Chapter 11Data Visualization and Geographic Information System.docx

Chapter 11
Data Visualization and Geographic Information Systems
Prepared by Dr. Derek Sedlack, South University
Copyright © 2015 John Wiley & Sons, Inc. All rights reserved.
Learning Objectives
Enterprise Data Mashups
Digital Dashboards
Geospatial Data and Geographic Information Systems
Data Visualization and Learning

Chapter 11
Figure 11.3 Tools and technologies in this chapter fall into
three related categories.
Heat Maps
Use colors to represent data categories that are more quickly
identified at a glance in high pace environments.
Visuals are used to accent what you want to learn or convey.
Tag Clouds
Represent the relative frequency of words and terms by their
sizes.
Help to better understand word patterns and use.
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Learning, Exploring, and Discovery
Data discovery: discovering hidden relationships through
visualization.
Used with predictive analytics to improve departmental
decisions.
Summary data rather than statistical data for higher level
absorption.
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Visualizations
Dials, charts, graphs, timelines, geospatial maps, and heat maps
with interactivity and drill-downs making it easier to understand
data and identify patterns.
Returned more quickly than completed reports.
A common mistake is to invest in the analytics foundation—
tools, quality data, data integration, touch screens—but
overlook the most crucial component—namely, users’ ability to
interpret the visual reports and analyses correctly.
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Performance Management Visualizations
IBM SPSS Analytic Catalyst
Advanced analysis designed for experts in statistical software.
Tableau
Easier to implement, requiring just basic database information.
Roambi Analytics
Leading mobile reporting and data visualization app designed
for iPads and iPhones.
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How does data visualization contribute to learning?
How do heat maps and tag clouds convey information?
Why are data visualization and discovery usage increasing?

Give two examples of data visualization for performance
management.
Chapter 11
Suggested Answers:
1. Visuals are the single best way our brain processes
information. Data visualization harnesses the power of analytics
and adds a visual display to capitalize on how our brains work.
Visual displays make it easier for individuals to understand data
and identify patterns that offer answers to business questions.
By using data visualization, companies are able to discover
hidden data relationships and learn how to improve
performance.
2. Heat maps use colors to convey information at a glance. A
heat map is like a spreadsheet whose cells are formatted with
colors instead of numbers.
Tag clouds use data, typically from unstructured content, and
represent the relative frequency of words and terms by their
sizes.
3. Answers may vary. Data discovery is expected to take on a
greater role in corporate decision making. Companies are
investing in the latest data discovery solutions largely because
of their speed and flexibility. Data visualization software
vendors continue to focus on business users of all levels and
backgrounds. Experts and non-experts can collect data quickly
from disparate sources and then explore the dataset with easy-
to-use interactive visualizations and search interfaces. Drill-
down paths are not predefined, which gives users more
flexibility in how they view detailed data. Today’s data

discovery technologies provide greater data exploration and
ease of use to help users find answers to “why” and “what if”
questions through self-service analytic apps. Enterprise apps for
Androids, Apple iPads, and BlackBerry Playbooks are replacing
static business reports with real-time data, analytics, and
interactive reporting tools.
4. Answers may vary.
Vendor Aqumin provides real time visual interpretation
solutions for the financial services industry. Aqumin’s
OptionVision enables traders, risk managers, and market
participants to spot opportunities, risk, and market changes.
AlphaVision for Excel enables visual interpretation capabilities
directly within the Microsoft Excel platform, and AlphaVision
for Bloomberg is developed for professional portfolio managers,
traders, and risk analysts and is connected directly to the
Bloomberg Terminal to leverage data provided by Bloomberg.
IBM SPSS Analytic Catalyst has made sophisticated analytics
accessible. Analytic Catalyst enables business users to conduct
the kind of advanced analysis that had been designed for experts
in statistical software. The software fast tracks analytics by
identifying key drivers, selecting an appropriate model, testing
it, and then explaining the results in plain English.
Roambi Analytics is a leading mobile reporting and data
visualization app designed for iPads and iPhones. The app can
take data from most sources, including Box, Google Docs,
spreadsheets, BI systems, databases, and Salesforce.com, and
transform them into interactive data visualizations.
8

Learning Objectives
Digital Dashboards
Enterprise Mashups
Combine business data and applications from multiple
sources—typically a mix of internal data and applications with
externally sourced data to create an integrated experience.
Does not require a huge investment and can be developed in
hours rather than days or weeks.
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Chapter 11
Figure 11.7 Architecture of enterprise mashup application.
Combinations of data from various business systems and
external sources, often in real time, without necessarily relying
on a middle step of ETL (extract, transform, and load) from a
data warehouse.
Chapter 11
Enterprise Mashup Types
Customer: provides a quick view of customer data for a sales
person in preparation for a customer site visit.
Logistics: displays inventory for a group of department stores
based on specific criteria.
Human resource: provides a quick glance at employee data such
as profiles, salary, ratings, benefits status, and activities.
Chapter 11
Chapter 11

Sketch or describe the architecture of an enterprise mashup
application.
What is an enterprise data mashup?
What are the functions and uses of enterprise mashups?
Explain why business workers may need data mashup
technology.
What are three benefits of mashup technology to the
organization?
Chapter 11
Suggested Answers:
1. Figure 11.7 illustrates the architecture of an enterprise
mashup application.
The general architecture of an enterprise mashup application
integrates data from operational data stores, business systems,
external data (economic data, suppliers, information,
competitors’ activities), and real-time news feeds to generate an
enterprise mashup.
2. Enterprise mashups are combinations of data from various
business systems and external sources, often in real time, and
without necessarily relying on a middle step of ETL (extract,
transform, and load) from a data warehouse.
3. Enterprise mashups improve operational efficiency, optimize
the sales pipeline, enhance customer satisfaction, and drive

profitability. In an enterprise environment, mashups can be used
to solve a wide variety of business problems and day-to-day
situations. Examples of these types of mashups are:
Customer. A customer data mashup that provides a quick view
of customer data for a sales person in preparation for a customer
site visit. Data can be pulled from internal data stores and Web
sources, such as contact information, links to related websites,
recent customer orders, lists of critical situations, and more.
Logistics. A logistics mashup that displays inventory for a
group of department stores based on specific criteria. For
example, you can mash current storm information onto a map of
store locations and then wire the map to inventory data to show
which stores located in the path of storms are low on
generators.
Human resource. An HR mashup that provides a quick glance at
employee data such as profiles, salary, ratings, benefits status,
and activities. Data can be filtered to show custom views, for
example, products whose average quarterly sales are lower than
last quarter.
Data mashup apps are used in organizations:
For real-time awareness and data freshness
To feed data to cross-functional dashboards
For competitive analysis
To monitor compliance and manage risk
For disaster monitoring and disaster response
To generate external vendor reports
4. Using data mashup apps, nontechnical users can easily and
quickly access, integrate, and display BI data from a variety of
operational data sources, including those that are not integrated
into the existing data warehouse, without having to understand
the intricacies of the underlying data infrastructures or schemas.
5. Below is a summary of benefits of mashup technology to an
enterprise:

Dramatically reduces time and effort needed to combine
disparate data sources.
Users can define their own data mashups by combining fields
from different data sources that were not previously modeled.
Users can import external data sources, e.g., spreadsheets and
competitor data, to create new dashboards.
Enables the building of complex queries by non-experts with a
drag-and-drop query-building tool.
Enables agile BI because new data sources can be added to a BI
system quickly via direct links to operational data sources,
bypassing the need to load them to a data warehouse.
Provides a mechanism to easily customize and share knowledge
throughout the company.
15
Learning Objectives
Digital Dashboards

Digital Dashboards
Dashboards
A style of reporting that depicts KPIs, operational or strategic
information with intuitive and interactive displays.
Custom programmed to automatically and securely pull,
analyze, and display data from enterprise systems, cloud apps,
data feeds, and external sources and then display the metrics.
Components of dashboards are:
Design
Performance metrics
API
Access
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Digital Dashboards
Dashboard – Real Time Data
Having real-time, or near-real-time, data is essential to keep
users aware of any meaningful changes in the metrics as they
occur and to provide information for making decisions in real
time.
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Digital Dashboards

