Crm Erp Scm 256j5r

Enterprise Business Systems

1

Learning Objectives 1. Identify and give examples to illustrate the following aspects of Integrated Information Systems, customer relationship management, enterprise resource management, and supply chain management systems: • • •

Business processes ed Customer and business value provided Potential challenges and trends

CRM - SCM - ERP

2

Why? • "many organizations are using information technology to develop integrated crossfunctional enterprise systems that cross the boundaries of traditional business functions (such as marketing and finance), in order to reengineer and improve vital business processes all across the enterprise and improve the efficiency and effectiveness of business objectives. CRM - SCM - ERP

3

How? • Organizations view cross-functional enterprise systems as a strategic way to use IT to share information resources and improve the efficiency and effectiveness of business processes, and develop strategic relationships with customers, suppliers, and business partners.

CRM - SCM - ERP

4

• Thus, instead of having functional mainframe-based legacy systems, organizations are shifting to integrated cross functional client/server applications, for example • ERP, SCM or CRM software systems from SAP, People Soft, Oracle, etc.

CRM - SCM - ERP

5

Why Integrated solutions? • Enterprise software focuses on ing integrated groups of business processes rather than information processing requirements of the respective business function. • ERP focuses on efficiency of a firm’s internal production logistics distribution, HR, and Financial processes. • CRM focuses on acquiring and retaining profitable customers through marketing, sales and service processes • SCM focuses on developing the most efficient and effective souring and procurement processes with suppliers for the products and services needed by a business. • Knowledge management (KM) applications focus on providing a firm’s employees with tools that group collaboration and decision (Sawhney Mohan, and Jeff Zabin, 2001). CRM - SCM - ERP

6

What is Cross – Functional Enterprise • cross-functional components are a set of extremely powerful components designed for streamlining, simplifying and handling critical processes found within most industries and businesses. • These processes include business performance, customer relationship management, supply chain management, business modeling, as well as document, quality and project management. CRM - SCM - ERP

7

• Business Modeler lets companies view their organization in of business processes. • Through its PC-based tools, methods, and graphical models that make it easier to match a company’s existing processes with the best-practice processes that IFS Applications s, it gives insight into ways to re-engineer businesses to be more efficient, more profitable and focused on customer satisfaction. CRM - SCM - ERP

8

Corporate Performance Management • Continuous improvement is essential for long-term profitability. • Corporate Performance Management is an integrated performance management system for measuring functions and processes. • It allows s to analyze areas for improvement and focus on results gained from changes, in order to make better strategic and operational decisions. CRM - SCM - ERP

9

Customer Relationship Management (CRM)

• Customer Relationship Management is essential for all types of business situations, enabling for business proposals and decisions in every interaction with the customer.

CRM - SCM - ERP

10

Quality Management • Quality management relies on two major considerations. • One a proactive decision making process. And • two, failure prevention.

• Therefore to maintain quality you need a Quality Management system that ensures you receive a steady flow of data via a totally integrated and highly accessible solution. CRM - SCM - ERP

11

Document Management • With Document Management™, you get full control over your company's documentation to focus on the things that really matter: • selling your products and services, • keeping your plant and equipment in top shape, and • ultimately meeting or exceeding your business goals.

CRM - SCM - ERP

12

Project Management • Without a progressive approach to project management a business runs the risk of allowing its operational efficiency to gradually decline. • With the right project management enterprise tools a company can review its business projects, both new and old, and continually raise them to higher levels.

CRM - SCM - ERP

13

Business Modeling • Anticipating your customers changing requirements is the best way to maintain their loyalty. • But it can only be successfully achieved when you have a business modeling solution that gives you a precise insight into what you’ll need to re-engineer your business to meet the change.

CRM - SCM - ERP

14

Why Study Customer Relationship Management? • It is easier than ever for customers to comparison shop and, with a click of the mouse, to switch companies. As a result, customer relationships have become a company’s most valued asset.

CRM - SCM - ERP

15

Customer Relationship Management (CRM) Definition: • The use of information technology to create a cross-functional enterprise system that integrates and automates many of the customer-serving processes in sales, marketing, and customer services that interact with a company’s customers

CRM - SCM - ERP

16

Customer Relationship Management (CRM) • CRM is application which takes care of the sales activities, customer interactions, marketing products and customer service. • The role of CRM is restricted to the sales related activities only.

