2.1 © 2006 by Prentice Hall 2 Chapter Information Systems in the Enterprise EnterpriseInformation Systems in the Enterprise Enterprise

2.1 © 2006 by Prentice Hall

2Chapter

Information Information

Systems in theSystems in the

EnterpriseEnterprise

Information Information

Systems in theSystems in the

EnterpriseEnterprise


OBJECTIVES

• Evaluate the role played by the major types of systems in a business and their relationship to each other

• Describe the information systems supporting the major business functions: sales and marketing, manufacturing and production, finance and accounting, and human resources

Management Information SystemsManagement Information SystemsChapter 2 Information Systems in the EnterpriseChapter 2 Information Systems in the Enterprise


• Analyze the relationship between organizations, information systems, and business processes

• Explain how enterprise applications promote business process integration and improve organizational performance

• Assess the challenges posed by information systems in the enterprise and management solutions


OBJECTIVES (continued)


• Challenge: monthly changes in fashions; Mango has 731 stores in 72 countries

• Solutions. Inventory replenishment system tracks all sales and matches stores with inventory.

• Design teams meet weekly to adjust to trends.• Distribution system allocates bar-coded items to

specific stores based on store/product mix.• Reduces time to market, increases agility• Increases accuracy of decision making


Mango Case: Fast Fashion, Hot Systems



MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

Types of Information Systems




Different Kinds of Systems

1. Operational-level systems: support operational managers by support operational managers by keeping track of the elementary activities and transactions of keeping track of the elementary activities and transactions of the organization, such as sales, receipts, cash deposits, the organization, such as sales, receipts, cash deposits, payroll, credit decisions, and the flow of materials in a factory. payroll, credit decisions, and the flow of materials in a factory. The principal purpose of systems at this level is to answer The principal purpose of systems at this level is to answer routine questions and to track the flow of transactions through routine questions and to track the flow of transactions through the organization. the organization.

• How many parts are in inventory? How many parts are in inventory? • What happened to Mr. Williams's payment? What happened to Mr. Williams's payment? • How many hours worked each day by employees on a How many hours worked each day by employees on a

factory floor.factory floor.

Three main categories of information systems servedifferent organizational levels:


2. 2. Management-Level Systems Management-Level Systems:: serve the monitoring, serve the monitoring, controlling, decision-making, and administrative controlling, decision-making, and administrative

activities of middle managers. activities of middle managers.

• The principal question addressed by such systems The principal question addressed by such systems is: Are things working well? Management-level is: Are things working well? Management-level systems typically provide periodic reports rather than systems typically provide periodic reports rather than instant information on operations. instant information on operations.

• Some management-level systems support no routine Some management-level systems support no routine decision making. decision making.

• They tend to focus on less-structured decisions for They tend to focus on less-structured decisions for which information requirements are not always clear. which information requirements are not always clear. These systems often answer "what if" These systems often answer "what if" questions:External & Internal Data.questions:External & Internal Data.


3. Strategic-level systems: help senior management TACKLE help senior management TACKLE and ADDRESS STRATEGIC issues and LONG-TERM trends, and ADDRESS STRATEGIC issues and LONG-TERM trends, both in the FIRM and in the EXTERNAL environment. both in the FIRM and in the EXTERNAL environment.

• Their principal concern is matching changes in the external Their principal concern is matching changes in the external environment with existing organizational capability. environment with existing organizational capability.

• What will EMPLOYMENT LEVELS be in FIVE YEARS? What will EMPLOYMENT LEVELS be in FIVE YEARS? • What are the LONG-TERM INDUSTRY COST trends? What are the LONG-TERM INDUSTRY COST trends? • What PRODUCTS should we be making in FIVE YEARS?What PRODUCTS should we be making in FIVE YEARS?




Major Types of Systems

1. Transaction Processing Systems (TPS)

2. Management Information Systems (MIS)

3. Decision-Support Systems (DSS)

4. Executive Support Systems (ESS)




The Four Major Types of Information Systems




1. Transaction Processing Systems (TPS)

• Basic business systems that serve the operational level

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

• TPS are also major producers of information for TPS are also major producers of information for the other types of systems.the other types of systems.




A Symbolic Representation for a Payroll TPS




Typical Applications of TPS




2. Management Information Systems (MIS)

Management level:serve the management level of serve the management level of the organization, providing managers with reports the organization, providing managers with reports or with on-line access to the organization's current or with on-line access to the organization's current performance and historical records. performance and historical records.

• They are oriented almost exclusively to internal, They are oriented almost exclusively to internal, not environmental or external, events. not environmental or external, events.

• MIS primarily serve the functions of planning, MIS primarily serve the functions of planning, controlling, and decision making at the controlling, and decision making at the management level. management level.

• They depend on underlying transaction processing They depend on underlying transaction processing systems for their data.systems for their data.


•Inputs: High volume transaction level data

•Processing: Simple models

•Outputs: Summary reports

•Users: Middle managers

Example: Annual budgeting


2. Management Information Systems (MIS)(Continued)




2. Management Information Systems (MIS) (continued)

Figure 2-5




2. Management Information Systems (MIS) (continued)

Figure 2-6

A sample MIS report


3. Decision-Support Systems (DSS)


•DSS help managers make decisions that are unique, DSS help managers make decisions that are unique, rapidly changing, and not easily specified in advance. rapidly changing, and not easily specified in advance.

•They address non-routine problems DSS use internal They address non-routine problems DSS use internal information from TPS and MIS bring in information information from TPS and MIS bring in information from external sources, such as product prices of from external sources, such as product prices of competitors.competitors.

