Enhancing enterprise intelligence leveraging ERP, CRM, SCM, PLM, BPM, and BI

Enhancing
Enterprise
Intelligence
Leveraging ERP, CRM, SCM,
PLM, BPM, and BI



Enhancing
Enterprise
Intelligence
Leveraging ERP, CRM, SCM,
PLM, BPM, and BI

Vivek Kale


CRC Press
Taylor & Francis Group
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© 2016 by Vivek Kale
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To
Tanaya and Abhishek
at the start of the new chapter in their lives



Contents
Preface.................................................................................................... xv
Acknowledgments................................................................................xix
Author...................................................................................................xxi
Chapter 1 Intelligent Enterprises......................................................... 1
Agile Enterprises............................................................................1
Stability versus Agility.............................................................4

Aspects of Agility......................................................................6
Principles of Built-for-Change Systems.................................8
Framework for Change Proficiency.......................................9
Enhancing Enterprise Agility...............................................10
e-Business Strategy............................................................10
Business Process Reengineering......................................11
Mobilizing Enterprise Processes......................................11
Network Enterprises...............................................................12
Operating Strategy......................................................................14
Enterprise-Wide Continuous Improvement Programs..........15
Lean System.............................................................................15
Theory of Constraints............................................................19
TOC Tools...........................................................................21
Six Sigma..................................................................................23
Time-Based Competition.......................................................... 28
Enhancing Enterprise Intelligence........................................... 30
Integrated Enterprise with ERP........................................... 30
Customer-Centric Enterprise with CRM............................31
Customer-Responsive Enterprise with SCM......................31
Renewing Enterprise with PLM...........................................32
Collaborative Enterprise with BPM.....................................32
Informed Enterprise with BI.................................................32
Summary..................................................................................... 34
Chapter 2 Enterprise Systems............................................................ 35
Evolution of ES.............................................................................35
Materials Requirement Planning.........................................37
vii


viii • Contents

Closed-Loop Materials Requirement Planning..................38
Manufacturing Requirement Planning II...........................39
Enterprise Resource Planning...............................................39
Extended Enterprise Systems.................................................... 40
Extended Enterprise Systems Framework...........................41
Extended Functionality........................................................ 43
ES Packages..................................................................................45
Valuing the ES-Based Enterprise..............................................50
Enterprise Stakeholders.........................................................50
From “Built-to-Last” to “Built-to-Perform”
Enterprises..........................................................................52
Aspects of Enterprise Value...................................................53
Value to Customers........................................................... 54
Value to Shareholders........................................................55
Value to Managers............................................................ 56
Value to Employees............................................................57
Value to Vendors................................................................58
Economic Value Add..............................................................59
Value-Based Management.................................................... 60
Time Value of Customers and Shareholder Value.........61
ES Metrics................................................................................63
Enterprise Performances Measurement.........................67
Balance Scorecard....................................................................... 68
Financial Perspective..............................................................72
Customer Perspective.............................................................72
Internal Business Processes Perspective..............................72
Learning and Growth Perspective.......................................73
Summary......................................................................................73
Chapter 3 Integrated Enterprise with ERP....................................... 75
Concept of Enterprise Resources Planning.............................76

Enterprise Resources Planning..................................................77
Characteristics of ERP............................................................... 80
ERP Transforms the Enterprise into an InformationDriven Enterprise................................................................... 80
ERP Fundamentally Perceives an Enterprise as a
Global Enterprise....................................................................81


Contents • ix
ERP Reflects and Mimics the Integrated Nature of
an Enterprise...........................................................................81
ERP Fundamentally Models a Process-Oriented
Enterprise.................................................................................82
ERP Enables the Real-Time Enterprise................................83
ERP Elevates IT Strategy as a Part of the Business
Strategy.................................................................................... 84
ERP Represents a Major Advance on the Earlier
Manufacturing Performance Improvement Approaches.... 84
ERP Represents the Departmental Store Model of
Implementing Computerized Systems.................................85
ERP Is a Mass-User-Oriented Application
Environment........................................................................... 86
Advantages of ERP......................................................................87
Enterprise Knowledge as the New Capital.............................. 88
Information as the New Resource........................................89
ERP as the New Enterprise Architecture.................................91
Enterprise Business Processes...................................................93
Enterprise Application Integration...........................................95
Service-Oriented Architecture..................................................97
Defining SOA......................................................................... 99
Services............................................................................. 100