CRM - SCM - ERP

17

CRM Application Clusters

CRM - SCM - ERP

18

CRM Application Components • and Management – helps sales, marketing, and service professionals capture and track relevant data about every past and planned with prospects and customers, as well as other business and life cycle events of customers • Sales – provides sales reps with tools and company data sources needed to and manage sales activities, and optimize crossselling and up-selling CRM - SCM - ERP

19

CRM Application Components • Marketing Fulfillment – help marketing professionals accomplish direct marketing campaigns by automating such tasks as qualifying leads for targeted marketing, and scheduling and tracking direct marketing mailings • Customer Service and – provides service reps with software tools and real-time access to the common customer database shared by sales and marketing professionals CRM - SCM - ERP

20

CRM Application Components • Retention and Loyalty Programs – help a company identify, reward, and market to their most loyal and profitable customers

CRM - SCM - ERP

21

Three Phases of CRM

CRM - SCM - ERP

22

Three Phases of CRM • Acquire new customers by doing a superior job of management, sales prospecting, selling, direct marketing, and fulfillment • Enhance relationship with customer by ing superior service from a responsive networked team of sales and service specialists and business partners

• Retain and expand business with customers by proactively identifying and rewarding the most loyal and profitable customers CRM - SCM - ERP

23

Benefits of CRM • CRM allows a business to identify and target their best customers so they can be retained as lifelong customers for greater and more profitable services. • CRM makes possible real-time customization and personalization of products and services based on customer wants, needs, buying habits, and life cycles. CRM - SCM - ERP

24

Benefits of CRM • CRM can keep track of when a customer s the company, regardless of the point.

• CRM systems can enable a company to provide a consistent customer experience and superior service and across all the points a customer chooses.

CRM - SCM - ERP

25

CRM Failures • Lack of understanding and preparation • Rely on CRM to solve business problem without first developing the business process changes and change management programs that are required • CRM projects implemented without the participation of the business stakeholders involved CRM - SCM - ERP

26

Trends in CRM • Operational • Analytical

• Collaborative • Portal-based

CRM - SCM - ERP

27

Operational CRM • s customer interaction with greater convenience through a variety of channels.

• Synchronizes customer interactions consistently across all channels • Makes your company easier to do business with CRM - SCM - ERP

28

Analytical CRM • Extracts in-depth customer history, preferences, and profitability information from your data warehouse and other databases • Allows you to analyze, predict, and derive customer value and behavior and forecast demand

• Lets you approach your customers with relevant information and offers that are tailored to their needs CRM - SCM - ERP

29

Collaborative CRM • Enables easy collaboration with customers, suppliers, and partners • Improves efficiency and integration throughout the supply chain • Allows greater responsiveness to customer needs through sourcing of products and services outside of your enterprise CRM - SCM - ERP

30

Portal-based CRM • Provides all s with the tools and information that fit their individual roles and preferences • Empowers all employees to respond to customer demands more quickly and become truly customer-focused • Provides the capability to instantly access, link, and use all internal and external customer information CRM - SCM - ERP

31

Partner Relationship Management (PRM) Definition: • Applications that apply many of the same tools used in CRM systems to enhance collaboration between a company and its business partners, such as distributors and dealers, to better coordinate and optimize sales and service to customers across all marketing channels

CRM - SCM - ERP

32

Enterprise Resource Planning (ERP) Definition: • A cross-functional enterprise system driven by an integrated suite of software modules that s the basic internal business processes of a company

CRM - SCM - ERP

33

Enterprise Resource Planning (ERP) • ERP is application software, which automates the internal functional departments of an organization. There will be a smooth flow of information across the functions like s, production, human resource and istration. • ERP looks after the supply chain management, production management and s management. There is no such a tool available in the industry which can cater all the issues across the company. CRM - SCM - ERP

34

ERP Application Components

CRM - SCM - ERP

35

ERP Process & Information Flows

CRM - SCM - ERP

36

ERP Benefits • Quality and Efficiency – ERP creates a framework for integrating and improving a company’s internal business processes that results in significant improvements in the quality and efficiency of customer service, production, and distribution

• Decreased Costs – Significant reductions in transaction processing costs and hardware, software, and IT staff CRM - SCM - ERP

