2023 ch09 BCOR 200

Management Information Systems: Managing
the Digital Firm

Sixteenth Edition
Chapter 9
Achieving Operational Excellence

and Customer Intimacy:
Enterprise Applications
Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved
Learning Objectives
9.1 How do enterprise systems help businesses achieve

operational excellence?
9.2 How do supply chain management systems coordinate

planning, production, and logistics with suppliers?
9.3 How do customer relationship management systems help firms

achieve customer intimacy?
9.4 What are the challenges that enterprise applications pose, and

how are enterprise applications taking advantage of new
technologies?
Enterprise Systems
• Also known as Enterprise Resource Planning (ERP)
systems
• Suite of integrated software modules and a common central

database
• Collects data from many divisions of firm for use in nearly all
of firm’s internal business activities
• Information entered in one process is immediately available

for other processes
Figure 9.1 How Enterprise Systems
Work
Business Value of Enterprise Systems
• Increase operational efficiency as it helps avoiding redundancies or

duplication of resources across the firm.
• Large firms with many operating units in different locations have used
enterprise systems to enforce standard practices so that everyone does
business the same way worldwide.
• Provide firm-wide information to support quick and informed decision

making
• Include analytical tools to evaluate overall performance and improve

decision-making
Top ERP systems
The Supply Chain
• Network of organizations and business processes for:
– Procuring materials
– Transforming materials into products
– Distributing the products to customers
• Upstream supply chain
• Downstream supply chain
• Internal supply chain
Figure 9.2 Nike’s Supply Chain
Supply Chain Management
• Supply chain inefficiencies (interruptions, delays, underutilized capacity,
excessive inventory…) waste as much as 25% of a company’s operating
costs.
• When shipments fail to arrive on time and the customer's expectations are

not met, it can result in poor reviews, lost sales, a shrinking customer
base…
• Supply chain inefficiencies result from inaccurate or untimely information.
• If a manufacturer had perfect information about exactly how many units of

product customers wanted, when they wanted them, and when they could
be produced, it would be possible to implement a highly efficient just-in-
time strategy.
Supply Chain Management
• Just-in-time strategy
– Components arrive as they are needed (buying on demand)
– Finished goods shipped after leaving assembly line
• To deal with uncertainties and unforeseen events, firms generally keep a

safety stock.
• One recurring problem in supply chain is the bullwhip effect. It refers to

small and temporary change in customer demand that can cause
amplified variations in orders placed by retailers, wholesalers and
manufacturers upstream in the supply chain.
Figure 9.3 The Bullwhip Effect
Supply Chain Management Software
• Supply chain software (SCS) optimize plans for sourcing, warehousing,
manufacturing and delivery, establish inventory levels, identify
transportation mode, etc.
• For example, if a large customer changes his order on short notice, this
can have a widespread impact throughout the supply chain. Additional raw
materials may need to be ordered. Manufacturing may have to change job
scheduling. Transporters may have to reschedule deliveries.
• The SCS makes the necessary adjustments to production, inventory and

distribution plans. Information about changes is shared in real time among
the relevant supply chain members so that they can adjust their plans
accordingly
Global Supply Chains
• Global supply chain raise additional complexities
– Greater geographical distances, time differences
– Participants from different countries
 Different performance standards
 Different legal requirements
• Internet helps manage global complexities
– Warehouse management.
– Transportation management
– Logistics
– Outsourcing
From Push to Pull Manufacturing
• The traditional SCM systems were driven by a Push-based model where
production volumes are based on forecasts of demand, and products are
“pushed” to customers.
• But With the use of internet SCM systems are following a pull-based
model where only the actual orders trigger the events in the supply chain.
• In a traditional sequential supply chain, each stage of the process

operates independently, passing finished products or materials from one
stage to the next in a linear way. Each stage waits for the previous stage
to complete before it begins its work, resulting in a slow and inefficient
process. Internet enables move from sequential supply chains to
concurrent supply chains
Figure 9.4 Push- Versus Pull-Based
Supply Chain Models
Figure 9.5 The Emerging Internet-
Driven Supply Chain
Business Value of SCM Systems
• SCM systems enable firms to streamline both their internal and external
supply chain processes and provide management with more accurate
information about what to produce, store, and move.
• By implementing an integrated SCM system, companies match supply to

