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Chapter 7: Enhancing Business Processes Using Enterprise Information Systems

Enterprise systems integrate business activities across the organization and with business partners

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Chapter 7 Learning Objectives

Core Business Processes and Organizational Value Chains

Explain core business processes that are common in organizations.

Enterprise Systems

Describe what enterprise systems are and how they have evolved.

Enterprise Resource Planning

Describe enterprise resource planning systems and how they help to improve internal business processes.

Achieving Enterprise System Success

Understand and utilize the keys to successfully implementing enterprise systems.

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Core Business Processes and Organizational Value Chains

Explain core business processes that are common in organizations.

Enterprise Systems

Describe what enterprise systems are and how they have evolved.

Enterprise Resource Planning

Describe enterprise resource planning systems and how they help to improve internal business processes.

Achieving Enterprise System Success

Understand and utilize the keys to successfully implementing enterprise systems.

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Organizations and Functions

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Core Business Processes

Order-to-Cash

The process of selling goods or services and collecting revenue for them

Procure-to-Pay

The process of ordering goods or services and paying for them

Make-to-Stock/Make-to-Order

The process of manufacturing goods, either based on forecasts or based on orders

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Core Business Processes:�Order-to-Cash

Functional Areas in Order-to-Cash

Marketing and Sales
Accounting and Finance
Manufacturing and Operations

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Core Business Processes:�Procure-to-Pay

Functional Areas in Procure-to-Pay

Supply Chain Management
Accounting and Finance
Manufacturing and Operations

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Core Business Processes:�Make-to-Stock and Make-to-Order

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An Example Supply Chain

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Organizational Activities Along the Value Chain

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Value Systems: Connecting Multiple Organizational Value Chains

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Enterprise Systems

Core Business Processes and Organizational Value Chains

Explain core business processes that are common in organizations.

Enterprise Systems

Describe what enterprise systems are and how they have evolved.

Enterprise Resource Planning

Describe enterprise resource planning systems and how they help to improve internal business processes.

Achieving Enterprise System Success

Understand and utilize the keys to successfully implementing enterprise systems.

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The Rise of Enterprise Systems:�Standalone Systems

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The Rise of Enterprise Systems:�Integrated Enterprise Systems

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Supporting Business Processes:�Internally Focused Systems

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Supporting Business Processes:�Externally Focused Systems

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Improving Business Processes Through Enterprise Systems: Software Types

Packaged Software

Also called “off-the-shelf”
May or may not require significant configuration
Enterprise software often divided into modules
Special functionality may require customizing the packaged (or vanilla) version

Custom Software

Designed and developed exclusively for a specific organization (Chapter 9)

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Improving Business Processes Through Enterprise Systems: Best Practices

Packaged Enterprise Software

Typically designed to operate with industry standard best practices
May not accommodate unique organizational practices that provide a competitive advantage
Modifying enterprise software can be a long and costly process, depending on the inherent flexibility of a given system

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Improving Business Processes Through Enterprise Systems: BPM

Business Process Management

Actively managing business processes
Using a structured approach
May be ongoing
May include radical process reengineering

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Improving Business Processes Through Enterprise Systems: Benefits and Costs

Benefits

Improved availability of information
Increased organizational interaction
Reduced manufacturing lead times
Improved customer interaction
Reduced operating expenses
Reduced inventory
Reduced IS costs
Improved supplier integration
Improved compliance

Costs

Travel and training costs for personnel
Ongoing customization and integration costs
Business process studies
Project governance costs

56% of ERP implementation costs are over budget

Average over budget is by $USD 2 million

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Enterprise Resource Planning

Core Business Processes and Organizational Value Chains
Explain core business processes that are common in organizations.

Enterprise Systems
Describe what enterprise systems are and how they have evolved.

Enterprise Resource Planning
Describe enterprise resource planning systems and how they help to improve internal business processes.

Achieving for Enterprise System Success
Understand and utilize the keys to successfully implementing enterprise systems.

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ERP Core and Extended Components

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Responding to Compliance and Regulatory Demands

ERP systems have built-in control systems

Mirror organizational processes
Support segregation of duties
Monitor business activities

ERP systems don’t solve all compliance problems, but help a lot

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Choosing an ERP System

ERP Control

Centralized or decentralized across business units
Policies and procedures

Do they need to be flexible?
Do they need to be standardized?

ERP Business Requirements

What modules are available?
How well do they meet specific business needs?

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Enabling Business Processes Using ERP Core Components

ERP systems support core business processes
Assist with:

Order-to-cash
Procure-to-pay
Make-to-stock/make-to-order
Other business processes

Often packaged industry-specific ERP versions

Support industry-specific core processes

Health care
Automotive
Construction
Retail
Specialized manufacturing industries

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Core Business Process Support

Source: Courtesy of Microsoft Corporation

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ERP Installation

Configuration is critical

Specifying the data to be in the underlying database
Thousands of decisions related to business processes
Companies need to understand how they do business to implement and configure their ERP systems

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ERP Limitations

ERP systems often require organizations to change their business processes
Once implemented, a company is locked in
Difficult and costly to make future changes
Modifications require extra and costly programming

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Achieving Enterprise System Success

Core Business Processes and Organizational Value Chains

Explain core business processes that are common in organizations.

Enterprise Systems

Describe what enterprise systems are and how they have evolved.

