4 Chapter 04 Introduction to E Business

Chapter-04

Enterprise e-Business Systems

(ERP, CRM and SCM)

Source: http://www.intellisat.com/Integration.htm

Chapter 4 Enterprise e-Business Systems Page 1

4.1 Introduction to e-Business Systems

(Strategic initiatives for implementing competitive advantages)

Abstract E-business is the conducting of business on the internet; not only buying and selling, but also

serving customers and collaborating with business partners.1 With the fast growth of information

technology and the accelerated use of the Internet, Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), and Supply Chain Management (SCM) are the

potent e-business infrastructure. Integration of these applications is the key to success of modern business. Integration allows the unlocking of information to make it available to any-user,

anywhere, any-time. Applications of ERP, CRM, and SCM are the strong backbone of e-

business.2

Introduction E-business

E-business introduces three high profile strategic initiatives that an organization can undertake to

help it gain competitive advantages and increases Business Driven Technology efficiencies

a) Enterprise Resource Planning (ERP) b) Customer Relationship Management (CRM) c) Supply Chain Management (SCM) and

Companies that are successful in the Digital Economy understand that current business designs

and models are insufficient to meet the challenges of doing business in the e-business era. A

close look at such leading companies as Amazon.com, Dell, and Cisco will provide inside into a

new kind of business model that focuses on having a finely tuned integration of business,

technology, and process. These companies frequently use technology to streamline supply chain

operations, prove customer loyalty, gain visibility into enterprise wide information, and

ultimately drive profit growth. To thrive in the e-business world, organizations must structurally

transform their internal architectures. They must integrate their disparate systems into a potent e-

business infrastructure.3

Most organization today has no choice but to piecemeal their application together since no one

vendor can respond to every organization need; hence customers purchase multiple applications

from multiple vendors. As a result, large companies usually have multiple applications that are

not designed to work together and find themselves having to integrate business solutions. For

example a single organization might choose its CRM components from Seibel, SCM

components from i2, financial components from Oracle, and HR management components from Peoplesoft.

Effectively managing the transformation to an integrated enterprise will be critical to success of

the 21st century organization. The key to an integrated enterprise is the integration of the


disparate IT applications. An integrated enterprise infuses support areas, such as finance and

human resources, with a strong customer orientation. Integrations are achieved using middleware

Several different types of software which sit in the middle of and provide connectivity between

disparate systems. Enterprise application integration(EAI) middleware represents a new

approach to middleware by packaging together commonly used functionally, such as providing

prebuilt links to popular enterprise applications, which reduces the time necessary to develop

solutions that integrate applications from multiple vendors. A few leading vendors of EAI

middleware include Active Software, Vitria Technology, and Extricity.

(Please see figure on 4.1) displays the data points where these applications integrate and

illustrates the underlying premise of e-business architecture infrastructure design: companies run

on interdependent applications. If one application of the company does not function well, the

entire customer value delivery systems are affected. The world-class enterprise of tomorrow

must be build on the foundation of world-class application today.

Figure 4.1 Source: http://nd20111517.blogspot.com/

Companies are expecting e-business to increase profitability, create competitive differentiation,

and support innovative business practices. To achieve these goals, companies must evolve

through distinct stages, from integrated processes to truly synchronized inter-enterprise

communities. Getting e-business applications based on different technologies and with differing

business models and data models to work together are a key issue for 21st century organizations.

4

Supply Chain consists of all parties involved, directly or indirectly, in the procurement of

a product or raw material


SCM : involves the management of information flows between and among stages in a

supply chain to maximize total supply chain effectiveness & profitability

Figure 4.2 http://www.intellisat.com/Integration.htm

4.2 What is Enterprise Resource Planning (ERP)? Write importance of ERP in business.

Business of all kinds has now implemented Enterprise Resource Planning (ERP) systems. ERP

serves as a cross-functional enterprise backbone that integrates and automates many internal

business process and information systems within the manufacturing, logistics, distribution,

accounting, finance, marketing and human resource functions of a company.