Dashboard Functions
Displays company performance metrics, automatically updated
in real time.
Improve the information synthesis process bringing in multiple,
disparate data feeds and sources, extracting features of interest,
and manipulating the data so the information is in a more
accessible format.
Eliminates need to log into multiple applications to view
business performance.
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Digital Dashboards
Dashboard Benefits
Visibility: blind spots are minimized or eliminated; Threats and
opportunities are detected as soon as possible.
Continuous improvement: custom designed to display the user’s
critical metrics and measures.
Single sign on: save time and effort logging onto numerous
corporate information systems.
Budget or planning deviations: metrics can be programmed to
display deviations from targets.
Accountability: employees tend to be motivated to improve their
performance when tracked.
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Digital Dashboards
Describe business dashboards and their functions.
Why do you think dashboards must be in real time and
customized for the executive or manager?
How do business dashboards differ from other types of visual

reports?
Explain the components of dashboards.
What are benefits of dashboards?
Chapter 11
Suggested Answers:
1. Dashboards are a style of reporting that depicts KPIs,
operational or strategic information with intuitive and
interactive displays. An executive dashboard displays a
company’s performance metrics, which are automatically
updated in real time (every 15 minutes) based on custom
programming and connectivity with existing business systems.
Dashboards improve the information synthesis process by
bringing in multiple, disparate data feeds and sources,
extracting features of interest, and manipulating the data so the
information is in a more accessible format. Users no longer
need to log into multiple applications to see how the business is
performing.
The purpose of dashboards is to give users a clear view of the
current state of KPIs, real time alerts, and other metrics about
operations. Having real time, or near real time, data is essential
to keep users aware of any meaningful changes in the metrics as
they occur and to provide information for making decisions in
real time. Users can take corrective actions promptly.
Dashboard design is a critical factor because business users
need to be able to understand the significance of the dashboard
information at a glance and have the capability to drill down to
one or more levels of detail.
3. Dashboards are often mistakenly thought of as reports

consisting of various gauges, charts, and dials, but the purpose
of business dashboards is much more specific and directed. The
purpose of dashboards is to give users a clear view of the
current state of KPIs, real time alerts, and other metrics about
operations. Dashboard design is a critical factor because
business users need to be able to understand the significance of
the dashboard information at a glance and have the capability to
drill down to one or more levels of detail. Having real time, or
near real time, data is essential to keep users aware of any
meaningful changes in the metrics as they occur and to provide
information for making decisions in real time. Users can take
corrective actions promptly.
4. Components of dashboards are:
Design. The visualization techniques and descriptive captions to
convey information so that they are correctly understood.
Infographics are widely used because they convey information
in interesting and informative designs.
Performance metrics. KPIs and other real time content displayed
on the dashboard. All dashboard data should reflect the current
value of each metric.
API. APIs (application programming interfaces) connect
disparate data sources and feeds to display on the dashboard.
The alternative is for users or IT to manually enter data to the
dashboard. Dashboards created in this manner tend to fail
because of the risk of incomplete, outdated, or wrong data,
which users learn not to trust.
Access. Preferred access is via a secure Web browser from a
mobile device.
5. The interrelated benefits of business dashboards are:
Visibility. Blind spots are minimized or eliminated. Threats and
opportunities are detected as soon as possible.
Continuous improvement. A famous warning from Peter
Drucker was “if you can’t measure it, you can’t improve it.”
Executive dashboards are custom designed to display the user’s

critical metrics and measures.
Single sign on. Managers can spend a lot of time logging into
various business systems and running reports. Single-sign-on
dashboards save time and effort.
Deviations from what was budgeted or planned. Any metrics can
be programmed to display deviations from targets, such as
comparisons of actual and planned or budgeted.
Accountability. When employees know their performance is
tracked in near real time and can see their results, they tend to
be motivated to improve their performance.
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Learning Objectives
Digital Dashboards

Geographic Information System (GIS)
Captures, manages, analyzes, and displays multidimensional
geographic data, also called geospatial data.
Geospatial Data
Where things or people are and where they are going—with
descriptive data—what things are like or what customers are
doing.
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GIS
GIS is not a map, with multiple layers of information for many
ways of thinking about a geographic space.
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Global Integration
Cellular and Internet service providers, sensors, Google Earth,
GPS, and RFID systems know the location of each connected
user or object.
Foursquare, Google Maps, and other mobile apps rely on GPS
locations.
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GIS Business Applications
Learn how store sales are impacted by population or the
proximity to competitors’ stores.
Use GIS to identify relevant demographics, proximity to
highways, public transportation, and competitors’ stores to
select the best location options.
Food and consumer products companies can chart locations of
complaint calls enabling product traceability in the event of a
crisis or recall.
Sales reps might better target their customer visits by analyzing
the geography of sales targets.
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Chapter 10
Strategic Technology and Enterprise Systems
Learning Objectives
Enterprise Social Platforms

Enterprise Resource Planning Systems
Supply Chain Management Systems
Customer Relationship Management Systems
Enterprise Systems
Enterprise Systems
Enterprise Systems
A category of cross-functional and inter-organizational systems
that support business strategy.
Primary enterprise systems:
Enterprise Resource Planning (ERP)
Supply Chain Management (SCM)
Customer Relationship Management (CRM)
Chapter 10

Enterprise Systems
Core business processes
Include accounting, finance, sales, marketing, human resources,
inventory, productions, and manufacturing.
Customer lifetime value
CLV is a formula for estimating the dollar value, or worth, of a
long-term relationship with a customer.
Value-added reseller (VAR)
Customizes or adds features to a vendor’s software or
equipment and resells the enhanced product.
Chapter 10
Enterprise Systems
Implementation Challenges
Complexity from incorporating different organizational facets.
Time-consuming coordinating an enterprise integration.
Typically requires consulting, vendor, or value-added reseller
(VAR) assistance.
Chapter 10
Enterprise Systems
Legacy Challenges
Legacy systems are older information systems maintained over
decades because they fulfill critical needs.
They are difficult and expensive to maintain, update, and
interface securely with leading-edge business applications
Chapter 10

Enterprise Systems
Legacy Challenges
High maintenance costs
Inflexibility (integration issues)
Integration obstacles (hardwired)
Lack of staff (qualified/trained professionals)
Chapter 10
Enterprise Systems
Benefits
Reduced maintenance through integrated or cloud systems.
Flexible architectures provide scalability.
CRM and web-based applications ease future integration.
Large enterprise systems mean more skilled staff availability.
Chapter 10
Enterprise Systems
Implementation Best Practices
Redesign of business processes through simplification and
redesign so that they can be automated, either totally or
partially, or removed.
Changes in how people perform their jobs or accommodate the
new processes.
Integration of many types of information systems so that data
can flow seamlessly among departments and business partners.
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Enterprise Systems
Insights
Provide and support applications that enable workers to access,
use, and understand data.
Using data about buying behaviors helps a company identify its
loyal customers and which ones are profitable.
Improving communication and integration among firms in a
global supply chain justifies billions invested in ERP systems.
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Enterprise Systems
Explain the purpose of an enterprise system.
Describe three types of enterprise systems.
What is customer lifetime value (CLV)?
What is a value added reseller (VAR)?
What are two challenges of legacy systems?
Why do companies migrate to enterprise systems?
Explain the challenges of enterprise system implementation.
Explain the three types of changes needed when an enterprise
system is implemented.
Chapter 10
Suggested Answers:
1. Enterprise systems integrate internal core business processes
by their connection to central data repositories that enable them

to synch and share the latest data and they link the enterprise
with suppliers, business partners, and customers.
2. Primary enterprise systems are:
ERP: Enterprise Resource Planning
SCM: Supply Chain Management
CRM: Customer Relationship Management
3. Customer lifetime value (CLV) is a formula for estimating
the dollar value, or worth, of a long-term relationship with a
customer.
4. A value-added reseller (VAR) is company that customizes or
adds features to a vendor’s software or equipment and resells
the enhanced product.
5. Legacy systems (older business systems that may be still in
use) are difficult and expensive to maintain, update, and
interface securely with leading-edge business apps.
6. Companies tend to migrate to an enterprise solution when
they need to consolidate their disparate systems, such as when
limitations caused by their existing legacy systems interfere
with performance or the ability to compete. Here are major
reasons why companies replace parts of their legacy systems or
supplement them with enterprise systems. It is important to
realize that many companies do not have the resources to
replace all their legacy systems.
High maintenance costs. Maintaining and upgrading legacy
systems are some of the most difficult challenges facing CIOs
(chief information officers) and IT departments.
Business value deterioration. Technological change weakens the
business value of legacy systems that have been implemented
over many years and at huge cost.
Inflexibility. Legacy architectures were not designed for
flexibility. These huge systems cannot be easily redesigned to

share data with newer systems, unlike modern architectures.
Integration obstacles. Legacy systems execute business
processes that are hardwired by rigid, predefined process flows.
Their hardwiring makes integration with other systems such as
CRM and Web-based applications difficult and sometimes
impossible.
Lack of staff. IT departments find it increasingly difficult to
hire staff who are qualified to work on mainframes and
applications written in languages no longer used by the latest
technologies.
Cloud. The cloud has lowered upfront costs. Cloud-based
enterprise systems can be a good fit for companies facing
upgrades to their legacy ERP and other enterprise systems.
7. Implementing an enterprise system is complex, time-
consuming, and typically requires the help of a consulting firm,
vendor, or value-added reseller (VAR). Integrating legacy
systems with cloud-based applications is complex, as described
in Tech Note 10-1. Much of the complexity is due to getting
new apps or system modules to interface with existing or legacy
systems that are several generations older.
Enterprise systems require data transfers—often to mainframes.
Designing enterprise-level systems involves a variety of
components that had been implemented on mainframes,
midrange computers, networks, or cloud environments. In most
large enterprises, mainframes are the workhorse systems that
run the majority of business transactions. In contrast, customer
interfaces through customer service; ERP, CRM, and SCM apps;
websites; and B2B interactions are usually on distributed
systems or in the cloud. Many times seemingly well-planned
projects fail and require extensive reworking because
integration issues had not been properly planned.
Some enterprises choose to avoid the challenges of integration
by creating a new system that replaces the full functionality of

