Information Management Report

BUSN2012

Information Management

Report

12 April 2006

1. Introduction

“An organisation which recognises the importance of information and more specifically, Information Systems as being synonymous with success may gain a competitive advantage over an organization that doesn’t because….”

The purpose of this report is to take this statement into consideration and to provide evidence, in relation to a specific industry, which will support it.

Introduction to Information Systems

According to Ratzan (2004) Information systems are systems that use information technology to capture, transmit, store, retrieve, manipulate, or display information used in one or more business processes. The oval surrounding information systems is light because information systems can sometimes be seen as business processes themselves. Firms consist of interdependent groups of business processes and compete in a business environment.

Ratzan (2004) believes the layers in Figure 1.1 illustrate why the term information system must be defined along with the terms information technology and business process. Information systems are systems that use information technology to capture, transmit, store, retrieve, manipulate, or display information used in one or more business processes.

Figure1.1

Firms consist of groups of business processes and compete in a business environment. More specifically: Information technology is the hardware and software that make information systems possible. Hardware is the devices and other physical things involved in processing information, such as computers, workstations, physical networks, and data storage and transmission devices. Software is the computer programs that interpret user inputs and tell the hardware what to do. Software includes operating systems, end-user software such as word processors, and application software related to specialized business tasks such as recording credit card transactions or designing automobiles.

An information system is a system that uses information technology to capture, transmit, store, retrieve, manipulate, or display information used in one or more business processes. For example, a department store’s bar-code system for collecting data at the point of sale is part of a larger purchasing and distribution system that includes purchasing decisions and physical movement of goods to the stores. Viewed as general-purpose tools, computer programs such as a spreadsheet program or word processing program are not information systems because they do not provide information for specific business processes. A business process is a related group of steps or activities that use people, information, and other resources to create value for internal or external customers. Business processes consist of steps related in time and place, have a beginning and end, and have inputs and outputs. Examples of business processes in a restaurant include taking orders, cooking food, and preparing a bill. Examples in a factory include manufacturing products, hiring employees, and maintaining equipment. Examples in a doctor’s office include making appointments, examining patients, and filling out insurance forms. Each of these business processes consists of a group of related activities that have a beginning and end and have inputs and outputs. Although some business processes such as providing customer service are directed at external customers, many business processes create products or services for internal customers within the organisation. A firm (or government organisation) consists of a large number of interdependent business processes that work together to generate products or services in a business environment. The business environment includes the firm itself and everything else that affects its success, such as competitors, suppliers, customers, regulatory agencies, and demographic, social, and economic conditions.

2. E-Business

The most basic definition of e-business is simply this: using the internet to connect with customers, partners, and suppliers. But the term also implies the transformation of existing business processes to make them more efficient. To engage in e-business, companies need to be able to unlock data in their back-end computer systems, so they can share information and conduct electronic transactions with customers, partners, and suppliers via the internet. For some companies, engaging in e-business means adopting new web-enabled business models—auctioning off surplus goods, selling products directly to consumers, or joining in online purchasing cooperatives with their competitors. Without a doubt, embarking on an e-business effort requires as much thinking about business strategy as it does about technology.

In today’s business world we often hear companies attempting to achieve competitive advantage through the use information technology. Moving along this area, e-business has evolved and is growing rapidly. E-business is viewed as a critical strategic marketing tool to achieve key business values, which direct or indirectly impacts the bottom-line of an organisation.

E-business is basically the use of internet-based tools to support business processes in organisations (Cagliano et al. 2003). The evolution in technology has fostered the development of powerful tools that are expected to improve performance of an organisation with higher levels of process efficiencies in a highly integrated business environment.

2.1 Cross-Functional System

According to Fredericks (2005), cross-functional systems refer to a group of systems with:

“Varying expertise directly, collaborating and sharing resources in the form of information, schedules, procedures, and processes, all of which are necessary to develop a timely and profitable innovation”.

Key Business Value

As explained by Crismatts (2003), business value, in the language of business refers to profit. The ultimate goals of every company are as follow:

Increase or protect profit
Increase or protect Return on Investment (ROI)
Improve cash flow

This is a preview of the whole essay

Key Business Value

As explained by Crismatts (2003), business value, in the language of business refers to profit. The ultimate goals of every company are as follow:

Increase or protect profit
Increase or protect Return on Investment (ROI)
Improve cash flow

In order to achieve the above, the company’s value chain has to be enhanced. Johnson (2001) describes value chain as “the sum of all processes – from idea to implementation – in a product’s creation, including design, pricing, procurement, and fulfilment”. With the help of enterprise systems, companies can re-evaluate its value chain to achieve process simplification, efficiency and effectiveness, cost savings, enhanced communication, increased capabilities and control, which will ultimately lead to better cash flow, higher profit margin, and better rate on investment (ROI).

