Business Value of Enterprise Systems

Business Value of Enterprise Systems

Increases operational efficiency by providing organizational-wide information to help managers make better decisions. Facilitates Standardizations and Coordination of important business processes Helps firms respond rapidly to customers requests for information or products Producing, procuring, shipping right amounts Enforcing standard practices and data throughout company Providing firm-wide information to help managers make better decisions Allowing senior management to easily find out at any moment how a particular organizational unit is performing or to determine which products are most or least profitable
Examples of Enterprise systems Supply Chain Management Systems (SCM) Supply chain: Network of organizations and business processes for: Procuring raw materials Transforming them into intermediate and finished products

Distributing finished products to customers
Includes secondary and tertiary suppliers Upstream portion: Suppliers Downstream portion: Distributors
Two main categories Supply chain planning systems Demand planning Order planning Advanced scheduling and manufacturing planning Distribution planning Transportation planning
Supply chain execution systems: Manage flow of products through distribution centers and warehouses to ensure products delivered to right locations in most efficient manner Order commitments Final production Replenishment

Distribution management Reverse distribution
Business value of supply chain management systems Matching supply to demand and reducing inventory levels Improving delivery service and speeding product time to market Using assets more effectively Increasing sales by assuring availability of products Increased profitability Supply chain costs can approach 75% of total operating budgets
Customer Relationship Management Systems (CRM) Capture, consolidate, analyze customer data and distribute results to various systems and customer touch points (contact points) across enterprise Provide single enterprise view of customers Provide customers single view of enterprise at touch points Provide analytical tools for determining value, loyalty, profitability of customers

Assist in acquiring new customers, providing better service and support to customers, customize offerings to customer preferences, provide ongoing value to retain profitable customers
Two main categories of CRM Operational CRM Customer-facing applications, e.g. tools for sales force automation, call center and customer service support, marketing automation
Analytical CRM Applications that analyze (OLAP, data mining, etc.) customer data Based on data warehouses consolidating data from operational CRM systems and customer touch points One important output: Customer lifetime value (CLTV)
Value based on revenue produced by a customer, expenses incurred in acquiring and servicing customer, and expected life of relationship between customer and company
Business value of CRM systems Increased customer satisfaction Reduced direct marketing costs More effective marketing Lower costs for customer acquisition and retention Increased sales revenue By identifying profitable customers and segments for focused marketing and cross-selling Reduced churn rate (number of customers who stop using or purchasing products or services)

Management Opportunities, Challenges, and Solutions

None of these enterprise systems are without their opportunities and challenges. Briefly, the opportunities are: Higher levels of productivity, earnings, and share prices Enhanced decision-making at all levels of the organization Information when and where necessary
The challenges are: Expensive to purchase and implement Total implementation cost may be four to five times of cost of software Deep-seated technological change Fundamental changes to organization, business processes New functions and responsibilities for employees SCM systems require business process change for multiple organizations Introduce ―switching costs‖, dependency on enterprise software vendor Require understanding firm’s data and cleansing data Integrating the system throughout the organization and yet serving specific needs Training managers and employees Managing the costs of information Managing user demands on the system

The solutions are:

Determine specific information requirements and which of the requirements are being met by current systems Pay attention to the training needs of managers and employees — allocate the necessary funds to ensure training needs are adequately met Ensure each division is charged for all the information services they use and make the division managers responsible for managing the resource the same as they must manage all their other resources

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