Database Management System

Section I: Managing Data Resources

DATA RESOURCE MANAGEMENT

Data is a vital organizational resource, which needs to be managed like other important business assets.  Most organizations could not survive or succeed without quality data about their internal operations and external environment.  Managers need to practice data resource management - a managerial activity that applies information systems technology like database management and other management tools to the task of managing an organization's data resources to meet the information needs of business users.

FOUNDATION DATA CONCEPTS

A hierarchy of several levels of data has been devised that differentiates between different groupings, or elements, of data.  Data are logically organized into:

·         Character - A character is the most basic logical data element.  It consists of a single alphabetic, numeric, or other symbol.

·         Field - A field consists of a grouping of characters.  A data field represents an attribute (a characteristic or quality) of some entity (object, person, place, or event).

·         Record - Related fields of data are grouped to form a record.  Thus, a record represents a collection of attributes that describe an entity.  Fixed-length records contain a fixed number of fixed-length data fields.  Variable-length records contain a variable number of fields and field lengths.

·         File - A group of related records is known as a data file, or table.  Files are frequently classified by the application for which they are primarily used, such as a payroll file or an inventory file, or the type of data they contain, such as a document file or a graphical image file.  Files are also classified by their permanence, for example, a master file versus a transaction file.  A transaction file would contain records of all transactions occurring during a period, whereas a master file contains all the permanent records.  A history file is an obsolete transaction or master file retained for backup purposes or for long-term historical storage called archival storage.

·         Database - A database is an integrated collection of logically related records or objects.  A database consolidates records previously stored in separate files into a common pool of data records that provides data for many applications.  The data stored in a database is independent of the application programs using it and of the type of secondary storage devices on which it is stored.

TYPES OF DATABASES

Continuing developments in information technology and its business applications have resulted in the evolution of several major types of databases. Several major conceptual categories of databases that may be found in computer-using organizations include:

·         Operational Databases - These databases store detailed data needed to support the operations of the entire organization.  They are also called subject area databases (SADB), transaction databases, and production databases.  Examples are customer databases, personnel databases, inventory databases, and other databases containing data generated by business operations.

·         Distributed Databases - Many organizations replicate and distribute copies or parts of databases to network servers at a variety of sites.  These distributed databases can reside on network servers on the World Wide Web, on corporate Intranets or extranets, or on other company networks.  Distributed databases may be copies of operational or analytical databases, hypermedia or discussion databases, or any other type of database.  Replication and distribution of databases is done to improve database performance and security.

·         External Databases - Access to external, privately owned online databases or data banks is available for a fee to end users and organizations from commercial online services, and with or without charge from many sources on the Internet, especially the Web.

·         Hypermedia Databases on the Web:  [Figure  3.6]  - The rapid growth of web sites on the Internet and corporate Intranets and extranets has dramatically increased the use of databases of hypertext and hypermedia documents. A web site stores such information in a hypermedia database consisting of a home page and other hyperlinked pages of multimedia or mixed media (text, sound, etc.).

DATA WAREHOUSES AND DATA MINING

·         Data Warehouses - A data warehouse stores data from current and previous years that has been extracted from the various operational and management databases of an organization.  It becomes a central source of data, which has been screened, edited, standardized, and integrated so it can be used by managers and other end user professionals throughout an organization.  Data warehouses may be subdivided into data marts, which hold specific subsets of data from the warehouse. 

·         Data Mining - A major use of data warehouse databases is data mining.  In data mining, the data in a data warehouse are processed to identify key factors and trends in historical patterns of business activity that can be used to help managers make decisions about strategic changes in business operations to gain competitive advantages in the marketplace.

Enterprise e-Business System....Contd

Section III: Supply Chain Management:  The Business Network

INTRODUCTION

Fundamentally, supply chain management helps a company get the right products to the right place at the right time, in the proper quantity and at an acceptable cost.  The goal of SCM is to efficiently manage this process by forecasting demand; controlling inventory; enhancing the network of business relationships a company has with customers, suppliers, distributors, and others; and receiving feedback on the status of every link in the supply chain.  To achieve this goal, many companies today are turning to Internet technologies to Web-enable their supply chain processes, decision-making, and information flows.

WHAT IS SCM?

