foundations of information systems
sai venkat
asses2resouces.pdf
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MODULE 3MODULE 3
Business Information Systems
3.2 Enterprise Systems
When we discussed enterprise resource planning (ERP) systems in the first
half of this module, we did not say so then, but, ERP is an example of an
enterprise system. An enterprise system is a large-scale consolidation of
various subsystems and it supports the collection and processing of data
into information and the subsequent use of that information in large,
complex firms. We have so far considered enterprise systems that are
confined to the scope of the firm only and in this section we examine
enterprise systems that transcend the borders of the firm.
The first of these is customer relationship management.
3.2.1 CUSTOMER RELATIONSHIP MANAGEMENT3.2.1 CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMSSYSTEMS
A key truism to any business is that if there are no customers, there is no
business! Firms therefore need to ensure they know their customers’
needs and wants. But there is more to it than that. In some industries,
some customers are worth more than others because they buy more of
the firm’s product(s). It is in the firm’s best interest then to identify those
customers and to keep providing the products and services to those
customers when and where they require them. Customer relationship
management (CRM) systems allow firms to be responsive to those
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customers.
The following figure illustrates the sphere of customers.
Figure 3.3: The Sphere of Increasing Customer Value
Figure 3.3 shows concentric circles with the target population in the outer
circle. Within it lies the customers who have converted from potential to
actual customers. Some of those customers will be repeat customers and
then some of them still will be classified as high- and low value (repeat)
customers. CRM systems allow firms to identify those high value repeat
customers. It is then up to the firm to design communications and to tailor
offers specific to those customers in order to retain them. At this point it is
important to distinguish between CRM strategy and CRM systems. The
strategy is the set of activities that the firm decides to take in order to
attract and retain its customers. The system is the means of facilitating the
strategy.
CRM is made more complicated by the number of channels that
customers have through which to interact with the firm. Examples include:
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in-store;
call centre;
website;
email;
sales representative; and
traditional mail.
So, a compounding aspect of CRM is the number of ‘places’ the customer
can use to interact with the firm (see the subject MKT600 Marketing for an
in-depth discussion of the so-called 4 Ps of marketing, which include
‘place’ among its dimensions). These places may have data sources that
need to be consolidated so that firm representatives from across all of the
touch points can interact with the customer, while creating the illusion
that the channel is invisible.
Once the customers are identified and they can easily interact via multiple
channels, the firm will be interested in the following activities:
cross-selling – marketing additional and related products to
customers based on previous buying behaviour. For example, if a
customer has bought a pair of jeans, she might be interested in
buying a matching belt;
up-selling – providing an opportunity to customers to buy a higher
value item. For example, if a customer intends on buying hatchback,
the salesman might display it next to a sportscar in the hope that
the customer considers it instead; and
bundling – a form of cross-selling where a business attempts to
group several products together and have their aggregate price less
than the sum of the individual products.
At this point, review the first reading (video) for an overview of CRM. This
video demonstrates scenarios where a team of salespeople work
collaboratively. CRM systems facilitate the collaboration by allowing all
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members of the team access to information about the customers.
However, implementing a CRM system for the first time might come with
challenges. The second reading is an academic paper that raises a number
of issues in implementing CRM systems. Consider these issues carefully
and be sure to take notes as you go through the reading.
In the next subsection, we present IS that work with the supply chain.
3.2.2 SUPPLY CHAIN SYSTEMS3.2.2 SUPPLY CHAIN SYSTEMS
A supply chain is a network of cooperating business partners where each
node in the chain contributes by adding value to a product until it reaches
the end customer. In the case of your breakfast cereal, the supply chain
begins at the wheat farmer, who adds value by harvesting the wheat and
packing it. The supply chain then continues at the wheat distributor, who
adds value by breaking down the large quantities into quantities that can
be allocated to processing facilities, or factories. The factories, in turn, add
value by manufacturing cereals using the wheat as a key raw material and
packaging the cereal into branded boxes. A wholesaler adds value by
buying and distributing the cereal to retail outlets, which in turn, present it
to the customer who buys the end product and consumes the cereal.