37

ERP Benefits • Decision – Provides vital crossfunctional information on business performance quickly to managers to significantly improve their ability to make better decisions in a timely manner • Enterprise Agility – ERP breaks down many former departmental and functional walls of business processes, information systems, and information resources CRM - SCM - ERP

38

Costs of ERP

CRM - SCM - ERP

39

Causes of ERP Failures • Business mangers and IT professionals underestimate the complexity of the planning, development, and training needed • Failure to involve affected employees in the planning and development phases • Trying to do too much too fast in the conversion process • Failure to do enough data conversion and testing CRM - SCM - ERP

40

Trends in ERP

CRM - SCM - ERP

41

Enterprise Resources Planning (ERP) Definition 1 (Cont.) Includes: Typical MRP II Functions

Quality Functions

Sales Force Automation

Field Service Functions

Engineering Function / PDM

Complete Financial Functions

Advance Manufacturing Function Human Resources Functions

Distribution / Logistics Functions Management Reporting ERP is a System for the Entire Company – A Global Tightly Integrated Closed-Loop System (1) Source: APICS Complex Industries Special Interest Group

Typical ERP Functionality

Engineering / Product Date MGT.  Document Creation, Management & Control  CAD Interface / Image Management  Configuration Management - Change Order Creation & Control - Revision Control  Engineering Data Management

Engineering / Product Date MGT. (Cont.)  Product Information Management  Technical Data Management  Technical Information Management  Engineering Item Data & BOMs

Manufacturing  MRPII Functionality - MPS, BOM, Routings, MRP, CRP, PAC

 Sales & Operations Planning  Integrated Production Configuration  Statistical Inventory Control  Flexible Product & Job Costing Options  Kanban / JIT / Flow Manufacturing  Theory of Constraints / Advanced Planning Systems

Sales and Operations Planning  Balance market demand with resource capability  Develops a contract between Manufacturing and Marketing  A single set of numbers upon which to base plans

and schedules  Manages Inventory and Backlog  Forecasting

Advance Planning and Optimizing Systems  Supply Chain optimization  Constraint-based multi-location master planning - Generation of feasible production plans across multiple plants

Advance Planning and Optimizing Systems (Cont.)  Constraint-based factory level scheduling

- Generation of feasible schedules (integrated with feasible production plan)  Optimized distribution and transportation planning - Intelligent allocation of inventory through a network

Distribution / Logistics  Purchasing  Supplier Reliability Analysis  Distribution Requirement Planning  Global Transportation Management  Fleet Management

 Shipping & Receiving  Import / Export  Warehouse Management

Human Resources  Requisition Management  Applicant Tracking  Employee Master  Job Descriptions  Employee Evaluations

 Training & Certification Management  Payroll Deduction ing  Benefits Tracking

Quality  Quality Management Plans  Quality Specifications / Requirements  Test / Inspection Results  Cause and Corrective Action Tracking  Process / Product Certification  Statistical Quality Control  Cost of Quality Reporting  Equipment & Tool Calibration Mgt

Finance  Financial Budgets  General Ledger  s Payable

 s Receivable  Payroll  Fixed Assets  Cash Management  Activity Based Costing  Financial Statements

Field Service  Installation Management  As-maintained BOM  Warranty Tracking

 Preventative Maintenance Scheduling & Control  Service Order Planning & Control

Typical ERP Integration

Typical ERP Integration  System Wide Elements  Project Management & Project Costing (EVM)  Executive Management Information System  Work Flow Management

 Multi-Company

Typical ERP Integration  Multi-Currency  Multi-Lingual  Multi-Mode  EDI / Electronic Commerce

 Web Enabled / Internet Communications  Imaging & Multi Media

Features • Each application has got its own features and benefits in a different way. • With the help of ERP, the business owner integrates the internal business process by automating all the departments. • CRM, tracks the marketing related activates, individual sales performances, customer services and all. • CRM is restricted to only marketing and sales departments. CRM - SCM - ERP

58

Benefits of CRM • Automated sales and marketing process • Regular work tracking of the sales person, which in turn leads to the higher sales productivity • Helps the company in cross selling the products, if the company is into multiple product lines • Ameliorated customer service as the system will automatically warns the sales person regarding the deadlines and this also leads to higher sales closures • Reduced expenses • Overall, higher profitability CRM - SCM - ERP

