CHAPTER 8

Organizational Information Systems

CHAPTER OUTLINE

8.1 Transaction Processing Systems

8.2 Functional Area Information Systems

8.3 Enterprise Resource Planning Systems

LEARNING OBJECTIVES

� Describe transaction processing systems.

� Describe functional area information systems

and the support they provide for each

functional area of the organization.functional area of the organization.

� Describe enterprise resource planning

systems.

8.1 Transaction Processing Systems

(TPS)

Rudy Giuliani checking out of a

Wal-Mart using a bar code

scanner that produces data

captured by a transaction

processing system

Note: the barcode scanner is an example of source data

automation.

Source data automation involves collecting data from sensors (e.g.,

barcode scanners) and entering the data directly into a computer

without human intervention.

8.1 Transaction Processing Systems

(TPS) (continued)

Transaction Processing System (TPS) – monitors, collects, stores,

and processes data generated from all business transactions.

� Batch Processing is when the firm collects data from

transactions as they occur, placing them in groups or batches,transactions as they occur, placing them in groups or batches,

then prepares and process the batches periodically i.e. every

night

� Online Transaction Processing (OLTP) is when business

transactions are processed online as soon as they occur.

How Transaction Processing Systems

Manage Data

8.2 Functional Area Information Systems

� Functional Area Information Systems are designed

to support a functional area by increasing its internal

effectiveness and efficiency in the following areas:

� Accounting

� Finance� Finance

� Marketing

� Operations (POM)

� Human Resources Management

� Provide information mainly to lower- and middle-level

managers in the functional areas via a variety of

reports.

Examples of Information Systems

Supporting the Functional Areas

Functional Area Information Systems Reports

Functional area information systems generate a

wide variety of reports:

� Routine reports

� Ad hoc (on demand) reports� Ad hoc (on demand) reports

� Drill-down reports

� Key-indicator reports

� Comparative reports

� Exception reports

Summary Report

A summary

report is one

type of routine

report

Summary reports provide summarized information, with less detail.

Detailed Report

A detailed

report is

another type of

routine report

Detailed reports provide high levels of detailed data, often in support of summary

reports.

Drill-Down Report

Drill-down

report is a

type of ad-

hoc reporthoc report

A drill-down report allows users to click on an item in a report and be able to

access underlying details about that item.

Key-Indicator Report

Key-indicator

report is a

type of ad-hoc type of ad-hoc

report

A key indicator report summarizes the performance of critical activities.

The key indicator in this report is the number of prison inmates per 100,000

of population in 1996-1997.

Comparative Report

Comparative report is one type

of ad-hoc report.This comparative report compares managed

health care to traditional fee-for-service

healthcare. Let’s use one example: Advice to

smokers to quit.

* Fee-for-service has a 37% compliance rate on * Fee-for-service has a 37% compliance rate on

seven Healthcare Effectiveness Data and

Information Set (HEDIS) preventive measures.

See purple arrow.

* The minimum managed care plans have a

30% compliance rate. (left end of bar)

* The maximum managed care plans have a

85% compliance rate. (right end of bar)

* The average of all managed care plans

(National Health Plan average) is 61%

compliance. (see red arrow).

We can see that there is quite a bit of

information in this graphical comparative report.

Exception Report

Exception reports include only information that falls outside certain threshold

standards (outside norm).

This image shows a financial transaction exception report using SAP from the

University of Toronto in 2003.

8.3 Enterprise Resource Planning

Systems (ERP)

Enterprise Resource Planning (ERP) systems

integrate the planning, management and use of all

resources of the organization. That is, ERP systems are

designed to break down the information silos of an

organization. organization.

Many information systems were developed for specific

functional areas and did not communicate with systems

in other functional areas. Therefore, these systems are

referred to as information silos.

8.3 Enterprise Resource Planning

Systems (ERP)

The major objective of ERP systems: integrate the functional

areas of the organization by enabling seamless information flows

across them.

Problems with information silos

SAP Modules

SAP is moving away from

describing their system

as a set of modules, and

now is using the term

“solutions.”

FI – Financial Acctg

CO – Controlling

HR – Human Resources

MM – Materials Mgmt

PP – Production Planning

QM – Quality Mgmt

WF - Workflow

ERP Systems (continued)

A business process is a set of related steps or

procedures designed to produce a specific outcome.

The image

shows an

example of a

business

process,

namely an

order process.

Manufacturing

& Production

ModuleAccounting

and

Financial

Module

Human

Resources

Module

Core ERP Modules

Suppliers Customers

ERP

ERP II

SYSTEM

Also known e-

business suites.

Business

Intelligence

Module

Supply

Chain

Management

Module

E-Business

Module

Customer

Relationship

Management

Module

Extended ERP Modules

ERPPlatform &

DatabaseInterorganizational

ERP systems that

provide Web-

enabled links

between a

company’s key

business systems

and its customers,

suppliers,

distributors, and

others.

