PowerPoint PresentationCreate a 7- to 10- slide presentation comparing and contrasting two major ERP systems from different ERP softwareproviders. You may use various sources including the companies

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Home >Business & Finance homework help >Accounting homework help >PowerPoint PresentationCreate a 7- to 10- slide presentation comparing and contrasting two major ERP systems from different ERP softwareproviders. You may use various sources including the companies

Critical IT Applications and Technologies
In a 2009 survey of Society for Information Management (SIM) members—primarily chief information officers (CIOs) and other senior IS executives—the executives placed “business intelligence” at the top of their to-do lists. A business intelligence system is an IT tool for focusing, filtering, and organizing business information so that executives can make more effective use of it. Business intelligence moved to the top of the list in 2009, after being in the number two position in the three previous annual SIM surveys. “Server virtualization” ranked second among the applications and technologies of importance to IS executives, with “enterprise resource planning (ERP) systems” ranking third, “customer/corporate portals” fourth, and “enterprise application integration/management” fifth. In the sixth position came “continuity planning/disaster recovery,” followed by “collaborative and workflow tools” in the seventh position. Items two through five are on the list in large part because all four represent ways to cut or contain IT costs. Items one and seven are primarily concerned with improving efficiency and effectiveness, while item six is a recognition of the importance of restoring mission-critical IT services after a major incident (Luftman and Ben-Zvi, 2010).

All seven of these critical applications and technologies will be discussed in this chapter or in later chapters in the book. “Business intelligence” will be considered in Chapter 6, and “server virtualization,” “ERP systems,” and “customer/corporate portals” will be covered in this chapter. “Enterprise application integration/management,” which is the integration of a set of enterprise computer applications, is interwoven throughout this chapter as we discuss ERP, customer relationship management (CRM), supply chain management (SCM), and other enterprise applications. “Continuity planning/disaster recovery” will be considered in the chapter on information security (Chapter 14), and “collaborative and workflow tools” will be covered in Chapter 6. Thus, the topics covered in this chapter and the next relate to six of the top seven critical applications and technologies, with the seventh topic dealt with in Chapter 14.
Application Areas

To consider a topic as broad as IT applications, some type of framework is needed. We have divided applications into those which are interorganizational systems and those which are intraorganizational systems. Electronic commerce or e-business applications, including electronic data interchange (EDI) systems, represent obvious examples of interorganizational systems, or systems that span organizational boundaries. The importance of applications that link businesses with their end consumers (B2C) or link businesses with other business customers or business suppliers (B2B) has been fueled by the growth of the Internet. Knowledge about e-business applications is so important today that we devote all of Chapter 7 to this topic.

To provide some structure to the broad range of intraorganizational systems, we have divided these applications into two major categories: enterprise systems, designed to support the entire enterprise (organization) or large portions of it, and managerial support systems, designed to provide support to a specific manager or a small group of managers. This chapter covers enterprise systems, such as transaction processing systems and groupware, as well as the critical concepts of client/server architecture and service-oriented architecture (SOA). Chapter 6 deals with systems specifically designed to support managers, such as decision support systems and expert systems.

Figure 5.1 lists these two major categories of applications, along with representative application areas that fall within each category. This figure provides the primary framework for our discussion of intraorganizational IT applications in this chapter and the following chapter. Please note that the application areas are neither unique nor exhaustive. For example, some specific applications fall in two or more application areas (such as enterprise resource planning systems also being transaction processing systems). Further, it is easy to argue that an application area such as groupware is both an enterprise system and a management support system. Somewhat arbitrarily, we have chosen to discuss group support systems, which is an important subset of groupware concerned with sup- porting the activities of a small group in a specific task or a specific meeting, as a management support system while discussing the broader category of groupware as an enterprise system. Despite these caveats, however, the application areas given in Figure 5.1 encompass the overwhelming majority of specific applications.

Figure 5.1
Types of Application System
Critical Concepts

Before we turn to specific examples of the various application areas, we must consider a number of important concepts that are intertwined throughout all the applications. An understanding of these concepts is a prerequisite to an understanding of the applications.

Batch Processing versus Online Processing

One of the fundamental distinctions for computer applications is batch processing versus online processing . In the early days of computers, all processing was batched. The organization accumulated a batch of transactions and then processed the entire batch at one time. For example, all inventory transactions (in and out) were recorded on paper during the day. After the close of business for the day, the transactions were keyed into a type of computer-readable medium, such as magnetic tape. The medium was then physically carried to the computer center, and the entire inventory was updated by processing that day’s batch against the master inventory file on the computer. By the beginning of the next business day, the master inventory file was completely up-to-date and appropriate inventory reports were printed. Figure 5.2 represents this batch processing approach in a simplified form.

Figure 5.2
Batch Processing (simplified)
The major problem with batch processing is the time delay involved before the master file is updated. Only at the beginning of the business day, for example, will the master inventory file be up-to-date. At all other times the company does not really know how many units of each product it has in stock.

As the technology improved, online processing was developed to avoid the time delay in batch processing. With a fully implemented online system, each transaction is entered directly into the computer when it occurs. For example, in an online inventory system a shipping clerk or sales clerk enters the receipt or sale of a product into a workstation (perhaps a sophisticated cash register) connected by a telecommunications line to the server computer, which holds the inventory master file. As soon as the entry is completed, the computer updates the master file within a fraction of a second. Thus, the company always knows how many units of each product it has in stock. Figure 5.3 depicts such an online system .

Figure 5.3
Online Processing
A fully implemented online system is also called an interactive system , because the user is directly interacting with the computer. The computer will provide a response to the user very quickly, usually within a second. Not all online systems, however, are interactive. Some systems, often called in-line systems , provide for online data entry, but the actual processing of the transaction is deferred until a batch of transactions has been accumulated.

A fully online system has the distinct advantage of timeliness. Why then aren’t all present-day systems online? There are two reasons—cost and the existence of so-called natural batch applications. In most cases, batch systems are less expensive to operate than their online counterparts. There are usually significant economies associated with batching, both in the data-entry function and the transaction processing. But if the data-entry function can be accomplished when the original data are captured (such as with a sophisticated cash register), an online data entry/batch processing system might be less expensive than a straight batch system. The decision of batch versus online becomes a trade-off between cost and timeliness. In general, online costs per transaction have been decreasing, and the importance of timeliness has been increasing. The result is that most applications today use online data entry, and an increasing proportion also use online processing.

The exception to this movement to online processing has been the natural batch applications. An organization’s payroll, for example, might be run once a week or once every two weeks. There is no particular advantage to the timeliness of online processing; the organization knows when the payroll must be run. Even in this instance, there might be advantages to online data entry to permit convenient changes in employees, exemptions, deductions, and wage rates. Thus, hybrid online data entry/batch processing systems will continue to exist.

Functional Information Systems

Instead of considering the two major categories and associated application areas of Figure 5.1, it is possible to create a framework based strictly on the organization’s primary business functions—a functional information systems framework. For example, consider an organization in which the primary business functions are production, marketing, accounting, personnel, and engineering. Applications may then be categorized as part of the production information system, part of the marketing information system, or part of the accounting information system, and so on. This functional approach is simply an alternative way of classifying applications.

In this alternative view, the overall IS is composed of multiple subsystems, each providing information for various tasks within the function. In turn, each functional subsystem consists of a possibly interrelated series of subsubsystems. For example, the production information system is likely to include interrelated subsystems for sales forecasting, production planning, production scheduling, material requirements planning (MRP), capacity requirements planning, personnel requirements planning, materials purchasing, and inventory. The marketing information system may include subsystems for promotion and advertising, new product development, sales forecasting (hopefully tied into the production sales forecasting subsystem), product planning, product pricing, market research, and sales information. The accounting information system, which is generally the oldest and most fully developed functional system, is likely to include computerized versions of the entire journal and ledger system, plus a cost or responsibility accounting system and a financial reporting system for preparing reports for stockholders and other external groups.

One of the most important trends in latter 1990s and the early 2000s is the movement toward integration of these functional information systems. Often these integration efforts have begun by focusing on a business process—the chain of activities required to achieve an outcome such as order fulfillment or materials acquisition—rather than on functions. Such a focus on process makes it easier to recognize where formerly distinct information systems are related and thus where they should be integrated (e.g., use common data and perform an activity only once). Sometimes the internal IS department has developed these integrated systems, but more often software packages called enterprise resource planning (ERP) systems have been purchased from outside vendors. We will return to these ERP systems later in the chapter.

Vertical Integration of Systems

Another important characteristic of some systems is that they operate across levels of the organization or, in some instances, across independent firms occupying different levels in an industry hierarchy, such as an automobile manufacturer and the associated independent dealers. (More on these interorganizational systems will be covered in Chapter 7.) A system that serves more than one vertical level in an organization or an industry is called a vertically integrated information system . For example, in a single firm, a vertically integrated sales information system might capture the initial sales data and produce invoices (acting as a transaction processing system), summarize these data on a weekly basis for use by middle managers in tracking slow- and fast-selling items as well as productive and unproductive salespeople (acting as a decision support system), and further analyze these data for long-term trends for use by top managers in determining strategic directions (acting as an executive information system).

In a somewhat similar way, a national fast-food chain might develop a sales information system with modules both for operating units (company stores and franchises) and for the national organization. Thus, data collected at the store level using the operating unit module are already in the appropriate form to be processed by the national organization module. These basic data are transmitted via telecommunication lines to the national organization on a periodic basis, perhaps each night. The extent of vertical integration is an important characteristic of applications.

Distributed Systems

Distributed systems , sometimes called distributed data processing , refers to a mode of delivery rather than a traditional class of applications like transaction processing or decision support systems. With distributed systems, the processing power is distributed to multiple sites, which are then tied together via telecommunications lines. Local area networks (LANs) and wide area networks (WANs) are both used to support distributed systems. Thus, distributed systems are systems in which computers of some size (microcomputers, midrange computers, mainframes, and so forth) are located at various physical sites at which the organization does business (i.e., headquarters, factories, stores, warehouses, office buildings) and in which the computers are linked by telecommunication lines of some sort in order to support some business process.

The economics of distributed systems are not perfectly clear but have tended to favor distribution. For the most part, communication and support costs go up with distributed systems while computer costs go down. Placing smaller microcomputers and workstations at noncentral sites is generally less expensive than expanding the capacity of a large system at the central site. Distributed systems do have disadvantages, such as greater security risk because of easy accessibility, dependence on high-quality telecommunications lines, and greater required coordination across sites. In most instances, however, the disadvantages are outweighed by the economic advantages. The distributed mode of computing has become the norm for business firms around the world.

Client/Server Systems

In the 1990s a particular type of distributed system known as a client/server system moved to center stage, and this type of system continues to enjoy the spotlight in the twenty-first century. With this type of system, the processing power is distributed between a central server computer, such as a midrange computer or a powerful workstation, and a number of client computers, which are usually desktop microcomputers. The split in responsibilities between the server and the client varies considerably from application to application, but the client usually provides the graphical user interface (GUI), accepts the data entry, and displays the immediate output, while the server maintains the database against which the new data are processed. The actual processing of the transaction may occur on either the client or a server. For example, in a retail client/server application, the client might be the sophisticated cash register on the sales floor while the server is a workstation in the back office. When a credit sale is made, the data are entered at the register and transmitted to the server, the server retrieves the customer’s record and updates it based on the sale, the server returns a credit authorization signal to the register, and the sales document is printed at the register. At the close of the billing cycle, the server prepares the bills for all of the customers, prints them, and produces summary reports for store management.

Now that we have a general idea about the nature of a client/server system, let us explore the three building blocks of such a system. First, the client building block, usually running on a PC, handles the user interface and has the ability to access distributed services through a network. Sometimes the client also does the processing. Second, the server building block, usually running on a bigger machine (a high-end PC, workstation, midrange computer, or even a mainframe), handles the storage of data associated with the application. This associated data might be databases, Web pages, or even objects for object-oriented programs. Sometimes the server (or even another server) does the processing. The third building block is middleware , a rather vague term that covers all of the software needed to support interactions between clients and servers. The Client/Server Survival Guide refers to middleware as “... the slash (/) component of client/server. In this first approximation, middleware is the glue that lets a client obtain a service from a server” (Orfali, et al.,1999, p. 44).

Middleware can be divided into three categories of software: server operating systems, transport stack software, and service-specific software. The server operating system, also called a network operating system, has the task of creating a single-system image for all services on the network, so that the system is transparent to users and even application programmers. The user does not know what functions are performed where on the network—it looks like a single system. The primary server operating systems include several variations of Microsoft Windows Server, several variations of UNIX, and Linux. Transport stack software allows communications employing certain protocols, such as Transmission Control Protocol/Internet Protocol (TCP/IP) (see Chapter 3), to be sent across the network. The server operating system often encompasses some elements of the needed transport stack software, but other middleware products might also be required. The service-specific software is used to carry out a particular service, such as electronic mail or the World Wide Web’s Hypertext Transfer Protocol (HTTP).

