Management Information Systems:

Managing the Digital Firm

Sixteenth Edition

Chapter 9
Achieving Operational Excellence
and Customer Intimacy: Enterprise
Applications

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Learning Objectives
9.1 How do enterprise systems help businesses achieve
operational excellence?
9.2 How do supply chain management systems coordinate
planning, production, and logistics with suppliers?
9.3 How do customer relationship management systems
help firms achieve customer intimacy?
9.4 What are the challenges that enterprise applications
pose, and how are enterprise applications taking
advantage of new technologies?
9.5 How will M I S help my career?

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Enterprise Systems
• Enterprise resource planning (ERP) systems
• Suite of integrated software modules and a common
central database
• Collects data from many divisions of firm for use in nearly
all of firm’s internal business activities
• Information entered in one process is immediately
available for other processes

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Figure 9.1 How Enterprise Systems
Work

Enterprise systems feature

a set of integrated
software modules and a
central database by which
business processes and
functional areas
throughout the enterprise
can share data.

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Enterprise Software
• Built around thousands of predefined business processes
that reflect best practices
– Finance and accounting
– Human resources
– Manufacturing and production
– Sales and marketing
• To implement, firms:
– Select functions of system they wish to use
– Map business processes to software processes
● Use software’s configuration tables for customizing

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Business Value of Enterprise
Systems
• Increase operational efficiency
• Provide firm-wide information to support decision making
• Enable rapid responses to customer requests for
information or products
• Include analytical tools to evaluate overall organizational
performance and improve decision-making

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The Supply Chain
• A firm’s supply chain is a network of organizations and
business processes for procuring raw materials,
transforming these materials into intermediate and
finished products, and distributing the finished products to
customers.
• Upstream supply chain
• Downstream supply chain
• Internal supply chain

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● The upstream portion of the supply chain includes the company’s suppliers,
the suppliers’ suppliers, and the processes for managing relationships with
them.
● The downstream portion consists of the organizations and processes for
distributing and delivering products to the final customers.
● internal supply chain processes for transforming materials,
components, and services their suppliers furnish into finished
products or intermediate products (components or parts) for their
customers and for managing materials and inventory

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Figure 9.2 Nike’s Supply Chain

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Supply Chain Management
• Inefficiencies cut into a company’s operating costs
– Can waste up to 25 percent of operating expenses
• Just-in-time strategy
– Components arrive as they are needed
– Finished goods shipped after leaving assembly line
• Safety stock: buffer for lack of flexibility in supply chain
• Bullwhip effect
– Information about product demand gets distorted as it
passes from one entity to next across supply chain

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Figure 9.3 The Bullwhip Effect

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Supply Chain Management Software
• Supply chain planning systems
– Model existing supply chain
– Enable demand planning
– Optimize sourcing, manufacturing plans
– Establish inventory levels
– Identify transportation modes
• Supply chain execution systems
– Manage flow of products through distribution centers
and warehouses

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Global Supply Chains and the
Internet
• Global supply chain issues
– Greater geographical distances, time differences
– Participants from different countries
● Different performance standards
● Different legal requirements
• Internet helps manage global complexities
– Warehouse management
– Transportation management
– Logistics
– Outsourcing
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Demand-Driven Supply Chains: From
Push to Pull Manufacturing and
Efficient Customer Response
• Push-based model (build-to-stock)
– Earlier SCM systems
– Schedules based on best guesses of demand
• Pull-based model (demand-driven)
– Web-based
– Customer orders trigger events in supply chain
• Internet enables move from sequential supply chains to
concurrent supply chains
– Complex networks of suppliers can adjust immediately

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Figure 9.4 Push- Versus Pull-Based
Supply Chain Models

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Figure 9.5 The Emerging Internet-
Driven Supply Chain

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Business Value of Supply Chain
Management Systems
• Match supply to demand
• Reduce inventory levels
• Improve delivery service
• Speed product time to market
• Use assets more effectively
– Total supply chain costs can be 75 percent of operating
budget
• Increase sales

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Customer Relationship Management
• Knowing the customer
• In large businesses, too many customers and too many
ways customers interact with firm
• CRM systems
– Capture and integrate customer data from all over the
organization
– Consolidate and analyze customer data
– Distribute customer information to various systems and
customer touch points across enterprise
– Provide single enterprise view of customers

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 Figure 9.6 Customer Relationship
Management (C R M)

CRM systems examine customers from a

multifaceted perspective. These systems
use a set of integrated applications to
address all aspects of the customer
relationship, including customer service,
sales, and marketing

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Customer Relationship Management
Software (1 of 2)
• Packages range from niche tools to large-scale enterprise
applications
• More comprehensive packages have modules for:
– Partner relationship management (PRM)
● Integrating lead generation, pricing, promotions, order
configurations, and availability
● Tools to assess partners’ performances
– Employee relationship management (ERM)
● Setting objectives, employee performance management,
performance-based compensation, employee training

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Customer Relationship Management
Software (2 of 2)
• CRM packages typically include tools for:
– Sales force automation (SFA)
● Sales prospect and contact information
● Sales quote generation capabilities
– Customer service
● Assigning and managing customer service requests
● Web-based self-service capabilities
– Marketing
● Capturing prospect and customer data, scheduling and
tracking direct-marketing mailings or e-mail
● Cross-selling
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Figure 9.7 How C R M Systems
Support Marketing
Responses by Channel for January 2019 Promotional Campaign

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Figure 9.8 C R M Software Capabilities

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Figure 9.9 Customer Loyalty
Management Process Map

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Operational and Analytical C R M
• Operational CRM
– Customer-facing applications
– Sales force automation call center and customer
service support
– Marketing automation
• Analytical CRM
– Based on data warehouses populated by operational
CRM systems and customer touch points
– Analyzes customer data (OLAP, data mining, etc.)
● Customer lifetime value (CLTV)

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Figure 9.10 Analytical C R M Data
Warehouse

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Business Value of Customer
Relationship Management Systems
• Business value of CRM systems
– Increased customer satisfaction
– Reduced direct-marketing costs
– More effective marketing
– Lower costs for customer acquisition/retention
– Increased sales revenue
• Churn rate
– Number of customers who stop using or purchasing
products or services from a company
– Indicator of growth or decline of firm’s customer base
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Enterprise Application Challenges
• Expensive to purchase and implement enterprise
applications
– Multi-million dollar projects in 2018
– Long development times
• Technology changes
• Business process changes
• Organizational learning, changes
• Switching costs, dependence on software vendors
• Data standardization, management, cleansing

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How Will M I S Help My Career?
• The Company: XYZ Global Industrial Components
• Position Description: Manufacturing management trainee
• Job Requirements
• Interview Questions
• Author Tips

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