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Chapter 9
Achieving Operational Excellence and Customer Intimacy:
Enterprise Applications
Student Learning Objectives
1. How do enterprise systems help businesses achieve operational excellence?
2. How do supply chain management systems coordinate planning, production, and
logistics with suppliers?
3. How do customer relationship management systems help firms achieve customer
intimacy?
4. What are the challenges posed by enterprise applications and how are enterprise
applications taking advantage of new technologies?
Learning Catalytics is a “bring your own device” student engagement, assessment, and
classroom intelligence system. It allows instructors to engage students in class with real-
Key Terms
The following alphabetical list identifies the key terms discussed in this chapter. The
page number for each key term is provided.
Analytical CRM, 366
Operational CRM, 366
Bullwhip effect, 355
Partner relationship management (PRM), 362
Churn rate, 367
Pull-based model, 360
Cross-selling, 365
Push-based model, 360
Customer lifetime value (CLTV), 366
Social CRM, 371
Demand planning, 356
Supply chain, 353
(ERM), 362
Enterprise software, 351
Supply chain planning system, 355
Touch point, 362
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Teaching Suggestions
The opening case, “ACH Food Companies Transforms Its Business with Enterprise
Systems” illustrates why companies need enterprise applications that integrate different
business functions and provide consistent information throughout the company.
Section 9.1, “How do enterprise systems help businesses achieve operational
excellence?” This section introduces enterprise systems and explains the benefits and
disadvantages of installing them. There have been success stories as well as horror stories
Section 9.2, “How do supply chain management systems coordinate planning,
production, and logistics with suppliers?” Section 9.2 goes into great depth about supply
chain processes and how information can help managers control the supply chain better.
Interactive Session: Management: Scotts Miracle-Gro Cultivates Supply Chain
Proficiency
Case Study Questions:
1. Identify the supply chain management problems faced by Scott’s Miracle-Gro.
What was the business impact of not being able to manage the company’s supply
chain well?
After Scott’s and Miracle-Gro merged companies, management discovered that customer
lists overlapped causing duplication of sales force efforts, multiple supply chain designs
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2. What management, organization, and technology factors contributed to Scott’s
Miracle-Gro’s supply chain problems?
Management: As the world’s principal supplier of lawn and garden care products, the
Scott’s Miracle-Gro Company, headquartered in Marysville, Ohio, needed to optimize its
entire supply chain—from shelf to supplier— in order to meet the needs of its seasonal,
weather-dependent business.
Organization: With execution during its peak-demand season suffering, the company
3. How did implementing JDA Software solutions change the way Scott’s Miracle–
Grow ran its business?
The company wanted to leverage its point-of-sale (POS) data so that customer purchases
would automatically trigger orders to replenish stock. The new software included tools
for better demand planning, fulfillment, space and category management, production
planning, collaboration, and transportation and logistics management.
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4. How did the new supply chain systems improve management decision making?
Describe two decisions that were improved by the new system solution.
Two key factors enabled Scotts Miracle-Gro to better respond to rapid changes in market
conditions: the ability to create POS forecasts and an increased adeptness at responding
to weather events.
POS forecasts at the store-level are the basis for Scott’s demand planning, which then
incorporates promotions, media and advertising campaigns, and stockout planning. These
plans are further honed by integrating safety-stock settings, on-hand quantities, and on-
Section 9.3, “How do customer relationship management systems help firms achieve
customer intimacy?” As the book states, “… the Internet, and electronic commerce have
put more power in the hands of customers.” A good example you can use to explain this
statement is the increased amount of information available on the Internet about
automobiles, their pricing, and availability of purchasing options. You can also point to
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Interactive Session: Organizations: Graybar Goes for Customer Analytics
Case Study Questions
1. What was the problem at Graybar described in this case? How did this problem
affect Graybar’s business performance?
Graybar was not following best practices for analyzing and understanding its customers.
The company is a wholesale distributor and does not sell directly to retail businesses. As
2. What people, organization, and technology issues had to be addressed by
Graybar to develop a customer analytics solution?
