Management information system
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This document provides an overview of value stream mapping (VSM), including its purpose, key sections, symbols, and process. VSM is a tool used to visualize and improve the flow of materials and information in a production process. The document outlines how to create a current state map by gathering data on cycle times and inventory levels. It then explains how to develop a future state map to eliminate waste. The goal is to synchronize production with customer demand and achieve continuous flow.
Management information system
- 2. Contents S No. Topic Page No. 1. Introduction 03 2. What is VSM? 04 3. Purpose of VSM tool 04 4. Sections of VSM 06 5. How to Create a VS map? 09 6. VSM Symbols 11 7. VSM Process Steps 16 8. Financial Management 21 9. Productivity 24 10. Enterprise Resource Planning 28 11. e-Business Model 28 12. Conclusion 40 13. References 41
- 3. VALUE STREAM MAPPING Introduction A value stream is defined as all the value-added and non-value-added actions required to bring a specific product, service, or combination of products and services, to a customer, including those in the overall supply chain as well as those in internal operations. VSM is an extremely valuable tool in lean manufacturing and the continuous improvement effort. Traditionally, it is a pencil-and-paper visualization tool that shows the flow of material and information as a product makes its way through the value stream; hence, waste and its sources can be identified. This initial map that identifies the sources of waste in a production process is referred to as the current state map. However, the purpose of value stream mapping is not only to identify the sources of waste, but also to eliminate the sources of waste by developing future state value stream that can be implemented in a short period and ultimately the production process is improved . Through VSM, a business process is examined from beginning to end. An end-to-end system map is created; this is called the current state map. A future state map shows how things should work in order to gain the best competitive advantage. The opportunities for improvement at each step that would have a significant impact on the overall production system are highlighted on the future state map and then implemented, creating a leaner production process. The key to VSM is to see the big picture as a sum of the parts. Rather than optimizing one part of one step or ―fixing something broken,‖ you see how that step fits into the overall production process and how changing it will affect the overall process. This provides the opportunity to visualize how different types of changes, or a combination of changes at multiple places in the process, will affect the entire system. The change, or set of changes, that will result in the most efficient production overall can then be chosen. It is often associated with manufacturing , it is also used in logistics, supply chain, service related industries, healthcare, software development, and product development. VSM technique involves flowcharting the steps, activities, material flows, communications, and other process elements that are involved with a process or transformation.
- 4. A Value Stream Map is a diagram of all actions (both value added and non-value added) required to bring a product through from raw material to the arms of the customers. “Whenever there is a product for a customer, there is a value stream. The challenge lies in seeing it.” What is Value Stream Mapping? A value stream map is a special type of flow chart that is used to depict and improve: a) the flow of the thing being processed, and b) information that controls the flow of the thing being processed. Purposes of a Value Stream Management tool 1. Graphically illustrate and analyze the flow of the thing being processed and the information needed to process it 2. Highlight problems and proposed countermeasures - in highly visual ways 3. Focus direction for your lean transformation teams 4. Serve as a dashboard to monitor and continuously improve. Preparation - Before forming your Value Stream Team Use the Product Family Matrix template to define your product and service families Define the segment of the value stream that you will be mapping First pass - Understand the Current State Train your Value Stream Mapping team Physically walk the path of the thing being processed - documenting process steps Create your As Is value stream map Choose the metrics you want to measure Enter your data
- 5. Second Pass - Analyze and Reflect Analyze and gain consensus for your value stream analysis Identify problems and root causes Reflect, ponder, and think... Play catchball Third Pass - Improve It is common to improve your value stream in phases: 1. Meet customer demand (immediately) 2. Organize for continuous flow 3. Level the work flow For each phase, create a Value Stream Plan, with specific assignments and deadlines Each "next phase" should have a timeline of no more than six months to have everything on that Value Stream Plan completely implemented. Continuously Improve Manage your lean value stream Add data for multiple scenarios
- 6. Sections of the Value Stream Map - Examples Section 1: Header Data Section 2: Information Flow The flow of the information that drives the flow of the thing being processed Section 3: Flow of the thing being processed Section 4: Lean Metrics - within each process Section 5: Lean Metrics - between processes Section 6: Simultaneous processes Section 7: Bottom Line Analyses
- 7. Section 8: Old State Comparison Section 9 : Hide/Unhide Rows Initially, value stream mapping can seem a bit intimidating. There are lots of funny looking icons and zig zaggy lines that upon first glance seem to do nothing but confuse things. Potential Opportunities for Improvement Include: · Eliminating redundant approvals; · Improving the flow of paperwork; · Restructuring how orders are handled; and/or · Labeling and rearranging a storage area to avoid ordering redundant supplies 7 Steps to Current State Value Stream Mapping 1. Diagram needs to be on one sheet of paper 2. Use the standard format for the diagram 3. Use the standard symbols for the diagram 4. Capture all of the data yourself 5. Walk, Understand and Validate the process 6. Involve as many people as practical 7. Use paper and pencil • Visual Representation of a Value Stream or the work process • Pencil & Paper Tool with lots of post its • Helps Reveal Waste & Problems with the Flow • It Establishes a common language to document a processes • Provides a blueprint for improvement Three Steps in Understanding the Value Stream Before a current-state value stream map can be created, a project team must identify and understand the value stream. Following is a three-step method for identifying value streams: 1. Create a List of Products and Group Them in Families -
- 8. Some companies offer varied products and services. For example, an investment company offers different investment opportunities. A finance company offers different types of loans, including first mortgages, home equity, car loans and small business loans. It is relatively easy to group products into families by constructing a simple table, like the one below. The goal is not only to identify all product families, but also to identify what process steps each product utilizes. 2. Determine which product or service is considered primary. While a product/service may utilize different processes, a company needs to concentrate on one process at a time, focusing on processes critical to company goals. In many instances, a company's improvement plans may be filled with process improvement projects with no clear link to its overall goals or vision. With limited resources available, efforts need to be concentrated only on those projects that really need to be done. Selecting which product family to analyze will depend on the individual business situation. Examples of products/services to analyze include those that: Stem from company goals/vision. Utilize the most process steps. Are known to have high defect rates. Represent the voice of the customer and offer the highest customer rate of return. Are high volume in dollars and/or units. 3. Document the steps of the process - initial walk-through. During the walk-through, think about the customer. How does the customer receive the product or service? What triggers the product or service to be delivered to the customer? What are the inputs? From where are these inputs supplied? Once the walk-through is completed, there should be enough initial data to understand the value stream, and begin creating a current-state value stream map with a more detailed depiction of the value stream.