Enterprise Resource Planning

Describe enterprise resource planning systems and how they help to improve internal business processes.

Achieving Enterprise System Success

Understand and utilize the keys to successfully implementing enterprise systems.

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ERP Recommendations

Recommendations

Secure executive sponsorship
Get help from outside experts
Thoroughly train users
Take a multidisciplinary approach to implementations
Evolve the implementation

ERP installation is a complex and involved process. It needs top-level support in the form of active executive sponsorship. The lack of executive support is believed to be the primary reason ERP installations fail.

Beyond executive sponsorship:

Hiring experts who know how to implement ERP systems is very beneficial. Companies may only install an ERP system once a decade, whereas experts do it for a living, and thus understand the unique challenge specific ERP systems may present.
Users need training before and after the implementation to ensure they can use it when deployed, and then as they become proficient can learn advanced features specific to their job functions.
When implementing an ERP system, it typically affects large portions of or the entire organization. Involving all the business functions affected helps ensure needs are met and buy-in is achieved.

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Secure Executive Sponsorship

Executive Sponsorship is Critical

Primary reason for ERP failure
Critical for buy-in
Dictates resource availability
Necessary to authorize business improvements
Key to removing obstacles

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Get Help from Outside Experts

ERP systems are very complex
Typically, IS departments aren’t familiar with new systems
Experts can help

Specify needs
Select a suitable vendor
Manage the implementation project
Provide technical expertise

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Thoroughly Train Users

ERP systems are complex from the user perspective as well

Training costs are often poorly judged
When systems go live it takes employees time to regain productivity

Proper training can alleviate concerns
Proper training can mitigate productivity loss
Proper training can set expectations

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Take a Multidisciplinary Approach to Implementations

ERP systems often affect the entire organization

The entire organization is a stakeholder
The entire organization needs involvement
Failure to have representatives can result in unmet critical needs
The project team can’t be experts in every aspect of user needs
Departments may become hostile if left out of the implementation and needs assessment

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Evolve the Implementation

Recent trend is to move away from large-scale ERP

Using cloud-based ERP allows scalability and agility

Another trend: managing businesses in real time

Take advantage of in-memory computing and mobile access

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END OF CHAPTER CONTENT

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Managing in the Digital World: �Amazon.com

Amazon has grown from an online bookstore to a complete marketplace

Almost any product can be purchased though Amazon
Amazon uses enterprise information systems to optimize processes, and now provides this to others
Amazon Web Services (AWS) is an IS infrastructure rented to companies for their enterprise system needs
AWS provides cloud services and hosting for other companies

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Brief Case: Crowdsourcing Cinema at Amazon Studios

Amazon Studios is an innovative film production venture

Lets anyone submit screenplays and movies
Aims to discover talent that hasn’t yet made it to the big time
Original content is aired on Amazon Instant Video
After feedback, Amazon Studios decides whether to produce a full season
Two successes: Alpha House and Mozart in the Jungle

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Ethical Dilemma:�Too Much Intelligence? RFID and Privacy

RFID tags being used to tag pharmaceuticals

RFID tags can be read by anyone with an RFID reader, creating concerns that a person’s medications could be revealed

RFID chips can be embedded in people

Mexico’s attorney general and senior staff
Alzheimer’s and diabetes patients
Implant in kids to prevent kidnapping?

Lots of public opposition, what are the dangers?

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Coming Attractions: Combating Counterfeits Using Liquid Crystal Lasers

University of Cambridge is developing a liquid crystal laser pattern print for product labels
Can distinguish a real product from fraudulent knockoffs
Inexpensive
Pharmaceutical application

Counterfeit pharmaceuticals is a big problem
Unlawful and potentially dangerous for patients
This technology can help prevent counterfeits

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Key Players:�The Titans of ERP

SAP

German company founded in 1972
Many of the worlds largest companies use SAP software
24% of the ERP market in 2012

Oracle

Best known for database software
ERP acquisitions: JD Edwards, PeopleSoft, Siebel CRM
13% of the ERP market in 2012

Microsoft

Largest software company in the world
Gained ERP software through acquisition of Great Plains
5% of the ERP market in 2012

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Who’s Going Mobile: Big ERP Systems Embracing Small Mobile Devices

ERP users originally used client PCs to access ERP systems
Mobile users can now access ERP systems on the road
There are many benefits to mobile ERP

Improved service quality
Improved productivity
Strengthened customer relationships
Improved competitive advantage
Improved data timeliness and accuracy

Examples: SAP, Microsoft

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When Things Go Wrong:�The Not-So-Beautiful ERP Implementation

Avon announced its “Promise” program in 2009

Mobile app and Web site for local sales reps entering product orders
Pilot launched in 2012 was a miserable failure
Difficult to use; sales reps quit in droves
$125 million loss, 30% stock price decline
Finger pointing: Avon, SAP, third party

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Industry Analysis:�The Automobile Industry

More than 800 million cars on the road, 83 million sold worldwide in 2013

Sales predicted to climb to 100 million by 2018
China, Brazil, Russia, India, other developing nations

Growing global demand for energy-efficient cars
Auto industry efforts:

Evolving global network of suppliers
Broader supply chains bring new innovations to market
USB ports, hard drives, mobile data connectivity
Google working on a self-driving car
Marketing enhancements via virtual showrooms