Consider the split in responsibilities between the client and the server. The question is where the actual processing of the application is done. Originally, all client/server systems had only two tiers—a client tier and a server tier. If most of the processing is done on the client, this is called a fat client or thin server model. If most of the processing is done on the server, then it is a thin client or fat server model. For example, Web servers and groupware servers are usually fat servers (i.e., the processing is largely done on the server for Web and groupware applications), while database servers are usually thin servers (i.e., the processing is largely done on the client). In the mid-1990s, three-tier client/server systems became popular. In the most common three-tier configuration, an application server that is separate from the database server is employed. The user interface is housed on the client, usually a PC (tier 1); the processing is performed on a midrange system or high-end PC operating as the application server (tier 2); and the data are stored on a large machine (often a mainframe or midrange computer) that operates as the database server (tier 3).

Let us consider some examples of client/server systems. An East Coast electric utility company used a three-tier approach to revamp its customer service system. The new system enables the utility’s 450 service representatives to gain access to the multiple databases the company maintains on its 1.5 million customers. The service representatives use PCs as clients (tier 1) working through four servers that process the customer inquiries (tier 2) by accessing data from the company mainframe (tier 3). A Canadian supplemental health insurer began its migration to client/server technology by concentrating on its most mission-critical system—processing claims for prescription drugs sold at more than 3,500 pharmacies across Canada—into a three-tier environment. The clients were PCs, running Windows, located in the pharmacies (tier 1); the application servers were Sun workstations and Hewlett-Packard midrange systems (tier 2); and the database server was a Unisys mainframe computer (tier 3). Programmers used the C and C++ programming languages to develop the tier 1 and tier 3 components of the system. They used a specialized development tool, BEA (now Oracle) Tuxedo, to develop the transaction processing component (tier 2) (Ruber, 1997).

In the twenty-first century, there is a renewed emphasis on the thin client model to service remote areas, small locations, and traveling employees, where it is difficult to update the client software regularly. As an example, Maritz Travel Company, a $1.8-billion travel management company, used a thin client approach based on Microsoft’s Windows NT Terminal Server Edition and MetaFrame software, from Citrix Systems. With the Citrix approach, applications execute on a server and are merely displayed on the client, with the client acting as a “dumb” terminal. Maritz initially licensed 15,000 Citrix users and plans to extend the applications to nearly 50 of its remote offices. Richard Spradling, the Chief Information Officer of Maritz, identifies many advantages to the thin client approach. According to Spradling, it is much easier to update only the servers; users automatically access the most current version of an application; performance of the applications has improved; and, over time, Maritz will spend less money on hardware by purchasing thin client devices rather than standard PCs or other fat clients (Wilde, 1999). Ten years after the initial thin client rollout, Maritz still uses thin clients in its call centers for all its customer service representatives.

Xerox Corporation is also adopting a thin client approach. Until recently, Xerox replaced employees’ PCs every three years, meaning about 10,000 employees got new machines each year. Starting in 2005, Xerox adopted less expensive thin clients, moving many key applications—such as those supporting sales and service personnel—to servers. Centralizing software will reduce support costs and will also provide better security because the applications are not scattered among tens of thousands of client devices. “We’re trying to be more efficient and want to do more with less money,” says Janice Malaszenko, Xerox’s Vice President and Chief Technology Officer for Information Management Strategy, Architecture, and Standards (Chabrow, 2005).

Virtualization

An increasingly popular way of delivering IT services is through virtualization, which comes in several flavors. With server virtualization , a physical server is split into multiple virtual servers. Each virtual server can run its own full-fledged operating system, and these operating systems can be different from one virtual server to the next. The physical server typically runs a hypervisor program to create the virtual servers and manage the resources of the various operating systems. Then each virtual server can be employed as if it were a stand-alone physical server, thus reducing the number of physical servers needed in an IT shop and saving the organization money and space.

With desktop virtualization , the desktop environment— everything the user sees and uses on a PC desktop—is separated from the physical desktop machine and accessed through a client/server computing model. This virtualized desktop environment is stored on a server, rather than on the local storage of the desktop device; when the user works from his or her desktop device, all the programs, applications, and data are kept on the server and all programs and applications are run on the server. The server does almost all the work, so a thin client is a very appropriate desktop device; of course, a standard PC, a notebook computer, or even a smartphone could also be used as the client.

Desktop Virtualization is Gaining Popularity
Driven by the business benefits gained from server virtualization—lower costs, ease of management, and flexibility—organizations are now moving to desktop virtualization for basically the same reasons. The lower costs are obvious: One company in Florida was spending between $700 and $1,000 per desktop before virtualization, and now it is spending $300 for a hardware-only Pano device. The Pano device receives the hosted image from a server using Pano Logic’s Virtual Desktop Solution software. Furthermore, expensive upgrades of the PCs will be avoided. To upgrade the virtual desktops, the company simply upgrades the servers and provides more memory or faster speeds to the images—much less expensive than buying new PCs. In terms of ease of management, the University of Maryland believes that it has saved 30 hours a week in management time by hosting 50 virtual PC images on two servers running Sun’s virtual desktop software; based on this success, the University is planning to increase its number of hosted PC images to 250. Flexibility is also an important reason to move to desktop virtualization. Users can access their desktops from almost any device residing almost anywhere, as long as they have a good network connection. The desktop image that users receive will look the same every time, with the same applications available and even their own customized wallpaper.

As a more detailed example, Cincinnati Bell has decided that desktop virtualization is a less expensive alternative than upgrading hundreds of PCs running an old version of Windows. Initially, Cincinnati Bell is converting 750 users—primarily call center, help desk, and service desk employees—to Sun Ray thin clients. Eventually many data center and network operations center staff will convert to thin clients with virtualized desktops, and some sales staff will move to Sun’s laptop-like thin client machine. The software used for the desktop virtualization project is VMware Infrastructure 3 and Sun Microsystems Virtual Desktop Infrastructure. Interestingly, as Cincinnati Bell has gained experience in using virtual desktops, it has started offering its customers the option of using desktop virtual machines managed by Cincinnati Bell. Thus far, Cincinnati Bell has acquired several large customers for this service.

[Based on Babcock, 2008; and Cummings, 2008]
Service-Oriented Architecture and Web Services

As we begin the second decade of the twenty-first century, client/server systems are still important, but service-oriented architecture and Web services are the hot buzzwords when considering the development and deployment of application systems. Service-oriented architecture (SOA) is an application architecture based on a collection of functions, or services, where these services can communicate (or be connected) with one another. A service is a function that is well-defined and self-contained, and that does not depend on the context or state of other services. Then there must be some means of connecting services to each other, when the services might be running on different machines, using different protocols, and using different operating systems and languages. The key advantage of SOA is that once services are created, they can be used over and over again in different applications—only the connections will vary. Furthermore, the services could be developed within an organization, or the software for the services could be purchased from a vendor, or the services could be obtained from a vendor on a fee-for-use basis.

Though built on similar principles, SOA is not the same as Web services , which is a particular collection of technologies built around the XML (eXtensible Markup Language; see Chapter 2) standard of communicating.1 In practice, Web services might be the means by which SOA services communicate with one another, but that would not have to be the case—other connecting technologies could be used. However, most commentators today use the terms SOA and Web services almost interchangeably.

1 In the Web services approach, XML is used to tag the data. Other protocols used in Web services include Web Services Description Language (WSDL) to describe the services available, Universal Description, Discovery, and Integration (UDDI) to list the services available, and SOAP (originally Simple Object Access Protocol, but now just the initials) to transfer the data.
SOA is slow in coming, although there are numerous vendors pushing their SOA-oriented products, including IBM, Oracle, Hewlett-Packard, TIBCO Software, and SOA Software. Based on a 2009 survey by InformationWeek, only 23 percent of respondents have deployed an SOA project, with another 15 percent having an SOA project in development. In the same survey, 14 percent are currently experimenting with SOA, 17 percent plan to evaluate SOA in the next 24 months, and 31 percent are not evaluating or considering SOA (Smith, 2009).

Among firms that have invested in SOA are Automatic Data Processing (ADP), Pep Boys, and BT Group. As ADP expanded from a payroll company to a full-services human resources (HR) company, it wanted better integration and more reuse of code. For example, all of its HR services require people to enter data for new employees, so ADP wanted to use the same code in each application—which resulted in an SOA approach. According to Bob Bongiorno, ADP’s Senior Vice President and Chief Information Officer for Employer Services, SOA let ADP deliver an HR product for a new market segment in about one-third of the time it normally would have taken. Auto parts seller Pep Boys is using IBM’s SOA strategy to help give its point-of-sale system a tune-up, including the rewriting of a linked inventory application. SOA’s ability to let companies reuse application modules appealed to Pep Boys. After an application is reconfigured as a service—as Pep Boys’ tax module was at the point of sale—it can be reused with other applications, such as customer service (Greenemeier and Babcock, 2006).

BT Group (formerly British Telecommunications) launched a major SOA effort. BT began its SOA initiative by designing straightforward services, such as billing or customer address checking, that could be used for BT’s retail customers or for an independent broadband provider using BT’s network. BT identified 160 core business processes that the company provided and then figured out the IT services used to perform these processes. The SOA services built to carry out one process can frequently be reused in another process. The result is that both BT and its business partners can leverage the SOA infrastructure as they develop new applications. George Glass, Chief Architect at BT, indicates that the SOA approach has helped the company cut time to market for a new customer service from 270 days to 90 days (Babcock, 2007).

Transaction Processing Systems

Let us begin our survey of applications with the “granddaddy” applications, the ones that started it all— transaction processing systems . These systems process the thousands of transactions that occur every day in most organizations, including sales; payments made and received; inventory shipped and received; hiring, firing, and paying employees; and paying dividends. In addition to producing the documents and updated records that result from the transaction processing (such as invoices, checks, and orders), these systems produce a variety of summarized reports that are useful to upper-level management.

Transaction processing systems are life-or-death systems for “paperwork” organizations, such as banks and insurance companies, and critical systems for the overwhelming majority of medium and large organizations. These systems were the first computerized systems, and they still use the majority of large-machine computing time in most organizations. For the most part, these transaction processing systems can be justified by traditional cost-benefit analysis. These systems are able to process transactions more rapidly and economically (and certainly more accurately) than a manual (human) system. Transaction processing systems might be mainframe-based or midrange-based, or they might be two-tier or three-tier client/server systems, or they might involve the use of service-oriented architectures (SOAs). Most of the latest systems being implemented are client/server systems or employ SOAs, but there are many mainframe- or midrange-based transaction processing

systems still in use.

As a manager, you do not need to know the details of these systems. You only need to have an understanding of a transaction processing system’s general nature, importance, and complexity. Therefore, we will limit our discussion to two representative transaction processing systems for single business functions—payroll and a sales order entry system.

Payroll System

At first glance, a payroll system seems fairly simple. Operators input the number of hours worked for each employee (usually employing online data entry), and the system batch processes these transactions to produce payroll checks. While this one-sentence description is correct, it represents only the tip of the iceberg, because it involves only about 10 percent of the system. The payroll processing subsystem also must keep year-to-date totals of gross income, social security income, individual deductions, various categories of taxes, and net income. It also must incorporate the ability to compute federal, state, and local taxes, as well as social security contributions, and it must handle both mandatory and voluntary deductions.

What other subsystems are necessary? Figure 5.4 lists the primary subsystems in most payroll systems and the tasks the subsystems must accomplish. Thus, the payroll system is both commonplace and complex. The payroll system is usually easy to justify on a cost-benefit basis because it would take an incredible number of payroll clerks to complete a modern payroll and maintain all the associated records.

Figure 5.4
Components of a Payroll System
Order Entry System

We will illustrate a mainframe- or midrange-based order entry system, but an order entry system could certainly employ client/server technology. The basic idea behind an online order entry system is simple. As orders are received (whether in person, by mail, or by telephone), the sales representative enters the information into the system. The data entry might be via a microcomputer on the sales representative’s desk or possibly through a point-of-sale transaction recording system (a sophisticated cash register that doubles as a terminal). The computer then updates the appropriate files and prints an invoice, either at the point-of-sale terminal, the sales representative’s desk, or in the computer center.

Once again, this basic explanation tells only a small part of the story. Figure 5.5 provides a more complete description and shows how each transaction (sale) interacts with as many as six files on the computer system. In addition to the invoice, more than a dozen types of computer output might be generated. For example, the computer can check the credit status of the customer and reject the sale if the customer’s credit limit will be exceeded. If the item ordered is in stock, a multipart shipping document is printed; if the item is not in stock, a message is sent (via the PC) to the customer to ask if he or she wants to back order the item. Periodically or on demand, the order entry system will print out sales reports organized by item or by customer, customer statements, inventory reports, back order status reports, and accounts receivable reports. The system will also generate reports when exception conditions occur, such as when an item is out of stock or when a customer attempts to exceed the established credit limit. In these cases, management action might be necessary. The order entry system can automatically print out purchase orders when an item is out of stock; it can also print out past-due billing notices for customers. A primary advantage of such an online system is that inquiries can be answered in a few seconds.

