Post on 05-Apr-2018
transcript
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ERP
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What is an enterprise?
The term enterprise is often used in general business
situations to describe a corporate entity, anything from a
sidewalk espresso cart to an organization as large as
TELCO or Hindustan Lever.
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An enterprise is a group of people with a common goal,
which has certain resources at its disposal toachieve this goal.
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Traditional Approach
In the traditional approach:
The organization is divided into different units based
on the functions they perform.
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So we have a:
Production department
Purchasing department
Finance department etc.
These departments are compartmentalized and have their
own goals and objectives, which from their point of
view is in line with the organization’s objectives.
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These department function in isolation and have
their own systems of data collection and analysis.
So the information that is created or generated by the
various departments, in most cases are available only
to the top management and not to the other
departments.
The result is that instead of taking the organization
towards the common goal the various departments
tend to pull it in different directions since one
department does not know what the other does.
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Also, departmental objectives can sometimes be
conflicting e.g.
the sales and marketing people may want more product
variety to satisfy the varying needs of the customers
while
the production department will want to limit the
product variety in order to cut down production costs.
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So, unless all the other departments know:
what the others are doing and for what purpose, suchconflicts will arise and disrupt the normal
functioning of the organization.
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In the enterprise way, the entire organization is
considered as one system and all the departments
are its sub-systems.
Modern Approach or Enterprise Way
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Business functions and business processes
A business process is a collection of activities that takes
one or more kinds of input and creates an output that
is of value to the customer. Thinking in terms of business processes helps managers to
look at their organizations from a customer’s
perspectives.
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For example, the important considerations for a person who
wants to buy a car are:
the information about the product
the available choices
quick and efficient service
fast order-processing and delivery
availability of finance and completion of other formalities
such as registration, insurance etc. with ease.
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Customer is not concerned with:
who is speaking to him
the policies of the company with regards to employee
selection
where the raw material are purchased and at what price,an so on.
Customer is concerned with:
Quality product, delivered to him at a competitive priceas fast as possible with minimum hassles.
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For example, assume that a car is damaged during
delivery.
It is a business function of the customer service
department to accept the damaged item and to
replace or repair it depending upon the severity of thedamage.
The actual repair or replacement of the car is a business
process that involves several functional areas and
functions within those areas.
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Thus, the customer is looking across the company’s
functional areas in the process of buying and
obtaining a product.
In order to provide customer satisfaction, a company must
make sure that its functional areas of operations are
integrated.
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Role of the enterprise in implementing the ERP System
The company’s decision-makers have to do a detailed,
consistent and technically correct job of selecting a
software package.
They have to ensure that all the key personnel are involvedin one way or another and committed to the project’s
implementation.
The enterprise has to identify a consulting firm that posses
all the attributes necessary to conduct theimplementation project successfully – qualified
professionals, proven methodology and excellent
references.
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There are a group of people:
the company employees
the package vendors
the hardware vendors
the communications experts
the implementation consultants, and so on
all with a common goal namely, the successful
implementation of the project.
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An ERP implementation project does not depend solely on
the:
software vendor
the consultants
Success for a project of this magnitude and scope dependslargely on:
Each party playing its role well, because:
the roles are singular in nature
there can be no substitution
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The most important and critical activity the company
management has to perform is:
To designate the right people to lead the project.
These people should be high up in the corporate
ladder.
These people should be willing to dedicate themselves
to learning how to operate the package correctly in
order to provide for the needs of the business.
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A brief history of ERP
In the manufacturing industry, MRP (Material
Requirement Planning) became the fundamental
concept of production management and control in
the mid-1970s.At this stage BOM which is purchase order management
that utilizes parts list management and part development,
was mainstream.
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This concept unfolded from order inventory management
of materials to plant and personnel planning and
distribution planning, which in turn became MRP II.
This incorporated financial accounting, human resource
management functions, distribution management
functions and management accounting functions, andcame to globally cover all areas of the enterprise
mainstay business and eventually came to-be called
ERP.
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Materials Requirements Planning (MRP)
MRP is the outgrowth of bill of materials (BOM)processing.
MRP began its life in the 1960s and became prominent in
the 1970s.
The manufacturing and production planning people were
searching for better and more efficient methods of ordering
materials and components.
They found that MRP was a perfect answer for theirneeds.
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MRP asks the following questions:
What products are we going to make?
What are the materials needed to make these products?
What are the materials that are presently available in
stock?
What are the items that need to – be purchased?
