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Unformatted text preview: MANAGEMENT INFORMATION SYSTEMS
LECTURE NOTES 6
LECTURE NOTES 6
Achieving Operational Excellence and Customer Intimacy (Enterprise Applications) SPRING 2010 Achieving Operational Excellence and Customer Intimacy
This chapter focuses on how firms use Enterprise-wide Systems
to achieve Operational excellence, Customer Intimacy, and
improved Decision making.
Enterprise Systems, and Systems for Supply Chain Management
and Customer Relationship Management help companies
integrate information from many different parts of the business,
forge closer ties with customers, and coordinate firm activities
with those of Suppliers and other business partners.
with As IT professionals, you would be excepted to evaluate and
install Software for Enterprise Applications and help your
companies redesign their Business Processes to work with
the new Software. Achieving Operational Excellence and Customer Intimacy
Enterprise Systems are also known as Enterprise Resource Planning (ERP)
Enterprise Systems feature a set of Integrated Software Modules and a Central
Database that enables data to be shared by many different Business
Processes and functional areas throughout the Enterprise.
• The Central Database collects data from a large number of key business
processes in Manufacturing, Finance and Accounting, Sales and Marketing
and Human Resources, making the data available for Applications that
support nearly all of an Company's internal Business activities
support • When new information is entered by one business process, the information is
made immediately available to other business processes.
made ENTERPRISE SYSTEMS
ENTERPRISE (Continued) Imagine that you run a business based on Information Systems from tens of
different Databases and Application Systems, none of which could
communicate to one another.
To make the case even more dramatic, imagine that the company had 10
different major Product Lines, each line is produced at separate factories,
and each with separate and incompatible sets of Application Systems
controlling production, warehousing, and distribution.
Your decision making would be difficult to really understand what was
happening in the business as whole. You would have a very poor grasp of
how profitable the company was as a whole, or what your costs were.
Thus, companies are increasingly becoming more connected, both internally
and with other companies.
and HOW ENTERPRISE SYSTEMS WORK
HOW ENTERPRISE SYSTEMS WORK ENTERPRISE SYSTEMS
For Example: If a Salesman places an Order for a car tyre, the ERP System proceeds as
Verifies the Customer’s credit limit
Reserves the items in Inventory (stock)
Identifies the best Shipping route
Schedules the Shipment
If Inventory Stock were insufficient to fill the order, the system; Schedules the Production of more tyres,
Order the needed materials from the Suppliers • Sales Forecast and Production Forecast are immediately updated
Sales • General Ledger and Corporate cash levels are automatically updated with
revenue and cost information from the order. • Users could tap into the system and find out the statues of the order at any minute.
• Management could obtain information at any point in time about how the business was
• Management could also obtain Enterprise-wide data for Management Analyses of
product Cost and Profitability
product ENTERPRISE SOFTWARE
Enterprise Software is built around so many predefined Business Processes
that reflect “Best Practice”.
Best Practices are the most successful solutions or problem-solving
methods in a particular industry for consistently and effectively
achieving a business objective.
Best Practices emerge from two sources: Consulting Firms (Who work for many firms in the industry)
Consulting Software firms ( Who develop industry expertise by working with
When a firm hire a Consulting Firm or a Software Firm to help build Enterprise
Systems, in reality hiring the knowledge base of best practices accumulated by
these companies over many years.
Companies implementing Enterprise Software would have to:
- Select the functions of the systems they wish to use
Select ENTERPRISE SOFTWARE
ENTERPRISE (Continued) A firm would have to use “ Configuration Tables” provided by the Software to
tailor a particular aspect of the System to the way it does business.
e.g. A firm could use configuration tables to select whether it wants to track
revenue by product line, by geographical unit or by distribution
If the Enterprise Software does not support the way organization does
business, companies can rewrite some of the software to support the way
business processes work.
Enterprise Software is unusually complex, and extensive customization may
required to make it suitable for your business. The customization may
degrade the system’s performance, and also compromise the Information and
process integration that are the main benefits of the enterprıse systems.
