S No. Topic Page No.
1. Introduction 03
2. What is VSM? 04
3. Purpose of VSM tool 04
4. Sections of VSM 06
5. How to Create a VS map? 09
6. VSM Symbols 11
7. VSM Process Steps 16
8. Financial Management 21
9. Productivity 24
10. Enterprise Resource Planning 28
11. e-Business Model 28
12. Conclusion 40
13. References 41
3. VALUE STREAM MAPPING
A value stream is defined as all the value-added and non-value-added actions required to bring a specific
product, service, or combination of products and services, to a customer, including those in the overall
supply chain as well as those in internal operations.
VSM is an extremely valuable tool in lean manufacturing and the continuous improvement effort.
Traditionally, it is a pencil-and-paper visualization tool that shows the flow of material and information
as a product makes its way through the value stream; hence, waste and its sources can be identified. This
initial map that identifies the sources of waste in a production process is referred to as the current state
map. However, the purpose of value stream mapping is not only to identify the sources of waste, but also
to eliminate the sources of waste by developing future state value stream that can be implemented in a
short period and ultimately the production process is improved .
Through VSM, a business process is examined from beginning to end. An end-to-end system map is
created; this is called the current state map. A future state map shows how things should work in order to
gain the best competitive advantage. The opportunities for improvement at each step that would have a
significant impact on the overall production system are highlighted on the future state map and then
implemented, creating a leaner production process.
The key to VSM is to see the big picture as a sum of the parts. Rather than optimizing one part
of one step or ―fixing something broken,‖ you see how that step fits into the overall production
process and how changing it will affect the overall process. This provides the opportunity to
visualize how different types of changes, or a combination of changes at multiple places in the
process, will affect the entire system. The change, or set of changes, that will result in the most
efficient production overall can then be chosen.
It is often associated with manufacturing , it is also used in logistics, supply chain, service related
industries, healthcare, software development, and product development.
VSM technique involves flowcharting the steps, activities, material flows, communications, and other
process elements that are involved with a process or transformation.
4. A Value Stream Map is a diagram of all actions (both value added and non-value added) required
to bring a product through from raw material to the arms of the customers.
“Whenever there is a product for a customer, there is a value stream. The challenge lies in seeing
What is Value Stream Mapping?
A value stream map is a special type of flow chart that is used to depict and improve:
a) the flow of the thing being processed, and
b) information that controls the flow of the thing being processed.
Purposes of a Value Stream Management tool
1. Graphically illustrate and analyze the flow of the thing being processed and the information
needed to process it
2. Highlight problems and proposed countermeasures - in highly visual ways
3. Focus direction for your lean transformation teams
4. Serve as a dashboard to monitor and continuously improve.
Preparation - Before forming your Value Stream Team
Use the Product Family Matrix template to define your product and service families
Define the segment of the value stream that you will be mapping
First pass - Understand the Current State
Train your Value Stream Mapping team
Physically walk the path of the thing being processed -
documenting process steps
Create your As Is value stream map
Choose the metrics you want to measure
Enter your data
5. Second Pass - Analyze and Reflect
Analyze and gain consensus for your value stream analysis
Identify problems and root causes
Reflect, ponder, and think...
Third Pass - Improve
It is common to improve your value stream in phases:
1. Meet customer demand (immediately)
2. Organize for continuous flow
3. Level the work flow
For each phase, create a Value Stream Plan, with specific assignments and deadlines
Each "next phase" should have a timeline of no more than six months to have everything on
that Value Stream Plan completely implemented.
Manage your lean value stream
Add data for multiple scenarios
6. Sections of the Value Stream Map - Examples
Section 1: Header Data
Section 2: Information Flow
The flow of the information that drives the flow of the thing being processed
Section 3: Flow of the thing being processed
Section 4: Lean Metrics - within each process
Section 5: Lean Metrics - between processes
Section 6: Simultaneous processes
Section 7: Bottom Line Analyses
7. Section 8: Old State Comparison
Section 9 : Hide/Unhide Rows
Initially, value stream mapping can seem a bit intimidating. There are lots of funny looking icons and zig
zaggy lines that upon first glance seem to do nothing but confuse things.
Potential Opportunities for Improvement Include:
· Eliminating redundant approvals;
· Improving the flow of paperwork;
· Restructuring how orders are handled; and/or
· Labeling and rearranging a storage area to avoid ordering redundant supplies
7 Steps to Current State Value Stream Mapping
1. Diagram needs to be on one sheet of paper
2. Use the standard format for the diagram
3. Use the standard symbols for the diagram
4. Capture all of the data yourself
5. Walk, Understand and Validate the process
6. Involve as many people as practical
7. Use paper and pencil
• Visual Representation of a Value Stream or the work process
• Pencil & Paper Tool with lots of post its
• Helps Reveal Waste & Problems with the Flow
• It Establishes a common language to document a processes
• Provides a blueprint for improvement
Three Steps in Understanding the Value Stream
Before a current-state value stream map can be created, a project team must identify and understand the
value stream. Following is a three-step method for identifying value streams:
1. Create a List of Products and Group Them in Families -
8. Some companies offer varied products and services. For example, an investment company offers
different investment opportunities. A finance company offers different types of loans, including first
mortgages, home equity, car loans and small business loans. It is relatively easy to group products
into families by constructing a simple table, like the one below. The goal is not only to identify
all product families, but also to identify what process steps each product utilizes.
2. Determine which product or service is considered primary.
While a product/service may utilize different processes, a company needs to concentrate on one
process at a time, focusing on processes critical to company goals. In many instances, a company's
improvement plans may be filled with process improvement projects with no clear link to its overall
goals or vision. With limited resources available, efforts need to be concentrated only on those
projects that really need to be done. Selecting which product family to analyze will depend on the
individual business situation. Examples of products/services to analyze include those that:
Stem from company goals/vision.