59

Benefits of ERP • Automated business environment leads to effective communication • Smooth flow of information between the interdepartments and intra-departments • Reduced lead time of the manufacturing products • Availability of relevant and accurate information on timeliness • Better decision making • Helps in improving ROI in the long-run CRM - SCM - ERP

60

Supply Chain Management (SCM) Definition: • A cross-functional interenterprise system that uses information technology to help and manage the links between some of a company’s key business processes and those of its suppliers, customers, and business partners

CRM - SCM - ERP

61

SCM Life Cycle

CRM - SCM - ERP

62

Electronic Data Interchange (EDI) Definition: • Involves the electronic exchange of business transaction documents over the Internet and other networks between supply chain trading partners

CRM - SCM - ERP

63

EDI Activities

CRM - SCM - ERP

64

Role of SCM

CRM - SCM - ERP

65

SCM Planning Functions • Supply Chain Design – optimize network of suppliers, plants, and distribution centers

• Collaborative Demand and Supply Planning – develop an accurate forecast of customer demand by sharing demand and supply forecasts instantaneously across multiple tiers CRM - SCM - ERP

66

SCM Execution Functions • Materials Management – share accurate inventory and procurement order information, ensure materials required for production are available in the right place at the right time, and reduce raw material spending, procurement costs, safety stocks, and raw material and finished goods inventory

• Collaborative Manufacturing – optimize plans and schedules while considering resource, material, and dependency constraints CRM - SCM - ERP

67

SCM Execution Functions • Collaborative Fulfillment – commit to delivery dates in real time, fulfill orders from all channels on time with order management, transportation planning, and vehicle scheduling, and the entire logistics process, including picking, packing, shipping, and delivery in foreign countries • Supply Chain Event Management – monitor every stage of the supply chain process, from price quotation to the moment the customer receives the product, and receive alerts when problems arise CRM - SCM - ERP

68

SCM Execution Functions • Supply Chain Performance Management – report key measurements in the supply chain, such as filling rates, order cycle times, and capacity utilization

CRM - SCM - ERP

69

Porter’s Value Chain Model (1985)

PRIMARY ACTIVITIES • • • • •

In bound logistics (in puts) Supply Operations (manufacturing & testing) Chain Outbound logistics (storage & distribution) Marketing & sales Service

CRM - SCM - ERP

70

70

SCM Objectives

CRM - SCM - ERP

71

Case: How Dell Reengineered its Supply Chain Problem:  Dell pioneered the mail order approach to selling PCs  In 1993, Compaq cuts prices to drive Dell out of the market. Dell experiences $65 million in losses. Solution:  Dell implements the following re-engineering strategies:      

mass customization just-in-time marketing electronic orders & shipments e-collaboration with major buyers reduction in testing period monitoring of productivity & returns on investments

72

Case: How Dell Reengineered its Supply Chain (cont.) Results:

 In 2001, Dell made over $4 million in computer web sales/ day.  Becomes leader in Customer Relationship Management (CRM)  Online tracking of orders & shipments  Viewer approved configurations and pricing

 Customized home pages for clients.  Use of Intelligent Agents in production process.  Increased communication with suppliers.  By 1999, Dell becomes the number two PC seller and is a leader in management & profitability.

73

Lessons from the Case  By introducing a new business model , one can change the manner in which business is done.

 To implement this model on a large scale, one needs to build superb supply chain management.

 Another major success factor in Dell‟s plans was the improvements made in its logistics system along the entire supply chain.

 Improved communications and customer service, which are part of Dell‟s CRM program, are the cornerstones of its success.

 Dell was using c-Commerce with its business partners.

74

Supply Chain & Value Chain Definitions SUPPLY CHAIN flow of materials, information, payments, and services from raw material suppliers, through factories and warehouses, to the end customers. DEMAND CHAIN the process of taking orders. SUPPLY CHAIN MANAGEMENT (SCM) to plan, organize, and coordinate all the supply chain’s activities.

75

Benefits of SCM

Reduces uncertainty & risks in the supply chain.

This positively affects inventory levels, cycle time, business processes & customer service.

Contributes to overall increase in profitability & competitive advantage.

76

Components of Supply Chain

77

Components of Supply Chains Upstream Supply Chain  Organization‟s first tier suppliers & their suppliers.

