The basic idea behind an enterprise system is the consolidation of data to eliminate redundancy while simultaneously streamlining business processes. When data is shared and centralized the end result is greater consistency among applications accessing the same data. This functionality is at the core of enterprise resource planning, or ERP. An ERP system is not a single application but a suite of applications performing a variety of tasks. ERP aims to centralize and thus integrate data and applications requesting that data. Many people define ERP systems in a multitude of ways but the key notions revolve around centralization and integration.
The logical progression of ERP has followed the push of business to the web. But before e-commerce can be effectively initiated the move to an e-business systems architecture must be complete. E-business may be defined as the complex fusion of business processes, enterprise applications, and organizational structures necessary to create a high performance business model (Kalikota & Robinson, 2001). This business model allows companies to leverage the investment of their integrated enterprise frameworks on and offline to focus on customers and costs. The e-business system is a suite of applications, with ERP at its core, that facilitates inter-organizational processes and that provides sophisticated analysis and decision-making capabilities.
The goal of this chapter is not mastery of any specific technology but exposure to key areas of the evolving enterprise (e-business) system. These key areas include customer relationship management, supply chain management and strategic enterprise management. Enterprise systems are also known to be packaged, configurable software solutions. These authors do not foresee the circumstances in which one hundred percent of an organization's functions can be represented in a packaged software system. There will continue to be a need to further innovate the organization and provide special, unique functionality through an "add-on" or through, more likely perhaps, a customized approach. Whether this occurs 20 percent of the time, or 80 percent of the time, organizations are going to require middleware and application integration capabilities. Hence, the basic concepts surrounding these technologies are also discussed.
The world of enterprise systems consists of many heterogeneous operating systems with many different applications. These applications need to speak to one another or transfer data between the two systems. Middleware is a distributed software layer that allows heterogeneous network technologies, machine architectures, operating systems and programming languages to communicate with one another. This communication is made possible because developers write general code that will run on top of the applications without taking operating system and application specific parameters into account.
In practice, organizations use middleware technologies such as CORBA and COM+ quite frequently, although the two do not mix well. This forces most organizations to implement either one technology or the other. CORBA typically functions in the UNIX world while COM+ dominates the Windows environment. In the context of enterprise systems, middleware is the glue that binds heterogeneous applications and systems to allow sharing of data. Another area very similar to middleware is enterprise application integration or EAI. The main difference between the two lies in the fact that middleware technologies adhere to programming language standards while EAI solutions are vendor specific. EAI has grown quickly due to the necessity of organizations to implement multiple vendor applications or best of breed enterprise systems.
Enterprise Application Integration, or EAI, is the combination of processes, software, standards, and hardware resulting in the seamless integration of two or more enterprise systems allowing them to operate as one. Although EAI is often associated with integrating systems within a business entity, EAI may also refer to the integration of enterprise systems of disparate corporate entities when the goal is to permit a single business transaction to occur across multiple systems (Gormly, 2001).
An integrated enterprise environment delivers savings in terms of costs, resources, and time. EAI connects existing and new systems to enable collaborative operation within the entire organization. In addition, a successfully integrated system allows information to work harder and smarter, increasing the speed of business reaction time, and facilitating seamless, straight-through transaction processing (Linthicum, 1999). EAI is, and will be, a huge investment in time and money. The authors do not foresee the circumstances under which companies won't need to deploy heterogeneous hardware and software solutions to some degree.
The future of EAI is very promising. IDC Research predicts that worldwide revenues in this market will jump from $5 billion in 2000 to nearly $21 billion in 2005. Furthermore, IDC projected EAI to become the most important and fastest-growing IT sector in the next three to five years. North America and Western Europe will generate more than 90 percent of the demand for global EAI services through 2005, with Japan and Latin America driving the remainder of this service demand.
This concludes the review of how different systems and applications transmit data from one source to another through middleware and EAI. Next is a review of three applications key to the realization of the 21st century intelligent enterprise: customer relationship management systems, supply chain management systems, and strategic management systems.
