ITM Exam review
Chapter 4 Enterprise Computing Challenges and Enterprise Resource Planning
Chapter 4 overview
SECTION 4.1 - ENTERPRISE COMPUTING CHALLENGES
– Innovation: Finding New
– Social Entrepreneurship: Going Green
– Social Networks: Who’s Who
– Virtual Worlds: It’s a Whole New World
SECTION 4.2 – ENTERPRISE RESOURCE PLANNING (ERP) “over view”
– Enterprise Resource Planning
– Core ERP Components
– Extended ERP Components
– Integrating SCM, CRM, and ERP
– Measuring ERP Success
– Choosing ERP Software
– ERP and SME Markets
• Enterprise resource planning (ERP) integrates all departments and
functions throughout an organization into a single IT system (or
integrated set of IT systems) so that employees can make decisions
by viewing enterprise-wide information on all business operations.
ERP as a business concept resounds as a powerful internal
information management nirvana: Everyone involved in sourcing,
producing, and delivering the company’s product works with the
same information, which eliminates redundancies, reduces wasted
time, and removes misinformation.
• Buffett believes in focused investing and believes that all investors
should look at five features:
1. The certainty with which the long-term economic characteristics of
the business can be evaluated
2. The certainty with which management can be evaluated, both as to
its ability to realize the full potential of the business and to wisely
employ its cash flows
3. The certainty with which management can be counted on to channel
the reward from the business to the shareholders rather than to itself 4. The purchase price of the business
5. The levels of taxation and inflation that will be experienced and that
will determine the degree by which an investor’s purchasing-power
return is reduced from his gross return
Innovation finding new
six best practices of innovation:
• Find your relevant edge
• Assemble innovation hothouses
• Reward risk takers
• Celebrate diversity
• Look around
• Mix practitioners and developers
Social entrepreneurship “going green”
• Social Responsibility implies that an organization has a
responsibility to society.
• Corporate Policy reflects the position a company takes on social and
• Sustainable or “Green” describes systems that minimize damage to
Breakdown of Power Usage in The Typical Data Centre
• For convenience and to allow for automatic updates and backup, the
majority of computer equipment is never completely shut down. It
draws energy 24 hours a day.
power distribution units
• Ewaste - Refers to discarded, obsolete or broken electronic devices
• Sustainable IT disposal - Refers to the safe disposal of MIS assets at
the end of their life cycle
• Electronic Product Stewardship Canada (EPSC) – an industry
association that educates and encourages e-waste control • Recent International laws restrict the use of hazardous materials.
• Moore’s Law has made technological devices smaller, cheaper, and
faster, allowing more people from all income levels to purchase
computing equipment. This increased demand is causing numerous
environmental issues. Ewaste refers to discarded, obsolete, or
broken electronic devices. Ewaste includes CDs, DVDs, thumb
drives, printer cartridges, cell phones, iPods, external hard drives,
TVs, VCRs, DVD players, microwaves, and so on.
Greener IT four ways to save energy in a data center
use outdoor air for cooling, cool high density areas, use low power
processors, incorporate cooling solutions, use server power
management, buy high efficiency power supplies, use vuirtulization
to condolidate servers.
Organizational social networking
• three types of social networking an organization can implement:
Passive Search—Finding people for new jobs who are happy and
productive where they through business networking sites.
Boomerangs—Former employees returning to old jobs.
Marketing Networks—Using business networks for marketing and events
It’s a whole new world
• Virtual World—An Internet resource which presents a 3D virtual
• Virtual Organizations– interactive web presence for businesses and
• Virtual Workforce—working from home…or anywhere via the
Tools for virtual workforce
• Mobile commerce (m-commerce)—ability to purchase goods and
services through a mobile device.
• Telematics—The blending of wired and wireless technologies for
efficient electronic communication.
• Electronic tagging—the use of RFID (radio frequency identification)
and other systems to identify and tracking digital assets.
4.2 enterprise resource planning ERP Failures
• Blaming ERP for the "pickle" that many a company who has
implemented ERP find themselves in is like blaming the CAD
package for a poorly architected building. Like just about everything
else, IT-enabling business processes is about using the right tools
for the right reasons and executing.