Utilize the most process steps.
Are known to have high defect rates.
Represent the voice of the customer and offer the highest customer rate of return.
Are high volume in dollars and/or units.
3. Document the steps of the process - initial walk-through.
During the walk-through, think about the customer. How does the customer receive the product or
service? What triggers the product or service to be delivered to the customer? What are the inputs?
From where are these inputs supplied? Once the walk-through is completed, there should be enough
initial data to understand the value stream, and begin creating a current-state value stream map
with a more detailed depiction of the value stream.
9. Value Stream Mapping Example
Four Steps To Value Stream Mapping
Define and pick the product or product family
Create the ―current state‖ value stream mapping (CSVSM)
Create the ―future state‖ value stream mapping (FSVSM)
Develop an action plan to make the CSVSM and FSVSM.
How to Create a Value Stream Map
How to do Value Stream Mapping
Value stream Mapping will help you to identify and eliminate the wastes in your processes
enabling you to make more profit and better satisfy your customers.
By creating a map showing you current state with all of the current flows of products and
information you can enable an analysis of your current state and develop your future state value
stream map as something to aim towards with your improvements.
10. Gather Data for Value Stream Mapping
A value Stream Map is not something that can be created from the comfort and peace of your
office, you have to get out and observe the actual process, not what is written in the company
manuals and other documentation.
You need to go out and start to gather the actual data that reflects the reality of what goes on in your
Start with the Customer and walk backwards through the process, record your data meticulously as
you go, identifying any obvious waste as you do so and inventory levels. Record information flows as
well as the flow of material.
Typical data to be collected is as follows,
Cycle time (time taken to make one product)
Change over time (from last good piece to next)
Uptime (on-demand machine utilisation)
Number of operators
Net available working time
Pack size/pallet sizes
Lean is a well-defined set of tools that increase customer value by eliminating waste and creating flow
throughout the value stream. The following bullets describe lean improvements:
Inexpensive to implement
Focus on improving the process, not the people
Address the batch and queue mentality of silos
Promote simple, error proof systems
11. The Lean Steps
Value Stream Mapping Symbols
The Symbols are typical symbols used when creating a value stream map, the map is best done by hand
in pencil so that you can modify and improve on it as you create it, the most important thing here is
getting the data organized in a meaningful manner.
Common Icons Used in Value Stream Maps
Here is a key to Lean symbols used in the value stream maps in this toolkit.
13. Transportation shapes
Most transportation shapes need no explanation.
There are so many modes of transportation, however, that you might want to add some custom shapes to
depict a mode of transportation used in your unique value stream.
(Perhaps a pipeline? A vacuum tube? A rocket? A horse and buggy?)
Rather than cluttering our standard template with every form of transportation known to man, we make it
easy for you to add your own custom shapes.
Custom Shapes for Value Stream Analysis
In addition to all of the standard value stream mapping symbols that come with your Systems2win
template, it is very easy to add your own custom shapes:
1. Simply paste any image from the clipboard to your current worksheet, or...
2. You can easily personalize your master Systems2win template - so that your custom shape is
always available every time that any of your licensed users open your (personalized) template.
Types of Lines and Arrows
Used in value stream mapping and other types of lean process flow charts.
14. Red dashed arrow = message flow arrow - indicating the flow of information.
Every message arrow should have a text box to explain the type and frequency of information,
and can optionally have a shape indicating the mode of information transfer (e.g. phone, FAX, email,
Red dot-dash arrow = Expedite information
Example: The expedite arrow containing the telephone - between Process 3 and 4
To change the "dash" property of any arrow, right-click > Format AutoShape > Colors and Line >
Broad white arrow = Shipment to Customers or from Outside Sources
such as suppliers and third-party logistics providers.
Thick black dashed arrow = Push Arrow
Example: Between Process 4 and 5
The thing being processed is being produced according to some pre-determined (non-Lean) schedule -
and then is "pushed" downstream - whether or not the next downstream process has any need for it.
Thin black arrow = Flow Arrow
15. Examples: Between Processes 2, 3, and 4
This is the most common arrow to indicate the flow of the thing being processed.
Dotted black arrow = Expedited Flow
Example: The dotted black arrow containing the airplane - between Processes 3 and 4
In this example, there are usually daily shipments between Processes 3 and 4, but about twice a year, the
production manager for Process 3 gets a phone call requesting an urgent plane shipment.
Dashed blue arrow = Kanban flow
Kanbans are a simple way to authorize release of work or materials.
What is a kanban?
A kanban is any signaling device that gives authorization and the minimal instructions needed:
a) for a supplying process to know what to produce, or
b) for a material handler to know what items to replenish
Circular black arrow = Withdrawal
The circular arrow between Process 1
and 2 conveys the exact same
information as the symbols between
Process 2 and 3 - using one simple
symbol as a shorthand shortcut.
Define Process Flows in VSM
The first thing to record is your actual process flow, which are the specific process steps and in what
order do they come. Map out the Flow from Supplier in the top left to the Customer in the top right.
Each process should be documented in the order in which they occur.
16. VSM Process Steps
Define Your Value Stream Map Information Flows
Detail out the flow of information from the company to suppliers, from customer to the company and
how the information flows between the different processes. Record what the information is, daily plan,
customer order, monthly schedule and so on.
VSM Information Flow
Add Process Data to your Value Stream Map
The next thing to add is the process data for each step in the overall process. Add the data which you
have gathered when you studied the process. You should include the location and size of any
inventory, cycle times, setup times and all other recorded data. This will give a full outline of how your
processes flow. Your lead time at each stage is calculated by multiplying the inventory by the cycle
time which will tell you how long it will take to process all of your inventory through the system.