3. Analysis

The following section identifies the key deliverables of each of the enterprise system and its relevance in supporting company, customers and business partners’ requirements.

Enterprise System

Enterprise system is “Enterprise Software running on an Enterprise Platform” (http://www.officevision.com/pub/p5ee/definitions.html), which demonstrates certain attributes such as scalability; mobility and security. There are different types of enterprise systems designed to support different areas in an organisation.

Electronic Customer Resource Management (e-CRM)

As customers today demand a different relationship with suppliers, a different marketing approach that focuses on customer’s requirements and changing preference is crucial.

Many companies such as Hewlett-Packard, Acer America Corp., Lucent Technologies, etc. are moving away from “traditional” CRM, which focuses on transaction-oriented views of customers, to internet-based CRM that goes beyond transactional data to manage customers’ satisfaction and loyalty by fulfilling business performance commitment and improving customer interactions through the internet by meeting business performance promises and to improve the quality of customer interactions over the internet (Davydov, 2004).

e-CRM helps deliver customer centric relationships that allows companies to understand the past, present and predict future requirements of customers through a centralized database that all employees in the company have access to (Xu et al. 2002). Basically e-CRM has several characteristics as listed below.

Sales force and Marketing Automation

With e-CRM, current customer, deal, product and competitor information are stored in a central database for sales person retrieval. A customer’s sales process is configured into the system. The integration of order placement and delivery allows sales cycle to be monitored and tracked. This provides a holistic view of each customer, which incorporates contact information, sales history, preferences and complaints, which is available to everyone who has access to the system. Customer data can even be segregated into regions, branches, types of customers or types of products to be used for marketing campaigns (Xu et al. 2002) that are tailored to customer’s needs. Companies can even capture a market before its competitors by understanding analysing it customer data. Sales force, when empowered with customer knowledge, can provide value-added services to the customers. Consequently, increases customer satisfaction and may lead to higher sales for the company.

Better Customer Service and Support

e-CRM enables exemplary customer service to be incorporated in a company’s core system. It also decreases customer migration rate through an increased customer involvement by constantly tracking, monitoring and measuring customer service responses (Davydov, 2004). With e-CRM, companies can even assign

customer queries to the appropriate channels to reduce unnecessary transferring of calls or call waiting, which frustrates customers. Hence, customers’ enquiries can be attended to immediately with proactive customer support system (Xu et al. 2002). Efficiently attending to customers increase customer satisfaction that may lead to better customer loyalty and retention rate.

3.5 Increased Mobility

Through the use of e-CRM, remote staffs can quickly and effectively respond to customers’ requirements by communicating with the customer service department via the company’s central database (Xu et al. 2002). Customers requests are recorded, assigned, monitored and tracked to ensure maximum customer service quality. Available personnel with specific expertise are instantly assigned to each problem, taking into considerations skill sets, workload, geographical location, availability, parts and tools, etc. The knowledge required and detailed instructions for problem solving are taken care of during the first service call. e-CRM also helps a company reduce the service inventory cost by automating execution, replenishment and cycle-counting functions (Xu et al. 2002).

3.6 Electronic Supply Chain Management (e-SCM)

SCM is viewed as a consolidation of manufacturers, suppliers or vendors, transporters or distributors, warehouses, retail outlets and the customers (Folinas et al. 2004).

Traditional SCM uses traditional media and channels to link business partners in linear, inefficient relationships. The growth of e-commerce over the internet has facilitated new relationships for connecting new supply chain partners, thus significantly increasing quality and quantity of inter-organisational information flows (Warkentin et al. 2000). A proper implementation of e-SCM enhances customer service by reducing technological structures that exist in a traditional organisation setup, whereby departments operate as independent islands (Madu, CN & Madu AA,2003).

e-SCM involves different functions and phases that are interdependent on the activities of the others. It is used to improve a company’s value chain in terms of producing and distributing products in the right quantity and quality, at the right place and time to maximize consumer satisfaction (Folinas et al. 2004).

4. Production Flow Management

Using the internet as a communication channel with SCM infrastructure, the economies of information has changed. New forms of affiliation and transaction between organisations allow better transfer of information, even with diverse and geographically disperse partners. e-SCM allows co-ordination of activities between partners instead of focusing on engineering and improving individual functional processes. Delivery time can then be significantly reduced through better co-ordination of suppliers’ activities, improved lead-time for sourcing items (Madu, CN & Madu, AA 2003). With operation efficiency, companies can reduce cost to offer products and services at a reasonable price to customers.

