Chapter 7 1

Chapter 7, 8

Information Technology For Management 4th Edition

Turban, McLean, Wetherbe

John Wiley & Sons, Inc.

Basic Information Systems

Chapter 7 2

Functional Areas in a Business

Business

Funtion

Accounting

Financing

MarketingSales

Operations

Human Resources

•Cash Management

•Asset Management

•Budgeting

•A/R

•A/P

•Payroll

•General Ledger

•Compensation

•Vacation

•Skills/Training

•Receiving

•Fulfillment

•Process control

•Purchasing

•Order Taking

•CRM

•Self-service

•Retail Pricing

•Sales Promotions

•Sales Force Management.

•Customer Loyalty

•Interactive Marketing

Chapter 7 3

Functional Areas – Value Chain Perspective

The value chain model, views activities in organizations as either primary (reflecting the flow of goods and services) or secondary (supporting the primary activities). The organizational structure of firms is intended to support both of these types of activities.

Chapter 7 4

Functional Areas – Supply Chain Perspective

The supply chain is a business process that links all the procurement from suppliers, the transformation activities inside a firm (the value chain) and the distribution of goods or services to customers via wholesalers and retailers.

Chapter 7 5

Functional Information Systems

Composed of smaller systems: A functional information system

consists of several smaller information systems that support specific activities performed in the functional area.

Integrated or independent: The specific IS applications in any

functional area can be integrated to form a coherent departmental functional system, they can be integrated across departmental lines to match a business process or be completely independent.

Interfacing: Functional information systems may interface

internally with each other to form the organization-wide

information system or externally systems outside the organization.

Supportive of different levels: Information systems applications

support the three levels of an organization’s activities: operational,

managerial, and strategic

Functional information systems support the organization, processes and business model.

Enterprise Wide Environment – All business units.

Chapter 7 6

Transactional

Office

Decision Support

Strategic

Functional Information Systems

Business transactions, events

and processes. Support of the

business and customers.

Back office

administrative

tasks and ops.

Datamining ops

that support

management

Data Analysis

and statistical

forecasting.

Operation Level of the

company is normally highly

structured and predefined.

Dynamic and what-if

features.

Integrated

Clerical documents,

schedules, mail,

manuals, etc.

Chapter 7 7

Supply and Value Chains

Supply Chain Flows Materials flows are all physical products, new materials, and

supplies that flow along the chain.

Information flows relates to all data associated with demand, shipments, orders, returns and schedules.

Financial flows include all transfers of money, payments, credit card information, payment schedules, e-payments and credit-related data.

Supply chain refers to the flow of materials, information, payments, and services from raw material suppliers, through factories and warehouses (Value Chain), to the final consumer (Demand Chain). It includes tasks such as purchasing, payment flow, materials handling, production planning & control, logistics & warehousing, inventory control, and distribution. When it is managed electronically it is referred to as an e-supply chain.

Supply Chains contribute to increased profitability and competitiveness

Chapter 7 8

Supply Chains Components

The supply chain involves three segments:

Upstream, where sourcing or procurement from external suppliers occur

Internal, where packaging, assembly, or manufacturing take place

Downstream, where distribution or dispersal take place, frequently by external distributors.

It also includes the movement of information and money and the procedures that support the movement of a product or a service.

Organizations and individuals are also part of the chain.

Chapter 7 9

Supply Chains Classifications There are several major types of supply chain

Integrated make-to-stock

Continuous replenishment

Build-to-order

Channel assembly.

Value Chain

Demand Chain

“Supply” Chain

Chapter 7 10

Adding value along the chain is essential for competitiveness, however problems exist especially in complex or long chains and in cases where many business partners are involved. These problems are due to uncertainties and the need to coordinate several activities, internal units, and business partners.

Demand forecasts are a major source of uncertainties Competition

Prices

Weather conditions

Technological development

Customer confidence

Uncertainties exist in delivery times Machine failures

Road conditions

Shipments

Quality problems may also create production delays

Supply Chain Problems

Chapter 7 11

The bullwhip effect refers to erratic shifts in orders up and down the supply chain because of poor demand forecasting, price fluctuation, order batching, and rationing within the chain.Even slight demand uncertainties and variability become magnified if each distinct entity, on the chain, makes ordering and inventory decisions with respect to its own interest above those of the chain. Distorted information can lead to tremendous inefficiencies, excessive inventories, poor customer service, lost revenues, ineffective shipments, and missed production schedules.

Supply Chain Problems continued

A common way to solve the bullwhip problem is by sharing information along the supply chain through EDI, extranets, and groupware technologies. For example employing a vendor-managed inventory (VMI) strategy, the vendor monitors inventory levels and when it falls below the threshold for each product this automatically triggers an immediate shipment.

Chapter 7 12

Information sharing among supply chain partners (c-commerce) sometimes referred to as the collaboration supply chain is one method to overcome problems in the flow. Others are:

Optimal Inventory Levels

Supply Chain Coordination and Collaboration

Supply Chain Teams

Performance Measurement and Metrics

Various IT-Assisted Solutions

wireless technology

optimal shipping plans

strategic partnerships with suppliers

just-in-time

Supply Chain Solutions

Chapter 7 13

ERP and Supply Chains

It is comprised of a set of applications that automate routine back-end operations:

such as financial management

inventory management

Scheduling

order fulfillment

cost control

accounts payable and receivable,

It includes front-end operations such as:

POS

Field Sales

Service

It also increases efficiency, improves quality, productivity, and profitability.

ERP or enterprise systems control all major business processes with a single software architecture in real time.

Enterprise Resource Planning

Chapter 7 14

Chapter 7 16

Chapter 7 17

ERP Reality

Complete systems can cost tens of millions of dollars

Implementation can take several years

Companies may lose flexibility

Chapter 7 21

What is SAP?Systems Applications and Products in Data Processing

SAP is the leading global provider of client/server business application solutions

SAP is the number one vendor of standard business applications software

SAP is the fifth largest independent software supplier in the world

Electronic Commerce

Interorganizational Systems:

Business-to-business

Electronic storefront

Chapter 7 23

Market ExchangeInterorganizational Structure

Vertical integrationMultiple activities in the same firm

Risk: range of expertise required

Selective sourcingSome outsourced activities

Risk: control of outsourcer

Virtual corporationCoordination of separate activities

Risk: loss of core competency

Chapter 7 24

Questions

Do we benefit from electronic commerce?

Do we use information to add value to customers?

Are we managing the product/service channel?

Have we redesigned business with our partners to take advantage of technology and provide security

Do we have partners with shared vision and common purpose?

Do we have the right infrastructure?

Chapter 7 25

External / Internal Hosting

Outside (Cheaper)

minimize bandwidth and hardware problems

use external experts

installed infrastructure

little additional staffing required

Inside (More Control)

dependent on third party reliability

possible single vendor software solutions

possible single vendor payment scheme

Chapter 7 26

External / Internal Hosting

External better at storefronts

but requires close integration with core business

Internal better at business to business

but often creates a self-contained replicated system that can be outsourced

Chapter 7 27

Payment

Credit CardsSET (Secure Electronic Transaction) with http

Electronic ChecksPublic/private key transactions with banks

Electronic Cash3rd party software to create virtual cash

EDI/EFTValue added network using 3rd party.

Common in business to business.

Chapter 7 28

Infrastructure Drivers