Supply chain management is a cross-functional interenterprise system that uses information technology to help support and manage the links between some of a company’s key business processes and those of its suppliers, customers, and business partners.  The goal of SCM is to create a fast, efficient, and low-cost network of business relationships, or supply chain, to get a company’s products from concept to market.

According to the Advanced Management Council, supply chain management has three business objectives:

·         Get the right product to the right place at the least cost.

·         Keep inventory as low as possible and still offers superior customer service.

·         Reduce cycle times.  Supply chain management seeks to simplify and accelerate operations that deal with how customer orders are processed through the system and ultimately filled, as well as how raw materials are acquired and delivered for manufacturing processes.

Electronic Data Interchange:

Electronic data interchange (EDI) involves the electronic exchange of business transaction documents over the Internet and other networks between supply chain trading partners (organizations and their customers and suppliers).  Data representing a variety of business transaction documents are electronically exchanged between computers using standard document message formats.  Characteristics of EDI software include:

·         EDI software is used to convert a company’s own document formats into standardized EDI formats as specified by various industry and international protocols.

·         Formatted transaction data are transmitted over network links directly between computers, without paper documents or human intervention.

·         Besides direct network links between the computers of trading partners, third-party services are widely used. 

·         EDI eliminates the printing, mailing, checking, and handling by employees of numerous multiple-copy forms of business documents.

Benefits of the business use of EDI include:

·         Reduction in paper, postage, and labor costs

·         Faster flow of transactions as formatted transaction data are transmitted over network links directly between computers, without paper documents or human intervention.

·         Reductions in errors

·         Increases in productivity

·         Support of just-in-time (JIT) inventory policies

·         Reductions in inventory levels

·         Value-added network companies offer a variety of EDI services.  They can offer secure, lower cost EDI services over the Internet.

·         Smaller businesses can now afford the costs of EDI services.

THE ROLE OF SCM

SCM supports the objectives of the top three management levels of an organization (strategic, tactical, and operational).  The role of information technology in SCM is to support these objectives with inter-enterprise information systems that produce many of the outcomes a business needs to effectively manage its supply chain.

BENEFITS AND CHALLENGES OF SCM

Major business benefits that are possible with effective supply chain management systems include:

·         Faster, more accurate order processing, reductions in inventory levels, quicker time to market, lower transaction and materials costs, and strategic relationships with suppliers.

·         Companies can achieve agility and responsiveness in meeting the demands of their customers and the needs of their business partners.

Major business challenges include:

·         Lack of proper demand planning knowledge, tools, and guidelines is a major source of SCM failure.

·         Inaccurate or overoptimistic demand forecasts will cause major production, inventory, and other business problems, no matter how efficient the rest of the supply chain management process is constructed.

·         Inaccurate production, inventory, and other business data provided by a company’s other information systems are frequent causes of SCM problems.

·         Lack of adequate collaboration among marketing, production, and inventory management departments within a company, and with suppliers, distributors, and others.

·         SCM software tools are considered to be immature, incomplete, and hard to implement by many companies who are installing SCM systems.

TRENDS IN SCM

Three possible stages in a company’s implementation of SCM systems. 

·         First stage – a company concentrates on making improvements to its internal supply chain process and its external processes and relationships with suppliers and customers.

·         Second stage – a company accomplishes substantial supply chain management applications by using selected SCM software programs internally, as well as externally via intranet and extranet links among suppliers, distributors, customers, and other trading partners.

·         Third stage – company begins to develop and implement cutting-edge collaborative supply chain management applications using advance SCM software, full-service extranets links, and private and public e-commerce exchanges.