The basics of Customer Relationship Management are straightforward; CRM is a software solution to identify, acquire and retain customers. CRM also has the ability to automate many marketing functions such as sales and customer service. CRM is a software solution that manages and optimizes customer relationships in terms of, for instance, profitability. In contrast to customer care, customer relationship management is used to deal specifically with the integration of all business functions with each other. There are four main components within the context of CRM: Marketing, Commerce, Fulfillment and Customer Care.
CRM's emphasis on marketing requires identifying, segmenting, and profiling customers while delivering personalized content. Purchasing demand is created through customized marketing to best match each buyer's needs. The key capabilities within the marketing function of CRM include segmentation and profiling, cost-effective, personalized marketing campaigns, targeted content and cost-effective and personalized product recommendations.
These solutions should be channel transparent, enabling companies to reach customers directly or through a variety of channel intermediaries. The commerce focus within CRM executes sales transactions accurately, rapidly, and securely (either directly or through indirect channels) in addition to providing real-time order availability. Commerce capabilities within CRM include: dynamic product catalogs, shopping carts and lists, cross-selling capacity, contract management, auctions, credit card processing and tax calculations. These optimization engines should enable companies to configure and price complex, multi-enterprise products while seamlessly integrating back-end supply chain processes to ensure that the customer offering is simultaneously valid, deliverable, and profitable. The functionality within fulfillment includes distributed order management and multi-enterprise order fulfillment. Fulfillment also provides a window into the supply chain by seamlessly extending supply chain efficiency to customer interaction.
Changing the customer care focus suggests sustaining long-term customer loyalty through superior customer interactions while lowering overall service expenses and assets deployed. Customer care capabilities include status monitoring, ability to log and track orders and returns, electronic billing, online product registration, logistics tracking, spare parts planning, field service/crew/repair depot scheduling and parts storage handling (Tripathi, 2000).
Figure 3 provides a complete overview of the functions and stakeholders within a CRM system from the supplier to the end customer. CRM is driven by customer service, customer profitability and cost reduction. CRM and its data measures provide valuable profitability reporting on a per customer basis and is an integral part of e-business. CRM integrates with existing ERP systems, as well as external sources such as suppliers and additional vendors. The integration provided by CRM allows the automation of sales and field services. For example, call centers, sales and field service may be provided with the complete customer history on a per client basis. This history may forecast potential technical problems based on call center volume on a specific product. Then, it can provide sales with the list of customers who have recently placed orders with the potentially problematic product and finally, inform field service to be aware that a product may have technical problems. CRM systems also provide self-service support tools via the web as well as e-commerce and customer tracking information. CRM attempts to unify all areas that affect the customer from sales, to marketing, to service and support.
Figure 3: CRM in the e-Business Systems Suite. (Adapted from Kalikota and Robinson, 2002.)
Supply Chain Management is designed to improve a company's operational business processes from finding raw materials all the way to delivering the final product to the customer. It offers the capabilities to reduce cost, increase revenues and provide increased services to customers for a company.
There are five basic components to Supply Chain Management software including planning, sourcing, producing (making), delivering, and returning. Each component is discussed in greater detail below.
Planning. The supply chain management strategy should manage all resources that go toward meeting customer demand for a product or service. Metrics are developed to monitor supply efficiency. The goal of planning is to ensure high quality products and value to customers at the least cost.
Sourcing. When determining the sources for the supply of goods (i.e., raw materials and purchased goods) and services that go into the final product or service, it is important to choose suppliers that will deliver. The development of pricing, delivery and payment processes with suppliers and metrics for monitoring and improving relationships should follow. Finally, it is important to create processes for managing the inventory of goods and services from suppliers. Inventory management should include receiving, verifying, and transferring shipments to manufacturing facilities as well as authorizing supplier payments.
Producing. Scheduling the activities necessary for manufacturing such as production, testing, packaging and preparation for delivery is done at this step. As the most metric-intensive portion of the supply chain, manufacturing should measure quality levels, production output and worker productivity.
Delivering. The delivery of materials and goods (also known as logistics) embodies the coordination of orders from customers, developing a network of warehouses, selection of carriers to transport products to customers. The delivery function should set up an invoicing system to receive payments from customers.