Internal Supply Chain  Processes used by an organization to transform their inputs to outputs.

Downstream Supply Chain  Processes involved in delivering the product to the final customers. 78

The Supply Chain  Involves the life of a product from „dirt to dust‟.  Involves movement of tangible & intangible inputs.  Can come in all shapes and sizes and may be fairly complex.  Can be bi-directional and involve the return of products (reverse logistics)

 The flow of goods, services, information & financial resources must be followed with an increase in value.

79

Sources of Supply Chain Problems UNCERTAINTY  In demand forecast  In delivery times & production delays

POOR COORDINATION  With Internal units and business partners  Ineffective customer service  High inventory costs, loss of revenue & extra cost for expediting services.

80

The Bull Whip Effect  The most persistent SCM problem.  Erratic shifts in orders up & down the supply chain.  Distributor orders fluctuate because of poor demand forecast, price fluctuation, order batching & rationing with supply chain.  Example: Porter & Gamble‟s distortion in SCM for manufacturing of disposable diapers.  Avoidable with proper interorganizational EC.  EDI, Extranets & Groupware technology 81

Solutions to Supply Chain Problems  Vertical Integration  Purchasing & managing the supply source.

 Building Inventories  “Insurance” against supply chain shortages.  Main problem: It is difficult to correctly determine inventory level for each product & part. This can be costly.

82

CASE: How Littlewoods Improved its SCM Problem:

 Littlewoods Large British clothing retailer with 136 stores in the UK & Ireland.  Overstocking problems in the supply chain management.

Solution:  Introduced web-based performance reporting system.  Enabled merchandising personnel to make more accurate stock, sales and supplier decisions. Results:  In 1997, Littlewoods saves $1.2 million as a direct result of its strategic price merchandizing.

83

Other Solutions to SCM Problems  During peak times, outsource rather than do-it-yourself.  “Buy” rather than “make” production inputs when appropriate.  Configure optimal shipping plans.  Create strategic partnerships with suppliers.  Use the just-in-time approach to purchasing.  Reduce the lead time for buying and selling.  Use fewer suppliers.  Improve supplier-buyer relationships.  Manufacture only after orders are in.  Achieve accurate demand by working closely with suppliers. 84

Two Tools for Reducing Supply Chain Problems  Supply Chain Teams  “Teams of tightly integrated business that work together and serve the customers”

 Measurements & Metrics  Use of IT for measuring areas in need of improvement. For example;

   

Delivery on time Quality at unloading area Cost performance Lead time for procurement 85

COMPUTERIZED SYSTEMS & S.C.M. PHASE 1: 1950s - 60s, the first software programs to the supply chain arrive. PHASE 2: Development of the Material Requirement Protocol (MRP).

PHASE 3: Enhanced MRP known as Material Resource Planning become available. PHASE 4: Enterprise Resource Planning (ERP) integrates transaction processing activities. PHASE 5: Extended ERP/SCM software.

86

COMPUTERIZED SYSTEMS & S.C.M.

87

Benefits of Systems Integration Source: Sandoe & Saharia (2001)

TANGIBLE BENEFITS

    

  

Inventory reduction Personnel reduction Productivity improvement Order management improvement Financial-close cycle improvements IT cost reduction Procurement cost reduction Revenue/profit increases,

INTANGIBLE BENEFITS

     

Information visibility New/improved processes Customer responsiveness Standardization Flexibility Globalization and business performance

88

Value Chain Integration

“The process by which multiple enterprises within a shared market channel collaboratively plan, implement, and manage (electronically as well as physically) the flow of goods, services, and information along the entire chain in a manner that increases customer-perceived value.“

89

Integrating the Supply Chain & Value Chain  A Supply Chain transforms into an integrated Value Chain

when it…..  Extends the chain all the way from sub-suppliers to customers.  Integrates the back-office operations with those of the front office.  Becomes highly customer-centric, focusing on demand generation and customer service.  Is proactively designed by chain to compete as an “extended enterprise”.  Seeks to optimize the value added by information and utility-enhancing services. 90

Value Chain Integration

91

Case: Warner-Lambert’s Integrated Supply Chain Problem:

 WL requires assistance with demand forecast of products. Solution:  They use Manugistic Inc.‟s Demand Planning Information System to analyze their manufacturing, distribution and sales data.  The system is able to anticipate seasonal impact or a production line problem.