Questions Related to Enterprise e-Business Systems

ANSWERS TO DISCUSSION QUESTIONS

1.            Should a company become a customer-focused business?  Why or why not?

It is a well-known fact that to survive in today’s competitive environment, companies have no choice but to be become customer-focused.  No longer can companies expect to rely on traditional methods of buying and selling of their products to suppliers, intermediaries or channel members.  The channels have changed, and companies are closer to the consumer who is the actual user of the product.  Technology is increasingly being used in the marketplace (marketspace) to reach these consumers and businesses have come to realize that the relationships that they build with these consumers are their most valuable assets.  Today’s consumers can quickly change from one company’s product offering to other companies with a click of a mouse.  As such, a customer-focused business is one that will more likely have a competitive advantage.  A customer-focused business strategy is not a matter of choice  - rather it is a matter of necessity, and technology makes this possible.  CRM allows a business to identify and target their best customers, those who are the most profitable to the business, so they can be retained as lifelong customers for greater and more profitable services.  It makes possible real-time customisation and personalization of products and services based on customer wants, needs, buying habits, and life cycles.  CRM can also keep track of when a customer contacts the company, regardless of the contact point.  And CRM systems can enable a company to provide a consistent customer experience and superior service and support across all the contact points a customer chooses.  These benefits provide strategic business value to a company and major customer value to its customers.

2.      Why would systems that enhance a company’s relationships with customers have such a high rate of failure?

Customer relationships management systems are very complex systems to develop.  Many failures happen when firms try to create a cross-functional enterprise system that will integrate and data from a wide array of departments into one system.  For example, integrating data from sales, marketing, manufacturing, customer service etc. is a daunting task.  e enterprise.  Organizations view cross-functional enterprise systems as a strategic way to use IT to share information resources and improve the efficiency and effectiveness of business processes, thus helping an e-business attain its strategic objectives.  Building such seamless CRM systems to enable employees to see a “total picture” of a customer is difficult.   Research shows that the major reason for high failure rates is lack of understanding and preparation.  For example, many CRM projects are implemented without the proper participation of the business stakeholders involved – both employees and customers are not prepared for the new processes or challenges that are part of a new CRM implementation.

3.      How could some of the spectacular failures of ERP systems have been avoided?

In answering this question, students could first start out by stating the most common causes of failed systems, then make suggestions as to how to avoid them such as knowing what you want the system to do, involve people, understand change management, hire consultants with proven track records, conduct extensive conversion and data testing etc.

Failures of ERP systems as stated in the text include: Business managers and IT professionals have been the major cause of ERP failures.  The reason given is that these individuals underestimate the complexity of the planning, development, and training that are needed to prepare for a new ERP system that would radically change their business processes and information systems.  Failure to involve affected employees in the planning and development phases and change management programs, or trying to do too much too fast in the conversion process, are also typical causes of failed ERP projects.  Insufficient training in the new work tasks required by the ERP system, and failure to do enough data conversion and testing, are other causes of failure.  In other cases, ERP failures are also due to overreliance by company or IT management on the claims of ERP software vendors or the assistance of prestigious consulting firms hired to lead the implementation.

4.      How can problem of overenthusiastic demand forecasts in supply chain planning be avoided?

Implementing collaborative SCM systems is a very complex undertaking.  A lack of proper demand planning knowledge, tools, and guidelines are stated as major sources of SCM failure.  Inaccurate and overenthusiastic demand forecasts will cause major production, inventory, and other business problems, no matter how efficient the rest of the supply chain management process is constructed.  Inaccurate production, inventory, and other business data provided by a company’s other information systems are a frequent cause of SCM problems.  Any lack of adequate collaboration among marketing, production, and inventory management departments within a company, and with suppliers, distributors, and others, will sabotage any SCM system. Even the SCM software tools themselves are considered to be immature, incomplete, and hard to implement by many companies who are installing SCM systems.

Given this information, students will provide suggestions to correct the problem of overenthusiastic demand forecasts by make suggestions such as ensuring that systems currently in place are capturing real-time and correct data.  Also, getting everyone on board of the project early so that problems can be identified before implementation.  Conversion, testing, training, etc should be carefully conducted to correct problems.

5.            What challenges do you see for a company that wants to implement collaborative SCM? How          would you meet such challenges?

Creating a real-time SCM infrastructure is a daunting and ongoing issue and quite often, a point of failure.  As stated in the text, one of the chief reasons of the failure of SCM systems is that the planning, selection, and implementation of SCM solutions is becoming even more complex as the pace of technological change accelerates and the number of company’s partners increases.

