Q.1 What is an ERP? - Mithun Jadhav | Connecting



ERP/EBiz Question Bank Solution 2016Contents TOC \o "1-3" \h \z \u Q.1 What is an ERP? PAGEREF _Toc466794283 \h 3Q.2 List down 5 major functions of ERP with details. PAGEREF _Toc466794284 \h 6Q.3 What is E - Business? And Its 5 major benefits and 5 major challenges. PAGEREF _Toc466794285 \h 9Q.4 What are the similarities and differences between E-Commerce & E-Business. Write few important revenue models of E-Business. PAGEREF _Toc466794286 \h 12Q.5 Define an organization & an extended organization? PAGEREF _Toc466794287 \h 16Q.6 Draw generic ERP diagram to illustrate organization and extended organization concept. PAGEREF _Toc466794288 \h 18Q.7 Successful organizations existed prior to ERP came in vogue. Write an essay on ‘Why necessity of ERP is felt in organizations now’? PAGEREF _Toc466794289 \h 21Q.8. Implementing successful change management. PAGEREF _Toc466794290 \h 25Q.9 Describe “Why is e-business important in current connected world”. PAGEREF _Toc466794291 \h 26(a)Cost-Effective Marketing PAGEREF _Toc466794292 \h 26(b)Flexible Business Hours PAGEREF _Toc466794293 \h 26(c)Eliminates Geographic Boundaries PAGEREF _Toc466794294 \h 26(d)Reduces Transaction Cost PAGEREF _Toc466794295 \h 26(e)Low Overhead Costs PAGEREF _Toc466794296 \h 26Q.10 What are different revenue models? PAGEREF _Toc466794297 \h 27Q.11 Explain the revenue model of Paytm, Flipcart or Ola cabs. PAGEREF _Toc466794298 \h 29Q.12 Explain the information Systems architecture of a typical organization. PAGEREF _Toc466794299 \h 30Q.13 Organizations have implemented standard ERP product. Since all the business processes are standard, describe the following: PAGEREF _Toc466794300 \h 34Why do they differ in their implementation successes rate? PAGEREF _Toc466794301 \h 34Why is their profitability different even though they use same ERP product? PAGEREF _Toc466794302 \h 34Q.14 Write pros & cons of eBusiness PAGEREF _Toc466794303 \h 37Q.15 What are the security risk associated with eBusiness? PAGEREF _Toc466794304 \h 40Q.16 Describe 4 stage approach to manage transition as part of change management. PAGEREF _Toc466794305 \h 44Q.17.We have discussed Advertisement, subscription, Transaction, Product/Service, affiliate based revenue models. Please suggest a new revenue model for eBusiness organization PAGEREF _Toc466794306 \h 46Q.18 Critical Success factors for an ERP implementation PAGEREF _Toc466794307 \h 49Q.19 Describe the importance of PM & PTs. PAGEREF _Toc466794308 \h 53Q.20 We have discussed the impact of GST on ERP systems. Please explain the process to implement it successfully for your organization. PAGEREF _Toc466794309 \h 61Q.1 What is an ERP?ANS: Enterprise resource planning?(ERP) is an enterprise-wide information system designed to coordinate all the resources, information, and activities needed to complete business processes such as order fulfillment or billing.An ERP system supports most of the business system that maintains in a single database the data needed for a variety of business functions such as Manufacturing, Supply Chain Management, Financials, Project s, Human Resources and Customer Relationship Management.ERP provides an integrated view of core business processes, often in real-time, using common?databases?maintained by a?database management system. ERP systems track business resources—cash,?raw materials,?production capacity—and the status of business commitments: orders,?purchase orders, and?payroll. The applications that make up the system share data across various departments (manufacturing, purchasing, sales,?accounting, etc.) that provide the data. ERP facilitates information flow between all business functions and manages connections to outside?stakeholders.ERP positively affects organizations in the following ways:Assisting in defining business processes and ensuring they are complied with throughout the supply chain.Protecting critical business data through well-defined roles and security access.Enabling to plan your work load based on existing orders and forecasts.Providing you with the tools to give a high level of service to your customers.Translating data into decision making information.The right ERP software brings all your business processes together for easier collaboration, faster decision making, and improved overall productivity for the whole team. An integrated ERP system helps you with:Financial management?- Improve your control over company assets, cash flow, and accountingSupply chain and operations management?- Streamline your purchasing, manufacturing, inventory, and sales-order processingCustomer relationship management?- Improve customer service, and increase cross-sell and upsell opportunitiesProject management?- Get what you need to deliver work on time and on budget with better billing and project monitoringHuman resources management?- Attract and retain good employees with tools that help you hire, manage, and pay your teamBusiness intelligence?- Make smart decisions with easy-to-use reporting, analysis, and business intelligence tools.Advantages:ERP can improve quality and efficiency of the business. By keeping a company's internal business processes running smoothly, ERP can lead to better outputs that may benefit the company, such as in customer service and manufacturing.ERP supports upper level management by providing information for decision making.ERP creates a more agile company that adapts better to change. It also makes a company more flexible and less rigidly structured so organization components operate more cohesively, enhancing the business—internally and externally.ERP can improve data security. A common control system, such as the kind offered by ERP systems, allows organizations the ability to more easily ensure key company data is not compromised.ERP provides increased opportunities for?collaboration. Data takes many forms in the modern enterprise. Documents, files, forms, audio and video,?emails. Often, each data medium has its own mechanism for allowing collaboration. ERP provides a collaborative platform that lets employees spend more time collaborating on content rather than mastering the learning curve of communicating in various formats across distributed systems.Disadvantages:Customization can be problematic. Compared to the best-of-breed approach, ERP can be seen as meeting an organization’s lowest common denominator needs, forcing the organization to find workarounds to meet unique demands.Re-engineering business processes?to fit the ERP system may damage competitiveness or divert focus from other critical activities.ERP can cost more than less integrated or less comprehensive solutions.High ERP?switching costs?can increase the ERP vendor's negotiating power, which can increase support, maintenance, and upgrade expenses.Overcoming resistance to sharing sensitive information between departments can divert management attention.Integration of truly independent businesses can create unnecessary dependencies.Extensive training requirements take resources from daily operations.Harmonization of ERP systems can be a mammoth task (especially for big companies) and requires a lot of time, planning, and 4 ERP TrendsThe ERP field can be slow to change, but the last couple of years have unleashed forces which are fundamentally shifting the entire area. The following new and continuing trends affect enterprise ERP software:Mobile ERP Executives and employees want real-time access to information, regardless of where they are. It is expected that businesses will embrace mobile ERP for the reports, dashboards and to conduct key business processes.Cloud ERPThe cloud has been advancing steadily into the enterprise for some time, but many ERP users have been reluctant to place data cloud. Those reservations have gradually been evaporating, however, as the advantages of the cloud become apparent.Social ERPThere has been much hype around social media and how important – or not -- it is to add to ERP systems. Certainly, vendors have been quick to seize the initiative, adding social media packages to their ERP systems with much fanfare. But some wonder if there is really much gain to be had by integrating social media with ERP.Two-tier ERPEnterprises once attempted to build an all-encompassing ERP system to take care of every aspect of organizational systems. But some expensive failures have gradually brought about a change in strategy – adopting two tiers of ERP.Q.2 List down 5 major functions of ERP with details.ANS: Functional Areas of a Typical ERP system1. Marketing and Sales (M/S): Marketing and Sales (M/S) department or functional area needs information from all other functional areas and share available information to effectively complete the business activities. In this functional area of business, the sale and marketing department following typical functions are included.Customers can order online, monitor the progress of their purchase order.Sales and marketing can process the order real time, access the stocks and monitor order status.Share the sales forecasts and sales orders with supply chain management.Provide sales order data to Accounting and Financing, and have a feedback on the cost and profits of sales.Provide Human resource requirements, and personnel information to HR department and receive legal and job information for the planning process.2. Supply Chain Management: Following are typical information sharing in the supply chain management functional area.The supply chain management can place order for raw material and get feedback on the raw material availability and delivery status.Share information on production plans, material stocks, and inventories with Accounting and Finance.Obtain sales data and manufacturing cost analysis from Accounting and Finance.Provide information to sales and marketing on product availability and order status.Know present sales forecasts and sales orders from Sales and Marketing.Provide human resource hiring need and personnel information to HR.Obtain legal requirements and job information from HR.3. Engineering / Production module: Production module is great help for manufacturing industry for delivering product.This module consist of functionalities like production planning, machine scheduling, raw material usage,(Bill of material)preparation, track daily production progress production forecasting & actual production reporting.4. Accounting and Finance: Following are some typical functions of ERP system in Accounting and Financing area.Issue invoices and credit memos, and receive payments.Provide sales data and manufacturing cost analysis to supply chain management.Receive data on production plans, material requirement and inventory data from supply chain management.Share cost and profit data with Marketing and Sales.Receive sales order data from Marketing and Sales.Share hiring needs and personnel information with HR.Receive legal requirements, job information, and payroll and benefit expense data.5. Human Resources: Following are typical functions of ERP system with respect to functions in HR department.The HR shares job information and legal requirements on employment and remunerations with other departments, namely Marketing and Sales, Supply Chain Management, and Accounting and finance.Receive hiring needs from other business functional areas such as Supply chain management, marketing and sales, and Accounting and Finance.Share payroll and benefit expense data with Accounting and Finance.Basic Management Modules and their functions in ERP systems:ModuleFunctionSales and Distribution (SD)This module records sales orders and scheduled deliveries. Information about the customer including pricing, address and shipping instructions, billing details, etc., is maintained and accessed from this module.Materials Management (MM)This module manages the purchasing of raw materials from suppliers and the subsequent handling of raw materials inventory, from storage to work-in-progress goods to shipping of finished goods to the customer.Production Planning (PP)This module maintains production information. This module facilitates to create production plans and schedule productions, and record information on actual production activities.Plant Maintenance (PM)This module helps to manage maintenance resources and facilitates planning for preventive maintenance of plant machinery in order to minimize equipment breakdowns.Asset Management (AM)This module helps the company to manage fixed-assets including plant and machinery and their related depreciation.Human Resources (HRThis module facilitates employee recruiting, hiring, and training. This module also includes payroll and benefits of employees.Project System (PS)This module facilitates the planning and control of research and development, construction, and marketing projects.Financial Accounting (FI)This module records transactions in the general ledger accounts. This module generates financial statements for external reporting purposes.Workflow (WF)This module includes set of tools that can be used to automate any of the activities in ERP systemControlling (CO)This module serves internal management purposes, assigning manufacturing costs to products and to cost centers so the profitability of the company’s activities can be analyzed. The CO module supports managerial decision making.Q.3 What is E - Business? And Its 5 major benefits and 5 major challenges.ANS: Electronic business (e-business) refers to the use of the Web, Internet, intranets, extranets or some combination thereof to conduct business. E-business is similar to e-commerce, but it goes beyond the simple buying and selling of products and services online. E-business includes a much wider range of businesses processes, such as supply chain management, electronic order processing and customer relationship management.?Electronic business methods enable companies to link their internal and external data processing systems more efficiently and flexibly, to work more closely with suppliers and partners, and to better satisfy the needs and expectations of their customers. In practice, e-business is more than just e-commerce. While e-business refers to more strategic focus with an emphasis on the functions that occur using electronic capabilities, e-commerce is a subset of an overall e-business strategy. E-commerce seeks to add revenue streams using the World Wide Web or the Internet to build and enhance relationships with clients and partners and to improve efficiency using the Empty Vessel strategy. Often, e-commerce involves the application of knowledge management systems. E-business involves business processes spanning the entire value chain: electronic purchasing and supply chain management, processing orders electronically, handling customer service, and cooperating with business partners. Special technical standards for e-business facilitate the exchange of data between companies. E-business software solutions allow the integration of intra and inter firm business processes. E-business can be conducted using the Web, the Internet, intranets, extranets, or some combination of these.Benefits of E – Business:1. Removes location and availability restrictions: The internet reaches across the world and spans all time zones. That means that when businesses take their operations online, they have the same capabilities. With a physical store, customers are limited by how close the store is and its hours of operation. E-businesses, on the other hand, are accessible from any area with internet access and open 24 hours a day. Additionally, with M-Commerce on the rise, E-business has yet another advantage: being accessible to anyone with a mobile device. Customers are only limited by their mobile network coverage, which goes practically everywhere.2. Reduces time and money spent: With bills for rent, electricity, telephones and general office upkeep, expenses for physical locations can start to pile up. By taking business online, one can reduce or eliminate a lot of these overhead costs. Plus, things get a lot easier from a logistical