17. Analyse Value Stream Map
The completed map will tell us an enormous amount about our processes, it will show how we use
information and schedules to push production rather than pull production. It shows how we run batches
of material rather than trying to flow it through our processes. We can also look at how much our value
add is as a proportion of our overall lead time, in this case we are looking at 8 minutes of value adding
time from a lead time of over 8 days, not an untypical result.
Most Value Stream Maps show that product is worked on for 5% or less of the time that it is within
our companies, most of the time it sits in inventory waiting to be processed.
Create Future State Value Stream Map
The future state VSM is created using the same symbols and process as the current process map.
However what we need to do is try to define a process flow that better meets the needs of our customers
whilst removing as much waste as possible.
Firstly confirm the required process flow, what processes are required in which order? Then the actual
demand of the customer, what is the Takt time? Tact time being the drum beat at which the customer
actually demands produc.t.
Each process must be able to meet the Takt time or we will not meet customer demand, too fast and we
To make this work we must ensure that we have repeatable reliable processes, we must introduce ideas
and Total Productive Maintenance (TPM). Without reliable, repeatable processes we will end up with
stock being held as a safety buffer.
Once we have our future state map, we can plan to implement our changes, once implemented we repeat
the process to gain further improvements of our processes.
The Three Steps to Value Stream Mapping
1. Current State Drawing
The current production system is drawn by first conducting a walk through of the entire system
from beginning to end. During the walk through gather information on the shop floor and
analyze the current production system. Then draw a basic overview map with process and
18. material flows represented by different symbols on the map. A set of existing symbols can be
used or a new set created, but the method of mapping should always be kept consistent within the
company to gain better staff understanding and awareness. After the basic production process is
understood, more detail is added to the map at each process step creating a comprehensive picture
of the current system.
2. Future State Drawing
Future state ideas will likely arise while gathering information in the first step. You can either keep a
running list of these ideas and turn them into a future state map after you have completed the current state
map, or draw the future state map alongside the current state map. A key to creating a more Lean future
state is identifying areas of overproduction and root causes of waste in the current production system, and
finding ways to reduce or eliminate them in the future system. The idea behind creating a Lean value
stream is to create only what is needed when it is needed. A few ways to help accomplish this are to use
takt time (the rate of customer demand) to synchronize the pace of production with the pace of sales,
develop a continuous flow, and level the production mix. More details on how to Lean the value stream
can be found in the resources below.
3. Work Plan and Implementation
In this step, a work plan is prepared based on the future state value stream map that describes specific
ways in which the future state map will be achieved. VSM is a tool to identify areas that need
improvement in the value stream. By itself, VSM will not produce the desired change; implementation is
key to achieving results. Implementation is usually best done in stages since the entire system is affected.
One way of doing this is to break the future state map into segments or loops, and implement changes
within one loop at a time. The work plan should also include measurable goals and checkpoints. Once the
work plan is implemented a new, more efficient current state is formed. To keep continuous
improvement happening in your business, once a future state becomes a new current state, a new future
state map should be drawn, and the cycle continued. An annual value-stream review is a good way to
keep things moving.
Why Draw Pictures?
A factory is enormously complex. Only visuals convey enough information to understand the pieces,
relationships, hidden waste and time-domain behavior.
Visualization brings a deep understanding and major break throughs in productivity and other
performance. It leads to consensus on systemic problems and remedies. While finished charts
19. communicate information about a situation, the real value is the mapping itself. This is where insights
grow, paradigms shift and consensus builds.
Value Stream and Process Maps take different perspectives, but, the work they visualize is the same.
Which Process Map Should Use?
Why not take advantage of both models by using detailed process mapping and adding value stream
mapping data into it. While each type of map is used to identify different variables, there is more value in
combining components of value stream with detailed process mapping. Detailed process mapping has all
the process components the value stream map does, and it can be broken down in much greater detail.
Due to the time involved in constructing detailed process maps, one could include detailed process
mapping after value stream mapping has located the bottleneck.
Value stream mapping requires both current- and future-state process maps. However, future-state maps
are often less well-defined in services or administrative organizations. These organizations typically
require a strategic perspective, like what the new service delivery model looks like. Value stream
mapping typically focuses on a single product family, but choosing only one product family may not be
appropriate in a service organization - especially if the customer can choose between different channels.
For example, in banking, the customer may choose channels such as online, email or telephone banking.
Focusing on a single product family may not provide the insight needed to identify all available
improvement opportunities. In such cases, the value stream mapping methodology can be combined with
other tools such as a bottleneck analysis.
Bottom line, value stream mapping is a powerful tool that helps identify the vital few Lean and Six
Sigma projects that will yield the most value to the process tagged for improvement. And its approach of
current- and future-state maps allows Six Sigma practitioners to know where they are starting from,
where they are going and how they will get there. When a company reaches tomorrow, it will be much
more rewarding if it knows the route it followed.
Manufacturing systems are faced with continuously changing market conditions. Due to this fact,
enterprises are permanently forced to adapt their organizational and personnel structures to new
requirements created by these changing market conditions. In order to fulfil these requirements, it is
becoming more and more important to take the cost intensive personnel resources into consideration. In
analysing the relationship between employee and organization, two extreme standpoints can be
distinguished. One school of thought claims that organizations do not exist (reification): there are only
20. people (parts) working together to obtain specific goals. The opposite standpoint is the claim that
separate human beings cannot function without a social context, such as an organization, providing a
meaning to the life of individual employees. The most important aims and tasks of personnel
departments, realize at the modern organizations, are the following activities:
�Work and task systems
�Training and development;
2. Personnel planning The planning which focuses on the prognoses of the future demand of the
organization on workers is first step in the logging of human supplies both from among already engaged
in the enterprise how and from behind him. The frame thanks to conducted recruitment and selection
becomes in the course of the selection appeared person or persons applying about the work group,
fulfilling criteria required by the institution. After positive finishing the process of recruitment and
selection, the management of the organization makes the decisions about the employment. The planning
of human resources consists in the settlement of the future workings, which aims to undertake for the
achievement the appointed aim. Planning of human supplies answers the strategy of the organization,
defines future structure and the size of the employment. The process of the planning of human supplies
defines the level of personnel needs indispensable to frame and the realization of the strategy of the
management human supplies. This is the process in which should be consider the present and future
requirements in the face of workers in the relationship with the realization of the established strategy.