- 9. Value Stream Mapping Example Four Steps To Value Stream Mapping Define and pick the product or product family Create the ―current state‖ value stream mapping (CSVSM) Create the ―future state‖ value stream mapping (FSVSM) Develop an action plan to make the CSVSM and FSVSM. How to Create a Value Stream Map How to do Value Stream Mapping Value stream Mapping will help you to identify and eliminate the wastes in your processes enabling you to make more profit and better satisfy your customers. By creating a map showing you current state with all of the current flows of products and information you can enable an analysis of your current state and develop your future state value stream map as something to aim towards with your improvements.
- 10. Gather Data for Value Stream Mapping A value Stream Map is not something that can be created from the comfort and peace of your office, you have to get out and observe the actual process, not what is written in the company manuals and other documentation. You need to go out and start to gather the actual data that reflects the reality of what goes on in your company. Start with the Customer and walk backwards through the process, record your data meticulously as you go, identifying any obvious waste as you do so and inventory levels. Record information flows as well as the flow of material. Typical data to be collected is as follows, Cycle time (time taken to make one product) Change over time (from last good piece to next) Uptime (on-demand machine utilisation) Number of operators Net available working time Scrap rate Pack size/pallet sizes Inventory Yield Lean Lean is a well-defined set of tools that increase customer value by eliminating waste and creating flow throughout the value stream. The following bullets describe lean improvements: Inexpensive to implement Focus on improving the process, not the people Address the batch and queue mentality of silos Promote simple, error proof systems
- 11. The Lean Steps Value Stream Mapping Symbols The Symbols are typical symbols used when creating a value stream map, the map is best done by hand in pencil so that you can modify and improve on it as you create it, the most important thing here is getting the data organized in a meaningful manner. Common Icons Used in Value Stream Maps Here is a key to Lean symbols used in the value stream maps in this toolkit.
- 13. Transportation shapes Most transportation shapes need no explanation. There are so many modes of transportation, however, that you might want to add some custom shapes to depict a mode of transportation used in your unique value stream. (Perhaps a pipeline? A vacuum tube? A rocket? A horse and buggy?) Rather than cluttering our standard template with every form of transportation known to man, we make it easy for you to add your own custom shapes. Custom Shapes for Value Stream Analysis In addition to all of the standard value stream mapping symbols that come with your Systems2win template, it is very easy to add your own custom shapes: 1. Simply paste any image from the clipboard to your current worksheet, or... 2. You can easily personalize your master Systems2win template - so that your custom shape is always available every time that any of your licensed users open your (personalized) template. Types of Lines and Arrows Used in value stream mapping and other types of lean process flow charts.
- 14. Red dashed arrow = message flow arrow - indicating the flow of information. Every message arrow should have a text box to explain the type and frequency of information, and can optionally have a shape indicating the mode of information transfer (e.g. phone, FAX, email, etc.) Red dot-dash arrow = Expedite information Example: The expedite arrow containing the telephone - between Process 3 and 4 To change the "dash" property of any arrow, right-click > Format AutoShape > Colors and Line > Dashed. Broad white arrow = Shipment to Customers or from Outside Sources such as suppliers and third-party logistics providers. Thick black dashed arrow = Push Arrow Example: Between Process 4 and 5 The thing being processed is being produced according to some pre-determined (non-Lean) schedule - and then is "pushed" downstream - whether or not the next downstream process has any need for it. Thin black arrow = Flow Arrow
- 15. Examples: Between Processes 2, 3, and 4 This is the most common arrow to indicate the flow of the thing being processed. Dotted black arrow = Expedited Flow Example: The dotted black arrow containing the airplane - between Processes 3 and 4 In this example, there are usually daily shipments between Processes 3 and 4, but about twice a year, the production manager for Process 3 gets a phone call requesting an urgent plane shipment. Dashed blue arrow = Kanban flow Kanbans are a simple way to authorize release of work or materials. What is a kanban? A kanban is any signaling device that gives authorization and the minimal instructions needed: a) for a supplying process to know what to produce, or b) for a material handler to know what items to replenish Circular black arrow = Withdrawal The circular arrow between Process 1 and 2 conveys the exact same information as the symbols between Process 2 and 3 - using one simple symbol as a shorthand shortcut. Define Process Flows in VSM The first thing to record is your actual process flow, which are the specific process steps and in what order do they come. Map out the Flow from Supplier in the top left to the Customer in the top right. Each process should be documented in the order in which they occur.
- 16. VSM Process Steps Define Your Value Stream Map Information Flows Detail out the flow of information from the company to suppliers, from customer to the company and how the information flows between the different processes. Record what the information is, daily plan, customer order, monthly schedule and so on. VSM Information Flow Add Process Data to your Value Stream Map The next thing to add is the process data for each step in the overall process. Add the data which you have gathered when you studied the process. You should include the location and size of any inventory, cycle times, setup times and all other recorded data. This will give a full outline of how your processes flow. Your lead time at each stage is calculated by multiplying the inventory by the cycle time which will tell you how long it will take to process all of your inventory through the system.
