2.1 © 2003 by Prentice Hall 2 2 INFORMATION SYSTEMS IN THE ENTERPRISE ENTERPRISE Chapter

2.1 © 2003 by Prentice Hall

22

INFORMATION INFORMATION

SYSTEMS IN THESYSTEMS IN THE

ENTERPRISEENTERPRISE

Chapter


• What are the key system applications in a What are the key system applications in a business? What role do they play?business? What role do they play?

• How do information systems support the How do information systems support the major business functions?major business functions?

• Why should managers pay attention to Why should managers pay attention to business processes?business processes?

Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 2 Information Systems in the EnterpriseChapter 2 Information Systems in the Enterprise

OBJECTIVES


• What are the business benefits of using What are the business benefits of using collaborative commerce, private collaborative commerce, private industrial networks and enterprise industrial networks and enterprise systems?systems?

• What types of information systems are What types of information systems are used by companies that operate used by companies that operate internationally?internationally?


OBJECTIVES


1.1. Integration:Integration: Different systems serve variety of Different systems serve variety of functions, connecting organizational levels functions, connecting organizational levels difficult, costlydifficult, costly

2.2. Enlarging scope of management thinking:Enlarging scope of management thinking: Huge system investments, long development Huge system investments, long development time must be guided by common objectivestime must be guided by common objectives


MANAGEMENT CHALLENGES



Types of Information Systems

Figure 2-1

KEY SYSTEM APPLICATIONS IN THE ORGANIZATION



Major Types of Systems

• Executive Support Systems (ESS)Executive Support Systems (ESS)

• Decision Support Systems (DSS)Decision Support Systems (DSS)

• Management Information Systems (MIS)Management Information Systems (MIS)

• Knowledge Work Systems (KWS)Knowledge Work Systems (KWS)

• Office Automation Systems (OAS)Office Automation Systems (OAS)

• Transaction Processing Systems (TPS)Transaction Processing Systems (TPS)




TYPES OF INFORMATION SYSTEMS

Figure 2-2




Transaction Processing Systems (TPS):Transaction Processing Systems (TPS):

• Basic business systems that serve the Basic business systems that serve the operational leveloperational level

• A computerized system that performs and A computerized system that performs and records the daily routine transactions records the daily routine transactions necessary to the conduct of the businessnecessary to the conduct of the business



Payroll TPS

Figure 2-3




Types of TPS Systems

Figure 2-4



Knowledge Work Systems (KWS):

Knowledge levelKnowledge level• Inputs:Inputs: Design specsDesign specs

• Processing:Processing: ModelingModeling

• Outputs:Outputs: Designs, graphicsDesigns, graphics

• Users:Users: Technical staffTechnical staff

Example: Engineering work stationExample: Engineering work station




Management Information System (MIS):

Management levelManagement level• Inputs:Inputs: High volume data High volume data

• ProcessingProcessing:: Simple models Simple models

• Outputs:Outputs: Summary reports Summary reports

• Users:Users: Middle managers Middle managers

Example: Annual budgetingExample: Annual budgeting





Figure 2-5


Management Information System (MIS)


• Structured and semi-structured decisionsStructured and semi-structured decisions

• Report control orientedReport control oriented

• Past and present dataPast and present data

• Internal orientationInternal orientation

• Lengthy design processLengthy design process



Management Information System (MIS)



Decision Support System (DSS):

Management levelManagement level• Inputs:Inputs: Low volume data Low volume data

• Processing: Processing: InteractiveInteractive

• Outputs:Outputs: Decision analysis Decision analysis

• Users:Users: Professionals, staff Professionals, staff

Example: Contract cost analysisExample: Contract cost analysis




Figure 2-6


Decision Support System (DSS)



Figure 2-7


Decision Support System (DSS)



Executive Support System (ESS):

Strategic levelStrategic level• Inputs:Inputs: Aggregate data Aggregate data

• Processing:Processing: Interactive Interactive

• Outputs:Outputs: Projections Projections

• Users:Users: Senior managers Senior managers

Example: 5-year operating planExample: 5-year operating plan





Executive Support System (ESS)