The basis of the success of this process is good employment plan arising from early worked out strategy
of the development. The datum-point of the human resources planning is to determine factors, which
influence on that supplies. The internal factors connected with the firm and external factors resulting
from the surroundings of the organization should be qualified. Factors connected with the firm are
�Vision, mission and the aims of the activity of the firm;
�Plans in the range of production and logistics, the development of technology, marketing and finances;
the organizational structure of the enterprise;
21. �The financial shape of the enterprise;
Size and structure of possessed human supplies, according to such the criteria as: the occupied position
of work, lids, possessed qualifications;
� Efficiency of the work;
Applied technique and technology;
�Time of the work.
The most important factors connected with surroundings of the firm:
Situation on the labour market,
Accessibility and the information topicality relating to free places of the work;
Position of the firm on the market, her credibility;
�Competition of different organizations, in the peculiarity matters connected with the height of offered
pays and the possibilities of the development of the professional career;
�Rate and the directions of the development of used and related technologies;
�Valid law regulations, which contain norms and duties of the employer in the range of workers
�Development of education and
Education conditioning the quality of the accessible supplies of the work.
Financial management of not-for-profits is similar to financial management in the commercial sector in
many respects; however, certain key differences shift the focus of a not-for-profit financial manager. A
forprofit enterprise focuses on profitability and maximizing shareholder value. A not-for-profit
organization‘s primary goal is not to increase shareholder value; rather it is to provide some socially
desirable need on an ongoing basis. A not-for-profit generally lacks the financial flexibility of a
commercial enterprise because it depends on resource providers that are not engaging in an exchange
transaction. The resources provided are directed towards providing goods or services to a client other
than the actual resource provider. Thus the not-for-profit must demonstrate its stewardship of donated
resources — money donated for a specific purpose must be used for that purpose. That purpose is either
specified by the donor or implied in the not-for-profit‘s stated mission. The management and reporting
activities of a not-for-profit must emphasize stewardship for these donated resources. The staff must be
able to demonstrate that the dollars were used as directed by the donor. The shift to an emphasis in
external financial reports on donor restriction has made the use of fund accounting systems even more
22. critical. Budgeting and cash management are two areas of financial management that are extremely
important exercises for not-for-profit organizations. The organization must pay close attention to whether
it has enough cash reserves to continue to provide services to its clientele. Cash flow can be extremely
challenging to predict, because an organization relies on revenue from resource providers that do not
expect to receive the service provided. In fact, an increase in demand for a not-for-profit‘s services can
lead to a management crisis. It is difficult to forecast contribution revenue in a reliable manner from year
to year. For that reason, the control of expenses is an area of increased emphasis. Budgeting therefore
becomes a critical activity for a not-for-profit.
The combination of a competitive, global environment and mandatory regulatory compliance makes
successfully managing your finances one of the biggest challenges. Financial Management offers a
refreshing new approach to business, a suite of accounting applications built for the highly regulated
post-Sarbanes-Oxley Act world, built around a series of ―global engines‖ that support effective financial
management and control anywhere.
Easily monitor and track invoicing, payments, asset management, payroll and benefits in order to cut
costs and improve cash flow. Financial modules can assist you in boosting your bottom line-the definitive
test of your success and competitive advantage.
Financial Management tools include:
Credit Card Processing
Fixed Assets Management
Financial Management is distinguished by its broad focus on managing processes and resources, both
within and across locations, companies and global boundaries.
23. Global Engines
Financial Management is built around a series of unique global engines, which in turn support the global
nature of business today, enabling effective operations in existing and new markets as necessary. As your
business is extended through a combination of organic growth, mergers and acquisitions it can become
challenged by complex and demanding global financial and regulatory burdens – demands that you must
adapt to instantaneously.Global engines are designed to add accounting agility and flexibility to your
business while simultaneously allowing you to meet the local financial and legal compliance
requirements of individual markets.
General Ledger is the heart of Financial Management, processing and posting all accounting transactions
created throughout applications, as well as entries made directly within the ledger. While it is seldom
accessed outside of the accounting and tax departments, the General Ledger's impact is felt throughout an
entire enterprise. The information and controls which flow from the General Ledger system enable an
organization to operate efficiently, comply with fiscal regulations, underpin strong corporate governance
and drive enterprise performance. General Ledger provides the accounting controls and system security
necessary to help ensure the integrity of your company's financial data.
Accounts Payable (AP) allows you to enter supplier invoices for purchases that you make, then create
checks for the invoices you want to pay. The system can generate payments for all invoices due, those for
a particular supplier or only for specific invoices. If a supplier calls you to discuss an invoice, you will
have complete information at your fingertips and that history can be kept indefinitely.
Accounts Payable allows you to update both purchase orders in Purchase Management as well as actual
job costs. Adjustments are created if the purchase price does not match the invoiced price. With Accounts
Payable, you will know how much you owe and when it is due.
Scheduling is an important tool for manufacturing and engineering, where it can have a major impact on
the productivity of a process. In manufacturing, the purpose of scheduling is to minimize the production
24. time and costs, by telling a production facility when to make, with which staff, and on which equipment.