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Manufacturing Resource Planning (MRP II)
It is the successor of MRP, it integrates planning of all
aspects of a manufacturing firm.
MRP-II includes functions such as:Business planning
Production planning and scheduling
Capacity requirement planning
Job costingFinancial management and forecasting
Order processing
Performance measurement
Sales and operations planning.
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Thus, MRP II is a method for the effective planning of all the
resources of a manufacturing company.
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ERP
The final step in the evolution is the emergence of ERP.
The fundamentals of ERP are the same as that of MRP II.
The ERP system is also capable of integrating with othertools like;
Customer Relationship management
Supply chain management and so on,
Thereby supporting business across company
boundaries.
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The goals of ERP includes:
High-levels of customer service
Productivity
Cost reduction and inventory turnover, and it provides
the foundation for effective supply chain management
and e-commerce.
It does this:
By developing plans and schedules so that the right
resources – manpower, materials, machinery, and money – are available in the right amount when needed.
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The primary purpose of implementing ERP is:
To run the business efficiently and effectively in thisbrutally competitive and rapidly changing business
environment.
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Roadmap for successful ERP
implementationThe most important step of ERP implementation is the phase
called
It is the step of negotiations between the companyrequirements and the functions a package possesses.
Gap analysis
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It is effective to invite outside consultants with wideexperience in package implementation to the user guide, suchpersons can be assigned the role of Coordinator between thepackage vendors and the system integrators.
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Consultant
This consultant can act as a neutral person to resolve
conflicts and can push the project ahead, while givingdirection on the whole.
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Points to be considered for ERP Implementation.
The first important point is:
clearly defining company objectives and targets, and
making these known and recognized throughout the
entire company.
Secondly, the manner in which the companymanagement involved in the project and the speed of
decision-making is important.
Last is the selection of experienced consultants.
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Benefits of ERP
1. Reduction of Lead-time:
The elapsed time between an order and receiving it is
known as the lead-time.
Most purchasing departments urge the managers toanticipate material demands well ahead of actual need.
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All inventory systems have safety mechanisms like:
safety stock,
re-order level and so on built into them, to avoid thesituation where the material is out of stock.
The consequences of the non-availability of an item canresult in a lot of problems like:
missing the delivery schedules
losing the customer goodwill due to delayed delivery.
In order to reduce the lead-times:
the organization should have an efficient inventorymanagement system, which is integrated with thepurchasing, production planning and productiondepartments.
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The ERP systems help in automating this task and thus,
make the inventory management more efficient and
effective.
Since the ERP system is integrated and the materialsmanagement module is integrated with other modules like:
Sales
Marketing
Purchasing
Manufacturing and production planning
The demand for a particular item can be known as early
as an order is received.
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For example;
Consider that an order is received for supplying, say 100
cars with air conditioners.
As soon as the order details are entered into the system, a lot
of actions are triggered.
The system will check whether the items are available in
the finished goods inventory.
Then it will generate a BOM for the order and will
check whether all the items are available in the
inventory.
Since all the records are kept in the system’s databaseand since every thing is up-to-date, finding out the parts
that are to be ordered takes no time.
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2. On time Shipment:
Today, companies must be able to deliver customer-
specific products (made-to-order) with the lead-time of
standard.
The companies must be able to change the mode of
production from make-to-stock to make-to-order, yet
retain the cost and time advantage.
Today, the ERP systems, businesses are not limited to a single
manufacturing methods, such as make-to-stock or make-
to-order.
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Many manufacturing and planning methods can be combined
within the same operation, with unlimited flexibility to
choose the best method for each product at each stagethroughout its life cycle.
ERP systems are designed to help your company trim data
transfer, reduce errors and increase design productivity by
providing an automated link between engineering and
production information.
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Thus, by integrating the various business functions and
automating the procedures and tasks, the ERP systems
ensure on-time delivery of goods to the customers.
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3. Reduction in Cycle Time:
Cycle time is the time between receipt of the order and
delivery of the product.
At one end of the manufacturing spectrum is the make-to-
order operation, where the cycle time and cost of
production are high.
This is because in a make-to-order situation the
manufacturer starts making the product only after
receiving the order.
On the other end of the manufacturing operations is the
make-to-stock approach, where the products are
manufactured before the order is placed.
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In both the cases:
The cycle time can be reduced by the ERP systems, but the
reduction time will be more in the case of make-to-order
systems.
In the case of make-to-stock, the items are already
manufactured and kept in warehouses or with distributors
for the sales. Here, the cycle time is reduced during orderfulfillment.
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For example;
Suppose a customer places an order.