Figure 5.5
Online Order Entry System
An important order entry system variant is an interorganizational system in which the orders are placed directly by the customer or the customer’s computer (more on e-business applications in Chapter 7). An early, pre-Internet example was the American Hospital Supply Corporation’s ASAP system in which order entry terminals, linked to AHSC’s computer, were placed on the customers’ (hospitals’) premises, and hospital personnel placed orders themselves by keying them in. This made placing orders much more convenient for the customers and at the same time greatly reduced the delays and costs associated with printing and mailing order forms. More recently, orders have been placed by the customer’s computer to the seller’s computer using electronic data interchange (EDI)—which will be discussed in Chapter 7. By the late 1990s, the World Wide Web had taken the order entry process one step further by making it easy for both consumers and businesses to do their own order entry via a Web browser and an Internet connection. For example, many businesses use the Web to order networking equipment from Cisco Systems, and both businesses and consumers use the Web to order PCs from Dell.

Enterprise resource Planning Systems

Enterprise resource planning (ERP) systems are also transaction processing systems, but they go well beyond traditional transaction processing system functionality—and thus deserve treatment as a separate application area. An ERP system is a set of integrated business applications, or modules, that carry out common business functions such as general ledger accounting, accounts payable, accounts receivable, material requirements planning, order management, inventory control, and human resources management. Usually these modules are purchased from a software vendor. In some cases, a company might buy only a subset of these modules from a particular vendor, mixing them with modules from other vendors and with the company’s existing applications.

An ERP system differs from earlier approaches to developing or purchasing business applications in at least two ways. First, the ERP modules are integrated, primarily through a common set of definitions and a common database. As a transaction is processed in one area, such as the receipt of an order, the impact of this transaction is immediately reflected in all other related areas, such as accounting, production scheduling, and purchasing. Second, the ERP modules have been designed to reflect a particular way of doing business—a particular set of business processes. Unlike a functional IS approach, ERP systems are based on a value-chain view of the business in which functional departments coordinate their work. To implement an ERP system, then, a company is committing to changing its business processes. If a company is purchasing an ERP system, the company might need to change its processes to conform to those embedded in the software package. The company adapts to the ERP software package, not vice versa.

Why did ERP become such a hot topic in the late 1990s and early 2000s, with most large and medium-sized firms either installing ERP systems or seriously thinking about it? The benefits from ERP will be specific to a given firm, but some common benefits have emerged. In many cases, the companies are not happy with the old way of doing business—by separate functional departments—and they do not have the integration of applications (and therefore the data) to support their decision-making and planning needs. The current applications often do not “talk” to each other, making it a time-consuming and difficult job to gather data, present a coherent picture of what is happening in the firm, and make informed decisions and plans. This situation is not new, but, until recently, packaged solutions were not available to companies. The cost to develop a set of integrated applications internally is prohibitive; even if the company had the IS resources to perform the task, it would take years. From previous reengineering efforts, many companies know that their internal business processes need to be changed, and they believe that the best and easiest way to fix them is by adopting the processes built into an ERP system that can be purchased. Thus, implementing an ERP system is a way to force business process reengineering.

In the late 1990s, the Year 2000 (Y2K) problem also added to the demand for ERP systems. At that time it became clear to many companies that their key application programs would cease to function correctly when dates past December 31, 1999, were used. When these programs were coded—often using COBOL—the programmers allowed only two digits to represent the year. They did not imagine that their programs, written in the 1970s and 1980s, would still be used when the millennium arrived. For companies with this problem, the effort and cost to change every reference from a two-digit year to a four-digit year in their programs would be substantial. Adopting an ERP system which correctly provided for dates beyond the year 2000 was a good, albeit expensive, solution to the problem. Rarely was the year 2000 problem the sole reason to implement an ERP system, but if the company was not happy with its existing, nonintegrated set of applications, then the year 2000 problem might well have tipped the balance.

It should be emphasized that implementation of an ERP system is extremely difficult because the company must change the way it does business. Further, ERP systems are very expensive. A typical large-scale ERP implementation costs tens of millions of dollars and takes a year or more. These implementation costs include not only the software licenses but also hardware and network investments and often consulting costs.

Further, choosing the right ERP software is a difficult task. The two giants in the ERP marketplace are SAP and Oracle. SAP (based in Germany) has been the leading ERP vendor since the beginning, and Oracle has grown in part by acquiring ERP vendor PeopleSoft in a hostile takeover in 2005 (PeopleSoft had, in turn, acquired ERP vendor J. D. Edwards in 2003). Other ERP vendors include the Sage Group (United Kingdom), Infor Global Solutions, and Microsoft with its Dynamics applications.

For ERP purchases, there are strong arguments for picking a single vendor, such as the tight integration of applications that is possible and the standardization of common processes. On the other hand, choosing a single vendor could also reduce flexibility for the adopting company. A “best of breed” or mix-and-match approach with multiple vendors might enable the company to meet more of its unique needs and reduce reliance on a single vendor; conversely, such an approach typically makes implementation more time-consuming and complicates system maintenance. With either approach, it is usually essential to employ the vendor or another consulting firm, or both, to assist in the implementation process. For large, multidivisional firms, implementing an ERP system is a very complex, challenging task that needs the best minds and careful attention of internal IS specialists, internal business managers, and external consultants. The potential payoff of an ERP system, in terms of better information for strategic and operational decision making and planning, and greater efficiency, profitability, and growth, makes the efforts and the costs worthwhile.

ERP Systems are Essential
In a survey of chief information officers (CIOs) and other IT leaders, CIO magazine found that the companies represented were completely dependent on their ERP systems—they “could not live without them”—but they also had major concerns. More than 85 percent of respondents agreed or strongly agreed that their ERP systems were essential to the core of their businesses. Among the challenges of using their ERP systems, IT leaders cited complex system integration, a lack of customization around particular business strategies, high cost of ownership, difficulty of accessing useful information, and systems that are difficult to use. They would also like to see more innovation from their ERP vendor partners. Despite these concerns, the IT leaders appear reluctant to dump their present ERP systems and move to a new vendor or try something new, such as ERP Software as a Service (SaaS). As CIO magazine states, “Can’t live with them, can’t live without them. That pretty much sums up how CIOs and IT leaders feel about their ERP systems.”

[Adapted from Wailgum, 2008]
An Example ERP System: SAP ERP
The most popular of the ERP systems is SAP ERP, developed by SAP AG, headquartered in Walldorf, Germany. On the strength of SAP’s R/3 system and its newer variants (the current version is SAP ERP 6.0), SAP is one of the top software firms in the world. SAP boasts more than 95,000 customers in over 120 countries.

SAP R/2 was a mainframe-based ERP; R/3 is a client/server system employing a common, integrated database with shared application modules. SAP developed R/3 using its own fourth generation language (4 GL), named ABAP, and customers may use this language, if they wish, to modify or enhance the standard R/3 modules. Today, however, if companies are interested in developing new SAP-related applications or extending SAP modules, the best option is to use SAP’s NetWeaver platform, especially SAP NetWeaver Developer Studio, to carry out the development work. SAP NetWeaver Developer Studio offers a convenient user interface and rich functionality for developing Java 2 Enterprise Edition (J2EE; see Chapter 2) applications.

In 1999, SAP launched mySAP, which was both an umbrella concept for SAP’s strategy of allowing its users to work through the World Wide Web and a brand name for the new Web-enabled versions of its R/3 software. In 2007, SAP dropped the mySAP label, calling the newest version of its ERP package simply SAP ERP 6.0. The all-encompassing SAP Business Suite includes a wide variety of enterprise software modules, including the robust ERP module (see Figures 5.6 and 5.7).

Financials

Financial Supply Chain Management
Financial Accounting
Management Accounting
Treasury Applications
Human Capital Management

Talent Management
Workforce Process Management
Workforce Deployment

Operations

Procurement
Inventory and Warehouse Management
Inbound and Outbound Logistics
Transportation Management
Production Planning
Manufacturing Execution
Product Development
Life-Cycle Data Management
Sales Order Management
Aftermarket Sales and Service
Professional-Service Delivery

Corporate Services

Real Estate Management
Enterprise Asset Management
Project and Portfolio Management
Travel Management
Environment, Health, and Safety Management
Quality Management
Global Trade Services

End-User Service Delivery

Manager Portal
Employee Portal
Employee Interaction Support Center

Analytics

Financial Analytics
Operations Analytics
Workforce Analytics

Figure 5.6

Key Functional Areas of SAP ERP

Customer Relationship Management (CRM)

Marketing
Sales
Service
Partner Channel Management
Interaction Center
Web Channel
Business Communication Management
Real-Time Offer Management
Enterprise Resource Planning (ERP)

See Figure 5.6

Product Lifecycle Management (PLM)

Life-Cycle Data Management
Program and Project Management
Life-Cycle Collaboration
Quality Management
Enterprise Asset Management
Environment, Health, and Safety
Supply Chain Management (SCM)

Supply Chain Planning and Collaboration
Supply Chain Execution
Supply Chain Visibility Design and Analytics
Supplier Relationship Management (SRM)

Procure to Pay
Catalog Management
Centralized Sourcing
Centralized Contract Management
Supplier Collaboration
Supplier Evaluation
Figure 5.7
SAP Business Suite Applications (in bold), with Supported Core Business Processes for Each Application
The family of SAP ERP software products fits the general description of an ERP system given previously. It is a tightly integrated system consisting of several modules. A company may choose to implement some or all of these modules. Most important, implementation of SAP ERP requires that the company change its business processes to conform to the processes built into the software.

Let us take a closer look at SAP ERP and the SAP Business Suite. SAP ERP consists of four primary sets of modules—SAP calls each set a “solution”—financials, human capital management, operations, and corporate services. In addition, modules are available for end-user service delivery and performance management (or analytics, to use SAP’s term). End-user service delivery includes both an employee portal and a manager portal. We will talk more about portals later in this chapter, but the employee portal gives employees more active participation in the organization’s human resources programs by permitting them to review and update their own address data, submit travel expenses or leave applications, view and print summary pay information, and check their own benefits selections and vacation balances. The manager portal provides support for managers in the budgeting area (including budget planning, budget monitoring, and cost analysis) and in the staffing area (including recruitment, employee reviews, and compensation planning). As an example of the various analytics available, financial analytics includes tools for financial and managerial reporting, working capital and cash flow management, payment behavior analysis, and popular scorecard methodologies such as balanced scorecard and activity-based costing. All the various modules run on the SAP NetWeaver platform, which is SAP’s integration and application platform to ensure seamless interaction with virtually any other SAP or non-SAP software. Figure 5.6 lists the key functional areas of SAP ERP. Note that SAP ERP is a relatively comprehensive package, with strength in the operations area as has historically been the case for SAP.

In addition to the modules in SAP ERP, other available applications in the SAP Business Suite include customer relationship management (CRM), product lifecycle management (PLM), supply chain management (SCM), and supplier relationship management (SRM) (see Figure 5.7 for the supported core business processes for each application). The names and core business processes of the applications should provide a reasonable understanding of what most of the applications do, but let us mention a few of the particularly interesting capabilities. Within the CRM application, the Web channel capability permits your business to carry out business-to-business (B2B) or business-to-consumer (B2C) sales on the Web; it also provides support for Web catalog management, content management, customer segmentation, and personalization, as well as a Web store locator. Within the PLM application, the enterprise asset management capability supports the selection, purchase, and installation of equipment; tracks the costs of individual assets and aggregates these costs as desired; and assists in determining the optimal time to replace equipment. Within the SRM application, the supplier collaboration capability permits the electronic exchange of documents in any format with suppliers and provides the tools to create and manage a supplier portal.

All of the previously mentioned SAP applications are generic software packages that would work in many businesses. In addition, the early years of the twenty-first century have seen the development of industry solutions by SAP and other ERP vendors that are tailored to the special needs of particular industries. SAP, for example, currently offers 24 specific industry solutions, including automotive, banking, chemicals, health care, insurance, life sciences, retail, and wholesale distribution. The trend is for more specialization of ERP packages, with variations for smaller businesses being introduced and more industry solutions under development.

