McGraw-Hill-Ryerson ©2011 The McGraw-Hill Companies, All Rights Reserved CHAPTER 2 Decision Making and Business Processes Opening Case: Information Systems

McGraw-Hill-Ryerson ©2011 The McGraw-Hill Companies, All Rights Reserved

CHAPTER 2CHAPTER 2

Decision Making and Business ProcessesDecision Making and Business Processes

Opening Case:Information Systems

Improve Business Processes at Grocery

Gateway

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Copyright © 2011 McGraw-Hill Ryerson Limited

Chapter Two Overview

• SECTION 2.1 - DECISION-MAKING AND INFORMATION SYSTEMS– Decision Making– Transactional Data & Analytical Information– TPS, DSS, and ESS– Artificial Intelligence– AI VS, TPS, DSS, and EIS

• SECTION 2.2 – BUSINESS PROCESSES– Understanding the Importance of Business Processes– Business Process Improvement– Business Process Reengineering– Business Process Modelling– Business Process Management

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LEARNING OUTCOMES

1. Explain the difference between transactional data and analytical information, and between OLTP and OLAP.

2. Define TPS, DSS, and EIS and explain how organizations use these types of information systems to make decisions.

3. Understand what AI is and the four types of artificial intelligence systems used by organizations today.

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LEARNING OUTCOMES

4. Describe how AI differs from TPS, DSS and EIS.

5. Describe the importance of business process improvement, business process reengineering, business process modelling, and business process management to an organization and how information systems can help in these areas.


SECTION 2.1SECTION 2.1

DECISION-MAKING SYSTEMS

DECISION-MAKING SYSTEMS

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Decision Making

• Decision-Making, Problem-Solving, and Opportunity-Seizing Information Systems

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DECISION MAKING

• Reasons for the growth of decision-making information systems– People need to analyze large amounts of

information– People must make decisions quickly– People must apply sophisticated analysis

techniques, such as modeling and forecasting, to make good decisions

– People must protect the corporate asset of organizational information

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TRANSACTIONAL DATA & ANALYTICAL INFORMATION

• Moving up through the organizational pyramid, users move from requiring transactional information to analytical information

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Transactional data & analytical information (Contd.)

• Online transaction processing (OLTP) – the capturing of transaction and event information using technology to (1) process the information according to defined business rules, (2) store the information, (3) update existing information to reflect the new information

• Online analytic processing (OLAP) – this is the analysis of summarized or aggregated information sourced form transaction processing systems, and sometimes from sources external to the organization.

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Transaction Processing Systems

• Transaction processing system (TPS) - the basic business system that serves the operational level (analysts) in an organization

A TPS performs OLTP and handles transactional data such as order-entry.

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Decision Support Systems

• Decision support system (DSS) – models information to support managers and business professionals during the decision-making process.

• DSS are examples of management information systems.

• A DSS can be used on transactional data or analytic information depending of the depth of analysis desired.

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• Three quantitative models used by DSSs include:1. Sensitivity analysis – the study of the impact that

changes in one (or more) parts of the model have on other parts of the model

2. What-if analysis – checks the impact of a change in an assumption on the proposed solution

3. Goal-seeking analysis – finds the inputs necessary to achieve a goal such as a desired level of output

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• “What-if” analysis

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• Goal-seeking analysis

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• Interaction between a TPS and a DSS

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Executive Information Systems

• Executive information system (EIS) – a specialized DSS that supports senior level executives within the organization

• EIS differs from DSS as the former typically contains information from external sources as well as information from internal data sources.

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Executive Information Systems

• Interaction between a TPS and an EIS

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Digital Dashboards

• Digital dashboard – integrates information from multiple components and presents it in a unified display

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ARTIFICIAL INTELLIGENCE (AI)

• Intelligent system – various commercial applications of artificial intelligence

• Artificial intelligence (AI) – simulates human intelligence such as the ability to reason and learn

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• The ultimate goal of AI is the ability to build a system that can mimic human intelligence

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• Four most common categories of AI include:

1. Expert system – computerized advisory programs that imitate the reasoning processes of experts in solving difficult problems

2. Neural Network – attempts to emulate the way the human brain works– Fuzzy logic – a mathematical method of handling

imprecise or subjective information

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• Four most common categories of AI include:3. Genetic algorithm – an artificial intelligent

system that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem

4. Intelligent agent – special-purposed knowledge-based information system that accomplishes specific tasks on behalf of its users

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OPENING CASE QUESTIONSInformation Systems are Central at Grocery

Gateway1. What information systems are used at Grocery

Gateway? Would you classify these systems as TPS, DSS, or EIS?

2. How do these systems support operational, analytical or strategic level decisions?

3. What steps could the company take to leverage the transactional information that is collected by the information systems outlined in the case to help make analytical and strategic decisions for the company?