- 17. Analyse Value Stream Map The completed map will tell us an enormous amount about our processes, it will show how we use information and schedules to push production rather than pull production. It shows how we run batches of material rather than trying to flow it through our processes. We can also look at how much our value add is as a proportion of our overall lead time, in this case we are looking at 8 minutes of value adding time from a lead time of over 8 days, not an untypical result. Most Value Stream Maps show that product is worked on for 5% or less of the time that it is within our companies, most of the time it sits in inventory waiting to be processed. Create Future State Value Stream Map The future state VSM is created using the same symbols and process as the current process map. However what we need to do is try to define a process flow that better meets the needs of our customers whilst removing as much waste as possible. Firstly confirm the required process flow, what processes are required in which order? Then the actual demand of the customer, what is the Takt time? Tact time being the drum beat at which the customer actually demands produc.t. Each process must be able to meet the Takt time or we will not meet customer demand, too fast and we make inventory. To make this work we must ensure that we have repeatable reliable processes, we must introduce ideas and Total Productive Maintenance (TPM). Without reliable, repeatable processes we will end up with stock being held as a safety buffer. Once we have our future state map, we can plan to implement our changes, once implemented we repeat the process to gain further improvements of our processes. The Three Steps to Value Stream Mapping 1. Current State Drawing The current production system is drawn by first conducting a walk through of the entire system from beginning to end. During the walk through gather information on the shop floor and analyze the current production system. Then draw a basic overview map with process and
- 18. material flows represented by different symbols on the map. A set of existing symbols can be used or a new set created, but the method of mapping should always be kept consistent within the company to gain better staff understanding and awareness. After the basic production process is understood, more detail is added to the map at each process step creating a comprehensive picture of the current system. 2. Future State Drawing Future state ideas will likely arise while gathering information in the first step. You can either keep a running list of these ideas and turn them into a future state map after you have completed the current state map, or draw the future state map alongside the current state map. A key to creating a more Lean future state is identifying areas of overproduction and root causes of waste in the current production system, and finding ways to reduce or eliminate them in the future system. The idea behind creating a Lean value stream is to create only what is needed when it is needed. A few ways to help accomplish this are to use takt time (the rate of customer demand) to synchronize the pace of production with the pace of sales, develop a continuous flow, and level the production mix. More details on how to Lean the value stream can be found in the resources below. 3. Work Plan and Implementation In this step, a work plan is prepared based on the future state value stream map that describes specific ways in which the future state map will be achieved. VSM is a tool to identify areas that need improvement in the value stream. By itself, VSM will not produce the desired change; implementation is key to achieving results. Implementation is usually best done in stages since the entire system is affected. One way of doing this is to break the future state map into segments or loops, and implement changes within one loop at a time. The work plan should also include measurable goals and checkpoints. Once the work plan is implemented a new, more efficient current state is formed. To keep continuous improvement happening in your business, once a future state becomes a new current state, a new future state map should be drawn, and the cycle continued. An annual value-stream review is a good way to keep things moving. Why Draw Pictures? A factory is enormously complex. Only visuals convey enough information to understand the pieces, relationships, hidden waste and time-domain behavior. Visualization brings a deep understanding and major break throughs in productivity and other performance. It leads to consensus on systemic problems and remedies. While finished charts
- 19. communicate information about a situation, the real value is the mapping itself. This is where insights grow, paradigms shift and consensus builds. Value Stream and Process Maps take different perspectives, but, the work they visualize is the same. Which Process Map Should Use? Why not take advantage of both models by using detailed process mapping and adding value stream mapping data into it. While each type of map is used to identify different variables, there is more value in combining components of value stream with detailed process mapping. Detailed process mapping has all the process components the value stream map does, and it can be broken down in much greater detail. Due to the time involved in constructing detailed process maps, one could include detailed process mapping after value stream mapping has located the bottleneck. Value stream mapping requires both current- and future-state process maps. However, future-state maps are often less well-defined in services or administrative organizations. These organizations typically require a strategic perspective, like what the new service delivery model looks like. Value stream mapping typically focuses on a single product family, but choosing only one product family may not be appropriate in a service organization - especially if the customer can choose between different channels. For example, in banking, the customer may choose channels such as online, email or telephone banking. Focusing on a single product family may not provide the insight needed to identify all available improvement opportunities. In such cases, the value stream mapping methodology can be combined with other tools such as a bottleneck analysis. Bottom line, value stream mapping is a powerful tool that helps identify the vital few Lean and Six Sigma projects that will yield the most value to the process tagged for improvement. And its approach of current- and future-state maps allows Six Sigma practitioners to know where they are starting from, where they are going and how they will get there. When a company reaches tomorrow, it will be much more rewarding if it knows the route it followed. Manufacturing systems are faced with continuously changing market conditions. Due to this fact, enterprises are permanently forced to adapt their organizational and personnel structures to new requirements created by these changing market conditions. In order to fulfil these requirements, it is becoming more and more important to take the cost intensive personnel resources into consideration. In analysing the relationship between employee and organization, two extreme standpoints can be distinguished. One school of thought claims that organizations do not exist (reification): there are only
