
supplier relationships. The bottom line is that SCM systems are
complex and costly
and implementing them correctly can be challenging even for
the most sophisticated
organization.
THE FUTURE OF SCM
There is a great commercial that depicts the future of supply
chain management. A man
wearing a uniform is walking through a home and quietly
replaces an empty cereal box
with a full one just as the child opens the kitchen cabinet. He
then produces a new bag of
BUSINESS DRIVEN ETHICS AND SECURITY
Zappos, Staples, and Amazon are just a few of the companies
taking advantage
of the latest innovation in warehouse management by replacing
traditional

order fulfillment technologies such as conveyor belts with little
orange robots.
The Kiva Mobile Fulfillment System (Kiva MFS) takes
advantage of a unique
order fulfillment system that improves productivity, speed,
accuracy, and flex-
ibility. Watching an order fulfillment center equipped with Kiva
MFS robots is
amazing; the operators stand still while the products come to
them. Inventory
pods store the products that are carried and transferred by a
small army of little
orange robots, eliminating the need for traditional systems such
as conveyors
and sorters. 3
What impact could Kiva MFS have on visibility and
profitability of the supply
chain? How would your warehouse employees react if you told
them you were
looking at implementing Kiva robots? What ethical issues arise
in the replace-
ment of human labor with robots? What security concerns could
a company
face when implementing Kiva MFS robots?
Kiva’s Robots
APPLY YOUR KNOWLEDGE
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dog food as soon as the hungry dog’s bowl is empty and finally
reaches into the shower
to hand a new bottle of shampoo to the man in the shower who
had just run out. The
next wave in supply chain management will be home-based
supply chain fulfillment. No
more running to the store to replace your products as your store
will come to you as soon
as you need a new product.
Walgreens is differentiating itself from other national chains as
the family’s just-
in-time supplier, developing custom websites for each
household that allow families
to order electronically and then pick up their goods at a self-
service counter or drive-
through window at their convenience. Walgreens even calls its
customers to let them
know their prescription medications are soon going to run out
and offers to fulfill the
new prescription.
As the supply chain management market matures, it is
becoming even more sophis-
ticated and incorporating additional functionality such as
marketing, customer service,
and even product development to its extended supply chain.
Advanced communica-
tions tools, easy-to-use decision support systems, and building
trust among participants
when sharing information are all making the home-based supply
chain possible. A few
of the fastest-growing SCM components include:

■ Collaborative demand planning— reduces inventory
investments, while improving
customer satisfaction.
■ Collaborative engineering— reduces product development
costs.
■ Selling chain management— automates order processes
from initial customer
inquiry to final product delivery.
■ Supply chain event management (SCEM)— increases real-
time information
sharing among supply chain partners focusing on reducing
response time to
unexpected events.
BUSINESS DRIVEN DEBATE
Lines at the post office are frustrating, and they are also
becoming unprofit-
able as the U.S. Postal Service faces billion-dollar losses for the
first time in
its history. What is causing this failure? It could be any number
of things, but
ebusiness competition is one of the primary challengers stealing
the Postal
Service’s market share. Stamps.com allows you to customize
and print your
own stamps 24 hours a day. If you are getting married, you can
place your
engagement picture on the stamp for the invitations. If you are
starting your
own business, you can purchase stamps showing your business
logo. And,

Stamps.com goes beyond simply delivering a product by
tracking customer
spending and recommending optimal delivery methods along
with postage
discounts. Now that is something you can’t get at the post
office. Talk about a
competitive advantage! 4
Why do you think the U.S. Postal Service is losing its market
share and
becoming unprofitable? What does the Postal Service’s supply
chain look
like? Who are its partners, suppliers, distributors, and
customers? What can
the Postal Service do to revamp its supply chain so it can
become profitable?
Many people believe the Postal Service should not be supported
by the gov-
ernment, and that if it can’t operate efficiently it should fail. Do
you agree?
Why or why not?
Fixing the
Post Office
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section 8.2 CUSTOMER RELATIONSHIP MANAGEMENT
AND ENTERPRISE RESOURCE PLANNING
L E A R N I N G O U T C O M E S
8.4 Describe customer relationship management and its role in
8.5. Identify the benefits and challenges of CRM along with its
future.
8.6 Describe enterprise resource management and its role in
8.7. Identify the benefits and challenges of ERP along with the
future of the connected corporation.
CUSTOMER RELATIONSHIP MANAGEMENT
Today, most competitors are simply a mouse-click away, and
this intense competition is
forcing firms to switch from sales-focused business strategies to
customer-focused busi-
ness strategies. Customers are one of a firm’s most valuable
assets, and building strong
loyal customer relationships is a key competitive advantage.
Harley-Davidson offers an
excellent example of a company that knows the value of
customer loyalty, and it finds
itself in the coveted position of demand outweighing its supply.
No other motorcycle
in the world has the look, feel, and sound of a Harley-Davidson.
Demand for Harley-
Davidson motorcycles outweighs supply and some models have
up to a two-year waiting
list. Knowing the value of its customers, Harley-Davidson