ERP Systems (Continued)

� Best practices are the most successful solutions or problem-solving methods for achieving a business objective.

� Drawbacks to ERP systems are that they can � Drawbacks to ERP systems are that they can be extremely complex, expensive and time-consuming to implement.

� Leading ERP software vendors include SAP (SAP R/3), Oracle and PeopleSoft.

CHAPTER 9

Customer Relationship Management

CHAPTER OUTLINE

9.1 Defining Customer Relationship

Management

9.2 Operational Customer Relationship

ManagementManagement

9.3 Analytical Customer Relationship

Management

9.4 Other Types of Customer Relationship

Management Applications

LEARNING OBJECTIVES

� Define customer relationship management

and discuss the objectives of CRM.

� Describe operational CRM and its major

components.components.

� Describe analytical CRM.

� Discuss mobile CRM, on-demand CRM, and

open-source CRM.

From Neighborhood Stores…….

Personal

To Today…..

Impersonal

Giant mallsThe Web

Mobile population

Customer Intimacy?

You

Your

customer

Your

competition

Your problem

The Need for CRM

� It costs six times more to sell to a new customer than to sell to an existing one.

� A typical dissatisfied customer will tell 8-10 people.

� By increasing the customer retention rate by 5%, profits could increase by 85%.by 5%, profits could increase by 85%.

� Odds of selling to new customers = 15%, compared to the odds of selling to existing customers (50%)

� 70% of complaining customers will remain loyal if their problem is solved

9.1 Defining Customer Relationship Management

Customer relationship management

(CRM) is an organizational strategy

that is customer-focused and

customer-driven.

Tenets of CRM

� One-to-one relationship between a customer and a

seller.

� “Treat different customers differently.”

Keep profitable customers and maximize � Keep profitable customers and maximize

lifetime revenue from them.

Lifetime Customer Value

The value of a customer to a company depends on three dimensions:

Customer Touch Points (Continued)

� Customer touch point is a method ofinteraction with a customer, such astelephone, e-mail, a customer service or helpdesk, conventional mail, Web site and store.desk, conventional mail, Web site and store.

Customer Touch Points

Smart

Phone

Web ComputerPhysical

Store

Customer

Service

CUSTOMERSales

Representative

Service

Service

Center

Email

Direct

Mail

Field

Service

Technician

360-Degree View of Customers

Data Consolidation

Accounting POM

Finance

Marketing MIS

HR

Customer

9.2 Operational CRM

Operational CRM is the component of CRM that

supports the front-office business processes.

That is, those processes that directly interact with

customers; i.e., sales, marketing, and service.

Two major components of operational CRM:

� Customer-facing applications

� Customer-touching applications

customers; i.e., sales, marketing, and service.

Customer-Facing Applications

Customer service and support

Sales force

automationautomation

Marketing

Campaign management

Customer-Facing Applications (Continued)

Customer-facing applications are those applications where an

organization’s sales, field service, and customer interaction center

representatives actually interact with customers.

Customer service and support refers to systems that automate Customer service and support refers to systems that automate

requests, complaints, product returns, and requests for information.

Sales force automation automatically records all the aspects in a

sales transaction process.

Campaign management applications help organizations plan

campaigns so that the right messages are sent to the right people

through the right channels.

Configurators

A configurator is an online product-building feature.

Marketing

Cross selling

Up selling

Bundling

Marketing (Continued)

Cross selling is the practice of marketing additional, related

products to customers based on their previous purchases.

Up selling is a sales strategy in which the sales person will

provide customers the opportunity to purchase higher-valueprovide customers the opportunity to purchase higher-value

related products or services as opposed to, or along with, the

consumer’s initial product or service selection.

Bundling is a form of cross selling in which a business sells

a group of products or services together at a price that is

lower than the combined individual prices of the products.

Customer-Touching Applications

Search and comparison capabilities

In customer-touching applications, customers interact

directly with online technologies and applications rather than

interact with a company representative.

Technical and other information and

services

Customized products and services

Loyalty programs

Personalized Web Pages,

FAQs,

E-mail and Automated Response

9.3 Analytical CRM

Analytical CRM systems analyze customer

behavior and perceptions in order to provide

actionable business intelligence.

The Relationship Between Operational

CRM and Analytical CRM

• Sales

• Marketing

• Customer Service and

Support

• Campaign Management

Customer-facing Applications

Customer

Data

Warehouse• Campaign Management• Campaign Management

• Search and Comparison

• Customized Products

• Technical Information

• Personalized Web Pages

• FAQ

• E-mail / Auto Response

• Loyalty Programs

Customer-touching Applications

• Data Mining

• Decision Support

• Business Intelligence

• OLAP

WarehouseWarehouse

9.4 Other Types of CRM

On-demand CRM

Open-source CRM

Mobile CRM: Pal Mickey

at Disneyworld

9.4 Other Types of CRM (Continued)

On-demand CRM is a CRM system that is hosted by an

external vendor in the vendor’s data center.