• 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.
ERP powerful organization tools
• Solution to incompatible applications.
• Addresses the need for global information sharing.
• Avoids the expense of fixing legacy systems.
Legacy Systems—are older computer technology still in use.
Functional Systems—serve single business departments or units.
Legacy systems exist in personal computing as well as business
Enterprise resource planning system
Core data – employees, orders, customers, sales, inventory ERP- Global sales
report, Global manufacturing report, global shipping report
Enterprise resource planning - ERP Integration Data Flow
• At the heart of all ERP systems is a database; when a user enters or
updates information in one module, it is immediately and automatically
updated throughout the entire system
“Data” (centre) – purchasing, accounting and finance, manual resources,
inventory, manufacturing, marketing and sales
• Why do organizations need integrations, if an ERP system contains one
database that connects all applications together?
• Most organizations operate functional “silos”, and each department
typically has its own systems
• A company might purchase an ERP and then all of the functional
silos would be on one system; however, this doesn’t happen very
often in the real world
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 representative takes an order from a customer,
he or she has all the data necessary to complete the order. When one department finishes with the order, it is automatically routed via the ERP system
to the next department. To find out where the order is at any point, a user needs
only to log in to the ERP system and track the order.
ERP systems automate business processes, for example, order fulfillment
When a Customer Service Representative (CSR) takes an order
from a customer, he or she has all the information necessary to
complete the order (the customer’s credit rating and order history,
the company’s inventory levels, and the delivery schedule)
ERP process flow
– warehouse pack/ship
– receiving returns
• The organization before ERP Multiple functional systems provide support
for the unique needs of each department but cannot be integrated across
the enterprise document management, workflow, erp …etc
The organization after ERP - A central data repository and integrated applications
in each department allow for the unique processing needs of each functional unit
while having data sharing across the enterprise.
Core and extended ERP components The evolution of ERP
ERP – material planning, order entry, distribution, general ledger, accounting,
shop floor control
Extended ERP – scheduling, forecasting, capacity planning, ecommerce,
ERP –II – project management, knowledge management, workflow management,
customer relationship’, human resource, portal capability ..
• Core ERP components – traditional components included in most ERP
systems and they primarily focus on internal operations • Ex
ERP components – extra components that meet the organizational needs
not covered by the core components and primarily focus on external
Core and extended ERP components
Three most common core ERP components
1. Accounting and finance
2. Production and materials management
3. Human resource
Accounting and finance ERP component – manages accounting data and
financial processes within the enterprise with functions such as general ledger,
accounts payable, accounts receivable, budgeting, and asset management
Deeley Harley-Davidson Canada (DHDC), the exclusive Canadian distributor of
Harley-Davidson motorcycles, has improved inventory, turnaround time, margins,
and customer satisfaction—all with the implementation of a financial ERP system
• Production and materials management ERP component – handles the
various aspects of production planning and execution such as demand
forecasting, production scheduling, job cost accounting, and quality control
Production and materials management ERP components
• This figure displays the typical ERP production planning process. The
process begins with forecasting sales in order to plan operations. A
detailed production schedule is developed if the product is produced, and
a materials requirement plan is completed in the product is purchased.
