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CHAPTER 10
STRATEGIC TECHNOLOGY AND ENTERPRISE SYSTEMS
IT at Work
10 Organic Valley Does Business Better with Enterprise System
Why did Organic Valley need an enterprise system? To meet the challenge of managing growth in the face of increasing competition from larger companies, Organic Valley needed to consolidate its disparate systems into one enterprise solution to improve operating efficiencies and maintain the high quality of its line of perishable food products.
What factors contributed to the successful implementation and outcomes? Explain their importance. Organic Valley hired a consultant during the selection process to help identify the most important functions and features, such as shelf-life management and expiration date management. Based on these requirements, three possible vendors were identified. Organic Valley and its consultant agreed that the solutions offered by the vendor Infor best fit its business.
Identifying requirements is critical to obtaining the proper system to meet business needs. Making a leap from a number of disparate systems to an enterprise solution required proper experience and knowledge of existing systems for a possible fit. Utilizing a consultant experienced in both requirements definition and enterprise systems also was critical for proper vendor selection and implementation.
Enterprise systems are expensive. What factor helped justify the investment? Expanding operations of a company that produces a wide variety of items required a move from insufficient systems to an integrated solution supporting all business processes across all of its lines of business. Organic Valley is much more agile on the technical side, and this has given it the ability to support rapid business growth. The resulting projected savings of $2 million per year through improved supply chain planning and other operational efficiencies justifies the investment expense.
Using spreadsheets for planning is rather common. Why do you think companies use stand-alone spreadsheets for planning? Answers may vary. Spreadsheet are easily available, affordable, relatively easy to use, and have many built-in capabilities for statistics, graphing, and planning.
10 Red Robin Transforms Its Business with Yammer
- Why are employees a source of valuable information? In your opinion, why are employees an untapped resource at many companies? Front-line employees understand the customer and the customer experience best.
Answers may vary. Corporate culture is part of the reason, but a lot has to do with the absence of a channel for employees to be heard.
How does Yammer capture BI from employees? Answers may vary. By using Yammer, employees can post information, ideas, problems, issues, and questions. By monitoring Yammer, managers can keep informed and respond promptly to obtain BI.
Explain Yummer and Yummversity. Why would employees want to use them? Yummer is a network for restaurant managers, regional managers, and corporate office members to exchange information and answer questions from field staff. Yummversity is a network for training employees. Yummer gave a voice to the silent front-line workers at Red Robin. Prior to Yummer, these employees would pass information up the company management chain, but they rarely received feedback on the information or what was done in response to it.
What is the expected benefit of naming the enterprise social platform, as Red Robin had done? Employees want to feel the company is behind the initiative. At Red Robin, for example, renaming Yammer to Yummer connected employees to the brand.
How did Red Robin motivate its employees to contribute to the enterprise social net? Answers may vary. They identified and leveraged change agents, provided visible feedback and rewards, and introduced a competition. A few employees were invited to join Yammer. After they were urged to invite colleagues, membership spread quickly. In one case, a $1,000 prize was offered for the best employee idea.
How did the restaurant reduce employee turnover? Senior VP of Business Transformation and CIO Chris Laping believed that the company’s workers—87 percent are Millennials—were searching for meaning. So engaging these workers in a meaningful way would create the atmosphere that strengthened employee loyalty. In 2010 the company invested in enterprise social networking, in part, to reduce the high cost of employee turnover that is common in the restaurant business.
10 Agency Replaced 50 Legacy Systems with an ERP
No Questions.
10 Got Contaminated Food? How Do You Know?
Select three food recalls. How could those products be tracked and traced? Answers may vary.
What factors impact the ability to manage the munitions supply chain? The ability to managing the supply chain is a result of asset visibility (tracking and monitoring), forecasting and decision-making capabilities, communication, and collaboration along the supply chain.
For the JMC, where does the munitions supply chain start and where does it end? As JMC manufactures, procures, stores, and transports all munitions, JMC manages the entire supply chain, beginning with the manufacture and ending with the delivery to locations worldwide.