Enterprise resource planning (ERP) is a cross-functional enterprise system driven by an

integrated suite of software modules that supports the basic internal business process of a

company. ERP software for a manufacturing company will typically process the data from and

track the status of sales, inventory, shipping and invoicing, as well as forecast raw material and

human resource requirements, presents the major application components of an ERP system.5


Figure 4.3 Source: erp.manufacturer-supplier.com

ERP is the technological backbone of e-business, an enterprise-wide transaction framework

with links into sales order processing, inventory management control, production and

distribution planning and finance.

Enterprise resource planning (ERP) integrates all departments and functions throughout an

organization into a single IT system (or integrated set of IT systems) so that employees can make

enterprise-wide decisions by viewing enterprise-wide information on all business operations. The

key word in ERP is enterprise and not necessarily resource or planning.6

Understanding that typical organizations operate by functional areas, which are often called

functional silos if they are not integrated, is the best way to see the value of ERP. Following

figure provides graphical depiction of an organization, with functional silos. Each functional area

undertakes a specific core business function:

Sales and Marketing: demand forecasting, sales forecasting, market segmentation, advertising, campaigns, and promotion, bids and quotes, order processing, order

management, customer relationship management, and customer support.

Operations and Logistics: purchasing, supplying, receiving, transportation, production, shipping, manufacturing and maintenance, production planning, materials

management, order entry and processing, warehouse management, transportation

management, and customer service management.

Accounting and Finance: financial and cost accounting, planning, budgeting, cash flow, tax compliance, general ledger, accounts receivable, accounts payable, treasury

management, and cost control.

Human Resources: hiring, training, benefits, and payroll.


Figure 4.4 Haag, Stephan et. el. (2006). Business Driven Technology, New York: McGraw-Hil. P. 26

4.3 What are the Benefits of the ERP systems? Explain.

Online Data Flow decreases the process time

Fast & Online Confirmation

Less Paperwork

No need for folder storage

Database Security

Less Employee needed

Easy Financial Management

Better Inventory Management

Easy to use Accounting Information Systems

User friendly Marketing Management Systems

ERP can greatly improve the quality and efficiency of a business. By keeping a company's internal business process running smoothly, ERP can lead to better outputs

that will benefit the company such as customer service, and manufacturing.

ERP provides support to upper level management to provide them with critical decision making information. This decision support will allow the upper level

management to make managerial choices that will enhance the business down the

road.

ERP also creates a more agile company that can better adapt to situations and changes.

ERP makes the company more flexible and less rigidly structured in an effort to allow

the different parts of an organization to become more cohesive, in turn, enhancing the business both internally and externally.


ERP systems can run on a variety of computer hardware and network configurations,

typically employing a database as a repository for information.

Enterprise Resource Planning (ERP) is business management software that allows an

organization to use a system of integrated applications to manage the business. ERP

software integrates all facets of an operation, including development, manufacturing,

sales and marketing.

Enterprise Resource Planning (ERP) software systems integrate internal and external

management information across an entire organization, embracing finance, accounting,

manufacturing, sales and service, customer relationship management etc. ERP systems

automate this activity with an integrated software application. The purpose of ERP is to

facilitate the flow of information between all business functions inside the boundaries of

the organization and manage the connections to outside stakeholders. ERP systems can

run on a variety of computer hardware and network configurations, typically employing a

database as a repository for information.

Enterprise resource planning (ERP) integrates all departments and functions throughout

an organization into a single IT system (or integrated set of IT systems) so that

employees can make enterprise-wide decisions by viewing enterprise-wide information

on all business operations. The key word in ERP is enterprise and not necessarily resource or planning. Understanding that typical organizations operate by functional

areas, which are often called functional silos if they are not integrated, is the best way to

see the value of ERP.