•DSS have more analytical power than other systems. DSS have more analytical power than other systems.

•They are built explicitly with a variety of models to They are built explicitly with a variety of models to analyze dataanalyze data

•DSS include user-friendly software. DSS include user-friendly software.

•DSS are interactive; the user can change DSS are interactive; the user can change assumptions, ask new questionsassumptions, ask new questions




Decision-Support Systems (DSS) Management level

• Inputs: Transaction level data

• Processing: Interactive

• Outputs: Decision analysis

• Users: Professionals, staff

Example: Contract cost analysis




Decision-Support Systems (DSS) (Continued)Voyage-estimating decision-support system

Figure 2-7


•ESS serve the strategic level of the organization. ESS serve the strategic level of the organization.

•They address long term non-routine decisions They address long term non-routine decisions requiring judgment, evaluation, and insight because requiring judgment, evaluation, and insight because there is no agreed-on procedure for arriving at a there is no agreed-on procedure for arriving at a solution.solution.

•ESS are designed to incorporate data about external ESS are designed to incorporate data about external events such as new tax laws or competitors, but they events such as new tax laws or competitors, but they also draw summarized information from internal MIS also draw summarized information from internal MIS

and DSSand DSS..

4. EXECUTIVE SUPPORT SYSTEMS (ESS):





EXECUTIVE SUPPORT SYSTEMS (ESS):

• Inputs: Aggregate data

• Processing: Interactive

• Outputs: Projections

• Users: Senior managers

Example: 5 year operating plan




Model of a Typical Executive Support System

Figure 2-8




EXECUTIVE SUPPORT SYSTEMS (ESS) (Continued)

• Top Level Management

• Designed to the individual senior manager

• Ties CEO to all levels

• Very expensive to keep up

• Extensive support staff




Relationship of Systems to One Another Interrelationships among systems

Figure 2-9




Relationship of Systems to One Another

•Systems serving different levels in the organization are related Systems serving different levels in the organization are related to one another. to one another. •TPS are typically a major source of data for other systems.TPS are typically a major source of data for other systems.•ESS are primarily a recipient of data from lower-level systems. ESS are primarily a recipient of data from lower-level systems. •The other types of systems may exchange data with each other The other types of systems may exchange data with each other as well. as well. •Data may also be exchanged among systems serving different Data may also be exchanged among systems serving different functional areas For example, an order captured by a sales functional areas For example, an order captured by a sales system may be transmitted to a manufacturing system as a system may be transmitted to a manufacturing system as a transaction for producing or delivering the product specified in transaction for producing or delivering the product specified in the order.the order.


•Selling the organization's products or services. Selling the organization's products or services.

•Sales& Marketing is concerned with: Marketing is concerned with:

– Identifying the customers for the firm's products or services

– Determining what they need or want

–Advertising and promoting these products and services.

–Sales is concerned with:

– Contacting customers

–Selling the products and services

–Taking orders, and following up on sales.

Sales and Marketing Systems

SYSTEMS FROM A FUNCTIONAL PERSPECTIVE





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

pricing, new products

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

pricing system





SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL

Order processing

Enter, process, and track orders Operational

Pricing analysis Determine prices for products and services

Management

Sales trend forecasting

Prepare 5-year sales forecasts Strategic

Table 2-2



Manufacturing and Production Systems

• Producing the firm's goods and services. Producing the firm's goods and services.

• Manufacturing and production activities deal Manufacturing and production activities deal with:with:

1.1. The planning, development, and maintenance The planning, development, and maintenance of production facilities of production facilities

2.2. The acquisition, storage, and availability of The acquisition, storage, and availability of production materialsproduction materials

3.3. The scheduling of equipment, facilities, The scheduling of equipment, facilities, materials, and labor required to fashion materials, and labor required to fashion finished products.finished products.





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

engineering, operations

Major application systems: • Materials resource planning systems, purchase

order control systems, engineering systems, quality control systems




SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL

Machine control

Control the actions of machines and equipment

Operational

Production planning

Decide when and how many products should be produced

Management

Facilities location

Decide where to locate new production facilities

Strategic




Overview of an Inventory System

Figure 2-10




Financing and Accounting Systems The finance function isThe finance function is responsible for: responsible for:

•Managing the firm's financial assets, such as cash, stocks, bonds, Managing the firm's financial assets, such as cash, stocks, bonds, and other investments, in order to maximize the return on these and other investments, in order to maximize the return on these financial assets. financial assets.

•Managing the capitalization of the firm (finding new financial Managing the capitalization of the firm (finding new financial assets in stocks, bonds, or other forms of debt). In order to assets in stocks, bonds, or other forms of debt). In order to determine whether the firm is getting the best return on its determine whether the firm is getting the best return on its investments.investments.

•The accounting functionThe accounting function is responsible for: is responsible for:

•Maintaining and managing the firm's financial records–Maintaining and managing the firm's financial records–receipts,expenses, payrollreceipts,expenses, payroll

•Accounting account for the flow of funds in a firm.Accounting account for the flow of funds in a firm.




Financing and Accounting Systems

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

accountingaccounting

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

payable, budgeting, funds management systemspayable, budgeting, funds management systems




Financing & Accounting Systems (Continued)

SYSTEM DESCRIPTION ORGANIZATION-AL LEVEL

Accounts receivable

Tracks money owed the firm Operational

Budgeting Prepares short-term budgets Management

Profit planning Plans long-term profits Strategic

Table 2-4

Documents

2.1 © 2006 by Prentice Hall 2 Chapter Information Systems in the Enterprise EnterpriseInformation Systems in the Enterprise Enterprise