the old one. This option is the most costly, difficult, and risky.
An advantage is that this option offers a longer-term solution
that is agile to respond to changing business needs. Despite that
potential payoff, complete replacement requires a large, up-
front investment for development, poses difficulties in
duplicating behavior of the legacy system, and increases the
risk of complete software project failure.
8. Best practices for implementing an enterprise system
involves changes in the management of processes, people, and
existing systems. Three required changes are as follows:
Re-design of business processes. Processes need to be
simplified and re-designed so that they can be automated, either
totally or partially. Tasks that are no longer necessary are
removed from the processes.
Changes in how people perform their jobs. Jobs and how they
are performed will change to accommodate the new processes.
Enterprise systems require retraining users whose productivity
will drop initially as they adjust to a new way of doing their
jobs.
Integration of many types of information systems. Integrating
information systems is necessary so that data can flow
seamlessly among departments and business partners.
Automated data flows are essential to productivity
improvements.
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Learning Objectives

Enterprise Systems
Smart companies connect their employees’ desire to contribute
and interact with peers, with their own need to get timely
feedback from the trenches.
Chapter 10

Enterprise Social
Refers to private (company owned) social media, software,
platforms, or apps specially designed for use by business
leaders and employees to fulfill the strategic mission.
Three main reasons for interest:
Knowledge management
Collaboration
Employee pressure
Chapter 10
Chapter 10
SharePoint
A collaborative and social platform from Microsoft with
Yammer the social collaboration tool of choice over the
Microsoft Cloud.
Yammer
A social network geared toward enterprises. Employees
collaborate across departments, locations, and business
applications.
Office Graph with Oslo
Provides a natural way for users to navigate, discover, and
search people, information, and knowledge across the
enterprise.
Chapter 10

SharePoint
Provides tools for setting up employee social network platforms
and company wikis.
Shared space to store documents from any desktop or mobile
device, so they are not siloed on any one person’s hard drive or
device.
Enables coworkers to stay up-to-date and work simultaneously
on a single document, save previous versions, and track
updates.
Chapter 10
Yammer
Features similar to Facebook likes, newsfeeds, threaded
conversation, and direct messaging.
This private social channel helps employees, partners, and
customers communicate; exchange information; and collaborate
across departments, locations, and business apps.
Includes Enterprise Graph shows how users are related to one
another that solves social network sprawl.
Chapter 10
Jive
Provides tools for communication, sharing, and content creation
to make social media monitoring and engagement easier.
Chatter

Salesforce.com add-on offers companies their own private
network while pushing updates and news in real time to user
feeds, offering smart search, which places items an employee
frequently uses higher in the search list.
Chapter 10
What are the basic functions of an enterprise social platform?
What are the capabilities of SharePoint?
In what ways can enterprises realize value from Yammer or
other enterprise social?
How do Office Graph and Enterprise Graph support
collaboration?
How does Chatter enable workers to solve problems?
Chapter 10
Suggested Answers:
1. The basic functions are to enable employees to connect and
collaborate with others, stay informed, build relationships, and
share documents and data.
2. SharePoint has the following social capabilities:
Intranet and Extranet
Intranets are the internal-facing sites everyone in a company
logs into to find news, announcements, scheduled tasks, and
access to files and data. Dashboards are customized by
department and role to control access. SharePoint also provides

tools for setting up employee social network platforms and
company wikis. SharePoint can be used to set up a secure,
access-controlled extranet site to share with external partners in
the supply chain, contractors, and so on.
Documents
SharePoint provides a shared space to store documents, so they
are not siloed on any one person’s hard drive or device.
Documents stored on SharePoint can be accessed by anyone in
the company—unless the administrator has limited access.
SharePoint enables coworkers to work simultaneously on a
single document, save previous versions, and track updates.
Collaboration and Business Intelligence
The platform makes it easy for users to stay up-to-date and to
coordinate their efforts on projects from any desktop or mobile
device; and to discover patterns and insights in enterprise data.
Yammer
Yammer is “Facebook for business.” Yammer is the social
collaboration tool of choice for SharePoint going forward
(Ryan, 2014).
3. To realize business value from enterprise social:
Make sure management is listening. Leaders and decision
makers need to monitor social chatter to keep informed and
respond promptly.
Provide visible feedback and rewards. Employee participation is
largely driven by the desire to be recognized by peers and
managers.
Brand the social network. Employees want to feel the company
is behind the initiative. At Red Robin, for example, renaming
Yammer to Yummer connected employees to the brand.
Identify and leverage change agents. Start with those employees
most eager to participate, especially Millennials who are
looking for recognition and purpose.

Introduce competitions and games. Experience shows that
people are more likely to engage when they are having fun.
Make the rules of engagement simple. Do not over-engineer or
control the social network. Make it easy to enroll and
participate.
4. Office Graph uses signals from e-mail, social conversations,
documents, sites, instant messages, meetings, and more to map
the relationships between people and concepts.
Enterprise Graph tries to show how users are related to one
another by mapping the relationships between people and
information by simply recording likes, posts, replies, shares,
and uploads. It enables developers and customers to seamlessly
connect people, conversations, and data across all their business
services.
5. With Chatter, the problem-solving process becomes a
conversation rather than a series of disjointed e-mails. People
can interact and spark new ideas. There is no confusion over
which is the latest version of a document. Other employees can
be brought into the conversation using the @ function. Chatter
customer groups let users work with external customers,
vendors, and partners, with the option of limiting what they can
see and access. Private groups can also be set up when
employees need to work on sensitive projects with certain
colleagues.
20
Learning Objectives

Enterprise Systems
ERP Past to Present
Integrating accounting, finance, HR, marketing, and other
critical business functions.
Originally run on client-server architecture and customer-
designed apps.
Now web-based with a focus on social collaboration,
deployment flexibility, faster response, and accessibility from
mobile devices.
An enterprise application integration (EAI) layer enables the
ERP to interface with legacy apps.

Chapter 10
ERP Add-ons
Sales associates to process orders, take payments, and collect
signatures with an iPad app.
Field technicians to provide customer service from anywhere.
Marketing to manage every aspect of ongoing customer
relationships using a smartphone app.
Production to access to the real-time information needed to
reduce stock-outs and excess inventory.
Customers to access, pay, and view invoices online.
Chapter 10
Manufacturing ERP
Success depends on lower costs, shorter cycle times, and
maximum production throughput.
Minimizing inventory errors and maintaining the optimal
inventory level.
Lean Manufacturing
Optimize inventory to keep production running while
minimizing inventory-on-hand to control holding costs.
Help manufacturers avoid material shortages, manage
production, and coordinate distribution channels, which
improves on-time delivery.
Chapter 10

ERP Selection Factors
Select an ERP solution that targets the company’s requirements.
Evaluate potential ERP vendors’ strengths and weaknesses.
Meet with each vendor and get a hands-on demo of its ERP
solutions.
Calculate the ERP’s total cost of ownership (TCO).
Chapter 10
ERP Success Factors
Focus on business processes and requirements.
Focus on achieving a measurable ROI.
Use a strong project management approach and secure
commitment of resources.
Obtain strong and continuing commitment from senior
executives.
Take sufficient time to plan and prepare up-front.
Provide thorough training and change management.
Chapter 10
ERP Failure Factors
Cost misrepresentation.
Unrealistic implementation timeframes.
Software-license issues.
Chapter 10

What are three ways ERP can be deployed?
Briefly describe the latest ERP features and add-ons.
Describe ERP from a technology perspective.
Explain manufacturing ERP systems and lean principles.
5List and briefly describe three ERP implementation success
factors.
Describe causes or factors that contribute to ERP failure.
Chapter 10
Suggested Answers:
1. Enterprise Resource Planning (ERP) is the software
infrastructure that integrates an enterprise’s internal
applications, supports its external business processes, and links
to its external business partners. ERP systems are commercial
software packages that integrate business processes, including
supply chains, manufacturing, financial, human resources,
budgeting, sales, and customer service. ERPs have migrated
from early client-server architectures to a Web-based
architecture.
ERPs were devised to help managers run a business, whether a
manufacturing, distribution, retail, or service organization.
Ideally, each business function would access a centralized
database instead of data silos. Departments stay informed about
what is ongoing in other departments that impact its operations
or performance.
2. Legacy systems (older business systems that may be still in

use) are difficult and expensive to maintain, update, and
interface securely with leading-edge business apps.
Legacy architectures were not designed for flexibility.
Integrating information systems is necessary so that data can
flow seamlessly among departments and business partners. ERP
solutions can have enough flexibility and versatility to manage
different lines of business as well as changing business
requirements. A full ERP offers a longer-term solution that is
agile to respond to changing business needs.
4. Manufacturers know that their success depends on lower
costs, shorter cycle times, and maximum production throughput.
A key factor in lowering costs is inventory management—such
as minimizing inventory errors and maintaining the optimal
inventory level. An optimal level has enough inventory to keep
production running while minimizing inventory-on-hand to
control holding costs. ERP demand forecasting modules help
manufacturers avoid material shortages, manage production, and
coordinate distribution channels, which improves on-time
delivery. Engineers, production floor workers, and those in the
purchasing, finance, and delivery departments can access and
share plans, production status, quality control, inventory, and
other data in real time.
The text shows the results of a survey to identify what ERP
experts had found to be most important to successful ERP
projects. These ERP experts were given the following six
options and asked to select only one of them as “most
important”:
Strong program management: 6 percent
Executive support and buy-in: 19 percent
Organizational change management and training: 13 percent
Realistic expectations: 8 percent