Production scheduling aims to maximize the efficiency of the operation and reduce costs.
Production scheduling tools greatly outperform older manual scheduling methods. These provide the
production scheduler with powerful graphical interfaces which can be used to visually optimize real-time
work loads in various stages of production, and pattern recognition allows the software to automatically
create scheduling opportunities which might not be apparent without this view into the data. For
example, an airline might wish to minimize the number of airport gates required for its aircraft, in order
to reduce costs, and scheduling software can allow the planners to see how this can be done, by analyzing
time tables, aircraft usage, or the flow of passengers.
Companies use backward and forward scheduling to allocate plant and machinery resources, plan human
resources, plan production processes and purchase materials.
Forward scheduling is planning the tasks from the date resources become available to determine the
shipping date or the due date.
Backward scheduling is planning the tasks from the due date or required-by date to determine the start
date and/or any changes in capacity required.
The benefits of production scheduling include:
Process change-over reduction
Inventory reduction, leveling
Reduced scheduling effort
Increased production efficiency
Labor load leveling
Accurate delivery date quotes
Real time information
Inputs are plant, labor, materials, tooling, energy and a clean environment.
Outputs are the products produced in factories either for other factories or for the end buyer. The extent
to which any one product is produced within any one factory is governed by transaction cost.
25. Within the factory
The output of any one work area within the factory is an input to the next work area in that factory
according to the manufacturing process. For example the output of the cutting room is an input to the
For the next factory
By way of example, the output of a paper mill is an input to a print factory. The output of a
petrochemicals plant is an input to an asphalt plant, a cosmetics factory and a plastics factory.
For the end buyer
Factory output goes to the consumer via a service business such as a retailer or an asphalt paving
Resource allocation is assigning inputs to produce output. The aim is to maximize output with given
inputs or to minimize quantity of inputs to produce required output.
Marketing management is a business discipline which is focused on the practical application
of marketing techniques and the management of a firm's marketing resources and activities. Rapidly
emerging forces of globalization have compelled firms to market beyond the borders of their home
country making International marketing highly significant and an integral part of a firm's marketing
strategy. Marketing managers are often responsible for influencing the level, timing, and composition of
customer demand accepted definition of the term. In part, this is because the role of a marketing manager
can vary significantly based on a business' size, corporate culture, and industry context. For example, in a
large consumer products company, the marketing manager may act as the overall general manager of his
or her assigned product To create an effective, cost-efficient Marketing management strategy, firms must
possess a detailed, objective understanding of their own business and the market in which they
operate. In analyzing these issues, the discipline of marketing management often overlaps with the
related discipline of strategic planning.
Traditionally, marketing analysis was structured into three areas: customer analysis, company analysis,
and competitor analysis (so-called "3Cs" analysis). More recently, it has become fashionable in some
marketing circles to divide these further into certain five "Cs": customer analysis, company analysis,
collaborator analysis, competitor analysis, and analysis of the industry context.
Customer analysis is to develop a schematic diagram for market segmentation, breaking down the market
into various constituent groups of customers, which are called customer segments or market
segmentation's. Marketing managers work to develop detailed profiles of each segment, focusing on any
number of variables that may differ among the segments: demographic, psycho graphic, geographic,
behavioural, needs-benefit, and other factors may all be examined.
If the company has obtained an adequate understanding of the customer base and its own competitive
position in the industry, marketing managers are able to make their own key strategic decisions and
develop a marketing strategy designed to maximize the revenues and profits of the firm. The selected
strategy may aim for any of a variety of specific objectives, including optimizing short-term unit
margins, revenue growth, market share, long-term profitability, or other goals.
To achieve the desired objectives, marketers typically identify one or more target customer segments
which they intend to pursue. Customer segments are often selected as targets because they score highly
on two dimensions: 1) The segment is attractive to serve because it is large, growing, makes frequent
purchases, is not price sensitive (i.e. is willing to pay high prices), or other factors; and
2) The company has the resources and capabilities to compete for the segment's business, can meet their
needs better than the competition, and can do so profitably. In fact, a commonly cited definition of
marketing is simply "meeting needs profitably."
The implication of selecting target segments is that the business will subsequently allocate more
resources to acquire and retain customers in the target segment(s) than it will for other, non-targeted
customers. In some cases, the firm may go so far as to turn away customers who are not in its target
In conjunction with targeting decisions, marketing managers will identify the desired positioning they
want the company, product, or brand to occupy in the target customer's mind. This positioning is often an
encapsulation of a key benefit the company's product or service offers that is differentiated and superior
to the benefits offered by competitive products.
27. Project, process, and vendor management
Once the key implementation initiatives have been identified, marketing managers work to oversee the
execution of the marketing plan. Marketing executives may therefore manage any number of specific
projects, such as sales force management initiatives, product development efforts, channel marketing
programs and the execution of public relations and advertising campaigns. Marketers use a variety
of project management techniques to ensure projects achieve their objectives while keeping to
established schedules and budgets.
More broadly, marketing managers work to design and improve the effectiveness of core
marketing processes, such as new product development, brand management, marketing communications,
and pricing. Marketers may employ the tools of business process reengineering to ensure these processes
are properly designed, and use a variety of process management techniques to keep them operating
Effective execution may require management of both internal resources and a variety of external vendors
and service providers, such as the firm's advertising agency. Marketers may therefore coordinate with the
company's Purchasing department on the procurement of these services. Under the area of marketing
agency management (i.e. working with external marketing agencies and suppliers) are techniques such as
agency performance evaluation, scope of work, incentive compensation, RFx's and storage of agency
information in a supplier database.
Reporting, Measurement, Feedback And Control Systems
Marketing management employs a variety of metrics to measure progress against objectives. It is the
responsibility of marketing managers – in the marketing department or elsewhere – to ensure that the
execution of marketing programs achieves the desired objectives and does so in a cost-efficient manner.