Mobile CRM is an interactive CRM system that enables an

organization to conduct communications related to sales,organization to conduct communications related to sales,

marketing, and customer service activities through a mobile

medium for the purpose of building and maintaining

relationships with its customers.

Open-source CRM is CRM software whose source code is

available to developers and users.

CHAPTER 10

Supply Chain Management

CHAPTER OUTLINE

10.1 Supply Chains

10.2 Supply Chain Management

10.3 Information Technology Support for Supply

Chain ManagementChain Management

LEARNING OBJECTIVES

� Define the term supply chain, and discuss the

three components of a supply chain.

� Define supply chain management, and

understand its goals.understand its goals.

� Identify various problems that can occur

along supply chains.

� Explain how information technology supports

supply chain management.

10.1 Supply Chains

Generic Supply Chain

Supply chain: refers to the flow of materials, information, money, and services

from raw material suppliers, through factories and warehouses, to the end

consumers.

Upstream component of a supply chain: sourcing or procurement takes

place.

Internal component of a supply chain: packaging, assembly, or

manufacturing takes place.

Downstream component of a supply chain: distribution takes place.

Supply Chain (recall Figure 2.2)

The Flows of the Supply Chain

Material flows

Information flows

Financial flows

The Flows of the Supply Chain

Material flows are the physical products, raw materials,

supplies and so forth that flow along the chain.Reverse flows – returned products, recycled products

and disposal of materials or products.

Information flows are all data related to demand, Information flows are all data related to demand,

shipments, orders, returns and schedules as well as

changes in any of these data.

Financial flows are all transfers of money, payments and

credit-related data. A supply chain involves a product life

cycle approach, from “dirt to dust”.

10.2 Supply Chain Management

� Supply chain management (SCM) is the

function of planning, organizing and

optimizing the supply chain’s activities.

� Interorganizational information system

(IOS) involves information flows among two

or more organizations.

Issues in Global IOS Design

� Cultural differences

� Localization

� Economic and Political Differences

� Legal issuesLegal issues

� Cross-border data transfer which refers to the flow of corporate data across nations’ borders.

Push Model

Mass production

Forecast

Salesperson

Happy customer

Pull Model

Dell customer order

Dell factory

Dell customer

Problems Along the Supply Chain

Poor customer service

Poor quality product

High inventory costs

Loss of revenues

New technologies

The Bullwhip Effect

Order

Quantity

Order

Quantity

Order

Quantity

Order

Quantity

Bullwhip effect refers to erratic shifts in orders up and down the supply chain.

Time

Customer

Sales

Time

Retail Orders

To Wholesaler

Time

Wholesaler

Orders to

Manufacturer

Time

Manufacturer

Orders to

Supplier

Solutions to Supply Chain Problems

Using inventories

� Just-in-time inventory: a system in which a supplier

delivers the precise number of parts to be assembled

into a finished product at precisely the right time.

Information sharing

� Vendor-managed inventory: an inventory strategy

where the supplier monitors a vendor’s inventory for

a product or group of products and replenishes

products when needed.

10.3 Information Technology Support

for Supply Chain Management

� Electronic data interchange (EDI) - is a

communication standard that enables

business partners to exchange routine

documents, such as purchase orders,

electronically.

� Extranets - link business partners to one

another over the Internet by providing access to

certain areas of each other’s corporate

intranets.

EDI Benefits

� Minimize data entry errors

� Length of messages are shorter

� Messages are secured

� Reduces cycle time� Reduces cycle time

� Increases productivity

� Enhances customer service

� Minimizes paper usage and storage

EDI Limitations

� Significant initial investment to implement

� Ongoing operating costs are high due to the

use of expensive, private VANs

� Traditional EDI system is inflexible� Traditional EDI system is inflexible

� Long startup period

� Multiple EDI standards exist

Comparing Purchase Order Fulfillment

Without EDI

Comparing Purchase Order Fulfillment

With EDI

Extranets

� Extranets link business partners to one

another over the Internet by providing access

to certain areas of each other’s corporate

intranets.

� The main goal of extranets is to foster

collaboration between business partners.

� An extranet is open to selected B2B

suppliers, customers and other business

partners.

The Structure of an Extranet

Types of Extranets

A company and its dealers, customers or

suppliers

An industry’s extranet

Joint ventures and other business partnerships

Types of Extranets (Continued)

A company and its dealers, customers or suppliers –

centers around one company.

An industry’s extranet – major players in an industry team

up to create an extranet.up to create an extranet.

Joint ventures and other business partnerships –

partners in a joint venture use extranet as a vehicle for

communications and collaboration.