c h a p t e r 2 INFORMATION SYSTEMS IN THE ENTERPRISE 2.1 Reading Notes for Chapter 2 in the textbook 1/2 The chapter introduces six types of information systems. Figure 2.1 and table 2.1 give an overall picture of organizations and how different types of information systems serve them. Figure 2.2 depicts different types of information systems and how they relate to one another (Figure 2.9 as well). Section 2.2 examines information systems from a functional view of an organization: Sales and marketing systems, manufacturing and production systems, finance and accounting systems, and human resources systems. Read this section carefully to develop an understanding of how information systems serve different functions of an organization. 2.2
Reading Notes for Chapter 2 in the textbook 2/2 Read section 2.3 carefully to understand integration of functions and business processes. Figure 2.12 illustrates a cross-functional business process. Pay also attention to customer relationship management and enterprise systems that are current trends in business. Contrast Figure 2.15 and 2.16. Extended enterprises and industrial networks are also recent trends and would not be possible without the support of information technology. 2.3 LEARNING OBJECTIVES Analyze Roles of 6 Types of Information Systems Describe Types of Information Systems Analyze Relationships between Business Processes 2.4
LEARNING OBJECTIVES Explain How Systems & Networks Create New Efficiencies Evaluate Benefits & Limitations of Systems & Networks 2.5 MANAGEMENT CHALLENGES Key System Applications Functional Perspective of Systems Integrating Functions & Processes 2.6
MANAGEMENT CHALLENGES 1. INTEGRATION: Different Systems Serve Variety of Functions, Connecting Organizational Levels Difficult, Costly 2. ENLARGING SCOPE OF MANAGEMENT THINKING: Huge System Investments, Long Development Time must be guided by common objectives 2.7 So Organizational Hierarchy Organizational Levels Information Systems 2.8
TYPES OF INFORMATION SYSTEMS KIND OF SYSTEM STRATEGIC LEVEL GROUPS SERVED SENIOR MANAGERS MANAGEMENT LEVEL MIDDLE MANAGERS KNOWLEDGE LEVEL KNOWLEDGE & DATA WORKERS OPERATIONAL LEVEL OPERATIONAL MANAGERS 2.9 SALES & MANUFACTURING FINANCE ACCOUNTING HUMAN MARKETING & PROD RESOURCES 2.10 Four General Kinds of IS in Terms of Organizational Levels Operational-level level systems support operational managers by monitoring the day-today s elementary activities and transactions of the organization. e.g. TPS. Knowledge-level level systems support knowledge and data workers in designing products, distributing information, and coping with paperwork in an organization. e.g. KWS, OAS Management-level systems support the monitoring, controlling, decision-making, and administrative activities of middle managers. e.g. MIS, DSS Strategic-level systems support long-range planning activities of senior management. e.g. ESS
MAJOR TYPES OF SYSTEMS (with respect to support provided) EXECUTIVE SUPPORT SYSTEMS (ESS) DECISION SUPPORT SYSTEMS (DSS) MANAGEMENT INFORMATION SYSTEMS (MIS) KNOWLEDGE WORK SYSTEMS (KWS) OFFICE AUTOMATION SYSTEMS (OAS) TRANSACTION PROCESSING SYSTEMS (TPS) 2.11 INTERRELATIONSHIPS AMONG SYSTEMS ESS MIS DSS KWS OAS TPS 2.12
TYPICAL TPS APPLICATIONS 1. Sales & Marketing Systems MAJOR FUNCTIONS OF SYSTEMS: Sales management, market research, promotion, pricing, new products MAJOR APPLICATION SYSTEMS: Sales order info system, market research system, pricing system 2.13 2.14 TYPICAL TPS APPLICATIONS 2. Manufacturing & Production Systems 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
2.15 TYPICAL TPS APPLICATIONS 3. Finance & Accounting Systems MAJOR FUNCTIONS OF SYSTEMS: Budgeting, general ledger, billing, cost accounting MAJOR APPLICATION SYSTEMS: General ledger, accounts receivable, accounts payable, budgeting, funds management systems 2.16 TYPICAL TPS APPLICATIONS 4. Human Resources Systems MAJOR FUNCTIONS OF SYSTEMS: Personnel records, benefits, compensation, labor relations, training MAJOR APPLICATION SYSTEMS: Payroll, employee records, benefit systems, career path systems, personnel training systems, example:
A Symbolic Representation for a payroll TPS Employee data (various departments) To general ledger: wages and salaries Payroll System Management Reports Payroll master file On-line queries Government documents Employee checks 2.17 2.18 TYPICAL TPS APPLICATIONS 5. Other Types (e.g., University) MAJOR FUNCTIONS OF SYSTEMS: Admissions, grade records, course records, alumni MAJOR APPLICATION SYSTEMS: Registration system, student transcript system, curriculum class control system, alumni benefactor system
OFFICE AUTOMATION SYSTEMS (OAS) All Levels Toward A Paperless Office Redesign Of Work Flow Integrated Software Ergonomic Design Bright, Cheerful Work Space Example: Presentation Graphics 2.19 KNOWLEDGE WORK SYSTEMS (KWS) Knowledge Level Inputs: Design Specs Processing: Modelling Outputs: Designs, Graphics Users: Technical Staff 2.2020 Example: Engineering Work Station