Figure 2-8



• Top level managementTop level management

• Designed to the individualDesigned to the individual

• Ties CEO to all levelsTies CEO to all levels

• Very expensive to keep upVery expensive to keep up

• Extensive support staffExtensive support staff


Executive support system (ESS)



INTERRELATIONSHIPS AMONG SYSTEMS

Figure 2-9


Major functions of systems:Major functions of systems:• Sales management, market research, Sales management, market research,

promotion, pricing, new productspromotion, pricing, new products

Major application systems:Major application systems:• Sales order info system, market research Sales order info system, market research

system, pricing systemsystem, pricing system


SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

Sales and Marketing Systems



SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL

ORDER PROCESSING ENTER, PROCESS, TRACK ORDERS OPERATIONAL

MARKET ANALYSIS IDENTIFY CUSTOMERS & MARKETS KNOWLEDGE

PRICING ANALYSIS DETERMINE PRICES MANAGEMENT

SALES TRENDS PREPARE 5-YEAR FORECASTS STRATEGIC


Sales and Marketing Systems


Major functions of systems:Major functions of systems:• Scheduling, purchasing, shipping, Scheduling, purchasing, shipping,

receiving, engineering, operationsreceiving, engineering, operations

Major application systems:Major application systems:• Materials resource planning systems, Materials resource planning systems,

purchase order control systems, purchase order control systems, engineering systems, quality control engineering systems, quality control systemssystems


Manufacturing and Production Systems





MACHINE CONTROL CONTROL ACTIONS OF EQUIPMENT OPERATIONAL

COMPUTER-AIDED-DESIGN DESIGN NEW PRODUCTS KNOWLEDGE

PRODUCTION PLANNING DECIDE NUMBER, SCHEDULE OF PRODUCTS MANAGEMENT

FACILITIES LOCATION DECIDE WHERE TO LOCATE FACILITIES STRATEGIC

Manufacturing and Production Systems




Overview of Inventory Systems

Figure 2-10



Major functions of systems:Major functions of systems:• Budgeting, general ledger, billing, cost Budgeting, general ledger, billing, cost

accountingaccounting

Major application systems:Major application systems:• General ledger, accounts receivable, General ledger, accounts receivable,

accounts payable, budgeting, funds accounts payable, budgeting, funds management systemsmanagement systems


Financing and Accounting Systems





ACCOUNTS RECEIVABLE TRACK MONEY OWED TO FIRM OPERATIONAL

PORTFOLIO ANALYSIS DESIGN FIRM'S INVESTMENTS KNOWLEDGE

BUDGETING PREPARE SHORT TERM BUDGETS MANAGEMENT

PROFIT PLANNING PLAN LONG-TERM PROFITS STRATEGIC

Financing and Accounting Systems



Major functions of systems:Major functions of systems:• Personnel records, benefits, Personnel records, benefits,

compensation, labor relations, trainingcompensation, labor relations, training

Major application systems:Major application systems:• Payroll, employee records, benefit Payroll, employee records, benefit

systems, career path systems, personnel systems, career path systems, personnel training systemstraining systems



Human Resource Systems




TRAINING & DEVELOPMENT TRACK TRAINING, SKILLS, APPRAISALS OPERATIONAL

CAREER PATHING DESIGN EMPLOYEE CAREER PATHS KNOWLEDGE

COMPENSATION ANALYSIS MONITOR WAGES, SALARIES, BENEFITS MANAGEMENT

HUMAN RESOURCES PLANNING PLAN LONG-TERM LABOR FORCE NEEDS STRATEGIC





Figure 2-11




Business processes Business processes

• Manner in which work is organized, Manner in which work is organized, coordinated, and focused to produce a coordinated, and focused to produce a valuable product or servicevaluable product or service

• Concrete work flows of material, Concrete work flows of material, information, and knowledge—sets of information, and knowledge—sets of activitiesactivities