Marketing management therefore often makes use of various organizational control systems, such as
sales forecasts, sales force and reseller incentive programs, sales force management systems,
and customer relationship management tools (CRM). Recently, some software vendors have begun using
the term "marketing operations management" or "marketing resource management" to describe systems
that facilitate an integrated approach for controlling marketing resources. In some cases, these efforts
may be linked to various supply chain management systems, such as enterprise resource
planning (ERP), material requirements planning (MRP), efficient consumer response (ECR),
and inventory management systems.
Measuring the return on investment (ROI) of and marketing effectiveness various marketing initiatives is
a significant problem for marketing management. Various market research, accounting and financial
28. tools are used to help estimate the ROI of marketing investments. Brand valuation, for example, attempts
to identify the percentage of a company's market value that is generated by the company's brands, and
thereby estimate the financial value of specific investments in brand equity. Another
technique, integrated marketing communications (IMC), is a CRM database-driven approach that
attempts to estimate the value of marketing mix executions based on the changes in customer behavior
these executions generate.
ENTERPRISE RESOURCE PLANNING
Enterprise Resource Planning, ERP is business management software that allows an organization to use a
system of integrated applications to manage the business. ERP software integrates all facets of an
operation, including development, manufacturing, sales and marketing.
E BUSINESS MODEL
A business model is a high-level description of an application type which contains all the common
features which can be found in specific examples of the model. For example, one of the most popular
business models is the e-shop which describes a website that sells products. The model is general in that
it does not describe the item that is sold or the mechanisms that are used to carry out the sales process.
The remainder of the unit describes a series of e-commerce and e-business models.
The e-Business model, like any business model, describes how a company functions; how it provides a
product or service, how it generates revenue, and how it will create and adapt to new markets and
technologies. It has four traditional components as shown in the figure, The e-Business Model. These are
the e-business concept, value proposition, sources of revenue, and the required activities, resources, and
capabilities. In a successful business, all of its business model components work together in a cooperative
and supportive fashion.
29. E-Business Concept
The e-business concept describes the rationale of the business, its goals and vision, and products or
offerings from which it will earn revenue. A successful concept is based on a market analysis that
identifies customers likely to purchase the product and how much they are willing to pay for it.
Goals and Objectives
The e-Business concept should be based, in part, on goals such as "become a major car seller, bank, or
other commercial enterprise", and "to become a competitor to some of the well-known firms in each of
these industries." Objectives are more specific and measurable, such as "capture 10% of the market", or
"have $100 million in revenues in five years." Whether these goals and objectives are realistic or not, and
whether the company is prepared to achieve these goals is addressed in the business plan process for
startup firms and in the implementation plan for an existing firm that is considering a significant
change. In looking at the business model it is sufficient to know what the goals and objectives are, and
whether they are being pursued.
30. The E-Business Concept and Market Research
The selection and refinement of the business concept should be integrally tied into knowledge of the
market it serves. In performing market research care must be taken to account for the global reach of
the Internet for both customers and competitors. It is also important to remember that markets shift, and
can shift rapidly under certain conditions. But most important is to truly understand what the market is,
who comprises it, and what do they want.
Figure: The e-Business Concept
31. It is widely acknowledged today that new technologies, in particular access to the Internet, tend to
modify communication between the different players in the professional world, notably:
relationships between the enterprise and its clients,
the internal functioning of the enterprise, including enterprise-employee relationships,
the relationship of the enterprise with its different partners and suppliers.
The term "e-Business" therefore refers to the integration, within the company, of tools based on
information and communication technologies (generally referred to as business software) to improve
their functioning in order to create value for the enterprise, its clients, and its partners.
The term e-Commerce (also called Electronic commerce), which is frequently mixed up with the term e-
Business, as a matter of fact, only covers one aspect of e-Business, i.e. the use of an electronic support
for the commercial relationship between a company and individuals.
E Business Technology provides professional services that help your business take full advantage of the
Internet and the World Wide Web. We focus on how these technologies can improve your business
processes in a cost-effective manner.
Comprised of talented professionals with extensive experience in business consulting, web-design,
programming and integration; e Business Technology looks to establish a trusted long-term relationship
with our customers. We've been through the ups and downs of the Internet market and with that
experience and our successful track record we are ready to serve you.
CREATION OF VALUE
The goal of any e-Business project is to create value. Value can be created in different manners:
As a result of an increase in margins, i.e. a reduction in production costs or an increase in
profits. E-Business makes it possible to achieve this in a number of different ways:
Positioning on new markets
Increasing the quality of products or services
Prospecting new clients
Increasing customer loyalty
Increasing the efficiency of internal functioning
32. As a result of increased staff motivation. The transition from a traditional activity to an
e-Business activity ideally makes it possible to motivate associates to the extent that:
The overall strategy is more visible for the employees and favors a common culture
The mode of functioning implies that the players assume responsibilities
Teamwork favors improvement of competences
As a result of customer satisfaction. As a matter of fact, e-Business favors:
a drop in prices in connection with an increase in productivity
improved listening to clients
products and services that are suitable for the clients' needs
a mode of functioning that is transparent for the user
As a result of privileged relationships with the partners. The creation of
communication channels with the suppliers permits:
Increased familiarity with each other
Improved anticipation capacities
Sharing of resources that is beneficial for both parties
An e-Business project can therefore only work as soon as it adds value to the company, but also to its
staff, its clients, and partners.