MANAGEMENT INFORMATION SYSTEMS (MIS) Management Level Inputs: High Volume Data Processing: Simple Models Outputs: Summary Reports Users: Middle Managers Example: Annual Budgeting 2.2121 MANAGEMENT INFORMATION SYSTEMS (MIS) Structured & semi-structured structured decisions Report control oriented Past & present data Internal orientation Lengthy design process 2.2222
TPS DATA FOR MIS APPLICATIONS TPS Order Processing System SALES DATA MIS ORDER FILE Materials Resource Planning System PRODUCTION MASTER FILE General Ledger System UNIT PRODUCT COST PRODUCT CHANGE DATA EXPENSE DATA MIS REPORTS MANAGERS ACCOUNTING FILES MIS FILES 2.2323 DECISION SUPPORT SYSTEMS (DSS) Management Level Inputs: Low Volume Data Processing: Interactive Outputs: Decision Analysis Users: Professionals, Staff Example: Contract Cost Analysis 2.2424
CHARACTERISTICS of DECISION SUPPORT SYSTEMS (DSS) 1. DSS offer users flexibility, adaptability, and a quick response. 2. DSS operate with little or no assistance from professional programmers. 3. DSS provide support for decisions and problems whose solutions cannot be specified in advance. 4. DSS use sophisticated data analysis and modelling tools. 2.2525 EXECUTIVE SUPPORT SYSTEMS (ESS) Strategic Level Inputs: Aggregate Data Processing: Interactive Outputs: Projections Users: Senior Managers Example: 5 Year Operating Plan 2.2626
Model of a Typical Executive Support System ESS workstation Menus Graphics Communications Local processing ESS workstation Menus Graphics Communications Local processing Internal Data TPS/MIS Data Financial Data Office Systems Modeling/ analysis External Data Dow Jones Gallup Poll Standard & Poor's ESS workstation Menus Graphics Communication Local processing 2.2727 CHARACTERISTICS OF EXECUTIVE SUPPORT SYSTEMS (ESS) Top level management Designed to the individual Ties CEO to all levels Very expensive to keep up Extensive support staff 2.2828
TYPES OF SYSTEMS ESS Summary Strategic Level Systems 5-ye ar 5-ye ar 5-ye ar Profit ope rating plan budge t fore casting sales trend planning fore casting Manpowe r planning MIS DSS Sale s manage me nt Sales region analysis Inve ntory Control Production Sche duling Management-Level Systems Annual budge ting Cost analysis Capital Investment analysis Pricing/profitability analysis Re location analysis Contract cost analysis KWS OAS Engine e ring workstations Word proce ssing Knowledge -Level Systems Graphics workstations Docume nt Imaging Manage rial workstations Ele ctronic Cale ndars TPS Order Tracking Operational Level Systems Machine control Se curitie s Payroll Plant scheduling trading Accounts payable Order processing Material movement Cash control manage me nt Compe nsation Training & development Accounts receivable Employee record keeping 2.2929 Sales and marke ting Manufacturing Finance Accounting Human Re source s INTERRELATIONSHIPS AMONG SYSTEMS ESS MIS DSS KWS OAS TPS 2.30
SYSTEMS FROM A FUNCTIONAL PERSPECTIVE 1. Sales & Marketing Systems 2. Manufacturing & Production Systems 3. Finance & Accounting Systems 4. Human Resources Systems 2.31 1. SALES & MARKETING INFORMATION SYSTEM SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL ORDER PROCESSING ENTER, PROCESS, TRACK ORDERS OPERATIONAL MARKET ANALYSIS IDENTIFY CUSTOMERS & MARKETS KNOWLEDGE PRICING ANALYSIS DETERMINE PRICES MANAGEMENT SALES TRENDS PREPARE 5-YEAR FORECASTS STRATEGIC 2.32
2. MANUFACTURING & PRODUCTION INFORMATION SYSTEM SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL MACHINE CONTROL CONTROL ACTIONS OF EQUIPMENT OPERATIONAL COMPUTER-AIDED-DESIGN DESIGN NEW PRODUCTS KNOWLEDGE PRODUCTION PLANNING DECIDE NUMBER, SCHEDULE OF PRODUCTS MANAGEMENT FACILITIES LOCATION DECIDE WHERE TO LOCATE FACILITIES STRATEGIC 2.33 3. FINANCE & ACCOUNTING INFORMATION SYSTEM SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL ACCOUNTS RECEIVABLE TRACK MONEY OWED TO FIRM OPERATIONAL PORTFOLIO ANALYSIS DESIGN FIRM'S INVESTMENTS KNOWLEDGE BUDGETING PREPARE SHORT TERM BUDGETS MANAGEMENT PROFIT PLANNING PLAN LONG-TERM PROFITS STRATEGIC 2.34
4. HUMAN RESOURCES INFORMATION SYSTEM SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL TRAINING & DEVELOPMENT TRACK TRAINING, SKILLS, APPRAISALS OPERATIONAL CAREER PATHING DESIGN EMPLOYEE CAREER PATHS KNOWLEDGE COMPENSATION ANALYSIS MONITOR WAGES, SALARIES, BENEFITS MANAGEMENT HUMAN RESOURCES PLANNING PLAN LONG-TERM LABOR FORCE NEEDS STRATEGIC 2.35 Recall MAJOR BUSINESS FUNCTIONS SALES & MARKETING MANUFACTURING FINANCE ACCOUNTING HUMAN RESOURCES 2.36
EXAMPLES OF BUSINESS PROCESSES (FUNCTIONS) 1/2 SALES & MARKETING: Identifying customers, creating customer awareness, selling MANUFACTURING & PRODUCTION: Assembling product, checking quality, producing bills of materials 2.37 2.38 EXAMPLES OF BUSINESS PROCESSES (FUNCTIONS) 2/2 FINANCE & ACCOUNTING: Paying creditors, creating financial statements, managing cash accounts HUMAN RESOURCES: Hiring employees, evaluating performance, enrolling employees in benefits plans Ex.
