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Chapter 03

Chapter 03. Strategic Initiatives for Implementing Competitive Advantages. 3- 1. LEARNING OUTCOMES. Explain supply chain management and its role in business Explain customer relationship management systems and how they can help organizations understand their customers

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Chapter 03

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  1. Chapter 03 Strategic Initiatives for Implementing Competitive Advantages 3-1

  2. LEARNING OUTCOMES • Explain supply chain management and its role in business • Explain customer relationship management systems and how they can help organizations understand their customers • Summarize the importance of enterprise resource planning systems • Identify how an organization can use business process reengineering to improve its business 3-2

  3. Strategic Initiatives • Organizations can undertake high-profile strategic initiatives including: • Supply chain management (SCM) • Customer relationship management (CRM) • Business process reengineering (BPR) • Enterprise resource planning (ERP) 3-3

  4. This is simply an introduction of SCM, CRM, BPR, and ERP • Each of these initiatives is discussed in detail throughout the text • There are also business plug-ins in this textbook offering advanced material on SCM, CRM, BPR, and ERP

  5. Supply Chain • A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer

  6. Supply Chain Management • Supply Chain Management(SCM) – involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability 3-6

  7. Supply Chain Management • Four basic components of supply chain management include: • Supply chain strategy – strategy for managing all resources to meet customer demand • Supply chain partner – partners throughout the supply chain that deliver finished products, raw materials, and services including pricing, delivery, and payment processes • Supply chain operation – schedule for production activities including testing, packaging, and preparation for delivery • Supply chain logistics – product delivery process including orders, warehouses, carriers, defective product returns, and invoicing.

  8. SCM • SCM software can enable an organization to generate efficiencies by automating and improving the information flow throughout and among the different supply chain component.

  9. Supply Chain Management • Wal-Mart and Procter & Gamble (P&G) SCM 3-9

  10. The SCM system save time, reduce inventory and decrease order-processing cost for P&G. P&G passes on these saving to Wal-Mart in the form of discounted prices.

  11. Supply Chain Management • 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 or services • Create entry barriers thereby reducing the threat of new entrants • Increase efficiencies while seeking a competitive advantage through cost leadership 3-11

  12. Supply Chain Management • Effective and efficient SCM systems effect on Porter’s Five Forces 3-12

  13. Supply Chain Example • The steps typically taken when a customer buys a bike from Trek bike • Customer places an order for a Trek bike with a store • Store (such as Gart Sports, local bike shop, or local sporting goods store) receives the order • Store receives the payment from the customer • Store orders the bike from Trek • Store sends payment to Trek • Trek orders materials from its suppliers, such as packaging material, metal, and accessories • Trek sends payments to suppliers • Trek receives materials from suppliers • Trek assembles the bike • Trek ships the bike to the store • Customer picks up the Trek bike from the store

  14. SCM OEM=Original Equipment Manufacturer

  15. Videos • Keeping the Global Supply Chain Moving (6 mins) • Fresh Produce Supply Chain Management ( 2 mins)

  16. Customer Relationship Management • Customer relationship management (CRM) involves managing all aspects of a customer’s relationship with an organization to increase customer loyalty and retention and an organization's profitability • Many organizations, such as Charles Schwab and Kaiser Permanente, have obtained great success through the implementation of CRM systems 3-16

  17. Customer Relationship Management • CRM is not just technology, but a strategy, process, and business goal that an organization must embrace on an enterprisewide level • CRM can enable an organization to: • Identify types of customers • Design individual customer marketing campaigns • Treat each customer as an individual • Understand customer buying behaviors 3-17

  18. Customer Relationship Management 3-18

  19. Charles Schwab’s CRM Case • Charles Schwab recouped the cost of a multimillion-dollar CRM system in less than two years • The system allowed Schwab to segment its customers in terms of serious and non-serious investors • The CRM system looked for customers that had automatic withdrawal from a bank account as a sign of a serious investor • The CRM system looked for stagnant balances as a sign of a nonserious investor • Charles Schwab could then focus efforts on selling to serious investors, and spend less time attempting to sell to nonserious investors

  20. Videos • What is CRM? ( 7 mins)

  21. Business Process Reengineering • Business process ( or workflow ) a standardized set of activities that accomplish a specific task, such as processing a customer’s order • Business process reengineering (BPR) – the analysis and redesign of workflow within and between enterprises • The purpose of BPR is to make all business processes best-in-class 3-21

  22. Finding Opportunity Using BPR • A company can improve the way it travels the road by moving from foot to horse and then horse to car • BPR looks at taking a different path, such as an airplane which ignore the road completely 3-22

  23. BPR • There is nothing more frustrating than a broken process. • The process can be a university process, mail-order process, Internet-order process, return merchandise process, etc. • Can you think of some process you are involved on everyday basis and needs to be re-engineered?

  24. Finding Opportunity Using BPR • Progressive Insurance Mobile Claims Process 3-24

  25. Finding Opportunity Using BPR • Types of change an organization can achieve, along with the magnitudes of change and the potential business benefit 3-25

  26. Videos • Business Process Management ( 6 mins) • Workflow - Improving Business Processes ( 2 mins)

  27. Enterprise Resource Planning • Enterprise resource planning (ERP) – integrates all departments and functions throughout an organization into a single IT system so that employees can make decisions by viewing enterprise wide information on all business operations 3-27

  28. Enterprise Resource Planning • Differences between SCM, CRM, and ERP • SCM systems focus specifically on suppliers • CRM systems focus specifically on customers • ERP systems focus on everything, all processes, departments, and operations for an enterprise

  29. Enterprise Resource Planning • Sample data from a sales database 3-29

  30. Enterprise Resource Planning • Sample data from an accounting database 3-30

  31. Non-correlating Data • How can you understand customers when one spreadsheet has customer name and one has customer ID? • How can you understand sales reps when one spreadsheet has sales rep names and one spreadsheet has sales rep ID? • Date format is different – will this cause problems? • One quantity is in units and one quantity has decimal points – what problems will this cause? • Unit price and unit cost is rounded to dollars in one spreadsheet and contains cents in another – what problems will this cause?

  32. Enterprise Resource Planning • ERP systems collect data from across an organization and correlates the data generating an enterprisewide view 3-32

  33. ERP • 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 • The two previous spreadsheets display examples of differences in data that can be fixed by using an ERP system

  34. ERP • Why it is important to have an enterprise wide view of data? • Without understanding how all of the different divisions, products, departments, etc. are operating you cannot run the business

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