People: sales representatives need to know which customers require the most attention in
order to turn them into more profitable customers.
3. How did analytical CRM change the way Graybar ran it business? Compare the
way Graybar handled its customer relationships before and it implemented
analytical CRM?
Before: the company was using spreadsheets with rows of data and assigning letter
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After: data presentation was more visual and understandable. A dashboard using SAP
4. Give examples of three decisions that were improved by Graybar’s new
customer analytics system.
The new CRM software 1) shows categories to which each individual customer belongs;
2) supplies information about customer transactions to explain why a particular customer
Section 9.4, “What are the challenges posed by enterprise applications and how are
enterprise applications taking advantage of new technologies?” This section explains
the difficulties of implementing CRM, SCM, and enterprise systems and integrating them
with other systems. New business processes must be built on enterprise-wide service
Review Questions
9-1 How do enterprise systems help businesses achieve operational excellence?
Define an enterprise system and explain how enterprise software works.
Enterprise software consists of a set of interdependent software modules that support
basic internal business processes. The software allows data to be used by multiple
functions and business processes for precise organizational coordination and control.
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Describe how enterprise systems provide value for a business.
Enterprise systems provide value both by increasing operational efficiency and by
providing firmwide information to help managers make better decisions. Large
companies with many operating units in different locations have used enterprise
Enterprise software includes analytical tools for using data captured by the system to
evaluate overall organizational performance. Enterprise system data have common
standardized definitions and formats that are accepted by the entire organization.
9-2 How do supply chain management systems coordinate planning, production,
and logistics with suppliers?
Define a supply chain and identify each of its components.
A supply chain is defined as a network of organizations and business processes for
procuring materials, transforming raw materials into intermediate and finished
products, and distributing the finished products to customers. It links suppliers,
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Explain how supply chain management systems help reduce the bullwhip effect
and how they provide value for a business.
The bullwhip effect occurs when information about the demand for a product gets
distorted as it passes from one entity to the next across the supply chain. It can also
Define and compare supply chain planning systems and supply chain execution
systems.
Supply chain planning systems enable the firm to generate demand forecasts for a
product and to develop sourcing and manufacturing plans for that product. They help
companies make better operating decisions such as determining how much of a
Supply chain execution systems manage the flow of products through distribution
centers and warehouses to ensure that products are delivered to the right locations in
the most efficient manner. They track the physical status of goods, the management
Describe the challenges of global supply chains and how Internet technology can
help companies manage them better.
Firms use intranets to improve coordination among their internal supply chain
processes, and they can use extranets to coordinate supply chain processes shared
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for the firm’s products. Business partners can use Web-based supply chain
management tools to collaborate online with suppliers and customers. Sales
representatives can access suppliers’ production schedules and logistics information
Distinguish between a push-based and pull-based model of supply chain
management and explain how contemporary supply chain management systems
facilitate a pull-based model.
In a push-based model, production master schedules are based on forecasts or best
guesses of demand for products, and products are “pushed” to customers. In a pull-
based model, actual customer orders or purchases trigger events in the supply chain.
9-3 How do customer relationship management systems help firms achieve customer
intimacy?
Define customer relationship management and explain why customer
relationships are so important today.
Customer relationship management: A business and technology discipline that
uses information systems to coordinate all of the business processes surrounding the
firm’s interaction with its customers in sales, marketing, and service.
Importance of customer relationships: Globalization of business, the Internet, and
electronic commerce have put more power in the hands of customers. Companies
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Describe how partner relationship management (PRM) and employee
relationship management (ERM) are related to customer relationship
management (CRM)?
CRM systems capture and integrate customer data from all over the organization,
consolidate the data, analyze the data, and then distribute the results to various
systems and customer touch points across the enterprise. Companies can use this
customer knowledge when they interact with customers to provide them with better
service or to sell new products and services. CRM systems integrate and automate
Describe the tools and capabilities of customer relationship management
software for sales, marketing, and customer service.