standpoint, since one person can do the work of several people. Take mass communicating with customers, for example. Sending a bulk email to a list of customers is easier than sending out 100 direct mailings (paper, postage, staff, etc.). In addition to customer-facing processes, inside processes also become friendlier on the pocketbook when going online. For example, transaction costs are lessened, since there’s no need to hire a cashier when shopping cart software lets customers check out themselves. And if that’s not enough, e-business marketing is often more affordable too, as online advertising tends to cost less than traditional marketing channels.3. Expedites customer service: When customers contact you, they want answers fast. Thanks to email and live chat software, e-businesses have no trouble fulfilling that need. Plus, these flexible forms of customer service can extend past a physical store’s hours of operation. E-businesses also offer the convenience of delivering products straight to a customer’s front door, no braving of traffic needed.4. Shows you how to improve: When it comes to learning more about your customers, a physical store is no match for an e-business. With tools like Google Analytics, it’s much easier to access information on your sales and customers, at no extra cost. Want to know how a product has fared over the past three months? What about how many returning customers you’ve had? Unless you’re doing some extreme record-keeping, you don’t have easy access to this kind of data with a brick and mortar store. This data gives insight into your customers’ buying behaviors and interests, which is invaluable to improving your business.5. Keeps your business relevant: The internet is a big part of our lives, and isn’t showing signs of leaving anytime soon. Opening an e-business keeps you in touch with what’s current: it levels the playing field and gives you the resources needed to compete in today’s increasingly digital marketplace. For example, having an online presence on social media websites is a big part of getting your name out there. To stay relevant, businesses need to consistently post content on these outlets that interest their consumers.When it comes to e-business, both the consumer and the business reap the benefits. Being online makes a business convenient, accessible, affordable and better equipped to help its customers, and when businesses are focused on benefiting their customers, everyone wins.Challenges of E-BusinessThe rapidly changing business environment has led several companies to adopt e-commerce. E-Business brings about a lot of changes in the way firms work. It also throws up challenges that they have to meet in order to reap the benefits of e-commerce.1. TechnologicalLack of universally accepted standards for quality, security, and reliabilityTelecommunication bandwidth is insufficient (mostly for m-commerce)Software development tools are still evolving.Difficulties in integrating the internet and EC software applications and databases.Special web servers are needed in addition to the network servers (added cost)Internet accessibility is still expensive and/ or inconvenientOrder of fulfillment of large-scale B2C requires special automated warehouses Increasing innovations and new technologiesRapid technological obsolescenceRapid decline in technology cost versus performance ratio2. Non-technologicalSecurity and privacy concerns deter some customer from buyingLack of trust in EC and in unknown sellers hinder buyingMany legal and public policy issues, including taxations, remain unresolvedNational and international government regulations sometimes get in the wayDifficulty in measuring some benefits in EC. (e.g. advertising,) lack of matured measurement methodologySome customers like to touch and feel the productAdamant to change from physical to virtual storeLack of trust in paperless, faceless transactionsInsufficient number (critical mass) of sellers and buyers (some cases) needed to make profit Increasing number of fraud on the netDifficulty to obtain venture capital due to the dot-com disaster 3. Difficulty in Developing RelationshipsWhile doing business on the Internet can open up markets all over the world, it can be more difficult to develop ongoing business relationships. If you're located in the United States, chances are you won't have the opportunity to meet face-to-face with a customer in Japan or Australia. While technology such as video conferencing allows you to see individuals via computer screen, it still lacks the personal touch of meeting someone in person.4. Internet marketing, including everything from email blitzes and social media campaigns to website copy, is a highly technical and competitive space. The Internet offers the possibility of reaching a huge, global customer-base, but also the danger of wasting your content and budget on people with no real interest in your product.5. Changes in attitudes of consumers result in behavioral challenges to businesses. These challenges include lack of trust of customers and their fear of intrusion of privacy which makes them reluctant to involve in e-transactions. In addition, the rampant frauds taking place over the Internet and lack of awareness of customers about the availability of services poses a challenge to businesses. Miscellaneous challenges such as channel conflict, the problem of attracting and retaining a critical mass of customers, and the need to improve the order fulfillment process, are the other aspects that have become a cause of worry to businesses.Q.4 What are the similarities and differences between E-Commerce & E-Business. Write few important revenue models of E-Business.ANS: Similarities1. A Service-oriented Website: Both e-commerce and e-business owners maintain service-oriented websites and work to cultivate an online presence. But while the primary goal of e-commerce websites is to sell a product or service, the primary goal of an e-business website is usually to provide customers with information about a product or service to inform them and help them to make better purchasing decisions.2. Encouraging Customer Interaction: An e-business encourages customer or visitor interaction through the use of online feedback forms, surveys and polls. Many e-businesses also have their own online forums, allowing users to further their interaction both with the company and with one another. E-commerce websites also encourage interaction, but the opportunities for interaction that they provide are usually centered around the products and services that they sell in the form of product reviews and product ratings.3. Establishment of Partner Relationships: Both simple e-commerce websites and full-service e-businesses encourage and foster relationships between service and vendor partners. This type of interaction between businesses is often necessary to allow companies to provide their customers with additions, accessories or add-ons to the products and services that they market and sell.4. Similar Business Models: Since e-commerce is a subset of e-business, it makes sense that both websites that provide e-business services, including e-commerce, and websites that focus only on the buying and selling expert of e-commerce should have similar business models. Both are focused on the idea of selling products and services and providing customer service, support and information if necessary. A straight e-commerce site, however, focuses only on buying and selling, providing the minimal amount of information to the consumer.Differences:The following are the major differences between e-commerce and e-business:1. Buying and Selling of goods and services through the internet is known as e-commerce. Unlike e-business, which is an electronic presence of business, by which all the business activities are conducted through the internet.2. E-commerce is a major component of e-business.3. E-commerce includes transactions which are related to money, but e-business includes monetary as well as allied activities.4. E-commerce has an extroverted approach that covers customers, suppliers, distributors, etc. On the other hand, e-business has an ambivert approach that covers internal as well as external processes.5. E-commerce requires a website that can represent the business. Conversely, e-business requires a website, Customer Relationship Management and Enterprise Resource Planning for running the business over the internet.6. E-commerce uses the internet to connect with the rest of the world. In contrast to e-business, the internet, intranet and extranet are used for connecting with the parties.BASIS FOR COMPARISONE-COMMERCEE-BUSINESSMeaningTrading of merchandise, over the internet is known as E-commerce.Running business using the internet is known as E-business.What is it?SubsetSupersetIs it limited to monetary transactions?YesNoWhat they carry out?Commercial transactionsBusiness transactionsApproachExtrovertedAmbivertedRequiresWebsiteWebsite, CRM, ERP, etc.Which network is used?InternetInternet, Intranet and Extranet.Revenue Models of E-BusinessRevenue is the amount of money that a company actually receives during a specific period, including discounts and deductions for returned merchandise. It is the "top line" or "gross income" figure from which costs are subtracted to determine net income. ?Revenue = Price of goods and services X no. of units?1. Advertising?Revenue?Model: Fees are generated from advertisers in exchange for advertisements. The advertising revenue model is based on contacts making it one of the indirect sources of revenue. The conventional version is display-marketing - for example wallpaper, super banner, rectangle, skyscraper4) - which is paid according to traffic (invoice per CPC/cost-per-click or CPX/cost-per-action). The main online advertising variations are besides display-marketing, affiliate-marketing (advertising on many websites, CPX) and search-engine-marketing (CPC). Special models are e-mail-marketing and social-media-marketing. For advertisers with a lower budget for example the New York Times created a self-booking-tool for display-ads on a CPM (Cost-per-mille)-basis. And there are still rising new opportunities.ExamplesGoogle?(e.g. AdWords and AdSense)FacebookNew York Times?(Marketing)2. Subscription Revenue Model: Users are charged a periodic (daily, monthly or annual) fee to subscribe to a service. Many sites combine free content with premium membership, i.e. subscriber- or member-only content. Subscription fees do not depend on transactions. Subscribers use the content as long and often as they wantExamplesPublishers and content services,?e.g. newspapers, magazines, tv channels - they provide text, audio or video content to users who subscribe for a fee to get access to the service or to download the new issue:?New York Times,?Spiegel Online,?NetflixNetworks offer premium memberships to find?business?partners or former classmates, subscribers can use all services, i.e. they get any information about their account via short notifications or newsletter, receive and send?e-mails, get job offers:? HYPERLINK "" \o "" Linkedin Special services: Companies offer security and payment services to internet service providers and online retail customers:? HYPERLINK "" \o "" Paypal,?VeriSign. VeriSign’s subscription fees depend in case of?SSL?Certificates on the level of security and the validity period which varies from one to three years.3. Transaction Fee Revenue Model: A company receives commissions based on volume for enabling or executing transactions. The?revenue?is generated through transaction fees by the customer paying a fee for a transaction to the operator of a platform. The company is a market place operator providing the customer with a platform to place his transactions. During this process the customer may be presented as a buyer as well as a seller. To actively participate in this?e-market, customers must register, so both parties of a transaction taking place are identified. From a?business?perspective, the offer is determined by others as customers offer their goods online and are acting as sellers. The amount of the transaction fee can be both – fixed and percentage calculated.ExampleseBayAmazon4. Sales Revenue Model: Wholesalers and retailers of goods and services sell their products online. The main benefits for the customer are the convenience, time savings, fast information etc. The prices are often more competitive. In terms of online sales there are different models such as market places as common entry points for various products from multiple vendors.Examplesthe shops of single companies, sometimes based on web-catalogs (combines mail, online and telephone-ordering) e-tailers?operating solely over the web:?Amazonmarketplaceslive shopping clubs 5. Affiliate Revenue Model: The affiliate program is an online distribution solution which is based on the principle of commission. Merchants advertise and sell their products and services through links to partner-websites. It is a pay-for-performance model: Commissions are only paid for actual revenue or measurable success. An affiliate-link includes a code, which identifies the affiliate. That’s how clicks, leads or sales are tracked. The affiliate therefore acts as the interface between merchants and customers. This model leads to a win-win situation: the merchants sell their products or services and the affiliates get their commissions. Variations include banner exchange, pay-per-click and revenue sharing programs. The affiliate model is well-suited for the web and therefore very popular.ExamplesAmazonaffilinetQ.5 Define an organization & an extended organization? Answer: -Organization definition: -An organization is an individual or group of people that collaborate to achieve certain commercial goals.An organization is an entity comprising multiple people, such as an institution or an association, that has a collective goal and is linked to an external environmentA social unit of people that is structured and managed to meet a need or to pursue collective goals. All organizations have a management structure that determines relationships between the different activities and the members, and subdivides and assigns roles, responsibilities, and authority to carry out different tasks. Organizations are open systems--they affect and are affected by their anizational structures usually have a leader and multiple layers of subordinates. In a functional organization, occupations are grouped together. In a divisional structure, each business unit conducts its own activities, such as sales, marketing and training.Most organizations are made up of departments such as R&D, marketing, procurement, engineering, planning, finance, sales, service, manufacturing, and distribution among othersOrganizations usually consider their employees to be one of the most important part of the organizations. Most successful organizations have found that it is crucial to involve their customers in the organization. They need constant input from their customers in order to identify their requirement and develop better and more innovation ways to meet those requirements. Example: - “McDonald’s”, McDonald's is the world's largest restaurant chain run by McDonald's Corporation. McDonald’s operating from 119 countries across approximately 36,615 outlets with 1.5 million employees.An extended organization definition: -An extended organization is a loosely coupled, self-organizing network of firms that combine their economic output to provide products and services offerings to the market. Firms in the extended enterprise may operate independently, for example, through market mechanisms, or cooperatively through agreements and contracts. They provide value added service or product to the OEM.Extended organization is the concept that a company does not operate in isolation because its success is dependent upon a network of partner relationships.The concept of extended organization was coined in 1990 at the Chrysler Corporation to explain the necessity for a collaborative relationship between