4. Identify a few key metrics that Grocery Gateway marketing executives might want to monitor.


SECTION 2.2SECTION 2.2

BUSINESS PROCESSESBUSINESS PROCESSES

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UNDERSTANDING THE IMPORTANCE OF BUSINESS PROCESSES

Sample Business Processes

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Business process – a standardized set of activities that accomplish a specific task, such as processing a customer’s order

Customer facing processes – result in a product or service that is received by an organization’s external customer.

Business facing processes – are invisible to the external customer but are essential to the effective management of the business

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Customer Facing, Industry-Specific, and Business Facing Processes

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BUSINESS PROCESS IMPROVEMENT

Business process improvement – attempts to understand and measure the current process and make performance improvement accordingly.

The purpose of BPI is to obtain gradual, incremental improvement to the process under focus.

There are five basic steps associated with BPI.

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BUSINESS PROCESS REENGINEERING

Business process reengineering (BPR) – the analysis and redesign of workflow within and between enterprises.

• BPR is radically different from BPI.

• It assumes the current state to be irrelevant, inefficient, or broken and must be overhauled from the scratch.

• The purpose of BPR is to:

- advocate a clean slate approach

- make all business processes best-in-class

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Finding Opportunity Using BPR

• A company can improve the way it travels the road by moving from foot to horse and then horse to car

• BPR looks at taking a different path, such as an airplane which ignores the road completely

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• Progressive Insurance mobile claims process

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• Types of change an organization can achieve, along with the magnitudes of change and the potential business benefit

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Pitfalls of BPR

• Shift in focus

• Employee resistance

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BUSINESS PROCESS MODELLING

Business process modelling (or mapping) – is the activity of creating a detailed flow-chart or process map of a work process showing its inputs, tasks, and activities, in a structured sequence.

Business process model – is a graphic description of a process, showing the sequence of process tasks, which is developed for a specific purpose and from a selected viewpoint.

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As-Is and To-Be Process Model for Ordering a Hamburger

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As-Is and To-Be Process Model for Order Fulfillment

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Customer Service As-Is Process Model

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BUSINESS PROCESS MANAGEMENT

Business Process Management (BPM) – integrates all of an organization’s business processes to make individual processes more efficient.

Key reasons for using BPM:

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BUSINESS PROCESS MODELLING EXAMPLES

E-business Process Model

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Online Banking Process Model

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Customer Order Business Process Model

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eBay Buyer Business Process Model

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eBay Seller Business Process Model

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Gateway

5. Describe how Grocery Gateway’s customer Web site improves or supports Grocery Gateway’s business processes.

6. Describe how Descartes’ fleet management software improved Grocery Gateway’s logistics business processes.

7. How do those improvements in business process affect the customer experience? The company’s bottom line?

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Gateway

8. What other kinds of information systems could be used by Grocery Gateway to improve its business processes?

9. Comment on the need for integration between the various types of information systems at Grocery Gateway. What benefits from integration do you see for the company’s various business processes? What challenges to you think will exist in facilitating such integration?

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CLOSING CASE ONEInformation Systems Are Critical For Take-Off in

Canada’s Airline Industry

1. What advantages are there for an airline to use a revenue management system.

2. Are revenue management systems a competitive advantage or simply a new necessity for doing business in the airline industry today?

3. What type of decisions could a revenue management system be used to help make?

4. Is a revenue management system a TSP, DSS, or an EIS?

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CLOSING CASE ONE Information Systems Are Critical For Take-Off in

Canada’s Airline Industry

5. Would the revenue management system described in the case contain transactional data or analytical information?

6. What types of metrics would an airline executive want to see in a digital dashboard displaying revenue information?

7. How could AI enhance the use of an airline’s revenue management system for decision support?

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CLOSING CASE TWOLeveraging the Power and Avoiding the Pitfalls of

BPM1. How can BPM help improve global outsourcing? Records

management? Supply chain management?

2. What other business activities are excellent candidates for BPM?

3. Which of the five pitfalls mentioned above do you think is the most important? Why?

4. Which of the five pitfalls mentioned above do you think is the most common pitfall that organizations face when undergoing BPM? Why?

5. What is the advantage of treating BPM as a project, as opposed to some other type of business activity?

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CLOSING CASE THREEImproving Business Processes at UK’s Woburn

Safari Park

1. What were the benefits of creating “As-Is” models of current business processed at WSP?

2. How did information systems help identify problem areas in the feed logistics process?

3. How did information systems help improve the management of feed logistics?

4. Are information systems necessary for business process improvements? Explain.

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McGraw-Hill-Ryerson ©2011 The McGraw-Hill Companies, All Rights Reserved CHAPTER 2 Decision Making and Business Processes Opening Case: Information Systems