SOA Benefits..........................................................................101
Characteristics of SOA.........................................................103
SOA Applications..................................................................105
Rapid Application Integration.......................................106
Multichannel Access........................................................106
Business Process Management.......................................107
Summary....................................................................................107
Chapter 4 Customer-Centric Enterprise with CRM...................... 109
The Concept of Customer Relationship Management.........110
Customer Centricity..................................................................115
From Products to Services to Experiences........................117
Convergence: From Marketplaces to Marketspaces........118
Customer Relationships as a Strategy................................121
Information is Relationship........................................... 122


x • Contents
Customer Capital: Customer Knowledge as the
New Capital.......................................................................... 124
Increasing Returns and Customer Capitalism................ 126
Leveraging the Customer Capital.......................................127
Compelling Customer Experiences....................................... 128
Personalization......................................................................130
Customer Loyalty......................................................................131
Customer Relationships........................................................... 134
Why Cultivate Customer Relationships............................135
Customer Interaction Channels.........................................136
Internet: The Web of Relationships...............................137
Customer Channel Integration......................................137
360-Degree View of Customer............................................138

One-to-One Marketing........................................................139
Permission Marketing..........................................................140
Customer Life Cycle..................................................................141
Customer Value.....................................................................143
Customer Lifetime Value.....................................................144
Customer Value Management.................................................146
Customers as Lifelong Investments....................................148
Customer as an Asset......................................................148
Summary....................................................................................150
Chapter 5 Customer-Responsive Enterprise with SCM................. 153
Concept of Supply-Chain Management................................ 154
Supply-Chain Management Challenges............................156
Supply-Chain Management.................................................158
SCM Characteristics........................................................159
SCM Components............................................................160
Supply-Chain Management Framework................................163
Supply-Chain Performance Framework............................165
Supply-Chain Performance Measurement........................169
Customer Responsiveness........................................................170
Salient Aspects of Customer Responsiveness...................174
Customer-Responsive Management...................................178
Networks of Resources....................................................181
Business Webs..................................................................183
Economics of Customer Responsiveness......................183


Contents • xi
Activity-Based Customer Responsiveness.........................187
Activity-Based Costing for BPR.....................................188
Time-Driven Activity-Based Costing.......................... 190

Responsive Activity Pricing............................................196
Summary....................................................................................198
Chapter 6 Renewing Enterprise with PLM..................................... 201
Concept of Product Lifecycle Management...........................201
Product Lifecycle Management.............................................. 203
Challenges of PLM............................................................... 204
Benefits of PLM.................................................................... 205
Components of PLM................................................................ 207
Advantages of Using PLM....................................................... 208
Porter’s Framework of Generic Strategies..............................210
Product Life Cycle.....................................................................212
Product Design Attributes...................................................215
Product Design Approaches................................................218
Quality Function Deployment.......................................218
Design for Manufacturability........................................219
Concurrent Engineering................................................ 220
Design for Sustainability................................................ 220
Customization and Standardization.......................................221
Mass Customization............................................................ 223
Methodologies for Managing Customization.................. 224
Summary................................................................................... 228
Chapter 7 Collaborative Enterprise with BPM............................... 229
Process-Oriented Enterprise................................................... 229
Value-Add-Driven Enterprise............................................ 230
Concept of Business Process Management............................231
Business Process................................................................... 234
Business Process Management................................................235
Enterprise BPM Methodology................................................ 238
Strategic Planning for Enterprise BPM............................. 238
Identifying the Business Processes in the Company..... 240

