Class 13: IT-Enabled Business Value Chains July 29th, 2011 List a few current events in information systems news Describe problems that face Supply Chain Management Indentify how IT can help address these problems Compare and contrast the purposes of Enterprise Resource Management (ERP), Supply Chain Management, and Customer Relationship Management systems? ERP “Inside the walls” Management SCM - Supply Chain Management Vendor-facing Management CRM – Enterprise Resource Management - Customer Relationship Management Customer-facing Management Has anyone played this before? YOU CANNOT TALK ABOUT THE GAME! Factory? Distributor? Wholesaler? Retailer? 9 8 7 Demand 6 5 4 3 2 1 0 0 10 20 30 40 Week Number 50 60 The impact of time delays on the supply chain Team behavior and decision-making Inventory cost money, but may help increase service levels Lags cause problems and longer supply chains cause problems Need information systems to monitor each stage in the chain Need cooperation in the channel The bullwhip effect One or more players cut orders in an attempt to reduce inventory Suppliers see a reduction in order size as a signal of declining demand and reduce their orders even more Meanwhile, retailers see a jump in consumer demand Retailers order extra in an attempt to fill the pipeline First of all, what is a supply chain? Upstream – where sourcing from external suppliers occurs Internal – where packaging, assembly, or manufacturing takes place Downstream – where distribution takes place, frequently by external distributors “Making stuff – that's easy. Supply chain, now that is really hard.” -Yossi Sheffi, MIT -NvBE11s-0M&feature=related SCM Real-World Implications of failure Wasted products (bananas) Overtime for employees Loss of profits due to lack of optimization (trucks at half capacity) Ways to prevent SCM failure Global communication Better forecasting Inventory turns: the number of times the business sells its inventory When SCM of companies are not linked, supplier requirements unknown so companies must overstock inventory Classic Problem: Bullwhip Effect – erratic shifts in orders up and down the supply chain One company sits with lean inventory while other stands, hence musical chairs Price Analysis of the cost of money (demand management) Batch promotions Purchasing Discounting for consolidated orders (logistical efficiency) Forecasting/Trend Anticipated increased demand (modeling) Shortage Analysis gaming Known shortages encourage customers to inflate order quantities (allocation of inventory) Inter-organizational Information Systems Involve information flows from two or more organizations Are often more suited to digital, rather than physical goods Cultural Differences Localization Packaging may need to be different in different countries – different languages, styles Economic/Political Differences Companies must be sure that practices and products are not offensive to targeted cultures IT infrastructures differ among countries – some governments may control use of IT Legal Issues Copyright laws, patents, file sharing, privacy laws differ by country Supply chain systems work best when all businesses are sharing information However, there is a risk of disclosing proprietary information and intellectual property figures Possibility of a trading partner taking advantage of anticipated demand Enterprise Resource Planning Systems Integrate the planning, management, and use of all of an organization’s resources Tightly integrate the functional areas in the organization – so changes in one functional area are immediately reflected in other areas Financial General ledger, accounts payable, asset accounting Sales and Accounting Processes and Marketing Processes Pricing, billing, order processing Manufacturing Inventory, shipping, production planning Human and Production Processes Resources Processes Personnel administration, payroll So you need ERP software. How are you going to get it? Will you buy an “off-the-shelf” suite? Advantages: Simple solution, may be inexpensive, covers all functional areas in one package Disadvantages: May have compatibility issues with new systems, may have to change business processes to suit the needs of the system Will you hire a consultant to create a customized solution? Advantages: Can get quick and easy maintenance, can get a totally suitable system for business process needs Disadvantages: Very expensive, need lots of coding from scratch Goal: Integrated View of Customer Sales, Marketing, and Customer Service Operational CRM Sales Force Automation eCommerce / Web Portals Customer Service Call Centers Campaign Management Analytical CRM Personalization Segmentation and Profiling Customer Valuation (Profitability Analysis) Customer Behavior Analysis / Call Patterns Need Analysis and Forecasting E-mail Telephone Conventional mail Web site Store Help desk Market research: discovers the populations (customers) and regions that are most likely to purchase product Traditional marketing conducts interviews with consumers and retailers Additional research methods use data mining techniques and statistical models to predict sales volumes of different products Automated Web-based customer service provides automated customer service 24/7 Saves labor costs Saves paper costs Consists of FAQs, tracking systems, maintaining customer profiles Artificial intelligence used to emulate a real-life customer service representative Auto-categorization used to improve performance Characteristics Allows consumers to collaborate and participate with companies Via Blogs, Wikis, and other Web 2.0 technologies Challenges Copyright – if consumers create new product value, who gets the credit and the cash? 1. How closely do you interact with the companies from which you buy your products? Your phones, computers, clothes, food? 2. Would you participate in a company’s wiki or comment on a company’s blog? If yes, what would you contribute? If no, why not? 3. At what point should CRM 2.0 stop? Should customers have the ability to provide input on product manufacturing? Project Management Business Processing Management Information Security / Data Communications IT Ethics and Green IT E-Government Challenge Anything else you would like to learn?