Customer relationship management systems typically provide software and online
tools for sales, customer service, and marketing. Refer to Figure 9.8 for a diagram of
the business processes that CRM software supports for sales, marketing, and service.
Capabilities include the following:
Sales:
• Sales force automation modules in CRM systems help sales staff increase their
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• Enable sales, marketing, and delivery departments to easily share customer and
prospect information.
Customer Service:
• Provide information and tools to make call centers, help desks, and customer
support staff more efficient.
Marketing:
• Support direct-marketing campaigns by providing capabilities for capturing
Distinguish between operational and analytical CRM.
Operational CRM includes customer-facing applications such as tools for sales force
automation, call center and customer service support, and marketing automation.
Analytical CRM includes applications that analyze customer data generated by
9-4 What are the challenges posed by enterprise applications and how are enterprise
applications taking advantage of new technologies?
List and describe the challenges posed by enterprise applications.
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Enterprise applications are very difficult to implement successfully. They require
extensive organizational change, expensive new software investments, and careful
assessment of how these systems will enhance organizational performance. Enterprise
applications require both deep-seated technological changes and fundamental changes
Explain how these challenges can be addressed.
Enterprise applications create new interconnections among myriad business processes
and data flows inside the firm (and in the case of supply chain management systems,
between the firm and its external supply chain partners). Employees require training
How are enterprise applications taking advantage of SOA, Web services, open
source software, and wireless technology?
Enterprise application vendors are delivering more value by developing systems that
are more flexible, Web-enabled, and capable of integration with other systems. Next-
generation enterprise applications include open source and on-demand solutions.
Small companies choose open source products because there are no software
Define social CRM and explain how customer relationship managements
systems are using social networking.
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Social CRM tools enable a business to connect customer conversations and
relationship from social networking sites to CRM processes rather than having them
in separate “silos.” The tools help organizations identify new ideas more rapidly,
Discussion Questions
9-5 Supply chain management is less about managing the physical movement of
goods and more about managing information. Discuss the implications of this
statement.
Student answers to this question will vary.
9-6 If a company wants to implement an enterprise application, it had better do its
homework. Discuss the implications of this statement.
Student answers to this question will vary.
9-7 Which enterprise application should a business install first: ERP, SCM, or
CRM? Explain your answer.
Student answers to this question will vary.
Hands-On MIS Projects
Management Decision Problems
9-8 Toronto-based Mercedes-Benz Canada: Fifty-five car dealers provided customer
data on an ad hoc basis. No real incentive for dealers to share information with the
company. How could customer relationship management (CRM) and partner
relationship management (PRM) systems help solve this problem?
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these channels sell to customers directly. It provides the ability to trade information
and distribute leads and data about customers, integrating lead generation, pricing,
promotions, order configurations, and availability. It also provides tools to assess its
9-9 Office Depot: The company tries to offer a wider range of office supplies at lower
costs than other retailers by using just-in-time replenishment and tight inventory
control systems. It uses information from a demand forecasting system and point-of-
sale data to replenish its inventory in its 1,600 retail stores. Explain how these
systems help Office Depot minimize costs and any other benefits they provide.
Identify and describe other supply chain management applications that would be
especially helpful to Office Depot.
Supply chain management systems provide organizations with more information and
tighter controls over the upstream and downstream portions of the supply chain. The
SCM applications that would be especially helpful to Office Depot are:
• Demand planning: Determines how much product Office Depot needs to
have suppliers produce to satisfy all of its customers’ demands.
• Supply chain execution system: Manage the flow of products through
distribution centers and warehouses to ensure that products are delivered to
the right locations in the most efficient manner. Information from this system
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Improving Decision Making: Using Database Software to Manage Customer Service
Requests
Software skills: Database design; querying and reporting
Business skills: Customer service analysis
9-10 Instructors should inform students that City was left out of fields describing a
particular account that should be included in the database.
The solution file represents one of many alternative database designs that would satisfy
(Learning Objective 9.3: How do customer relationship management systems help firms
achieve customer intimacy? AACSB: Analytical thinking, Application of knowledge.)