4.1 Reducing Bureaucratic Structure

With standardisation of information transmission in e-SCM, new business relationships with important new information flows are made possible. The process of disintermediation using the internet platform allow, “Direct channel” opportunities (Warkentin et al. 2000). Companies like Dell and Amazon have created huge markets by selling their products directly to consumers, bypassing traditional intermediaries.

This new relationship not only allows significant cost savings, also improve purchasing experience through direct communication with customers, enabling customised products to be delivered (Madu, CN & Madu, AA 2003). In addition, tangible product sellers like computers or automobiles can even mass-customise production.
The benefits organisations achieve through e-SCM such as cost savings, better turnaround time and paperless services can be translated into cost reduction to

customers (Warkentin et al. 2000). When operating cost decreases, companies have more margins to maneuver with. This may lead to better prices for consumers or higher profit margins for companies.

Consistency in Quality

According to Croom (2005), when the entire product fulfilment process is integrated in an environment where each partner optimises their resources internally, consistency in quality can be achieved. The combination of unique capabilities with continuous evaluation puts an organisation ahead of its competitors. Companies can even differentiate their strategy by competing in providing consistent quality with its competitors, instead of merely focusing on price-cutting strategies.

Electronic Enterprise Resource Planning (e-ERP)

ERP relates to enterprise management with the goal to develop an integrated enterprise, one which links all the company’s functional units onto a single computer system that serves different needs.

With e-commerce, new channels of ERP are being built – one for customers (business-to-consumer) and one for suppliers and partners (business-to-business). With e-ERP, not only suppliers and partners, consumers too can have order status and billing information via the internet (Koch 2002).

Traditional differentiation between automation and enterprise has diminished with greater emphasis on managing information through the supply chain.

(Source: Peach, M 2000, Enterprise and Controls Companies Converge in the Information Management World, viewed 3 April 2006, http://www.manufacturing.net/ctl/article/CA191377).

As trading exchanges multiply, general information and the amount of business transactions increases, ERP will have to be extended beyond the four walls of the company and be electronically accessible to customers and all supply chain partners (Peach 2000).

Working Towards Global Optimum Goals

With e-ERP, departments are connected internally via the internet and have better information flow. Internet-based ERP systems allow better reach to vendors, providing more competitive bids to companies. When payment and ordering are automated, processing and paper costs reduce. Furthermore, e-ERP enables companies to have fast access to detailed customer histories, providing useful information to improve planning and analysis (Enterprise Resource Planning Newsletter 2001).

Each department will understand and appreciate the contributions of other departments towards the company’s overall objectives and goals. Having global optimum goals allows companies to stay focused and minimize waste of time and resources in working towards non-unified goals (Madu, CN & Madu, AA 2003).

Simultaneous Tracking of Orders

e-ERP ensures lateral transfer of information to various departments, allowing placement of orders to be tracked by relevant departments simultaneously and quickly relay information to the customer. This way, an operation’s productivity is improved by reducing or eliminating non-value added time required to complete a transaction. With improved processing time, companies can provide better service to their customers (Bendoly & Schoenherr 2005). In addition, e-ERP helps companies cut down setup costs by eliminating the need of individual database in each department. Since departments do not have to re-enter customer order information, the likelihood of errors is greatly reduced, which will also lead to better customer service.

Reduced Inventories

With integration and collaboration across e-business supported ERP, companies can enhance its just-in-time system to effectively manage inventory. This approach not only helps companies in handling delivery time from suppliers better, production planning and scheduling are also enhanced due to better information flow, which assist companies in making effective decisions.

5. Transaction Cost Reduction

Market pressure has placed companies in a position to offer products and services at a reasonable price, at a rapid pace, with good quality and design that suits customers’ needs and preferences. Increasing demands in the market has led to migration from traditional enterprise systems to internet-based systems.

Integration of systems such as e-ERP, e-SCM and e-CRM allows companies to efficiently and effectively produce goods that maximize available resources, according to customers’ requirements (Madu, CN & Madu, AA 2003). For example when a customer places an order using the internet, suppliers can immediately track the order and respond to the customer with the projected cost, based on specific requirements, quantity and delivery time. Each functional unit in the network can track the order of the customer from point of contact to point of delivery (Warkentin et al. 2000). As time is money, this speeding up of the turnaround time for processing reduces companies operating cost by minimising unnecessary time for information flow, as well as ensuring effective use of resources that minimises wastage (Bendoly & Schoenherr 2005). Furthermore, intermediary departments such as purchasing departments may even be eliminated as customer orders are now directly linked to the suppliers’ network (Warkentin et al. 2000). This of course means further cost reduction to the organisation. When operating cost is at its optimum level, companies have more margins to maneuver with. This can mean offering products or services at a more affordable price, which is favourable to customers, or having a higher profit margin that benefits the company. An efficient system also benefits business partners in the network with optimum turnaround time.