Focus on business processes: 5 percent
Interaction of all five factors: 49 percent
Nearly half of the experts indicated that the failure of any one
of the five factors significantly increases the risk of ERP
failure.
The text also lists the following recommendations to explain
why ERP success depends on several key factors being met:
Focus on business processes and requirements. Too often,
companies get caught up in technical capabilities or platforms
on which the ERP runs. But compared to business processes,
none of this really matters. What matters is how managers want
business operations to run and what the key business
requirements are. Once management and IT have defined them,
they can intelligently choose the software, modules, and vendor
that fits their unique business needs.
Focus on achieving a measurable ROI. Developing a business
case to get approval from upper management or the board of
directors is essential, but not sufficient. Establish key
performance measures, set baselines and targets for those
measures, and then track performance after going live. The
performance results are proof of how well the ERP meets the
expectations that had been listed in the business case.
Use a strong project management approach and secure
commitment of resources. An ERP project depends on how it is
managed. Responsibility for the management of the ERP
implementation project cannot be transferred to vendors or
consulting fi rms. Because of the business disruption and cost
involved, ERP projects require the full-time attention and
support of high-profile champions on the key functions for a
long period of time, from 6 to 12 months on average. It is also
known that ERP projects cannot be managed by people who can
be spared. They must be managed by people who are
indispensable personnel. Without powerful champions and an
adequate budget, expect the ERP to fail.

Obtain strong and continuing commitment from senior
executives. Any project without support from top management
will fail. No matter how well run a project is, there will be
problems such as conflicting business needs or business
disruptions that can only be resolved by someone with the
power and authority to cut through the politics and personal
agendas.
Take sufficient time to plan and prepare up-front. An ERP
vendor’s motive is to close the deal as fast as possible. The
company needs to make sure it correctly defines its needs and
what it can afford to achieve in order to intelligently evaluate
and select the best vendor. Do not be rushed into a decision.
Too often, companies jump right into a project without
validating the vendor’s understanding of business requirements
or their project plan. The principle of “measure twice, cut once”
applies to vendor selection. The more time the company spends
ensuring these things are done right at the start, the lower the
risk of failure and the less time spent fixing problems later.
Filing a lawsuit against a vendor (see Table 10.4) is not a fi x.
Lawsuits are both expensive and risky, and contribute nothing
to the company’s performance.
Provide thorough training and change management. Another key
principle to understand is that when you design an ERP, you
redesign the organization. ERP systems involve dramatic change
for workers. ERPs lose value if people do not understand how to
use them effectively. Investing in training, change management,
and job design are crucial to the outcome of any large-scale IT
project.
Students may give the inverse of success factors; i.e., failure to
have strong program management, executive support, and buy-
in, sufficient change management and training, realistic
expectations, focus on business processes.
The success of an ERP depends on organizational and

technological factors that occur prior to, during, and after its
implementation. Knowing what to do and what not to do are
important.
ERP implementations are complex—and risky. Planning,
deploying, or fine-tuning these complex business software
systems for your company is such a large undertaking that such
projects fail more than 50 to 70 percent of the time. You need to
conduct your own research rather than depend upon vendor data
for the full story of enterprise system implementations.
Many times seemingly well-planned projects fail and require
extensive reworking because integration issues had not been
properly planned.
ERPs are expensive and such an investment needs to be
justified. This includes the total cost of ownership, not simply
the cost of the ERP or monthly SaaS fee.
Processes need to be redesigned so that they can be automated,
either totally or partially. Tasks that are no longer necessary are
removed from the processes. Jobs and how they are performed
will change to accommodate the new processes. Enterprise
systems require retraining users whose productivity will drop
initially as they adjust to a new way of doing their jobs.
Applications must be tightly aligned with well-defined and
well-designed business processes - a standard which few
enterprises are able to achieve.
28
Learning Objectives

Enterprise Systems
Supply Chain
Starts with the acquisition of raw materials or the procurement
(purchase) of products and proceeds through manufacture,
transport, and delivery—and the disposal or recycling of
products.
Chapter 10

Figure 10.10 Model of the supply chain.
Supply Chain Functions
Starts with the acquisition of raw materials or the procurement
(purchase) of products and proceeds through manufacture,
transport, and delivery—and the disposal or recycling of
products.
Chapter 10
Supply Chain Flows
Material or product flow: the movement of materials and goods
from a supplier to its consumer.
Information flow: the movement of detailed data among
members of the supply chain, for example, order information,
customer information, order fulfillment, delivery status, and
proof-of-delivery confirmation.
Financial flow: the transfer of payments and financial
arrangements.
Chapter 10
Supply Chain Management (SCM)
The efficient management of the flows of material, data, and
payments along the companies in the supply chain, from

suppliers to consumers.
SCM systems are configured to achieve the following business
goals:
To reduce uncertainty and variability in order to improve the
accuracy of forecasting.
To increase control over processes in order to achieve optimal
inventory levels, cycle time, and customer service.
Chapter 10
Order Fulfillment
Part of back-office operations, such as accounting, inventory
management, and shipping; and closely related to front-office
operations or customer-facing activities with the key aspect as
delivery of materials or products at the right time, to the right
place, and at the right cost. Part of logistics.
Logistics
Logistics entails all the processes and information needed to
move products from origin to destination efficiently.
Chapter 10
Order Fulfillment Steps
Step 1: Make sure the customer will pay.
Step 2: Check in-stock availability and reorder as necessary.
Step 3: Arrange shipments.
Step 4: Insurance.
Step 5: Replenishment.
Step 6: In-house production.
Step 7: Use suppliers.

Step 8: Contacts with customers.
Step 9: Returns.
Chapter 10
Order Fulfillment
Part of back-office operations, such as accounting, inventory
management, and shipping; and closely related to front-office
operations or customer-facing activities with the key aspect as
delivery of materials or products at the right time, to the right
place, and at the right cost.
Chapter 10
Supply Chain Research
The top two strategic priorities of executives are supply chain
analytics and multichannel fulfillment.
The two major barriers preventing innovation in the supply
chain are a talent shortage and a continuing focus on cost
reduction reducing sustainability.
Chapter 10
Supply Chain Analytics
Algorithms and SCM models based on past demand, supply, and
business cycles are inadequate to effectively manage the supply

chain used to help predict the future.
Multichannel Fulfillment
Efficient handling of back-end order fulfillment processes.
Chapter 10
Supply Chain Technology
Mobility and mobile-to-mobile (M2M) technologies improving
responsiveness and customer service.
3D printing could have far-reaching implications, but immediate
potential remains unrealized.
Chapter 10
What is a supply chain?
List four functions carried out by companies in a supply chain.
List and describe the three main flows being managed in a
supply chain.
Describe SCM.
What are steps in the order fulfillment?
Explain logistics.
What are the top two strategic priorities of SCM executives?
What are the two major barriers preventing innovation in the
supply chain?
What are the top innovative digital technologies impacting
SCM?
Chapter 10