• If a company wants to reap the maximum benefits from enterprise
software, it must change the way it works to conform to Business ENTERPRISE SOFTWARE
ENTERPRISE (Continued) Software Vendors such as SAP, Oracle, SSA Global, Lawson Software, and
Microsoft (Dynamic Software Suite) are major Enterprise Software
Vendors. There are versions of enterprise software which can be obtained from
Application Service Providers over the Web. Enterprise Software initially designed to automate the companies' internal
“Back-office” business processes, then become more externally oriented and
capable of communicating with customers, suppliers, and other
organizations. BUSINESS VALUE OF ENTERPRISE SYSTEMS
ENTERPRISE ERP Systems provide value both by increasing operational efficiency and
organization-wide information to help managers make better decisions.
Large companies with many operating units at different geographical locations
worldwide have used ERP Systems to enforce standard practices and data so
that everyone does business in the same way .
For example: Due to lack of standard company-wide business processes,
For prevented Coca Cola company from leveraging its worldwide
buying power to obtain prices for raw materials and from reacting
rapidly to market changes.
Coca Cola have implemented SAP Enterprise Systems to
standardise and coordinate important Business Processes in 200
countries. BUSINESS VALUE OF ENTERPRISE SYSTEMS (Continued)
ERP Software helps firms respond rapidly to their customer requests for
information on products and services by integrating order, manufacturing and
• Manufacturing is better informed about producing only what customers
• Buying exactly the right amount of components or raw materials to fill
• Staging Production,
• Minimizing the storage time of components and finished products
Minimizing ERP Software includes Analytical tools for using data captured by the System
to evaluate overall Organizational performance.
ERP System data have common standardized definitions and formats that are
accepted by the company.
ERP Systems allow companies’ Senior Management to easily find out how a
particular Organizational Unit is performing or to determine which Product
are most or least profitable at any moment .
are SUPPLY CHAIN MANAGEMENT (SCM) SYSTEMS
A large firm that produces many complex products and services has tens and even
hundreds of suppliers and sometimes the firm’s suppliers each have their own sets of
suppliers. In that event the company will need to coordinate the activities of many
supplier firms in order to produce their products and services.
Supply Chain Management Systems, are an answer to these problems of supply chain
complexity and scale.
A firm’s Supply Chain is network of organization, organizations’ bbusiness processes for
procuring raw materials, transforming raw materials into intermediate and finished
products, and distributing the finished products to customers.
Supply Chain links all participants listed below from source to consumption:
Customers SUPPLY CHAIN MANAGEMENT (SCM) SYSTEMS
Materials, information, and payments flow through the Supply Chain in both directions. Goods start out as raw materials and, as they move through the Supply Chain, they
are transformed into intermediate products (Components or parts) , and finally , into
finished products. The finished products are shipped to distribution centres and from there to retailers
and eventually to customers. Returned items flow in the reverse direction from the buyer back to the seller.
Example: NIKE designs, markets, and sells sneakers, socks, athletic clothing and
accessories throughout the word.
Nike’s primary suppliers are contract manufacturers with factories in
China, Indonesia, Brazil Thailand and several other countries.
However, Nike’s contract suppliers do not manufacture sneakers from
scratch. They obtain components from other sand then assemble
them into finished sneakers. These component suppliers in turn have their
owns suppliers and the chaıın contınues.
the SUPPLY CHAIN MANAGEMENT (SCM) SYSTEMS
The following ddiagram shows simplified Supply Chain for Nike. It shows the flow of Information
and materials among Suppliers, Nike, and Nike’s Distributors, Retailers, and Customers.
The Contract Manufacturers are Nike’s primary Suppliers. Suppliers of soles, uppers, laces etc.
are the secondary (Tier 2) Suppliers. Suppliers to the Secondary Suppliers are the tertiary (Tier 3)
The Upstream portion includes Nike’s Suppliers, The Suppliers’ Suppliers and the processes for managing
relationships with them.
The Downstream portion consists of the Nike’s Processes for Distributing and Delivering products to the final
Customers SUPPLY CHAIN MANAGEMENT (SCM) SYSTEMS
Companies doing Manufacturing like Nike’s Contractors also manage their own
“Internal Supply Chain Processes” for transforming materials, components, and services
furnished by their Suppliers into finished products (components or parts) for their
Customers and for managing materials and inventory.