supply chain members and focus attention on the competitive advantages the company felt could be gained when suppliers become partners.Extended organizations have learned that the boundaries of the organization must include more than just their own employees. They have included other stakeholders as part of the organization, government agencies that regulate the industry, and suppliers. Information technology (IT) plays an important role in an extended organization, facilitating communication and relationship-building and providing each member of the supply chain with a common view of data in real or near-real time. An extended organization is driven not only by the need to share data, but also by IT consumerization, the blurring of lines between personal and work-related use of technology.Today’s most successful companies have become successful by integrating the supplier into the corporate organizations. Extended organizations incorporate all suppliers and sub suppliers into the supply chain of the organization. The extended organization considers suppliers to be partners in the future of the organization. The good of organizations becomes the good of the suppliers and vice versa.Example: - The extended enterprise associated with "McDonald's"In McDonald’s includes “McDonald’s Corporation, franchisees and joint venture partners of McDonald's Corporation, the 3PLs that provide food and materials to McDonald's restaurants, the advertising agencies that produce and distribute McDonald's advertising, the suppliers of McDonald's food ingredients, kitchen equipment, building services, utilities, and other goods and services, the designers of Happy Meal toys, and others.Q.6 Draw generic ERP diagram to illustrate organization and extended organization concept.Answer: -Generic ERP Diagram: -Organization Concept: -Organizational structures usually have a leader and multiple layers of subordinates. In a functional organization, occupations are grouped together. In a divisional structure, each business unit conducts its own activities, such as sales, marketing and training.Most organizations are made up of departments such as Sales, Procurement (SRM), Production (PLM), Distribution (SCM), Accounting, Human Resource, Corporate performance and governance, Customer service (CRM), etc.Extended organization concept: -An extended organization is a loosely coupled, self-organizing network of firms that combine their economic output to provide products and services offerings to the market. Firms in the extended enterprise may operate independently, for example, through market mechanisms, or cooperatively through agreements and contracts. They provide value added service or product to the OEM.Extended organization is the concept that a company does not operate in isolation because its success is dependent upon a network of partner relationships.The concept of extended organization was coined in 1990 at the Chrysler Corporation to explain the necessity for a collaborative relationship between supply chain members and focus attention on the competitive advantages the company felt could be gained when suppliers become partners.Extended organizations have learned that the boundaries of the organization must include more than just their own employees. They have included other stakeholders as part of the organization, government agencies that regulate the industry, and suppliers. Information technology (IT) plays an important role in an extended organization, facilitating communication and relationship-building and providing each member of the supply chain with a common view of data in real or near-real time. An extended organization is driven not only by the need to share data, but also by IT consumerization, the blurring of lines between personal and work-related use of technology.Today’s most successful companies have become successful by integrating the supplier into the corporate organizations. Extended organizations incorporate all suppliers and sub suppliers into the supply chain of the organization. The extended organization considers suppliers to be partners in the future of the organization. The good of organizations becomes the good of the suppliers and vice versa.Q.7 Successful organizations existed prior to ERP came in vogue. Write an essay on ‘Why necessity of ERP is felt in organizations now’?Answer: -Enterprise Relationship Management Systems are the backbones of the modern day industries. These are a set of applications combining key functions like finance, production. Sales, logistics, statutory compliance, human resources etc., in an integrated fashion. In a manner these combine Enterprise Resource Planning system with extended enterprise needs like employees, customers and vendors. The transition to ERP environment from old MIS environment has been slow, expensive and painful to say the least for even the best managed organizations. It has been proven that the benefits of the ERP have outweighed these migratory issues. Its benefits, what one can expect from ERP, the costs, the chances and causes of failure, and how to organize oneself to ensure smooth implementation of ERP. Organization prior to ERP came in vogue: -ERP system offers a single repository for company-wide data that is accessible to everyone, the risks associated with working with disparate systems and data -- like the potential for error or duplicating business functions in different departments -- can be reduced.List of Problems organizations faced prior to ERP existence: -Data duplicationData inconsistencySharing of data between systemsApplications that don’t talk to one anotherMaintaining Separate SystemsLimited or lack of integrated informationIsolated decisions lead to overall inefficienciesIncreased expensesInventory inaccuracy Insufficient reportingManual paper processesOrganizational Scalability IssuesLow customer retentionWithout ERPOrganizations efficiency is suffering due to poor communication –Departments suffer from poor communication with each other. Failed to pass information effectively, which can result negative outcomes like sales failing.Many of organizations processes involve time-consuming manual data entry or repetitive tasks –Manual data entry and processes become even more error-prone and time-consuming when carried out on a larger scale. For example, accounting team may spend a large portion of their time typing up data for sales invoices and cross-referencing spread sheets. As with all manual processes, one minor typing error or a misread figure could result in major negative consequences.Disparate, standalone software systems are making business procedures unnecessarily complicated –When each department using different software package, processes become excessively complicated and time-consuming.Insufficient customer information –Prior to ERP system, to keep track of customer records, it may be difficult to serve customers as well as organization could.Limited information for making better business decisions –Prior to ERP, due to limited integration and Standardization between departments, limited information is available. Information about organization is not easily available. This effects on making better business decisions. Different software for different processes – Organization having different software for different processes. Like accounting applications, spreadsheet’s, desktop applications, home grown applications and disparate applications etc. This application doesn’t talk to each other. This leads data duplication and inconsistency. When various front-end and back-end systems run separately, it can wreak havoc on the processes. Without accurate data from sales, inventory management may suffer, while not having the latest information from accounting can trigger a ripple effect on everything from marketing budgets to payroll.Examples of Organization Before ERP Why necessity of ERP is felt in organizations now?Streamline financial: speed process (CU-ERP), development of supply chain, eOrdering,Integrate customer order information: order tracking (USAA- empowerment)Reduce inventory: consolidated order, visualizing inventory, reducing dead stock,Standardize HR process: reducing man-hourStandardize manufacturing process: enforce practiceOrganizations ERP implementation objects: -Integration: financial, customer order, accounting, purchasingStandardization: HR information, merge processes, eliminate variationVisualizing inventory: real-time inventory, Smooth business process flow &WIP,Advantages of ERP for organizationsComplete visibility into all the important processes, across various departments of an organization.Automatic and coherent workflow from one department/function to another.A unified and single reporting system to analyze the statistics/status etc. in real-time, across all functions/departments.Individual departments having to buy and maintain their own software systems is no longer necessary.Certain ERP vendors can extend their ERP systems to provide Business Intelligence functionalities, that can give overall insights on business processes and identify potential areas of problems/improvements.Advanced e-commerce integration is possible with ERP systems – most of them can handle web-based order tracking/ processing.There are various modules in an ERP system like Finance/Accounts, Human Resource Management, Manufacturing, Marketing/Sales, Supply Chain/Warehouse Management, CRM, Project Management, etc.Since a Database system is implemented on the backend to store all the information required by the ERP system, it enables centralized storage/back-up of all enterprise data.ERP systems are more secure as centralized security policies can be applied to them. All the transactions happening via the ERP systems can be tracked.ERP systems provide better company-wide visibility and hence enable better/faster collaboration across all the departments.It is possible to integrate other systems (like bar-code reader, for example) to the ERP system through an API (Application Programing Interface).ERP systems make it easier for order tracking, inventory tracking, revenue tracking, sales forecasting and related activities.ERP systems are especially helpful for managing globally dispersed enterprise companies, better.Example of Organization After ERP implementation: -Q.8. Implementing successful change management.Change Management (CM) refers to any approach to transitioning individuals, teams, and organizations using methods intended to re-direct the use of resources, business process, budget allocations, or other modes of operation that significantly reshape a company or organization. Organizational Change Management (OCM) considers the full organization and what needs to change. Organizational Change Management principles and practices include CM as a tool for change focused solely on the individual.CM focuses on how people and teams are affected by an organizational transition. It deals with many different disciplines, from behavioral and social sciences to information technology and business solutions. In a project management context, CM may refer to the change control process wherein changes to the scope of a project are formally introduced and approvedImplementing successful change managementAlthough there are many types of organizational changes, the critical aspect is a company’s ability to win the buy-in of their organization’s employees on the change. Effectively managing organizational change is a four-step process: Recognizing the changes in the broader business environmentDeveloping the necessary adjustments for their company’s needsTraining their employees on the appropriate changesWinning the support of the employees with the persuasiveness of the appropriate adjustmentsAs a multi-disciplinary practice that has evolved as a result of scholarly research, organizational change management should begin with a systematic diagnosis of the current situation in order to determine both the need for change and the capability to change. The objectives, content, and process of change should all be specified as part of a change management plan.Change management processes should include creative marketing to enable communication between changing audiences, as well as deep social understanding about leadership styles and group dynamics. As a visible track on transformation projects, organizational change management aligns groups’ expectations, integrates teams, and manages employee-training. It makes use of performance metrics, such as financial results, operational efficiency, leadership commitment, communication effectiveness, and the perceived need for change in order to design appropriate strategies, resolve troubled change projects, and avoid change failures.Successful change management is more likely to occur if the following are included : Define measurable?stakeholder?aims and create a business case for their achievement (which should be continuously updated)Monitor assumptions, risks, dependencies, costs, return on investment, dis-benefits and cultural issuesEffective communication that informs various stakeholders of the reasons for the change (why?), the benefits of successful implementation (what is in it for us, and you) as well as the details of the change (when? where? who is involved? how much will it cost? etc.)Devise an effective education, training and/or skills upgrading scheme for the organizationCounter resistance from the employees of companies and align them to overall strategic direction of the organizationProvide personal counseling (if required) to alleviate any change-related fearsMonitoring of the implementation and fine-tuning as requiredQ.9 Describe “Why is e-business important in current connected world”.The Internet has been a door to a myriad new business opportunities. Business owners of e-businesses and their customers find advantages in Internet transactions as opposed to brick-and-mortar operations. Following are the advantages an e-business offers :-(a)Cost-Effective MarketingWith an e-business, all of your marketing efforts end with one goal to drive target traffic to your business website. With one central place to send customers to your e-business website, it allows you to use many online marketing tactics including email marketing, article marketing, social media networking and e-newsletters. Most of these online marketing efforts are very low cost or free, so an e-business allows for highly cost-effective marketing strategies.(b)Flexible Business HoursE-business breaks down the time barriers that location-based businesses encounter, according to eCommerce Education. Because the Internet is available 24 hours a day, seven days a week, your business never closes. An e-business can literally be making money while you are fast asleep.(c)Eliminates Geographic BoundariesAn e-business also allows you to broaden your reach. An online business can reach customers in the four corners of the Earth. As long as someone has an Internet connection, you may be able to reach and sell your product or service to these visitors to your business website.(d)Reduces Transaction CostRunning an online business reduces the cost per transaction because it takes less manpower to complete an online transaction. Once you get your website up and running, the customer places the order online, which removes the need for a salesperson. The customer payment goes through your online payment processing software or system—again eliminating the need for a store clerk. Someone has to download the order and ship it, which is probably you, but an e-business transaction has less burden of cost on the business, making each transaction more cost effective than a brick-and-mortar business.