Business Processes and Information Systems

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES




• Unique ways to coordinate work, Unique ways to coordinate work,

information, and knowledgeinformation, and knowledge

• Ways in which management chooses Ways in which management chooses

to coordinate workto coordinate work






Information systems help organizationsInformation systems help organizations

• Achieve great efficiencies by automating Achieve great efficiencies by automating parts of processes parts of processes

• Rethink and streamline processesRethink and streamline processes


• Manufacturing and production:Manufacturing and production: Assembling product, checking quality, Assembling product, checking quality, producing bills of materialsproducing bills of materials

• Sales and marketing:Sales and marketing: Identifying Identifying customers, creating customer awareness, customers, creating customer awareness, sellingselling


Examples of Business Processes



• Finance and accounting:Finance and accounting: Paying Paying creditors, creating financial statements, creditors, creating financial statements, managing cash accountsmanaging cash accounts

• Human Resources:Human Resources: Hiring employees, Hiring employees, evaluating performance, enrolling evaluating performance, enrolling employees in employees in benefits plansbenefits plans


Examples of Business Processes





Cross-Functional Business ProcessesCross-Functional Business Processes

• Transcend boundary between sales, Transcend boundary between sales, marketing, manufacturing, and research and marketing, manufacturing, and research and developmentdevelopment

• Group employees from different functional Group employees from different functional specialties to a complete piece of workspecialties to a complete piece of work

Example: Order Fulfillment ProcessExample: Order Fulfillment Process




Figure 2-12

The Order Fulfillment Process





Customer Relationship Management (CRM)Customer Relationship Management (CRM)

• Manages all ways used by firms to deal with Manages all ways used by firms to deal with existing and potential new customersexisting and potential new customers

• Business and Technology disciplineBusiness and Technology discipline

• Uses information system to coordinate entire Uses information system to coordinate entire business processes of a firmbusiness processes of a firm

Customer Relationship Management (CRM)




• Provides end-to-end customer careProvides end-to-end customer care

• Provides a unified view of customer Provides a unified view of customer across the companyacross the company

• Consolidates customer data from multiple Consolidates customer data from multiple sources and provides analytical tools for sources and provides analytical tools for answering questionsanswering questions






Figure 2-13




Supply Chain Management (SCM)Supply Chain Management (SCM)• Close linkage and coordination of activities Close linkage and coordination of activities

involved in buying, making, and moving a involved in buying, making, and moving a productproduct

• Integrates supplier, manufacturer, Integrates supplier, manufacturer, distributor, and customer logistics time distributor, and customer logistics time

• Reduces time, redundant effort, and Reduces time, redundant effort, and inventory costsinventory costs

Supply Chain Management (SCM)




Supply ChainSupply Chain

• Network of organizations and business Network of organizations and business processes processes

• Helps in procurement of materials, Helps in procurement of materials, transformation of raw materials into transformation of raw materials into intermediate and finished productsintermediate and finished products





• Helps in distribution of the finished Helps in distribution of the finished products to customersproducts to customers

• Includes reverse logistics - returned items Includes reverse logistics - returned items flow in the reverse direction from the flow in the reverse direction from the buyer back to the sellerbuyer back to the seller





Supply Chain Management

Figure 2-14


• Decide when, what to produce, store, moveDecide when, what to produce, store, move• Rapidly communicate orders Rapidly communicate orders • Communicate orders, track order statusCommunicate orders, track order status• Check inventory availability, monitor levelsCheck inventory availability, monitor levels• Track shipments Track shipments • Plan production based on actual demand Plan production based on actual demand • Rapidly communicate product design changeRapidly communicate product design change• Provide product specificationsProvide product specifications• Share information about defect rates, returnsShare information about defect rates, returns


How Information Systems Facilitate Supply Chain Management





Limitations:Limitations:

• Inefficiencies can waste as much as 25% Inefficiencies can waste as much as 25% of company’s operating costsof company’s operating costs

• Bullwhip Effect: Information about the Bullwhip Effect: Information about the demand for the product gets distorted as demand for the product gets distorted as it passes from one entity to nextit passes from one entity to next





