Introduction to Information Technology Turban, Rainer and Potter John Wiley & Sons, Inc. Copyright Chapter 7 1

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1 Introduction to Information Technology Turban, Rainer and Potter John Wiley & Sons, Inc. Copyright 2005 Chapter 7 1

2 APPLYING IT FOR COMPETITIVE ADVANTAGE Chapter 7 2

3 Transaction Processing, Functional Application, and Integration Copyright 2005 John Wiley & Sons Inc. Chapter 7 3

4 Chapter Outline Functional information systems Transaction processing information systems Managing the accounting and finance systems Managing production/ operations and logistics Managing human resource systems Integrating functional information systems Chapter 7 4

5 Learning Objectives Describe the drivers and characteristics of functional information systems. Describe MISs. Describe the transaction processing system and how it is supported by IT Describe the support provided by IT and the Web to accounting and finance. Describe the support provided by IT and the Web to marketing and sales. Describe the support provide by IT and the Web to production / operations management, including logistic Describe the support provided by IT and the Web to human resources management Describe the benefits and issues of integrating functional information systems. Chapter 7 5

6 7.1 Functional Information Systems Chapter 7 6

7 Functional Information Systems cont Functional information Systems can be divided into two general categories: functionspecific and function- general. The most common type of function-general system, is management information systems (MISs) Chapter 7 7

8 Management Information System (MIS) A system that provides information to managers in the functional areas, in order to support managerial tasks of planning, organizing, and controlling operations. Chapter 7 8

9 An MIS produces routine, ad-hoc (ondemand) and exception report: Ad-hoc ( on- demand) reports: Nonroutine reports. Drill- down report: Reports that show a greater level of detail than is included in routine reports. Key- indicator reports. Reports that summarize the performance of critical activities. Comparative reports. Reports that compare performance of different business units or time periods. Exception report. Report that include only information that exceeds certain threshold standard Chapter 7 9

10 Information systems can also be function-specific Typical function- specific system are accounting, finance, marketing, operations (POM), and human resources management Chapter 7 10

11 Major characteristic of functional information systems Frequently composed of smaller systems Integrated or independent Interfacing Supportive of different organizational levels Chapter 7 11

12 7.2 Transaction Processing Information Systems (TPS) Information system that supports routine, core business transactions. Chapter 7 12

13 Objectives of a TPS To provide all the information needed by law, by management and / or by organizational policies to keep the business running properly and efficiently to efficiently handle high volume of data, to avoid errors due to concurrent operations to handle large variations in volume To avoid downtime, never lose results, and maintain privacy and security To interface with many IT applications, including e- payment, e-procurement and e-marketing. Chapter 7 13

14 Activities and Methods of TPSs First, data are collected by people or sensors and entered into the computer via any input device. Next the system processes data in one of two basic ways: batch or online processing. Batch processing: processes data in batches at fixed periodic intervals. Online processing: processes data as soon as a transaction occurs. Chapter 7 14

15 The Major Characteristics of a TPS Typically. Large amounts of data are processed. The source of data are mostly internal, and the outputs is intended mainly for an internal audience. This characteristic is changing somewhat, since trading partners may contribute data and may be permitted to use TPS output directly. The TPS processes information on a regular basis: daily, weekly, biweekly and so on. Large storage (database) capacitv is required. High processing speed is needed due to the high volume. The TPS monitors and collects past data Input and output data are structured. Since the processed data are fairly stable, they are formatted in a standard fashion. A high level of detail (raw data, not summarized) is usually observable, especially in input data but often in output as well. Low computation complexity (simple mathematical and statistical operations) is usuallv evident in a TPS. A high level of accuracy, data integrity, and security is needed. Sensitive issues such as privacy of personal data are strongly related to TPSs. High reliability is required. The TPS can be viewed as the lifeblood of the organization. Interruption in the flow of TPS data can be fatal to the organization. Inquiry processing is a must. The TPS enables users to query files and databases ( even online and in real time) Chapter 7 15

