Chapter 7

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Question Answer
Competitive advantage developed 2 waysthrough information systems and business processes
Information systems make primary and support activities more productive than those of competitors
Increase productivity realized when business processes become more effective and more efficient
True for commercial companies, non-profit organizations, government
5 functional systemsmarketing and sales, operations, manufacturing, human resources, accounting & finance
Functional systemsfacilitate the work of a single department or business function (information systems such as customer management for sales & marketing and accounts receivable for accounting)
Each functional system is closely allied with the activities it supports, there is little cross-over among activities
Functional silosfunctional applications that are designed to work independently of one another - however, all functional systems are interrelated (e.g. accounting department would use accounting system, marketing deparmtnet would do its work using marketing and sales system)
The manager must query separate functional systems and integrate the data manually
Cross-development / cross-functional systemsintegrate data and business processes across different departments and systems
Interorganizational systemsfunctional systems that are used by 2 or more related companies (i.e. e-commerce applications, supply chain management systems)
Problems with isolated functional systemsdata duplication, data inconsistency - lack of data integrity (changes in one system may take a while to get to the other), disjointed processes (typed in differently), limited information and lack of integrated information, isolated decisions lead to inefficient overall activities, increased expense
Business process design(a procedure whereby business analysts create a representation of the operational processes of a company in order to assess and improve those processes); Organizations should not simply automate or improve existing functional systems but making significant changes by integrating functional systems
Enterprise application integration (EAI)an approach to combining functional systems, which uses layers of software (EAI interface & EAI server) as a bridge to connect different functional systems
functional systems still exist separately and store actual data
Enterprise resource planning (ERP)
- 5 key points
supports many or all of the primary business processes as well as human resources and accounting support processes - it is a central database that is combined with a set of standard business processes built on top of the database to ensure integration between functional areas;
People in functional areas use ERP to send and receive data directly from central database, no functional system exist, replaced by ERP modules
Provides cross-functional, process view of the organization
Has formal approach based on formal business models
Offers large benefits but is difficult, fraught with challenges, can be slow to implement
is often VERY expensive
Industry standard processesbusiness process design must be tailored to industry standard processes, save the organization cost of designing new processes itself
build-in process, organization must conform its activity to those process
if software is designed well, industry standard process will effectively integrate activities across departments
pre-build processes save organization $$
ERP vendorsSAP, Oracle, Infor
Process blueprintin ERP, a comprehensive set of inherent processes for all organizational activities (ERP is based on documented, tested business models)
documents each process with diagrams that use a set of standard symbols
Benefits of ERPefficient business processes (business blueprint), inventory reduction, lead-time reduction, improved customer service (all data reside in one place and readily accessible so can provide better information about orders, products to their costomers + less costly), greater, real-time insight into an organization, higher profitability (smaller inventories, reduced lead time, less expensive customer support)
Customer relationship management (CRM) systemssupports the business processes of attracting, selling, managing, delivery, and supporting customers (supports all direct value-chain activities that involve the customer)
Customer life cycle 4 phases1. marketing, 2. customer acquisition, 3. relationship management, 4. loss/churn
marketing sends messages to target market to attract customer prospects
when prospects order, they become customers who need to be supported
additionally, resell processes increase the value of existing customers
over time, organization lose customers
win-back processes categorize customers and attempt to win back high-value customers
Customer relationship (CRM) management 3 components:Solicitation
- generate prospects via messages to targe market
- use email, websites, and other IS messaging media
- support direct mail, catalogue, other traditional promotion
Lead-tracking (presale)
- track sale leads
- track customer responses and contacts
- prioritize responses to maximize new customer revenue
Relationship management (post-sale)
- maximize the value of existing customer base
- sales management applications (prioritize customers using purchase history, increase sales to existing customers, focus on reselling on gigh-value customers, win back lost-high value customers)
- customer support applications (manage orders, track customer problems and problem resolutions, prioritize responses according to customer value, gather data for product improvement)
Sale management applicationssupport sales to existing customers by prioritizing customers according to their puchase history
Integrated CRM applicationsstore data in a single database
Supply chain management (SCM) systeminterorganizational systems that enable companies to efficiently handle the flow of goods from suppliers to customers
Supply chainnetwork of organizations and facilities that transform raw material into products delivered to customers
Disintermediationthe reduction in use of intermediaries between producers and consumers i.e. manufactures sell directly to retailers and omit distribution level
4 drivers that affect supply chain performance1. facilities, 2. inventory, 3. transportation, 4. information
3 factors of information1. purpose
- can be transactional, such as order and order returns, or can be informational such as sharing of inventory and customer order data between organizations in supply chain
2. availability,
- the way in which organizations share their information - that is which organizations have access to which information and when
3. means
- method by which information is transmitted
3 fundamental information systems involved with supply chain management1. supplier relationship management (SRM), 2. inventory, 3. customer relationship management (CRM)
Supplier relationship management (SRM)a business process for managing all contacts between the organization and its suppliers
Supplier relationship management (SRM) 3 processes1. source (find vendors, assess capabilities, negotate terms and conditions, make contract),
2. purchase (request information, quotation, proposal, approve purchase, create an order)
3. settle (receive goods, resolve receivable to order, pay according to term and policy)
Benefits of information systems on supply chain performancereduce costs of buying and selling, increase supply chain speed, reduce size and cost of inventories, improve delivery scheduling - enables just-in-time inventory
SAP R/3a product licensed by SAP, an industry standard process; diagrams show the business processes that must be followed to effectively use the software

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