started the Harley’s Owners
Group (HOG), which is the largest motorcycle club in the world
with more than 600,000
members. HOG offers a wide array of events, rides, and benefits
to its members and
is a key competitive advantage as it helps to build a strong
sense of community among
Harley-Davidson owners. Harley-Davidson has built a customer
following that is
extremely loyal, a difficult task to accomplish in any industry. 5
Customer relationship management (CRM) is a means of
managing all aspects of
a customer’s relationship with an organization to increase
customer loyalty and reten-
tion and an organization’s profitability. CRM allows an
organization to gain insights into
customers’ shopping and buying behaviors. Every time a
customer communicates with
a company, the firm has the chance to build a trusting
relationship with that particu-
lar customer. Harley-Davidson realizes that it takes more than
just building and selling
motorcycles to fulfill the dreams of its loyal customers. For this
reason, the company
strives to deliver unforgettable experiences along with its top-
quality products. When
the company began selling products online it found itself facing
a dilemma—its online
strategy for selling accessories directly to consumers would
bypass Harley-Davidson’s
dealers, who depend on the high-margin accessories for store
revenues. The solution
was to deploy Harley-Davidson.com, which prompts customers
to select a participating
Harley-Davidson dealership before placing any online orders.

The selected dealership is
then responsible for fulfilling the order. This strategy ensured
that the dealers remained
the focus point of each customer’s buying experiences. To
guarantee that every customer
has a highly satisfying online buying experience, the company
asks the dealers to agree
to a number of standards including:
■ Checking online orders twice daily.
■ Shipping online orders within 24 hours.
■ Responding to customer inquiries within 24 hours. 6
Harley-Davidson still monitors online customer metrics such as
time taken to process
orders, number of returned orders, and number of incorrect
orders, guaranteeing that
the company delivers on its critical success factor of providing
prompt, excellent cus-
tomer service consistently to all its loyal customers.
A primary component of managing a customer relationship is
knowing when and
why the customer is communicating with the company. Imagine
an irate customer that
has just spent an hour on the phone with your call center
complaining about a defective
LO 8.4: Describe customer relation-
ship management and its role in sup-
porting business operations.
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product. While the customer is on the phone, your sales
representative decides to drop
by the customer’s office in an attempt to sell additional
products. Obviously, this is not
the ideal time to try to up-sell or cross-sell products to this
particular customer. A cus-
tomer relationship management system would inform the sales
representative that
the customer was on the phone with customer service and even
provide details of the
call. Then your sales representative could stop by and offer
assistance in resolving the
product issue, which might help restore the relationship with the
customer and provide
opportunities for future sales.
The complicated piece of this puzzle is that customers have
many communication
channels they can use to contact a company including call
centers, websites, email,
faxes, and telephones. To make matters even more complex, a
single customer can
communicate with a firm using all of the different
communication channels multiple
times. Keeping track of customer communications is important
if the firm wants to con-
tinue to build and manage that relationship. A CRM system can
track every form of cus-
tomer communication providing this information to all

employees (see Figure 8.10 ).
The firm can then implement strategies for the best ways to
communicate effectively
with each and every customer. With a CRM system a firm can
obtain an overview of
the customer’s products, preferences, account information,
communications, and
purchasing history, allowing it to send customized product
offers, expedite shipping,
ensure satisfaction, and other marketing and sales techniques
that can greatly add to
sales and profits.
FIGURE 8.10
Customer Relationship
Management Overview
Customer
Service
System
Inventory
System
Order
Fulfillment
System
Accounting
System
Customer Relationship Management System
Customer information flows

are represented by arrows.
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THE BENEFITS OF CRM
Companies that understand individual customer needs are best
positioned to achieve
success. Of course, building successful customer relationships
is not a new business prac-
tice; however, implementing CRM systems allows a company to
operate more efficiently
and effectively in the area of supporting customer needs. CRM
moves far beyond technol-
ogy by identifying customer needs and designing specific
marketing campaigns tailored
to each. This enables a firm to treat customers as individuals,
gaining important insights
into their buying preferences and shopping behaviors. Firms
that treat their customers
well reap the rewards and generally see higher profits and
highly loyal customers. Iden-
tifying the most valuable customers allows a firm to ensure that
these customers receive
the highest levels of customer service and are offered the first
opportunity to purchase
new products. Firms can find their most valuable customers by
using the RFM formula—
recency, frequency, and monetary value. In other words, an