The order entry clerk has to check whether the order is
available in the warehouse nearest to the customer.
If it is not available there, he will have to check whether it
is available in any other warehouse or with any of the
distributors.
Then he will have to process the order, inform the
concerned warehouse or distributor to ship the item,
inform the finance department to raise the invoice and so
on.
All this used to take a lot of time few days or sometimes
even weeks.
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But with an ERP system;
As soon as the order is entered into the system, the system
checks the availability of the items. If it is not available with the nearest manufacturer, then
the warehouse that is closest to the customer and which
has the item in stock is identified.
The warehouse is informed about the order and theshipment details are sent to the distribution module.
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4. Improved Resource Utilization:
Manufacturers place emphasis upon planning and controlling
capacity because: Manufacturing process become more sophisticated
Philosophies of elimination of waste achieve broader
acceptance.
The creation of an accurate, achievable productionschedule requires the availability of both material and
capacity.
Waste not only raises costs, it also affects customer service
levels and customer good will.
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ERP Systems offers the:
Capacity Planning feature.
It is the process of determining the production capacity
needed by an organization to meet changing demands.
Capacity is the maximum amount of work that an
organization is capable of completing in a given period of
time.
Capacity definitions are provided from work centre and
machine records.
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The ERP systems also have simulation capabilities that helpthe capacity and resource planners to simulate the variouscapacity and resource utilization scenarios and choose the
best option.The efficient functioning of the different modules in the ERP
system like manufacturing, materials management, plantmaintenance, sales and distribution ensures that the:
Inventory is kept to a minimum level
The machine down time is minimum
The goods are produced only as per the demand
The finished goods are delivered to the customer in themost efficient way.
Thus, the ERP system help the organization in drasticallyimproving the capacity and resource utilization.
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5. Better customer satisfaction:
Customer satisfaction means meeting or exceeding
customers requirements for a product or service.Assessment of the degree of satisfaction is usually made
on at least three measures:
a. Whether the product or service includes the features thatare most important to the customer?
b. Whether the company can respond to the customers
demands in a timely manner?
c. Whether the product or service is free of defects andperforms as expected?
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ERP systems have proved that they can produce goods at
the flexibility of make-to-order approach without
loosing the cost and time benefits of made-to-orderoperations.
This means that customer will get individual attention
and the features that he/she wants.
With the introduction of web-enabled ERP systems, the
customers can:
Place the order
Track the status of the order
Make the payment sitting at home
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The customer could get technical support by either:
Accessing the company’s technical support knowledge
base.
By calling the technical support.
Since all the details of the product and the customer are
available to the person at the technical supportdepartment, the company will be able to provide better
support to the customer.
All this is possible because of the use of the latest
developments in IT by the ERP systems.
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6. Improved Supplier Performance:
The quality of the raw materials or components The capability of the vendor to deliver them on time
are of critical importance for the success of any organization.
So, an organization needs to choose its suppliers, or vendors
very carefully and monitor their activities closely, so that:
problems can be corrected before it can disrupt the
functioning of the company.
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The ERP systems provide vendor management and
procurement support tools designed to coordinate all
aspects of the procurement process.
They support the organization in its efforts to effectively
negotiate, monitor, and control procurement costs and
schedules while assuring superior product quality.
The supplier management and control processes are
comprised of features that will help the organization in
managing the supplier relations.
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7. Increased flexibility:
Because competition are growing:
Companies must learn to respond more rapidly tocustomers wishes as well as changes in the market.
They will need to design new products or redesign old
products quickly and efficiently.
The manufacturing process must be flexible enough toaccommodate new product designs with minimal
disruption or time loss.
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Product flexibility is the:
Ability of the operation to efficiently produce highly
customized and unique products. Manufactures tried to introduce some amount of flexibility
by using the assemble-to-order approach.
This provided some amount of flexibility without
increasing the production cost, but could not be applied toall situations.
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ERP systems not only:
improve the flexibility of the manufacturing operations,
but also:
the flexibility of the organization as a whole.
A flexible organization is one that can adapt to the changes
in the environment rapidly. New competitors are emerging each day.
New and complex problems have to be tackled every day.
To stay in business, new marketing strategies have to be
devised and implemented at very short notices.
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8. Reduced Quality Costs:
Quality is defined in many different ways:
ExcellenceConformance to specifications
Fitness for use
Value for the price an so on.
Whereas manufacturing and design engineers are typically
responsible for some of the technological issues in the
quality assurance for products.
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In the design phase of a new product or service,
The cost of correcting a defect may be minimal.