INFORMATION AND SUPPLY CHAIN MANAGEMENT
The inaccurate or untimely information cause Inefficiencies in the Supply Chain such as:
- Parts Shortage
Underutilized plant capacity
Excessive finished goods inventory
High transportation costs e.g. Manufacturing companıes may keep too many parts in their inventory, because they
do not know exactly when they will receive next shipment from their suppliers.
Suppliers may order too few raw materials, because they do not have precise
information on demand. INFORMATION AND SUPPLY CHAIN MANAGEMENT
If a Manufacturer had accurate and timely Information about exactly how
many units of Product Customers wanted, when they wanted and when they
could be produced , it would be possible to implement a highly efficient
Just-in-time (JIT) Strategy.
Components would arrive exactly at the moments they were needed and
finished goods would be shipped as they left the assembly line.
Uncertainties arise in a Supply Chain, because many events connot be foreseen
such as : Uncertain product demands,
Late shipment of raw materials from suppliers,
Defective parts of raw material,
Production process breakdowns
Production Manufacturers often deal with such uncertainties and unforeseen events.
Manufacturers INFORMATION AND SUPPLY CHAIN MANAGEMENT
In order to satisfy the Customers demands companies have to keep more raw material
And finished products in inventory than what they think they may actually need as
The Safety Stock acts as a buffer for the lack of flexibility in the Supply Chain.
Although excessive Inventory is expensive, low inventory level is also costly because
business may lose a lot from cancelled orders.
One recurring problem in Supply Chain Management is the Bullwhip Effect, in which
information about the demand for a product gets distorted as it passes from one entity to
the next across the Supply Chain.
the A slight rise in the demand for an item might cause different members in the Supply
Chain Distributors, Manufacturers, Suppliers, Secondary and tertiary Suppliers to
stockpile Inventory so each has enough “Just in Case” . These changes ripple throughout the Supply Chain, magnifying what started out as a small
change from planned orders, creating excess Inventory, Production, Warehousing, and
Shipping costs. INFORMATION AND SUPPLY CHAIN MANAGEMENT
The diagram below shows how inaccurate information can cause fluctuations in
demand for a product to be amplified as one moves further back in the Supply
Chain. Mirror fluctuations in Sales of a Product can create excess Inventory
for Distributors, Manufacturers and Suppliers
for INFORMATION AND SUPPLY CHAIN MANAGEMENT
INFORMATION The Bullwhip effect can be eliminated or minimized by
reducing uncertainties about Demand and Supply by having
accurate and up-to-date information and sharing dynamic
information about inventory levels, production schedules,
forecasts and shipments amongst the participants.
Supply Chain Management Systems provide the kind of
information that helps members of the Supply Chain make better
purchasing and scheduling decisions.
purchasing SUPPLY CHAIN MANAGEMENT APPLICATIONS
SUPPLY Supply Chain Planning Systems
Supply Chain Execution Systems 1. SUPPLY CHAIN PLANNING SYSTEMS
Help the firm to generate Demand Forecasts for a product and to develop
sourcing and manufacturing plans for that product.
Supply Chain Planning Systems help companies make better operating
decisions, such as:
- Determining how much of a specific Product to be manufactured in a
given time period establishing raw materials, components or parts,
and finished goods inventory.
- Determining were to store finished goods
- Identifying the transportation mode to use for product delivery. SUPPLY CHAIN MANAGEMENT APPLICATIONS
1. SUPPLY CHAIN PLANNING SYSTEMS
Example: If a customer places a large order than usual or changes that
order on short notice, it can have a widespread impact
throughout the supply chain. Additional raw materials or different mix of raw materials may
need to be ordered from suppliers. Manufacturing may have to change job scheduling Transporter may have to reschedule deliveries. The Supply Chain Planning Software makes the necessary adjustment to
Production and Distribution Plans.