demand, reduce inventory levels, improve delivery service, speed product
time to market, and use assets more effectively
Customer Relationship Management
(CRM)
• Competitive advantage may come from a better knowledge of customers
• In large businesses, too many customers and too many ways customers
interact with firm
• CRM systems
– Capture and integrate customer data
– Consolidate and analyze customer data
– Distribute customer information to the concerned users
Figure 9.6 Customer Relationship
Management (CR M)
CRM Software (1 of 2)
• Packages range from niche tools to large-scale enterprise applications
• More comprehensive packages have modules for:
– Partner relationship management (PR M)
 Integrating lead generation, pricing, promotions, order

configurations, and availability
 Tools to assess partners’ performances
– Employee relationship management (ER M)
 Setting objectives, employee performance management,

performance-based compensation, employee training
CRM Software (2 of 2)
• CRM packages typically include tools for:
– Sales force automation (SF A)
 Sales prospect and contact information
 Sales quote generation capabilities
– Customer service
 Assigning and managing customer service requests
 Web-based self-service capabilities
– Marketing
 Capturing prospect and customer data, scheduling and tracking

direct-marketing mailings or e-mail
 Cross-selling
Figure 9.7 How CRM Systems
Support Marketing
Responses by Channel for January 2019 Promotional Campaign
Figure 9.8 CR M Software Capabilities
Business Value of CRM Systems
• Business value of CRM systems
– Increased customer satisfaction
– Reduced direct-marketing costs
– More effective marketing
– Lower costs for customer acquisition/retention
– Increased sales revenue
– Reducing the churn rate (number of customers who stop using or

purchasing products or services from a company)
Enterprise Application Challenges
• Expensive to purchase and implement enterprise applications
• Technology and business processes changes
• Organizational learning
• Switching costs, dependence on software vendors
• Data standardization
• Companies can save time and money by keeping customizations to a

minimum.

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Management Information Systems: Managing

the Digital Firm

Achieving Operational Excellence

9.1 How do enterprise systems help businesses achieve

9.2 How do supply chain management systems coordinate

9.3 How do customer relationship management systems help firms

9.4 What are the challenges that enterprise applications pose, and

• Suite of integrated software modules and a common central

• Information entered in one process is immediately available

• Increase operational efficiency as it helps avoiding redundancies or

• Provide firm-wide information to support quick and informed decision

• Include analytical tools to evaluate overall performance and improve

– Transforming materials into products

– Distributing the products to customers

• Upstream supply chain

• Downstream supply chain

• Internal supply chain

• When shipments fail to arrive on time and the customer's expectations are

• Supply chain inefficiencies result from inaccurate or untimely information.

• If a manufacturer had perfect information about exactly how many units of

– Components arrive as they are needed (buying on demand)

– Finished goods shipped after leaving assembly line

• To deal with uncertainties and unforeseen events, firms generally keep a

• One recurring problem in supply chain is the bullwhip effect. It refers to

• The SCS makes the necessary adjustments to production, inventory and

– Greater geographical distances, time differences

– Participants from different countries

 Different performance standards

 Different legal requirements

• Internet helps manage global complexities

• In a traditional sequential supply chain, each stage of the process

• By implementing an integrated SCM system, companies match supply to

– Capture and integrate customer data

– Consolidate and analyze customer data

– Distribute customer information to the concerned users

• More comprehensive packages have modules for:

– Partner relationship management (PR M)

 Integrating lead generation, pricing, promotions, order

 Tools to assess partners’ performances

– Employee relationship management (ER M)

 Setting objectives, employee performance management,

– Sales force automation (SF A)

 Sales prospect and contact information

 Sales quote generation capabilities

 Assigning and managing customer service requests

 Web-based self-service capabilities

 Capturing prospect and customer data, scheduling and tracking

• Business value of CRM systems

– Increased customer satisfaction

– Reduced direct-marketing costs

– More effective marketing

– Lower costs for customer acquisition/retention

– Increased sales revenue

– Reducing the churn rate (number of customers who stop using or

• Technology and business processes changes

• Switching costs, dependence on software vendors

• Companies can save time and money by keeping customizations to a

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