- 20. people (parts) working together to obtain specific goals. The opposite standpoint is the claim that separate human beings cannot function without a social context, such as an organization, providing a meaning to the life of individual employees. The most important aims and tasks of personnel departments, realize at the modern organizations, are the following activities: �Personnel planning, �Recruitment, �Selection, �Work and task systems �Training and development; �Assessment; �Rewarding; �Participation. 2. Personnel planning The planning which focuses on the prognoses of the future demand of the organization on workers is first step in the logging of human supplies both from among already engaged in the enterprise how and from behind him. The frame thanks to conducted recruitment and selection becomes in the course of the selection appeared person or persons applying about the work group, fulfilling criteria required by the institution. After positive finishing the process of recruitment and selection, the management of the organization makes the decisions about the employment. The planning of human resources consists in the settlement of the future workings, which aims to undertake for the achievement the appointed aim. Planning of human supplies answers the strategy of the organization, defines future structure and the size of the employment. The process of the planning of human supplies defines the level of personnel needs indispensable to frame and the realization of the strategy of the management human supplies. This is the process in which should be consider the present and future requirements in the face of workers in the relationship with the realization of the established strategy. The basis of the success of this process is good employment plan arising from early worked out strategy of the development. The datum-point of the human resources planning is to determine factors, which influence on that supplies. The internal factors connected with the firm and external factors resulting from the surroundings of the organization should be qualified. Factors connected with the firm are following: �Vision, mission and the aims of the activity of the firm; �Plans in the range of production and logistics, the development of technology, marketing and finances; the organizational structure of the enterprise;
- 21. �The financial shape of the enterprise; Size and structure of possessed human supplies, according to such the criteria as: the occupied position of work, lids, possessed qualifications; � Efficiency of the work; Applied technique and technology; �Time of the work. The most important factors connected with surroundings of the firm: Situation on the labour market, Accessibility and the information topicality relating to free places of the work; Economic situation; Position of the firm on the market, her credibility; �Competition of different organizations, in the peculiarity matters connected with the height of offered pays and the possibilities of the development of the professional career; �Rate and the directions of the development of used and related technologies; �Valid law regulations, which contain norms and duties of the employer in the range of workers employment, �Development of education and Education conditioning the quality of the accessible supplies of the work. Financial Management Financial management of not-for-profits is similar to financial management in the commercial sector in many respects; however, certain key differences shift the focus of a not-for-profit financial manager. A forprofit enterprise focuses on profitability and maximizing shareholder value. A not-for-profit organization‘s primary goal is not to increase shareholder value; rather it is to provide some socially desirable need on an ongoing basis. A not-for-profit generally lacks the financial flexibility of a commercial enterprise because it depends on resource providers that are not engaging in an exchange transaction. The resources provided are directed towards providing goods or services to a client other than the actual resource provider. Thus the not-for-profit must demonstrate its stewardship of donated resources — money donated for a specific purpose must be used for that purpose. That purpose is either specified by the donor or implied in the not-for-profit‘s stated mission. The management and reporting activities of a not-for-profit must emphasize stewardship for these donated resources. The staff must be able to demonstrate that the dollars were used as directed by the donor. The shift to an emphasis in external financial reports on donor restriction has made the use of fund accounting systems even more
- 22. critical. Budgeting and cash management are two areas of financial management that are extremely important exercises for not-for-profit organizations. The organization must pay close attention to whether it has enough cash reserves to continue to provide services to its clientele. Cash flow can be extremely challenging to predict, because an organization relies on revenue from resource providers that do not expect to receive the service provided. In fact, an increase in demand for a not-for-profit‘s services can lead to a management crisis. It is difficult to forecast contribution revenue in a reliable manner from year to year. For that reason, the control of expenses is an area of increased emphasis. Budgeting therefore becomes a critical activity for a not-for-profit. The combination of a competitive, global environment and mandatory regulatory compliance makes successfully managing your finances one of the biggest challenges. Financial Management offers a refreshing new approach to business, a suite of accounting applications built for the highly regulated post-Sarbanes-Oxley Act world, built around a series of ―global engines‖ that support effective financial management and control anywhere. Easily monitor and track invoicing, payments, asset management, payroll and benefits in order to cut costs and improve cash flow. Financial modules can assist you in boosting your bottom line-the definitive test of your success and competitive advantage. Financial Management tools include: Global Engines General Ledger Accounts Payable Accounts Receivable Tax Connect Credit Card Processing Multi-Currency Management Multi-Company Management Fixed Assets Management Cash Management Financial Management is distinguished by its broad focus on managing processes and resources, both within and across locations, companies and global boundaries.