Suggested Answers:
1. Supply chains involve the flow of materials, data, and money.
The journey that a product travels, starting with raw material
suppliers, to manufacturers or assemblers, then distributors and
retail sales shelves, and ultimately to customers is its supply
chain. Supply chain starts with the acquisition of raw materials
or the procurement (purchase) of products and proceeds through
manufacture, transport, and delivery—and the disposal or
recycling of products.
2. The supply chain is like a pipeline composed of multiple
suppliers, distributors, manufacturers, retailers, and logistics
providers that:
purchase (procurement) raw materials or products
transform materials (i.e., manufacture, service) into
intermediate or finished products
transport and deliver finished products to retailers or customers,
and
dispose or recycle product
3. Supply chains involve the flow of materials, data, and money.
Descriptions of these three main flows are:
Material or product flow: This is the movement of materials and
goods from a supplier to its consumer. For example, Ford
supplies dealerships that, in turn, sell to end-users. Products
that are returned make up what is called the reverse supply
chain because goods are moving in the reverse direction.
Information flow: This is the movement of detailed data among
members of the supply chain, for example, order information,
customer information, order fulfillment, delivery status, and
proof-of-delivery confirmation. Most information flows are
done electronically, although paper invoices or receipts are still
common for non-commercial customers.
Financial flow: This is the transfer of payments and financial

arrangements, for example, billing payment schedules, credit
terms, and payment via electronic funds transfer (EFT). EFT
provides for electronic payments and collections. It is safe,
secure, efficient, and less expensive than paper check payments
and collections.
4. Supply chain management (SCM) is the efficient management
of the flows of material, data, and payments along the
companies in the supply chain, from suppliers to consumers.
SCM systems are configured to achieve the following business
goals:
To reduce uncertainty and variability in order to improve the
accuracy of forecasting
To increase control over the processes in order to achieve
optimal inventory levels, cycle time, and customer service.
5. Step 1: Make sure the customer will pay. Depending on the
payment method and prior arrangements with the customer,
verify that the customer can and will pay, and agrees to the
payment terms. This activity is done by the finance department
for B2B sales or an external company, such as PayPal or a
credit card issuer such as Visa for B2C sales. Any holdup in
payment may cause a shipment to be delayed, resulting in a loss
of goodwill or a customer. In B2C, the customers usually pay by
credit card, but with major credit card data theft at Target and
other retailers, the buyer may be using a stolen card.
Step 2: Check in-stock availability and reorder as necessary. As
soon as an order is received, the stock is checked to determine
the availability of the product or materials. If there is not
enough stock, the ordering system places an order, typically
automatically using EDI (electronic data interchange). To
perform these operations, the ordering system needs to interface
with the inventory system.
Step 3: Arrange shipments. When the product is available,
shipment to the customer is arranged (otherwise, go to Step 5).
Products can be digital or physical. If the item is physical and

available, packaging and shipment arrangements are made. Both
the packaging/shipping department and internal shippers or
outside transporters may be involved. Digital items are usually
available because their “inventory” is not depleted. However, a
digital product, such as software, may be under revision, and
thus unavailable for delivery at certain times. In either case,
information needs to flow among several partners.
Step 4: Insurance. The contents of a shipment may need to be
insured. Both the finance department and an insurance company
could be involved, and again, information needs to be
exchanged with the customer and insurance agent.
Step 5: Replenishment. Customized orders will always trigger a
need for some manufacturing or assembly operation. Similarly,
if standard items are out of stock, they need to be produced or
procured. Production is done in-house or outsourced.
Step 6: In-house production. In-house production needs to be
planned and actual production needs to be scheduled.
Production planning involves people, materials, components,
machines, financial resources, and possibly suppliers and
subcontractors. In the case of assembly and/or manufacturing,
several plant services may be needed, including collaboration
with business partners. Production facilities may be located in a
different country than the company’s headquarters or retailers.
This may further complicate the flow of information.
Step 7: Use suppliers. A manufacturer may opt to buy products
or subassemblies from suppliers. Similarly, if the seller is a
retailer, such as in the case of Amazon. com or Walmart.com,
the retailer must purchase products from its manufacturers. In
this case, appropriate receiving and quality assurance of
incoming materials and products must take place.
Once production (Step 6) or purchasing from suppliers (Step 7)
is completed, shipments to the customers (Step 3) are arranged.
Step 8: Contacts with customers. Sales representatives keep in
contact with customers, especially in B2B, starting with the
notification of orders received and ending with notification of a
shipment or change in delivery date. These contacts are

frequently generated automatically.
Step 9: Returns. In some cases, customers want to exchange or
return items. The movement of returns from customers back to
vendors is reverse logistics. Such returns can be a major
problem, especially when they occur in large volumes.
6. Logistics entails all the processes and information needed to
move products from origin to destination efficiently. The order
fulfillment process is part of logistics.
7. The top two strategic priorities of executives are supply chain
analytics and multichannel fulfillment.
8. The two major barriers preventing innovation in the supply
chain are a talent shortage and a continuing focus on cost
reduction.
9. Mobility and M2M technologies can improve responsiveness
and customer service by providing supply chain workers with
the information they need—whenever and wherever they need it.
40
Learning Objectives

Enterprise Systems
Chapter 10
Figure 10.12 Four CRM critical success factors and their
importance.
Making CRM Matter
Data analytics, sophisticated predictive analytics, and BI are
needed to determine customer lifetime value (CLV); then
business rules need to specify how to treat or manage customers
based on their value score.
Intelligently managing relationships with customers can
increase revenues and net profits significantly.

Chapter 10
CRM and Customer Acquisition/Retention
CRM technologies help marketing managers run effective
campaigns, promotions, commercials, and advertisements to
attract new customers, or to increase sales to existing
customers, or to do both.
Newly acquired customers are unprofitable until they have
purchased enough products or services to exceed the cost to
acquire and service them.
Retaining customers that generate revenues in excess of the
costs is critical.
Chapter 10
Drucker on Marketing Effectiveness
Know your customers
Understand customer needs
Communicate intelligently with customers
Loyalty Effect
Chapter 10

CRM Failures
IT department in charge instead of business users.
Incorrect CRM requirements by not involving key business
stakeholders from the outset.
Mobility CRM strategy is an afterthought.
Taking the wrong approach to CRM training.
Underestimating users’ resistance to change.
Chapter 10
Measuring CRM Success
Tangible net benefits, intangible benefits, risk assessments lead
to:
Increased staff productivity (more closed deals)
Cost avoidance
Revenues
Margin increases
Inventory cost reductions
Increased customer satisfaction, loyalty, and retention
Chapter 10
Explain the four critical success factors for CRM.
Why does CRM matter?
Discuss how CRM impacts customer acquisition and retention.
According to Peter Drucker, what does marketing effectiveness
depend on?
Give three reasons why CRM fails.

How can CRM be justified?
Chapter 10
Suggested Answers:
1. The four critical success factors and their relative importance
for CRM are:
Data (15%)
CRM technology (20%)
People (40%)
Process change (25%)
2. CRM systems play the major role in customer experience
(CX), and good CX helps to retain customers. However, not all
customers are worth retaining. Customers can be unprofitable.
Intelligently managing relationships with customers can
increase revenues and net profits significantly. Similar to
managing inventory and supplier relationships, effective CRM
is data-driven, complex, and continuously changing. The growth
of mobile sales channels and social networking makes
recognizing customers across multiple touchpoints complex. In
addition, many companies have customer data in multiple,
disparate systems that are not integrated—until they implement
CRM systems.
3. CRM technologies help marketing managers run effective
campaigns, promotions, commercials, and advertisements to
attract new customers, or to increase sales to existing
customers, or to do both. Attracting and acquiring new
customers are expensive activities, for example, it costs banks
roughly $100 to acquire a new customer. Newly acquired
customers are unprofitable until they have purchased enough
products or services to exceed the cost to acquire and service

them. Therefore, retaining customers that generate revenues in
excess of the costs (e.g., customer service, returns, promotional
items, and the like) is critical. The purpose of loyalty or
frequent purchase programs offered by online retailers, coffee
shops, airlines, supermarkets, credit card issuers, casinos, and
other companies is to track customers for CRM purposes and
build customer loyalty to improve financial performance.
Loyalty programs rely on data warehouses and data analytics to
recognize and reward customers who repeatedly use services or
products.
4. According to management guru Peter Drucker, “Those
companies who know their customers, understand their needs,
and communicate intelligently with them will always have a
competitive advantage over those that don’t” (Drucker, 1969).
For most types of companies, marketing effectiveness depends
on how well they know their customers; specifically, knowing
what their customers want, how best to contact them, and what
types of offers they are likely to respond to positively.
According to the loyalty effect, a five percent reduction in
customer attrition can improve profits by as much as 20 percent.
Customer-centric business strategies strive to provide products
and services that customers want to buy.
Putting IT department in charge of the CRM project instead of
the business users. The hands-on business users need to
champion and lead the project initiative, with IT playing a
supporting role.
Not getting the CRM requirements right by not involving key
business stakeholders from the outset. CRM implementations
need buy-in from the users and other business stakeholders, who
can spread enthusiasm. Frequent communication about the
project is important to engaging them in a meaningful way.
Making mobile CRM strategy an afterthought. Consider
mobility a priority in the CRM project from the outset. Putting

an existing CRM on mobile devices is a bad plan.
Taking wrong approach to CRM training. Make sure the
interface is intuitive enough that most users will not need
hands-on training. When people sit in a classroom for an hour,
they will only retain 5 minutes of what they hear. A learning
program during lunch that focuses on one or two lessons is a
much more effective adoption strategy.
Underestimating users’ resistance to change. Users will not
tolerate poorly designed systems. Frustrating users is a fast
track to failure, or at a minimum, suboptimal results.
6. A formal business plan must be in place before the CRM
project begins—one that quantifies the expected costs, tangible
financial benefits, and intangible strategic benefits, as well as
the risks. The plan should include an assessment of the
following:
Tangible net benefits. The plan must include a clear and precise
cost-benefit analysis that lists all of the planned project costs
and tangible benefits. This portion of the plan also should
contain a strategy for assessing key financial metrics, such as
ROI, net present value (NPV), or other justification methods.
Intangible benefits. The plan should detail the expected
intangible benefits, and it should list the measured successes
and shortfalls. Often, an improvement in customer satisfaction
is the primary goal of the CRM solution, but in many cases this
key value is not measured.
Risk assessment. The risk assessment is a list of all of the
potential pitfalls related to the people, processes, and
technology that are involved in the CRM project. Having such a
list helps to lessen the probability that problems will occur.
And, if they do happen, a company may find that, by having
listed and considered the problems in advance, the problems are
more manageable than they would have been otherwise.
48