Companies choose to implement the SAP modules or applications that make sense for them. Comcast Corporation, the leading cable provider in the United States, has selected the SAP Human Capital Management (HCM) solution to carry out the human resources and payroll business processes for the company’s employee base of approximately 90,000 people (SAP, 2007b). Harry & David Operations Corporation, the premium gourmet food retailer, has selected the SAP for Retail solution, including the SAP Merchandise and Assortment Planning and SAP Forecasting and Replenishment applications, to drive business benefits in inventory management and retail and channel sales. These applications will support Harry & David’s ability to offer more targeted merchandise selections in its retail stores. Harry & David will begin its implementation with food and beverage capabilities, followed by SAP ERP Financials. “We are poised for tremendous growth, both as a direct retailer and as a wholesaler to numerous retail outlets,” said Joe Foley, Chief Information Officer of Harry & David Holding, Inc. “The seasonality of our business demands a platform that can rapidly scale and meet our ever-changing needs. Only SAP’s fully integrated business model can provide us with a single operating platform that will take costs out of our infrastructure and give us a solid basis for growth” (SAP, 2007a).

In other examples, Graybar Electric Company, a leading North American wholesale distributor of electrical, telecommunications, and networking products, has chosen the SAP ERP application to more effectively manage its physical inventory (more than 1 million stock-keeping items) and process its tens of thousands of purchase and customer orders and quotes daily. Benefits to Graybar from SAP ERP include streamlined reporting of key performance indicators, yielding better decisions; improved inventory management resulting from better forecasting; better control of chargebacks; and enhanced efficiency from self-service functions and improved workflows (SAP, 2007c). As part of an outsourcing agreement with EDS, Dial Corporation has scrapped enterprise software packages from Oracle, Siebel Systems, and Manugistics and moved to a single suite from SAP. The SAP implementation included manufacturing, supply chain, finance, accounting, performance management, and customer relationship management software and cost about $35 million, including licenses, implementation services, and maintenance. According to Dial Chief Information Officer Evon Jones, Dial went with SAP because “SAP and the processes with SAP’s software are regarded as best in class and will drive operational efficiencies, particularly when you start to get greater visibility within your supply chain” (Bacheldor, 2003).

For a more detailed description of a SAP implementation at a major pharmaceutical firm, see the section entitled “What is the Experience with ERP?” in Jacobs, Berry, Whybark, and Vollmann (2011, pp. 26–30). Also see the box entitled “Toyota Motorsport Accelerates Formula One Operations with SAP.” Today, ERP software systems are still a hot commodity.

Toyota Motorsport Accelerates Formula One Operations with SAP
Toyota Motor Corporation, the world’s largest automobile manufacturer, employs SAP software at many places within the company, but one of the more interesting is within Toyota Motorsport GmbH, Toyota’s German-based motorsport subsidiary. In 2003, Toyota Motorsport chose to implement software from SAP’s automotive industry solution to streamline ERP processes across its Formula One racing operations. Toyota Motorsport replaced its previous, nonintegrated systems with SAP for Automotive, including mySAP Product Lifecycle Management, mySAP Supply Chain Management, mySAP Human Resources, and mySAP Financials.

Having won seven world championship titles with its World Rally Championship program, Toyota decided to enter Formula One racing in 1999. The entire car, including the engine and chassis, was completely designed and constructed at Toyota Motorsport’s headquarters in Cologne, Germany. In order to operate a Formula One racing program, 20,000 to 30,000 made-to-order parts are required, and these parts must be quickly available. Further, the parts must be analyzed on an ongoing basis. Toyota Motorsport felt that SAP software was the best choice to efficiently manage the enormous amount of data required for the racing program’s success, as well as to control its supply chain, production, and financial processes cost effectively.

“Applying knowledge effectively translates into competitive edge,” said Thomas Schiller, IT General Manager for Toyota Motorsport. “After comprehensive evaluation of several vendors, we found that SAP could best enable the solid data foundation that is critical to our business. SAP gives us a strategic advantage, ensuring high availability of reliable information across our operations to make faster and more

informed decisions. With its integrated solutions and powerful scope of functionality, SAP enables us to effectively execute these decisions and accelerate our production and supply chain processes.”

Toyota Motorsport chose to run the SAP software on Intel-based servers using the Linux operating system and Oracle Real Application Clusters (RAC) software. The Oracle software permitted database clustering over multiple servers, such that in the event of a failure one cluster node can take over for another and system operations can continue.

In late 2009, Toyota pulled out of Formula One racing because of the global economic situation, but Toyota Motorsport continues to operate as a high-performance development, testing, and manufacturing facility. Among the services currently offered by Toyota Motorsport are car design and development, wind tunnel services, engine design and development, and advanced component testing.

[Based on Oracle, 2005; SAP, 2003; and Toyota Motorsport GmbH, 2010]
Data Warehousing

In order to create a data warehouse, a firm pulls data from its operational systems—the transaction processing systems we have just discussed—and puts the data in a separate “data warehouse”

The comprehensive data warehousing software packages include IBM InfoSphere Warehouse, Informatica Platform, Microsoft SQL Server, Oracle Data Integrator Enterprise Edition, and SAS/Warehouse Administrator. A data warehousing appliance is a packaged solution consisting of hardware (i.e., server, storage) and software (i.e., operating system, database management system, other data warehousing software), where the software has been specifically pre-installed and pre-optimized for data warehousing. Data warehousing appliances on the market include Hewlett-Packard NeoView, IBM InfoSphere Balanced Warehouse, Netezza TwinFin, Oracle’s Sun Oracle Database Machine, Sybase IQ, and Teradata Data Warehouse Appliance. Note that some data warehousing appliances, such as Sybase IQ, employ third-party hardware.

In addition to appliances, another new development in the data warehousing scene is column-store databases . Consider a customer database, where each customer’s record occupies one row, and where each column contains the same attribute, such as customer name or customer zip code, for each customer. When this database is stored in memory or on the hard drive as a traditional, row-store database, all the attributes for the first customer (or row) are serialized together, followed by all the attributes for the second customer, and so on. When the same database is stored in column-store format, then all the values for the first attribute (or column), say customer names, are serialized together, followed by all the values for the second attribute, say customer zip code, and so on. The traditional row-store approach tends to be more efficient in transaction processing, because entire new rows are created and existing rows are modified. However, in queries that are only concerned with a limited number of columns (attributes), such as producing a report of sales by zip code, a column-store approach is more efficient. In this case, only the zip code and sales columns need to be accessed, and all the values for zip codes are stored together, as are all the values for sales. Thus, operational databases, which are used primarily for transaction processing, are almost always row-store, while data warehouses, which are used for a variety of purposes—including querying—might be either row-store or column-store, depending on the mix of uses of the warehouse (Henschen, 2008). Column-store data warehouse solutions include Infobright (based in Canada), ParAccel Analytic Database, Sybase IQ, and Vertica Analytic Database.

For data warehouses built around traditional database management systems, there is a wide variety of software tools available in the warehouse access and analysis area. While comprehensive data warehousing software packages include some access and analysis tools, some users need different types of analysis tools and choose to add another package. Among the many analysis packages available are Computer Associates’ CA ERwin Data Modeler, Information Builders’ WebFOCUS, Microstrategy 9, Oracle Data Mining, and SAS Institute’s Enterprise Miner and SAS Visual BI. We will defer further consideration of these analysis tools until the next chapter, when we consider decision support systems, data mining, executive information systems, and especially business intelligence systems in more detail. In our judgment, creation and maintenance of the data warehouse is an enterprise system, while these end-user reporting and analysis tools are designed for management support—the topic of Chapter 6.

Data warehousing is being used successfully by organizations of all shapes and sizes. Let us consider some examples. The U.S. Postal Service has assembled a gigantic 32-terabyte data warehouse, and is using the system to analyze many areas of its business, including sales at individual post offices, the efficiency of mail-processing facilities, and the use of manpower and transportation resources. The data warehouse is based on hardware and software from Teradata. The warehouse collects retail data from 37,000 post offices, data from mail-processing facilities, package-tracking data, air-transportation data, and data from the Postal Service’s ERP and CRM applications. At present, the data warehouse generates about 20,000 reports for 1,800 users every day, using software from Microstrategy; the number of reports is expected to grow to 60,000 reports for more than 5,000 users, according to Wayne Grimes, Customer-Care Operations Manager for the Postal Service. The data warehouse provides the Postal Service with a much clearer picture of its finances and operations. In the past, it took three to four months to close the books at the end of the fiscal year, but last year—using the data warehouse—it took less than five weeks (Whiting, 2005).

Walmart operates a massive data warehouse containing—as of January 2006—583 terabytes of sales and inventory data. The data warehouse is built on a massively parallel 1,000-processor system from Teradata. “Our database grows because we capture data on every item, for every customer, for every store, every day,” says Dan Phillips, Walmart’s Vice President of Information Systems. Phillips goes on to indicate that Walmart deletes data after two years and does not track individual customer purchases. Walmart refreshes the information in its data warehouse every hour, and thus it has turned its data warehouse into an operational system for managing daily store operations. Managers can check the database hourly and see what is happening at an individual store or stores throughout a region. As an example of the use of the data warehouse, Phillips relates an interesting story: On the morning after Thanksgiving a few years ago, the IT staff at Walmart’s headquarters checked the data warehouse and noticed that East Coast sales of a computer/monitor holiday special were far below expectations. When the marketing staff contacted several stores, they learned that the computers and monitors were not being displayed together, so customers could not see what they were getting for the posted price. Calls went out to Walmart stores across the country to rearrange the displays, and by 9:30 a.m. CST the data warehouse showed that the pace of sales was picking up (Babcock, 2006).

Walmart is not standing still with its data warehousing efforts. By mid-2007, its Teradata-based warehouse had grown to over 1,000 terabytes. Then—in addition to the Teradata warehouse—Walmart decided to become one of the earliest customers of Hewlett-Packard’s new NeoView data warehousing system. The NeoView warehouse will be used with Walmart’s important Retail Link system, which permits Walmart’s 20,000 suppliers to access data about the sales of their products in Walmart stores. The Retail Link system also permits Walmart to carry out market basket analysis in order to understand what products are commonly purchased together (and then develop appropriate marketing strategies); to conduct profit analysis on markdowns; and to track percentage of items in stock (Walmart aims for a 98.5 percent in-stock rate). Through its data warehouses, Walmart is leveraging massive amounts of data for competitive advantage (Weier, 2007).

Online dating company eHarmony uses a Netezza data warehouse appliance to manage its massive data warehouse—12 terabytes of data on more than 20 million registered users. Scoring algorithms are run on eHarmony’s pool of users to match potential mates, according to Joseph Essas, Vice President of Technology. Then data are collected on users’ satisfaction with matches and what results from the matches, and these data are fed into Netezza for analysis and possible updating of the scoring algorithms. Netezza provided the plug-ins needed for the warehouse to work with Oracle, Microstrategy, and other software packages used by eHarmony. Implementation of Netezza was easy, according to Essas: “Within 24 hours we were up and running. I’m not exaggerating, it was that easy.” Essas has found that the Netezza warehouse is “more or less working as advertised. It runs complicated queries; it’s fantastic in terms of table scanning and those sorts of things” (Kanaracus, 2009). Data warehousing has the potential to let companies understand and utilize the data that they are already collecting as they run their businesses.

Harrah’s Earns “Total Rewards” Through Data Warehousing and Customer Relationship Management
Harrah’s Entertainment, with 39 casinos in 12 states and Ontario, Canada, has created an enterprise data warehouse to track and analyze customer spending in all these casinos through its Total Rewards system. (Harrah’s has other international casinos that are not part of the Total Rewards system.) All casino guest transactions are captured, including those at slot machines and gaming tables, through the use of a magnetic membership card. To encourage use of the card, members receive regular points and bonus points each time it is used. After a certain number of regular points have been earned, the cardholder qualifies for a Gold, Platinum, or Diamond membership, which offers privileges such as club memberships and expedited check-ins. The bonus points can be turned in for free food, drinks, and other perks at the casinos. The Total Rewards loyalty program has been a big success, with 6 million members who used the card in 2002 and 26 million members overall.

Surprisingly, statistical analysis on the Total Rewards data revealed that Harrah’s best customers were not the so-called “high rollers,” but the slot-playing middle-aged folks or retired professionals with time and discretionary income. Surveys of these customers indicated that they visited casinos primarily because of the anticipation and excitement of gambling. With this insight, Harrah’s decided to concentrate its strategy on these middle-ground customers. For example, Harrah’s built

its advertising around the feeling of exuberance that came from gambling. Further research found that if customers had very happy experiences with Harrah’s, they increased their spending on gambling at Harrah’s by 24 percent a year, but if they had unhappy experiences, they decreased their spending by 10 percent a year. Harrah’s efforts to create happy experiences for these middle-ground customers—largely through the Total Rewards program—seems to have worked. The program offers members powerful incentives to consolidate their gambling at Harrah’s properties. Overall, Harrah’s estimates that its customers spent about 43 percent of their annual gambling budgets at Harrah’s properties in 2002, up from 36 percent when the program began in 1997.

One result of Harrah’s marketing strategy—which is centered on the Total Rewards program—is that Harrah’s hotel occupancy rate exceeds 90 percent versus an industry average of 60 percent. David Norton, Senior Vice President of Relationship Marketing for Harrah’s, attributes the high occupancy rate directly to the Total Rewards program.