Sales forcasting operaations planning detailed scheduling/production,
materials requirement planning, purchasing
• Human resource ERP component – tracks employee information
including payroll, benefits, compensation, performance assessment, and assumes compliance with the legal requirements of multiple jurisdictions
and tax authorities
Extended ERP components include:
• Business intelligence
• Customer relationship management
• Supply chain management
• Business intelligence – describes information that people use to
support their decision-making efforts
• Customer relationship management – involves managing all
aspects of a customer’s relationships with an organization to
increase customer loyalty and retention and an organization's
• Supply chain management – involves the management of
information flows between and among stages in a supply chain to
maximize total supply chain effectiveness and profitability
• E-business – means conducting business on the Internet, not only
buying and selling, but also serving customers and collaborating
with business partners
Primary Users and Business Benefits of Enterprise Applications
Enterprise application – crm, scm, erp \ssmles parketing/cs, custommers,
accouting finance logistics
• Middleware – Several different types of software that sit between and
provide connectivity for two or more software applications
The connected corporation
• Enterprise application integration middleware – Takes a new approach
to middleware by packaging commonly used applications together,
reducing the time needed to integrate applications from multiple vendors
Measuring ERP Success with the Balanced Scorecard
The Four Primary Perspectives of the Balanced Scorecard
Vision and strategy – financial, internal business process, customer, learning and
Balanced Scorecard is a measurement system whose objective is to clarify the
company’s vision and strategy and translate them into actions. It starts with the
customer… • Customer—”To achieve our vision, how should we appear to our
• Financial –”To succeed financially, how should we be appearing to our
• Internal Business Process—”To satisfy our shareholders and customers,
what business processes must we excel at?”
• Learning and Growing—”To achieve our vision, how will we sustain our
ability to change and improve?”
Choosing ERP software
Successful ERP projects share 3 attributes
1. Overall fit
• Off the rack
• Off the rack and tailored to fit
• Custom made
2. Proper business analysis
• Successful companies spend up to 10 percent of the project
budget on a business analysis
3. Solid implementation plans
• A plan is needed to monitor the quality, objectives, and
This refers to the degree of gaps that exist between the system and
the business process. A well-fitting ERP has no major process gaps
and very few minor ones
Proper business analysis
The best way to determine which fit strategy is right is to conduct a thorough
business analysis. Successful companies normally spend up to 10 percent of the
project budget on a business analysis.
Chapter 5 Operations Management and Supply Chain Management
• SECTION 5.1 – OPERATIONS MANAGEMENT “over view”
– Operations Management Fundamentals
– OM in Business
– Information Systems’ Role in OM
• SECTION 5.2 – SUPPLY CHAIN FUNDAMENTALS
– Supply Chain Fundamentals
– Information Systems’ Role in the Supply Chain
– Supply Chain Management Success Factors
– Future Supply Chain Trends
Operations management foundations
Production management describes all the activities managers do to help
companies create goods. Operations management (OM) is the management of systems or processes
that convert or transform resources (including human resources) into goods and
A transformation process is often referred to as the technical core, especially in
manufacturing organizations, and is the actual conversion of inputs to outputs.
Operations management fundamentals
Operations Involves the Conversion of Inputs into Outputs
Example of Inputs, Transformation, and Outputs
Hospital inputs include patients, medical supply, doctors, and nurses.
OM in business
Typical OM activities include:
• Capacity planning
• Managing inventory
• Assuring quality
• Motivating and training employees
• Locating facilities
Forecasting: Estimating demand for a product/service
Capacity Planning: Determining the amount of space, equipment and
throughput is needed to achieve the production targets.
Scheduling: Determining when the production will occur.
Managing inventory: Ensuring raw materials will be available on time and in
place and that work in progress and finished goods have storage.
Assuring quality: Ensuring standards are met through sampling inputs, in
process work and outputs.
Motivating and training employees: Appropriate pay, benefits, scheduling, and
direction, supervision and instructions.
Locating Facilities: Determining where to put production facilities and the cost
effectiveness of near major markets or away from markets and close to
Hierarchy of operational planning IS support for operations strategy depends on
IS support for operations strategy depends on:
– Level of available technology.
– Skill level of workers.
– Degree of vertical integration, to what degree the suppliers are
owned (or partnered) with the company.
– Extent to which outside suppliers are used.
• SBU Strategic Business Unit—is a stand-alone business under a
• Strategic Planning—are the collection of decisions focus in doing the
right things over a longer period of time
• MPR Systems—use sales forecast to make sure parts and materials are
• Global Inventory Management Systems (GIMS)—locate, track and
predict materials and components by installing GPS in transportation
• Operational Planning and Control (OP&C)—deals with day-to-day
Competitive OM strategy
Five key competitive priorities that can add value for customers:
1. Cost—key determinant in a customer purchase decision
2. Quality—Product quality should reflect the exact requirements of a
customer Process quality ensures a consistent error-free quality level. Several
international quality methodologies exist including Six Sigma Quality,
ISO9000, ISO14000, TQM, CMMI. An assignment for students is for
individual students or groups to research one of these methodologies to see
when they started and by whom; what objective is achieved and how; what
prominent companies use them today and why; and what the advantages as
well as disadvantages there are.