Selecting Business Processes for BPM...............................241
Creating Process Maps........................................................ 242
Analyzing Processes for Breakthrough Improvements.... 243


xii • Contents
Innovative Breakthrough Improvement in Processes.... 244
Implementing Designed Processes.................................... 245
Measuring the Performance of Designed Processes....... 245
Business Process Reengineering............................................. 247
Management by Collaboration............................................... 249
Relationship-Based Enterprise............................................251
Information-Driven Enterprise..........................................252
Process-Oriented Enterprise...............................................252
Value-Add-Driven Enterprise.............................................253
Enterprise Change Management....................................... 254
Learning Enterprise..............................................................255
Virtual Enterprise................................................................ 256
Business Processes with SOA...................................................257
Process................................................................................... 258
Workflow............................................................................... 260
Business Process Management...........................................261
Business Processes via Web Services................................ 263
Service Composition....................................................... 264
Summary................................................................................... 265
Chapter 8 Informed Enterprise with BI.......................................... 267
Concept of Business Intelligence (BI).................................... 267
Business Intelligence (BI)........................................................ 268
Benefits of BI..............................................................................270
Technologies of BI.....................................................................272

Data Warehousing and Data Marts...................................272
Business Intelligence............................................................272
Data Mining..........................................................................274
Online Analytical Process...................................................275
Applications of BI......................................................................275
Context-Aware Applications................................................... 277
Decision Patterns as Context..............................................279
Concept of Patterns........................................................ 280
Domain-Specific Decision Patterns....................................... 284
Financial Decision Patterns................................................ 284
CRM Decision Patterns...................................................... 287
CRM Decision Patterns through Data Mining...........291
Summary................................................................................... 294


Contents • xiii
Chapter 9 Implementing Enterprise Systems................................. 295
Mission and Objectives of the ES Project.............................. 296
Examples of Cited Reasons for Implementing ES........... 297
Guiding Principles for ES Best Practices............................... 297
Project Initiation and Planning.............................................. 298
Critical Success Factors............................................................ 299
Direct Involvement of Top Management......................... 299
Clear Project Scope.............................................................. 300
Covering as Many Functions as Possible within the
Scope of the ES Implementation........................................ 300
Standardizing Business Process......................................... 300
Proper Visibility and Communication in the ES
Project at All Stages..............................................................301
Allocation of Appropriate Budget and Resources............301

Full-Time Deputation of Key Managers from All
Departments..........................................................................301
Completing Infrastructural Activities in Time and
with High Availability......................................................... 302
Instituting a Company-Wide Change Management
Plan........................................................................................ 302
Training of ES Team Members.......................................... 303
Training of User Members................................................. 303
Scheduling and Managing Interface of ES with
Other Systems....................................................................... 303
Transition Plan for Cut Over to ES................................... 304
Implementation Strategy......................................................... 304
Big Bang Implementation of ES Components................. 304
Base Components Implemented First............................... 305
Implementation of ES Standard Functionality................ 305
Pilot Site Deployment Followed by Rollouts at Other
Sites........................................................................................ 306
Utilize External Consultants to Primarily Train
In-House Functional and Technical Consultants........... 306
Centralized or Decentralized ES Configuration............. 307
User-Driven Functionality................................................. 307
ES Implementation Project Bill of Resources....................... 307
Money.................................................................................... 308
Materials................................................................................ 308


xiv • Contents
Manpower............................................................................. 308
Time Period.......................................................................... 309
Information.......................................................................... 309

Implementation Environment................................................ 309
Implementation Methodology................................................ 309
Accelerated SAP (ASAP) Methodology.............................311
Project Preparation..........................................................311
Business Blueprint............................................................311
Realization........................................................................312
Final Preparation.............................................................312
Go Live and Support........................................................312
Project Management.................................................................313
Project Organization............................................................313
Project Control......................................................................313
Time Recording................................................................314
Meetings.................................................................................314
Project Monitoring..........................................................315
Project Reviews................................................................315
ES Implementation....................................................................315
Preimplementation...............................................................315
Training.............................................................................316
ES Installation..................................................................316
Implementation................................................................316
Postimplementation.............................................................316
ES Support..................................................................................317
ES Deployment...........................................................................317
Why Some ES Implementations May Sometimes Be
Less Than Successful.................................................................318
Summary....................................................................................319
Epilogue: Enterprise Performance Intelligence................................. 321
Appendix I: SAP Business Suite......................................................... 323
Bibliography......................................................................................... 361
Index..................................................................................................... 363