Harrah’s has implemented its data warehouse on an NCR massively parallel processor server, using Teradata database and warehousing software. The system employs SAS software for modeling and Cognos business intelligence software for queries and reports. This unique data warehouse/customer relationship management system is working: Harrah’s executives believe that the Total Rewards program is the cornerstone of Harrah’s growth strategy.

[Based on Bligh and Turk, 2004; Watson, et al., 2005; and Young, 2003]
Customer Relationship Management Systems

A type of application that often pulls much of its data from the organization’s data warehouse is customer relationship management (CRM) . A CRM system attempts to provide an integrated approach to all aspects of interaction a company has with its customers, including marketing, sales, and support. The goal of a CRM system is to use technology to forge a strong relationship between a business and its customers. To look at CRM in another way, the business is seeking to better manage its own enterprise around customer behaviors.

A variety of software packages have been created to manage customer relationships, most based on capturing, updating, and utilizing extensive profiles of individual customers. These profiles are often stored in a data warehouse, and data mining (discussed in Chapter 6) is used to extract relevant information about the firm’s customers. Furthermore, customer profiles are made available online to all those in the company who might interact with a customer. In addition, Web-based front-ends have been created so that a customer can interact with the company online to obtain information about products and services offered by the company, to place an order, to check on the status of an existing order, to seek answers from a knowledge base, or to request service. CRM software packages enable organizations to market to, sell to, and service customers across multiple channels, including the Web, call centers, field representatives, business partners, and retail and dealer networks.

There are many players in the CRM marketplace, so let’s attempt to differentiate them in various ways. For the first cut, we will look at the leading firms that market to larger firms versus those that market to small and medium businesses. ISM, Inc., a strategic advisor to organizations planning and implementing CRM initiatives, names the top 15 CRM enterprise (larger firms) winners and the top 15 CRM small and medium business (SMB) winners each year—in other words, the top 15 vendors to larger firms and the top 15 vendors to small and medium businesses. Both rankings are based on ISM’s surveys and testing, and both lists are presented alphabetically (Lager, 2009).

Most of the top 15 CRM enterprise vendors offer a traditional out-of-the-box CRM application, including call-center support, sales-force automation, and marketing support, as well as templates for specific vertical industries, such as health care, manufacturing, distribution, and financial services. Several of these vendors also offer a hosted or on-demand solution (also called Software as a Service, or SaaS). With a hosted solution, the software runs on the vendor’s hardware, and the customer pays a subscription fee on a per user, per month basis to use the application. Two of the firms in the top 15 are major software vendors SAP (with SAP CRM) and Oracle (with PeopleSoft CRM), both of which offer both a traditional CRM application and a hosted solution. Another major player in this market is Salesforce.com, which offers only a hosted solution and is the clear leader in the hosted market subsegment. Other vendors in this category include Clear C2 (C2CRM); Infor Global Solutions (Infor CRM); RightNow Technologies (RightNow CRM, which is only a hosted solution); and Sage Software’s SalesLogix (Sage Software is based in the United Kingdom). A few vendors have chosen to focus on a particular industry—for example, Amdocs Ltd. (Amdocs CRM) focuses on telecommunications carriers and Internet service providers.

Turning to the top 15 CRM SMB vendors, we find a few repeats, including Oracle, Salesforce.com, Clear C2, and Sage Software, which has two products on the SMB list—Sage SalesLogix and Sage CRM. Microsoft enters this list with its Microsoft Dynamics CRM product, which is available as a traditional CRM or a hosted solution. A few of these top 15 SMB vendors offer a Lotus Notes–based product (more on Lotus Notes later in this chapter), including Ardexus Mode (Canada) and Relavis CRM. Other products in this top 15 SMB list include FrontRange Solutions’ GoldMine, NetSuite’s CRM+ (which is a hosted solution), and StayinFront CRM.

We have already described one example of a CRM project using a data warehouse in the box discussing Harrah’s Entertainment. Other examples abound: BT Group plc (formerly British Telecommunications) has implemented a multimillion dollar CRM system to upgrade its online customer service, based on software from RightNow Technologies. The CRM application includes a knowledge management system for use by BT’s 10,000 call center staff members when dealing with customer queries. It also incorporates an improved call-handling system and a live IM-style service for customers to have queries answered by support staff (Ferguson, 2007).

Resurrection Health Care, a Chicago-based integrated health care provider that operates eight hospitals, home and occupational health services, free-standing medical imaging centers, nursing homes, and more, has deployed Microsoft Dynamics CRM to manage and grow its relationships with physicians. Resurrection’s CRM system, which was customized by reseller Sonoma Partners, is used by Resurrection’s sales staff to build relationships with physicians to encourage them to refer their patients to Resurrection services such as rehabilitation, home health services, and medical imaging. The software enables capturing a variety of data about each physician, including records of e-mails, telephone, and in-person meetings, a list of personnel who work with the physician, and even the physician’s concerns about Resurrection’s services so that these concerns can be dealt with. Resurrection sales staff is also using the CRM to manage relationships with large, non-health-related companies in order to build awareness of Resurrection’s drug testing services for employees and occupational rehabilitation services for workmen’s compensation cases. “The use of CRM is moving into niches, like in health care to manage physician relationships, and real estate management to keep track of properties,” says Chris Fletcher, an analyst at research firm AMR (McGee, 2009a).

Author Solutions, the market-share leader when it comes to publishing books for individuals, created its CRM system based on a hosted solution from Salesforce.com and customization by Appirio, a consulting firm. Author Solutions published about 24,000 titles in 2009, with revenue close to $100 million; it has grown both from the increased popularity of self-publishing and by acquisition of other self-publishing companies. Kevin Weiss, the President and Chief Executive Officer of Author Solutions, knew that the company’s technology systems were antiquated and that it needed to prepare for explosive growth. He also knew that he didn’t want to manage the new technology himself, so he opted for a SaaS solution. As the company has grown through acquisition, the new companies have been quickly migrated to Author Solutions’ CRM system, named Gemini. Weiss believes that “The applications have made us able to move our customers through the production process faster. Customer service has improved. We have a world-class production system to serve our authors and fulfill exactly what they want” (Weiss, 2009). In recent years, many companies have publicly stated that they were becoming more customer-focused—and some companies are carrying through on such statements in a very significant way by installing a CRM system.

The Future of CRM
The basic ideas, goals, and challenges of CRM have not changed in the last decade, but there have been changes and these changes are continuing. For one thing, the cost of CRM software has decreased. According to a Gartner study, CRM application pricing reached a peak of $3,000 per licensed user in 2000 and dropped to between $1,000 and $1,500 per licensed user in 2009. Perhaps more significant is the movement to hosted solutions—Software as a Service (SaaS)—as the delivery mechanism for CRM. Gartner expects SaaS to be the delivery model for 50 percent of all field sales applications in 2009, compared to less than 1 percent in 2000. Considering all CRM applications, Gartner predicts that SaaS will be the delivery model for 25 percent of applications by 2012 and 40 percent by 2020. At the same time, pricing of SaaS-delivered CRM will drop from $800 per user per year in 2009 to $500 by 2020.

Another change in CRM is just beginning—the incorporation of social media into CRM applications. Clara Shih, Chief Executive Officer of Hearsay Labs, a SaaS provider of B2C sales and marketing software, argues that “Facebook, Twitter, and other social sites have become CRM for individuals. They’re how a growing number of people manage relationships across personal and professional realms.” Ed Thompson, Vice President of Gartner, believes that social CRM will become a big part of what CRM means over the next 10 years. Salesforce.com has been the early leader in incorporating social media into its CRM. Salesforce.com first partnered with Google by permitting its core CRM software to be used alongside Google Ad Words, which allows companies to advertise their products on Google by associating them with specific keywords. Then the two companies announced that any customer of Salesforce.com could add Google Apps (a competitive product to Microsoft Office) to their existing CRM software for free. Salesforce.com next partnered with Facebook, unveiling a product that allowed developers to build business applications for Facebook using Salesforce.com technology. A feature was built into Salesforce.com’s customer service application—named Service Cloud—to connect it to Facebook, so that customer service representatives can read and post messages on Facebook. More recently, Salesforce.com established a similar partnership with Twitter so that a customer service representative can monitor conversations over Twitter and respond if appropriate. These moves into social CRM permit businesses to build a marketing and customer service presence on Facebook and Twitter, and they serve as a logical step in helping companies figure out how to utilize social media.

[Based on Lynch, 2009; Musico, 2009; and Shih, 2009]
Office Automation

Office automation refers to a far-reaching set of office-related applications, including telephony (including Internet telephony), voicemail, videoconferencing, electronic mail (and its variants), word processing, copying, desktop publishing, electronic calendaring, and document imaging, along with document preparation, storage, and sharing. Like other areas in IT, office automation has its buzzwords, and the newest buzzword in office automation is unified communications (UC) , which is the integration of real-time communication services, such as telephony and IM, with non–real-time communication services, such as e-mail, voicemail, and facsimile. With UC, an individual can send a message on one medium and have it read on another medium. For example, one can receive a voicemail message and choose to access it via e-mail (or vice versa). The UC products are getting better and more “unified” over time, with strong offerings from Avaya, Cisco, Hewlett-Packard, IBM, and Microsoft, among others.

In Chapter 2 we discussed imaging, word processing, and desktop publishing, and we will not repeat that discussion here. Similarly, we discussed telephony, and especially Internet telephony, in Chapter 3. We also introduced e-mail in Chapter 3, but e-mail is so central to office automation that we will pursue electronic mail and its variants (as well as other features often related to electronic mail, such as electronic calendaring) in more detail in this section and the next. Before turning to e-mail, we will discuss videoconferencing, which is one of the newer office automation tools. At the end of this section and the groupware section, you should have a good overall picture of the office automation area.

Videoconferencing

Videoconferencing permits face-to-face, or, more properly, image-to-image meetings and conferences without the need for costly and time-consuming travel. In most cases, computer-generated reports and graphics, such as a PowerPoint presentation, can also be shared during the conferences.

Desktop videoconferencing has become popular for one-on-one and small group conferences. The screen on a desktop PC is so small, however, that desktop videoconferencing would be unsatisfactory for larger group conferences. Splitting an already small screen into multiple smaller images will reduce the sense of being there, reducing the effectiveness of the conference. Thus, larger businesses often have a separate videoconferencing facility (usually a conference room) where a group of people can participate in a conference with a group at another location.

As an example of both group and desktop videoconferencing, let us consider offerings from Polycom, Inc., headquartered in Pleasanton, California. With its 2001 acquisition of PictureTel Corporation, Polycom solidified its position as the worldwide market leader in voice- and videoconferencing. Polycom’s HDX series provides a choice of several conference room videoconferencing units designed to work in a custom boardroom, a large room, or an auditorium. The various HDX models are designed for different-sized rooms and different-sized groups. Full-room systems start at about $34,000. All of the models have high-definition video, designed to be superb at any data rate. The high-end models have two video screens, and the lower-end models have dual monitor emulation on a single screen. The audio is also high-definition, and it is possible to distinguish which side of the room a person is talking from, just as in an in-person meeting. Audio is activated automatically, only when needed. The HDX models feature “People+Content” as well as “People on Content.” People+Content is a data-sharing capability which permit users to share content from laptops or PCs (e.g., a spreadsheet or a PowerPoint presentation) that have an IP network connection (they do not have to be connected to the HDX system). With the two-video screen arrangement, people are shown on one screen with content on the second screen; with the dual monitor emulation, the screen is split between people and content. People on Content is particularly useful for remote speaker presentations. The speaker stands in front of a blue or green background, and then the content—the spreadsheet or PowerPoint slides—is electronically placed behind the speaker, so that the remote audience sees the speaker standing in front of a screen displaying the presentation materials (Polycom, Inc., 2010).

At the desktop level, Polycom offers Polycom PVX software, which is designed to work with your PC and your own high-quality USB camera attached to the PC. The price from a third-party retailer varies from $120 to $190. Polycom PVX includes the data-sharing capability described earlier. For a desktop system with even more capabilities, Polycom offers the low-end HDX 4000 series with high-definition video and audio (Polycom, Inc., 2010). Of course, one-on-one desktop videoconferencing—but no data sharing—can also be carried out using Skype, an Internet telephony company based in Luxembourg. The Skype software can be downloaded from the Internet at no cost, and then audio calls or video plus audio calls to another Skype user are free. There is a charge for audio calls to a cell phone or a landline. One of the authors has used Skype this past year to have video calls with his grandson, who is studying in Germany.

Electronic Mail

Electronic mail (e-mail) systems permit rapid, asynchronous communication between workstations on a network, eliminating telephone tag. Most systems incorporate such features as sending a note to a distribution list, forwarding a note to someone else with an appended message, replying to a note without reentering the address, and filing notes in electronic file folders for later recall. All the authors of this book use electronic mail on a regular basis, and we feel we could not do without it.

