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?
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MIS 111: computers and the inter