3. Delivery—fast and reliable
4. Flexibility—offering a wide variety of products to customers. Offering a
choice of environmentally friendly products and services.
5. Service—New products revert to being commodities quickly. Often the
distinguishing factor is the service provided by the supplier.
OM and the supply chain
• Supply chain consists of all parties involved, directly or indirectly, in the
procurement of a product or raw material
• Supply chain management (SCM) involves the management of
information flows between and among stages in a supply chain to
maximize total effectiveness and profitability.
Supply chain management
• The four basic components of Supply chain management (SCM) are:
– Supply chain strategy
– Supply chain partners
– Supply chain operation
– Supply chain logistics
• Supply Chain Strategy. A company must have a plan for managing all
the resources that go toward meeting customer demand for products or
• Supply Chain Partners – Companies chosen to deliver finished products,
raw materials and services.
• Supply Chain Operations –Scheduling production activities, including
testing, packaging, and preparing for delivery.
• Supply Chain Logistics—product delivery process and elements
including orders, warehouses, carriers, defective product returns and
A typical manufacturing supply chain:
Supplier, storage, manufacturing, storage (finished goods), distribution,
A typical service supply chain:
Supplier, storage, service, customer • SCM software can enable an organization to generate efficiencies within
these steps by automating and improving the information flows throughout
and among the different supply chain components.
Impact of Efficient & Effective Supply Chain Management on Porter’s Five Forces
• Effective and efficient SCM systems can enable an organization to
Decrease the power of its buyers
Increase its own supplier power
Increase switching costs to reduce the threat of substitute products
Create entry barriers thereby reducing the threat of new entrants
Increase efficiencies while seeking a competitive advantage
through cost leadership
“Organizations supply chain”
Supplier power +
5.2 Supply Chain Fundamentals
Supply chain fundamentals
• The supply chain has three main links:
1. Materials flow from suppliers and their “upstream” suppliers at all
2. Transformation of materials into semi-finished and finished products
through the organization’s own production process
3. Distribution of products to customers and their “downstream”
customers at all levels • Collecting, analyzing, and distributing transactional information to all
relevant parties, SCM systems help all the different entities in the supply
chain work together more effectively
• SCM has significantly improved companies’ forecasting abilities over the
last few years
A Typical Supply Chain for a Manufacturer
Supplier/supplies supplier manufacturer (transformation) distributor retailer
customer customer’s customer
• They need to determine all areas and potential threats that make the
supply chain vulnerable. For example,
• An unusually bad season in Australia causes the eucalyptus
harvest to fall short of expectation production levels, which causes
the price to skyrocket
• The factory in Lititz, Pennsylvania, is destroyed by a fire
• One of its transportation ships sinks
• A hurricane causes one of its transportation ships to be delayed
The five basic supply chain management components
• Plan – This is the strategic portion of supply chain management. A
company must have a plan for managing all the resources that go toward
meeting customer demand for products or services.
• Source – Companies must carefully choose reliable suppliers that will
deliver goods and services required for making products.
• Market– This is the step where companies manufacture their products or
services. This can include scheduling the activities necessary for
production, testing, packaging, and preparing for delivery.
• Deliver – This step is commonly referred to as logistics. Logistics is the
set of processes that plans for and controls the efficient and effective
transportation and storage of supplies from suppliers to customers.
• Return – This is typically the most problematic step in the supply chain.