Results:  WL increases its „shelf fill‟ rate from 87% to 98%, earning them $8 million/year in additional sales.

92

Enterprise Resource Planning ERP = Process of planning & managing all resources & their use in the entire enterprise.

Leading ERP software producers SAP, Oracle, J.D. Edwards, Computer Associates, People Soft

MAIN OBJECTIVE of ERP

 to integrate all departments & functions across a company onto a single computer system.

93

Functions of ERP  Provides a single interface for managing routine manufacturing activities.

 Facilitates customer interaction & manages relationships with suppliers & vendors.

 Forces discipline & organization around business.  s istrative activities.

94

Post- ERP: 2nd Generation ERP  By the late 1990s, the major benefits of ERPs had been fully exploited.

 There was a need for planning systems oriented towards decision-making.

 Emergence of SCM systems that complement ERP

systems.  Provide intelligent decision capabilities.  Overlay existing system & pull data from every step of the supply chain.

95

How is SCM Integration Achieved? FIRST APPROACH

 Work with different software products from different vendors (i.e. one for ERP & one for SCM).

SECOND APPROACH

 ERP vendors add

decision and business intelligence capabilities.

 Creation of 2nd

generation ERP.

96

3 Ways to Provide Supply Chain Intelligence 1) Use an enhanced ERP package that includes business intelligence capabilities

2) Integrate the ERP with business intelligence software from a specialized vendor such as Brio, Cognus, or Comshare.

3) Create a “best of breed” system by using components from several vendors that will provide the required capabilities.

97

Componentization  Breaking large ERP systems into individual components that work together.

 Makes it easier for ERP vendors to enhance their solutions and for customers to upgrade their software.

 Helps vendors extend the core ERP system with

supply chain, sales force automation solutions, and customer relationship management (CRM). 98

ERP Implementation To avoid failures, the following factors should be considered;

 The customer‟s expectations.  The ERP product capabilities, and  The customer‟s organization gaps.

 The level of change the customer has to go through to make the system fit.

 The level of commitment within

the customer organization to see the project through.

and culture.

 The risks presented by politics within the customer organization.

 The consultant‟s capabilities, responsibilities and role (if applicable).

99

Application Service Providers & ERP Outsourcing  “ASP alternative” = A popular option today for businesses that want ERP functions but lease applications rather than building systems.

 Application Service Provider (ASP) is a software vendor that offers to lease ERP-based applications to other businesses.

 The ASP concept is especially useful in ERP projects, which are expensive to install and take a long time to implement, and for which staffing is a major problem.

100

Global Supply Chains  Some of the issues involved in

Global Supply Chains = Supply chains that involve suppliers and/or customers in other countries.

global supply chains;  legal issues, customs fees and taxes  language and cultural differences  fast changes in currency exchange rates  political instabilities.

101

CASE: LEGO Struggles with Global Issues Problem:  In a rush to get its innovative product to market, Lego did not first solve all necessary issues, for example;  The need for a ive distribution & service system.  Merging the offline and online operations  Existing warehouses were not optimized to handle distribution to individual customers  How to handle returns around the globe.  Invoicing must comply with the regulations of many countries.

Results:  Lego closed the Web site for business. It took almost a year to solve all global trade-related issues.

102

How EC contributes to SCM  Digitizes products such as

 Change the nature and structure

 Replaces all paper documents

 Results in shorter supply chain

 Replaces faxes, phone &

 Facilitates customer service.

software, which expedites the flow of materials. with electronic documents. telegrams with electronic messaging system.

 Enhances collaboration & information sharing.

of the supply chain from linear to a hub. and minimum inventories.

 Introduces efficiencies in buying & selling through the creation of e-marketplaces.

103

Buying & Selling along the Supply Chain A major role of EC is to facilitate buying and selling along the supply chain. The major activities are;

 UPSTREAM  INTERNAL SCM  DOWNSTREAM  COMBINED UPSTREAM / DOWNSTREAM

104

Integration of EC with ERP  Since most middle-sized and large companies already have an

ERP system, and since EC needs to interface with ERP, it makes sense to interconnect the two.

 By extending the existing ERP system to e-commerce,

organizations not only leverage their investment in the ERP solution, but also speed up the development of EC applications.