(e)Low Overhead CostsRunning an e-business cut back or out most of the costs involved in running a physical location. E-businesses have less expensive phone, rent and utility bills than businesses with physical locations. An e-business also reduces the cost of paying employees because you do not need someone to manage your website during business hours. Some e-businesses do not require any additional space and can be run out of your home, which you are already paying rent for or your mortgage payment. Even housing inventory may not be an issue because you may be able to establish a drop-shipping situation, where your wholesaler ships orders for you on behalf of your business.Q.10 What are different revenue models?Revenue Is the amount of?money?that a company actually receives?during a specific period, including discounts and deductions for?returned merchandise. It is the "top line"?or?"gross income"?figure from which costs are subtracted to determine net income. Revenue = Price of goods and services X no. of unitsFollowing are different revenue models :- (a)Advertising modelSimply you have website and provides a contents and forum for advertisements and get fees from advertisers.The advertising model is an addition of the traditional media model. The web site, provides content which always free and services like email, IM, blogs and users accepts advertising messages in the form of banner ads.To attract users to its site, leading Web portal Yahoo! offers things like free e-mail, extensive content, and travel services. The firm got its start in early 1995 when founders Jerry Yang and David Filo put together a simple list of favorite Web sites. (b)Subscription modelA company offers it users content or services and charges a subscription fee for access to some or all of it offerings. where a customer must pay a subscription price to have access to the product/service. The model was pioneered by magazines and newspapers, but is now used by many businesses and website.Industries that use this model include mail order book sales clubs and music sales clubs, cable television, satellite television providers with pay-TV channels, satellite radio, telephone companies, cell phone companies, internet providers, software providers, business solutions providers, financial services firms, fitness clubs, and pharmaceuticals, as well as the traditional newspapers, magazines and academic journals.(c)Transaction fee modelThere are businesses offering services for which they charge a fee based on the number or size of transactions they process. The business provides information to the customers which is required to complete a transaction and revenue is purely earned on that basis.For example, online travel agents receive a fee for facilitating a transaction that includes the making of travel arrangement for their clients, as well as, advising them about lodging, transportation etc. Stock brokerage firms also use this model as they charge their customers a commission for each transaction of stocks/shares executed through them.(e)Sales modelA company derives revenue by selling goods, information, or services.Here the merchants provide goods and services online but based on list prices or via auction.Examples: wThis site sells the flowers online, and deliver your order almost everywhere in US.(f)Affiliate modelA company steers business to an affiliate and receives a referral fee or percentage of the revenue from any resulting sales.Example: This site uses Amazon Associates Web Services to deliver a complete marketplace of DVDs. Q.11 Explain the revenue model of Paytm, Flipcart or Ola cabs.Flipkart Revenue ModelFlipkart has launched its Marketplace business model, transforming from the old regular inventory model.This will allow third party sellers to transact easily while users will continue to enjoy COD/EMI options and friendly return/replacement policies.Sellers will be identified through a rigorous on-boarding process and allowed to sell only genuine products. Sellers who provide a superior customer experience will receive prominence on Flipkart Marketplace.Sellers can increase their sales multi-fold by reaching out to Flipkart's large user base, utilize to list or select from Flipkart's existing catalogue and continue to enjoy hassle-free shipping with Flipkart's trusted logistics partner.This business model is successful because of good customer services like COD, hassle free shopping experience 24 Hrs.,?Well this is its?Business model not to keep inventory & follow JIT(just in time) approach.?Now lets talk about its?Revenue model.?How they generate revenue.1). They earn by advertising other products on websites.2). Flipkart offers preferred customer service also on annual subscription to its user base. In this they offers preferential services to them like they can purchase any deal before 15mint of scheduled opening.3). Flipkart earns by charging commission on sales.4). Flipkart charge annual fees to? the shopkeeper also who list there products in website.5). They earn interest on excrow account by taking money from all of customers & giving to shopkeeper after delivery.If we talk about revenue model of any e-retailer, it is very much the same as of any retailer.For Own Inventory Products :? Buy a Product -> stock a product -> Sell a Product and earn margin in the same. By buying at low and selling at high.For Marketplace Product : Sell Product -> Source Product -> Deliver Product.. Earn Commission/Margin in the process.But AFAI understand, you are asking this to know how these e-retailers are able to sell at low cost and still make profit.To respond to this, these e-retailers are not making profits as of now,they are selling at loss as they have to spend too much on marketing to bring customers on the site. Current Customer Acquisition Cost(CAC) is >1000 for almost all.Revenue model is simple but problem here is they cannot fully implement it as of now.Other Source of revenues: a). Customer Data : They have huge pile of data that they can use for selling, analysis for advt selling, upsell, cross sell.b). Valuation of the Business? : As customer visiting sites increases, orders increases and valuation of business increases simultaneously. Investor normally invests in such business for this part of revenue.PAYTM Revenue ModelAdvertisingPAYTM allows seller to show their advertisement on their website and charges some amount for the advertisement.SubscriptionPAYTM allows sellers to list their products on their website and then charges some annual subscription fees from these mission PAYTM charges commission from the seller for selling of products on their websiteQ.12 Explain the information Systems architecture of a typical organization. An information system can be defined as a set of coordinated network of components, which act together towards producing, distributing and or processing information. An important characteristic of computer-based information systems information is precision, which may not apply to other types.In any given organization information system can be classified based on the usage of the information. Therefore, information systems in business can be divided into operations support system and management support system.In any given organization information system can be classified based on the usage of the information. Therefore, an information system in an organization can be divided into A) Operations support system B) Management support system.Operations support systemIn an organization, data input is done by the end user which is processed to generate information products i.e. reports, which are utilized by internal and or external users. Such a system is called operation support system.The purpose of the operation support system is to facilitate business transaction, control production, support internal as well as external communication and update organization central database. The operation support system is further divided into a transaction-processing system, processing control system and enterprise collaboration system.Transaction Processing System (TPS)In manufacturing organization, there are several types of transaction across department. Typical organizational departments are Sales, Account, Finance, Plant, Engineering, Human Resource and Marketing. Across which following transaction may occur sales order, sales return, cash receipts, credit sales; credit slips, material accounting, inventory management, depreciation accounting, etc.These transactions can be categorized into batch transaction processing, single transaction processing and real time transaction processing.Process Control SystemIn a manufacturing organization, certain decisions are made by a computer system without any manual intervention. In this type of system, critical information is fed to the system on a real-time basis thereby enabling process control. This kind of systems is referred as process control systems.Integrating SystemsThis refers to various computerized systems that are being integrated to increase their functionalities. One popular form of integrated system is enterprise resources planning (ERP). ERP plans and manages all of an organization’s resources and their use, including contacts with business partnersEnterprise Collaboration SystemIn recent times, there is more stress on team effort or collaboration across different functional teams. A system which enables collaborative effort by improving communication and sharing of data is referred to as an enterprise collaboration system.Management Support SystemManagers require precise information in a specific format to undertake an organizational decision. A system which facilitates an efficient decision making process for managers is called management support system.Management support systems are essentially categorized as:Management information systemDecision Support system & Expert SystemAccounting Information systemManagement information system provides information to manager facilitating the routine decision-making process. Decision support system provides information to manager facilitating specific issue related solution.Major Outputs of a Management Information System include:Statistical Summaries - Summaries of raw data such as daily production, and weekly and monthly usage of electricity.Exception reports - Highlights of data items that are larger or smaller than designated levels.Periodic reports - Statistical summaries and exception reports provided at scheduled, regular periods.Ad hoc reports - Special, unscheduled reports provided on parative analysis - Performance comparison to that of competitors, past performance, or industry standards.Projections - Advance estimates of trends in future sales, cash flows, market share, etc.Architecture of Information system:An information system is essentially made up of five components hardware, software, database, network and people. These five components integrate to perform input, process, output, feedback and control.Hardware consists of input/output device, processor, operating system and media devices. Software consists of various programs and procedures.Database consists of data organized in the required structure. Network consists of hubs, communication media and network devices. People consist of device operators, network administrators and system rmation processing consists of input; data process, data storage, output and control. During input stage data instructions are fed to the systems which during process stage are worked upon by software programs and other queries. During output stage, data is presented in structured format and reports. These components could be interconnected in any of the following architectures:Distributed environmentdivides the processing work between two or more computersClient/server architectureseveral computers share resources and are able to communicate with many other computersa client - a computer such as a PC attached to the network, which is used to access shared network resourcesa server - a machine that is attached to the same network and provides clients with these servicesEnterprise-wide Architectureaccess to data, applications, services, and real-time flows of data in different LANs or databasesuses client/server architecture to create a cohesive, flexible, and powerful computing environmentprovide total integration of departmental and corporate IS resourcesincrease the availability of information and thereby maximize the value of an organizationInternet based architecturebased on the concepts of client/server architecture and enterprise-wide computingthe Internet is the basis for a network connection from the outside world to the company, as well as with the organization’s web siteorganization’s internal private Internet (intranet) - useful for distributing information throughout the organizationQ.13 Organizations have implemented standard ERP product. Since all the business processes are standard, describe the following:Why do they differ in their implementation successes rate?Why is their profitability different even though they use same ERP product?Doing it in the first place.Even before implementation the company is dilemma whether they really require it or not. Often large ERP implementation projects fail before they even start. Companies unhappy with their current system become convinced their reporting, integration, or efficiency problems lie in the software they are using. Convinced the grass is greener on the other side of the fence, they embark on a large, risky, and expensive ERP replacement project, when a simple tune-up of their current system, or a small add-on application, such as a better reporting system or employee portal, would address the problem at a fraction of the cost. Even a reimplementation of the same software is usually less costly than switching to another software vendor.No clear destination.To be clear with the expectations. Once an organization makes the decision to implement a new ERP system, the first step is to have a clear definition of success. Often, lack of consensus on the problems being solved, the outcome desired, or the specific financial justification of the project, leads to challenges later controlling the scope and maintaining executive sponsorship. Having a clear destination means defining the important business processes, financial benefits, and deadlines up front and making certain stakeholders agree how to address them. Without a strong definition of success, the end point becomes a moving target.A good plan or just a plan?A detailed plan is very necessary for successful implementation. All projects of this size start with some kind of plan. However, more times than not, the plan are not realistic, detailed, or specific enough. Companies build a high-level plan with broad assumptions or underestimate the amount of business change involved. Despite how obvious this sounds, it remains the most common mistake companies make. To be a good plan, it needs to identify all the requirements and the people who are going to work on them. It needs to be at a level of detail where a knowledgeable person can visualize the work, usually in work blocks of a few days. It needs to have a logical sequence of tasks, like leaving time in the schedule to fix bugs found in test cycles. Until you have a good plan, you really do not know when the project will end or how much it will cost.Part-time project management.A person experienced in project management makes lot of difference. There is some debate whether project management is a skill all good managers should have or whether the field will eventually develop into its own professional discipline, just like there are registered engineers, nurses, and lawyers. Putting that debate aside, it is clear software projects of this size need their own dedicated, experienced project managers. Asking the executive sponsor or the business owner to also manage the project as a part-time adjunct to their main role means neither job will be done well. Not just a scorekeeper, the project manager needs to be an active leader pushing for accountability, transparency, and decisiveness.Under-estimating resources required.Most common blunder to happen is with resources projected. Having a solid understanding of the internal and external resources needed to complete the project is critical. For internal resources, understanding the time commitment needed from business users, typically in the Finance, Accounting, or Human Resources