6.      Should companies install e-business software suites or “best of breed” e-business software components?  Why?

e-business suites are defined as an integrated system of software modules for customer relationship management, enterprise resource planning, supply chain management, and other business applications.    The major ERP software companies have developed modular, Web-enabled software suites that integrate ERP, CRM, SCM, procurement, decision support, enterprise portals, and other business applications and functions.  The goal of these software suites is to enable companies to run most of their business using one Web-enabled system of integrated software and databases, instead of a variety of separate e-business applications.  The answer to this question could go either way.  For companies that know what they are doing, and how to use these suites they integration of is probably a good move as they should operate seamlessly without any major problems.  However, for companies who really don’t know how to operate any of these components, this is no magic cure or recipe to their problems.  In fact, for these companies it may cause even major problems as they will be ill prepared for such a challenge.

System

Enterprise e-Business Systems... Contd

Section II: Enterprise Resource Planning: The Business Backbone

INTRODUCTION

Enterprise resource planning (ERP) systems serve as a cross-functional enterprise backbone that integrates and automates many internal business processes and information systems within the manufacturing, logistics, distribution, accounting, finance, and human resource functions of a company.

WHAT IS ERP? 

Enterprise resource planning (ERP) is a cross-functional enterprise system that serves as a framework to integrate and automate many of the business processes that must be accomplished within the manufacturing, logistics, distribution, accounting, finance, and human resources functions of a business.  Characteristics of ERP software include:

·         ERP software is a family of software modules that supports the business activities involved in vital back-office processes. 

·         ERP gives a company an integrated real-time view of its core business processes.

·         ERP systems track business resources, and the status of commitments made by the business no matter what department has entered the data into the system.

·         ERP software suites typically consist of integrated modules of manufacturing, distribution, sales, accounting, and human resource applications.

BENEFITS AND CHALLENGES OF ERP

·         Quality and efficiency – ERP creates a framework for integrating and improving a company’s internal business processes that results in significant improvements in the quality and efficiency of customer service, production, and distribution.

·         Decreased costs – many companies report significant reductions in transaction processing costs and hardware, software, and IT support staff compared to the non-integrated legacy systems that were replaced by their new ERP systems.

·         Decision support – ERP provides vital cross-functional information on business performance quickly to managers to significantly improve their ability to make better decisions in a timely manner across the entire business enterprise.

·         Enterprise agility – ERP can be used in breaking down many former departmental and functional walls, which results in more flexible organizational structures, managerial responsibility, and work roles. The result is a more agile and adaptive organization and workforce that can more easily capitalize on new business opportunities.

The Cost of ERP:

·         Costs and risks involved in implementing ERP are considerable.

·         Hardware and software costs are a small part of the total costs.  The costs of developing new business processes (reengineering) and preparing employees for the new system (training and change management) make up the bulk of implementing a new ERP system.

·         Converting data from previous legacy systems to the new cross-functional ERP system is another major category of ERP implementation costs.

Causes of ERP Failures:

·         Business managers and IT professionals underestimate the complexity of the planning, development, and training that are needed to prepare for a new ERP system that would radically change their business processes and information systems.

·         Failure to involve affected employees in the planning and development phases and change management programs

·         Trying to do too much too fast in the conversion process.

·         Insufficient training in the new work tasks required by the ERP system.

·         Failure to do enough data conversion and testing.

·         Over reliance by company or IT management on claims of ERP software vendors or the assistance of prestigious consulting firms hired to lead the implementation.

TRENDS IN ERP 

Four major developments and trends that are evolving in ERP applications include:

·         ERP software packages are gradually being modified into more flexible products.

·         In relation to the growth of the Internet and corporate intranets and extranets prompted software companies to use Internet technologies to build Web interfaces and network capabilities into ERP systems.

·         Development of interenterprise ERP systems that provide Web-enabled links between key business systems of a company and its customers, suppliers, distributors, and others.

·         ERP software companies have developed modular, Web-enabled software suites that integrate ERO, customer relationship management, supply chain management, procurement, decision support, enterprise portals, and other business applications and functions.

Enterprise e-Business Systems

Section I: Customer Relationship Management:  The Business Focus

INTRODUCTION

Customer-focused business is one of the top business strategies that can be supported by information technology.  Many companies are implementing customer relationship management (CRM) business initiatives and information systems as part of a customer-focused or customer centric strategy to improve their chances for success in today’s competitive business environment.

WHAT IS CRM?

·         CRM is described as a cross-functional e-business application that integrates and automates many customer-serving processes in sales, direct marketing, accounting and order management, and customer service and support.

