Enterprise-Wide Information Systems

1. Enterprise-Wide Information Systems Chapter 7

2. System Categories Enterprise-wide Systems aka Enterprise Systems, are systems that allow companies to integrate information across operations on a company-wide basis Interorganizational Systems (IOS) Systems that communicate across organizational boundaries whose goal it is to streamline information flow from one company to another

3. The Value Chain – Internally Focused Used to identify the flow of information through a set of business activities. It identifies two types of activities: primary and support.

4. The Value Chain - Primary Activities Functional areas within an organization that process inputs and produce outputs. These activities may vary widely based on the unique requirements of a company’s industry • Primary Activities include: • Inbound Logistics – receiving and stocking raw materials, parts, products • Operations/Manufacturing – processing orders and raw materials into finished product • Outbound Logistics – distribution of the finished product to customers • Marketing and Sales – creating demand for the product (pre-sales activities) • Customer Service – providing support for the product or customer (post-sales activities)

5. The Value Chain - Support Activities Support activities are business activities that enable Primary Activities. These activities can be unique by industry but are generally more typical across industries. • Support Activities include: • Infrastructure – hardware and software that must be implemented to support applications for primary activities • Human Resources – employee management activities: hiring, interview scheduling, and benefits management • Technology Development – the design and development of applications that support the organization • Procurement – purchase of goods or services that are required as inputs to primary activities

6. A Value System – Externally Focused • A connection of value chains across organizations • Allows the flow of information between organizations to support business activities • Upstream flow is information received from another organization • Downstream Flow is information sent to another organization

7. Options for Enterprise Systems – Packaged vs. Custom Packaged Applications “Off-the-Shelf” computer applications purchased from a vendor or the company that created the system (i.e. Quicken or MS Money for financial applications) • Packaged Key Characteristics • Best Use– • Cost Effectiveness– • Organizational Fit – • Maintenance –

8. Options for Enterprise Systems –Packaged vs. Custom Custom Applications “Custom-built” computer applications created by the organization or a third party (e.g. a consulting organization) • Custom Key Characteristics • Best Use– • Cost Effectiveness– • Organizational Fit – • Maintenance –

9. Enterprise System Evolution System Types System Evolution Standalone Systems Integrated Systems (Intraorganizational) Integrated Systems (Interorganizational)

10. Enterprise Systems - Legacy System Example Legacy (stand-alone) Systems – information is not readily shared between systems (i.e. Inbound Logistics inventory information shared with Operations)

11. Enterprise Resource Planning Integrated Packages (Enterprise Resource Planning) Richly functional systems designed to support many organizational functions (e.g. accounting and finance) • ERP Key Characteristics • Internally focused systems designed to support the internal operations of the organization • Highly integrated systems sharing a common data warehouse for information sharing across functions, using real-time updates • Organizational fit may be less for individual departments but the integrated sharing of information usually outweighs these issues • Usually packaged applications supported by the vendor utilizing a common user interface • Customization is discouraged but these systems have the flexibility to support other outside applications using the common data repository and interfaces

12. In Tech We trust Enterprise Systems – Integrated System Example Integrated Systems – Information is stored in a single data repository and can be accessed and updated by all functional systems (e.g. Operations)

13. Choosing an ERP System - Issues • ERP Systems are: • Supplied by multiple vendors including SAP, Baan, Oracle, etc., with each having their own unique features and structures • Packaged systems that follow a one-size-fits-all strategy which means they may not support all functions as well as a custom system does • Similar but are also different. They should be selected based on factors including control, business requirements, and best practices

14. Choosing an ERP System – Selection Factors Control refers to where the power lies related to computing and decision support systems (centralized vs. decentralized) in selecting systems, developing policies and procedures, etc. (Who will decide?) Business Requirements refers to the system’s capabilities and how they meet organizational needs through the use of software modules or groups of business functionality (What do you need?) Best Practices refers to the degree to which the software incorporates industry standard methods for doing business which can cause a need for significant business processes reengineering (How much change is required?)