Production Information about changes is shared among relevant supply chain members
so that their work can be coordinated.
so SUPPLY CHAIN PLANNING SYSTEMS
SUPPLY One of the most important and complex supply Chain Planning
function is ‘’Demand Planning’’.
Demand Planning determines how much product a business needs to make to
satisfy all its customers’ demands.
satisfy CAPABILITIES OF SUPPLY CHAIN PLANNING SYSTEMS
a) Order Planning b)
e) Advanced Scheduling and Manufacturing Planning
Transportation Planning CAPABILITIES OF SUPPLY CHAIN PLANNING SYSTEMS
CAPABILITIES a) Order Planning
Selects an Order fulfilment plan that best meets the desired level of
service to the customer given existing transportation and
manufacturing a) Advanced Scheduling and Manufacturing Planning
Provides detailed coordination of scheduling based on an analysis
of changing factors, such as:
• Customer orders,
Create job schedules for the manufacturing process and
supplier CAPABILITIES OF SUPPLY CHAIN PLANNING SYSTEMS
CAPABILITIES a) Demand Planning
Generates demand forecasts from all business units using statistical
tools and business forecasting techniques. a) Distribution Planning
Create operating plans for logistic management for order fulfilment
based on Input from demand and manufacturing modules. a) Transportation Planning
Tracks and analyze inbound, outbound , and inter-company movement
of materials and products to ensure that materials and finished goods
are delivered at the right time and places at the minimum cost.
are SUPPLY CHAIN MANAGEMENT APPLICATIONS
2. SUPPLY CHAIN EXECUTION SYSTEMS
Supply Chain Execution Systems manage the flow of products through Distribution
Centres and Warehouses to ensure that the products are delivered to the right
locations in the most efficient manner.
locations Supply Chain Execution Systems tracks :Supply The physical status of goods,
The management of materials,
Warehouse and transportation operations
Financial information involving all parties CAPABILITIES OF SUPPLY CHAIN EXECUTION SYSTEMS
e) Order commitment
Reverse distribution CAPABILITIES OF SUPPLY CHAIN EXECUTION SYSTEMS
a) Order Commitment
Enable company to quote accurate delivery dates to customers by providing more
real-time detailed information on the status of orders from availability of raw
materials and inventory to production and shipment status.
materials b) Final Production
Organize and schedule final sub-assemblies required to make each final product.
Organize a) Replenishment
Coordinate component replenishment work so that warehouses remain stocked
with the minimum amount of inventory in the pipeline.
with a) Distribution Management
Coordinate the process of transporting goods from the Manufacturer to
Distribution Centres and to the Final Customer. Provide online customer access to
shipment and delivery data.
shipment a) Reverse Distribution
Track the Shipment and Accounting for Returned Goods or Re-manufactured
Products. SUPPLY CHAIN MANAGEMENT AND INTERNET
SUPPLY CHAIN - Before The Internet Era: Supply Chain coordination was hampered by the difficulties of making information
flow smoothly among disparate internal Supply Chain Systems for Purchasing ,
Material Management, Manufacturing, and Distribution.
Material It was also difficult to share Information with External Supply Chain Partners
because the Systems of Suppliers, Distributors, or Logistics provides were based on
incompatible Technology platforms and standards.
Enterprise Systems could supply some integration of Internal Supply Chain Processes
but they were not designed to deal with External Supply Chain Processes.
SUPPLY CHAIN WITH INTERNET Some Supply Chain Integration is supplied inexpensively using Internet
Technology such as Intranets and Extranets.
Technology Firms use Intranets to improve coordination among their Internal Supply Chain
Processes, Firms use Extranets to coordinate Supply Chain Processes shared with their Business
Partners. INTERNETS AND EXTRANETS FOR SUPPLY CHAIN MANAGEMENT
INTERNETS Intranets integrate information from isolated Business Processes within the Firm to
help manage its Internal Supply Chain. Access to the private Intranets can also be extended to Authorized Suppliers,
Distributors, Logistic Services, and sometimes to Retail Customers to improve
coordination of External Supply Chain Process. DEMAND DRIVEN SUPPLY CHAINS
Supply Chain Management Systems facilitate efficient Customer response, enabling the
workings of business to be driven more by Customer Demand as well as reducing costs.