CHARACTERIZATION OF THE e-BUSINESS
A company can be viewed as an entity providing products or services to clients with the support of
products or services of partners in a constantly changing environment. The functioning of an
enterprise can be roughly modeled in accordance with a set of interacting functions, which are
commonly classified in three categories:
33. Performance functions, which represent the core of its activity (core business), i.e. the production
of goods or services. They pertain to activities of production, stock management, and purchasing
The management functions, which cover all strategic functions of management of the company;
they cover general management of the company, the human resources (HR) management functions as
well as the financial and accounting management functions;
The support functions, which support the performance functions to ensure proper functioning of
the enterprise. Support functions conver all activities related with sales (in certain cases, they are part
of the core business) as well as all activities that are transversal to the organization, such as
management of technological infrastructures (IT, Information Technology function).
Enterprises are generally characterized by the type of commercial relationships they maintain.
Dedicated terms therefore exist to quality this type of relationship:
B To B (Business To Business, sometimes written B2B) means a commercial relationship
business to business based on the use of a numerical support for the exchange of information.
B To C (Business To Consumer, sometimes wrritten B2C) means a relationship between a
company and the public at large (individuals). This is called electronic commerce, whose definition is
not limited to sales, but rather covers all possible exchanges between a company and its clients, from
the request for an estimate to after-sales service;
B To A (Business To Administration, sometimes written B2A) means a relationship between a
company and the public sector (tax administration, etc.) based on numerical exchange mechanisms
(teleprocedures, electronic forms, etc.).
As an extension of these concepts, the term B To E (Business To Employees, sometimes written B2E)
has also emerged to refer to the relationship between a company and its employees, in particular
through the provision of forms directed at them for managing their career, vacation, or their
relationship with the company committee.
The concept of e-Business is nonetheless very flexible and covers all possible uses of information and
communication technologies (ICT) for any and all of the following activities:
Making the relationships between the enterprise and its clients and different partners (suppliers,
authorities, etc.) more efficient
Developing new business opportunities
Facilitating the internal flow of information
34. Controlling the different processes of the enterprise (production, warehousing, purchasing, sales,
human resources, etc.)
The goal is therefore to create privileged communication channels between the enterprise and its
environment and link them with its internal processes to better control internal and external costs.
E -B us i ne s s T e c hn o l o g y - Se r v i c e P r o v i de r s
Service providers include many kinds of businesses that provide outsourced services electronically to
other businesses. The general concept is that the service is connected at the ‗backend‘ of a firm‘s
operations to enhance their own product or service offering, or perhaps to do so at a lower cost than the
firm could do itself.
Importantly, with any Service Provider, the key issues include reliability, security, capacity and speed. If
a business depends on another to support a part of its business, it will become reliant on that service
provider. Typically, a major firm would seek a SLA (Service Level Agreement) with its service
providers, which might include penalties for significant ‗downtime‘ or ‗service outages‘.
These services tend to be abbreviated a ‗xSP‘s, where the x is an abbreviation for the kind of service
offered, for example:
ASP - Application Service Provider – a business that hosts a software application and usually provides
access via a browser link, so that with a simple Internet connection and browser, software can be
accessed and operated remotely.
MSP - Managed Service Provider also called a management service provider, is a company that manages
information technology services for other companies via the Internet. Common services provided by
MSPs include remote network, desktop and security monitoring, patch management and remote data
back-up, as well as technical assistance. Most MSPs provide these services on a monthly basis which
give small and medium sized businesses an option to have their IT needs taken care of instead of paying
for on-site staff.
PSP - Payment Service Provider (or IPSP – Internet Service Provider) – includes a range of different
payment services such as Worldpay, Paypal, Nochex, Western Union and so on. These businesses allow
other businesses to receive payments from customers via credit card, debit card and other electronic
banking services. In particular for small businesses and individuals, a PSP can provide a secure and cost-
effective solution; many such traders would be too small to afford the cost of setting up electronic
payments themselves or might be considered too small for merchant facilities by their bank.
35. ISP – Internet Service Provider – offers internet access through broadband, leased line, ISDN, dial-up
link, mobile access and so on. In many cases, ISPs also offer secure website hosting and associated email
and data storage facilities.
TSP - Telecom Service Provider - a business or organization that offers users access to the Telephone
and related services. In the past, most TSP's were government-run in most countries, due to the nature of
capital expenditure involved in it. But today there are many private players in most regions of the world,
and even most of the government-owned companies have been privatized.
Building the e-Business Infrastructure
Few in business today are unaware of the power of e-business to transform whole organizations. Yet any
organization hoping to exploit its potential must develop an infrastructure that can cope with the demands
of e-business. Are you prepared?
Infrastructure is a major issue today as it is the crucial determinant of how easily corporations can
respond to the increasingly urgent demands of their executives. ‗We need it now‘ is an e-business mantra.
IT directors can only deliver if they have an appropriate infrastructure. This Report illustrates how
companies are setting about meeting the challenge of building the e-business infrastructure.
What makes the challenge so taxing is that most companies already have an installed base of technology
that represents a major sunk cost. The installed base is highly complex in many cases, consisting of
multifarious disparate components. To replace it with a new, more unified platform is time-consuming
and risky. It will also be subject to the pressures that result in platform fragmentation; everyone has to
confront the problem of enormous pressure towards fragmentation.
At the same time, new technology suppliers are emerging in the form of more mature and sophisticated
outsourcing vendors and, more radically, application service providers (ASPs), who may enable
companies to finesse the infrastructure problem (though they are not yet mature enough to achieve this).