- 23. Global Engines Financial Management is built around a series of unique global engines, which in turn support the global nature of business today, enabling effective operations in existing and new markets as necessary. As your business is extended through a combination of organic growth, mergers and acquisitions it can become challenged by complex and demanding global financial and regulatory burdens – demands that you must adapt to instantaneously.Global engines are designed to add accounting agility and flexibility to your business while simultaneously allowing you to meet the local financial and legal compliance requirements of individual markets. General Ledger General Ledger is the heart of Financial Management, processing and posting all accounting transactions created throughout applications, as well as entries made directly within the ledger. While it is seldom accessed outside of the accounting and tax departments, the General Ledger's impact is felt throughout an entire enterprise. The information and controls which flow from the General Ledger system enable an organization to operate efficiently, comply with fiscal regulations, underpin strong corporate governance and drive enterprise performance. General Ledger provides the accounting controls and system security necessary to help ensure the integrity of your company's financial data. Accounts Payable Accounts Payable (AP) allows you to enter supplier invoices for purchases that you make, then create checks for the invoices you want to pay. The system can generate payments for all invoices due, those for a particular supplier or only for specific invoices. If a supplier calls you to discuss an invoice, you will have complete information at your fingertips and that history can be kept indefinitely. Accounts Payable allows you to update both purchase orders in Purchase Management as well as actual job costs. Adjustments are created if the purchase price does not match the invoiced price. With Accounts Payable, you will know how much you owe and when it is due. Production management Scheduling is an important tool for manufacturing and engineering, where it can have a major impact on the productivity of a process. In manufacturing, the purpose of scheduling is to minimize the production
- 24. time and costs, by telling a production facility when to make, with which staff, and on which equipment. Production scheduling aims to maximize the efficiency of the operation and reduce costs. Production scheduling tools greatly outperform older manual scheduling methods. These provide the production scheduler with powerful graphical interfaces which can be used to visually optimize real-time work loads in various stages of production, and pattern recognition allows the software to automatically create scheduling opportunities which might not be apparent without this view into the data. For example, an airline might wish to minimize the number of airport gates required for its aircraft, in order to reduce costs, and scheduling software can allow the planners to see how this can be done, by analyzing time tables, aircraft usage, or the flow of passengers. Companies use backward and forward scheduling to allocate plant and machinery resources, plan human resources, plan production processes and purchase materials. Forward scheduling is planning the tasks from the date resources become available to determine the shipping date or the due date. Backward scheduling is planning the tasks from the due date or required-by date to determine the start date and/or any changes in capacity required. The benefits of production scheduling include: Process change-over reduction Inventory reduction, leveling Reduced scheduling effort Increased production efficiency Labor load leveling Accurate delivery date quotes Real time information Productivity Inputs Inputs are plant, labor, materials, tooling, energy and a clean environment. Outputs Outputs are the products produced in factories either for other factories or for the end buyer. The extent to which any one product is produced within any one factory is governed by transaction cost.
- 25. Within the factory The output of any one work area within the factory is an input to the next work area in that factory according to the manufacturing process. For example the output of the cutting room is an input to the sewing room. For the next factory By way of example, the output of a paper mill is an input to a print factory. The output of a petrochemicals plant is an input to an asphalt plant, a cosmetics factory and a plastics factory. For the end buyer Factory output goes to the consumer via a service business such as a retailer or an asphalt paving company. Resource allocation Resource allocation is assigning inputs to produce output. The aim is to maximize output with given inputs or to minimize quantity of inputs to produce required output. Marketing management Marketing management is a business discipline which is focused on the practical application of marketing techniques and the management of a firm's marketing resources and activities. Rapidly emerging forces of globalization have compelled firms to market beyond the borders of their home country making International marketing highly significant and an integral part of a firm's marketing strategy. Marketing managers are often responsible for influencing the level, timing, and composition of customer demand accepted definition of the term. In part, this is because the role of a marketing manager can vary significantly based on a business' size, corporate culture, and industry context. For example, in a large consumer products company, the marketing manager may act as the overall general manager of his or her assigned product To create an effective, cost-efficient Marketing management strategy, firms must possess a detailed, objective understanding of their own business and the market in which they operate. In analyzing these issues, the discipline of marketing management often overlaps with the related discipline of strategic planning.
- 26. Structure Traditionally, marketing analysis was structured into three areas: customer analysis, company analysis, and competitor analysis (so-called "3Cs" analysis). More recently, it has become fashionable in some marketing circles to divide these further into certain five "Cs": customer analysis, company analysis, collaborator analysis, competitor analysis, and analysis of the industry context. Customer analysis is to develop a schematic diagram for market segmentation, breaking down the market into various constituent groups of customers, which are called customer segments or market segmentation's. Marketing managers work to develop detailed profiles of each segment, focusing on any number of variables that may differ among the segments: demographic, psycho graphic, geographic, behavioural, needs-benefit, and other factors may all be examined. Marketing Strategy If the company has obtained an adequate understanding of the customer base and its own competitive position in the industry, marketing managers are able to make their own key strategic decisions and develop a marketing strategy designed to maximize the revenues and profits of the firm. The selected strategy may aim for any of a variety of specific objectives, including optimizing short-term unit margins, revenue growth, market share, long-term profitability, or other goals. To achieve the desired objectives, marketers typically identify one or more target customer segments which they intend to pursue. Customer segments are often selected as targets because they score highly on two dimensions: 1) The segment is attractive to serve because it is large, growing, makes frequent purchases, is not price sensitive (i.e. is willing to pay high prices), or other factors; and 2) The company has the resources and capabilities to compete for the segment's business, can meet their needs better than the competition, and can do so profitably. In fact, a commonly cited definition of marketing is simply "meeting needs profitably." The implication of selecting target segments is that the business will subsequently allocate more resources to acquire and retain customers in the target segment(s) than it will for other, non-targeted customers. In some cases, the firm may go so far as to turn away customers who are not in its target segment. In conjunction with targeting decisions, marketing managers will identify the desired positioning they want the company, product, or brand to occupy in the target customer's mind. This positioning is often an encapsulation of a key benefit the company's product or service offers that is differentiated and superior to the benefits offered by competitive products.
