Managing the Digital Firm, Seventh Canadian Edition
CHAPTER 9
Enterprise Applications to Manage
Supply Chains and Respond to
Customers
LEARNING OBJECTIVES
After reading this chapter, you will be able to answer the following questions:
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?
Teaching Suggestions
The opening case illustrates how Allan candy needed, as an independent company, the
ability to improve its benefits to customers, including speed to market. Allan candy
needed to manage both its upstream and downstream production and distribution
Section 9.1, “Enterprise Systems”
This section introduces enterprise systems and explains the benefits and disadvantages of
installing them. There have been success stories as well as horror stories about companies
who have used enterprise systems. Figure 9-1 is a good way to diagram how enterprise
systems work. Use Table 9-1 to discuss various business processes that enterprise
systems support. This table shows students how an enterprise system permeates every
functional area in a business.
Managing the Digital Firm, Seventh Canadian Edition
Section 9.2, “Supply Chain Management Systems”
Section 9.2 goes into great depth about supply chain processes and how information can
help managers control the supply chain better. Have your students give you examples of
WINDOW ON MANAGEMENT: CANADA POST AUTOMATES
DATA ENTRY WITH SAP
Case Study Questions:
1. Why is it hard for Canada Post to automate data entry into its SAP systems?
What business processes are involved?
1) Data had to be loaded into the SAP system, and required that there was
2. Why were management, organization, and technology factors responsible for
Canada Post’s problems with automating data entry?
Management: Management eventually recognized the inefficiencies associated
with manual data entry.
3. How did implementing the Winshuttle software change the way Canada Post
handled data entry?
4. Describe two processes that were improved by implementing the Winshuttle
system?
Payroll processing was improved; Canada Post can make salary revisions and for
Section 9.3, “Customer Relationship Management Systems”
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 the availability of
Section 9.4, “Enterprise Applications: New Opportunities and Challenges”
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 platforms. The trend toward next-generation enterprise
WINDOW ON TECHNOLOGY: CUSTOMER RELATIONSHIP
MANAGEMENT HEADS TO THE CLOUD
Case Study Questions
1. What types of companies are most likely to adopt cloud-based CRM software
services? Why? What companies might not be well-suited for this type of software?
Small to mid-size companies that lack the know-how or financial resources to
successfully build and maintain CRM applications in-house are most likely to use
cloud-based CRM software services. Smaller companies are moving toward open-
2. What are the advantages and disadvantages of using cloud-based enterprise
applications?
Advantages: Reduced costs; access to software that may be too sophisticated or
3. What management, organization, and technology issues should be addressed in
deciding whether to use a conventional CRM system versus a cloud-based version?
Management: Employee training; number of employees needed for each system
type; switching costs associated with each system type.
Review Summary
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?
5. How are enterprise applications taking advantage of new technologies?
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 292
Bullwhip eff ect 283
Partner relationship management
(PRM) 289
Review Questions
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
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
Managing the Digital Firm, Seventh Canadian Edition
systems to enforce standard practices and data so that everyone does buisness the
same way. Enterprise systems helps firms respond rapidly to customer requests for
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.
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
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
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
Managing the Digital Firm, Seventh Canadian Edition
specific product to manufacture in a given time period; establishing inventory levels
for raw materials, intermediate products, and finished goods; determining where to
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
with their business partners. Using intranets and extranets, all members of the supply
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.
In contemporary supply chain management systems, the Internet and Internet
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.
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
Managing the Digital Firm, Seventh Canadian Edition
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 9-9 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
productivity by focusing sales efforts on the most profitable customers, those who
are good candidates for sales and services.
Customer Service:
• Provide information and tools to make call centers, help desks, and customer
Marketing:
• Support direct-marketing campaigns by providing capabilities for capturing
prospects and customer data, for providing product and service information for
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.
Managing the Digital Firm, Seventh Canadian Edition
Analytical CRM includes applications that analyze customer data generated by
4. What are the challenges posed by enterprise applications?
List and describe the challenges posed by enterprise applications.
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
Explain how these challenges can be addressed.
Enterprise applications create new interconnections among myriad business processes
5. How are enterprise applications used in platforms for new cross-functional
services?
Define a service platform and describe the tools for integrating data from
enterprise applications.
Service platforms integrate multiple applications from business functions, units, or
Managing the Digital Firm, Seventh Canadian Edition
Discussion Questions
1. Supply chain management is less about managing the physical movement of
goods and more about managing information. Discuss the implications of this
statement.
The information obtained through a supply chain management system can be used to
make better decisions regarding purchasing, production, and logistics. Information
2. If a company wants to implement an enterprise application, it had better do its
homework. Discuss the implications of this statement.