PUSH-BASED SUPPLY CHAIN MANAGEMENT MODEL In a Push-based Model Production Master Schedules are based on Forecasts or best
guesses of Demand for Products, and Products are “Pushed” to Customers. Earlier SCM Systems were driven by a Push-based model known as Build-to-Stock
PULL-BASED SUPPLY CHAIN MANAGEMENT MODEL
PULL-BASED With new flow of information made possible by Web-based tools, SCM more easily
follows a Pull-based Model also known as Build-to-Order Model , or “Demand-driven
Model” In the Pull-based Model actual Customer Orders or Purchase trigger events in the
Supply Chain .
Supply Transactions to Produce and Deliver only what Customers have Ordered move up the
Supply Chain stream from Retailers to Distributors to Manufacturers and eventually
to Suppliers. DEMAND DRIVEN SUPPLY CHAINS
• Only Products to fulfil the Orders move back down the Supply Chain to the Retailer.
• Manufacturers use only actual Order demand information to drive their Production
Schedules and the Procurement of Components or raw materials. The difference between Push-based Models and the Pull-based Models is summarized by
the slogan “Make what we sell, not sell what we make”
“Make DEMAND DRIVEN SUPPLY CHAINS
The Internet and Internet Technology make it possible to move from Sequential Supply
Chains, where information and materials flow sequentially from company to company,
to concurrent Supply Chains, where information flows in many directions
simultaneously among members of a Supply Chain network.
• Members of the network immediately adjust to changes in schedules or orders.
• Ultimately, the Internet could create a ‘’Digital Logistics Nervous System’’ through the
Digital Logistics Nervous System permits simultaneous multidirectional
communication of information about supply chain participants Inventories,
Orders and capacities, optimizing the activities of individual firms and groups of
firms interacting in e-commerce marketplaces. THE FUTURE INTERNET-DRIVEN SUPPLY CHAIN
The future Internet-driven Supply Chain operates like a Digital Logistics Nervous
The Future Internet-driven Supply Chain provides multidirectional communication
among firms, networks of firms, and e-marketplaces so that entire networks of Supply
Chain partners can immediately adjust Inventories, Orders and Capabilities.
Chain BUSINESS VALUE OF SUPPLY CHAIN MANAGEMENT SYSTEMS
Supply Chain Management Systems enable firms to streamline both their internal and
external Supply Chain Processes and provide Management with more accurate
information about what to produce, store, and move.
By implementing a Networked and Integrated Supply Chain Management System,
. Match Supply to Demand,
• Reduce Inventory levels,
• Improve Delivery service,
• Speed Product time to market,
• Use Assets more effectively.
• Total Supply Chain Costs represent the majority of Operating expenses for many
businesses and in some industries approach 75% of the total Operating budget.
• Reducing Supply Chain Costs may have a major impact on firms profitability.
In addition to reducing Costs , SCM Systems help increase sales.
• Also Control of Supply Chain, enhances the firm’s ability to have the right product
available for Customer purchase at the right time,. CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS (CRM)
The following Slogans make more sense than ever before.
‘’The Customer is always right’’ OR ‘’Customer Comes First’’.
Competitive Advantage based on an innovative new product or service
is often very short lived, companies are realizing that their only enduring
competitive strength may be their relationships with their Customers.
Nowadays, Competition has switched from ‘’Who sell the most products and
services to ‘’Who owns the Customer’’ , and that Customer Relationships
represent a firm’s most valuable assets.
What kind of information would you need to build and nurture strong,
long-lasting relationship with Customers? You need to know exactly:
• Who your customers are;
How to contact your Customers;
Whether they are costly to service and sell to;
What kind of Products ands Services they are interested in;
What CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS (CRM)
CUSTOMER In a small business operating in a neighbourhood , it is possible to know
customers on a personal, face-to-face basis. But in a large business
operating on a metropolitan, regional national or even global basis, it is
impossible to know customers in the intimate way. Because there are many Customers and too many different ways that
customers interact with the firm (over Web, phone, fax and face-to face).