Is munitions supply chain management unique, and if so, why? Or, is it similar to the management of any supply chains? Explain your positions. No. Like other supply chains, it depends on good relationships among suppliers in the network, the quality of supplier information, communication channels. The fact that JMC manages the entire supply chain does not change the factors upon which a good supply chain relies.
10 1-800-Flowers Uses Data Mining for CRM
Why is being number one in operation efficiency not enough to keep 1-800- FLOWERS at the top of its industry? Competition is very strong in this industry and all major competitors provide the same features today.
What is the role of data mining? Data mining turns data into knowledge for understanding and anticipating customer behavior, meeting customer needs, building more profitable customer relationships, and gaining a holistic view of a customer’s lifetime value by discovering trends, explain outcomes, and predict results so that the company can increase response rates and identify profitable customers.
How is the one-to-one relationship achieved in such systems? By collecting data at all customer touchpoints, data mining software helps the company identify the many different types of customers and how each would like to be treated.
Review Questions
10 Enterprise Systems
Explain the purpose of an enterprise system. Enterprise systems integrate internal core business processes by their connection to central data repositories that enable them to synch and share the latest data and they link the enterprise with suppliers, business partners, and customers.
Describe three types of enterprise systems. Primary enterprise systems are: - ERP: Enterprise Resource Planning
- SCM: Supply Chain Management
- CRM: Customer Relationship Management
What is customer lifetime value (CLV)? Customer lifetime value (CLV) is a formula for estimating the dollar value, or worth, of a long-term relationship with a customer.
What is a value added reseller (VAR)? A value-added reseller (VAR) is company that customizes or adds features to a vendor’s software or equipment and resells the enhanced product.
What are two challenges of legacy systems? Legacy systems (older business systems that may be still in use) are difficult and expensive to maintain, update, and interface securely with leading-edge business apps.
Why do companies migrate to enterprise systems? Companies tend to migrate to an enterprise solution when they need to consolidate their disparate systems, such as when limitations caused by their existing legacy systems interfere with performance or the ability to compete. Here are major reasons why companies replace parts of their legacy systems or supplement them with enterprise systems. It is important to realize that many companies do not have the resources to replace all their legacy systems.
- High maintenance costs. Maintaining and upgrading legacy systems are some of the most difficult challenges facing CIOs (chief information officers) and IT departments.
- Business value deterioration. Technological change weakens the business value of legacy systems that have been implemented over many years and at huge cost.
- Inflexibility. Legacy architectures were not designed for flexibility. These huge systems cannot be easily redesigned to share data with newer systems, unlike modern architectures.
- Integration obstacles. Legacy systems execute business processes that are hardwired by rigid, predefined process flows. Their hardwiring makes integration with other systems such as CRM and Web-based applications difficult and sometimes impossible.
- Lack of staff. IT departments find it increasingly difficult to hire staff who are qualified to work on mainframes and applications written in languages no longer used by the latest technologies.
- Cloud. The cloud has lowered upfront costs. Cloud-based enterprise systems can be a good fit for companies facing upgrades to their legacy ERP and other enterprise systems.
Explain the challenges of enterprise system implementation. Implementing an enterprise system is complex, time-consuming, and typically requires the help of a consulting firm, vendor, or value-added reseller (VAR). Integrating legacy systems with cloud-based applications is complex, as described in Tech Note 10-1. Much of the complexity is due to getting new apps or system modules to interface with existing or legacy systems that are several generations older.
a secure, access-controlled extranet site to share with external partners in the supply chain, contractors, and so on.
Documents SharePoint provides a shared space to store documents, so they are not siloed on any one person’s hard drive or device. Documents stored on SharePoint can be accessed by anyone in the company—unless the administrator has limited access. SharePoint enables coworkers to work simultaneously on a single document, save previous versions, and track updates.
Collaboration and Business Intelligence The platform makes it easy for users to stay up-to-date and to coordinate their efforts on projects from any desktop or mobile device; and to discover patterns and insights in enterprise data.
