The Business Value of Information Systems. Case Study: Amazon.Com

THE BUSINESS VALUE OF INFORMATION SYSTEMS circumstance STUDY AMAZON Isabel Maria Arroyo Moreno affair training technology Module BSc course counseling with HR Greenwich School of steering, University of Plymouth (London) resignation date 8th December 2011 raillery count 2. 776 Table of Contents executive director Summary4 The rail line think of of reading placements5 foundation5 line of intersection points look on of learning5 commercial estimateprise selective discipline caution done teaching Systems6 The Value of info Systems6 guest affinity Management (CRM) Systems6 go-ahead choice Planning (ERP) Systems7 total range of a function Management (SCM) Systems8 Information Systems and the Changing subscriber line environs8 virago. com Information Systems10 Introduction10 virago. coms Information Systems Value10 viragos node Relations Management (CRM) remains11 CRM System demarcation Value11 viragos Enterprise Resource Management (ERP) System Value 13 amazon. coms Supply chemical string Management (SCM) arranging13 virago. coms SCM system Value13 amazon IS and the external changing environment . 5 finishing 16 ? Executive Summary transmission line entropy prudence requires the lend oneself of learning systems, which make feasible the conversion of data into recyclable randomness to be employ by termination makers in cheeks (Chaffey, 2004) The learning and further deployment of much(prenominal)(prenominal) systems requires makeups to make costly investments prior to know whether they be expiration to produce the desired bank line reformments.Therefore, delivering fourth dimension respect for money from teaching systems investments has be acclaim a very serious issue for many a(prenominal) an(prenominal) arrangements. There ar several examples in both the private and public firmament of dear(predicate) failures, but there argon fewer published faces of conquest (Ward, 2006) The exercise of the present wall report is to explain how added descent concern pass judgment emerges from the drill of teaching systems. The paper begins with a review of the connect belles-lettres and then, it takes a practical approach finished a case scan epitome which intends to set out the shelter of reading systems to a successful organisation much(prenominal)(prenominal) as virago.Therefore, the case study pull up stakes illustrate how different study systems adopt alterd virago to achieve a whole agonistical wages by change its food exchange techniques and the expertness of its diffusion take in a time in which the fast development of technologies call for come to redefine the commerce model deep down the sell constancy. Indeed, the exercise of Internet has changed the mode in which people acquire goods and military dishs, and present there is a strong parapraxis towards online shopping that is forcing retailers to go onto the Net if they hope to re main warlike.In this regards, amazon has been a pioneer in employ entropy systems to watch changes in the retail intentness environment, and in addition, it provides the perfect example of how a keep partnership chiffonier obtain value for money from learning system investments. ? The Business Value of Information Systems Introduction Business discipline caution is necessary to organisations in distinguish to support strategical decisions. Information adds value to organisations as it allows improving carrefours and profits, decrease line of reasoning cost and developing forward-looking innovations.Information systems argon procedured in guild to manage business information in such a agency that allows organisations to increase profitability, to mitigate harvest-feastivity and to conglomerate former(a) intangible benefits with the objective of achieving sustainable competitive advantage and bon ton success. In addition, the mathematical function of infor mation systems allow organisations to align to external changes in the business environment, differently they could non remain competitive. Business Value of InformationInformation management is essential to businesses in society to support practicable appendagees, organisational writ of execution, and strategic decisions affecting their position in the market place. According to Marchand (2000) information drive out create value for organisations by Adding value to products and dishs finished a transgress understanding of node characteristics and fills, as node activities ar monitored to develop competitive strategies. diminution cost and making business butt ones and operations to a greater extent expeditious, as information alters organisations to use fewer resources and to repair communication. Supporting organisational strategic decisions and helping with risk management assessment Enabling innovations and brand-new product and service developments (Chaffe y, 2004 Oestreich, 2010) Business Information Management through Information SystemsBusiness information management involves the use of information systems (IS) which, according to the UK academy for IS, are the means by which organisations and people, using information technologies resources, pull ahead, turn, store, use and disseminate information. (www. ukais. org Chaffey, 2004) Therefore, IS are computer based systems that collect, process and stores data, making possible its conversion into useful management information data exploit process- to be used by decision makers within organisations. (Davis & Olson, 1985 Lucas, 1990 McLeod, 1995 cited by Ramesh, 1997).The Value of Information Systems During the 1990s, there was a great line of descent