It becomes especially difficult to integrate information from all theses
sources and to deal with the large number of Customers. Customer Relationship Management Systems help to solve the above
mentioned problems. Customer Relationship Management Systems (CRM) capture and
integrate customer data from all over the organization, consolidate
and analyze the data, and then distribute the results to various
Systems and Customer touch points or Contact point across the
enterprise. CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS (CRM )
CUSTOMER A Touch Point is a method of interaction with the Customer, such as by
telephone, fax, e-mail, service desk, mail, web site, wireless device, or
at retail store. Well designed CRM Systems provide a single enterprise view of customers
that is useful for improving both sales and customer service. CRM also provides a single view of the customer to the company
regardless of what touch point the customer uses. (figure below)
(figure CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS (CRM )
CUSTOMER CRM Systems examine Customers from a multifaceted perspective.
CRM Systems use a set of integrated applications to address all aspect of the
Customer Relationship, including Customer service, Sales, and Marketing.
Customer Good CRM Systems provide Analytical tools for answering questions such
as : What is the value of a particular customer to the firm over his/her lifetime?
Who are the most loyal Customers?
Who are the most profitable customers?
What do these profitable customers want to buy? Firms use the answers of the above questions to :
Firms Acquire new Customers,
Provide better services and support to existing Customers,
Customize their offerings more precisely to customer preferences,
Provide ongoing value to retain profitable Customers.
Provide CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS (CRM)
Customer Relationship Management Software (CRM) Packages range
from niche tools that perform a limited functions, such as personalizing
Web Sites for specific customers, to Large-scale Enterprise Applications
that capture myriad interactions with customers and analyze them with
sophisticated Analytical and Reporting Tools, and link customers to other
major Enterprise Applications, such as Supply Chain Management and
The more comprehensive CRM Packages contain modules for :
Partner Relationship Management (PRM) System
Employee Relationship Management (ERM) System.
Employee CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS (CRM )
Partner Relationship Management System (PRM) uses many of the same
data, tools, and Systems as Customer Relationship Management to enhance
collaboration between a company and its selling partners.
collaboration If a company does not sell directly to Customers but rather works
through Distributors or Retailers, PRM helps these channels sell to
Customers directly. PRM provides a company and its selling partners with the ability
to trade information and distribute leads and data about
customers, integrating lead generation, pricing, promotions,
order configurations and availability.
order PRM also provides a firm with tools to assess its Partners’
performance so it can make sure its best partners receive the
support they need to close more business.
support EMPLOYEE RELATIONSHIP MANAGEMENT SYSTEMS (ERM SYSTEMS)
EMPLOYEE Employee Relationship Management (ERM) Software deals with Employee
issues that are closely related to CRM, such as:
- Setting objectives
Employee Performance Management
Performance based compensation
Employee training etc…..
Employee CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS (CRM)
Customer Relationship Management Systems (CRM) typically provide Software and
Online Tools for Sales, Customer Services and Marketing business functions.
Online CRM Systems contain the following Modules
- Sales Force Automation
Sales - Customer Service
- Marketing Automation
SALES FORCE AUTOMATION MODULE (SFA) Sales Force Automation Modules in CRM Systems help Sales staff increase
their productivity by focusing sales efforts on the most profitable customers,
who are good candidates for sales and services. CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS (CRM )
CUSTOMER CRM SOFTWARE provides:
• Sales prospects and contact information,
Product configuration capabilities,
Sales quote generation capabilities.
• CRM Software Assemble information about a particular customer’s
past purchases to help the Salesperson make personalized
• Enables Sales, Marketing and Delivery Departments to easily share
Customer and prospect Information.
• Increases each Salesperson’s efficiency by reducing costs per sales as
well as cost of acquiring new customers and retaining old ones.
• CRM Software also has capabilities for Sales Forecasting, Territory
Management, and Team Selling.
- CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS (CRM)
CUSTOMER SERVICE MODULE
Customer Service Modules provide Information and tools to increase the
efficiency of Call Centre, Help Desks and Customer Support staff.
They have capabilities for assigning and managing Customer service requests.