departments, is one of the most commonly underestimated areas. During critical phases of the project, it is often necessary to backfill the majority of transactional employees by bringing in temporary resources. This frees up the users of the new system so they have time for implementation and training. For external resources, having an agreement up-front with your consultants and contractors about the specific duration, skills, and quantity of resources needed is critical.Over-reliance on the consultants.Too much dependability on consultant can make the team more redundant. Most ERP implementation projects involve consultants, for the expertise, best-practices, and additional resources they bring. While their outside experience is definitely helpful for a project, there is a risk that the company can become over-reliant on the consultants. The company needs to maintain control over the key business decisions, hold the consultants accountable, and have an explicit plan to transfer the knowledge from the consultants to the internal employees when the project is winding down.Customization.This aspect makes it or breaks it for an ERP tool. Most companies these days understand that customizing their ERP system adds risk, time, and cost to the project. In fact, customizations, along with interfaces and data conversion, are the main areas of technical risk in ERP implementations. Perhaps more surprising is that in a recent survey, less than 20% of respondents implemented their ERP system with little or no customization. Despite the risk and expense of customizations, most companies find it enormously difficult to control the project scope by turning down customizations. Customizations always start out small, but incrementally grow to become the technical challenges that derail these projects. Few ERP implementations have zero customizations, but take a very firm line on justifying even the smallest ones and manage them tightly.On the job training.Experience makes a lot of difference. The typical lifespan an ERP system within an organization is 10 to 12 years. With that in mind, most employees in a company have been through one or two ERP implementations in their career. Just as you would not be comfortable with a surgeon as their first or second patient, the leaders of your ERP project, both internal and external, need to have experience implementing your specific chosen system several times. This is one of the major benefits to working closely with an outside consultant or directly with the software vendor.Insufficient testing.It should be treated as rectifying stage. When schedules get tight, reducing the number and depth of test cycles is one of the first areas that often get cut. The purpose of testing in an ERP project is not to see if the software works. The purpose is to see if the system meets your business needs and produces the output you need. Reducing testing may not leave defects undiscovered, but it certainly increases the risk the ERP system will be missing important functions or not be well accepted by end users.Not enough user training.The management shouldn’t hurry to start using the tool without adequate training to users. Today’s modern ERP systems are being used by more and more personnel within a company. Beyond the Finance and Accounting departments, modern systems also cover procurement, supply chain functions, compliance, customer relationships, sales, and much more. If the system includes human resources or expense reporting, then essentially all employees use the system. Training hundreds or thousands of users, to the right depth, at just the right time, is no easy task. Leaving training to a small phase at the end of the project makes it very difficult for users to get the training they need to understand the system and have a positive first impression at the rollout.If ERP systems are the nervous system of a company, then doing an ERP implementation is like brain surgery: only to be attempted if there is a really good reason and not to soon be repeated. Unfortunately, ERP implementation projects often fall victim to some of the same problems of any large, complex project. However, there are some repeatable problems that good planning early in a project can work to avoid.Q.14 Write pros & cons of eBusinesseBusiness refers to exchange of Goods and/or Service over electronic medium.eBusiness shifts business towards digitalization. The objective here is to use internet as the medium as was the case in the first phase. In the new wave, key will be application of Cloud for conducting e-Business. The need for e-Business: Working with people is challenging with respect to implementation of standards, rules and policies. Government policies are not very conducive to business.Technological advancement and automation is increasing demand for online services. Penetration of Internet through Mobile devices have increased interest in building mobile based e-Business solutionsThe Internet has created a business environment in which time and distance are less important, people have access to more information to help them make decisions and consumers have better access to a broader range of products and services.Benefits to the Service providers:Ease of setting up business:A significant benefit for entrepreneurs is that the initial investment for starting up an e-business is generally lower than the costs associated with starting an equivalent business using a traditional model. The technology used to setup and operate an e-business is becoming more advanced whilst also becoming cheaper to obtain. With the advent of cloud services, the IT infrastructure cost is significantly reduced and most of it is managed by 3rd party service providers. Low Cost of operations: Online sellers are able to reduce their overheads as they don't need to invest on physical infrastructure like shops, employees or need to hold as much inventory on hand. Running an e-business cut back or out most of the costs involved in running a physical location. E-businesses have less expensive phone, rent and utility bills than businesses with physical locations. Cost-Effective Marketing: With an e-business, all of the marketing efforts are targeted at increasing website hits. Thus digital marketing techniques are used on large scale including email marketing, blogging, social media networking and e-newsletters. Most of these online marketing efforts are very low cost or free, so an e-business allows for highly cost-effective marketing strategies.The internet can also make it easier and more cost effective for business managers to track and analyze the buying patterns of their customers, and in turn tailor the business to better suit their needs and expectations.Reduces Transaction Cost: An online business reduces the cost per transaction as it takes less manual efforts to complete an online transaction. The customer places the order online, which removes the need for a salesperson and related tracking processes. Effective Management: E-business makes it easier, faster and cheaper for businesses to communicate with their suppliers and their customers. Using email and online ordering systems, communication and transactions can occur almost instantly between organizations situated anywhere in the world.Wider Market reach: An e-business helps to broaden the market reach. An online business can reach customers in the four corners of the Earth. Benefits to the Consumers:Convenience in Buying: With e-business the consumers get the convenience of buying the products and services online at their preferred time and location. Low Prices: The benefits obtained from e-business allow the service providers to reduce their prices and pass the savings on to their customers, who save money by shopping from them. Diverse Choices: The consumers get access to a diverse range of products and services from different brands. This allows them to search and compare prices, features and services of different sellers and take appropriate buying decision. Product Reviews: A consumer can put review comments about a product and can see what others are buying or see the review comments of other customers before making a final buy.Service Availability: The internet is accessible twenty-four hours a day, seven days a week. This means that buyers and sellers can conduct transactions at any time, as opposed to the regular trading hours of traditional business models. Disadvantages of E-business:Sectoral LimitationsNot every company can participate in e-commerce. Some are challenged in terms of expertise and availability of technology, while others carry products that can't be shipped economically. For example, some large, odd-sized items may be uneconomical to transport across state lines, making it difficult to sell them online. Other products may be legally restricted, depending on state and federal laws, such as certain explosives, ammunition and alcoholic beverages.Pricey E-business solutions pertaining to OptimizationSubstantial sources are essential with regard to redefining product lines to end up being able to offer online. Upgrading personal computer systems, coaching personnel, as well as updating websites need significant resources. Moreover, need for expensive systems like Electronic Information Management (EDM) and Enterprise Resource Planning (ERP), necessary for guaranteeing optimal internal company processes, may end up being looked upon, through a range of firms, as one of its disadvantages.Legal & Regulatory Challenges:Challenges associated with legal and regulatory framework include the difficulty in regulating and enforcing standards, due to lack of consistent rules and policies; customs and taxation uncertainties; and government intervention.Security and Integrity IssuesHackers are adept at manipulating online business websites to harvest financial data. The information of the customers -- shipping address, credit card details and email -- potentially provides ample resource for hackers to initiate identity theft. This risk keeps some people from shopping online. The service providers must assure customers of the security of their personal data as they interact with your e-business. Ensure site integrity by investing time and money in learning and implementing good security measures, including digital signatures and data encryption, to protect client information lest it falls in the wrong hands and lawsuits ensue.Purchase to Delivery TimeAs much as the Internet has the advantage of processing orders and payments in real time, this has little benefit to the customer who requires the purchased item equally fast. Unlike brick-and-mortar businesses, purchases from your e-business typically have a time lag from purchase to delivery of the physical goods. Some customers would rather go to the physical store and pick up the item unless it's of a digital kind, such as an e-book or music file.Momentary IntangibilityThe personal touch is a missing factor in online transactions. An e-business normally offers the customer no physical proximity to the items purchased until delivery. Experiencing the feel, taste or smell of a product can influence the decision to buy. Unless it's a repeat buyer, your typical customer would want to feel the texture of the leather wallet, the comfort of the shoe or smell the cologne before ordering. The absence of an opportunity to physically examine the product places a major limitation on e-businesses.Miscellaneous challengesThese include channel conflict, the problem of attracting and retaining a critical mass of customers, and the need to improve the order fulfillment process, are the other aspects that have become a cause of worry to businesses.Q.15 What are the security risk associated with eBusiness? E-Business is not simply a new distribution channel, or a new way to communicate. It is many other things: a marketplace, an information source, a tool for manufacturing goods and services. It changes the way managers run their every day business, from locating a new supplier to coordinating a project, to collecting and managing customer data. Each such activity affects the corporation in different ways, with the result that E-Business brings changes that are more pervasive than anything we have seen before from information technology. E-Business can be defined as business transactions, customer service, and intra-business tasks that make use of digital communications. EBusiness or E-commerce, broadly, is: "The use of electronic networks to exchange information, products, services and payments for commercial and communication purposes between individuals (consumers) and businesses, between businesses themselves, between individuals themselves, within government or between the public and government and between business and government.” The essential infrastructure for EBusiness and the new economy is a digital networked computing environment that links organization and individuals in business, industry, non-profit institutions, government, and the home. E-BUSINESS SECURITY ISSUESWhile the Web and the internet technologies offer a powerful platform for launching new virtual stores and instant access to millions of consumers around the world, e-businesses are subject to the traditional security issues and to a variety of new security challenges. Many companies now have large e-business departments and some like base their entire business model around e-business. Breaking into the online sales world can be extremely profitable, but it also has its fair share of security issuesBefore implementing an e-business plan, you have to address the security of your systems and data to ensure that people who shouldn't be accessing data can't get at it and to ensure that your system will be available despite attempts at a denial-of-service attack which is one of the most troublesome security issues facing e-businesses. A denial of service attack can make e-businesses systems inaccessible to thousands or millions of consumers. In addition, no one will deal with an e-business that may distribute, accidentally due to a security attack, sensitive consumer data such as credit card number, personal information, financial and account information, or other access information like user id and password. To elaborate more on these vulnerability issues, consider this simplified e-commerce scenario where a user uses a web site for an e-business system and gives his/her credit card number and address information for buying and shipping the purchased items. Even this is a simple on-line transaction, it has many potential security vulnerabilities that are related to the number of systems and networks involved which include the following: ? Security problems in client/home computers where data stored in web “cookie” can be stolen and cracked by hostile web-sites, or mail-borne viruses that can steal the user's financial data from the local disk. ? Eavesdropping and data stealing due to ineffective encryption or lack of encryption in home wireless networks. ? Eavesdropping and data stealing from the user's keystrokes at Point-of-Sale (POS) terminals in brick-and-mortar stores, ? Eavesdropping and data stealing from the user's mobile and handheld devices. ? Eavesdropping and data stealing from networks and different intermediate communication links. ? Firewall problems or insecure merchant's web and database servers or third party fulfillment servers and other processing agents that leads to hacking the archives of recent and old purchasing orders with all the financial and personal information. Although the above is a simplified model of e-commerce architecture, and some of the security measures like data encryption, authentication, and authorization may alleviate some of the above security problems; there are still lots of vulnerabilities in other areas or components of an e-business system especially in the software clients and servers that must use the data. In summary for an e-business system to be fully secure, security measures should be applied at all levels which include business applications, front-end clients and servers, the business internal networks, the back-end systems and servers, and data and information exchanges. This will help in protecting against unauthorized access and intrusion, and in ensuring privacy, confidentiality, and integrity of data. In what follows, I will classify and discuss all these security components and vulnerabilities at the different levels of ebusiness systems. Software Development Issues.Security holes do exist in most new and existing software systems mainly due to software bugs/faults left by careless or not highly skilled security-focused programmer or software developers. A software bug could be simply a mistake or oversight in a computer program or website coding that makes the site or program behave in an unintended way that could range from a minor problem like wrong rendering or formatting of the information on the screen to a major problem like allowing unauthorized users to access important data on the servers. E-business software systems should be interoperable and must exchange data with software systems owned and controlled by others like customers, suppliers, partners, and other processing and fulfillment software agents or servers. Therefore, security mechanisms deployed in e-business systems must be flexible, standards based, and interoperable with others’ systems. They must support browsers, and work in multi-tier architectures with one or more middle tiers such as web servers and application servers. On top of these, network and communication standards and protocols are in a state of continuous changes which makes keeping up-to-date with all security advisories and security patches a difficult task. Hackers constantly discover and make use of these vulnerabilities. In addition, hackers can use viruses and other malicious software to infect e-business systems and be able to steal customers’ information, cause data loss, or make e-business systems inaccessible. According to Consumer Reports, malicious software cost consumers about $2.3 billion in 2010 , and as another example, Sony's PlayStation Network was the victim of a major hacking operation in 2011 that resulted in the theft of millions of users' personal information. 