Preface
As experiences with enterprise systems are being collated during the past
decade or more across companies world-wide, the overall sense of elation
has been missing. Despite hundreds of consultants working overtime to
assuage the absence of unequivocal success of enterprise systems implementations, there is a distinct sense of puzzlement as to the real benefit of
a decade-long investment into IT enablement of company operations and
management.
There is no panacea for elevating or correcting the situation. One thing
is clear, one cannot hope to gain much by merely migrating the traditional
operations and processes to enterprise systems (ES). Traditional operations and systems are innately constrained by the limitations of manual
operations and systems, consequently, migrating traditional operations
and processes directly to ES pitches them at the lowest-end of the value-add
spectrum. Migrating mundane operations and processes without optimization or re-design or re-engineering does not even begin to unleash the
stupendous potential and power inherent in integrated enterprise-wide
process-oriented information-driven real-time systems like ES–enterprise
systems begin from where traditional systems reach the pinnacle of their
performance! Thus, what is required is to revisit the basics of enterprise
systems and rededicate ourselves to improve the application, relevance,
and usage of these cross-company platforms. This book attempts to help
you in that endeavor.
This book provides an overview of the characteristics and essential strengths of various categories of Enterprise Systems (ES), namely,
Enterprise Resource Planning (ERP), Customer Relationship Manage­
ment (CRM), Supply-Chain Management (SCM), Product LifeCycle
Management (PLM), Business Process Management (BPM), and Business
Intelligence (BI).
Initiating change and confronting change are the two most important
issues facing today’s enterprises. The ability to change business operations and processes contributes directly to the innovation bottom line.
The traditional concept of change management is usually understood as

a one-time event or at least a non-frequent event. But if an enterprise is
looking for the capability to handle not only change management but also
xv


xvi • Preface
management of changes on a continual basis, then establishing a constellation of integrated enterprise systems such as ERP, CRM, SCM, PLM,
BPM, and BI is a must!
Customary treatment of business excellence seldom highlights the
change-enabling aspects of IT generally, and ES more specifically.
Conventional work in this area has the now familiar refrain of the notion
of business and IT alignment to assure optimal creation of business value,
but it seldom discusses the very key enabler role of IT: IT makes enterprisewide change possible, more easily and effortlessly.
It is phenomenally important to realize that business processes that
reside or are internalized within an organization’s employees are difficult
to change simply because human beings naturally find it more difficult
to change. However, processes that reside within computerized systems
are easy to change because they are not thwarted by problems of inertia, fatigue, or lack of motivation. ES enable the essential and continual
changing of processes that are so critical to the ­successes of an enterprise.
However, the requisite rationale and supporting details are too technical
to be tackled here and are beyond the scope of the objectives of this book,
which is essentially focused on business management.

WHAT MAKES THIS BOOK DIFFERENT
This book presents the phenomenon of the emergence of ES such as ERP,
CRM, SCM, PLM, BPM, and BI from business and technological perspectives. It attempts to demystify ES and their power and potential to transform businesses. Unlike customary work on ES, which seldom discusses
the key differentiators of ES from the earlier mission-critical systems, this
book brings to the fore the fact that ES collectively contribute to enhancing the intelligence quotient of the enterprise.
Enterprise intelligence can be defined as the ability to initiate change
(to unsettle competitors) and confront change (initiated by competitors,

regulators, and other players) in the market environment.
This book presents a case that ES enhance enterprise intelligence by
enabling
1.Integrated Enterprise with ERP
ERPs enable the integration of heterogeneous and disparate business units, functions, and processes to coordinate, cooperate, and


Preface • xvii










collaborate in aligning the business operations of the enterprise with
its corporate strategy.
2.Customer-Centric Enterprise with CRM
CRMs enable the relationships with individual customers to cocreate and coinnovate solutions to the satisfaction of customers at
­optimal cost on an ongoing basis.
3.Customer-Responsive Enterprise with SCM
SCMs enable the flexibility to obtain the capability and capacity
needed to respond quickly to individual customer requests.
4.Renewing Enterprise with PLM
PLMs enable the continuous renewal (creation and innovation) of
enterprise offerings, i.e., products and services in sync with the continuous changes in customer preferences and needs and also in the
changing market environment (because of the impact of competitors, regulators, activists, etc.).