organization must track:
■ How r ecently a customer purchased items.
■ How frequently a customer purchases items.
■ The monetary value of each customer purchase.
After gathering this initial CRM information, the firm can
analyze it to identify pat-
terns and create marketing campaigns and sales promotions for
different customer seg-
ments. For example, if a customer buys only at the height of the
season, the firm should
send a special offer during the off-season. If a certain customer
segment purchases shoes
but never accessories, the firm can offer discounted accessories
with the purchase of a
new pair of shoes. If the firm determines that its top 20 percent
of customers are respon-
sible for 80 percent of the revenue, it can focus on ensuring
these customers are always
satisfied and receive the highest levels of customer service.
Evolution of CRM
There are three phases in the evolution of CRM: (1) reporting,
(2) analyzing, and
(3) predicting. CRM reporting technologies help
organizations identify their customers
across other applications. CRM analysis technologies help
organizations segment
their customers into categories such as best and worst
customers. CRM predicting
technologies help organizations predict customer behavior,
such as which customers

are at risk of leaving. Figure 8.11 highlights a few of the
important questions an organiza-
tion can answer in these areas by using CRM technologies.
LO 8.5: Identify the benefits and
challenges of CRM along with its
future.
ANALYZING
Customer Segmentation:
Asking Why It Happened
• Why did sales not meet
forecasts?
• Why was production so
low?
• Why did we not sell as
many units as previous
years?
• Who are our customers?
• Why was revenue
so high?
• Why are inventory
levels low?
PREDICTING
Customer Prediction:
Asking What Will Happen
• What customers are at
risk of leaving?
• Which products will our
customers buy?
• Who are the best
customers for a

marketing campaign?
• How do we reach our
customers?
• What will sales be this
year?
• How much inventory do
we need to preorder?
REPORTING
Customer Identification:
Asking What Happened
• What is the total
revenue by customer?
• How many units did we
make?
• What were total sales
by product?
• How many customers
do we have?
• What are the current
inventory levels?
FIGURE 8.11
Evolution of CRM
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Operational and Analytical CRM
The two primary components of a CRM strategy are operational
CRM and analytical
CRM. Operational CRM supports traditional transactional
processing for day-to-day
front-office operations or systems that deal directly with the
customers. Analytical CRM
supports back-office operations and strategic analysis and
includes all systems that do
not deal directly with the customers. Figure 8.12 provides an
overview of the two.
BUSINESS DRIVEN GLOBALIZATION
Barclays Bank, a leader in the global financial markets,
maintains business
operations in more than 70 countries. Barclays chose to invest
in CRM technol-
ogies to help it gain valuable insights into its personal and
business customers,
many of which carry credit cards. The purpose of the CRM
system was to predict
the financial behavior of individual customers and assess
whether a customer
is likely to pay back a loan in full within the agreed-upon time
period and inter-
est rate. Surprisingly, Barclays’ CRM system quickly identified
that about 50
percent of its customers were nonprofitable, and that 90 percent
of its profits
were generated by fewer than 30 percent of its customers.
This valuable information allowed Barclays to revamp its
offerings and
charge customers an interest rate based on risk assessment.

Barclays also iden-
tifies groups of profitable customers, both on a corporate and
personal level,
which it can then target for new financial products. 7
How can a business like Barclays use RFM (recency,
frequency, and mone-
tary value) to improve customer relations? Provide three
examples of questions
a bank would ask in each of the following categories: CRM
reporting technolo-
gies, CRM analysis technologies, and CRM predicting
technologies.
Banking on
Customer
Relationships
FIGURE 8.12
Operational CRM and
Analytical CRM
Sales
Systems
Marketing
Systems
Customer
Service
Systems
Front Office–Operational CRM