Yammer Yammer is “Facebook for business.” Yammer is the social collaboration tool of choice for SharePoint going forward (Ryan, 2014).
In what ways can enterprises realize value from Yammer or other enterprise social? To realize business value from enterprise social:
- Make sure management is listening. Leaders and decision makers need to monitor social chatter to keep informed and respond promptly.
- Provide visible feedback and rewards. Employee participation is largely driven by the desire to be recognized by peers and managers.
- Brand the social network. Employees want to feel the company is behind the initiative. At Red Robin, for example, renaming Yammer to Yummer connected employees to the brand.
- Identify and leverage change agents. Start with those employees most eager to participate, especially Millennials who are looking for recognition and purpose.
- Introduce competitions and games. Experience shows that people are more likely to engage when they are having fun.
- Make the rules of engagement simple. Do not over-engineer or control the social network. Make it easy to enroll and participate.
How do Office Graph and Enterprise Graph support collaboration? Office Graph uses signals from e-mail, social conversations, documents, sites, instant messages, meetings, and more to map the relationships between people and concepts. Enterprise Graph tries to show how users are related to one another by mapping the relationships between people and information by simply recording likes, posts, replies, shares, and uploads. It enables developers and customers to seamlessly connect people, conversations, and data across all their business services.
How does Chatter enable workers to solve problems? With Chatter, the problem-solving process becomes a conversation rather than a series of disjointed e-mails. People can interact and spark new ideas. There is no confusion over which is the latest version of a document. Other employees can be brought into the
conversation using the @ function. Chatter customer groups let users work with external customers, vendors, and partners, with the option of limiting what they can see and access. Private groups can also be set up when employees need to work on sensitive projects with certain colleagues.
10 Enterprise Resource Planning Systems
What are the three ways ERP can be deployed? Enterprise Resource Planning (ERP) is the software infrastructure that integrates an enterprise’s internal applications, supports its external business processes, and links to its external business partners. ERP can be deployed on-premises, in the cloud, or as a managed service.
Briefly describe the latest ERP features and add-ons. The latest ERP solutions are designed with the focus on social collaboration, deployment flexibility, faster response, and mobile device accessibility. They include user interfaces that are touch-enabled and work with all touch screen devices.
Describe ERP from a technology perspective. Enterprise systems require data transfers—often to mainframes. ERPs are usually on distributed systems or in the cloud. The term ERP often refers to commercially available software systems. ERP solutions are designed with the focus on social collaboration, deployment flexibility, faster response, and mobile device accessibility. They include user interfaces that are touch-enabled and work with all touch screen devices.
Explain manufacturing ERP systems and lean principles. Manufacturers know that their success depends on lower costs, shorter cycle times, and maximum production throughput. A key factor in lowering costs is inventory management—such as minimizing inventory errors and maintaining the optimal inventory level. An optimal level has enough inventory to keep production running while minimizing inventory-on-hand to control holding costs. ERP demand forecasting modules help manufacturers avoid material shortages, manage production, and coordinate distribution channels, which improves on-time delivery. Engineers, production floor workers, and those in the purchasing, finance, and delivery departments can access and share plans, production status, quality control, inventory, and other data in real time.
List and briefly describe three ERP implementation success factors. Answers may vary. The text shows the results of a survey to identify what ERP experts had found to be most important to successful ERP projects. These ERP experts were given the following six options and asked to select only one of them as “most important”: 1. Strong program management: 6 percent 2. Executive support and buy-in: 19 percent 3. Organizational change management and training: 13 percent 4. Realistic expectations: 8 percent 5. Focus on business processes: 5 percent
understand how to use them effectively. Investing in training, change management, and job design are crucial to the outcome of any large-scale IT project.
- Describe causes or factors that contribute to ERP failure. Answers may vary. Students may give the inverse of success factors; i., failure to have strong program management, executive support, and buy-in, sufficient change management and training, realistic expectations, focus on business processes.
The success of an ERP depends on organizational and technological factors that occur prior to, during, and after its implementation. Knowing what to do and what not to do are important.