16 The flow of information in TPS Chapter 7 16

17 Web Based and Online TPS In online transaction processing (OLTP) business transaction are processed online as soon as they occur. Chapter 7 17

18 Typical TPS Activities Activities The ledger Accounts payable and receivable Description The entire financial accounts: all of the assets, liabilities, and owner s (stockholders') equity accounts Record of all account to be paid and those owed by customers. Receiving and shipping records Transaction records of all item send or received and returns Inventory-on-hand records Fixed-assets management Record of inventory levels. Use of barcodes improves ability to count inventory periodically Record of the value of an organization s fixed assets ( e.g. buildings, cars, machine ), including depreciation rate and major improvements made in assets, for taxation purposes Payroll Personnel files and skills inventory Reports to government All raw and summery payroll records. Files of employee s history, evaluations, and record of training and performance. Report on compliance with government regulations, taxes, etc Other periodic reports and statements Financial, tax, production, sales and routine reports Chapter 7 18

19 7.3 Managing The Accounting and Finance Systems Chapter 7 19

20 Financial planning and budgeting Financial and economic forecasting Budgeting Capital budgeting Chapter 7 20

21 Managing financial transactions E-commerce applications of financial transactions (global stock exchange, multiple currencies, E-bonds, etc.) Virtual close. The ability of a company to close its accounting records quickly and on short notice Expense Management Automation (EMA). Systems that automate data entry and processing of travel and entertainment expenses. Chapter 7 21

22 Investment Management Access to financial and economic reports Financial analysis Chapter 7 22

23 Control and auditing Budgetary control Auditing Financial ratio analysis. Product pricing Contract management Profitability analysis and cost control Chapter 7 23

24 7.4 Managing marketing and sales systems Channel systems. The systems involved in the process of getting a product or services to customers and dealing with all customers needs. Chapter 7 24

25 Marketing Channel Systems Chapter 7 25

26 Customer relations The Customer is King /Queen Customer profile and preference analysis Prospective customer lists and marketing Databases Mass customization Personalization Advertising and promotions Chapter 7 26

27 Distribution channels and In-store innovations New IT-support distribution channel Chapter 7 27

28 Marketing Management Pricing of products or services Salesperson productivity (sales force automation, sales productivity software) Profitability analysis Sales Analysis and trends New products, services and marketing planning Web-based systems in marketing Chapter 7 28

29 7.5 Managing production/ operations and logistics In-house logistics and materials management Inventory management Quality control Chapter 7 29

30 Planning production and operations Material requirement planning: A planning process that integrates production, purchasing and inventory management of interdependent items. Manufacturing resource planning: A planning process that integrates an enterprise s production, inventory management, purchasing, financing and labor activities. Just- in- time systems: An inventory scheduling system in which materials and parts arrive at a workplace just when needed. Other areas. Chapter 7 30

31 Computer-integrated manufacturing Computer-integrated manufacturing (CIM). Manufacturing approach that integrates several computerized systems such as CAD, CAM, MRP and JIT into a whole, in a factory. Chapter 7 31

32 The CIM model Chapter 7 32

33 Product lifecycle management (PLM) A business strategy that enables manufacturers to collaborate on product design and development efforts, using webbased strategies. Chapter 7 33

34 How product life cycle management works? Chapter 7 34

35 7.6 Managing Human Resources Systems: Recruitment Using he web for recruitment, HRM portals and salary surveys. Chapter 7 35

36 Human Resources Maintenance and Development Performance evaluation Training and HR development Chapter 7 36

37 Human Resources Planning and Management Payroll and employees records Benefit administration Employee relationship management Chapter 7 37

38 7.7 Integrating Functional Information Systems Approaches to integration Integrating front- office and back-office operations Process-centric integration: System integrating solutions designed, developed and managed from a business- process perspective Chapter 7 38

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