4.5 What are the different types of ERP Software? Explain.

Enterprise Resource Planning (ERP) is business management software that allows an

organization to use a system of integrated applications to manage the business. ERP software

integrates all facets of an operation, including development, HRH, sales and marketing.

Recent mostly used ERP software are:

Sage ERP 300 (formerly ACCPAC)

Microsoft Dynamics NAV SAP BusinessOne Epicor 9 (formerly Vantage) Microsoft Dynamics GP Macola ES (Exact Software) Sage ERP 100 Netsuite SysPro Sage ERP X3

Enterprise Resource Planning (ERP) systems integrate internal and external management

information across an entire organization, embracing finance/accounting, manufacturing, sales

and service, customer relationship management, etc. ERP systems automate this activity with an


integrated software application. The purpose of ERP is to facilitate the flow of information

between all business functions inside the boundaries of the organization and manage the

connections to outside stakeholders. ERP systems can run on a variety of computer hardware and

network configurations, typically employing a database as a repository for information. ERP

systems includes different types of software modules like Sales Monitoring Systems, Inventory

Management, Purchasing, Vender Integration, CRM, Payroll Management, Accounting, Internet

connectivity software, and Customer support software etc.

Figure 4.5 Source: http://www.acsonnet.com/images/erp

4.6 Integration of ERP Software

ERP systems connect to realtime data and transaction data in a variety of ways. These systems are typically configured by systems integrators, who bring unique knowledge on process,

equipment, and vendor solutions.

Direct integration-ERP systems have connectivity (communications to plant floor equipment)

as part of their product offering. This requires the vendors to offer specific support for the plant

floor equipment that their customers operate. ERP vendors must be expert in their own products,

and connectivity to other vendor products, including competitors.

Database integration-ERP systems connect to plant floor data sources through staging tables in

a database. Plant floor systems deposit the necessary information into the database. The ERP

system reads the information in the table. The benefit of staging is that ERP vendors do not need

to master the complexities of equipment integration. Connectivity becomes the responsibility of

the system integrator.


Enterprise appliance transaction modules (EATM)these devices communicate directly with plant floor equipment and with the ERP system via methods supported by the ERP system.

EATM can employ a staging table, Web Services, or systemspecific program interfaces (APIs). The benefit of an EATM is that it offers an offtheshelf solution.

Customintegration solutions-many system integrators offer custom solutions. These systems

tend to have the highest level of initial integration cost, and can have a higher long term

maintenance and reliability costs. Long term costs can be minimized through careful system

testing and thorough documentation. Customintegrated solutions typically run on workstation or server class computers.

4.6 What is the Data migration process of ERP?

Data migration is the process of moving, copying and restructuring data from an existing system

to the ERP system. Migration is critical to implementation success and requires significant

planning. Unfortunately, since migration is one of the final activities before the production

phase, it often receives insufficient attention. The following steps can structure migration

planning.

Identify the data to be migrated

Determine migration timing

Generate the data templates

Freeze the toolset

Decide on migration-related setups

Define data archiving policies and procedures.

4.7 What are the advantages of ERP? Explain.

The fundamental advantage of ERP is that integrating the myriad processes by which businesses

operate saves time and expense. Decisions can be made more quickly and with fewer errors.

Data becomes visible across the organization. Tasks that benefit from this integration include:

Sales forecasting, which allows inventory optimization

Chronological history of every transaction through relevant data compilation in

every area of operation.

Order tracking, from acceptance through fulfillment

Revenue tracking, from invoice through cash receipt

Matching purchase orders (what was ordered), inventory receipts (what arrived),

and costing (what the vendor invoiced) ERP systems centralize business data,

bringing the following benefits:

They eliminate the need to synchronize changes between multiple systemsconsolidation of finance, marketing and sales, human resource, and manufacturing

applications

They bring legitimacy and transparency in each bit of statistical data.

They enable standard product naming/coding.