Chapter 9
Effective and Efficient Business Functions
Learning Objectives
Manufacturing, Production, and Transportation Management
Systems
Sales and Marketing Systems
Accounting, Finance, and Regulatory Systems
Human Resource Systems, Compliance, and Ethics
Solving Business Challenges at All Management Levels

Mission
Set of outcomes an enterprise wants to achieve.
Strategic Plan
A document used to communicate the company’s goals and the
actions needed to achieve them.
Chapter 9
Chapter 9
Figure 9.5 Three organizational levels, their concerns, and
strategic and tactical questions, planning, and control.
Order Fulfillment Process
Moving products from customer order to the customer,
including checking credit, collecting payment, picking shipping
departments to pack products, printing mailing labels, preparing
for shipment, and notifying departments.
Standard Operating Procedures
Set of written instructions on how to preform a function or
activity.

Chapter 9
Basic Functional Area Systems
Manufacturing and production: materials purchasing, quality
control, scheduling, shipping, receiving.
Accounting: accounts receivable, accounts payable, general
ledger, and budgeting. Accounting systems keep account
balances up to date, disburse funds, and post statements.
Finance: Finance: cash management, asset management, credit
management, financial statement reporting to comply with
federal and industry-specific regulations and government
agencies.
Chapter 9
Basic Functional Area Systems
IT: cloud computing services, SLA management, software
license management, user accounts management, information
and network security.
Sales and marketing: pricing, social media promotions, market
research, demand forecasts, sales campaign management, order
tracking, and online and mobile order processing and sales.
HR: payroll, recruitment and hiring, succession planning,
employee benefits, training, compensation, performance
appraisal, compliance with federal and state employment
regulations.
Chapter 9

ACID Test
Atomicity: If all steps in a transaction are not completed, then
the entire transaction is cancelled.
Consistency: Only operations that meet data validity standards
are allowed.
Isolation: Transactions must be isolated from each other.
Durability: Backups by themselves do not provide durability.
Chapter 9
Transaction Processing
Transaction processing systems monitor, collect, store, process,
and distribute all financial and nonfinancial transactions.
Batch: events or transactions are processed during scheduled
times.
Online (OLTP): events or transactions are processed as soon as
they occur.
Chapter 9
Chapter 9
Figure 9.7 Information flows triggered by a transaction or
event.

Explain the core concerns and time horizons of each level of
management.
Define what a standard operating procedure (SOP) is and give
an example.
Explain each component of the ACID test.
4Explain the differences between batch and online processing.
Describe the flow of information in transaction processing.
Chapter 9
Suggested Answers:
1. There are three levels of Management (Robert Anthony’s
Management hierarchy): strategic, managerial (tactical, or
administrative) and operational.
At the strategic level, senior or top level management plan and
make decisions that set or impact the long-term direction of the
entire organization. They set priorities, focus energy and human
and technology resources, strengthen operations, and ensure that
employees and business partners work toward common goals.
These decisions are visionary and future-oriented.
At the managerial level, middle-level managers define business
models and make tactical decisions that are shorter range.
Middle-level managers design business processes, procedures,
and policies to implement strategic plans.
At the operational level, managers and supervisors depend on
detailed data, in real time or near real time. Decision making is
mostly immediate or short-term, because decisions are made to

control ongoing activities and operations. Feedback and control
are vital to identify deviations from goals as soon as possible in
order to take corrective action.
2. A SOP is a set of written instructions on how to perform a
function or activity. SOPs provide the framework for complex
processes to be managed more effectively.
Answers may vary. SOPs are written, for example, for handling
purchase orders, order fulfillment, customer complaints,
recruitment and hiring, emergency response, and disaster
recovery.
3. The ACID test is short for atomicity, consistency, isolation,
and durability:
Atomicity: If all steps in a transaction are not completed, then
the entire transaction is cancelled.
Consistency: Only operations that meet data validity standards
are allowed. For instance, systems that record checking
accounts only allow unique check numbers for each transaction.
Any operation that repeated a check number would fail to insure
that the data in the database is correct and accurate. Network
failures can also cause data consistency problems.
Isolation: Transactions must be isolated from each other. For
example, bank deposits must be isolated from a concurrent
transaction involving a withdrawal from the same account. Only
when the withdrawal transaction is completed successfully will
the new account balance be reported.
Durability: Backups by themselves do not provide durability. A
system crash or other failure must not cause any loss of data in
the database. Durability is achieved through separate
transaction logs that can be used to re-create all transactions
from a known checkpoint. Other ways include database mirrors
that replicate the database on another server.
4. In online transaction processing (OLTP), events or

transactions are processed as soon as they occur. Data are
accessed at that time directly from the database, including
updates.
With batch processing, like transactions are grouped together
and the entire group is processed at a later time. This type of
processing is more efficient and less costly, but results,
including updates to the database, have to wait until the group
is processed.
5. The flow of information in transaction processing consists of
the basic input-process-output model. Internal and/or external
data are entered (input), processed against data from the
database by TPS programs which handle changes to the database
(processing) and generating reports (output.)
11
Learning Objectives
Systems

Systems
Chapter 9
Figure 9.9 Production operations management (POM) systems
process and transform inputs into outputs.
Systems
Production Operations Management
Transparency: being able to access current data to learn what is
needed in order to make informed decisions without delay.
Quick response: being able to respond appropriately to changes
in conditions, demand, or new opportunities.
Chapter 9

Systems
Transportation Management Systems
Relied on to handle transportation planning including shipping
consolidation, load and trip planning, route planning, fleet and
driver planning, and carrier selection.
Four trend factors contributing to TMS growth:
Outdated transportation systems need to be upgraded or
replaced.
Growth of intermodal transport.
TMS vendors add capabilities.
TMSs handle big data.
Chapter 9
Systems
Logistics Management
Inbound logistics refers to receiving.
Outbound logistics refers to shipping.
Inventory control systems are stock control or inventory
management systems.
Logistics management systems:
Optimize transportation operations.
Coordinate with all suppliers.
Integrate supply chain technologies.
Synchronize inbound and outbound flows of materials or goods.
Manage distribution or transport networks.
Chapter 9

Systems
Safety Stock
Needed in case of unexpected events, such as spikes in demand
or longer delivery times.
Inventory Control Systems
Important because they minimize the total cost of inventory
while maintaining optimal inventory levels. Inventory control
systems minimize the following three cost categories:
Inventory holding costs
Ordering and shipping costs
Cost of shortages
Chapter 9
Systems
Just-in-Time Inventory
Deciding when to order and how much to order is used to
answer both questions is the economic order quantity (EOQ)
model, taking all costs into consideration.
JIT inventory management attempts to minimize holding costs
by not taking possession of inventory until it is needed in the
production process.
Chapter 9
Systems
Lean Manufacturing Systems
Leverages suppliers delivering small lots on a daily or frequent
basis, and production machines are not necessarily run at full

capacity.
Empowers workers so that production decisions can be made by
those who are closest to the production processes.
Chapter 9
Systems
Quality Control (QC) Systems
Stand-alone or part of an enterprise-wide total quality
management (TQM) effort providing data about the quality of
incoming materials or parts, as well as the quality of in-process
semi-finished and finished products.
Data collection by sensors or RFID and interpreted in real-time,
or stored in a database for future analysis.
Chapter 9
Systems
Computer-integrated Manufacturing (CIM)
Control day-to-day shop floor activities to replace disparate
information sources frequently late, unreliable, voluminous, and
extremely difficult to assimilate.
Benefits:
It simplifies manufacturing technologies and techniques
automates as many of the manufacturing processes as possible,
integrates and coordinates all aspects of design, manufacturing,
and related functions.
Chapter 9