 The problem is that the ERP software is very complex and

inflexible (difficult to change), so it is difficult to achieve easy, smooth, and effective integration.

105

Order Fulfillment in EC  When a company sells direct to customers it is involved in the following activities:

 Quickly find the products to be shipped, and pack them.  Arrange for the packages to be delivered quickly to the customer‟s door.  Collect the money, either in advance, in COD, or by individual bill.  Handle the return of unwanted or defective products.

 Many companies find it very difficult to fulfill these activities

effectively & efficiently. This reveals that they have problems in their own supply chains. 106

Online Order Fulfillment & Logistics  While order fulfillment is a part of the back-office operations, it is strongly related to front-office operations.

 Recently, e-Tailors have faced continuous problems in order

fulfillment, especially during the holiday season.  For example, Amazon.com had to add physical warehouses in order to expedite deliveries and reduce order fulfillment costs.

 EC is based on the concept of “pull” operations, which begin with an order, frequently a customized one.  In the “pull” case it is more difficult to forecast demand.  Furthermore, in a B2C pull model, the goods need be delivered to the customer‟s door.

107

Innovative Solutions to Supply Chain Problems Galleryfurniture.com Uses dozens of cameras, (Webcam) to demonstrate its product inventory on the Web. This is an alternative to paper or electronic catalogs.

Garden.com

Developed proprietary software that allows it to collaborate with its 70 suppliers efficiently and effectively.

Mail Boxes Etc. & Return.com Rightfreight.com Developed a logistics system that determines whether a customer is entitled to a return & refund. .

Manages a marketplace that helps companies with goods to find "forwarders" -- the intermediary that prepare goods for shipping.

108

Automated Warehouses  Traditional warehouses are built to deliver large quantities to a small number of stores and plants. But in B2C EC, companies need to send small quantities to large number of individuals.

 Large-volume EC fulfillment requires special automated warehouses.  This may include robots and other devices that expedite the pick up of products.

 Most B2C is shipped via outsourcers.  Fingerhut handles the logistics of mail orders (including online orders) for Wal-Mart, Macys, and many others.

109

Options for Dealing with Returns  Return an item to the place where it was purchased.  This only works when there is a small amount of returns.

 Returns are shipped to an independent unit and handled separately inside the company.

 May be more efficient, but the buyer is still unhappy.

 Allow the customer to physically drop the returned items at collection stations.

 Such as convenience stores or Mail Boxes, Etc.

 Completely outsource returns.  Several outsourcers, including UPS provide such services. 110

MANAGERIAL ISSUES  Ethical issues. Conducting a supply chain management project may

result in the need to lay off, retrain, or transfer employees. Other ethical issues may involve sharing of personal information and computer programs.

 How much to integrate? While companies should consider extreme integration projects, including ERP, SCM, and electronic commerce, they should recognize that integrating sometimes results in failure.

 Role of IT. Almost all major SCM projects use IT. However, it is

important to that technology plays a ive role to organizational and managerial issues.

111

SCM Benefits • Faster, more accurate order processing • Reductions in inventory levels

• Quicker times to market • Lower transaction and material costs • Strategic relationship with suppliers CRM - SCM - ERP

112

Causes of SCM Failures • Lack of proper demand planning knowledge, tools and guidelines • Inaccurate or overoptimistic demand forecasts • Inaccurate production, inventory and other business data provided by a company’s other information systems • Lack of adequate collaboration among marketing, production, and inventory management departments within a company • Immature, incomplete or hard to implement SCM software tools CRM - SCM - ERP

113

Trends in SCM

CRM - SCM - ERP

114

Summary • Customer relationship management is a cross-functional enterprise system that integrates and automates many of the customer-serving processes in sales, marketing, and customer services that interact with a company’s customers.

CRM - SCM - ERP

115

Summary • Enterprise resource planning is a crossfunctional enterprise system that integrates and automates many of the internal business processes of a company, particularly those within the manufacturing, logistics, distribution, ing, finance, and human resource functions of the business.

CRM - SCM - ERP

116

Summary • Supply chain management is a crossfunctional inter-enterprise system that integrates and automates the network of business processes and relationships between a company and its suppliers, customers, distributors, and other business partners.

CRM - SCM - ERP

117

Chapter

End of Chapter

118