- 27. Project, process, and vendor management Once the key implementation initiatives have been identified, marketing managers work to oversee the execution of the marketing plan. Marketing executives may therefore manage any number of specific projects, such as sales force management initiatives, product development efforts, channel marketing programs and the execution of public relations and advertising campaigns. Marketers use a variety of project management techniques to ensure projects achieve their objectives while keeping to established schedules and budgets. More broadly, marketing managers work to design and improve the effectiveness of core marketing processes, such as new product development, brand management, marketing communications, and pricing. Marketers may employ the tools of business process reengineering to ensure these processes are properly designed, and use a variety of process management techniques to keep them operating smoothly. Effective execution may require management of both internal resources and a variety of external vendors and service providers, such as the firm's advertising agency. Marketers may therefore coordinate with the company's Purchasing department on the procurement of these services. Under the area of marketing agency management (i.e. working with external marketing agencies and suppliers) are techniques such as agency performance evaluation, scope of work, incentive compensation, RFx's and storage of agency information in a supplier database. Reporting, Measurement, Feedback And Control Systems Marketing management employs a variety of metrics to measure progress against objectives. It is the responsibility of marketing managers – in the marketing department or elsewhere – to ensure that the execution of marketing programs achieves the desired objectives and does so in a cost-efficient manner. Marketing management therefore often makes use of various organizational control systems, such as sales forecasts, sales force and reseller incentive programs, sales force management systems, and customer relationship management tools (CRM). Recently, some software vendors have begun using the term "marketing operations management" or "marketing resource management" to describe systems that facilitate an integrated approach for controlling marketing resources. In some cases, these efforts may be linked to various supply chain management systems, such as enterprise resource planning (ERP), material requirements planning (MRP), efficient consumer response (ECR), and inventory management systems. Measuring the return on investment (ROI) of and marketing effectiveness various marketing initiatives is a significant problem for marketing management. Various market research, accounting and financial
- 28. tools are used to help estimate the ROI of marketing investments. Brand valuation, for example, attempts to identify the percentage of a company's market value that is generated by the company's brands, and thereby estimate the financial value of specific investments in brand equity. Another technique, integrated marketing communications (IMC), is a CRM database-driven approach that attempts to estimate the value of marketing mix executions based on the changes in customer behavior these executions generate. ENTERPRISE RESOURCE PLANNING Enterprise Resource Planning, ERP is business management software that allows an organization to use a system of integrated applications to manage the business. ERP software integrates all facets of an operation, including development, manufacturing, sales and marketing. E BUSINESS MODEL A business model is a high-level description of an application type which contains all the common features which can be found in specific examples of the model. For example, one of the most popular business models is the e-shop which describes a website that sells products. The model is general in that it does not describe the item that is sold or the mechanisms that are used to carry out the sales process. The remainder of the unit describes a series of e-commerce and e-business models. The e-Business model, like any business model, describes how a company functions; how it provides a product or service, how it generates revenue, and how it will create and adapt to new markets and technologies. It has four traditional components as shown in the figure, The e-Business Model. These are the e-business concept, value proposition, sources of revenue, and the required activities, resources, and capabilities. In a successful business, all of its business model components work together in a cooperative and supportive fashion.
- 29. E-Business Concept The e-business concept describes the rationale of the business, its goals and vision, and products or offerings from which it will earn revenue. A successful concept is based on a market analysis that identifies customers likely to purchase the product and how much they are willing to pay for it. Goals and Objectives The e-Business concept should be based, in part, on goals such as "become a major car seller, bank, or other commercial enterprise", and "to become a competitor to some of the well-known firms in each of these industries." Objectives are more specific and measurable, such as "capture 10% of the market", or "have $100 million in revenues in five years." Whether these goals and objectives are realistic or not, and whether the company is prepared to achieve these goals is addressed in the business plan process for startup firms and in the implementation plan for an existing firm that is considering a significant change. In looking at the business model it is sufficient to know what the goals and objectives are, and whether they are being pursued.
- 30. The E-Business Concept and Market Research The selection and refinement of the business concept should be integrally tied into knowledge of the market it serves. In performing market research care must be taken to account for the global reach of the Internet for both customers and competitors. It is also important to remember that markets shift, and can shift rapidly under certain conditions. But most important is to truly understand what the market is, who comprises it, and what do they want. Figure: The e-Business Concept e-Business Technology
- 31. It is widely acknowledged today that new technologies, in particular access to the Internet, tend to modify communication between the different players in the professional world, notably: relationships between the enterprise and its clients, the internal functioning of the enterprise, including enterprise-employee relationships, the relationship of the enterprise with its different partners and suppliers. The term "e-Business" therefore refers to the integration, within the company, of tools based on information and communication technologies (generally referred to as business software) to improve their functioning in order to create value for the enterprise, its clients, and its partners. The term e-Commerce (also called Electronic commerce), which is frequently mixed up with the term e- Business, as a matter of fact, only covers one aspect of e-Business, i.e. the use of an electronic support for the commercial relationship between a company and individuals. E Business Technology provides professional services that help your business take full advantage of the Internet and the World Wide Web. We focus on how these technologies can improve your business processes in a cost-effective manner. Comprised of talented professionals with extensive experience in business consulting, web-design, programming and integration; e Business Technology looks to establish a trusted long-term relationship with our customers. We've been through the ups and downs of the Internet market and with that experience and our successful track record we are ready to serve you. CREATION OF VALUE The goal of any e-Business project is to create value. Value can be created in different manners: As a result of an increase in margins, i.e. a reduction in production costs or an increase in profits. E-Business makes it possible to achieve this in a number of different ways: Positioning on new markets Increasing the quality of products or services Prospecting new clients Increasing customer loyalty Increasing the efficiency of internal functioning