about the sure value delivered by expensive organisational investments on IT and IS, as studies lay out out that there was weak correlation take onween IS investments and increased business performance (Solow, 1987 Brynjolfsoon , 1993 Strassman, 1997 cited by Dans, 2003 Chaffey, 2004) However, studies by Delone and McLean (1992, 2003) and by bring up (2009) demonstrated the importance of IS to the creation of business value and competitive advantage. jackstones, 2011) According to Jacks (2011) IS make organisations successful by any Increasing profitability gross gross revenue product, profits, ROI, rationalise be, market share increase. Increasing productivity business process outcomes, operative susceptibility, service performance Intangible benefits guest cheer and loyalty, industry performance, quality improvement. guest Relation wide-eyedcast Management (CRM) SystemsCRM systems are intended to name and sustain retentive-term business relationships with clients of an organisation. Organisations whitethorn increase their profitability if they bottom of the inning fulfil nodes and sell additional products to them. Research by Reicheld and Schefter (2000) showed that by retaining 5% more(prenominal)(prenominal) customers, online companies can increase their profits by 25% to 95%. (Chaffey, 2004) Consequently, CRM systems focus on the activities aimed to market products and services to customers in a more efficient way.By understanding customer characteristics and necessitate, organisations can elaborate tailored merchandising campaigns to acquire, retain, extend and select potential customers, which lastly will translate into increased sales and organisational profitability (Steinberg, 2006 Chaffey, 2004 Lee-Kelly, 2003) Table 4 market activities of CRM CRM marketing activitiesObjectiveInformation based marketing techniques client acquisitionGain new customersTailored marketing communication Customer keepingEncourage repeated buysPersonalized/tailored ommunications Customer extensionUp-sell (more expensive products) Cross-sell (additional products) Personalised/tailored communication Customer selectionIdentify the most responsive groups of customersData base analysis and exemplar Enterprise Resource Planning (ERP) Systems ERP systems coalesce all departments and functions crosswise an organisation, thereof eliminating IS isolation in departments such as finance, HR, marketing and the warehouse, and replacing them with a single system where all important information is affiliated unneurotic (Wailgum, 2008 Steinberg, 2006).ERP systems add value to organisations by Integrating customer assure information ERP systems integrate rank information, product encumbrance and invoices in one single system, change organisations to improve hunting lodge tracking, and to coordinate lineage and shipment among different locations simultaneously. Therefore, the order process speeds towering-speed through the organisational departments, and customers get their orders faster and with fewer mistakes. cut inventories ERP systems streamline the order utmost process and help with the address process, thus improving the decrease of the or ganisations proviso cosmic string. Wailgum, 2008 Steinberg, 2006) Supply train Management (SCM) Systems SCM systems coordinate all furnish activities of a company such as egress and distribution profits, logistic activities and chronicle management and these add value to an organisation by (Gabe, 2010 Chaffey, 2004) Increasing process efficiency SCM systems help to reduce the pass time of business processes and the resources inevitable to execute them, thus lessen costs per order. Reducing supply chains complexity SCM systems enable organisations to order today from suppliers, thus reducing the costs of distribution. better data integration within the supply chain SCM systems enable information sharing on product command between the organisation and its suppliers, which improves breed management efficiency through the use of VMI (vendor-managed inventory). The benefits include rock-bottom cost of paper processing and lower inventory retentions. Reducing costs SCM sys tems enables organisation to outsource authentic assets, to lower costs through expense competition and to offer burst service quality. (Steinberg, 2006 Chaffey, 2004) Information Systems and the Changing Business EnvironmentThe environmental influences on any organisation change rapidly, and therefore it is important to unceasingly monitor the current environment and to anticipate future trends through environmental see or sensing activities, in order to respond to changes accordingly. Organisations that either do not monitor environmental factors or do not respond to changes passablely may lose competitiveness or horizontal incur in failure. As example, IS managers need to constantly assess the relevance of new technologies and to monitor technology trends and innovations in order to remain competitive. (Chaffey, 2004). ? amazon Information SystemsIntroduction amazon is the biggest online retailer in world, although many consider that it is more a booster cable computer software developer or information systems company with a little pick, pack and ship service (Hof, 2003). This world-class retailer, which began doing business as an online bookseller in the mid 90s, has changed with the time and currently it offers its customers a wide variety of products such as electronics, clothes, beauty products, and so on. In addition, amazon operates as a service provider allowing opposite retailers to sell on its site and it also commercializes cloud terminal services and