·         CRM systems create an IT framework that integrates all the functional processes with the rest of a company’s business operations.

·         CRM systems consist of a family of software modules that perform the business activities involved in such front office processes.

·         CRM software provides the tools that enable a business and its employees to provide fast, convenient, dependable, and consistent service to its customers.

Contract and Account Management

CRM software helps sales, marketing, and service professionals capture and track relevant data about every past and planned contact with prospects and customers, as well as other business and life cycle events of customers.

Sales

CRM software tracks customer contacts and other business and life cycle events of customers for cross-selling and up-selling.

Marketing and Fulfilment

CRM software can automate tasks such as qualifying leads, managing responses, scheduling sales contacts, and providing information to prospects and customers.

Customer Service and Support

CRM helps customer service managers quickly create, assign, and manage service requests.  Help desk software assists customer service reps in helping customers whom are having problems with a product or service, by providing relevant service data and suggestions for resolving problems.

Retention and Loyalty Programs

·         It costs six times more to sell to a new customer than to sell to an existing one.

·         A typical dissatisfied customer will tell eight to ten people about his or her experience.

·         A company can boost its profits 85 percent by increasing its annual customer retention by only 5 percent.

·         The odds of selling a product to a new customer are 15 percent, whereas the odds of selling a product to an existing customer are 50 percent.

·         Seventy percent of complaining customers will do business with the company again if it quickly takes care of a service snafu.

·         More than 90 percent of existing companies don’t have the necessary sales and service integration to support e-commerce.

Examples of business benefits of customer relationship management include:

·         CRM allows a business to identify and target their best customers; those who are the most profitable to the business, so they can be retained as lifelong customers for greater and more profitable services.

·         CRM enables real-time customization and personalization of products and services based on customer wants, needs, buying habits, and life cycles.

·         CRM can keep track of when a customer contacts the company, regardless of the contact point.

·         CRM enables a company to provide a consistent customer experience and superior service and support across all the contact points a customer chooses.

THE THREE PHASES OF CRM 

CRM can be viewed as an integrated system of Web-enabled software tools and databases accomplishing a variety of customer-focused business processes that support the three phases of the relationship between a business and its customers.

·         Acquire – a business relies on CRM software tools and databases to help it acquire new customers by doing a superior job of contract management, sales prospecting, selling, direct marketing, and fulfilment. 

o   The goal of these CRM functions is to help customers perceive the value of a superior product offered by an outstanding company.

·         Enhance – Web-enabled CRM account management and customer service and support tools help keep customers happy by supporting superior service from a responsive networked team of sales and service specialists and business partners.  CRM sales force automation and direct marketing and fulfilment tools help company’s cross-sell and up-sell to their customers, thus increasing their profitability to the business. 

o   The value perceived by customers is the convenience of one-stop shopping at attractive prices.

·         Retain – CRM analytical software and databases help a company proactively identify and reward its most loyal and profitable customers to retain and expend their business via targeted marketing and relationship marketing programs. 

o   The value perceived by customers is of a rewarding personalized business relationship with “their company”.

BENEFITS AND CHALLENGES OF CRM

·         CRM allows a business to identify and target their best customers; those who are the most profitable to the business, so they can be retained as lifelong customers for greater and more profitable services.

·         CRM enables real-time customization and personalization of products and services based on customer wants, needs, buying habits, and life cycles.

·         CRM can keep track of when a customer contacts the company, regardless of the contact point.

·         CRM enables a company to provide a consistent customer experience and superior service and support across all the contact points a customer chooses.

CRM Failures:

·         Major reason for the failure of CRM systems is the lack of understanding and preparation.

TRENDS IN CRM

Four types or categories of CRM that are being implemented by many companies today include:

·         Operational CRM – most businesses start out with operational CRM systems such as sales force automation and customer service centers.

·         Analytical CRM – analytical CRM applications are implemented using several analytical marketing tools, such as data mining, to extract vital data about customers and prospects for targeted marketing campaigns.

·         Collaborative CRM – CRM systems to involve business partners as well as customers in collaborative customer service.

·         Portal-based CRM – Internet, intranet, and extranet Web-based CRM portals as a common gateway for various levels of access to all customer information, as well as operational, analytical, and collaborative CRM tools for customers, employees, and business partners.