Hello, this is Matthew Schieber. I will be covering the material over chapter two from the textbook about how companies are able to gain a competitive advantage using IT.
This chapter is broken up into four main areas; Supply Chain Management, Customer Relationship Management, Enterprise Resource Planning, and Social Media. Each of which will be discussed individually.
First off what is Supply Chain Management (SCM)? It is the ability of a business to track and control the different products or services the company provides. Today organizations big and small use some form of an SCM system to electronically keep track of inventory and other related information across the entire organization. SCM systems allow organizations to forecast consumer behavior, create demand forecasts, and develop closer relationships with suppliers/partners to better manage their distribution chain, aka supply chain. A distribution chain is the path a product or service follows from the actual provider to the end consumer. The better an organization understands its distribution chain the quicker the organization can adapt and make changes.
In todays competitive environment information is king, the more information an organization has the better. SCM creates visibility up and down the supply chain allowing managers to make quicker more accurate decisions. This visibility is the key to allow an organization to focus on a production method called Just-in-time. Just-in-time (JIT) is a method of delivering a product or service just when the customer wants it. This means there is just enough items in inventory to meet customer demands without being out of stock but not so much that all of the organization’s money is tied up in inventory. In order for an organization to achieve JIT a close almost personal relationship is needed with suppliers. Most organizations which use JIT form some type of information partnership. This is where two or more companies integrate their IT systems together.
When an organization creates a tight efficient supply chain costs are kept at the lowest possible level. When costs are low products can be sold at lower costs. This makes it more likely customers will shop at the same store over and over again. There is a reason Wal-Mart became the biggest and the best retailing company. It has one of the most if not the most efficient supply chains in the world. The best supply chains are optimized across five different areas. The first is fulfillment by making sure parts for production and for sale arrive at the correct time. Second is logistics by keeping transportation costs low and having consistent reliable delivery of products. Next is production by ensuring production lines run smoothly. Fourth is revenue and profit by ensuring no sales are lost because items are out of stock. The last area is cost and price. By keeping supply chain costs low, prices for consumers will be low as well.
The second part of the chapter focuses on customer relationship management (CRM). A CRM system uses technology to create and store information about customers to gain insight into what it is customers want/need and how to better meet those want/need(s). The better an organization is able to understand and manage its customers the happier customers become and are more likely they will stay and be repeat customers.
To be successful organizations have to be able to communicate with customers and provide numerous interaction points. They have to provide what’s called a multi-channel service delivery. Since every customer communicates in their own way organizations have to be able to communicate via email, phone, websites, fax, and in a personal face to face manner just to name a few.
All organizations that use CRM first start out by using a sales force automation system. This system tracks all of the steps during the sales process before, during, and after the actual sale. The system is able to perform contact management, identify potential sale opportunities, create sales forecasts, manage orders, and a whole host of other capabilities.
CRM uses technology to gain insight into customer behaviors and provide better products or services. However, technology is only a small part of the puzzle. CRM is fundamentally a business process, a strategy, a goal. Technology simply enhances that process to help managers make better decisions. The technology helps organizations to identify customers and divide them into specific categories. This in turn allows specific marketing campaigns to be marketed to specific customers allowing the customer to feel more like and individual and not part of a crowd. Charles Schwab did so with all of its customers to determine which investors were serious and which were non-serious. These two categories then allowed Charles Schwab to focus efforts on selling items to its serious investors and less time on non-serious investors saving the organization time and money all while increasing customer satisfaction.
For CRM technology to work properly all of the information CRM uses must be contained within a database. The database is the key for the technology end of CRM to work. From there two different systems use the database. Front office systems is where the database gets most of the information pertaining to customers. It is the primary interface customers see and interact with. Here orders are taken and customer feedback is obtained. The second system is known as the back office system. This is where a customer order is fulfilled and if needed customer support is provided. Both front and back office systems feed information into the database where the information is analyzed for managers to make decisions.
Historically organizations used software which was either developed internally or bought and maintained in-house. This is a very expensive and time consuming process to install, maintain, and upgrade. Something only very large corporations were able to afford. A growing trend in business is to move away from owning software to paying for software on an as needed basis. Software-as-a-service (SaaS) is software provided on a pay-per-use basis where you pay by the month per user. This type of system uses cloud computing. Paying for software as needed can dramatically reduce costs and allows even medium or small companies to use software previously unattainable such as SCM or CRM. Salesforce.com is one of the best software-as-a-service CRM providers. SaaS is something you will soon be seeing at a personal level if not already.