Achieving Operational Excellence: Evaluating Supply Chain Management Services
Software skills: Web browser and presentation software
Business skills: Evaluating supply chain management services
9-11 In addition to carrying goods from one place to another, some trucking companies
provide supply chain management services and help their customers manage their
information. In this project, you’ll use the Web to research and evaluate two of these
business services. Investigate the Web sites of two companies, UPS Logistics and
Schneider Logistics, to see how these companies’ services can be used for supply chain
management. Then respond to the following questions:
What supply chain processes can each of these companies support for their clients?
UPS Logistics
help you reduce costs and increase your
Taken from the UPS Logistics Web site:
No matter your product or your market,
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global reach.
Services Offered:
• Distribution
• Transportation Management
How can customers use the Web site of each company to help them with supply
chain management?
UPS Logistics Supply Chain Services: “Thriving in today’s increasingly complex, global
What We Can Do for You:
• Streamline your distribution network, reducing costs and improving customer
service
• Provide insight into logistics design, re-engineering, and supply chain
management
Schneider Logistics: “At Schneider Logistics, you have a set of logistics challenges.
Schneider Logistics has the solutions. Schneider Logistics helps you manage your supply
chain to its maximum efficiency. We do this by leveraging 60 years of transportation
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Compare the supply chain management services provided by these companies.
Which company would you select to help your firm manage its supply chain? Why?
Responses to the question will vary. Perhaps those who do not possess an in-depth
background with this type of technology will find the UPS Logistics site relatively
easy to use. If they run into difficulties they can easily access one of the many
tutorials and determine what they need to do. The Schneider Logistics site might be
thinking, Application of knowledge.)
Collaboration and Teamwork Project
9-12 In MyMISLab, you will find a Collaboration and Teamwork Project dealing
with the concepts in this chapter. You will be able to use Google Drive, Google Docs,
Google Sites, Google +, or other open source collaboration tools to complete the
assignment.
Case Study: Vodafone: A Giant Global ERP Implementation
9-13 Identify and describe the problem discussed in this case. What management,
organization, and technology factors contributed to the problem?
Management: Vodafone has 400 million customers and 86,000 employees distributed
throughout 40 countries. It has experienced phenomenal growth but its systems and
business processes hadn’t kept up.
Organization: The company was decentralized and lacked common practices,
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Technology: The company lacked any data sharing and shared networks from unit to unit
making it difficult for the organization to act as a single global firm so it could deal better
with competitive pressures. (Learning Objective 9.1: How do enterprise systems help
9-14 Why did Vodafone have to spend so much time dealing with change during its
business transformation?
The company lacked the expertise and resources to manage such a complex project
entirely on its own. It spent a year identifying and designing new business processes and
establishing the scope of the problem. It wanted to limit risks associated with
implementation of the new system.
The project team had to be sensitive to local trends as system rollouts took place so
employees and customers were not disrupted any more than necessary with the new
9-15 Why was an ERP system required for Vodafone’s global business
transformation?
Vodafone had to gain efficiencies in procurement so it could reduce its costs. It needed to
get all of its operating companies to work more like one unit to increase efficiencies and
9-16 What management, organization, and technology issues had to be addressed by
the Vodafone project team to ensure the transformation would be successful?
Management: The company had to be sensitive to local trends such as economic
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Organization: Each operating company had unique challenges and demands, large
numbers of users and interfaces, and legal requirements based on local law.
Technology: The implementation teams used what they learned along the way to
improve future implementations. Testing and feedback revealed that more attention to
9-17 What were the business benefits of Vodafone’s global business transformation?
How did it change decision making and the way the company operated?
The new system increased business efficiency and produced annual cost savings of $719
million dollars. The total cost of ownership was reduced and a consistent way of working
9-18 What are three reasons why a company would want to implement an enterprise
resource planning (ERP) system and two reasons why it might not want to do so.
Visit MyMISLab for suggested answers.
9-19 What are the sources of data for analytical CRM systems? Provide three
examples of outputs from analytical CRM systems.
Visit MyMISLab for suggested answers.