3.2 Network Issues Networks have their own security issues mainly due to the fact that most networks are dependent on other private networks, owned and managed by others, and on a public-shared infrastructure where you have much less control of, and knowledge about, the implemented security measures. Although encryption aid to some extends in securing information moving across networks, it’s the network operator’s job to ensure that the information is securely transported to its final destination. Some of the well known security issues related to networks that affect e-businesses are listed and discussed below. Distributed Denial of Service (DDOS). One of the most troublesome security issues facing e-business is when hackers launch a denial of service attack. This attack is characterized by an explicit attempt by attackers to prevent users from using an ebusiness system. DDOS attacks are common in all kinds of networks where the attacker does not require any physical infrastructure, all what he do is flood the main e-business server with a large number of invalid requests slow it down or crash it and make it inaccessible. High profile ebusinesses like e-Bay, and were subject to DDOS attack and put out of service for sometime in year 2008 [6]. In addition to the immediate loss of business activity, another more important loss as a result of such an attack is the customer retention factor which is so volatile in ebusiness field that may cause business closure due to the fear and mistrust instilled in customers by such attacks. Session Interception and Messages Modification. The attacker can intercept a session and alter the transmitted messages of the session. Another possible scenario by an attacker is to intercept the session by inserting a malicious host between the client host and the server end host to form what is called man-in-the-middle. In this case all communications and data transmissions will go via the attacker’s host Firewall Loophole: A firewall is software or a hardware device that is used in e-business systems to separate the back-end servers from the corporate networks and enables communication between the back-end servers and a few servers within the corporate network Firewalls are mandatory for business sites. However, they are usually implemented at the network protocol layer and do not protect the system from attacks aimed at higher protocols such as HTTP. For example, the Web servers accept data packets through port 80, meant for HTTP requests. If a user accesses a component through an HTTP request that causes buffer overflow, the service can crash and provide the user access to the system for further attacks. Hackers can gain access to the intranet corporate back-end servers using some known unfixed firewall loopholes and try to hack into price lists, catalogs and email lists and change or destroy the data, which can disrupt or even disable business operations. This potential for having important data changed/hacked is a serious threat to ebusinesses.3.3 Wireless and Mobile Issues Many customers use wireless Internet connections and mobile devices to access ebusiness systems. Wireless networks and mobile devices present a security hazard, since outside users can eavesdrop on wireless communications. Securing a wireless network with a password can make it more difficult for outside users to connect to the network and access sensitive information, but a wireless connection is not as secure as a wired connection, even if it has password protection [7]. In addition to this, mobile devices can be a security concern because they are easy to be misplaced. Some of the well known security issues related to wireless networks and mobile devices that affect e-businesses are listed and discussed below. Information Leakage. This potential security issue lies in the possibility of information leakage, through the inference made by an attacker masquerading as a mobile support station. The attacker may issue a number of queries to the database server with the aim of deducing parts of the user's purchasing patterns and history. Captured and Retransmitted Messages. The attacker can capture a full message that has the full credential of a legitimate user and replay it with some minor but crucial modification to the same destination or to another one to gain unauthorized access and privileged to important information. Eavesdropping. This is a well known security issue in wireless networks. If the network is not secure enough and the transmitted information is not encrypted then an attacker can hack on to the network and get access to sensitive data. Mobile Devices Pull Attacks: The attacker controls the mobile device as a source of propriety data and control information. Data can be obtained from the device itself through the data export interfaces, a synchronized desktop, mobile applications running on the device, or the intranet servers. Mobile Devices Push Attacks: The attacker use the mobile device to plant a malicious code and spread it to infect other elements of the network. Once the mobile device inside a secure network is compromised, it could be used for attacks against other devices or servers on the network. Lost Device: Before allowing users or employees to use hand-held devices to conduct business, the possibility of the device being lost or stolen and abused by unauthorized users should be considered by applying some security measures like a password-protection feature on each mobile device. Multi-protocol Communication. This security issue is the result of the ability of many mobile devices to operate using multiple protocols, e.g. one of the 802.11 family protocols, a cellular provider’s network protocol, and other protocols which may have well-known security loop-holes [9, 10]. Although these types of protocols aren’t in active usage, many mobile devices have these interfaces set “active” by default. Attackers can take advantage of this vulnerability and connect to the device, allowing them access to extract information from it or use its services.Q.16 Describe 4 stage approach to manage transition as part of change management. Change management is a systematic approach to dealing with change both from the perspective of an organization and the individual.?For an organization, change management means?defining and implementing procedures?and/or technologies to deal with changes in the business environment and to profit from changing opportunities. In an information technology (IT) system environment, change management refers to a systematic approach to keeping track of the details of the system (for example, what?operating system?release is running on each computer and which?fixes?have been applied).While the obvious starting point is to gain an understanding and evaluation of an organization’s current processes in order to identify where waste and/or rework occurs, it is also possible to take a more “visionary” approach and look to producing new processes without the constraints or inhibitions imposed by an organization’s current operations and capability. This Envision stage exists in the standard business process re-engineering (BPR) methodology and requires an identification of any gaps to be undertaken and quantified in order to identify the level of transition to made to the “to - be”processes of the organization compared with those of the organization’s current “as - is” position. A widely employed approach to BPR is shown in Figure. As mentioned above, the starting point on the model may be either at the Evaluate or Envision stage, although both stages will need to be ultimately addressed. lefttopQ.17.We have discussed Advertisement, subscription, Transaction, Product/Service, affiliate based revenue models. Please suggest a new revenue model for eBusiness organizationWeb Catalog Revenue Model: Many companies sell goods and services on the Web using an adaptation of mail order catalog revenue model that is over 100 years old. In this traditional catalog-based retail revenue model, the seller establishes a brand image and then uses the strength of that image to sell through printed information mailed to prospective buyers. This model is often called the mail order or catalog model, has proven to be successful for a wide variety of consumer items, including apparel, computers, electronics, housewares and panies can take this model online by replacing or supplementing their print catalogs with information on their Web sites. When a catalog model is expanded this way it is often called the Web catalog revenue model. Customers place orders through the Web site or by telephone. This flexibility is important because many customers are still reluctant to buy on the Web. The first few years of consumer electronic commerce, most shoppers used the Web to obtain information about products and compare prices and features but then make their purchases by telephone. These shoppers found early Web sites hard to use and were often afraid to send their credit card numbers over the Internet. Although these fears are less prevalent today, most companies that use the Web catalog revenue model do give customers a way to complete the payment part of the transaction by telephone or by mail.Many of the most successful Web catalog sales businesses are firms that were already operating in the mail order business and simply expanded their operations to the Web. Other companies that use the Web catalog revenue model adopted it after realizing that the products they sold in their physical stores could also be sole on the Web. This additional sales outlet did not require them to build additional stores, yet provided access to customers throughout the world. Types of businesses using the Web catalog revenue model included sellers of computers and consumer electronics, books, music, and videos, luxury goods, clothing, flowers and gifts and general discount merchandise.1. Computers and Consumer Electronics: Leading computer manufactures such as Apple, Dell, Gateway and Sun Microsystems have had great success selling on the Web. All sell a full range of products - from small desktop computers to large server computers - to individuals, businesses and other organizations through their Web sites.Dell has been a leader in allowing customers to specify exactly the configuration of computers they order on the Web. Dell created value by designing its entire business around offering this high degree of flexibility to its customers. Other personal computer manufactures that sell direct to customers on the Web have followed Dell's lead by offering visitors different ways to access product information.2. Books, Music and Videos: Retailers using the Web catalog model to sell books, music and videos have been among the most visible examples of electronic commerce. In 1924, a 29-year-old Wall Street financial analyst named Jeff Bezos became intrigued by the rapid growth of the Internet. Looking for a way to capitalize on this new marketing tool, he made a list of 20 proc ducts that he thought would sell well on the Internet. He determined that books were at the top of that list. Books were a small-ticket commodity item and were easy and inexpensive to ship. Customers were willing to buy books without inspecting them in person and that books could be impulse purchase items if properly promoted. the was formed from that idea and now has a annual sales of over 6$ billion and over 60 million customers. has now evolved to become a general retailer and sells book, music, videos, customer electronics, housewares, tools, and many other items.3. Clothing Retailers: A number of apparel sellers have adapted their catalog sales model to the Web, including bebe, Gap, Lands' End, L.L. Bean, Talbots and Wet Seals. Unlike sellers in the high fashion clothing category, these Web stores display photos of casual and business clothing with prices, sizes, colors and tailoring details. Their intent is to have customers examine the clothing and place orders through the Web site. Lands' End new Web shopping assistance in 1999, allowed customers to initiate a text chat with a customer service representative or click a button on the Web page to have the representative call. The representative can also offer suggestions by pushing Web pages the the customers browser. Lands' End recently added personal shopper and virtual model features to their Web site. The personal shopper is an intelligent agent program that learns the customer's preferences and makes suggestions. The virtual model is a graphic image built from customer measurements on which customers can try clothes. The canadian company that developed this Web site feature, My Virtual Model, has sold the technology to a number of other clothing retailers.Lands' End also has a feature that allows two shoppers to browse the Web site together form different computers. Only one of the shoppers can purchase items, but either can select items to view. The items appear in both Web browsers.In the fast-changing clothing business, retailers have always had to deal with the problem of overstocks-products that did no sell as well as hoped. Many retailers used outlet stores to sell their overstocks. Lands' End found that its overstocks Web page worked so well that it has closed some of its physical outlet stores. An online overstock store works well because it reaches more people than a physical store and it can be updated more frequently than a printed overstock catalog.4. Flowers and gifts (gift retailers)- 1-800 Flowers- Online extension to successful telephone business- Competes with online –only florists- Godiva offers business gift plans- Hickory Farms and Mrs. Fields Cookies-Offer familiar name brands on the Web- Harry and David-Original Web site for informational purposes-Promoted catalog business and added online ordering feature5. General Discounters-Buy. com and -Borrowed Wal-Mart and discount club sales model-Sell merchandise at extremely low prices-Traditional discount retailers(Costco, Kmart, Target, Wal-Mart)-Slow to implement online sales on their Web Sites.