The third part of the chapter talks about enterprise resource planning (ERP). Enterprise resource planning 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. Solid financial management is essential to running a business. Enterprise resource planning (ERP) systems support front office systems such as sales and marketing and back office systems such as financing and human resources. Although not generally considered mission-critical, ERP systems must be implemented and managed properly to provide visibility into operations in a cost-effective, flexible way.
With every business operation being done or assisted by technology organizations face a huge problem in making sure all of these operations work and communicate with each other. Historically every department has used its own separate system, which worked fine from the 1970’s-1990’s. The accounting department may use Microsoft Excel, shipping may use Access, and human resources may use an Adobe product. The problem is not every program or system is compatible causing them to not communicate and share data. These old systems, often called legacy systems, still work but are expensive to fix, maintain, and update since the original vendors no longer support the software. The solution to this problem is an (ERP) system. ERP integrates all of the separate legacy systems; CRM, HR, accounting, finance, etc. into one IT system. This creates consistency across all business operations. The true benefit of an ERP system is its ability take the many different forms of data from across the different organizational systems and correlate, aggregate, and provide an enterprise-wide view of organizational information.
At the heart of an ERP system is one database that connects all applications together and feeds information into all of the ERP system’s individual application components (called modules), supporting diverse business functions such as accounting, manufacturing, marketing, and human resources to name a few. When a user enters or updates information in one module, it is immediately and automatically updated throughout the entire system. Similar to how dropbox.com works. When a file is uploaded from your phone or computer it is automatically updated to all of the other devices or computers which have dropbox.com setup on them.
ERP automates business processes such as order fulfillment-taking an order from a customer, shipping the purchase, and then billing for it. With an ERP system, when a customer service rep takes an order from a customer, he or she has all the information necessary to complete the order. Everyone else in the company sees the same information and has access to the database that holds the customer’s new order.
The last section talks about what many of todays younger people are experts at, social media. Social media is a mobile web based technology that allows users to create, use, interact, and consumer a whole host of content. It is a rapidly changing and evolving process that is revolutionizing how organizations interact with customers. It is almost guaranteed now you will see every business big or small have a profile on facebook or some other social media website.
Social media has become popular because of Web 2.0. Web 2.0 defines the second generation of the World Wide Web that focuses on online collaboration, dynamic information, the modification of content and a whole host of other technologies. I do want to point out that Web 2.0 does not mean the same thing as a software upgrade such as from Adobe Flash 11.0 to 11.3. Web 2.0 just describes a point in time such as how the Industrial Revolution took place from 1750-1850.
To help explain what Web 2.0 is lets take a look at how the Web has evolved through the years. The early users of the Web had to gather information from static web pages and actively search for content they want. In other words they had to pull information on their own this was long before Google or even Yahoo! came into existence. Toward the mid to let 90’s the Web moved from a pulling information environment to a push environment where information was provided to customers without having look for the information. By the early 2000’s the Web started to move away from static web pages to dynamic web pages as the use of databases grew. Today the Web is an almost limitless supply of web pages in which users have information pushed to them via dynamic webpages.
Social media is a broad term given to any social related website. The backbone of social media are social networking sites. A social networking site allows you to post information about your self, shared content, and communicate with friends, family, or even corporations. And of course by far the most used social networking site is facebook with almost 1 billion users world wide. Some other popular sites are LinkedIn, the professional site equivalent to facebook, Twitter, and the recently launched Google+. Its hard to believe that just five years ago myspace was the largest social networking on the Web, now it’s a name few people recognize or even remember.
The world of social media allows for just about any kind of activity to take place and for people to participate in. Some of the more major activities include playing games such as MMORPGs the most popular being World of Warcraft, shopping, “Green” initiatives that create sustainable ideas, and the most controversial of all the activities location based services. Location based services face a double edge sword because organizations are able to track where users are all the time. Many people view it as an invasion of privacy. Other people use it to help cause crimes. After all if you check into a department store on the other side of town then who is at home. This concludes the presentation over chapter 2. Have a good day.