If that defect goes undetected and the company releases theproduct or service to the public, it will incur a much
greater cost to resolve the problems that result.
The Quality Management Systems in ERP packages supportthe benchmarking and use of optimal product design,
process engineering, and quality assurance data by all
functional departments within the manufacturing
enterprise.
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The American Society for Quality Control (ASQC) has
developed a typology of quality related costs.
This typology has four categories:1. Internal failure costs:
It includes costs of re-work, re-inspection
2. External failure costs:
It includes warranty claims, repairs, and service costs
3. Appraisal costs:
It includes cost of inspecting upon arrival, during
manufacture, in laboratory tests and by outside
inspectors.
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4. Prevention costs:
It includes design and development of new quality
equipment, evaluation costs of a new product or service
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9. Improved Information Accuracy and Decision-Making Capability:
To survive, thrive and beat the competition in today’sbrutally competitive world, one has to manage the future.
Managing the future means managing the information.
In order to manage the information.In order to deliver high quality information to the decision-
makers at the right time.
In order to automate the process of data collection, collation
and refinement,
Organization have to make IT an ally, harness its full
potential and use it in the best way.
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TOP ERP Vendors
1. SAP (System Application Product)
2. Oracle Corp.
3. J.D. Edwards
4. PeopleSoft5. The Baan Co.
6. System Software Assistant (SSA)
7. MK Group/Acacia Technologies
8. JBA International9. Marcam Corp.
10. Intentia
11. QAD Inc.
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Marketing of ERP
A study of the dynamics of the ERP market,
How they evolve through a number of stages
The characteristics of competitive behavior
Provides a basis for assessing market attractiveness and
assists the ERP marketing personnel to choose a market,
the market segment and to position themselves
competitively.
Managing the ERP Marketing Strategy
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Managing the ERP Marketing StrategyProcess
The competitive marketing manager should have the
following:
1. Deep understanding of the market and the product
2. know all about the process of managing marketing
strategy from the organization’s point of view.
The marketing managers foremost job is to:
Manage the marketing strategy process. This means making
the correct choice of markets and industry segments.
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Analysis for competitive positioning:
To make a competitive decision the manager must know
1. Customer purchase criteria2. Customer preference concerning service or product
performance
3. Customer perceptions of competing vendor and their
products on each criterion.
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1. Customer purchase Criteria
There are several important purchase criteria involved in the
buying pattern.
1. Price related criteria
2. Performance related
3. Quality
4. Delivery schedule
5. Multisite discounts offered
6. Warranty provided7. After Sales Service
8. Credit terms
9. Implementation Strengths
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2. Customer Preferences
After the criteria have been identified, the next step is to:
Identify customer preferences concerning ERP
performance.
Customer preference is of enormous importance because:
It documents explicitly an ideal service from the
Customer’s viewpoint.
3 Customer perceptions of competing
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3. Customer perceptions of competingproducts
The next step is to detail the perceived position of each
competing product on each criterion.
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Competitive positioning decision
The marketing team decides:
How to position its ERP offering in the market.
It makes marketing sense in so far as it is chosen relative to
the identified customer preferences and competitor
performance on each important criterion and relative to
the company’s capabilities.
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It becomes very necessary before launching anypromotion, to establish the identity of the ERP.
Identity is based on characteristics that make an ERP:
What it is
What it is intended to provide.
Once the identity is established, it is time to decide the unique
selling proposition (USP).
Promotion
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Understanding the advantages and the limitations of the
ERP,
the company should target those prospects that willpossibly look at what it is offering.
Those companies do best:
which define their target markets carefully and
prepare a tailored marketing programme.
Target market
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A company can define its target market but fail to fully
understand customer needs.
For example,
a customer says he wants an “inexpensive” car. The marketermust probe further. We can distinguish among five types
of needs.
Customer Needs
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1. Stated needs (the customer wants an inexpensive car)
2. Real needs (the customer wants a car of which the
operating cost, not the initial price, is low)3. Unstated needs (the customer expects good service from
the vendor)
4. Delight needs (the customer buys a car which would earn
him complements)5. Secret needs (the customer wants to be seen by friends as
a value oriented savvy consumer)
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Relationship marketing
To understand customer relationship marketing, firstly Examine the process involved in attracting and keeping
customers.
The first point is:
Suspect everyone who might conceivably buy your ERP andimplementation service.
The company looks hard at the suspects to determine who
the most likely prospects may be:
The people who have a strong potential interest in theproduct.