-Had huge investments in physical stores-Did not understand online retaining world-Now use the Web catalog revenue model in their successful online sales operationsQ.18 Critical Success factors for an ERP implementationOne of the most common fallacies with ERP implementations is that organizations are prepared for the undertaking. Organizations need to not only recognize and understand the success drivers, but also to take action on related preparatory recommendations that support them.?Success is defined as getting what you want with the ERP implementation, on time, on budget and with a satisfactory Return on Investment (ROI).?The key success factors are:Project StartupManagement CommitmentProject ScopeProject TeamChange Management, Communication and TrainingCustomizations/ModificationsBudgetProject Closure?1. Project Startup?Perform the due diligence of getting the project on the right track by preparing all the necessary information and communicating it to the appropriate personnel.?Recommendations:?? Prepare/review the business strategy.? Prepare/review the IT strategy.? Prepare/review the ERP strategy.? Prepare/review the project scope (included in more detail below).? Prepare the organization for process changes and the new system by applying the proper change management strategies and techniques.?2. Management Commitment?An ERP implementation is going to impact how a company operates by updating business processes and changing system transactions. IT should not be the only area responsible for the project. Senior managers and mid-level managers should be involved in the project from its inception to its completion. This gives the project the proper visibility across the organization and shows the staff in general the importance of the project.?Recommendations:?? Involve management in project sponsorship, a steering committee, issue escalation and issue resolution. This involvement will help to maintain management support and keep them informed about the project.?3. Project Scope?The core ERP system will most likely not satisfy all the needs of the organization. Develop the ERP strategy and understand the components of the ERP, and how it will fit with other systems and tools. Define your project scope from a position of knowledge, fully detailing what the project is going to include.?Recommendations:?? Understand the business requirements and plan how they are going to be satisfied.? The ERP will satisfy some of your business requirements. Put together a plan as to how other business requirements such as data management, business intelligence, social media, etc. will be met.? Document items that are not in scope.?4. Project Team?The core project team should be composed of full-time personnel, including a project manager and others representing the core areas of the business. If a consulting integrator is used, the core project team needs to have a good and cohesive working relationship with the consultants. Also, identify a set of resources from the various areas of the business to provide subject matter expertise.?Recommendations:?? Use proven implementation methodologies and tools for the project.? Empower the implementation team to make decisions.? The core project team should be in the same location to aid in communication.? Create a competency center for post go-live support needs.? Identify subject matter experts (SMEs) from pertinent areas across the organization.? Project team to have a good working relationship with the consultants.?5. Change Management, Communication and Training?The ERP project will not only result in changes in systems, but also process and organizational changes. A change management team will be necessary for the organization to deal with the impact. The size of the team will vary depending on the size of the project and amount of changes. Training falls under change management, and the most common method is to “train the trainers.” Normally the software vendors or the consulting integrators will train the trainers, who are employees in the organization. This approach is most helpful, because the organization will end up with the trained professionals on its staff.?Recommendations:? Create communication mechanisms such as a website, newsletters, road shows, lunch and learns, etc.? Develop good communication between the project team and the organization as a whole.? Key users should be involved with the project and its progress, as this will aid in acceptance of the changes.? Create a business case that shows the changes to processes and system functionality, and also the benefits brought about with the changes. Share the business case with the pertinent individuals within the organization.? Hire a third party to perform an organization readiness assessment.? Be prepared to train during the project and after the post go-live date.6. Customizations/ModificationsMost ERPs are built with embedded best practices. An organization must keep a tight control on the customizations, as they may diminish the application of the best practices. These modifications may result in an increase in scope and budget as well.?Recommendations:?? Study other ERP implementations in the industry and see what customizations were required.? Perform a gap analysis and prioritize the gaps (High=Required, Medium=Workaround Exist, Low=Nice to Have).? Set clear expectations on the company’s position regarding customizations.? Create a process by which a business case must be created for every customization.? Be prepared to maintain these modifications as the software vendor releases new versions of the software.?7. BudgetOrganizations must create a realistic budget to include all costs for the implementation, such as software, hardware and staff resources. Most organizations expect a timely Return on Investment (ROI) from an ERP project. Some companies reduce the project budget in an attempt to improve on the ROI. The area’s most commonly reduced are change management, training and project management.Recommendations:? Create a good estimate of your implementation costs and keep tight control of the costs.? Do not cut costs in change management, training and project management. Instead, consider rapid implementation methods and tools. Some of the consulting implementers offer these methods and tools.?8. Project ClosureHaving good project closure is just as important as the project start up. Personnel need to have clear lines of communication as to when the new system is going live and when the legacy system is being decommissioned. This also applies to the introduction of new business processes.Recommendations:?? Communicate clearly when the new system is going live and when the old system is being decommissioned.? Communicate when new business processes will go into effect and old processes will be disabled.? Prepare to transfer system support functions from the project structure to the on-going system support structure.? Audit processes and system transactions to make sure they are working as planned.Q.19 Describe the importance of PM & PTs.Performance measures (PMs) are a set of parameters linked to the CSFs, and used to measure the success level of CSFs achievement using performance targets (PTs) attached to these PMs Together with Performance Targets (PTs), it can be used to Drive strategy within the organization Motivate employees to attain high levels of achievement Track progress against CSFs through PTs Initiate & institutionalize continuous improvement capabilities PTs can be ‘one leap’ or ‘stretched’ PMs & PTs must be a balanced set Internal & external entities Financial & Non Financial Short-term and long-termHow to evolve PMs & PTs? Jot down any measure you can think of Validate through the CSFs / Strategic Mandates Consolidate / Fine-tune Segregate process & IT based PMs from others Evolve the method to derive (data & logic) PMs - optional now Fixed targets against each of the measures (can be selectively now, fully later) Performance measurement and target-setting are important to the growth process. While many small businesses can run themselves quite comfortably without much formal measurement or target-setting, for growing businesses the control these processes offer can be indispensable.The benefits of performance measurementKnowing how the different areas of your business are performing is valuable information in its own right, but a good measurement system will also let you examine the triggers for any changes in performance. This puts you in a better position to manage your performance proactively.One of the key challenges with performance management is selecting what to measure. The priority here is to focus on quantifiable factors that are clearly linked to the drivers of success in your business and your sector. These are known as key performance indicators (KPIs). Bear in mind that quantifiable isn't the same as financial. While financial measures of performance are among the most widely used by businesses, nonfinancial measures can be just as important.For example, if your business succeeds or fails on the quality of its customer service, then that's what you need to measure - through, for example, the number of complaints received. For more information about financial measurement, see the page in this guide on measurement of your financial performance.The benefits of target-settingIf you've identified the key areas that drive your business performance and found a way to measure them, then a natural next step is to start setting performance targets to give everyone in your business a clear sense of what they should be aiming for.Strategic visions can be difficult to communicate, but by breaking your top level objectives down into smaller concrete targets you'll make it easier to manage the process of delivering them. In this way, targets form a crucial link between strategy and day-to-day operations.Deciding what to measureGetting your performance measurement right involves identifying the areas of your business it makes most sense to focus on and then deciding how best to measure your performance in those areas.Focusing on key business driversYour performance measurement will be a more powerful management tool if you focus on those areas that determine your overall business success.This will vary from sector to sector and from business to business. So put some time into developing a strategic awareness of what it is that drives success for businesses like yours.It's crucial that you tailor your measurement to your specific circumstances and objectives. A manufacturer producing and selling low-cost goods in high volume might focus on production line speed, while another producing smaller quantities using high-cost components might focus instead on reducing production line errors that result in defective units.Finding your specific measuresOnce you have identified your key business drivers, you need to find the best way of measuring them. Again, your priority here should be to look for as close a link as possible with those elements of your performance that determine your success.For example, you may decide that customer service is a strategic priority for your business and to therefore start measuring this. But there are many ways of doing so.You might consider measuring:the proportion of sales accounted for by returning customersthe number of customer complaints receivedthe number of items returned to youthe time it takes to fulfil an orderthe percentage of incoming calls answered within 30 secondsNone of these is necessarily better than any other. The challenge is to find which specific measure (or measures) will enable you to improve your business.This type of measurement unit is often referred to as a key performance indicator (KPI). The two key attributes of a KPI are quantifiability (i.e. you must be able to reduce it to a number) and that it directly captures a key business driver. See the page in this guide on choosing and using key performance indicators.Using standardised measuresThere are standardised performance measures that have been created which almost any business can use. Examples include balanced scorecards, ISO standards and industry dashboards.Choosing and using key performance indicatorsKey performance indicators (KPIs) are at the heart of any system of performance measurement and target-setting. When properly used, they are one of the most powerful management tools available to growing businesses.Selecting KPIsThere are a number of key criteria that your KPIs should meet:First, they should be as closely linked as possible to the top-level goals for your business. See the page in this guide on deciding what to measure.Second, your KPIs need to be quantifiable. If you can't easily reduce your measurement to a number, there will be too much scope for variation and inconsistency if different people carry out the measurements at different times.Third, your KPIs should relate to aspects of the business environment over which you have some control. For example, interest rates may be a crucial determinant of performance for a given business, but you can't use the Bank of Canada base rate as a KPI because it's not something that businesses have any power to change. By contrast, a business' exposure to fluctuations in interest rates can be controlled and so this might make a useful KPI.Getting the most from your KPIsThe purpose of performance measurement is ultimately to drive future improvements in performance. There are two main ways you can use KPIs to achieve this kind of management power.The first is to use your KPIs to spot potential problems or opportunities. Remember, your KPIs tell you what's going on in the areas that determine your business performance. If the trends are moving in the wrong direction, you know you have problems to solve. Similarly, if the trends move consistently in your favour, you may have greater scope for growth than you had previously forecast.The second is to use your KPIs to set targets for departments and employees throughout your business that will deliver your strategic goals. For more information about using target-setting to implement your strategic plans, see the page in this guide on how to set useful targets for your business.Managing your informationAs with most areas of your business operations, the more detailed and well structured the information you keep about your KPIs is, the easier it will be to use as a management tool. Computer-based management information systems are available for this purpose.Measurement of your financial performanceGetting on top of financial measures of your performance is an important part of running a growing business.It will be much easier to invest and manage for growth if you understand how to drill into your management accounts to find out what's working for your business and to identify possible opportunities for future expansion.Measuring your profitabilityMost growing businesses ultimately target increased profits, so it's important to know how to measure profitability. The key standard measures are:Gross profit margin - this measures how much money is made after direct costs of sales have been taken into account, or the contribution as it is also known.Operating margin - the operating margin lies between the gross and net (see below) measures of profitability. Overheads are taken into account, but interest and tax payments are not. For this reason, it is also known as the EBIT (earnings before interest and taxes) profit margin - this is a much narrower measure of profits, as it takes all costs into account, not just direct ones. So all overheads, as well as interest and tax payments, are included in the profit calculation.Return on capital employed (ROCE) - this calculates net profit as a percentage of the total capital employed in a business. This allows you to see how well the money invested in your business is performing compared