In this Report, we view infrastructure not only in terms of technology but also in the wider context of:
various sources of supply of technology platform services
expertise and skills required to deliver infrastructure technology
processes required to manage them
complementary investments required to enable IT infrastructure to deliver appropriate e-business
36. The Report will resonate most with senior IT executives but is in fact highly relevant to senior business
executives – technology is merely the context for what is essentially an organizational and management
In conclusion, the Report reflects the process of building e-business infrastructure. It sees infrastructure
as a dynamic process to be managed rather than as a state to be achieved. Today, it is fundamentally
about preparing organizations for a continually changing business environment. There is no technology
blueprint, rather multiple approaches that contribute to an organization‘s ability to respond to and deliver
Many e-Business opportunities fail due to inadequate infrastructure. With Building the e-Business
Infrastructure discover how you can successfully exploit e-business opportunities
Put simply, e-business is the application of sound business principles via modern, global, technology-
based communications media. As such, it reaches far and wide, affecting everyone from staff to
management, players to competitors. e-Business must address business models, values, operational
dynamics and include both audience and enterprise.
Infrastructure determines how easily corporations can respond to the increasingly urgent demands of its
executives, how they can respond to the 'fast-food' data requirements of modern business, and the
competitive nature of a global marketplace.
The technical infrastructural elements of e-business consist of Internet and server technologies, hardware
and software. That is, the Internet, intranets, extranets, networks, security solutions and a myriad of
applications promoting customer relationship management, knowledge management, business
intelligence, integrated supply chain management and many others.
However, infrastructure is much more than technology. It is the dynamic interaction and management of
strategy, skilled people, tools and processes. – It drives and must be driven by e-business. Discover how
you can create an organizational infrastructure that supports e-business with this report.
Many e-Business opportunities fail due to inadequate infrastructure.
This report addresses:
infrastructure as a management issue
role and dynamics of infrastructure
37. trends and developments in e-business and infrastructure technology
sources and supply of technology and platform services
the expertise and skills required to deliver infrastructure technology
investments necessary for optimum e-business delivery
the role of outsourcing as an infrastructural element.
With all the hallmarks of a Business Intelligence management report,
Building the e-Business Infrastructure is the complete management resource, containing:
original and exclusive research results and analysis from a survey commissioned exclusively for
analysis of the latest e-business trends and developments
insights and experiences from many leading commentators from the field of
e-business and infrastructure development
fourteen in-depth case studies illustrating how leading organizations have exploited e-business
opportunity through addressing infrastructure issues.
Optional CD-ROM format, allowing greater flexibility and versatility in information sharing.
A good infrastructure is critical to the success of an e-Business. Infrastructure must be viewed as part of
the overall picture, not a stand alone component. It must be tightly coupled with all other components
such as strategy, processes and organization. However, infrastructure decisions are sometimes taken in
isolation. That results in ―technology for technology‘s sake‖. The best hardware or software is often not
the best for every situation. Much like Rolls Royce might not be the ―best‖ car for a farmer in Idaho.
Business requirements should drive infrastructure selection. A complete and thorough analysis that
weighs in key factors such as portability, scalability, existing skills, future direction and cost should
result in an infrastructure that is the ―best‖ one for that situation.
38. E BUSINESS ENVIRONMENT AND STRATEGIES
The rate of change in e-business presents an enormous challenge to managers. Business on the Internet is
just beginning, and is evolving through a process of trial and error. Management flexibility is a key for
survival and success in e-business.
The environment of any organization consists of all of the factors that are beyond its control, but
influence it in one way or another. To counter the potential adverse affects of these factors, the e-business
can respond with strategies. An external strategy is an approach to deal with factors in the external
business environment such as competitors, markets, and technological developments, that are beyond the
company's direct control.
Technology for E Business
Technology plays a vital role in e-business. Nevertheless, companies often consume significant resources
in technology only to find out their business goals are not effectively met.
39. Implementing a product idea is always a challenge with the usual on-target, on-budget, on-time criteria.
Among the crucial tasks is to get the right technical resources - a team with great sense of responsibility;
project leads with adequate management skills and leadership; individual contributors with domain
expertise. Other challenges include proper decision in "make versus buy" for individual components of a
project and effective knowledge transfer in a out-sourced situation.
Internet technologies have revolutionized the business world by creating a global online marketplace.
Appropriate understanding for the technologies and the impact of different design choices of
technologies (including the Internet and open systems) dramatically affects both functional and non-
functional aspects of the e-business solution.
In from a few short years, e-business has gone a simple concept to an undeniable reality, and for good
reason. It works for everyone: consumers, businesses, and governments. The e-business technologies are
based on all the technologies existed on e-commerce, extranets, virtual organizations, publishing.
The next model maximizes the use of open standards and protocols versus proprietary technologies. The
most important technologies used in ebusiness and implemented by IBM Software Strategy for e-
business are: Java, Extensible Mark up Language (XML), Java 2 Platform, Enterprise Edition (J2EE),
Presentation layer, Web application server, Integration server, Protocols, Objects, Struts, Eclipse, MVC
patterns, Common Object Request Broker Architecture (CORBA), Transactions. Many of these
technology choices continue to evolve and expand as the open standards specification evolves to include
a broader view of the enterprise architecture. Next figure demonstrates some of the common ebusiness
technologies. Some technologies, such as Java and XML, can apply to more than one layer.
Trends in e-Business Technologies
As e-business continues to develop, various technologies associated with computing underlie its
evolution. Currently, the Java™ programming language and platform, the Extensible Mark up Language,
and trans-coding are emerging as major technologies for performing e-business functions.
The primary values of e-business, such as cost savings, revenue growth, and customer satisfaction, are
proving to be only the tip of the iceberg. Having realized the benefit of Web-enabling individual business
processes, many companies now seek further return on investment (ROI) by integrating new and existing
e-business applications and technologies. The key to their success is to find a way to give customers what
they want without the expense of traditional business operations. The direction toward Web services will
particularly help ―Net Generation‖ companies that are born on the Web—to become successful by
allowing their services to be easily discovered worldwide and easily integrated with other services
ranging in scale from other Net Generation services to enterprise-scale services.