They provide a comprehensive enterprise view (no "islands of information").

They make realtime information available to management anywhere, any time to make proper decisions. They protect sensitive data by consolidating multiple

security systems into a single Structure.

Figure 4.8 Source: http://www.acsonnet.com/images/erp

4.8 What is Customer Relationship Management (CRM)? Write importance of CRM in business.

Customer Relationship Management (CRM) uses Information Technology to create a cross-

functional enterprise system that integrates and automates many of the customers serving

processes in sales, marketing, and customer services that interact with a companys customer. CRM systems also create an IT framework of Web-enable software and databases that integrates

these processes with the rest of a companys business operations. CRM systems include a family of software modules the provides the tools that enable a business and its employees to provide

fast, convenient, dependable, and consistent service to its customers.7

Customer relationship management (CRM) is a widely implemented model for managing a

companys interactions with customers, clients, and sales prospects. It involves using technology to organize, automate, and synchronize business processesprincipally sales activities, but also those for marketing, customer service, and technical support.8 The overall goals are to find,

attract, and win new clients, service and retain those the company already has, entice former


clients to return, and reduce the costs of marketing and client service. Customer relationship

management describes a company-wide business strategy including customer-interface

departments as well as other departments. Measuring and valuing customer relationships is

critical to implementing this strategy. 9

Figure 4.9 Source : http://www.marketingteacher.com/lesson-store/lesson-crm.html

Customer Relationship Management (CRM) involves managing all aspects of a customers relationship with an organization to increase customer loyalty and retention and an

organizations profitability.10 CRM allows an organization to gain insights into customers shopping and buying behavior in order to develop and implement enterprise-wide strategies.

Kaiser Permanente, for example, undertook a CRM strategy to improve and prolong the lives of

diabetics. After compiling CRM information on 84,000 of its diabetic patients among its 2.4

million northern California members, Kaiser determined that only 15 to 20 percent of its diabetic

patients were getting their eyes checked routinely. Diabetes is the leading eye-screening

programs for diabetics and creating support groups for obesity and stress (two more factors that

make diabetes even worse). This CRM-based preventive medicine approach is saving Kaiser considerable sums of money and saving the eye-sight of diabetic patients.

A Customer Relationship Management (CRM) system uses information about customers to gain

insights into their needs, wants, and behaviors in order to serve them better. Customers interact

with companies in many ways, and each interaction should be easy, enjoyable, and error free.

CRM systems typically include such functions as:

Sales force automation

Customer service and support

Marketing campaign management and analysis

Improve customer satisfaction

Share customer information more easily

Increase sales by up selling and cross selling other products

Identify most profitable and unprofitable customers


There are many pieces of software available that offer customer relationship management

features, but in reality, CRM goes beyond software implementation. It's a business strategy that

often involves using multiple pieces of software, as well as implementing policies that promote

(1) the collection of customer information, and (2) the use of that information by individuals

throughout the company in order to maximize customer service and increase sales. 11

4.9 What are the benefits of CRM in business?

A Customer Relationship Management (CRM) system may be chosen because it is thought to

provide the following advantages, Quality and efficiency:

Decrease in overall costs

Increase Profitability

Increase Sales

Operations

Marketing

Information Technology

Customer Service

Support

The customer relationship management system is an enterprise system, which means that it spans

multiple departments. Virtually all departments within a corporation have at least some indirect

access to customers, or customer information; the goal of CRM is to collect that information in a

central repository, analyze it, and make it available to all departments. For example, a company's

call center may have a "screen pop," a small application that is connected to the phone system.

This application, which is a type of CRM, automatically senses who is calling, and by the time

the agent answers the phone, produces a screen on the computer that lists important information

about the caller, such as what they have purchased in the past, what they are likely to buy in the

future, and what products the company may have available that would go well with what the

customer has already bought. This "screen pop" is made up of several bits of information from

different databases; it may draw on information from the accounting department to show the


agent what their current balance may be; it may draw on information from the sales department

to show what has been purchased recently, and it may draw on information from the credit

department to show the agent what terms can be offered.