Systems
Manufacturing Execution Systems (MESs)
Manage operations in shop factories, sometimes a few critical
machines, sometimes all operations on the shop floor.
Typically broader infrastructure than CIM.
Based on standard reusable application software instead of
customer-designed software.
Chapter 9
What is the function of POM in an organization?
What trends are contributing to the growing use of TMS?
Define logistics management.
What are the three categories of inventory costs?
What are the objectives of JIT?
Explain the difference between EOQ and JIT inventory models.
What is the goal of lean manufacturing?
What is CIM?
Chapter 9
Systems
Suggested Answers:
1. The production and operations management (POM) function
is responsible for the processes that transform inputs into value-
added outputs. These inputs include human resources, such as
workers, staff, and managers; facilities and processes, such as

buildings and equipment; they also include materials, IT, and
information. Outputs are the goods and services a company
produces.
2. Four factors contribute to the growth of TMS:
1. Outdated transportation systems need to be upgraded or
replaced. Many systems were installed over 10 years ago—
before tablet computers and mobile technologies had become
widespread in business. Similar to most legacy (old) systems,
they are inflexible, difficult to integrate with other newer
systems, and expensive to maintain.
2. Growth of intermodal transport. Intermodal transportation
refers to the use of two or more transport modes, such as
container ship, air, truck, and rail, to move products from
source to destination. Many more companies are shipping via
intermodals and their older TMSs cannot support or deal with
intermodal movement, according to Dwight Klappich, a research
vice president for Gartner.
When brick-and-mortar manufacturers began selling online, for
example, they learned that their existing TMSs are inadequate
for handling the new line of business. Shippers that expand
globally face similar challenges when they try to manage
multiple rail, truck, and ocean shipments. Thus, there is a
growing need for more robust TMSs to handle multidimensional
shipping arrangements.
3. TMS vendors add capabilities. The basic functions performed
by a TMS include gathering data on a load to be transported and
matching those data to a historical routing guide. Then the TMS
is used to manage the communication process with the various
carriers. New feature-rich TMSs are able to access information
services to help the shipper identify optimal routes given all
current conditions. For example, the latest TMSs can interact

directly with market-data benchmarking services. An automated,
real-time market monitoring function saves shippers time,
errors, and cuts costs significantly.
4. TMS handle big data. Transportation tends to generate a high
volume of transactional data. Managing the data isn’t easy.
TMS vendors are developing systems that make valuable use of
the big data that are collected and stored. By drilling down into
specific regions or focusing on particular market trends, for
example, shippers can use their big data to make better
decisions.
3. Logistics management deals with the coordination of several
complex processes, namely ordering, purchasing or
procurement, inbound logistics (receiving), and outbound
logistics (shipping) activities.
Logistics management systems:
Optimize transportation operations
Coordinate with all suppliers
Integrate supply chain technologies
Synchronize inbound and outbound flows of materials or goods
Manage distribution or transport networks
4. The three inventory cost categories are:
1. Inventory holding costs: warehousing costs (see Figure 9.10),
security costs, insurance, losses due to theft or obsolescence,
and inventory financing costs based on the interest rate.
2. Ordering and shipping costs: employees’ time spent ordering,
receiving, or processing deliveries; and shipping fees.
3. Cost of shortages: production delays and missed sales
revenues because of stockouts.

5. The main objective of JIT inventory management is to
minimize holding costs by not taking possession of inventory
until it is needed in the production process. With JIT, costs
associated with carrying large inventories at any given point in
time are eliminated. However, the tradeoff is higher ordering
costs because of more frequent orders.
6. To minimize the sum of the three categories of inventory
costs, the POM department has to decide when to order and how
much to order. One inventory model that is used to answer both
questions is the economic order quantity (EOQ) model. The
EOQ model takes all costs into consideration.
JIT inventory management attempts to minimize holding costs
by not taking possession of inventory until it is needed in the
production process. With JIT, costs associated with carrying
large inventories at any given point in time are eliminated.
However, the tradeoff is higher ordering costs because of more
frequent orders.
Because of the higher risk of stockouts, JIT requires accurate
and timely monitoring of materials’ usage in production.
7. In a lean manufacturing system, suppliers deliver small lots
on a daily or frequent basis, and production machines are not
necessarily run at full capacity. One objective of lean
manufacturing is to eliminate waste of any kind; that is, to
eliminate anything that does not add value to the final product.
Holding inventory that is not needed very soon is seen as waste,
which adds cost but not value. A second objective of lean
manufacturing is to empower workers so that production
decisions can be made by those who are closest to the
production processes.
8. Computer integrated manufacturing (CIM) systems control
day-to-day shop floor activities. In the early 1980s, companies

invested greatly in CIM solutions even though they were
complex, difficult to implement, and costly to maintain. They
had required the integration of many products and vendors.
Today’s CIM systems provide scheduling and real-time
production monitoring and reporting. CIM data-driven
automation affects all systems or subsystems within the
manufacturing environment; design and development,
production, marketing and sales, and field support and service.
CIM systems can perform production monitoring, scheduling
and planning, statistical process monitoring, quality analysis,
personnel monitoring, order status reporting, and production lot
tracking.
23
Learning Objectives
Systems

Data-Driven Marketing
Data-driven, fact-based decision making such as push-through
pay-per-click (PPC) marketing.
Push-through ads use data about the person to determine
whether the ad should appear.
Pull-through ads appear based on the user’s keyword searches.
Chapter 9
Chapter 9
Figure 9.12 Sales and marketing systems and subsystems.
Sales and Distribution Channel
Ways to optimize product and service distribution.
Example channels:

Electronic channels.
Mobile channels.
Physical channels.
Chapter 9
Marketing Management
Pricing of Products or Services
Sales volumes as well as profits are determined by the prices of
products or services.
Salesperson Productivity
collected in the sales and marketing TPS and used to compare
performance along several dimensions, such as time, product,
region, and even the time of day.
Profitability Analysis
profit contribution or profit margin (profit margin 5 sale price
minus cost of good) of certain products and services derived
from the cost accounting system.
Chapter 9
Explain push-through marketing and pull-through marketing.
List two sales and distribution channels.
Describe profitability analysis.
Chapter 9
Suggested Answers:

1. In pull-through marketing, ads appear based on the user’s
keyword searches. In push-through pay-per-click (PPC)
marketing, ads use data about the person to determine whether
the ad should appear; i.e., online advertising that “appears” on
the screens of consumers’ devices is based on the user’s
location, behavior, interests, or demographic information. This
capability creates opportunities for highly targeted advertising
programs.
2. Answers may vary. They fall into three categories: electronic,
mobile, and physical channels. A PPC advertising campaign
with other online and offline advertising initiatives generally
provides the best overall results. A dealer is another example of
a physical channel.
3. In deciding on advertising and other marketing efforts,
managers need to know the profit contribution or profit margin
(profit margin 5 sale price minus cost of good) of certain
products and services. Profitability metrics for products and
services can be derived from the cost accounting system.
29
Learning Objectives
Systems

Income Statement
Summarizes a company’s revenue and expenses for one quarter
of a fiscal year or the entire fiscal year.
Also known as a P&L (profit and loss) or earnings statement.
Compliance
Generally accepted accounting principles (GAAP) and the
Financial Accounting Standards Board (FASB).
Financial Misrepresentation
Occurs when a company has intentionally deceived one or more
other parties.
Chapter 9

Chapter 9
Figure 9.14 Overview of the creation of XBRL documents.
eXtensible Business Reporting Language (XBRL)
Reporting (disclosure) system designed by the SEC to eliminate
document “search and find” difficulties and improve how
investors find and use information.
Designed to:
Generate cleaner data, including written explanations and
supporting notes.
Produce more accurate data with fewer errors that require
follow-up by regulators.
Transmit data more quickly to regulators and meet deadlines.
Increase the number of cases and amount of information that
staffers can handle.
Chapter 9
Fraud Prevention and Detection
Terms used for Insider fraud are internal, employment, or
occupational fraud.
Insider fraud is a term referring to a variety of criminal
behaviors perpetrated by an organization’s employees or
contractors.
Fraud occurs because internal controls to prevent insider fraud –

no matter how strong – will fail on occasion.
Chapter 9
Internal Controls
Segregation of duties
Job rotation
Oversight
Safeguard of assets
IT policies
Chapter 9
Fraud Risk Management
A system of policies and procedures to prevent and detect
illegal acts committed by managers, employees, customers, or
business partners against a company’s interests.
Fraud Risk Factors
A high level of trust in employees without sufficient oversight
to verify that they are not stealing from the company.
Relying on informal processes of control.
A mindset (belief) that internal controls and fraud prevention
systems are too expensive to implement.
Assigning a wide range of duties for each employee, giving
them opportunities to commit fraud.
Chapter 9

Auditing Information Systems
Fraud can be easy to commit and hard to detect.
Information systems can provide a federated approach to
auditing payroll, scheduling, accounts payable/receivable, and
other electronic data.
Federated systems are the combination of independent systems
designed with unique functions.
Chapter 9
Financial Planning and Budgeting
Budgeting: allocation of financial resources among participants,
activities, and projects. Includes the process of analyzing and
selecting investments with the highest ROI for the organization
or capital budgeting.
Forecasting: estimating expenses, inventory, or other corporate
assets to secure sufficient cash flow.
Chapter 9
Financial Planning and Budgeting
Financial Ratio Analysis: used by external parties when they
decide whether to invest in an organization, extend credit, or
buy it.
Profitability Analysis: understanding the profitability of
individual products or services, product lines, or the financial
health of the entire organization.