• When a Customer calls a standard phone number, the System routes
the call to the correct Service person, who inputs information about
the customer into the system only once.
Once the data is in the System , any Service Representative can handle
the Customer Relationship. CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS (CRM)
CUSTOMER SERVICE MODULE • Improved access to consistent and accurate customer information
helps Call Centres handle more calls per day and decrease the
duration of each call.
duration • Call Centres and Customer Service Groups achieve greater
productivity, reduced transaction time, and higher quality of service
at lower cost.
at • Customer is happier because s/he spends less time on phone
restating his/her problem to Customer Service Representatives.
restating CRM may also include Web-based Self-service capabilities.
• Web site can provide inquiring Customer personalized Support
information as well as the option to contact Customer Service Staff
by phone for additional assistance. CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS (CRM )
CRM Marketing Module provides a single point for users to manage and
evaluate Marketing Campaigns across multiple channels, including e-mail,
direct mail, the Web, and Wireless messages.
CRM Marketing Modules also include Tools for analyzing Marketing and
Customer Data to:
- Identifying profitable and unprofitable Customers,
Designing products and services to satisfy specific Customer needs and
- Identifying opportunities for Cross-selling.
Cross- Selling is the Marketing of Complementary Products to Customers.
Example: In Financial Services a Customer with a Checking Account might be
sold a Money Market Account or a Home Improvement Loan.
CRM Tools also help firms manage and execute Marketing Campaigns at all
stages, from Planning to Determining the Rate of Success for each campaign.
stages, CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS (CRM )
CRM MARKETING MODULE CRM Marketing Module supports Direct Marketing Campaign by
providing capabilities for capturing:
• Prospect and customer data,
• Product and service information, for qualifying leads for targeted
marketing, and for Scheduling and tracking direct-Marketing
•or e-mail. CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS (CRM )
Figure below illustrates the most important capabilities for Sales, Services, and
Marketing processes that would be found in major CRM Software Products like
Enterprise Software which is a business-process driven , incorporating hundreds of
business processes thought to represent best practices in each of these areas.
To achieve maximum benefits from CRM, companies need to revise and model their
business processes to conform to the best-practice business process in the CRM
Software. CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS (CRM )
CRM Software provides a firm with Customer Loyalty Management
process to assign each customer a score, which is based on the Customer’s
Value and Loyalty to the company.
The loyalty information help call centres route each customer’s service
request to service agents who can best handle that customer’s needs.
The CRM System would automatically provide the Service Agent with a
detailed profile of the customer that included his /her score for value and
• The Service Agent would use this information to present special offers
or additional services to the Customer to encourage the customer to
keep transacting business with the company. CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS (CRM)
CUSTOMER LOYALTY MANAGEMENT PROCESS
Figure below illustrates how a Best-practice for increasing customer loyalty through
customer service might be modelled by CRM Software.
The CRM Software helps firms identify High-value Customers for preferential treatment
The CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS (CRM )
OPERATIONAL AND ANALYTICAL CRM
Operational CRM includes Customer-facing Applications such as tools for: Sales Force Automation,
Call Centre and Customer Service Support,
Marketing Automation. Analytical CRM includes Applications that analyze customer data generated by
Operational CRM Applications to provide information for improving business
Analytical CRM Applications are based on Data Warehouses that consolidate the
data from Operational CRM Systems and Customer Touch Points for use with
Online Analytical Processing (OLAP), Data Mining and other Data Analysis
Techniques. CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS (CRM)
ANALYTICAL CRM DATA WAREHOUSE
DATA Analytical CRM uses a Customer Data Warehouse and Tools to analyze
Customer data collected from the firm’s Customer Touch Points and from other
sources. CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS (CRM )
• Customer Data collected by the Organization’s operatıng CRM systems might be combined with data from other sources, such as customer lists for direct Marketing campaigns (purchased from thırd partıes) or demographic data. • Customer data are analyzed to: • Identify the buying patterns, to create segments for targeted marketing, and to pinpoint profitable and unprofitable customers . Define ‘’Lifetime Value of Customers’ Customer Lifetime Value (CLTV) is based on the relationship between the: • Revenue generated by a specific Customer, • Expenses incurred in acquiring and servicing customers, • Expected life of the relationship between the Customer and the company. CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS (CRM )
BUSINESS VALUE OF CUSTOMER RELATIONSHIP MANAGEMENT
Companies with effective Customer Relationship Management Systems realize many
benefits including :
benefits Increased customer satisfaction,
Reduced direct-marketing costs,
Increase the effectiveness of marketing,
Lower costs for customer acquisition and retention. Information from CRM Systems increases sales revenue by identifying the most
profitable customers and segments for focused marketing and cross-selling.