its own tablet post-PC gismo fire up-. Businessweek, 2003 Hof, 2003 Jenkinson, 2005) Therefore, amazon has become the Nets premier shopping destination in 2011, and data, information technology and information systems institute its most valuable assets. (Manjoo, 2011). viragos Information Systems Value Between 2001 and 2003, Amazon invested $300,000 into building new distribution centres and getting information systems software. However, experts hardly criticised the company assert that it would never rec all over the investment, (Gabe, 2010) and even monetary analysts such as Lehman and Brothers expressed concerns over its cash flow situation. Foley, 2000) Although it took Amazon long time to become profitable, additional revenues move once the company got enough customers and sales to pay off the initial IS investments, and their bet for information systems technology enabled the company to scale competitors such as Barnes and Nobles in the 90s and more recently Wal-Mart Stores Inc (Hof, 2003 Gabe, 2010). Amazon uses information systems to improve profitability faster and its current financial situation, strategic position, market share, and intangible benefits riposte evidence of that the companys IT and IS strategies worked as expected.According to Hottovys report (2011) Amazon doubled in size from 2008 to 2011 with $34 billion in net sales and its current revenue growth is windup to 40%. The company has a paygrade of $325 per share and generates r eturn on invested uppercase exceeding the 50% note that Amazon invests mainly in IT and IS technologies . Moreover, it has an active customer base of 137 million users that accounts for an annual growth rate of 20%.All in all, Amazon has one of the most seat of government efficient-models in e-commerce and its low cost operations, network effect and focus in customer service provide the company sustainable competitive advantage (Hottovy, 2011). Amazon uses ERP, SCM and CRM information systems. prophesier (ERP) built a multi-terabyte database for the company, bandage SCM software was acquired to lead costs and to improve cargo ships and logistics efficiency. In addition, Amazons CRM system intends to work up e-marketing efforts through the analysis of customers preferences and the readying of products for specific segments (Foley, 2000).Amazons Customer Relations Management (CRM) system Amazons CRM system uses the following applications to gather customer information A databa se of customers with personal, pen and transactional data which include their purchase collects and activities An order processing system that includes the testify of credit card information and is link to a address system A network-page system that takes customer information such as customer feedback, personal interests, regard list and product review records, and customises formats. automate communication ystems e-mail and message systems and order information systems that ensure personalised and applicable communication with customers (Hof, 2003 Jenkinson, 2005 Hottovy, 2011) CRM System Business Value Amazons CRM system creates business value through integrating customer sales, services and communication theory legally (Jenkinson, 2005 Manjoon, 2011) In order to detect patterns of consumer behaviour, customer information is analysed by data mining experts using statistical CRM and artificial intelligence (SAS) software fleck collaborative filtering technology mechanic ally analyzes past customer purchases.The analysis provides bear upon information that serves to elaborate profiles of customer item-by-item interests, which enables Amazon to send them tailored product recommendations in order to increase product sales (Foley, 2000 Hof, 2003 Jenkinson, 2005). In addition, CRM data mining activities also compare individual profiles to other customer profiles and bring them together into connatural groups. As result, the company has taken tralatitious campaign techniques and move into faster campaigns to purport different customer segments more effectively.Thus, Amazon has the ability either to launch broad campaigns to millions of customers, or more focused campaigns to a few thousands and tailored recommendations to individuals, callable to a better understanding of customer characteristics and needs (Foley, 2000 Hof, 2003). Summarizing, Amazons CRM system commix advertising, service and selling to acquire customers in order to encourage rep eated purchases through cross selling and up selling tailored marketing techniques. Jenkinson, 2005) As a result, Amazon has achieved high levels of customer inscription and loyalty. Research by Millward Brown (BrandZ study) showed that 54% of US buyers are loyal to the company, as compared with a 10% of the industry norm while a 67% of its orders are from repeated customers. Moreover, Amazon customers are more likely to buy at a higher rate than loyal customers across the syndicate, as 40% of Amazon customers are frequent users compared to an 8% of the average category (Jenkinson, 2005). ?Amazons Enterprise Resource Management (ERP) System Value prophesier is the ERP system used by Amazon and it consists of a multi-terabyte database that integrates all the information related to customer orders such as purchase history, product shipment and invoices, thus modify to streamline the order fulfilment process (Wailgum, 2008) Oracle automates the steps of this process by taking cust omer orders and process them into invoices, so when a customer comes online to buy a product the order system communicates straightway with the warehouse system to find the adequate distribution centre, while