- 32. As a result of increased staff motivation. The transition from a traditional activity to an e-Business activity ideally makes it possible to motivate associates to the extent that: The overall strategy is more visible for the employees and favors a common culture The mode of functioning implies that the players assume responsibilities Teamwork favors improvement of competences As a result of customer satisfaction. As a matter of fact, e-Business favors: a drop in prices in connection with an increase in productivity improved listening to clients products and services that are suitable for the clients' needs a mode of functioning that is transparent for the user As a result of privileged relationships with the partners. The creation of communication channels with the suppliers permits: Increased familiarity with each other Increased responsiveness Improved anticipation capacities Sharing of resources that is beneficial for both parties An e-Business project can therefore only work as soon as it adds value to the company, but also to its staff, its clients, and partners. CHARACTERIZATION OF THE e-BUSINESS A company can be viewed as an entity providing products or services to clients with the support of products or services of partners in a constantly changing environment. The functioning of an enterprise can be roughly modeled in accordance with a set of interacting functions, which are commonly classified in three categories:
- 33. Performance functions, which represent the core of its activity (core business), i.e. the production of goods or services. They pertain to activities of production, stock management, and purchasing (purchasing function); The management functions, which cover all strategic functions of management of the company; they cover general management of the company, the human resources (HR) management functions as well as the financial and accounting management functions; The support functions, which support the performance functions to ensure proper functioning of the enterprise. Support functions conver all activities related with sales (in certain cases, they are part of the core business) as well as all activities that are transversal to the organization, such as management of technological infrastructures (IT, Information Technology function). Enterprises are generally characterized by the type of commercial relationships they maintain. Dedicated terms therefore exist to quality this type of relationship: B To B (Business To Business, sometimes written B2B) means a commercial relationship business to business based on the use of a numerical support for the exchange of information. B To C (Business To Consumer, sometimes wrritten B2C) means a relationship between a company and the public at large (individuals). This is called electronic commerce, whose definition is not limited to sales, but rather covers all possible exchanges between a company and its clients, from the request for an estimate to after-sales service; B To A (Business To Administration, sometimes written B2A) means a relationship between a company and the public sector (tax administration, etc.) based on numerical exchange mechanisms (teleprocedures, electronic forms, etc.). As an extension of these concepts, the term B To E (Business To Employees, sometimes written B2E) has also emerged to refer to the relationship between a company and its employees, in particular through the provision of forms directed at them for managing their career, vacation, or their relationship with the company committee. The concept of e-Business is nonetheless very flexible and covers all possible uses of information and communication technologies (ICT) for any and all of the following activities: Making the relationships between the enterprise and its clients and different partners (suppliers, authorities, etc.) more efficient Developing new business opportunities Facilitating the internal flow of information
- 34. Controlling the different processes of the enterprise (production, warehousing, purchasing, sales, human resources, etc.) The goal is therefore to create privileged communication channels between the enterprise and its environment and link them with its internal processes to better control internal and external costs. E -B us i ne s s T e c hn o l o g y - Se r v i c e P r o v i de r s Service providers include many kinds of businesses that provide outsourced services electronically to other businesses. The general concept is that the service is connected at the ‗backend‘ of a firm‘s operations to enhance their own product or service offering, or perhaps to do so at a lower cost than the firm could do itself. Importantly, with any Service Provider, the key issues include reliability, security, capacity and speed. If a business depends on another to support a part of its business, it will become reliant on that service provider. Typically, a major firm would seek a SLA (Service Level Agreement) with its service providers, which might include penalties for significant ‗downtime‘ or ‗service outages‘. These services tend to be abbreviated a ‗xSP‘s, where the x is an abbreviation for the kind of service offered, for example: ASP - Application Service Provider – a business that hosts a software application and usually provides access via a browser link, so that with a simple Internet connection and browser, software can be accessed and operated remotely. MSP - Managed Service Provider also called a management service provider, is a company that manages information technology services for other companies via the Internet. Common services provided by MSPs include remote network, desktop and security monitoring, patch management and remote data back-up, as well as technical assistance. Most MSPs provide these services on a monthly basis which give small and medium sized businesses an option to have their IT needs taken care of instead of paying for on-site staff. PSP - Payment Service Provider (or IPSP – Internet Service Provider) – includes a range of different payment services such as Worldpay, Paypal, Nochex, Western Union and so on. These businesses allow other businesses to receive payments from customers via credit card, debit card and other electronic banking services. In particular for small businesses and individuals, a PSP can provide a secure and cost- effective solution; many such traders would be too small to afford the cost of setting up electronic payments themselves or might be considered too small for merchant facilities by their bank.
- 35. ISP – Internet Service Provider – offers internet access through broadband, leased line, ISDN, dial-up link, mobile access and so on. In many cases, ISPs also offer secure website hosting and associated email and data storage facilities. TSP - Telecom Service Provider - a business or organization that offers users access to the Telephone and related services. In the past, most TSP's were government-run in most countries, due to the nature of capital expenditure involved in it. But today there are many private players in most regions of the world, and even most of the government-owned companies have been privatized. Building the e-Business Infrastructure Few in business today are unaware of the power of e-business to transform whole organizations. Yet any organization hoping to exploit its potential must develop an infrastructure that can cope with the demands of e-business. Are you prepared? Infrastructure is a major issue today as it is the crucial determinant of how easily corporations can respond to the increasingly urgent demands of their executives. ‗We need it now‘ is an e-business mantra. IT directors can only deliver if they have an appropriate infrastructure. This Report illustrates how companies are setting about meeting the challenge of building the e-business infrastructure. What makes the challenge so taxing is that most companies already have an installed base of technology that represents a major sunk cost. The installed base is highly complex in many cases, consisting of multifarious disparate components. To replace it with a new, more unified platform is time-consuming and risky. It will also be subject to the pressures that result in platform fragmentation; everyone has to confront the problem of enormous pressure towards fragmentation. At the same time, new technology suppliers are emerging in the form of more mature and sophisticated outsourcing vendors and, more radically, application service providers (ASPs), who may enable companies to finesse the infrastructure problem (though they are not yet mature enough to achieve this). In this Report, we view infrastructure not only in terms of technology but also in the wider context of: various sources of supply of technology platform services expertise and skills required to deliver infrastructure technology processes required to manage them complementary investments required to enable IT infrastructure to deliver appropriate e-business solutions.