5.Collaborative Enterprise with BPM
BPMs enable the reconciled, i.e., collaborative working of different
cross-company stakeholders of any business process, activity, or
decision in compliance with its strategy, policy, and procedures.
6.Informed Enterprise with BI
BIs enable enterprises to access current, correct, consistent, and complete information on any process or transaction to take informed
decisions in compliance with its strategy, policy, and procedures.

HOW THIS BOOK IS ORGANIZED
Chapter 1 presents an overview of agile enterprises and dimensions of
intelligent enterprises. Chapter 2 introduces enterprise systems and related
concepts of enterprise value and enterprise performance management.
Chapter  3 elaborates on the characteristics of ERP and Service-Oriented
Architecture (SOA). While Chapter 4 details the CRM’s focal concept of customer centricity as also a constellation of related concepts such as customer
relationships, customer life cycle, and customer lifetime value, Chapter 5
presents SCM’s focal concept of customer responsiveness. Product Lifecycle
Management (PLM) and Product Life Cycle (PLC), which are at the heart
of ongoing enterprise renewal, are discussed in Chapter 6. Chapter 7 discusses establishing a collaborative enterprise with BPM and enterprise BPM


xviii • Preface
methodology. Chapter 8 deals with the realization of an informed enterprise
with BI along with the novel concept of decision patterns. This chapter highlights the fact that any end-user application’s effectiveness and performance
can be enhanced by transforming it from a bare transaction to a transaction
clothed by a surrounding context formed as an aggregate of all relevant decision patterns in the past. Finally, Chapter 9 presents details of various issues
relating to an enterprise systems implementation project.
To give a practical context to the discussions on ES presented in the
book, Appendix I provides an overview of the SAP Business Suite.

WHO SHOULD READ THIS BOOK

All who are involved with any aspect of ES projects—ERP, CRM, SCM,
PLM, BPM, BI—will profit by reading this book to make a more meaningful contribution to the success of their ES implementation project(s).
The following categories of stakeholders will benefit from reading this
book:
•
•
•
•
•
•

Executives, and business and operational managers
ES evaluation and selection team members
ES technical and project managers, and module leaders
ES functional and technical members
Industry professionals interested in understanding the role of ES
Students of engineering, management, computer, and technology
courses
• General readers interested in the use of ES in organizations


Acknowledgments
I would like to thank all those who have helped me with their clarifications, criticism, and valuable information during the writing of this book.
Thanks to John Wyzalek for making this book happen and guiding it
through to completion.
I thank my beloved daughters Tanaya and Atmaja for their understanding and support. And finally, thanks to my wife Girija—to whom I am
grateful, beyond measure, for her continuous loving support and help.
Vivek Kale
Mumbai, India

xix



Author
Vivek Kale has more than two decades of professional IT experience
­during which he has handled and consulted on various aspects of enterprise-wide information modeling, enterprise architecture, business process redesign, and e-business architecture. He has been Group CIO of
Essar Group, the steel/oil and gas multi-national conglomerate of India,
as well as Raymond Apparel Ltd., the textile and apparel manufacturer
of India. He is a seasoned practitioner in transforming the business of IT,
facilitating business agility, and enabling the Process-Oriented Enterprise.
He is the author of Implementing SAP R/3: The Guide for Business and
Technology Managers, Sams (2000), A Guide to Implementing the Oracle
Siebel CRM 8.x, McGraw-Hill India (2009), and Inverting the Paradox of
Excellence: How Companies Use Variations for Business Excellence and
How Enterprise Variations Are Enabled by SAP, Productivity Press (2014).

xxi



1
Intelligent Enterprises

AGILE ENTERPRISES
The difficult challenges facing businesses today require enterprises to be
transitioned into flexible, agile structures that can respond to new market opportunities quickly with a minimum of new investment and risk.
As enterprises have experienced the need to be simultaneously efficient,
flexible, responsive, and adaptive, they have transitioned themselves into
agile enterprises with small, autonomous teams that work concurrently

and reconfigure quickly, and adopt highly decentralized management that
recognizes its knowledge base and manages it effectively.
Enterprise agility is the ability to be
1.Responsive—Adaptability is enabled by the concept of loosely
­coupled interacting components reconfigurable within a unified
framework. This is essential for ensuring opportunity management
to sustain viability.
The ability to be responsive involves the following aspects:
• An organizational structure that enables change is based on
­reusable elements that are reconfigurable in a scalable framework. Reusability and reconfigurability are generic concepts
that are applicable to work procedures, manufacturing cells,
­production teams, or information automation systems.
• An organizational culture that facilitates change and focuses on
change proficiency.
2. The ability to be intelligence intensive or to manage and apply knowledge effectively whether it is knowledge of a customer, a market
opportunity, a competitor’s threat, a production process, a business
practice, a product technology, or an individual’s competency. This is
essential for ensuring innovation management to sustain leadership.
1