ERP implementations are complex—and risky. Planning, deploying, or fine-tuning these complex business software systems for your company is such a large undertaking that such projects fail more than 50 to 70 percent of the time. You need to conduct your own research rather than depend upon vendor data for the full story of enterprise system implementations.
Many times seemingly well-planned projects fail and require extensive reworking because integration issues had not been properly planned.
ERPs are expensive and such an investment needs to be justified. This includes the total cost of ownership, not simply the cost of the ERP or monthly SaaS fee. Processes need to be redesigned so that they can be automated, either totally or partially. Tasks that are no longer necessary are removed from the processes. Jobs and how they are performed will change to accommodate the new processes. Enterprise systems require retraining users whose productivity will drop initially as they adjust to a new way of doing their jobs.
Applications must be tightly aligned with well-defined and well-designed business processes - a standard which few enterprises are able to achieve.
10 Supply Chain Management Systems
What is a supply chain? Supply chains involve the flow of materials, data, and money. The journey that a product travels, starting with raw material suppliers, to manufacturers or assemblers, then distributors and retail sales shelves, and ultimately to customers is its supply chain. Supply chain starts with the acquisition of raw materials or the procurement (purchase) of products and proceeds through manufacture, transport, and delivery—and the disposal or recycling of products.
List four functions carried out by companies in a supply chain. The supply chain is like a pipeline composed of multiple suppliers, distributors, manufacturers, retailers, and logistics providers that:
purchase (procurement) raw materials or products transform materials (i., manufacture, service) into intermediate or finished products transport and deliver finished products to retailers or customers, and dispose or recycle product 3. List and describe the three main flows being managed in a supply chain. Supply chains involve the flow of materials, data, and money. Descriptions of these three main flows are:
Material or product flow: This is the movement of materials and goods from a supplier to its consumer. For example, Ford supplies dealerships that, in turn, sell to end-users. Products that are returned make up what is called the reverse supply chain because goods are moving in the reverse direction.
Information flow: This is the movement of detailed data among members of the supply chain, for example, order information, customer information, order fulfillment, delivery status, and proof-of-delivery confirmation. Most information flows are done electronically, although paper invoices or receipts are still common for non- commercial customers.
Financial flow: This is the transfer of payments and financial arrangements, for example, billing payment schedules, credit terms, and payment via electronic funds transfer (EFT). EFT provides for electronic payments and collections. It is safe, secure, efficient, and less expensive than paper check payments and collections.
Describe SCM. Supply chain management (SCM) is the efficient management of the flows of material, data, and payments along the companies in the supply chain, from suppliers to consumers. SCM systems are configured to achieve the following business goals: To reduce uncertainty and variability in order to improve the accuracy of forecasting To increase control over the processes in order to achieve optimal inventory levels, cycle time, and customer service.
What are steps in the order fulfillment? Step 1: Make sure the customer will pay. Depending on the payment method and prior arrangements with the customer, verify that the customer can and will pay, and agrees to the payment terms. This activity is done by the finance department for B2B sales or an external company, such as PayPal or a credit card issuer such as Visa for B2C sales. Any holdup in payment may cause a shipment to be delayed, resulting in a loss of goodwill or a customer. In B2C, the customers usually pay by credit card, but with major credit card data theft at Target and other retailers, the buyer may be using a stolen card. Step 2: Check in-stock availability and reorder as necessary. As soon as an order is received, the stock is checked to determine the availability of the product or materials. If there is not enough stock, the ordering system places an order, typically automatically using EDI (electronic data interchange). To perform these operations, the ordering system needs to interface with the inventory system. Step 3: Arrange shipments. When the product is available, shipment to the customer is arranged (otherwise, go to Step 5). Products can be digital or physical. If the item is physical and available, packaging and shipment arrangements are made. Both the
What are the top innovative digital technologies impacting SCM? Mobility and M2M technologies can improve responsiveness and customer service by providing supply chain workers with the information they need—whenever and wherever they need it.