Of course, there are potential drawbacks to e-mail communication. Because it is so easy to use, the volume of e-mail can become overwhelming, particularly standard messages sent to a distribution list. Spam—unsolicited e-mail that most of us regard as junk—is the bane of e-mail users. E-mail is also less personal because it is dependent on text signals alone (but some users spice it up a bit by using e-mail smileys such as :-) or :-( ). Some people use offensive words and phrases that they would never use in face-to-face conversation, called “flaming.” Privacy issues arise because of the opportunity for electronic monitoring by supervisors. For most organizations and most users, however, these drawbacks are totally overshadowed by the advantages of rapid, asynchronous communication.

Variants of e-mail include electronic bulletin boards, listservs, computer conferencing, chat rooms, instant messaging (IM), blogs, and, most recently, Twitter. An electronic bulletin board is a repository (a disk on a computer) on which anyone with access to the bulletin board can post messages and read other messages. Bulletin boards can be operated within an organization (employing the usual communication links) or over the Internet. A listserv is a computerized mailing list that accepts a message sent to the listserv address and forwards it to everyone on the particular mailing list.

Computer conferencing is similar to a bulletin board, but it is set up around a particular topic. For example, a professional society can set up a computer conference to consider changes in its annual meeting program. The announcement of the topic and the Web address at which the conference will be held are published in the society’s newsletter, which can be distributed electronically via a listserv. Users participate in the conference by logging into the conference, entering an opinion, and reading other participants’ opinions. Chat rooms are real-time versions of computer conferencing (synchronous communication) conducted on the Internet, with an incredibly wide array of topics. Group chat has emerged as an important real-time collaboration tool for businesses, providing communication support for far-flung project teams and reducing the need for in-person meetings, voice conferencing, and videoconferencing.

IM is a synchronous communication system that enables the user to establish a private chat room with another individual to carry out text-based communication in real time over the Internet. IM is a hit in business, with research firms estimating that 20 percent or more of employees use IM. A blog is a user-generated Web site where entries are made in journal style, typically displayed in reverse chronological order. Blogs can deal with any subject—sometimes they serve as personal online diaries, and sometimes they provide commentary on a particular subject such as the environment, politics, or local news. Twitter, a social networking and microblogging application that enables its users to send and read short messages known as tweets, is sort of a broadcast version of IM.

The first popular e-mail systems were mainframe- or minicomputer-based, which makes sense because e-mail predated client/server systems. They were also designed to run under proprietary operating systems (e.g., not UNIX). Examples are Digital Equipment’s ALL-IN-ONE and IBM’s PROFS (Professional Office System). The more advanced mainframe-based systems, such as PROFS, packaged e-mail together with electronic calendaring and other related features. In this mainframe environment, the e-mail system runs on the mainframe, with the workstation being used as a terminal; there is no GUI interface. With PROFS, the main menu included a calendar with the current date highlighted, a clock, a message area where other users could directly communicate with this workstation, and a menu of other choices, such as process schedules (electronic calendaring), open the mail, search for documents, and prepare documents.

The second wave of e-mail systems was designed to run on UNIX servers (high-powered workstations running the UNIX operating system). Popular systems include Pine and Elm. This type of e-mail system runs on the server, with the PC being used as a terminal; again, there is no GUI interface. These systems do not have the functionality of mainframe systems like PROFS, but they are much more economical to operate on a per-user or per-message basis.

The development of POP-servers and POP-mail demonstrates how PC-based front-ends can be used to provide a friendlier interface for users. POP stands for post office protocol, and POP-mail is based on an analogy with post office boxes. To use POP-mail, a POP-client such as Eudora or Pegasus must be loaded on the PC. Various e-mail systems, including Pine, can be used as a POP-server. All incoming mail is kept on the POP-server until the user logs on and asks for mail to be downloaded to his or her own machine; this is analogous to traditional mail being kept in a post office box until the patron opens the box and empties it. The user processes the mail on his or her own machine, using the GUI provided by Eudora or Pegasus. The user can read mail, throw some of it away, store some in electronic file folders, and prepare responses to some of it. After processing the mail on the PC, the user reopens a connection to the POP-server on the host computer and uploads any outgoing messages.

The third wave of e-mail systems was LAN-based client/server software systems that incorporated well- designed GUI interfaces, complete with small inboxes, outboxes, wastebaskets, attractive fonts, color, and other GUI features. Example packages are cc:Mail by Lotus and Microsoft Mail. If an organization wants e-mail only, these packages are sufficient. LAN-based e-mail systems were very popular in the 1990s, but they have largely been replaced in the 2000s by the more robust groupware systems such as Lotus Notes/Domino and Microsoft Outlook/Exchange—we will talk more about these groupware systems in the next section. A variation of this third wave of client/server e-mail systems is Internet mail, which has become very popular for small business and home use. Internet mail is gaining traction for larger businesses under a SaaS arrangement with a vendor such as Google or Microsoft. For Internet mail, the client software is the user’s Web browser, and the server software is located on a high-powered Web server operated by an Internet service or software provider. The user must, of course, have access to the Internet via an Internet service provider (ISP) or an organizational link to the Internet. Examples of these Internet mail systems, which are usually free for small business and home use, are Microsoft Hotmail, Google Gmail, and Juno E-mail on the Web.

Most organizations, however, have moved beyond simple e-mail. They want the greater functionality of the older mainframe systems plus the GUI interface of the POP-mail and LAN-based systems. They want electronic calendaring and document sharing. The answer is groupware. We will discuss groupware as a separate category of applications in the next section.

In summary, office automation is moving forward, slowly but steadily, and the key to further development appears to be the use of unified communications combined with collaboration tools or groupware.

Groupware and Collaboration

Earlier in this chapter, we argued that ERP systems deserved treatment as a separate application area because of their currency and importance, despite the fact that ERP systems are, indeed, transaction processing systems. Now we wish to make the same argument for including groupware and collaboration as an application area vis-à-vis office automation. Clearly, the groupware and collaboration area is part of office automation, but it is a very critical part that deserves special attention.

Groupware is an industry term that refers to software designed to support groups by facilitating collaboration, communication, and coordination. Nowadays, the term collaboration or the phrase collaborative environment is often used as a synonym for groupware. In choosing a groupware product, the decision maker must decide what functions are required and seek a product (or a combination of products) that provides these features. Some groupware features are electronic mail, electronic bulletin boards, computer conferencing, electronic calendaring, group scheduling, sharing documents, electronic whiteboards, shared workspace, meeting support systems, workflow routing, electronic forms, Internet telephony, desktop videoconferencing, learning management systems, unified communications, and IM. One groupware feature needed to support real-time collaboration is presence awareness, or the ability to detect others’ online availability (which is the key technology underlying IM). None of the leading groupware packages provide all the functions that a company might want, but in many cases add-on packages can be purchased to fill the gaps.

One might guess that the heart of a successful general-purpose groupware product is electronic mail, and that is certainly right—both industry leader Microsoft Exchange2 and top contender Lotus Notes3 (from IBM) have excellent e-mail capabilities. Until 2004, Lotus Notes held the top position based largely on its outstanding

ability to share documents of all types. Lotus Notes is still used in more than half of the Fortune 100 companies, with 145 million corporate employees using Notes (Boulton, 2009). However, for a variety of reasons—Exchange is somewhat less expensive to operate, Exchange has a user interface that some find easier to use, and Microsoft’s marketing prowess—Exchange has passed Notes in terms of its installed base. In terms of market share, no other contenders come close to the top two. However, there are other players in the market with exciting groupware products, including Oracle Beehive Collaboration Software, Novell GroupWise, HotOffice, Webcrossing Community (from Bayspire, Inc.), and EMC’s Documentum eRoom.

2 Actually, Microsoft Exchange is the name of the server program, while Microsoft Outlook is the name of the client program that runs on a PC. However, it is common for users to refer to the Microsoft Outlook/ Microsoft Exchange combination as a Microsoft Exchange groupware system.
3 In this case, Lotus Notes is the name of the client program that runs on a PC. Lotus Domino is the name of the server program. However, it is common for users to refer to the Lotus Notes/Lotus Domino combination as a Lotus Notes groupware system.
The top two players have added additional products to supplement the collaboration capabilities built into their baseline groupware products. Microsoft offers Microsoft Office SharePoint Server, an integrated suite of server capabilities including extensive collaboration services such as shared workspaces, shared calendars, presence awareness and IM, document management, workflow routing, wikis, and blogs. Then Microsoft Office Communications Server—this is Microsoft’s primary UC offering—delivers streamlined communications including presence awareness and IM, VoIP telephony, voice and videoconferencing, and mobile access. We should also note that Microsoft Exchange and Microsoft SharePoint are available as hosted (SaaS) services.

IBM Lotus Sametime—IBM’s primary UC offering—provides integrated, real-time communications services including presence awareness and IM, voice and video conferencing, VoIP telephony, mobile access, and community collaboration tools such as chat rooms, easy connection to experts, and screen sharing. IBM Lotus Quickr is team collaboration software with an extensive set of content and team services. On the content side, Quickr provides content libraries to organize and share content as well as personal file sharing, where each user decides who will have access to his or her files. Quickr also enables creation of team places (shared workspaces), including team calendars, discussion forums, blogs, and wikis. Like Microsoft, IBM has hosted groupware services available. IBM LotusLive Notes uses the Notes client loaded on a PC to access a Domino server hosted by IBM—again, SaaS. IBM also offers a less expensive option called LotusLive iNotes, which is a Web client accessing a server hosted by IBM. LotusLive iNotes provides e-mail service, but does not have full Domino functionality. An interesting specialized groupware area deals with electronic meeting support systems, and we will talk more about this area in the next chapter.

Groupware, like ERP systems, is a growth area in the software industry as well as an evolving area. To gain a greater understanding of this area, let us take a closer look at a leading groupware product, Lotus Notes.

An Example Groupware System: Lotus Notes

Lotus Development Corporation’s first important product was 1-2-3, and it became the dominant spreadsheet package in the 1980s and early 1990s. The second important product was Notes, a groupware system originally featuring strong document-sharing features and a reasonable e-mail package that has grown into a more full-featured product. Notes—and Lotus’s expertise in developing PC and client/server software—were important to IBM, which paid $3.5 billion to purchase Lotus in 1995. IBM was already a software powerhouse, as we have noted earlier in this book, but its strength was in large machine software. IBM felt it needed to bolster its PC software prowess to compete with Microsoft in that market, and it also wanted the Notes groupware product. IBM has allowed Lotus to operate as a separate business unit, and the buyout seems to have benefited both IBM and Lotus.

Users can configure the welcome page of Lotus Notes to their liking; Figure 5.9 shows the slightly customized welcome page used by one of the authors of this book. At the top left of the screen is the menu bar containing the menus of commands used to perform tasks within Notes. Just below the menu bar is a row of icons that permit the user to perform tasks quickly by clicking the mouse on an icon. Below the row of icons is an address box. To go to a Web address you have not visited before, enter the Uniform Resource Locator (URL) in the address box; to go to a page you have previously visited, click the down arrow at the right end of the address field and select the appropriate URL from the drop-down list. To the right of the menu bar is the navigation bar that allows the user to navigate in Notes just as you would in a Web browser (Notes is, in fact, a Web browser). Down the left side of the screen are the bookmark buttons, which represent a powerful way to navigate to Web pages as well as to Notes databases, views, and documents. In the big area of the screen, the upper left quadrant shows the most recent entries in the user’s Notes inbox, the upper right quadrant shows the calendar entries for the current week, and the lower half contains “hot spot” links to the user’s mail, calendar, address book, “to do” list, and personal journal.

Figure 5.9
Lotus Notes® Welcome Page (IBM Lotus Notes Screen Captures ©2010 IBM Corporation. Used with permission of IBM Corporation. IBM, Lotus, Notes, and Domino are trademarks of IBM Corporation, in the United States, other countries, or both.)
When the user opens the mail—either by clicking the mail bookmark button on the left side of any page (the top icon, which looks like a piece of mail) or the mail hot spot in the bottom area of the welcome page—the inbox view of the mailbox is displayed, as shown in Figure 5.10. In addition to the bars and icons appearing on the welcome page, a view action bar appears above the listing of e-mail messages in the larger window to the right. The actions listed relate to the current view. For the inbox view, the entries are new memo, reply, reply to all, forward, delete, follow up, folder (i.e., move to folder), and copy into new—all common actions used in processing e-mail. Most of the screen is divided into a navigation pane on the left and an active view pane on the right. In the inbox view, the active view pane lists the user’s mail messages, tells who sent the message, the date and time it was sent, the size of the message, and the subject assigned by the sender. To open a message a user double-clicks on it. A star immediately to the left of the sender’s name indicates an unread message. The navigation pane on the left lists a number of views and folders that can be used to manage the mail. For instance, the folder “drafts” contains messages you are working on but have not yet sent, and the set of file folders with names such as Academic Dishonesty, Accreditation MIS, ACM, and Advising constitute the electronic filing system for this user. Notes also has a valuable electronic calendaring feature that you access by clicking on the calendar bookmark button on the left side of the page (the second icon, which looks like a page of a desk calendar) or by clicking on the calendar hot spot on the welcome page. Several different calendar views are available, including a one-day view, a one-week view, and a one-month view.