2  •  Enhancing Enterprise Intelligence
The ability to be intelligence intensive involves the following aspects:
• Enterprise knowledge management
• Enterprise collaborative learning
When confronted with a competitive opportunity a smaller
company is able to act more quickly, whereas a larger company has access to more comprehensive knowledge (options,
resources, etc.) and can decide to act sooner and more
thoroughly.
Agility is the ability to respond to (and ideally benefit from) unexpected

change. Agility is unplanned and unscheduled adaption to unforeseen
and unexpected external circumstances. However, we must differentiate
between agility and flexibility. Flexibility is scheduled or planned adaptation to unforeseen yet expected external circumstances.
One of the foremost abilities of an agile enterprise is its ability to quickly
react to change and adapt to new opportunities. This ability to change
works along two dimensions:
i.The number or “types of change” an enterprise is able to undergo
ii.The “degree of change” an enterprise is able to undergo
The former is termed as range, and the latter is termed as response ability.
The more response-able an enterprise is, the more radical a change it can
gracefully address. Range refers to how large a domain is covered by the agile
response system; in other words, how far from the expected set of events one
can go and still have the system respond well. However, given a specific range,
how well the system responds is a measure of response or change ability.
Enterprises primarily aim progressively for efficiency,
flexibility, and innovation in that order. The Model Builder,
Erector set, and LEGO kits are illustrations of enterprises
targeting for efficiency, flexibility, and innovation (i.e.,
agility), respectively.
Construction toys offer a useful metaphor because the enterprise systems
we are concerned with must be configured and reconfigured constantly,


Intelligent Enterprises • 3
precisely the objective of most construction toys. An enterprise system
architecture and structure consisting of reusable components reconfigurable in a scalable framework can be an effective base model for creating
variable (or built-for-change) systems. To achieve this, the nature of the
framework appears to be a critical factor. We can introduce the framework/component concept, by looking at three types of construction toys
and observe how they are used in practice, namely, Erector Set Kit, LEGO
Kit, and Model Builder’s Kit.

You can build virtually anything over and over again with any of these
toys; but fundamental differences in their architecture give each system
unique dynamic characteristics. All consist of a basic set of core construction components, and also have an architectural and structural framework that enables connecting the components into an unbounded variety
of configurations. Nevertheless, the Model Builder is not as reusable in
practice as the Erector Set, and the Erector Set is not as reusable or reconfigurable or scalable in practice as LEGO, and LEGO is more reusable,
reconfigurable, and scalable than either of them. LEGO is the dominant
construction toy of choice among preteen builders—who appear to value
experimentation and innovation.
The Model Builder’s kit can be used to construct one object like airplane of one intended size. A highly integrated system, this construction
kit offers maximum esthetic appeal for one-time construction use but
the parts are not reusable, the construction cannot be reconfigured, and
one intended size precludes any scalability. It will remain what it is for all
time—there is zero variability here.
Erector Set kits can be purchased for constructing specific models, such
as a small airplane that can be assembled in many different configurations. With the Erector Set kit, the first built model is likely to remain as
originally configured in any particular play session. Erector Set, for all
its modular structure, is just not as reconfigurable in practice as LEGO.
The Erector Set connectivity framework employs a special-purpose intermediate subsystem used solely to attach one part to another—a nut-andbolt pair and a 90-degree elbow. The components in the system all have
holes through which the bolts may pass to connect one component with
another. When a nut is lost, a bolt is useless, and vice versa; when all the
nuts and bolts remaining in a set have been used, any remaining construction components are useless, and vice versa. All the parts in a LEGO set
can always be used and reused, but the Erector Set, for all its modularity,
is not as reusable in practice as LEGO.