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IT

Ron Williams

Business Innovation Through Information Technology

ERP, CRM, & SCM

PPTTEST 04/21/23 10:43

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IT

Ron Williams

The Holistic View of IT Strategy Organization

Bus.

ORG IT

ProcessesJobs Beliefs

Incentives

Processes

Task

Relationship

Architecture

Business Needs

Policies

Technology

InformationalInformational

StrategicStrategic

TransactionalTransactional

InfrastructureInfrastructure

InformationalInformational

StrategicStrategic

TransactionalTransactional

InfrastructureInfrastructure

IT Investment Portfolio

Technology

HardwareSoftware

InformationNetwork

“Emerging”

IS Management

OwnSourceManage

IS Development

SDLC

Project Mgn’t

Business

Technology

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IT

Ron Williams

Value Chain

Inbound Logistics

Operations Outbound Logistics

Marketing & Sales

Service

Procurement

Technology & Development

Human Resource Management

Firm Infrastructure

Support Activities

Primary Activities

Source: Michael Porter 1985

Processes: Activities that the firm has value enabledReduce cost & cycle time Improve qualityImprove service

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IT

Ron Williams

What’s the core of ERP?

• It’s not resources, it’s not planning, but it is enterprise

• It is back office software

• It’s a common platform for taking the customer order and processes through invoice and revenue– Order processing with customer history, inventory levels, and credit info.– Manufacturing planning– Inventory Management– Purchase order processing/management– Cost accounting– Financials– Human resources

• Integrated set of software programs that run off a single database

• Enables internal departments to better share information and communicate

• Started in discrete manufacturing and moved on.

• Other industries – Some have implemented modulus like order management or finances– Other have their own industry specific back office systems

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IT

Ron Williams

Enterprise Resource Planning (ERP)

Source: Davenport

Focus on cross-functional activitiesTask-driven processesCommon operational databaseReducing legacy systems

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IT

Ron Williams

ERP Implementation & Issues• Who has done it

– 60% of multi-national firms had implemented ERP by 19992

– General survey - 38% had implemented, 26% were implementing according to CIO survey of 10/07/01

• Implementations cost & time– Average cost $15 million (can run as high as 2-3% of revenue)13

• Highest - $300 million• Lowest - $400,000• Total cost of ownership for heads-down user - $53,000

– Takes on average 21 months to install with benefits starting to accrue after 31 months3

– Why so long and cost so much?• Simultaneous process redesign of multiple functional areas within the firm• Need to adapt processes to the capabilities of the software

• Median annual savings - $1.6 million13

• Many reported problems– Hershey Foods, Nike, Whirlpool– Agilent Technologies, August 19, 2002 Reports that ERP installation problems cost them

• $105 million in revenue for the quarter• $70 million in operating profit

3. Hitt, Wu, Xiaoge13. Meta Survey of 63 companies in 1998 reported by Hitt, Wu, Xiaoge and CIO Magazine

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IT

Ron Williams

Application Heterogeneity Built over The Years

Some Shared InfrastructureSome Servers, Possibly a data center or two, Network?

Desktop platforms, e-mail

Sales

Marketing

Mfg.

Dist.

DataWarehouse

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Many point to point connections (only 2 sources shown here)Change one - Broad impact on internals of many other systemsSystems are complex and increasingly fragile

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IT

Ron Williams

ERP was also a Technology Fix

Shared InfrastructureNetwork, Some Servers, Possibly a data center or two

Sales

Marketing

Mfg.

Dist.

DataWarehouseA

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New ERP Application becomes extension to Infrastructure

Reduce # of Legacy SystemsBuild Common Operational DatabaseReduce Maintenance and Future Development

PPTTEST 04/21/23 10:43

9

IT

Ron Williams

General ERP Benefits12

• Improved information flow across sub-units through standardization and integration of activities

• Enable centralization of administrative activities such as account payables and payroll

• Reduced IS maintenance costs and increased the ability to deploy new IS functionality

• Enable a transformation from inefficient business processes toward accepted best of practice processes

• Often resulting in – Improved information to customers– Reduced cycle times– On-time completion rates

12. Gattiker and Goodhue (2000)

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IT

Ron Williams

ERP

Suppliers Enterprise Customers

Value Chain

ERP

Enterprise

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IT

Ron Williams

What is CRM?