10 Customer Relationship Management (CRM) Systems
Explain the four critical success factors for CRM. The four critical success factors and their relative importance for CRM are: Data (15%) CRM technology (20%) People (40%) Process change (25%)
Why does CRM matter? CRM systems play the major role in customer experience (CX), and good CX helps to retain customers. However, not all customers are worth retaining. Customers can be unprofitable. Intelligently managing relationships with customers can increase revenues and net profits significantly. Similar to managing inventory and supplier relationships, effective CRM is data-driven, complex, and continuously changing. The growth of mobile sales channels and social networking makes recognizing customers across multiple touchpoints complex. In addition, many companies have customer data in multiple, disparate systems that are not integrated—until they implement CRM systems.
Discuss how CRM impacts customer acquisition and retention. CRM technologies help marketing managers run effective campaigns, promotions, commercials, and advertisements to attract new customers, or to increase sales to existing customers, or to do both. Attracting and acquiring new customers are expensive activities, for example, it costs banks roughly $100 to acquire a new customer. Newly acquired customers are unprofitable until they have purchased enough products or services to exceed the cost to acquire and service them. Therefore, retaining customers that generate revenues in excess of the costs (e., customer service, returns, promotional items, and the like) is critical. The purpose of loyalty or frequent purchase programs offered by online retailers, coffee shops, airlines, supermarkets, credit card issuers, casinos, and other companies is to track customers for CRM purposes and build customer loyalty to improve financial performance. Loyalty programs rely on data warehouses and data analytics to recognize and reward customers who repeatedly use services or products.
According to Peter Drucker, what does marketing effectiveness depend upon? According to management guru Peter Drucker, “Those companies who know their customers, understand their needs, and communicate intelligently with them will always have a competitive advantage over those that don’t” (Drucker, 1969). For most types of companies, marketing effectiveness depends on how well they know their customers; specifically, knowing what their customers want, how best to contact them, and what types of offers they are likely to respond to positively. According to the loyalty effect, a five percent reduction in customer attrition can improve profits by as much as 20 percent.
Customer-centric business strategies strive to provide products and services that customers want to buy.
Give three reasons why CRM fails. Answers may vary. Putting IT department in charge of the CRM project instead of the business users. The hands-on business users need to champion and lead the project initiative, with IT playing a supporting role. Not getting the CRM requirements right by not involving key business stakeholders from the outset. CRM implementations need buy-in from the users and other business stakeholders, who can spread enthusiasm. Frequent communication about the project is important to engaging them in a meaningful way. Making mobile CRM strategy an afterthought. Consider mobility a priority in the CRM project from the outset. Putting an existing CRM on mobile devices is a bad plan. Taking wrong approach to CRM training. Make sure the interface is intuitive enough that most users will not need hands-on training. When people sit in a classroom for an hour, they will only retain 5 minutes of what they hear. A learning program during lunch that focuses on one or two lessons is a much more effective adoption strategy. Underestimating users’ resistance to change. Users will not tolerate poorly designed systems. Frustrating users is a fast track to failure, or at a minimum, suboptimal results.
How can CRM be justified? A formal business plan must be in place before the CRM project begins—one that quantifies the expected costs, tangible financial benefits, and intangible strategic benefits, as well as the risks. The plan should include an assessment of the following:
- Tangible net benefits. The plan must include a clear and precise cost-benefit analysis that lists all of the planned project costs and tangible benefits. This portion of the plan also should contain a strategy for assessing key financial metrics, such as ROI, net present value (NPV), or other justification methods.
- Intangible benefits. The plan should detail the expected intangible benefits, and it should list the measured successes and shortfalls. Often, an improvement in customer satisfaction is the primary goal of the CRM solution, but in many cases this key value is not measured.
- Risk assessment. The risk assessment is a list of all of the potential pitfalls related to the people, processes, and technology that are involved in the CRM project. Having such a list helps to lessen the probability that problems will occur. And, if they do happen, a company may find that, by having listed and considered the problems in advance, the problems are more manageable than they would have been otherwise.