Cost Control: financial management of assets, through proper
estimation, to assure financial health and cash flow.
Chapter 9
What is eXtensible Business Reporting Language (XBRL)?
Why does the SEC mandate data disclosure, whereby data items
are tagged to make them easily searchable?
What is insider fraud? What are some other terms for insider
fraud?
What is fraud risk management?
What four factors increase the risk of fraud?
Explain how accounting ISs can help deter fraud.
Define capital budgeting.
What is the purpose of auditing?
Chapter 9
Suggested Answers:
1. XBRL: eXtensible Business Reporting Language
XBRL is a language for the electronic communication of
business data. Each item, such as cash or depreciation expense,
is tagged with information about various attributes, such as
calendar year, audited/unaudited status, currency, and so on.
XBRLtagged data can be read by any software that includes an
XBRL processor, which makes them easy to transfer among
computers. Creating XBRL documents does not require XML
computer programming. Software is available to tag data,
submit tagged data to various recipients, and receive and
analyze tagged data from other sources.

XBRL helps companies:
Generate cleaner data, including written explanations and
supporting notes.
Produce more accurate data with fewer errors that require
follow-up by regulators.
Transmit data faster to regulators and meet deadlines.
Increase the number of cases and amount of information that
staffers can handle.
2. The SEC’s financial disclosure system is central to its
mission of protecting investors and maintaining fair, orderly,
and efficient markets. Since 1934 the SEC has required
financial disclosure in forms and documents. In 1984 the SEC
began collecting electronic documents to help investors obtain
information, but those documents made it difficult to search for
and find specific data items To eliminate that difficulty and
improve how investors find and use information, the SEC
sought a new disclosure system that required data disclosure,
whereby data items are tagged to make them easily searchable.
3. Insider fraud refers to a variety of criminal behaviors
perpetrated by an organization’s employees or contractors.
Other terms for this crime are internal, employment, or
occupational fraud.
4. Fraud risk management is a system of policies and procedures
to prevent and detect illegal acts committed by managers,
employees, customers, or business partners against the
company’s interests. Although each corporation establishes its
own specific procedures, fraud risk management involves
assessing a company’s exposure to fraud; implementing
defenses to prevent and detect fraud; and defining procedures to
investigate, prosecute, and recover losses from fraud. Analyzing
why and how fraud could occur is as important as detecting and
stopping it. This analysis is used to identify necessary corporate

policies to deter insider fraud and fraud detection systems for
when prevention fails.
5. The interaction of the following four factors make companies
targets for fraud:
1. A high level of trust in employees without sufficient
oversight to verify that they are not stealing from the company
2. Relying on informal processes of control
3. A mindset (belief) that internal controls and fraud prevention
systems are too expensive to implement
4. Assigning a wide range of duties for each employee, giving
them opportunities to commit fraud
6. Accounting ISs can provide strong internal controls, can
prevent some fraud from taking place, can provide transaction
tracking, and can provide the perception that if an employee
tries to commit fraud, he/she will most likely be caught.
7. Capital budgeting is the process of analyzing and selecting
investments with the highest ROI for the company. The process
may include comparing alternative investments; for instance,
evaluating private cloud vs. public cloud computing options.
8. The major purpose of auditing is to protect and defend the
accuracy and condition of the financial health of an
organization. Auditing helps to meet compliance mandates,
deter fraud, and facilitate capital budgeting and forecasting.
40
Learning Objectives

Systems
HR Information Systems
Systems that focus on legal and compliance responsibilities,
employee development, talent management, hiring, and
succession planning.
HRIS moved into intranets or clouds, including leasing external
information system software as a service (Saas):
Reduce demand on internal businesses and IT resources.

Dramatically improve time to value without overstretching
internal IT resources.
Reduce development/implementation times for new systems.
Chapter 9
Management and Employee Development
Performance Evaluation
Corporate managers can analyze employees’ performances with
the help of intelligent systems, which provide systematic
interpretation of performance over time.
Training and Human Resources Development
Provide career development plan for each employee. IT can
support the planning, monitoring, and control of these activities
by using workflow applications.
Chapter 9
HR Planning, Control, and Management
Personnel Planning and HR Strategies
Forecasts requirements for people and skills, planning how to
locate sufficient human resources or develop them from within.
Benefits Administration
Salary/wage, bonuses, and other rewards for service.
Employee Relationship Management
Chapter 9

HR Planning, Control, and Management
Employee Relationship Management
Self-service personal information tracking, online training, and
other employee-focused tasks resulting in better retention and
higher productivity.
Ethical Challenges and Considerations
Recruiting, training, and performance evaluation procedures
may involve ethical issues. Information and employee privacy
should be protected.
Chapter 9
What are the key HR functions?
What are the benefits of moving HRISs to intranets or the
cloud?
Why have companies implemented SaaS HR?
What concerns have deterred companies from implementing
SaaS HR?
How can companies reduce the cost of recruiting qualified
employees?
Describe IT support for HR planning and control.
What are ethical issues related to HRM apps?
Chapter 9

Suggested Answers:
1. The key HR functions are:
Planning: Labor needs, skills, sources, strategy
Assessing: Measure performance, evaluate, and assess impact
Recruiting: Attract, select, match, and advertise
Retaining: Retain people, motivate, compensate, engage, and
satisfy
Deploying: Assign the right people to jobs, schedule
Developing Human Resources: Train, create teams; improve
skills
HR also deals with employment policies, procedures,
communications, and compliance requirements. HR will monitor
workplace and employment practices to ensure compliance with
the Fair Labor Standards Act (FLSA), Occupational Health &
Safety Agencies (OSHA), and the antidiscrimination and sexual
harassment laws. Effective HR compliance programs are a
necessity for all organizations in today’s legal environment.
2. Using intranets, HR apps have shifted many routine tasks to
employees who log in to manage their benefits, deductions,
direct deposits, health care, and the like. When employees
manage their own HR services, HR professionals can focus on
legal and compliance responsibilities, employee development,
talent management, hiring, and succession planning.
3. Cost savings and greater effectiveness. SaaS can be an
efficient way to transform and improve HR and at lower cost.
Three major factors holding companies back from HR SaaS
investments include:
Security. SaaS security may be as effective as security

associated with in-house data centers, but many companies
don’t understand the situation. Some early adopters are keeping
highly sensitive applications in house.
Quality of service. The lack of formal service-level agreements
(SLA) or performance and availability means quality of service
may be a risky issue for some organizations.
Integration. Many companies have questions about their ability
to integrate SaaS applications seamlessly with their in-house
applications.
5. IT provides the ability to access more potential recruits,
collect their information, search the data, and select a pool of
applicants based upon specific criteria. This allows a company
to evaluate more people with less human intervention.
6. Personnel planning and development: The HR department
forecasts requirements for people and skills. In some
geographical areas and for overseas assignments, it may be
difficult to find particular types of employees. In such cases,
the HR department plans how to locate sufficient human
resources or develop them from within. Sophisticated HR
departments build a career development plan for each employee.
IT can support the planning, monitoring, and control of these
activities by using workflow applications.
Benefits administration: In some industries, labor negotiation is
an important aspect of HR planning and it may be facilitated by
IT. For most companies, administering employee benefits is also
a significant part of the human resources function. Managing
the benefits system can be a complex task, due to its many
components and the tendency of organizations to allow
employees to choose and trade off benefits. In large companies,
using computers for self-benefits selection can save a
tremendous amount of labor and time for HR staff. Providing
flexibility in selecting benefits is viewed as a competitive
advantage in large organizations. It can be successfully

implemented when supported by computers. Some companies
have automated benefits enrollments. Employees can self-
register for specific benefits using the corporate portal or voice
technology. Employees can self-select desired benefits from a
menu.
Performance evaluations: Evaluations are usually recorded on
paper or electronic forms. Using such information manually is a
tedious and error-prone job. Once digitized, evaluations can be
used to support many decisions, ranging from rewards to
transfers to layoffs.
Employee relationship management: In their effort to better
manage employees, companies are developing human capital
management, facilitated by the Web, to streamline the HR
process. These Web applications are more commonly referred to
as employee relationship management. For example, self-
services such as tracking personal information and online
training are very popular in ERM. Improved relationships with
employees result in better retention and higher productivity.
Privacy: Employment laws make securing HR information
necessary for the protection of employees and the organization.
IT can secure access to information based on job function.
7. Training activities that are part of HRM may involve ethical
issues in recruiting and selecting employees and in evaluating
performance. Likewise, TPS data processing and storage deal
with private information about people, their performance, and
so forth. Care should be taken to protect this information and
the privacy of employees and customers.
The federal law related to workplace substance abuse, the Drug-
Free Workplace Act of 1990 requires employers with federal
government contracts or grants to ensure a drug-free workplace
by documenting and certifying that they have taken a number of
steps. Dealing with alcoholism and drugs at work entails legal

risks because employees have sued for invasion of privacy,
wrongful discharge, defamation, and illegal searches.
Employment laws make securing HR information necessary for
the protection of employees and the organization.
46

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