customers receive communications about their purchase status and delivery times (Bacheldor, 2004) The company recognises that without this system it would be very difficult to coordinate and control the flow of merchandise in their business operations (Bell, 2011). Such integration of information creates business value by allowing Amazon to speed faster the order fulfilment process, as well as to improve visibility of order tracking and to reduce distribution mistakes. In fact, the company has reduced its customer service contacts per order by 50% since 1999 delinquent to fewer distribution mistakes (Businessweek, 2003). Amazons Supply Chain Management (SCM) system Back in 2000, Amazon. om made expensive IS investments into building its high quality automated warehouses, and nowadays their supply chain is one of the most efficient and sophisticated in the world (Jenkinson, 2004 Businessweek, 2003, Gabe, 2010). A CRM system controls all supply chain activities of Amazon, such as transportation management, shipping activities and inventory planning, with the aim of reducing available costs and optimizing logistic operations (Gabe, 2010) Amazons SCM system Value In 2000, Amazons operational costs accounted for about a 15% of sales revenue because the process of picking and boxing different products was not very efficient. Employees had to enter data into the system manually and chutes holding pending orders were backed up when products did not arrive on time. (Businessweek, 2003)Nowadays, the implementation of a SCM system has enabled Amazon to reduce the cycle time and the resources needed to complete its operational processes, thus making them more efficient. The SCM system examines Amazons customer demand to identify items that are often purchased toge ther in order to place them at the front of the supply lines, thus modify to speed faster the process flow (Businessweek, 2003) The SCM system also allows to find where the items are physically located, so after receiving an order the system will send a picker where the product is shelved. In the case of multi-orders, the system generates optimised pick lists, finding the shortest possible route for picking the product. (Gilmour, 2003).As a result, Amazons operation costs fell down from 15% of get along sales revenue in 2000 to a 5% in 2003, and lower costs have enabled the company to offer more product discounts and free shipping in orders over $25 (Businessweek, 2003). Moreover, Amazons CRM system enables information sharing on product demand between the company and its suppliers, which improves inventory management efficiency. Amazons CRM system is linked to its suppliers IS in order to share information in real time about orders and shipment. Thus, Amazon can hold lower levels of inventory root in warehouses as it receives goods from its suppliers except when needed and accordingly to customer demand levels. Hof, 2003 Foley, 2000) convey to the CRM system, Amazon reduces costs by carrying only a 15 days worth of inventory while handed-down retailers must stock up to one hundred sixty days worth of inventory in their warehouses (Hof, 2003). In addition, information systems integration between suppliers and Amazon enables customers to buy goods directly from suppliers. The company forwards orders to its suppliers which get the product to customers directly therefore the complexity of the supply chain and costs of distribution get reduced. (Knowledge Wharton, 2009). Amazons IS and the changing external environment. Information systems have provided Amazon with competitive advantage since it as been able to adapt its business model better than its competitors to the changes that the retail industry has experienced during the past decade such as the shif t towards online shopping due to a more widespread use of Internet (Manjoo, 2011) Thus, Amazon forced handed-down retailers to go onto the Net in the 90s (Hof, 2003), while nowadays, it has the best record with new products -as they are constantly monitoring environmental changes- and their web services, cloud computing services and Kindle device are true innovations that have changed the rest of the industry (Manjoo, 2011) ? Conclusion This paper demonstrates the importance of information management and information systems to the creation of organisational business value and competitive advantage.According to Jacks, information systems contribute to organisational success by increasing profitability and productivity, and providing other intangible benefits such as customer loyalty. Subsequently, Amazons case study illustrates the perfect example of how an organisation obtains value for money of their information systems investments. The effective use of information systems has all owed the company to improve the efficiency of its distribution channels, to provide cost effective convenient products to its customers and to achieve the highest levels of customer retention and loyalty within the e-retail industry, which ultimately has helped Amazon to increase profitability and to achieve a solid financial position.In addition, information systems have provided the company with notorious competitive advantage over their competitors since it has been able to better adapt its business model to the changes that the retail industry has experienced during the past decade, such as the shift towards online shopping due to a more widespread use of Internet. ? REFERENCE LIST Books and journals 1. Bausch, P. (2003) Amazon Hacks cytosine Industrial-Strength Tips and Tools (1st Edition) ORelly. USA 2. 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