4.10 What is Supply Chain Management (SCM)? Write benefits of SCM in business.

Supply chain management (SCM) is the management of an interconnected or interlinked

between network, channel and node businesses involved in the provision of product and service

packages required by the end customers in a supply chain. Supply chain management spans the

movement and storage of raw materials, work-in-process inventory, and finished goods from

point of origin to point of consumption. It is also defined as the "design, planning, execution,

control, and monitoring of supply chain activities with the objective of creating net value,

building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with

demand and measuring performance globally."

Figure 4.4 Source: http://en.wikipedia.org/wiki/File:Supply_and_demand_network_(en).png

Supply Chain Management (SCM) helps a company get the right products, to the right place, at

the right time, in proper quantity and at an acceptable cost. The goal of SCM is to efficiently

manage this process by forecasting demand, controlling inventory, enhancing the network of

business relationships a company has with customers, suppliers, distributors, and others, and

receiving feedback on the status of every link in the supply chain. The another goal of Supply

Chain Management is to create a fast, efficient, and low-cost network of business relationships,

or supply chain, to get a companys products from concept to market.12


Supply chain management (SCM) is the management of a network of interconnected businesses

involved in the provision of product and service packages required by the end customers in a

supply chain. Supply chain management spans all movement and storage of raw materials,

work-in-process inventory, and finished goods from point of origin to point of consumption.

Another definition is provided by the APICS Dictionary when it defines SCM as the "design,

planning, execution, control, and monitoring of supply chain activities with the objective of

creating net value, building a competitive infrastructure, leveraging worldwide logistics,

synchronizing supply with demand and measuring performance globally.13

Figure 3.13 Source: http://en.wikipedia.org/wiki/Supply_chain_management

Supply Chain Management (SCM) involves the management of information flows between and

among stages in a supply chain to maximize total supply chain effectiveness and profitability.

The four basic components of supply chain management are: 14

1. Supply chain strategy- the strategy for managing all the resources required to meet customer demand for all products and services.

2. Supply chain Partner- the partners chosen to deliver finished products, raw materials,

and services including pricing, delivery, and payment processes along with partner

relationship monitoring metrics.

3. Supply chain Operation- the schedule or production activities including testing,

packaging, preparation for delivery. Measurements for this component include

productivity and quality.

4. Supply chain logistics- the product delivery processes and elements including orders,

warehouse, carriers, defective product returns, and invoicing.


References

1 Haag, Stephan et. el. (2006). Business Driven Technology, New York: McGraw-Hil. P. 136 2 Ibid, p.122 3 Ibid, p.121 4 Ibid, p.124 5 O Brien, James A.(2004). Management Information Systems, New Delhi:Tata McGraw-Hill Publication Co. Ltd. P. 194 6 Haag, Stephan et. el. (2006). Business Driven Technology, New York: McGraw-Hil. P. 26 7 O Brien, James A.(2004). Management Information Systems, New Delhi:Tata McGraw-Hill Publication Co. Ltd. P. 184 8 http://en.wikipedia.org/wiki/Customer_relationship_management#cite_note-0 9 http://en.wikipedia.org/wiki/Customer_relationship_management#cite_note-dest1-2 10 Haag, Stephan et. el. (2006). Business Driven Technology, New York: McGraw-Hil. P. 24 11 http://www.wisegeek.com/what-is-customer-service.htm

12 O Brien, James A.(2004). Management Information Systems, New Delhi:Tata McGraw-Hill Publication Co. Ltd. P. 201-203

13 ://en.wikipedia.org/wiki/File:Supply_and_demand_network_(en).png

14 Haag, Stephan et. el. (2006). Business Driven Technology, New York: McGraw-Hil. P. 22-21

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