Those who have ability to pay
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Disqualified prospects are those:
Whom the company rejects because they have poor credit
or would be unprofitable.
The company hopes to convert many of its qualified prospects
into:
First-time customers and then to convert those satisfied first-time customers
into repeat customers.
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The next challenge is:
To turn clients into advocates, customers who praise the
company and encourage others to buy it.
The ultimate challenge is:
To turn advocates into partners, where the customer and
the company actively work together.
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Planning Marketing Programmes
To transform marketing strategy into marketingprogrammes:
Marketing managers must take basic decisions on:
Marketing expenditures
Marketing mix
Marketing allocation
Fi tl i M k ti E dit
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Firstly in Marketing Expenditure,
The organization must decide the level of their marketing
expenditures.
A particular company may spend more than the normal
percentage ratio in the hope of achieving a higher market
share.
Secondly in Marketing Mix,
The company has to decide:
How to divide the total marketing budget among the
various tools in the marketing mix.
Finally in Marketing Allocation
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Finally in Marketing Allocation,
Marketers must decide on the allocation of the marketing
budget to the:
ERP
Channels
Promotion media
Sales areas
Direct versus distributor sales
M k i S
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Marketing Strategy
The product manager now outlines the broad marketingstrategy or “game plan” that the person will use to
accomplish the plan’s objectives.
T t k t T id tif i d t t
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Target market: To identify industry sectors
Positioning: Define and emphasize USP the product
Product Line: Add-on products
Price: Competitive price
Distribution: Synergy with hardware/softwarevendors.
Sales force: To expand by 10% andintroduce a national account-management system.
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Service: To provide widely available and quick service by
competent professionals.
Advertising: To develop a new advertising campaign that
supports the positioning.
Seminars/Trade shows: To participate in trade shows and
seminars.
Strategy: To emphasize USP in the advertisements andcommercials
P i i i h ERP b i
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Participants in the ERP buying process
1. Those who request that some ERP must be purchased.They may be users who initiate the proposal and help
define the ERP requirements.
2. Those who will use the software or service.
3. Technical personnel
4. People who decide on ERP requirements and/or on
vendors.
5. People who have formal authority to select the vendor
and arrange the purchase terms.
Within any organization, the buying centre will vary in the
number and type for different classes of products.
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According to a Pentagon research survey, the average
number of people involved in a buying decision ranges
between three and four. There is a trend towards team-
based buying.
Wh ill i ERP?
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Who will require ERP?
1. Organizations with a vision for leadership. To be aleader, it is necessary that the organizations make the
best use of the available resources.
2. Organizations that are customer-service driven
3. Organizations that are under tremendous pressure to becompetitive.
4. Organizations that enter an already crowded market.
5. An organization in which the business processes are too
complex and which, therefore, requires the highest levelof coordination among the employees.
Th A t l S l C l
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The Actual Sales Cycle
Step 1: Prospecting:
Generate a pipeline of prospects to assess the ERP
automation needs of the organization.
The pipeline should include the top 500 companies:
Companies which are willing to embrace the latest in
the technology and have the approved budget.
St 2 Q lifi ti f t
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Step 2: Qualification of prospect:
In Step 2:The identification and assessment of the prospect is carried
out and understood at this point.
If proper qualification is not done, then the salesperson may
end up wasting his/her time talking to the wrong prospect.
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Step 3: Corporate marketing presentation:
The first step towards proving your strength either in termsof the organization or in terms of the ERP product is
through a:
Jazzy presentation.The presentation should cover details about:
The company
Its corporate mission
Philosophy
Culture
List of customer organizations.
Step 4: Demonstration of the key features of the software:
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Step 4: Demonstration of the key features of the software:
This is the most crucial process in the entire sales cycle as
most of the decision-makers and user groups will
participate in this demonstration.
Its success is directly related to the:
Ability of the technical staff to effectively relate and
map the business processes of the organization to the
features available on the ERP software.
This requires the technical consultants to understand the
various business processes of an organization.
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Step 5: Simulation:
After the demonstration is successfully carried out, it will beideal on the part of the vendor to be more proactive by way
of talking to various user groups and getting some of their
business processes mapped onto the ERP software.
This will help in gaining confidence of the customer byproving that the ERP can deliver what is expected.
S 6 Cl i h l
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Step 6: Closing the sale:
This is the ultimate and most tricky step in the entire salescycle.
If the above mentioned steps are successfully carried out,
80% of the selling is done.
The final 20% depends on the:Price
The discounts offered
The track record of the organization in successful
implementation of the ERP.