Most students should agree that adopting an enterprise system is a key business
3. Which enterprise application should a business install first: ERP, SCM, or
CRM? Explain your answer.
Because each of these applications are so powerful in changing the way an
organization works implementation is an extreme challenge for any business. The
decision about which to install first depends on individual organizations. A business
may decide to go with just a CRM system or a SCM system first to gain experience in
the implementation process. Some issues a business or organization needs to consider
include:
• Expenses associated with purchase and implementation
Managing the Digital Firm, Seventh Canadian Edition
• Understanding just how much organizational change is required
Hands-On MIS Projects
Management Decision Problems
1. Toronto-based Mercedes-Benz Canada: 55 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?
Comprehensive CRM packages contain modules for partner relationship management
(PRM) and employee relationship management (ERM). PRM uses many of the same
data, tools, and systems as CRM to enhance collaboration between a company and its
selling partners. If a company does not sell directly to customers but rather works
2. 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.
Managing the Digital Firm, Seventh Canadian Edition
Supply chain management systems provide organizations with more information and
tighter controls over the upstream and downstream portions of the supply chain. The
information can alert managers and executives to those areas of the supply chain that
may bog down the rest of the channels. Because Office Depot receives effective
SCM applications that would be especially helpful to Office Depot are:
• Demand planning: Determines how much product Office Depot needs to have
• Supply chain execution system: Manage the flow of products through distribution
Improving Decision Making: Using Database Software to Manage Customer Service
Requests
Software Skills: Database design; querying and reporting
Business skills: Customer service analysis
The solution file would usually have three tables for Accounts, Requests, and Service
Improving Operational Excellence: Evaluating Supply Chain Management Services
Software Skills: Web browser and presentation software
Business skills: Evaluating supply chain management services
Trucking companies no longer merely carry goods from one place to another. Some also
provide supply chain management services to their customers and help them manage their
1. What supply chain processes can each of these companies support for their clients?
UPS Logistics
UPS Supply Chain Solutions has assembled
a comprehensive portfolio of services,
which, as stand-alone or bundled together,
create innovative supply chain solutions for
Our service categories include:
▪ Freight Forwarding
▪ Customs Brokerage
▪ Logistics & Distribution
▪ Trade Management Services
▪ Technology
With the rise of global commerce, we’re
uniquely positioned to help you make use of
the latest technology and ideas to streamline
your supply chain.
2. How can customers use the Web site of each company to help them with supply
chain management?
UPS Supply Chain Solutions is your one source for comprehensive logistics services. Our
established operations around the world offer supply chain redesign and re-engineering,
customer care solutions, transportation and inventory management, warehousing
operations, systems integration, reverse logistics and more – all custom-tailored to the
individual needs of our clients. Our in-house consultants and operations experts provide
valuable experience and expertise in a wide variety of industries, including:
▪ Consumer Goods
▪ Financial
▪ Healthcare
▪ High Tech
▪ Telecom
Managing the Digital Firm, Seventh Canadian Edition
Customized solutions, measurable results
Optimizing an entire supply chain — from suppliers to end-users — is a complex task
requiring broad service capabilities and industry expertise. UPS Supply Chain
Solutions brings together all these and more, to serve the changing needs of the many
large, global companies who are our clients.
Our solutions begin by working with you to evaluate and fully understand your
supply chain requirements and business objectives. We apply our proven resources
3. Compare the supply chain management services provided by these companies.
Which company would you select to help your firm manage its supply chain?
Why?
While Trans-X provides the forms, UPS provides the software to allow an integrated
CASE STUDY: BLUEWATER POWER SEES SMOOTH SAILING
AHEAD
1. What problems was Bluewater Power encountering as it merged? What
management, organization, and technology factors were responsible for these
problems?
Bluewater Power was created in late 2000 aftre a merger of six local utilities. At
around the same time government deregulation brought about new multiered billing
2. How easy was it to develop a solution using SAP/ERP software? Explain your
answer.
The President and CEO of Bluewater said that they “experienced minimal disruption
3. List and describe the benefits from the SAP software.
Since implementation, the company has better control of data. This results in
• increased confidence in regulatory compliance and financial information
• more visibility and greater cost control across operations
• improved statistical tracking which means it now has insight into consumer
trends, allowing the utility to further enhance customer satisfaction and plan its
growth strategy
• tighter controls to ensure correct time and materials along its supply chain.
4. How much did the new system solution transform the business? Explain your
answer.
The improvements mentioned above will result in decreased costs and greater
5. How successful was this solution for Bluewater Power? Identify and describe the
metrics used to measure the success of the solution.
We can say that the ERP system was successful although the case does not offer any
6. If you had been in charge of the SAP ERP implementations, what would you
have done differently?