The Order Fulfillment Process (F 2.12) Sales Generate Order Submit Order Accounting Check Credit Approve Credit Generate Invoice Manufacturing & P roduct ion Assemble Product Ship Product 2.39 Customer Relationship Management Business and technology discipline to coordinate the business processes for dealing with customers. 2.40 Sales T elephone sales W eb sales Field sales Retail sales Market ing Campaign data Cont ent Data analysis Customer Service Call center data W eb self service data Field service data W ireless data Unified view of customers Consistent message to customers End-to-end customer care Long-term customer relationships Identification of best customers
SUPPLY-CHAIN MANAGEMENT (SCM) CUSTOMERS ORDER PROCESSING PLANNING & FORECASTING SUPPLIERS ACCOUNTING INTRANET PROCUREMENT PRODUCTION LOGISTICS SERVICES SHIPPING INVENTORY DISTRIBUTORS 2.41 Supply Chain Management Integration of supplier, distributor, and customer logistics requirements into one cohesive process. Network of facilities for procuring materials, transforming raw materials into finished products,' and distributing finished produce to customers. Capacity, inventory level, delivery schedule, payment terms Supplier Manufacturer Distributor Retail Outlet Customer Orders, return requests, repair and service requests, payments 2.42
HOW INFORMATION SYSTEMS FACILITATES SUPPLY CHAIN MANAGEMENT DECIDE WHEN, WHAT TO PRODUCE, STORE, MOVE RAPIDLY COMMUNICATE ORDERS TRACK ORDER STATUS CHECK INVENTORY AVAILABILITY, MONITOR LEVELS TRACK SHIPMENTS PLAN PRODUCTION BASED ON ACTUAL DEMAND RAPIDLY COMMUNICATE PRODUCT DESIGN CHANGES PROVIDE PRODUCT SPECIFICATIONS SHARE INFORMATION ABOUT DEFECT RATES, RETURNS... 2.43 WITHIN THE BUSINESS: TRADITIONAL VIEW OF SYSTEMS There are functions, each having its uses of information systems to do own business processes OUTSIDE THE ORGANIZATION S BOUNDARIES: There are customers and vendors 2.44 FUNCTIONS TEND TO WORK IN ISOLATION i. e.
TRADITIONAL VIEW OF SYSTEMS Business Functions Organizational Boundaries Manufacturing Accounting Finance Business Processes Manufacturing Systems Business Processes Accounting Systems Business Processes Finance Systems Marketing and Sales Business Processes Marketing and Sales Systems Human Resources Business Processes Human Resources Systems Organizational Boundaries Vendors Information Systems Customers In some organizations today, separate systems built over along period of time to support discrete business processes (no real integration) These systems rarely include transactions with customers and vendors. BUT 2.45 ENTERPRISE SYSTEM Enterprise systems can integrate the key business processes of an entire firm into a single software system that allows info to flow seamlessly throughout the org. These systems may include transactions with customers and vendors. Manufacturing Accounting Vendors Business Processes Enterprise-wide Business Processes Customers Human Resources Finance 2.46 Sales & Marketing
BENEFITS OF ENTERPRISE SYSTEMS FIRM STRUCTURE & ORGANIZATION: One organization MANAGEMENT: Firmwide knowledge-based management processes TECHNOLOGY: Unified platform BUSINESS: More efficient operations & customer- driven business processes 2.47 CHALLENGES OF ENTERPRISE SYSTEMS Daunting Implementation High Up Front Costs & Future Benefits Inflexibility Hard To Realize Strategic Value 2.48
2.49 Extended Enterprises Extended Enterprises: Networks linking systems of multiple firms in an industry. Also called extended enterprises. Example: INDUSTRIAL NETWORKS link firms into industry-wide system Vertical industrial networks: Networks for integrating the operations of a firm with its suppliers. Horizontal industrial networks: Networks for linking firms across an entire industry including competitors. c h a p t e r 2 INFORMATION SYSTEMS IN THE ENTERPRISE 2.50