Critical Thinking Questions
- Consider the following scenario: In the 1990s, hard disk drive (HDD) makers were among the first industries to move production to lower-cost countries. Beginning in Singapore, these companies shifted manufacturing operations to China and Thailand, in search of ever-lower labor costs. Since then, Thailand has become the second-largest maker of hard drives and a major supplier of parts to the industry worldwide. With the
Answers may vary. It may take some time for the results of a problem to become visible. When the problem is noticed, a company can really only affect some of the actions of the external entities on either side of its part of the supply chain. The power the company has for encouraging external business partners to change may decrease the further away the problem is in the chain. The problem may be further along the chain and may take some time for other companies to get the issue resolved. The issue may also not be a problem for others in the supply chain and they may not see anything to resolve.
b. What impacts might slow problem (issue) resolution have on the supply chain? Answers may vary. One impact may be that the longer the problem takes to fix, the more subsequent problems will likely result, thus increasing the time it takes to fix the chain of problems. Some business partner may go out of business, i., if there is a problem with receiving payments. Wrong decisions may be made using incorrect data.
c. Based on your answer to (a), discuss which enterprise systems could speed up problem resolution. Answers may vary. Companies could use ERP, SCM KM, Enterprise social systems, or simply Facebook, bulletin boards and blogs to discuss problems and post solutions. Companies could regularly meet via Skype or Google Hangout to discuss issues. A knowledge management system would provide a central storage location for problems and their resolutions to be described, indexed, and stored.
d. What is meant by learning curve improvements? As companies figure out the system and how to work together, the speed at which they will solve system problems will increase.
In your opinion, what might limit the growth of 3D printing? Answers may vary. 3D printing has not yet reached the point where its cost, speed, and scalability can compete with traditional manufacturing.
Distinguish between ERP and SCM software. In what ways do they complement each other? Why should they be integrated? Answers may vary. ERP is the software infrastructure that links an enterprise’s internal applications, supports its external business processes, and links to its external business partners. ERP systems are commercial software packages that integrate business processes, including supply chains, manufacturing, financial, human resources, budgeting, sales, and customer service. Departments can easily stay informed of what’s going on in other departments that impact its operations or performance. SCM software supports the steps in the supply chain—procurement, sourcing, manufacturing, inventory control, scheduling, order fulfillment, and distribution. SCM improves decision making, forecasting, optimization, and analysis. It has a somewhat narrower scope and it can be integrated with an ERP.
The core ERP functions are integrated with other systems or modules, such as SCM and CRM. An enterprise application integration (EAI) layer enables the ERP to interface with
legacy apps. EAI is middleware that connects and acts as a go-between for applications and their business processes.
The key benefit of enterprise systems is data integration. Integration enables the sharing or exchange of data. For example, ERP is integrated with SCM to improve supply chain performance. Many ERP systems incorporate lean manufacturing principles, which involve minimizing all forms of waste. Firms track detailed supply chain activities from start to finish, so that any procedures and processes that delay the design, creation, or delivery of goods are identified and corrected. Manufacturing ERP software makes it easier to detect and prevent defects, which reduces scrap and rework. Better tracking combined with more accurate demand planning eliminates costly excess inventory.
- State the business value of enterprise systems and how they can be used to manage the supply chain more effectively. Answers may vary. Enterprise systems - ERP, SCM, and CRM – are integrated by their connection to central data repositories that enable them to synch and share the latest data. They are cross-functional and inter-organizational systems that support the business strategy.
The integration of ERP and SCM improves inventory management and supply chain performance. They integrate core business processes and functions such as accounting, finance, marketing, human resources, inventory, and operations. Integration is achieved by linking databases and data warehouses so that data can be shared with internal functions and external business partners.
Another advantage of enterprise systems is that processes can be automated for consistency and efficiency.