Customer Management

In today’s business environment, sustainable competitive advantage is only possible when a company has knowledge about a customer that its competitors don’t. Hence, there is a need for vast quantity of information about individual customer needs and perception about a company, to customise products and services on a one-to-one basis (Davydov, 2004).

e-CRM helps companies in building customer information to understand its customers. Companies are now adopting e-CRM with e-SCM and e-ERP to deliver customer configured products. An example would be Dell’s Built-to-Order concept allows customer to select its own specifications (http://www.dell.com, 2/3/06). Once the systems are built Dell will arrange a number of custom delivery services, using its selected carriers, to best suit the customer’s work environment and staffing constraints. Another example would be improved flow of order placement (Madu, CN & Madu, AA 2003). When a customer places an order from the web, the order is transferred to the manufacturer’s inventory and production planning systems, as well as the customer database for credit history checking and the financial system for invoice issuance. The details of the transaction is then recorded so that customer service representatives can better service customers and telesales personnel can leverage on the information to cross-sell other products (Xu et al. 2002). When company products are flexible with reasonable price and delivery time, customer loyalty and retention can be achieved. Larger customer base means higher market share for the company and its partners.

6. Resource Management

In today’s turbulent market condition, it is a challenge for companies to achieve optimum level of resource management. Companies cannot afford to have over-supply or under-supply situations that will impact its overall profitability and affect turnaround time.

e-ERP and e-SCM systems are generally designed to improve the production flow of a company. While e-ERP focuses more on integrating different parts of an organisation to achieve synergistic benefits, e-SCM is aimed at rationalising procurement along the whole business value chain (Madu, CN & Madu, AA 2003). When integrated information flow, the Just-in-Time system enables companies to effectively manage its resources, from inventory to manpower to ensure no wastage or over supply. When resources are well managed, companies are able to minimise risk on its current assets. Also, using the Supply-by-Demand concept, internet allows companies to learn about the demand pattern by analysing internet users browsing habit, purchasing activities, feedbacks, enquiries, etc.

6.1 Communication

While e-ERP being the software backbone to integrate internal operations, e-SCM and e-CRM are increasingly being integrated with e-ERP to share same database information on customers. With quality data management, efficient and effective production process, respond time or feedback information to customer inquiries is quickened. Moreover, companies can gain deeper knowledge of customer preferences and habits by analysing the transaction history of a customer. This enhanced communication between customer, company and business partners adds value to the customers and improve turnaround time of companies.

6.2 Decision Making and Planning

Organisations are facing increasingly complex and competitive environment. Technological innovation and capabilities are major challenges that are important for business success (Tornatzky & Fleishcer, 1990; Veliyath & Fitzgerald, 2000). Successful enterprise systems enable timely and accurate information exchange and data collection that are essential for decision-making, allow improved co-ordination and communication with business partners, facilitate customer service improvement and help reduce administrative costs (Zhuang & Lederer, 2003).

With proper knowledge management such as knowledge acquisition, application and sharing of information, companies can decide and plan for different areas of an organisation, from company overall objective such as global optimum goals to departmental functional applications like designing new products, running promotions and marketing campaigns, deciding the level of inventory, predicting profit margins, forecasting sales based on current and future trend, with the knowledge of its internal and external capabilities, as well as customer requirements in the changing market environment.

7. Conclusion

At present organisations rely on integrated cross-functional systems to be innovative, productive, efficient and effective. This report discussed electronic enterprise systems such as e-SCM, e-ERP and e-CRM, with its respective deliverables, in helping companies collaborating internal and external systems. e-CRM is now incorporated onto e-SCM and e-ERP, focusing on customer preferences and requirements, to deliver flexible and innovative products and services efficiently and effectively.

In today’s turbulent market environment, companies need to adopt BRP to re-design and re-engineer its business process to achieve dramatic and sustaining improvements.

BRP will only succeed if the organisational structure of companies is flattened, following application of enterprise systems such as e-SCM.

The aim of adopting enterprise systems is of course to deliver key business values to customers, companies and business partners.

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