to other investments you could make with it, like putting it in the bank.Other key accounting ratiosThere are a number of other commonly used accounting ratios that provide useful measures of business performance. These include:liquidity ratios, which tell you about your ability to meet your short-term financial obligationsefficiency ratios, which tell you how well you are using your business assetsfinancial leverage or gearing ratios, which tell you how sustainable your exposure to long-term debt isCash flowBear in mind that even though you are likely to use an increasing number of financial measures as your business grows, one of the most familiar – cash flow - remains of fundamental importance.Cash flow can be a particular concern for growing businesses, as the process of expansion can burn up financial resources more quickly than profits are able to replace them.Measurement and your customersFinding and retaining customers is a crucial task for every business. So when looking for areas of your business to start measuring and analysing, it's worth asking yourself if you know as much as possible about your clientele.See your business through your customers' eyesLooking at things from your customers' perspective can help you avoid getting sidetracked as you consider your options for growth.Feedback is key - the more you know about what your customers think and want, the easier it will be to cater for growing numbers of them. Look for as many ways of capturing this information as possible, including:sales data - what your customers choose to buy (or not to buy) provides the clearest indication of their preferencescomplaints - but remember that many customers will simply switch suppliers before making a complaintquestionnaires and comment cards - a very useful source of information, so consider using incentives to encourage more customers to complete themmystery shopping - having someone pose as a customer for research purposes can give a very clear sense of how well you are performingManage customer information and relationshipsSoftware for customer relationship management (CRM) can be a powerful tool for capturing and analysing information about your customers and the products and services they purchase.CRM also enables you to push up service levels by ensuring that all customer-facing staff have ready access to each customer's history.Widen your focus beyond current customersSelling more to existing customers might be the easiest way of increasing sales, but most businesses aiming for significant growth will need to find ways of reaching new groups of customers.So knowing more about sections of the market you haven't yet tapped is crucial.Measurement and your employeesAs your business grows the number of people you employ is likely to increase. To keep on top of how your staff are doing, you may need to find slightly more formal ways of measuring their performance.Measuring through meetings and appraisalsInformal meetings and more formal appraisals provide a very practical and direct way of monitoring and encouraging the progress of individual employees. They allow frank exchanges of views by both sides and they can also be used to drive up productivity and performance through setting employee targets and measuring progress towards achieving them.Regular staff meetings can also be a very useful way of keeping tabs on wider developments across your business. These meetings often give an early indicator of important concerns or developments that might otherwise take some time to come to the attention of your management team.Quantitative measurement of employee performanceLooking at employee performance from a financial perspective can be a very valuable management tool. At the level of reporting for the overall business, the most commonly-used measures are sales per employee, contribution per employee and profit per employee. These measures shouldn't be thought of as an alternative to the broader appraisals outlined above, but can flag up issues that might later be explored in more detail in those meetings.Expressing employee performance quantitatively is easier for some sectors and for some types of worker. For example, it should be quite easy to see what kind of sales an individual sales person has generated, or how many units manufacturing employees produce per hour at work.But with a bit more effort, these kinds of measures can be applied in almost any business or sector. For example, using timesheets to assess how many hours an employee devotes each month to different projects or customers under their responsibility gives you a way of assessing what the most profitable use of their time is.Measurement against other businesses - benchmarkingBenchmarking is a valuable way of improving your understanding of your business performance and potential by making comparisons with other businesses.Who to benchmark againstIt is usually helpful to compare yourself against businesses in the same sector. But your market position and your objectives, among other things, will affect the specific comparisons you want to make.For example, a small business in a crowded sector may want to benchmark itself against average performance levels in the sector. But a business targeting rapid and significant growth may choose comparisons with an established market leader.You can also benchmark internally within your business. For example, comparing absenteeism rates between departments may enable you to spread good working practices from the best-performing areas of your business.What to benchmarkIn general, the same rule applies to benchmarking as to choosing which performance measures to use. You should focus on those areas that drive business success in your sector - your key drivers. See the page in this guide on deciding what to measure.How to benchmarkYou should have ready access to all the figures for your own business, so the main challenge with benchmarking is often the process of finding external data for your comparisons.There are a number of sources for this kind of information:Your trade association is a useful starting point, as these organisations often collate sector-wide mercial market reports may provide greater detail, although these can be costly.Using your benchmarking dataBenchmarking data should be used in the same way as any other performance measurement data you generate - as a spur to improve the way your business operates.Typically this will involve setting targets to help you reach the benchmark values you aspire to. For more information on target-setting, see the page in this guide on how to set useful targets for your business.Measurement in the manufacturing sectorThe manufacturing sector is one in which there is significant scope for performance measurement, as most aspects of the production process can be accurately measured in quantitative terms.An indication of the way manufacturers can measure their performance is provided by the Quality-Cost-Delivery (QCD) system. This comprises seven key measures which between them capture some of the key drivers of most manufacturing operations.The seven QCD measures are:Not right first time (NRFT) - this is a measure of the rate of defective units being produced. The higher it goes, the greater the waste of resources and the greater the risk that customers will be inconvenienced.Stock turns (ST) - this gauges the number of times a business sells and replaces its inventory. Higher stock turn rates indicate that a business is operating efficiently and not tying up resources in slow-moving inventory.Overall equipment effectiveness (OEE) - this is a way of measuring whether you're making the most of a piece of machinery. It combines three elements - the amount of time the machine can be used, the rate at which it is operated and the proportion of its output that is defective.People productivity (PP) - this measures the number of worker hours taken to produce each unit of output. However, PP also distinguishes between valuable and wasteful production - this to ensure that productivity figures aren't skewed by the overproduction of units for which there's no customer demand.Floor space utilisation (FSU) - this measures the level of revenue generated per square metre of factory floor space. It reflects how efficient a business is at minimising its fixed costs.Delivery schedule achievement (DSA) - this measures your success at delivering the goods your customers have ordered to the schedule you have promised them.Value added per person (VAPP) - this measures the amount of value the manufacturing process adds to raw materials and compares it to the number of people involved in the process. Like PP above, it is a measure of employee productivity.How to set useful targets for your businessIt is just a small step from measuring your performance to the much more dynamic process of driving up performance levels across your business. This involves setting performance targets in the key areas that drive your business performance.For more information about these business drivers, see the page in this guide on deciding what to measure.Key performance indicators (KPIs), targets and business strategyPerformance targets are a powerful management tool that can help you deliver the kind of strategic changes that many growing businesses need to make. The top-level objectives of your strategic plan can be implemented through departmental goals, and setting targets based on KPIs is an ideal way of doing this.For example, a company seeking to expand on the basis of its product design capabilities might target year-on-year increases in the number of patents it secures, of new products it launches, or of its licensing income. The specifics will depend on which KPIs best capture the dynamics in the market.Setting SMART targetsIt's a familiar acronym, but a very useful one - your targets should be SMART - specific, measurable, achievable, realistic and time-bound:Using KPIs ensures your targets will meet the first two criteria, as all KPIs should, by definition, be specific and measurable. For more information about KPIs, see the page in this guide on choosing and using key performance indicators.Achievable - you need to set ambitious targets that will motivate and inspire your employees, but if you set the bar too high you risk deflating and discouraging them instead. Look back at your performance data for recent years to get a sense of what kind of performance boosts you've seen before - this will give you a sense of what is feasible.Realistic - setting realistic targets means being fair on the people who will have to reach them. Make sure you only ask for performance improvements in areas that your staff can actually influence.Time-bound - people's progress towards a goal will be more rapid if they have a clear sense of the deadlines against which their progress will be assessed.Assigning responsibility and resourcesOnce you have identified the targets based on your KPIs that you believe will deliver the strategic growth you're aiming for, make sure you follow through by assigning clear responsibility for delivering each of them.It is fine for your top-level strategic objectives to be abstract and business-wide, but your KPI targets should be concrete and clearly owned by a department or individual.Hitting your targets is unlikely to be a cost-free process, so be ready to make the necessary resources available when needed. Also, undertake regular reviews to assist with motivation and to make changes if the progress made isn't as expected.Q.20 We have discussed the impact of GST on ERP systems. Please explain the process to implement it successfully for your organization.The Goods and Services Tax (GST), likely to be implemented from 1 April 2017 and is expected to bring major changes in the Indian taxation system, by replacing multiple existing taxes such as Excise, Value Added Tax (VAT), Central Sales Tax (CST), Service tax, Octroi duty, etc. into a single taxation system.Goods such as alcohol and tobacco products still do not fall under the purview of the proposed GST regime.A dual GST structure has been proposed wherein a combination of a Central GST (CGST) and State GST (SGST) might be levied separately (IGST on interstate transactions). The manufacturer, trader or service provider is required to keep a track of each of these tax credits and liabilities at the state level for submitting their monthly returns.Potential impact of GST on Enterprise Resource Planning (ERP) systemsGST could have a multifold impact on ERP systems, which has been highlighted below:Adaptability of the ERP system: The ERP system needs to be checked for the appropriate version and an upgrade might be needed to make the system GST compliant.Business process refinement:All the tax-related inward and outward processes will be required to be reviewed and aligned, as applicable, to GST requirements. Business processes such as interstate stock transfers, subcontracting, etc. might be required to be closely evaluated, since in the proposed GST framework, taxes are also levied on such transfers. In addition to this, the process for tax utilization at the end of the month might also have to be setup as per the new policies.Tax configuration and computation:It is likely that tax calculation procedures would require a major change to accommodate the proposed taxation requirements. Appropriate considerations may have to be taken into account to fulfill the requirements of monthly tax returns. While making the configuration changes, due consideration should be given, such that the system is not only GST ready, but is also scalable and adaptable to future changes in the Indian financial environment.Document numbering:A unique sequential numbering for outgoing GST invoices may be specified, which need to be configured as per the directives of the tax authorities.Master data amendments:Various master data such as the chart of account, material master, vendor master, customer masters, price masters, etc. may need to be updated as per the new requirements. In this context, vendor and customer GST registration numbers will become mandatory for availing or passing the credits and reporting purpose.Reporting and printing requirements:Appropriate reports are expected to be developed based on the regulatory requirements. The necessary changes may also be required in existing forms such as contracts, purchase orders, quotations, invoices, etc.Impact on interfaces:The impact on any interfaces with third party tools, if any, should be analyzed on a case-to-case basis.Tax credit migration:Tax credits from existing deductible taxes such as excise, service tax, VAT, etc. might need to be updated or distributed to the appropriate account as per the directives of the new regime.?Closure or reversal of partially open transactions:Partially-open transactions such as goods received but an invoice has not been booked, or goods issued for sale but not received by the customer, etc. need to be closed or reversed and migrated to the new system.Migration of open transactions:Open transactions, including contracts, purchase orders and sales orders, may have to be migrated.Managing exceptional transactional requirements:Managing the transactional requirements in scenarios such as the return of goods sold or purchased before GST and returned after GST implementation, stock in transit during the cutover activities, etc will be important.Significant changes are expected to take place in ERP systems on account of implementation of GST. These changes may be visible in areas related to master data, business process changes, interfaces and reporting requirements for GST migration. Companies need to adopt a proactive approach in understanding the potential impact of GST on their ERP systems before the GST Bill becomes a law. Post finalization, there could be multiple changes to the supply chain, which again could have a cascading impact on the underlying ERP. Companies are thus recommended to be well-prepared, before GST comes into effect. ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download