Figure 5.10
Lotus Notes® Inbox (IBM Lotus Notes Screen Captures ©2010 IBM Corporation. Used with permission of IBM Corporation. IBM, Lotus, Notes, and Domino are trademarks of IBM Corporation, in the United States, other countries, or both.)
The user’s mail files, as described previously, constitute a Notes database. The calendar files are another database, and the contacts are yet a third database. In fact, the various databases are the heart of Notes. Each database contains a collection of documents (of some sort) relating to the same topic. An experienced Notes user most likely will have created databases for the variety of activities in which he or she is engaged, such as a significant committee assignment, an ongoing research project, a graduate information systems course, and a faculty discussion group. These are databases that the user most likely does not want to share with other users. However, there are other databases—created by users throughout the company—that are intended for sharing. As mentioned previously, the real strength of Notes is its document-sharing abilities. This is done through various shared databases. Some of the databases might be set up so that the user can only read documents, not modify them or add new ones; in other databases, such as discussion groups, all participants are encouraged to enter into the discussion.

To open a particular database, first click on the database bookmark button on the left side of the page (this button appears to be two cylinders, or hard drives, in front of a file folder). This opens the database bookmark page, showing all the databases that the user has bookmarked. The user opens a database by double-clicking on the relevant database listing. What if the user has not bookmarked the desired database? The database bookmark page also contains “Find a Database” and “Browse for a Database” selections. The opening screen of any database looks similar to Figure 5.10, with appropriate tool buttons, a navigation pane to the left, and a list of topics or documents in the view pane to the right. The user double-clicks on a document to display it.

How does all this work? Lotus Notes is a client/server system, with the large files (databases) stored on the server, which Lotus calls a “Domino server powered by Notes.” The user can opt to store databases on the PC hard drive, but master copies of the large corporate or departmental databases of documents are stored on the server. Corporate files are replicated from one Notes server to another on a regular basis, so that everyone in the organization has access to the same version of a document. The Lotus Notes client, operating on a PC, is used to access the server with appropriate password protection. This access might either be directly across a LAN or via an Internet connection. Any Web browser on the Internet can also access Notes. Of course, the Notes client is itself a Web browser. A major advantage of using Notes as the browser is that Notes gives you the ability to store copies of Web pages as documents in a Notes database.

Finally, another strength of Lotus Notes is its ability to serve as a development platform, allowing companies to create their own Notes applications customized for their needs. In fact, a growing number of these specialized applications are available commercially through third-party vendors, including project management, human resources, help desk, document management, health care, sales and marketing, and imaging applications.

Lotus Notes in Action
Let’s consider three recent examples of Lotus Notes/Domino applications in three quite different settings. IMS Health, based in the United Kingdom, is the world’s leading provider of market intelligence to the pharmaceutical and health care industries, with $2.2 billion in 2007 revenue. IMS Health provides market intelligence, such as pharmaceutical pricing and reimbursement information in different world markets, to its customers via newsletters, a monthly magazine, and its Web site. When IMS Health decided to redesign its Web site to make it more attractive and easier to use, the company chose to build on its existing Lotus Domino–based content management system. Neil Turner, Senior Manager of Editorial Publications, explained that “Lotus Domino is very popular with our IT team because of the flexibility of the platform, which makes it easy to develop new applications and databases that are integrated with e-mail and calendaring, as well as to support our Web site.” IMS Health worked with Kelros, a consulting firm, to develop the new Web site, and the company is very pleased with the result. The new site offers greatly improved search and browse functions, helping users drill down to relevant data and get answers more quickly. IMS Health has seen a marked increase in traffic on the new Web site and expects to see an increase in customer renewals (IBM, 2008a).

The Kentucky Baptist Convention (KBC) is a cooperative missions and ministry organization serving over 2,400 Baptist churches in Kentucky. This nonprofit organization moved to Lotus Notes/Domino in 1998 to provide e-mail, calendaring, and scheduling to its employees. KBC’s headquarters are in Louisville, but about 40 of its employees travel throughout the state of Kentucky. To satisfy the needs of all its employees—especially these remote workers—for communication, KBC upgraded its Notes/Domino software, including Lotus Sametime, in 2008. With this upgrade, KBC provides mobile access, presence awareness, IM, and real-time chat services to its employees. Lotus Quickr was used to create a centralized, easily searchable library of reference records. Lotus Domino has also served as KBC’s development platform—the IT staff has developed over 20 unique business applications using Domino and has designed its Web site to be hosted in the Domino environment. “The big benefit of the Lotus Notes and Domino platform is all the things that we can do with one system,” explains Troy Fulkerson, Director of Information Technology at KBC (IBM, 2008b).

Shikoku Electric Power Company, in Japan, supplies electrical power to more than 2.8 million people. Shikoku Electric decided to set up a new communications system for knowledge sharing throughout the company, focusing on the need for high reliability and improved service levels. The company used its existing Lotus Notes/Domino application, which was running on a number of UNIX servers, as a starting point for the new system. In order to hold its costs down, Shikoku Electric chose to implement an expanded Lotus Notes/Domino solution on an IBM System Z9 mainframe computer rather than on numerous smaller servers. The IBM System Z9 uses virtualization technology to provide multiple copies of Lotus Domino on a single machine. To install a new server, no hardware needs to be added—a virtual server is simply created on the mainframe. “We believe we have succeeded in deploying a system that is easy to use, with high reliability and security,” says Shinji Nakauchi, System Promotion Group Leader in Shikoku Electric’s IT department (IBM, 2009).
Intranets and Portals

The notion of an intranet was introduced in Chapter 3: An intranet is a network operating within an organization that employs the TCP/IP protocol, the same protocol used on the Internet. In most cases, an intranet consists of a backbone network with a number of connected LANs. Because the protocol is the same, the organization may use the same Web browser, Web search engine, and Web server software that it would use on the Internet. The intranet, however, is not accessible from outside the organization. The organization decides whether or not people within the organization have access to the Internet.

An intranet presents some incredible advantages to the organization. If an organization already has an internal network of interconnected LANs plus Web browsers on most workstations and an operating Web server, as most organizations do, then implementing an intranet is a relatively easy task involving some programming on the Web server. With minimal effort the full functionality of a localized World Wide Web, including e-mail and document sharing, is available within the organization. The Web browser is a “universal client” that works with heterogeneous platforms. Furthermore, virtually no training is needed to implement an intranet because users already know how to use a browser. Deploying a new intranet application is simple—just send an e-mail message containing the URL (address) of the new application to users.

Even if the organization does not have a Web server and Web browsers, the costs are not overwhelming. Web browsers are free, and a minimal Web server complete with software can be obtained for well under $10,000. Intranets are easy enough to set up that in some organizations the first intranet was set up by end users (such as engineers), not by the IS organization, to enable sharing of particular documents.

Intranets serve a variety of important uses within organizations. In many organizations, the intranet serves as a valuable communication tool between the organization and its employees and between employees as well as a repository of organizational information. General announcements, benefits information, news releases, organizational policies, and employee manuals, as well as a calendar of activities, can be posted on the intranet. The intranet can incorporate an organizational directory to find e-mail addresses and telephone numbers—and perhaps even find others in the organization with a particular area of expertise. The intranet can permit blogs and wikis as well as forums on particular topics. It can also host many self-service applications, such as updating personal address and withholding information, requesting vacation time, submitting travel reimbursement requests, and even online training. Depending upon the nature of the organization, there may be even more important features that can be built into the intranet. In a health care network setting, for example, intranets have been used to consolidate medical records from geographically dispersed patients, clinics, and laboratories into a single clinical database and make these records accessible to health care professionals via a Web browser. With patients’ medical histories available on the intranet, health care professionals can easily determine information such as past surgeries, medications used, and allergies.

Let’s consider the award-winning intranets of two well-known companies. In 2010, Walmart’s intranet—known as mywalmart.com—was selected as one of the ten best intranets in the world according to Nielsen Norman Group, a research firm that advises companies on human-centered product and service design. Rather than building a traditional intranet site, Walmart focused on creating a successful social networking intranet. The intranet still conveys corporate information, but the primary purpose of the intranet is to encourage associates to communicate with each other, share information, and build relationships. The Walmart intranet provides associates a place to learn about Walmart, find co-workers, discuss topics with each other, and chat online with company leaders. The site also contains company benefits information, news, and access to self-service applications. Walmart does not interfere with discussion threads on the intranet; any negative attacks on Walmart are usually answered by other associates. The result is that, a year after the site’s introduction, about 75 percent of Walmart’s 1.4 million U.S. associates regularly use mywalmart.com, and the company expects that number to go up after the corporate benefits Web site is fully integrated into the intranet (Tuttle, 2010).

IBM’s intranet, known inside the company as “w3 on Demand Workplace,” was selected as a top 10 intranet in 2006 by Nielsen Norman Group, and it continues to receive praise as an outstanding intranet. Nielsen Norman said that IBM achieved consistency and personalization in its intranet, which facilitates collaboration between 329,000 employees in 75 countries.

Among the features of IBM’s intranet recognized by Nielson Norman are the following:

the personalization of news based on self-created profiles
the creation of role-specific portlets for employees in finance, sales, and management (A portlet is a specialized content area, or window, within an intranet opening page or within a portal.)
a robust employee directory, which permits its employees to search for other employees in many ways, including particular areas of expertise
a facility for blogging—employees can create their own blogs through BlogCentral, or they can subscribe to each other’s blogs via RSS (RSS is the de facto standard for the syndication, or distribution, of Web content—in this case, employees’ blogs, but also news feeds, event listings, project updates, or corporate information.)
accessibility—the intranet is designed to be accessible for people with disabilities, memory issues, and low vision (Jones, 2006)
When originally introduced, intranets were seen as competing with full-service groupware products such as Lotus Notes and Microsoft Exchange. Both fostered communication within the organization. Intranets did not provide the full range of groupware services, but they were much less expensive. Over time, intranets and groupware have grown closer together. Groupware has fully embraced the Internet, and groupware clients such as Lotus Notes are now Web browsers. Today some intranets employ the groupware client as the Web browser. At the same time, intranets became so complex and cumbersome to use that it was necessary to provide some structure, some organization so that users could find what they needed on the intranet. The answer was a portal—software that provided a structure and thus easier access to internal information via a Web browser. (If the organization desires, those external to the organization can also use the portals—see the Volkswagen example later in this section and the Haworth, Inc., box.) This added software meant that intranets became more expensive. Portal software is available from a number of software firms, both large and small, including groupware vendors IBM (with IBM WebSphere Portal), Microsoft (with Microsoft Office SharePoint Server), and Oracle (with Oracle Portal). Among other portal products are SAP NetWeaver Enterprise Portal, TIBCO PortalBuilder, Open Text Vignette Portal, and JBoss (now part of Red Hat) Enterprise Portal Platform.

Volkswagen AG has created two major portals, one internal and one external, to help the company manage the production of five million cars a year at 40 factories in 16 countries. The internal portal, known as iPAD (Integrated Purchasing Agent’s Desk), provides an incredible array of information on parts to purchasing agents throughout the company. According to Meike-Uta Hansen, Director of e-Supply Chain Integration and Services, the iPAD portal “provides 360-degree views of suppliers, parts, and projects.” The external, business-to-business portal enables VW to collaborate more closely with its suppliers. This portal features 30 applications, links to 16,000 supplier sites, and has 55,000 users. Through the portal, suppliers have access to the specific information they need to track VW’s procurement needs; they also receive event-driven alerts to keep them up-to-date on changes in VW’s plans (Travis, 2005).

Ball Memorial Hospital in Muncie, Indiana, has successfully used a portal for its physicians, and it is currently extending the portal to be useful for all its employees. Ball Memorial has used portal development tools from Bowstreet, Inc. (purchased by IBM in late 2005), along with IBM’s WebSphere Portal, to build more than 20 applications for its physicians. Christina Fogle, e-Systems Manager at Ball Memorial, estimates that the tools helped shave 40 percent off the development time for complex applications and as much as 70 percent for simpler applications. The hospital is currently using the same tools for new employee self-service applications, including benefits management and travel (Whiting, 2006).

In another hospital example, Cincinnati Children’s Hospital Medical Center has created a Fetal Care Portal to make available patient data, including electronic medical records and digitized radiology images, to doctors at CCHMC and two nearby hospitals where surgery on fetuses is performed, if needed. The portal permits doctors to view patient data on two side-by-side screens, with images on one screen and written reports on the other. Doctors may also access data about treatments and outcomes of other patients with the same conditions who have been treated at CCHMC and its two partner hospitals, and they can use the portal’s database query tools to analyze trends and devise improved treatments (McGee, 2009b). For organizations such as Walmart, IBM, Volkswagen, Ball Memorial Hospital, Cincinnati Children’s Hospital, and many others, intranets and portals have brought improved performance and communication.