Collaborative
CRM
System
Data
Warehouse
Data
Mining
Back Office–Analytical CRM
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Communications302
Figure 8.13 shows the different technologies marketing, sales,
and customer service
departments can use to perform operational CRM.
Marketing and Operational CRM
Companies are no longer trying to sell one product to as many
customers as possible;
instead, they are trying to sell one customer as many products
as possible. Marketing
departments switch to this new way of doing business by using
CRM technologies that

allow them to gather and analyze customer information to tailor
successful marketing
campaigns. In fact, a marketing campaign’s success is directly
proportional to the orga-
nization’s ability to gather and analyze the right customer
information. The three pri-
mary operational CRM technologies a marketing department can
implement to increase
customer satisfaction are:
1. List generator.
2. Campaign management.
3. Cross-selling and up-selling.
List Generator List generators compile customer
information from a variety of
sources and segment it for different marketing campaigns.
These sources include web-
site visits, questionnaires, surveys, marketing mailers, and so
on. After compiling the
Marketing
Operational CRM Technology
Sales
Customer Service
List Generator
Campaign Management
Cross-Selling and Up-Selling
Sales Management

Contact Management
Opportunity Management
Contact Center
Web-Based Self-Service
Call Scripting
FIGURE 8.13
Operational CRM
Technologies
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customer list, it can be filtered based on criteria such as
household income, gender, edu-
cation level, political facilitation, age, or other factors. List
generators provide the mar-
keting department with valuable information on the type of
customer it must target to
find success for a marketing campaign.
Campaign Management Campaign management systems
guide users through
marketing campaigns by performing such tasks as campaign
definition, planning,
scheduling, segmentation, and success analysis. These advanced

systems can even cal-
culate the profitability and track the results for each marketing
campaign.
Cross-Selling and Up-Selling Two key sales strategies a
marketing campaign
can deploy are cross-selling and up-selling. Cross-selling is
selling additional products
or services to an existing customer. For example, if you were to
purchase Tim Burton’s
movie Alice in Wonderland on Amazon, you would also be
asked if you want to purchase
the movie’s soundtrack or the original book. Amazon is taking
advantage of cross-selling
by offering customers goods across its book, movie, and music
product lines. Up-selling
is increasing the value of the sale. McDonald’s performs up-
selling by asking customers
whether they would like to super-size their meals for an extra
cost. CRM systems offer
marketing departments all kinds of information about customers
and products, which
can help identify up-selling and cross-selling opportunities to
increase revenues.
Sales and Operational CRM
Sales departments were the first to begin developing CRM
systems. They had two primary
motivations to track customer sales information electronically.
First, sales representa-
tives were struggling with the overwhelming amount of
customer account information
they were required to maintain and track. Second, managers
found themselves hindered
because much of their vital customer and sales information

remained in the heads of their
sales representatives, even if the sales representative left the
company. Finding a way to
track customer information became a critical success factor for
many sales departments.
Figure 8.14 depicts the typical sales process, which begins
with an opportunity and
ends with billing the customer for the sale. Leads and potential
customers are the
lifeblood of all sales organizations, whether they sell
computers, clothing, consulting, or
cars. How leads are handled can make the difference between
revenue growth and decline.
Lead sent
to salesperson
Potential
customer
contacted
Sales Process
Potential
customer
meeting
Problems and
solutions
identified
Order
fulfilled
Customer

billed
Sales order
placed
Customer
sales quote
generated
Opportunity
generated
FIGURE 8.14
A Typical Sales Process
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Confirming Pages
Communications304
Sales force automation (SFA) automatically tracks all the
steps in the sales process.
SFA products focus on increasing customer satisfaction,
building customer relation-
ships, and improving product sales. The three primary
operational CRM technologies a
sales department can adopt are:
1. Sales management CRM systems.
2. Contact management CRM systems.

3. Opportunity management CRM systems.
Sales Management CRM Systems Sales management CRM
systems automate
each phase of the sales process, helping individual sales
representatives coordinate and
organize all their accounts. Features include calendars,
reminders for important tasks,
multimedia presentations, and document generation. These
systems can even provide
an analysis of the sales cycle and calculate how each individual
sales representative is
performing during the sales process.
Contact Management CRM Systems A contact management
CRM system
maintains customer contact information and identifies
prospective customers for future
sales, using tools such as organizational charts, detailed
customer notes, and supple-
mental sales information. For example, a contact management
system can take an
incoming telephone number and automatically display the
person’s name along with a
comprehensive history including all communications with the
company. This allows the
sales representative to personalize the phone conversation and
ask such things as, “How
is your new laptop working, Sue?” or “How was your family
vacation to Colorado?” The
customer feels valued since the sales associate knows her name
and even remembers
details of their last conversation.
Opportunity Management CRM Systems Opportunity
management CRM

ENGL 2131Fall 2018Dr. RogersTopic for Critical Essay 2, du.docx

ENGL 2131Fall 2018Dr. RogersTopic for Critical Essay 2, du.docx

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