15. ERP Capabilities – SAP Example

16. ERP and Business Process Reengineering Business Process Reengineering A systematic, structuredimprovement approach by all or part of an organization whereby people critically examine, rethink, and redesign business processes in order to achieve dramatic improvements in one or more performance measures (e.g. quality, cycle time, cost) Hammer and Champy, (“Reenginerring the Corporation”) “The radical redesign of an organization was sometimes necessary in order to lower costs and increase quality and information technology was the key enabler for that radical change.”

17. Example of BPR Taco Bell created the K-Minus program a retail service company , not a manufacturing company new process, meat, beans, corn shells, lettuce, tomatoes and cheese for their products are prepared outside of the restaurant in central commissaries greater quality control, better employee morale, fewer employee accidents and injuries (due to preparation task off-site), big savings and more time to focus on the customer business processes from a $500 million regional company to a $3 billion national company

18. Elle Mae Mortgage Business Process Reengineering • Steps in Business Process Reengineering • Develop a vision for the organization that specifies business objectives (e.g. reduced costs, shorter time to market, improved quality, etc.) • Identify critical processes that are to be redesigned • Understandand measure the existing processes as a baseline for future improvements • Identify ways that information technology can be used to improve processes • Design and implement a prototype of the new process(es)

19. BPR Today – Observations and Research • Large bodies of research are available on the role of ERP and BPR implementations. Some of this research has come to the following conclusions: • Reengineering and related organizational issues are as important as the technical implementation issues • Managers in many cases must choose between making the ERP system fit the organization or the organization fit the ERP system • For an ERP system to help transform the organization and gain new competitive capabilities, a full organizational and operational change is required • To be successful, manager must first transform the organization and then implement the ERP system

20. Enterprise Systems – Integrated (Interorganizational) Integrated Packages Richly functional systems designed to support externally focused functions Upstream– Supply Chain Management Downstream– Customer Relationship Management)

21. Customer Relationship Management Objective Applications that help organizations attract new business and attract and encourage repeat business • Functions • There are two primary functions in CRM systems: • Sales – tools designed to assist in presales activities such as marketing and prospecting (e.g. Sales Force Automation) • Service – tools that help with the post-sales aspects of the business (e.g. call center technology, analytics) • Sources • There are two primary sources of CRM systems: • CRM Software Vendors – Siebel, FirePond, Onyx, E.Piphany • ERP Vendors – SAP, Baan, Oracle, etc.

22. Sales Support – Sales Force Automation (SFA) Sales Force Automation provides salespeople and sales managers with computerized support tools to assist in daily routines

23. Supply Chain Management • Objective • Applications that accelerate product development and reduce cost associated with procuring raw materials, components, and services from its suppliers • Supply Chain – the suppliers that an organization purchases from directly • Supply Network – the suppliers that an organization purchases from directly and its suppliers • Sources • There are two primary sources of SCM systems. These systems are built to tightly integrate with ERP systems • SCM Software Vendors – Agile, Ariba, I2, Manugistics, Commerce One, etc. • ERP Vendors – SAP, Baan, Oracle, etc

24. Amazon.com SCM – Example of a Supply Network

25. SCM Application Functions

26. SCM Application Functions 2nd Half

27. Supply Chain Management Benefits • Supply Chain Management applications can help organizations to gain competitive advantage and provide substantial payback in several ways by: • Streamlining workflow and increasing employee productivity (i.e. efficiently managing business travel, time, and expenses by collaborating with suppliers in real time) • Accelerating product development (i.e. enabled by the ability of organizations to swiftly react to market conditions) • Streamlining cost and creating efficiencies across the supply network (i.e., supporting contract negotiation and measuring effectiveness of those agreements)

28. google Recommendations for Enterprise System Success Secure Executive Sponsorship The highest level support is required to obtain resources and make and support difficult reengineering decisions Get Help from Outside Experts Implementation success is enabled by deep application experience and access to supporting tools and methods Thoroughly Train Users Training in organization, business process, and application functions is critical to success and must be reinforced Take a Multidisciplinary Approach to Implementations Enterprise systems span the entire organization and as such require input and participation from all functions