• CRM is a technology-enabled business strategy whereby companies leverage increased customer knowledge to build profitable relationships, based on optimizing value delivered to and realized from their customers17

• Typically includes– Data Warehousing – capturing and management of customer information – Automating front-office functions – typically including

• Sales(force automation) – Lead/opportunity identification & tracking, access to information, analysis and reporting, configurators

• Marketing – campaign management & e-marketing• Customer service (Call center effectiveness) – Voice response units, call routing, linking caller info with

call, link to ERP system, problem resolution• eCustomer service• Channel linkage

• Hard to separate CRM front-office functions from e-business– ERP built a base before the Web– CRM is growing along with the Web

• When discussing CRM it is very important to understand the functions being discussed, where the investments are being made, and associated returns or lack thereof

17.The CRM Forum

PPTTEST 04/21/23 10:43

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IT

Ron Williams

ERP & CRM

Suppliers Enterprise Customers

Value Chain

ERP CRM

Enterprise

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IT

Ron Williams

Customer Relationship Management

• Who has or is implementing 1

– 40% of high tech, aerospace, retailing, & utilities (US & Europe)– 66% of US telecom– >50% of US financial services, pharmaceutical, &

transportations

• Highly complex installations can cost $100 million and take 3 years

• Results– 35% of respondents said met expectations 2

– 20% of US retail banks have raised profitability as a result 3

1. AMR Research 2001

2. IDC Study 2001

3. Mc Kinsey Productivity Study 2001

MGI Study

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IT

Ron Williams

Supply Chain Management (SCM)

• Supply chain planning– Forecasting– Materials & capacity planning– Transportation planning– Facilities planning– Scheduling– Sourcing

• Logistics coordination - Execution– Forward– Reverse

• Software focus– Complex analytical tools – Inter-organizational transactions– Collaboration

PPTTEST 04/21/23 10:43

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IT

Ron Williams

Enterprise Systems

Suppliers Enterprise Customers

Value Chain

ERPSCM CRM

Enterprise

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IT

Ron Williams

SCM Benefits and Issues

• Benefits– Costs – inventory, people, prices paid, returns, physical assets– Cycle time – design, order fulfillment– Quality

• Issues – Same as ERP & CRM

PPTTEST 04/21/23 10:43

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IT

Ron Williams

What’s Behind the Problems with Enterprise Systems?

• Business ownership

• Process changes

• Software complexity

• Long cycle times

• Clean-up vs. new value

• Managing inputs vs. outcomes

PPTTEST 04/21/23 10:43

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IT

Ron Williams

Enterprise Systems - Where They fit, What They Fix from an IT Viewpoint

Shared Infrastructure TCP/IP Network, Web Application Servers, Middleware, Security,

Pervasive PCs, Rationalized Information, Collaboration Capabilities, Analytics, Privacy Management

Sales

Marketing

Mfg. Dist.

DataWarehouseA

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New ERP Application becomes extension to Infrastructure

CRM

SCM

Cu

stom

ers

Cu

stom

ers

Ven

dor

Ven

dor

Process breakageLabor intensiveSlow and Time intensiveFragileDifficult to integrateSlow, Hard, & Expensive to change

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IT

Ron Williams

LegacyApplication

ApplicationProcessing

ApplicationProcessing

DBMS

Database

Server

Distributed computing

Server

Client

Client

Client

Networking: Three-Tier Client/Server

PPTTEST 04/21/23 10:43

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IT

Ron Williams

Legacy ApplicationsERP Applications

Browser

Web ApplicationServer

DBMS

ERP Database

Server

Distributed computing

Server

Client

Client

Client

Front-ending Enterprise Systems

User Friendly Applications