2. Case Study - Amazon.Com
• Launched in 1995 as an online bookstore by Jeff Bezos.
• Diversified into a broad range of items including DVDs, CDs, computer
software, video games, electronics, apparel, furniture and groceries.
• Separate websites to serve Canada, UK, Germany, Austria, France, China
and Japan.
Gross sales have
reached almost $
50B at the end of
2011 with a net
income after tax of
$ 556M.

3. Amazon.Com’s Competitive Advantage
Capital Efficiency – It does not have retail stores and limits its capital
investment to its headquarters and warehouses. It receives payments from its
customers on an average of 17 days before it has to pay its suppliers.
Inventory Velocity – Averages 16.5 times per year.
Technology - Uses information technology to execute supply chain on a large
scale to realize economies of scale making its gains in capital efficiency and
inventory velocity possible.
• Run its warehouses as efficiently as possible. It is so high tech that its ERP has
complex algorithms that can analyze relationships among the items customers
purchase to find groupings that can be located in the same warehouse, thus reducing
shipping costs. Warehouse operating costs has dropped from 20% of revenue to less
than 10%.
• Optimizes delivery performance and enhances service reputation that minimizes
distribution mistakes.
• Offers its retailing and supply chain management services to more than 1.1M other
retailers both large and small.

4. Amazon.Com’s Competitive Advantage
• The heart of Amazon.Com’s business model is information technology. It has
been investing an average of 7% of its sales.
• Some argue that Amazon has built “a stack of software on which thousands
or millions of others can build businesses that in turn will bolster the platform
in a self-reinforcing cycle.”
• Amazon strives to be “earth’s most customer-centric company” focusing on
selection, availability and price.

5. Achieving Competitive Advantage
Some IT investments only allow a company to achieve parity with its
competitors. In either case, to develop an information technology strategy, a
company must answer the following questions:
1. Can the company derive a competitive advantage from its investments in information
technology?
2. How much should the company invest? Should it be sustained over time or can it be
reduced as the company grows and becomes more established?
3. Where should the proposed investment in information technology be focused? How
should the investment be distributed across projects?
4. Should the company invest in purchasing standard information technology
applications or developing custom applications? In what balance should it use
standard and custom information technology?
5. How should information technology development, implementation and maintenance
be organized? How will projects be implemented? How should performance of the IT
management function be measured?

6. Davenport, T. H. 1998. Putting the Enterprise into the Enterprise System.
Harvard Business Review (July-August): 121-131.

7. Primary Reasons Why Companies Undertake ERP
Implementation
• To integrate their financial information and develop a common picture of what is going
on throughout the company.
• To integrate customer order information and smooth the flow from order through
delivery.
• To standardize and speed up manufacturing processes across dispersed business
units.
• To reduce inventory across the supply chain.
• To standardize human resources information.

8. Some Nasty Real Life Issues
• Hershey Foods experienced massive distribution problems following a flawed
implementation of SAP’s R/3 ERP system in 1999.
• Whirlpool blamed shipping delays on difficulties associated with its SAP R/3
implementation.
• Pharmaceutical distributor FoxMeyer Drug actually collapsed and filed a $ 500M
lawsuit against SAP and another $ 500M suit against Anderson Consulting.
• GSIS filed a controversial Php 100M lawsuit in 2009 against IBM Philippines and
Questronix over an alleged failure of its Integrated Loans, Membership, Acquired
Assets and Accounts Management System.

9. Develop Strategies to Avoid Implementation Pitfalls
• Training – Successful implementation depends on the skills and experience of the
workforce in using the enterprise systems correctly. Until people understand the big
picture and their roles in it, they find it hard to appreciate the value of entering their
own data properly and the adverse effects if they don’t.
The performance of enterprise systems is only as good as the weakest link in the
system. Overcoming the natural resistance in some organizations to sharing
information across organizational boundaries is an important part of training.
• Data Integrity – GIGO
• Reengineering Associated Business Processes – The company must understand
and take on the required process changes. Reengineering blurs organizational
boundaries and changes lines of responsibility, so attention to organizational design
issues is important in implementation as well.
• Complexity versus Simplicity – Well managed companies simplify their operating
systems so that the necessary software tools can be used effectively, but at the same
time understand the limitations of the system. ERP systems focus on solving the
problems that are most common across companies and rarely deal with the full
complexity or with the specific nuances of the business.

10. The Internet Connected Supply Chain
The Innovators Will Control the Supply Chain,
Lapide L., 2000

11. Opportunities for IT Based Competitive Advantage in
Operations
• IT investments, particularly when implemented as a standard ERP package, are rarely
the source of competitive advantage as a whole.
• Strategic advantage is derived from the business process redesign that accompanies
implementation, or more likely from the customization of select pieces of the ERP
system.
• IT can drive operations strategy, but usually only in conjunction with other operational
concepts such as lean manufacturing or just-in-time inventory.
• Sometimes competitive advantage is derived by applying IT to specific locations
within the value chain and other times it entails orchestrating activities that span the
value chain.

12. Opportunities for IT Based Competitive Advantage in
Operations
New Product Development: Use of Workgroup Technologies
It enables individuals to work together under different circumstances such as
geographical location. Examples are groupware, workflow management and document
management.