Supply chain management (SCM) is the set of activities aimed at improving
and operating the supply chain as efficiently as possible. In doing so,
supply chain managers divide the supply chain into tiers; their immediate
suppliers are considered their 1st-tier suppliers and suppliers to those
1st-tier suppliers are considered 2nd-tier suppliers. Furthermore, nodes
that are closer to the customer can be termed ‘downstream’ nodes
whereas nodes closer to the raw materials can be termed ‘upstream’
nodes. Collecting and managing information from the supply chain allows
supply chain managers to identify opportunities for improvement.
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At this point, you should review the third reading (video). This video, from
Arizona State University, provides an illustrated and animated overview of
supply chain management, using a simple example of bottled water. The
video reinforces the resources—including human resources—required to
run a supply chain as well as the energy requirements. It poses the
complexity of the supply chain and how and why finding efficiencies,
especially when working with several external businesses, is a hugely
complex and challenging feat.
In the same vein as CRM systems, SCM systems facilitates the information
flow between nodes in the supply chain. For example, it would be easier
on the business nodes if they were able to standardise the way that
purchase orders are sent to their suppliers. Likewise, it would be easier if
invoices and payments were able to be made in a uniform and standard
manner. A SCM system will facilitate standardising business documents
such as purchase orders and invoices, for regular supply to a regular
customer.
The fourth reading provides insight into the information sharing
capabilities in modern SCM systems. It highlights information sharing as a
key component to high performing supply chains. Initially, it may seem
counterproductive to share information with external businesses.
However, sharing some information, such as your future sales plans will
help a supplier meet your purchasing needs.
An interesting side note here is just-in-time manufacturing. W Edwards
Deming (referred to in a previous module) spent a lot of time in Japan,
attempting to instruct the Japanese on Western manufacturing techniques
following the conclusion of World War II, in an attempt to rebuild the
Japanese economy. The result of spending such time in Japan was that
Deming actually brought back to the USA an amazing set of new
techniques concerning quality; the Japanese had an enormous propensity
for quality built into their culture. One key addition to US manufacturing
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was just-in-time manufacturing.
For just-in-time (JIT) manufacturing, firms are interested in eliminating
waste from the supply chain and so they focus on carrying as little
inventory as possible. For JIT to work, it requires the nodes in the supply
chain to have intimate knowledge—and information sharing—so that the
suppliers are able to deliver the right quantity of required products at the
time they are needed. The philosophy of JIT manufacturing requires the
components of a product to arrive on the production line just as it is
required, which eliminates the need for carrying inventory at all. JIT is the
pinnacle in terms of supply chain efficiency since precision of timing and
zero waste and inventory are the parameters being the metrics to be
judged on.
3.2.3 PRODUCT LIFECYCLE MANAGEMENT3.2.3 PRODUCT LIFECYCLE MANAGEMENT SYSTEMSSYSTEMS
The final enterprise system to be discussed in this module is the product
lifecycle management (PLM) system. This system was mentioned briefly in
the previous section on business IS in the context of operations
management IS and we want now to discuss it in more detail before
closing out the module.
As we mentioned earlier, PLM systems are necessary because the
complexity of products continues to grow. If you consider the techniques
required to build a radio transmitter from the 1930s and compare them to
the circuitry involved in your mobile phone today, there is no question
that the number of components and their complexity have grown
exponentially. Furthermore, with that number of moving parts in your
device—as well as other products—the number of points at which things
can go wrong increases significantly. Take, for example, the number of
components in a helicopter. Working with a SCM system, a PLM allows the
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design of those components to be shared across the supply chain and to
allow manufacturers of related products to understand the quality
requirements of cross components.
You should now review the fifth reading (video), which is produced by a
PLM consultancy that is agnostic to any one specific brand of PLM. The
video shows how PLM integrates to SCM systems and other enterprise
systems, all with the viewpoint of achieving efficiency and improvements
across the supply chain and within the firm itself. The video highlights that
among a firm’s greatest asset is its intellectual assets, which often are
those that are managed most inefficiently.
PLM systems evolved to enable and assist product teams to work with the
complexity of modern-day products as well as increase the likelihood that
those products will last as long as the customer is expecting them to.
Additionally, with the changing legal landscape concerning sustainability,
product safety and the recent so-called chain of command changes, it is
very difficult for any firm to be able to manage compliance to legal
requirements and best practices. PLM allows the firm to focus on the
whole lifecycle of the product from raw materials, through manufacturing,
distribution and sales through to the recycling of the product.