Haworth’s dNet Portal
Office furniture maker Haworth, Inc., an innovator in office products with more than 250 patents to its credit, offers more than 35 million products—one of the largest selections of office furniture and products in the world. In order to better serve its 600 dealers, Haworth decided to build a portal, which it called dNet. The initial version of the portal was unsatisfactory, so Haworth chose to start again with new vendor proposals. Haworth went with a proposal from systems integrator Ascendant Technology, using IBM WebSphere Portal and IBM Lotus Web Content Management software. The new dNet portal has proved valuable for both Haworth’s dealers and Haworth’s own employees. Before the upgrade, the number of visitors to the portal averaged about 12 a month. After the new portal was put in place, it garnered about 4 million hits in 7 months, according to Mike Stock, dNet’s manager.

The company’s dealers use dNet to obtain real-time financial information, inventory status, and marketing materials. Before the upgrade, Haworth’s sales representatives would spend more than 30 minutes per customer call to search various databases for product availability, pricing, and order-status information. Dealers can now do much of this work for themselves. The portal has also increased productivity for other Haworth employees. “Internally, all of our employees now have a centralized place to access order-entry, marketing materials, and product-development information,” Stock says. “They no longer have to walk down the hall or call across the room to get information like part numbers.” dNet has been a big success for Haworth: The company has been able to reduce the amount of time employees spend on customer service, increase security of financial information, and increase overall efficiency in its processes.

[Based on Ascendant Technology, 2010; and Hulme, 2005]

Factory Automation

The roots of factory automation lie in (1) numerically controlled machines, which use a computer program, or a tape with holes punched in it, to control the movement of tools on sophisticated machines and in (2) material requirements planning (MRP) systems, which rely on extensive data input to produce a production schedule for the factory and a schedule of needed raw materials. The newer computer-integrated manufacturing (CIM) combines these basic ideas not only to let the computer set up the schedules (as with MRP) but also to carry them out through control of the various machines involved (as with numerically controlled machines).

Computer-integrated manufacturing is one of the primary ways by which manufacturers are facing the challenges of global competition. Through the various components of CIM, manufacturers are increasing productivity and quality while simultaneously reducing the lead time from the idea stage to the marketplace for most products. A list of strong proponents of CIM reads like a who’s who of manufacturing—General Motors, John Deere, Ford, Weyerhauser, FMC, and Kodak, among others.

CIM systems fall into three major categories: engineering systems, manufacturing administration, and factory operations. Table 5.1 lists the acronyms used in this section on factory automation. The engineering systems are aimed at increasing the productivity of engineers and include such systems as computer-aided design (CAD) and group technology (GT). Manufacturing administration includes systems that develop production schedules and monitor production against these schedules; these systems are usually termed manufacturing resources planning systems. Factory operations include those systems that actually control the operation of machines on the factory floor. Computer-aided manufacturing (CAM) and shop floor control (SFC) are examples of such systems.

TABLE 5.1
Abbreviations Used in Factory Automation
Acronym Full Name
CIM computer-integrated manufacturing
CAD computer-aided design
CAE computer-aided engineering
GT group technology
CAPP computer-aided process planning
MRP material requirements planning
MRP II manufacturing resources planning
SCM supply chain management
CAM computer-aided manufacturing
AGV automated guided vehicle
MAP Manufacturing Automation Protocol
SFC shop floor control
Engineering Systems

Computer-aided design (CAD) is perhaps the most familiar of the engineering systems. CAD involves the use of computer graphics—both two-dimensional and three-dimensional—to create and modify engineering designs. Computer-aided engineering (CAE) is a system designed to analyze the functional characteristics of a design and simulate the product performance under various conditions in order to reduce the need to build prototypes. CAD and CAE permit engineers to conduct a more thorough engineering analysis and to investigate a wider range of design alternatives. Advanced CAD/CAE systems store the information they generate in a database that is shared with the other components of CIM, such as CAM.

Group technology (GT) systems logically group parts according to physical characteristics, machine routings through the factory, and similar machine operations. On the basis of these logical groupings, GT is able to identify existing parts that engineers can use or modify rather than design new parts, simplifying the design and manufacturing processes. Computer-aided process planning (CAPP) systems plan the sequence of processes that produce or assemble a part. During the design process, the engineer retrieves the closest standard plan from a database (using the GT classification of the new part) and modifies that plan rather than starting from scratch. The resulting plans are more accurate and more consistent, thereby reducing process planning and manufacturing costs.

Manufacturing Administration

Manufacturing resources planning (MRP II) systems usually have three major components: the master production schedule, material requirements planning, and shop floor control. The master production schedule component sets the overall production goals based on forecasts of demand. The MRP component then develops a detailed production schedule to accomplish the master schedule, using parts explosion, production capacity, inventory, and lead-time data. The shop floor control component releases orders to the shop floor based on the detailed production schedule and the actual production accomplished thus far. MRP II systems attempt to implement just-in-time (JIT) production. Note that MRP II does not directly control machines on the shop floor; it is an information system that tries to minimize inventory and employ the machines effectively and efficiently.

In our discussion of enterprise resource planning (ERP) systems earlier in this chapter, we noted that MRP is often one of the key modules of an ERP system. Thus, such an ERP system ties together the manufacturing production schedule with the other important aspects of running an enterprise, including sales and distribution, human resources, and financial reporting. The latest type of manufacturing administration system—supply chain management (SCM)—goes beyond ERP and outside the boundaries of the firm itself. In our view, SCM systems are so important that we have chosen to treat them as a separate application area in a section that immediately follows the factory automation section.

Factory Operations

Factory operations systems go a significant step further than MRP II—they control the machines. By definition, computer-aided manufacturing (CAM) is the use of computers to control manufacturing processes. CAM is built around a series of computer programs that control automated equipment on the shop floor. In addition to computer-controlled machines such as automated drill presses and milling machines, CAM systems employ automated guided vehicles (AGVs) to move raw materials, in-process materials, and finished products from one workstation to another. AGVs are loaded using robot-like arms and then follow a computer-generated electronic signal (often a track under the floor that has been activated) to their next destination. Workers are used only to provide maintenance on the equipment and to handle problems. Because job setups (preparing a machine to work on a new part) are automated and accomplished in minimum time, CAM permits extremely high machine utilization. With the low setup time, very small batches (even as small as one) can be produced efficiently, shortening production lead times and reducing inventory levels.

As this brief description has implied, a CAM system is very sophisticated and requires a great deal of input data from other systems. Product design data would come from CAD, process design data from CAPP, and the master production schedule and material requirements from MRP II. The CAM system must also be able to communicate electronically with the machines on the shop floor.

The manufacturing communications network is likely to employ the Manufacturing Automation Protocol (MAP), pioneered by General Motors and now accepted by nearly all major manufacturers and vendors. MAP is a communications protocol (a set of rules) to ensure an open manufacturing system. With conformance to MAP by all vendors, seamless communication between all equipment on the factory floor—regardless of the vendor—is possible. MAP is a user-driven effort, and the details of the concept are evolving. Nevertheless, MAP is a reality in factory automation upon which future systems will be based.

Within factory operations applications, shop floor control (SFC) systems are less ambitious than CAM but are still important. These systems provide online, real-time control and monitoring of machines on the shop floor. For example, the SFC might recognize that a tool on a particular milling machine is getting dull (by measuring the metal that the machine is cutting per second) and signal this fact to the human operator on duty. The operator can then take corrective measures, such as instructing the SFC to change the tool or changing it himself or herself, depending on the system.

Robotics

Outside the broad area of CIM, robotics is one other aspect of factory automation that deserves mention. Robotics is, in fact, one branch of the artificial intelligence tree. (Artificial intelligence, especially expert systems and neural networks, is discussed in the next chapter.) With robotics, scientists and engineers are building machines to accomplish coordinated physical tasks in the manner of humans. For over two decades, robots have been important in manufacturing to accomplish simple but important tasks, such as painting and welding. Robots perform repetitive tasks tirelessly, produce more consistent high-quality output than humans, and are not subject to such dangers as paint inhalation or retinal damage. Newer robots incorporate a certain amount of visual perception and thus are able to perform assembly tasks of increasing complexity. Industrial robots are expensive, but they are becoming economically viable for a wider range of tasks as their capabilities are extended. Robots and CIM are producing a vastly different “factory of the future” based on IT.

Supply Chain Management Systems

Supply chain management (SCM) systems are designed to deal with the procurement of the components a company needs to make a product or service and the movement and distribution of components and finished products throughout the supply chain. These supply chain management systems are often interorganizational in nature, involving two or more levels of the supply chain—such as a manufacturer and its suppliers or a retailer and its suppliers. There are five basic components of SCM: plan, source, make, deliver, and return. Planning means developing a strategy, with appropriate metrics, for managing

all the resources that are needed to meet customer demand for your product or service. Sourcing is choosing the suppliers for the resources needed to produce your product or service, as well as developing pricing, delivery, payment, and inventory management processes for these resources. Making is the manufacturing step, including scheduling the activities required. Delivering is the logistics associated with getting your product or service to customers, and returning is creating a procedure for handling defective and excess products and supporting customers who have problems (Worthen, 2007).

Each of these five basic components actually consists of dozens of specific tasks, and SCM software has grown up around these specific tasks, such as demand planning, inventory management, and transportation planning. SCM software packages are available to handle a few of these specific tasks, or many of them, but no vendor has a complete package that is right for every company. Each company must carefully assess its needs, and select the package—or perhaps the combination of products from several vendors—that best meets its needs. Among large companies, the SCM market tends to be dominated by the ERP vendors, especially SAP and Oracle; Microsoft has a significant presence in the small and medium business SCM market. Other important SCM vendors are JDA Software Group, Ariba, Inc., Manhattan Associates, and RedPrairie. JDA Software Group, which traditionally had strength in SCM for retailers, merged with Manugistics in 2006 and i2 Technologies in 2010, both of which had strength in SCM for manufacturers. With these mergers, JDA Software Group moved into the number three position in the SCM field, behind industry giants SAP and Oracle.

An interesting use of SCM occurs at Perdue Farms, which produces more than 48 million pounds of chicken products and almost 4 million pounds of turkey products each week. For Thanksgiving, Perdue will ship roughly 1 million whole turkeys—and all these turkeys will arrive at the supermarkets within 24 hours of processing. This logistics task is much easier for Perdue after the company invested $20 million in Manugistics SCM software, including forecasting and supply chain planning tools. With the aid of the SCM system, Perdue has gotten much better at delivering the right number of turkeys to the right customers at the right time, according to Chief Information Officer Don Taylor. “As we get to November, we have live information at our fingertips,” he says.

Perdue also uses technology to make sure its products arrive fresh. Each of its delivery trucks is equipped with a global positioning system, so dispatchers always know where the trucks are and can send out replacement trucks if necessary. Some supermarkets have vendor-management inventory control systems, which allow Perdue to track sales of its products in real time (Luttrell, 2003).

Imperial Sugar, the third-largest sugar refinery in the United States, experienced a terrible disaster in February 2008 when its refinery in Port Wentworth, Georgia, exploded, resulting in deaths and injuries to employees. The explosion destroyed approximately 60 percent of Imperial Sugar’s production capacity, and it turned out to be twenty months before the sugar refinery was online again. Imperial Sugar’s Chief Information Officer, George Muller, credits its SCM system, especially its demand-management software, with helping the company make the best of available resources and satisfying as many of its customers as possible. According to Muller, the demand-management software from Demand Foresight “took our demand, our inventory and capacity, and the number of new orders coming in and tied it all together. We couldn’t fulfill every order, but we were able to fill more orders than we ever would have had we not had that tool.” SCM software helped keep Imperial Sugar going in the face of disaster (Overby, 2010).

As an example of SCM in the retail industry, let’s consider J. C. Penney, an $18.4 billion company. In 2002, J. C. Penney implemented an inventory management system from i2 Technologies and a forecasting and replenishment system from Teradata. Based on the success of these systems and other changes in the supply chain and product development processes, J. C. Penney has reduced the time it takes to get a product from the design stage to the sales floor from as long as two years to just 45 days, according to Jeffrey Allison, J. C. Penney Executive Vice President and Director of Planning and Allocation.

In 2003, J. C. Penney created its factory-store system, which enables the store to replenish such basics as towels, sheets, and jeans on an as-needed, just-in-time basis. Because J. C. Penney can now get these items directly from its suppliers, who can produce them in a matter of days, the company no longer has to store them in warehouses, said Peter McGrath, J. C. Penney’s Executive Vice President of Product Development and Sourcing. “