- What problems are encountered in implementing ERP systems? Answers may vary. The success of an ERP depends on organizational and technological factors that occur prior to, during, and after its implementation. Knowing what to do and what not to do is important. The results of a survey to identify what ERP experts had found to be most important to successful ERP projects are: - Strong program management - Executive support and buy-in - Organizational change management and training - Realistic expectations - Focus on business processes Nearly half of the experts indicated that the failure of any one of the five factors significantly increases the risk of ERP failure. The text also lists several key factors that lead to successful ERP implementation: - Focus on business processes and requirements - Focus on achieving a measurable ROI - Use a strong project management approach and secure commitment of resources - Obtain strong and continuing commitment from senior executives - Take sufficient time to plan and prepare up-front
Online and Interactive Exercises
Visit each of the following enterprise vendor websites. Write a brief report on the latest features of their enterprise systems, platforms, apps, or solutions.
- SharePoint
- Yammer
- Oracle
- Salesforce
- SAP Answers will vary.
Apply IT Concepts to Business Decisions
Select an enterprise system vendor. Search and read a case study of one of the vendor’s customers. Summarize the case and identify the benefits of the implementation. Answers will vary.
Assess the costs and benefits of a cloud CRM. A large food-processing company would like to determine the cost–benefit of installing a CRM app in a private cloud. Create a report that contains these analyses:
a. Calculate the tangible costs and benefits in a spreadsheet using the data provided. Total one-time costs (training): $105, Total yearly repeating costs: $225, Total yearly sales increase: $6,540, Total yearly gross profit increase: $1,308, Clearly tangible benefits far outweigh the costs. b. List two intangible benefits of moving to the cloud. Answers will vary. c. Estimate the value of those two benefits and include them in your spreadsheet prepared for Question 1. Answers will vary. d. List two risks associated with the CRM app if it were moved to a public cloud. Answers will vary. Data breach revealing sensitive customer data, etc.
DATA Tangible Costs
CRM in private cloud: $35 per user per month
Technical support and maintenance: $250 per month
Total number of users: 100 (90 salespeople and 10 supervisors)
Training of 90 salespeople for five days: productivity loss $200 per day per person
Training of five supervisors: productivity loss $300 per day per person
Additional hardware, networks, and bandwidth: $15,000 per month Tangible Benefits
Increase in average sales revenues = $6,000 per month per salesperson
Increase in sales revenues from an improvement in customer retention = $5,000 per month
Gross profit from sales revenues = 20 percent
Cases
Case 1 Opening Case: 3D Printing
What do the leading research and investment firms forecast for 3D printing? Leading research and investment management firms—Goldman Sachs, Gartner, and McKinsey, have strong forecasts for 3D printing. According to global investment management firm Goldman Sachs: 3D printing is 1 of 8 technologies that are going to creatively destroy how we do business. IT research firm Gartner predicted: 3D printing of nonliving medical devices such as prosthetic limbs, combined with fast population growth and insufficient health care in emerging markets, is likely to cause an explosion in demand for the technology. Global research firm McKinsey forecasted: 3D printing is 1 of 12 disruptive technologies that could deliver major economic impact to the global economy by 2025.
Why is 3D printing more appropriately called additive manufacturing? 3D printing builds objects layer by layer. Traditional manufacturing typically uses a subtractive process, whereby materials are cut, ground, or molded to create an object.
Is 3D printing better suited for high or low volumes of production? Explain your answer. Low volume, at least for now. 3D printing has not yet reached the point where its cost, speed, and scalability can compete with traditional manufacturing.
In what situations is 3D printing most valuable? 3D technology is being used by consumer product designers, automotive manufacturing engineers, and dental labs for building prototypes, replacement parts, and customized products on demand.
How would you benefit from 3D printing? Answers may vary.
How can 3D printing make some types of traditional manufacturing obsolete? Answers may vary. 3D printing is a process that has less overhead costs and allows for more complex designs. The manufacturing processes are clean and energy-efficient. Compared to traditional manufacturing and prototyping methods, 3D printing offers high levels of customization, reduced costs for complex designs, and lower overhead costs for short-run parts and products. According to McKinsey, 3D printing will have an impact on consumer sectors that place a premium on highly customizable products, for example, footwear, toys, and jewelry. McKinsey estimates that by 2025 sales of 3D-printed products in these three industries alone may reach $550 billion per year.
Do you consider 3D printing an important technology? Explain. Answers may vary.
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