Using PLM, products can be considered within the firm even before it
exists physically. That is, it exists in the form of technical drawings and
system designs but has not yet been built as a prototype of manufactured
in any way. In some firms, a product will not get a product number until it
has been receipted for the first time. Using PLMs, a firm that designs its
own products (Target Australia is an example of a firm that designs its
own apparel products) can instantiate products before they exist so that
quality plans can be attached to the product in the ERP.
You should now review the sixth reading, an academic paper that ties
together many of the PLM issues we have been discussing already into the
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broader context of enterprise systems. Note the discussion of the ‘closed
loop PLM’ and be ready to discuss its difference to the other two types
discussed and examined in the paper.
3.2 Readings
1. ISM (2013) 'What is CRM?', ISM [online] https://www.youtube.com/watch?v=7me7mjvTiTI.
2. Khlif, H & Jallouli, R (2014) 'The Success Factors of CRM Systems: An
Explanatory Analysis', Journal of Global Business & Technology, 1010(2), pp.25-42, [online]
http://search.ebscohost.com.ezproxy.laureate.net.au/login.aspx?
direct=true&db=bsu&AN=101143116&site=ehost-live.
3. Carey (2010) 'Module 1: What is Supply Chain Management?', WP Carey Business School, [online] https://www.youtube.com/watch? v=Mi1QBxVjZAw.
4. Goswami, S, Engel, T & Krcmar, H (2013) 'A Comparative Analysis of
Information Visibility in Two Supply Chain management Information
Systems', Journal of Enterprise Information Management, 2626(3), pp.276-94, [online] https://www-emeraldinsight-
com.ezproxy.laureate.net.au/doi/pdfplus/10.1108/17410391311325234.
5. CIMdata (2016) 'PLM in 15 Minutes' CIMdata PLM Leadership, [online] https://www.youtube.com/watch?v=5e37huUXh6g.
6. Hadaya, P & Marchildon, P (2012) 'Understanding Product Lifecycle
Management and Supporting Systems', Industrial Management & Data Systems, 112112(4), pp.559-83, [online] https://www- emeraldinsight-
com.ezproxy.laureate.net.au/doi/pdfplus/10.1108/02635571211225486.
3.2 Activities
From your reading of 3.2.2, make a list to summarise the main issues the
paper raises. With your list of issues, identify opportunities to group the
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issues together into clusters or themes. Convert the list of themes into a
list of risks. Thinking about implementing a CRM in a client organisation of
your choice, for each risk, propose a list of mitigation activities that
management could take if they are to maximise the chances of the CRM
implementation being a success. Bring your list of recommendations to
class or be prepared to post it on the discussion forum. Ask questions of
your colleagues and clarify or revise your position if necessary.
Using the knowledge you have for CRM-, SCM- and PLM systems, without
using any further information or referring to any other source, make a
drawing for how these systems fit within firms. Don’t be too concerned
about the type of firm or the industry that the firm operates in, keep it
general. Draw linkages between the systems and the ERP. What are the
information requirements for the remaining functions in the firm? Now
consider what the firm will need to do if there were a change to the way
the business worked. What if there was a business structural change?
What if there was a change in government policy that made it necessary
for all products to have additional safety designed into it? What are the
implications to all of these systems?
From what you know already, and without further reference to any other
materials, write a one-page brief that outlines the driving forces behind
why firms adopt enterprise systems. As you are writing, pay attention to
the way you structure your argument. Watch for the conclusions you draw
and be sure that whatever you say can be traced back to a logical source.
Bring your written response to class. If you’re studying this subject online,
start or contribute to a Wiki in Blackboard. Invite your colleagues to
comment or improve your contributions and make improvements to the
contributions to others. When you have what the group believes is a
defensible brief, now go to the Torrens University library and find good
quality sources that support the points you make. Cite them and keep a
list of the sources (this will become a pooled bibliography that you can
later use when you’re putting your assignment together).
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3.2 References
Deming, WE (1994) The New Economics for Industry, Government,
Education, Massachusetts Institute of Technology Press, Cambridge, MA,
USA.
C L I C K H E R E T O R E T U R N T O M O D U L E T O PC L I C K H E R E T O R E T U R N T O M O D U L E T O P