- 36. The Report will resonate most with senior IT executives but is in fact highly relevant to senior business executives – technology is merely the context for what is essentially an organizational and management issue. In conclusion, the Report reflects the process of building e-business infrastructure. It sees infrastructure as a dynamic process to be managed rather than as a state to be achieved. Today, it is fundamentally about preparing organizations for a continually changing business environment. There is no technology blueprint, rather multiple approaches that contribute to an organization‘s ability to respond to and deliver e-business. Many e-Business opportunities fail due to inadequate infrastructure. With Building the e-Business Infrastructure discover how you can successfully exploit e-business opportunities Put simply, e-business is the application of sound business principles via modern, global, technology- based communications media. As such, it reaches far and wide, affecting everyone from staff to management, players to competitors. e-Business must address business models, values, operational dynamics and include both audience and enterprise. Infrastructure determines how easily corporations can respond to the increasingly urgent demands of its executives, how they can respond to the 'fast-food' data requirements of modern business, and the competitive nature of a global marketplace. The technical infrastructural elements of e-business consist of Internet and server technologies, hardware and software. That is, the Internet, intranets, extranets, networks, security solutions and a myriad of applications promoting customer relationship management, knowledge management, business intelligence, integrated supply chain management and many others. However, infrastructure is much more than technology. It is the dynamic interaction and management of strategy, skilled people, tools and processes. – It drives and must be driven by e-business. Discover how you can create an organizational infrastructure that supports e-business with this report. Many e-Business opportunities fail due to inadequate infrastructure. This report addresses: infrastructure as a management issue role and dynamics of infrastructure
- 37. trends and developments in e-business and infrastructure technology people infrastructure sources and supply of technology and platform services the expertise and skills required to deliver infrastructure technology investments necessary for optimum e-business delivery the role of outsourcing as an infrastructural element. With all the hallmarks of a Business Intelligence management report, Building the e-Business Infrastructure is the complete management resource, containing: original and exclusive research results and analysis from a survey commissioned exclusively for this report analysis of the latest e-business trends and developments insights and experiences from many leading commentators from the field of e-business and infrastructure development fourteen in-depth case studies illustrating how leading organizations have exploited e-business opportunity through addressing infrastructure issues. Optional CD-ROM format, allowing greater flexibility and versatility in information sharing. A good infrastructure is critical to the success of an e-Business. Infrastructure must be viewed as part of the overall picture, not a stand alone component. It must be tightly coupled with all other components such as strategy, processes and organization. However, infrastructure decisions are sometimes taken in isolation. That results in ―technology for technology‘s sake‖. The best hardware or software is often not the best for every situation. Much like Rolls Royce might not be the ―best‖ car for a farmer in Idaho. Business requirements should drive infrastructure selection. A complete and thorough analysis that weighs in key factors such as portability, scalability, existing skills, future direction and cost should result in an infrastructure that is the ―best‖ one for that situation.
- 38. E BUSINESS ENVIRONMENT AND STRATEGIES The rate of change in e-business presents an enormous challenge to managers. Business on the Internet is just beginning, and is evolving through a process of trial and error. Management flexibility is a key for survival and success in e-business. The environment of any organization consists of all of the factors that are beyond its control, but influence it in one way or another. To counter the potential adverse affects of these factors, the e-business can respond with strategies. An external strategy is an approach to deal with factors in the external business environment such as competitors, markets, and technological developments, that are beyond the company's direct control. Technology for E Business Technology plays a vital role in e-business. Nevertheless, companies often consume significant resources in technology only to find out their business goals are not effectively met.
- 39. Implementing a product idea is always a challenge with the usual on-target, on-budget, on-time criteria. Among the crucial tasks is to get the right technical resources - a team with great sense of responsibility; project leads with adequate management skills and leadership; individual contributors with domain expertise. Other challenges include proper decision in "make versus buy" for individual components of a project and effective knowledge transfer in a out-sourced situation. Internet technologies have revolutionized the business world by creating a global online marketplace. Appropriate understanding for the technologies and the impact of different design choices of technologies (including the Internet and open systems) dramatically affects both functional and non- functional aspects of the e-business solution. In from a few short years, e-business has gone a simple concept to an undeniable reality, and for good reason. It works for everyone: consumers, businesses, and governments. The e-business technologies are based on all the technologies existed on e-commerce, extranets, virtual organizations, publishing. Technology Options The next model maximizes the use of open standards and protocols versus proprietary technologies. The most important technologies used in ebusiness and implemented by IBM Software Strategy for e- business are: Java, Extensible Mark up Language (XML), Java 2 Platform, Enterprise Edition (J2EE), Presentation layer, Web application server, Integration server, Protocols, Objects, Struts, Eclipse, MVC patterns, Common Object Request Broker Architecture (CORBA), Transactions. Many of these technology choices continue to evolve and expand as the open standards specification evolves to include a broader view of the enterprise architecture. Next figure demonstrates some of the common ebusiness technologies. Some technologies, such as Java and XML, can apply to more than one layer. Trends in e-Business Technologies As e-business continues to develop, various technologies associated with computing underlie its evolution. Currently, the Java™ programming language and platform, the Extensible Mark up Language, and trans-coding are emerging as major technologies for performing e-business functions.
- 40. Conclusion The primary values of e-business, such as cost savings, revenue growth, and customer satisfaction, are proving to be only the tip of the iceberg. Having realized the benefit of Web-enabling individual business processes, many companies now seek further return on investment (ROI) by integrating new and existing e-business applications and technologies. The key to their success is to find a way to give customers what they want without the expense of traditional business operations. The direction toward Web services will particularly help ―Net Generation‖ companies that are born on the Web—to become successful by allowing their services to be easily discovered worldwide and easily integrated with other services ranging in scale from other Net Generation services to enterprise-scale services.