Companies must create a network for receiving defective and excess
products and support customers who have problems with delivered
Information Systems’ Role in the Supply Chain
• IS’s primary role is to create integrations or tight process and information
linkages between functions within a firm
• Information systems’ primary role in SCM is in integrating the information
links between functions within a firm such as marketing, sales, finance,
manufacturing and distribution—and between firms to allow the smooth
synchronized flow of both information and products between customers,
suppliers and transportation providers across the supply chain. Factors Driving SCM “supply Chain management/middle”
• Information technology – only recently have advances in IT made it
possible to bring the idea of a truly integrated supply chain to life
• Visibility – The ability to view all areas up and down the supply chain.
The bullwhip effect means that distruptions upstream at supply source
increase in impact as they move downstream to the consumer. For
example: A strike at a supplier making one critical computer component
means stock-outs on the shelves of the computer retailer. Organizations
need to know what is happening above and below them to be able to
• Consumer behaviour – Demand Planning systems create forecasts
using statistical tools and techniques so that customers can respond faster
to consumer demands, reducing inventory and improving delivery time.
• Competition – To provide a competitive edge, Supply Chain Planning
Systems (SCP), process correct and timely information with Mathematical
algorithms to improve the flow of input materials and final product outputs
through the supply chain. Supply Chain Execution (SCE) automates
steps in the supply chain such as order, shipment and payment. A blanket
PO (purchase order) sits in the suppliers’ computers and the use of the
purchasers’ products are tracked. When the purchasers’ inventory falls to
a specified level an automatic shipment is triggered and payment is done
through automatic bank withdrawal. The most common system is EDI
(Electronic Data Interchange).
• Speed – As EDI and other Supply Chain Execution applications remove
the need for paper flow and allow for continuous materials and product
flow, speed is increased. Increasing speed and capacity of servers and
telecommunications has improved supply chain speed dramatically.
Competition Supply chain planning
Supplier manufacturer distributor retailer customer
Supply chain execution
As each link in the Supply Chain becomes automated the speed of the flow of
goods and services increases.
Three Factors Fostering Speed
1. Pleasing customers has become something of a obsession. Serving the
customer in the best, most efficient, and most effective manner has
become critical, and information about issues such as order status.
2. Information is crucial to manager’s abilities to reduce inventory and human
resource requirements a competitive level.
3. Information flows are essentials to strategic planning for and deploying
Why is information speed critical in a supply chain?
a. If the information arrives three dates late, chances are high that
managers have already made decisions based on current
information that might have been inaccurate
b. Information timeliness is critical
c. IT is an enabler of information timeliness
Supply Chain Management Metrics
• Common supply chain metrics include:
– Back order
– Inventory cycle time
– Customer order cycle time
– Inventory turnover
• Supply chain management metrics can help an organization understand
how it’s operating over a given time period. Supply chain measurements
can cover many areas including procurement, production, distribution,
warehousing, inventory transportation, and customer service.
• The solution is to measure all key areas of the supply chain.
Seven Principles of SCM
1. Segment Customers by service needs, regardless of industry, and tailor
service to those segments.
2. Customize the logistics network and focus intensively on the service
requirements and on profitability of the pre-identified customer segments.
3. Listen to signals of market demand and plan accordingly. Planning must
span the entire chain to detect signals of changing demand. 4. Differentiate products closer to the customer, since companies can no
longer afford to hold inventory to compensate for poor demand
5. Strategically manage sources of supply, by working with key suppliers to
reduce overall costs of owning materials and services.
6. Develop a supply chain information technology strategy that supports
different levels of decision-making and provides a clear view (visibility) of
the flow of products, services and information.
7. Adopt performance evaluation measures that apply to every link in the
supply chain and measure true profitability at every stage
Supply Chain Success Factors
• SCM industry best practices include:
1. Make the sale to suppliers.
2. Wean employees off traditional business practices.
3. Ensure the SCM system supports the organizational goals.
4. Deploy in incremental phases and measure and communicate
5. Be future oriented.
Studying industry best practices is an excellent way to improve SCM
6. A large part of any SCM system extends beyond the organization to
the suppliers. Since the organization has very little control over
anything external to itself, these pieces are typically the most
complicated to build, develop, and implement. Be sure suppliers
are on board with the benefits that the SCM system will provide to
ease SCM implementation difficulties