Return. A network for receiving defective and excess products from customers is also handled within the supply chain. It is important that measures are created to identify customers who have problems with delivered products and to resolve their issues (Koch, 2002).
A supply chain is a network of facilities and distribution options that perform the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Supply chains integration with suppliers is of particular importance because their raw materials or products have great effect on the final product. Organizations want the most dependable, reliable, quality oriented suppliers for their products and at the best price.
Supply chain integration allows vendors, suppliers and customers to integrate their networks. This sharing of information reduces inventory costs, improves design specifications, and builds vendor, supplier and customer relationships. These capabilities are necessary to transform an organization from ERP to e-business.
E-business systems are simply the integration of applications (i.e., packaged functionality), like customer relationship management and supply chain management, to port business to the Internet. Another important and emerging tool within e-business is strategic enterprise management systems.
With increasing global competition, strategic thinking and analysis has become a key factor in the survival for today's enterprise. Technological development has facilitated the ability to optimize products and services as well as operational business processes with the emergence of ERP systems. SEMS (Strategic Enterprise Management Systems) are tools to assist executive management, instill sound enterprise-wide, value-chain-orientated management practice thus allowing for quick, process-oriented strategic decision making in the best interest of the company and its shareholders.
As the growth of ERP systems continues and integration becomes the standard, these advanced tools may seep into executive offices. Globalization and the emergence of the Internet have increased the dynamics of markets today. The Internet has allowed for the movement of data in real-time, thereby accelerating decision making processes and operations. Strategic enterprise management systems take advantage of real time data and provide managers with planning, analysis and presentation to enhance their decision-making capabilities. Over time, the importance of strategic management processes and systems should mature as these tools attempt to: link strategy to action in real-time; support automation, outsourcing, and shared services; and optimize the extended supply chain.
Fundamentally, SEMS are a suite of tools designed to enable advanced cost management, profitability analysis, and performance measurement capabilities, allowing managers to focus explicitly on driving increased shareholder value (CSS, Computer Science Corporation, 2000).
For example many SEMS offer the following functionality:
Link to strategy with operational activities using integrated strategic management processes
Web-enabled end-user access
Internal management control using value-based management techniques
Generic and industry specific business content for strategic enterprise management and value-based management
Analytical applications based on current online processing and data warehouse technology
Figure 4: Strategic Enterprise Management Architecture. (Adapted from KPMG, UK— eFinance SAP Strategic Enterprise Management, 2000.)
Easy customization and the ability to deploy components incrementally
Integration with ERP systems
Strategic enterprise management systems are structured into three main areas (KPMG, UK: eFinance SAP Strategic Enterprise Management, 2000): cost/profitability management; performance management; and forward-looking analysis. These areas are further described below (CSC, 2000):
Activity-Based Costing/Management (ABC/M). A well-recognized approach for enhancing the quality of cost information provided to management, ABC/M allows companies to analyze the cost of work performed in the enterprise, view resource consumption and significantly enhance the quality of channel, customer, service and product profitability analysis. This approach also provides visibility to non-value-added work and a basis for process improvement and customer/product rationalization (CSC, 2000). Supported functions and computations generally include process/activity costing, delivered cost, product profitability, cost to serve, and customer profitability. Source data for the cost computations include financial and accounting systems.
Performance Management. Performance management includes the ability to: (1) track and report a balanced set of financial and nonfinancial performance measures throughout the organization; (2) provide insights regarding the impact of business units or customers on the enterprise's market valuation, often referred to as economic value analysis; and (3) communicate the company's strategic intentions throughout the organization. Typically, advanced performance management capabilities include graphical presentations of data and linkages between lower-level organizational metrics and enterprise-level strategic goals and objectives. Typical functions supported include the balanced scorecard approach, benchmarking, and value-based management.
Forward-Looking Analytical Capabilities. These tools allow operating managers to assess the impact of alternative courses of action on shareholder value. This functionality encompasses a broad range of tools, including simulation, activity-based budgeting, forecasting and scenario analysis.