Customer Churn is reduced as Sales, Services, and Marketing better respond to
Customer The Churn Rate measures the number of customers who stop using the
company or purchasing products or services from a company. Churn Rate is an important indicator of the growth or decline of a firm’s
Churn NEW OPPORTUNITIES AND CHALLENGES WITH ENTERPRISE APPLICATIONS Enterprise Applications involve complex pieces of Software that are very
expensive to purchase and implement. Development and large scale of implementation of an Enterprise System,
Supply Chain Management or a Customer Relationship Management System
might take a large company several years. The Total Implementation cost of a large System, including the followings
might amount to four to five times the initial Purchase price for the Software.
Hardware costs, ( if applicable)
Hardware Enterprise Applications require not only deep seated technological changes
but also fundamental changes in the way the business operates. NEW OPPORTUNITIES AND CHALLENGES WITH ENTERPRISE APPLICATIONS
NEW Companies must make sweeping changes to their business processes to work
with the Entrprıse software. Employees must accept new job functions and responsibilities. They must
learn how to perform a new set of work activities and understand how the
information they enter iinto the System can affect other parts of the company
System Supply Chain Management Systems require multiple organizations to
share information and business processes. Each participant in the
System may have to change some of its business processes and the way it
uses information to create a System that best serves the Supply Chain as
whole. Some firms experienced enormous Operating losses, when they first
implemented Enterprise Application. Because they did not understand
how much organizational change was required.
how NEW OPPORTUNITIES AND CHALLENGES WITH ENTERPRISE
APPLICATIONS Enterprise Applications also introduce ‘’Switching Costs’’ . Once you adopt
an Enterprise Application from a single Software Vendor, (such as SAP,
Oracle etc..) . It gets very costly to switch vendors, and the firm becomes
dependant on that vendor for upgrade and maintenance. Enterprise Applications are based on organizational wide definitions of
Therefore, it is absolutely necessary to understand exactly how the business
uses that data and how the data would be organized in a Customer
Relationship Management, Supply Chain Management or Enterprise
Resource Planning Systems. Customer Relationship Management System in particular will necessitate
some data cleansing work. EXTENDING ENTERPRISE SOFTWARE
Many experienced business firms are looking for ways to bring more value
from their Enterprise Applications.
from One way to extend is to make Enterprise Software more flexible ,
Web-enabled, and capable of integration with other Systems.
The major Enterprise Software Vendors have created what they
call ‘’Enterprise Solutions’’, ‘’Enterprise Suites’’ or E-business
Suites to make their Customer Relationship Management, Supply
Chain Management, and Enterprise Resource Planning System
that work closely with each other, and to link with Customers’ and
Suppliers systems. Another way of leveraging investments in Enterprise Applications is to
use the systems to create Service Platforms for new or improved business
processes that integrate information from multiple functional areas.
A Service Platform integrates multiple applications from multiple business
functions, business units, or business partners to deliver a seamless experience
for the customer, business partner, manager and employee. ENTERPRISE APPLICATIONS SOFTWARE
In summary, it takes a lot of work to install and get the
In summary, it takes a lot of work to install and get the
Enterprise Applications to work properly. Everyone in the organization must be involved in the
Enterprise application project. Of course, for those
companies that have successfully implemented ERP, CRM, and SCM, the results have justified the effort. ...
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This note was uploaded on 08/12/2011 for the course ITEC 421 taught by Professor Huseyingursev during the Spring '11 term at Eastern Mediterranean University.
- Spring '11