13. New Product Development: Use of Workgroup Technologies
Vendor Gartner: Horizontal Portals 2010 Gartner: Social Software 2010 Gartner: Enterprise Content Management 2010 Gartner: Unified Communications 2010 Forrester Wave: Collaboration Platforms 2009
Alcatel-Lucent No No No Challenger No
Alfresco No No Visionarist No No
Atlassian No Challenger No No Strong performer
Autonomy Corporation No No Visionarist No No
Avaya No No No Yes, leader No
Cisco No No No Yes, leader Contender
Covisint Visionarist No No No No
Day Software No No Visionarist No No
Drupal No Visionarist No No No
Huddle No Visionarist No No No
Hyland Software No No Challenger No No
IBM Yes, leader Yes, leader Yes, leader Challenger Yes, leader
Interactive Intelligence No No No Visionarist No
Jive Software No Yes, leader No No Strong performer
Liferay Yes, leader Niche No No No
Microsoft Yes, leader Yes, leader Yes, leader Yes, leader Yes, leader
MindTouch No No No No Strong performer
Mitel No No No Visionarist No
NEC No No No Challenger No
NewsGator No Visionarist No No No
Novell No Niche No No Strong performer
OpenText Challenger Challenger Yes, leader No Strong performer
Oracle Corporation Yes, leader No Yes, leader No No
RedHat JBoss Challenger No No No No
SAP AG Yes, leader No Niche Niche No
Siemens No No No Visionarist No
Socialtext No Visionarist No No Strong performer
SpringCM No No Visionarist No No
SuccessFactors No Visionarist No No No
Telligent No Visionarist No No No
Tibco Software Visionarist No No No No
Traction Software No Niche No No Strong performer
Vendor Gartner: Horizontal Portals 2010 Gartner: Social Software 2010 Gartner: Enterprise Content Management 2010 Gartner: Unified Communications 2010 Forrester Wave: Collaboration Platforms 2009

14. Opportunities for IT Based Competitive Advantage in
Operations
Forecasting
• Forecasting will always be subject to significant errors, but use of more sophisticated
approaches can reduce the variability of forecasts compared to demand.
• Internet supply chains require collaborative forecasting, planning and replenishment.
• It also requires market intelligence to develop consensus-based forecasts.
• This software integrates time series information on past demand and other external
factors such as industry data, demand for related products, the company’s and
competitor’s promotions, external data such as weather information and
macroeconomic data.

15. Opportunities for IT Based Competitive Advantage in
Operations
Pricing
• Pricing decisions can be optimized for specific market and operational conditions.
• Revenue management, a concept pioneered by the airline industry, optimizes
revenue given assessments of demand and capacity.
• A company can dynamically change prices to reflect product availability and
inventory, relative demand in recent periods, measured price elasticity and competitor
pricing.

16. Opportunities for IT Based Competitive Advantage in
Operations
Distribution
• IT enables a number of improvements in routing algorithms, load consolidation,
cross-docking methods at transit hubs, flow optimization, package tracking and
supply chain event management.
• Some are enabled with handheld devices for recording distribution actions.
Amazon.com uses dispatching software that introduces loads at different postal
locations to optimize total distribution.
• Distribution software significantly enhances the company’s rapid response to orders
and product customization.

17. Opportunities for IT Based Competitive Advantage in
Operations
Large-Scale Inventory Systems and Product Availability
• Inventory management improves efficiency and inventory turnover that reduces cash-
to-cash cycle times.
• Sophisticated systems use complex algorithms using quantitative analysis to set
inventory stock levels to reduce overages and shortages.
• There are systems that can handle complicated supply chains that consist of multiple
productions and inventory management stages.
• Large companies can pool national demand to achieve a significant advantage in
economies of scale.

18. Three Step Process for Generating an IT Strategy
Understand How the Company Wishes to Gain Competitive
Advantage
1. The business strategy dictates where the company wants to be positioned in terms
of cost, quality, availability, features / innovativeness and environmental
performance.
2. It also suggests capabilities that the firm should leverage or needs to develop.
3. The output of this step should be a general direction for the business strategy, a list
of processes that must be optimized to achieve this strategy, the set of assumptions
that constrain the process and how much it wishes to invest in IT.
4. It also includes benchmarks against competitors and knowledge of whether or not
the company wishes to distinguish itself through IT.

19. Three Step Process for Generating an IT Strategy
Identify the Ways in Which Information Technology Can be Used
to Support Those Goals
1. It depends upon understanding which processes are core and which are context,
which processes are stable and which are evolving and which processes are
supported by standard packages and which require custom development.
2. More investment in custom development to support core processes and less
investment in standard packages to support context, stable processes is required if
IT is a competitive differentiator for the organization.

20. Three Step Process for Generating an IT Strategy
Organize the IT Function to Accomplish the Goals
1. IT functions should be decentralized if there are a large number of diverse business
units with different business needs.
2. A more centralized IT function allows the company to leverage IT investments in a
homogenous environment.
3. IT skill sets must be matched to the task at hand. The greater the customization
required, the more skilled the IT organization must be.
4. Metrics to assess the IT organization’s performance should link clearly to the
company’s business strategy and ensure that individual projects yield the expected
benefits on time and on budget.