• Supply chain planning system:Supply chain planning system: Enables Enables firm to generate forecasts for a product and firm to generate forecasts for a product and to develop sourcing and a manufacturing to develop sourcing and a manufacturing plan for the productplan for the product

• Supply chain execution system:Supply chain execution system: Manages flow of products through Manages flow of products through distribution centers and warehousesdistribution centers and warehouses





• Uses digital technologies to enable Uses digital technologies to enable multiple organizations to collaboratively multiple organizations to collaboratively design, develop, build, move, and manage design, develop, build, move, and manage products products

• Increases efficiencies in reducing product Increases efficiencies in reducing product design life cycles, minimizing excess design life cycles, minimizing excess inventory, forecasting demand, and inventory, forecasting demand, and keeping partners and customers informedkeeping partners and customers informed

Collaborative Commerce



Figure 2-15


Collaborative Commerce




Private Industrial NetworksPrivate Industrial Networks

• Web-enabled networks Web-enabled networks

• Link systems of multiple firms in an Link systems of multiple firms in an industry industry

• Coordinate transorganizational business Coordinate transorganizational business processesprocesses

Industrial Networks


• Within the business:Within the business: There are functions, There are functions, each having its uses of information systemseach having its uses of information systems

• Outside the organization’s boundaries:Outside the organization’s boundaries: There are customers and vendorsThere are customers and vendors

Functions tend to work in isolationFunctions tend to work in isolation


Traditional View of the Systems




Figure 2-16

Traditional View of the Systems




Figure 2-17

Enterprise Systems



• Firm structure and organization:Firm structure and organization: One One organizationorganization

• Management:Management: Firm-wide knowledge-based Firm-wide knowledge-based management processesmanagement processes

• Technology:Technology: Unified platform Unified platform

• Business:Business: More efficient operations and More efficient operations and customer-driven business processescustomer-driven business processes


Benefits of Enterprise Systems



• Difficult to build:Difficult to build: Require fundamental Require fundamental changes in the way the business operateschanges in the way the business operates

• Technology:Technology: Require complex pieces of Require complex pieces of software and large investments of time, software and large investments of time, money, and expertisemoney, and expertise

• Centralized organizational coordination Centralized organizational coordination and decision making: and decision making: Not the best way for Not the best way for the firms to operatethe firms to operate


Challenges of Enterprise Systems



Four main ways of organizing businesses Four main ways of organizing businesses internationally:internationally:• Domestic Exporter:Domestic Exporter: Heavy centralization of Heavy centralization of

corporate activities in the home country of origincorporate activities in the home country of origin

• Multinational:Multinational: Financial management and Financial management and control out of a central home base, production, control out of a central home base, production, sales and marketing operations decentralizedsales and marketing operations decentralized


INTERNATIONAL INFORMATION SYSTEMS

Forms of Global Business Organization


• Franchiser:Franchiser: Product created, designed, Product created, designed, financed, and produced in the home country, financed, and produced in the home country, relies on foreign personnel for production, relies on foreign personnel for production, marketing and human resourcesmarketing and human resources

• Transnational:Transnational: No national headquarters; No national headquarters; value-added activities managed from a global value-added activities managed from a global perspective, no reference to national borders, perspective, no reference to national borders, sources of supply and demand and local sources of supply and demand and local competitive advantage optimized competitive advantage optimized



Forms of Global Business Organization


Four types of system configuration:Four types of system configuration:

• Centralized Systems Centralized Systems

• Duplicated SystemsDuplicated Systems

• Decentralized SystemsDecentralized Systems

• Networked SystemsNetworked Systems



Global System Configuration



Global System Configuration

INTERNATIONAL INFORMATION SYSYTEMS

Figure 2-18


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INFORMATION INFORMATION

SYSTEMS IN THESYSTEMS IN THE

ENTERPRISEENTERPRISE

Chapter

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2.1 © 2003 by Prentice Hall 2 2 INFORMATION SYSTEMS IN THE ENTERPRISE ENTERPRISE Chapter