CHAPTER 9 FUNCTIONAL AND ENTERPRISE SYSTEMS

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CHAPTER 9FUNCTIONAL AND ENTERPRISE SYSTEMS
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Learning Objectives

• Describe the role and characteristics of
  functional information systems
• State the objective and operations of transaction
  processing and how it is supported by IT
• Discuss the managerial and strategic applications
  in the accounting and finance areas that are
  supported by IT
• Understand the marketing and sales applications
  provided by IT

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Learning Objectives(continued )

• List the various production and operations
  management activities and describe how they are
  supported by IT
• Discuss the human resources management activities
  and how they can be improved by IT
• Discuss the need for integrating functional
  information systems and describe the role of ERP
  and supported software such as SAP

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Chapter Overview
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Chapter Overview (continued )
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Case Colonial Building Supply

• The Business Problem

• Needed a technology
• to monitor inventory and support-related
  decisions
• to provide it with current information about
  inventory levels and customer buying trends
• to show the price of the lumber fluctuates daily

• The Solution

• integrated system
• Point-of-sales (POS) terminals with hand-held
  automatic identification and data collection
  devices

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Case (continued)

• The Results

• Lower costs for data entry labor
• Reduction in inventory and storage space
• Fast access to information
• Better customer service
• Higher employee satisfaction
• Stay competitive
• Increase its market share and profitability

• What have we learned from this case??

• The systems major applications are in logistics
• IT can be beneficial to a relatively small
  company
• An integration includes connection to business
  partners using the Internet

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Characteristics ofFunctional Information Systems

• Comprises of several smaller information system
• Specific IS applications
• can be integrated to form a coherent departmental
  function system
• can be completely independent
• can be integrated across departmental lines
• Interface with each other to form the
  organization wide information system
• Interface with the environment

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Management Information Systems

• Provide routine information to managers in the
  functional areas
• Provide information in exception reports and ad
  hoc (demand) reports

A Management Information System
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Transaction Processing Information Systems

• Transaction Processing
• major business processes
• provide the mission-critical activities
• transaction may generate additional transaction
• simple transactions
• large volume and repetitive transactions
• Transaction Processing System (TPS)
• computerized information system
• supports the transaction processes

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Characteristics of TPS

• Large amounts of data are processed
• The sources of data are mostly internal, and the
  output is intended mainly for an internal
  audience
• The TPS processes information on a regular basis
• Large storage (database) capacity is required
• High processing speed is needed due to the high
  volume
• Input and output data are structured
• High level of detail is usually observable
• Low computation complexity is usually evident
• High level of accuracy, data integrity, and
  security is needed
• High processing reliability is required
• Inquiry processing is a must

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Overview of typical transaction processing
TPS (continued)
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The Process of TPS
Data are collected and entered automatically

• Modernized TPS from OLTP to the Internet

• Online Transaction Processing (OLTP)
• created on a client/server architecture can save
  money
• Internet (Intranet) transaction Processing
• allow multimedia data transfer, fast response
  time, and storage of large databases of graphics
  and videos

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Accounting Finance Systems

• Financial Planning and Budgeting

• Financial and Economic Forecasting
• much of the interrelated indicators are available
  on the Internet
• many software packages conducting forecasting and
  planning
• Planning for Cash Management
• build a decision support model
• make decisions about when and how much to
  refinance
• Budgeting
• Budget 2000 and Comshare BudgetPlus are available
  to support budgeting and to facilitate
  communication among all participants in the
  preparation process

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Accounting Finance Systems (continued )

• Major activities

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Accounting Finance Systems(continued )

• Investment Management

• Access to financial and economic reports
• hundreds of sources for the financial and
  economic reports and news
• Financial analysis
• is executed with a spreadsheet program, or with
  commercially available, ready-made decision
  support software

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Accounting Finance Systems(continued )

• Financial Controls
• Budgetary Controls
• more sophisticated software attempts to tie
  expenditures to program accomplishment
• Auditing
• auditing software is especially suitable when
  computerized information systems are audited
• Financial Health Analysis
• supported by expert systems
• Profitability Analysis and Cost Control
• profitability analysis software allows accurate
  computation of profitability for individual
  products and for entire organizations

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Marketing Sales Systems

• Distribution Channel
• provide the goods or services to the customer,
  and may extend through various intermediaries
  such as wholesalers and retailers
• Channel Systems
• support all marketing linkages, such as
  after-sales customer support

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Marketing Sales Systems (continued ...)
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Marketing Sales (continued ...)

• Customer Service
• Customer Profiles and Preference Analysis
• IT creates customer database and merges
  computerized lists
• Mass Customization
• Dell computers assembles computers according to
  the specifications of the buyers
• J.C. Penny measures you and transfers the data
  directly to the production floor
• Targeted Advertisement on the Web
• match appropriate ads with specific groups of
  customers
• Customer Inquiry Systems and Automated Help Desk
• expert systems and intelligent agents

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Marketing Sales (continued ...)

• Telemarketing

• Five major activities which are supported by IT
• advertisement and reaching customers
• order processing ? customer service
• sales support ? account management

• Distribution Channels

• Delivery management
• DSS models are used to support decisions like use
  own outlets or distributors, and transportation
  mode
• Improving sales at retail stores
• IT reduces the long lines in stores by
  reengineering the checkout process

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Marketing Sales (continued ...)

• Marketing Management

• Pricing of Products or Services - online
  analytical processing is supporting pricing
  decisions
• Salesperson Productivity - sales-force automation
  provides salespeople in the field with portable
  computers, access to databases, and to the web
• Product-Customer Profitability Analysis - a
  cost-accounting system identifies profitable
  customers and frequency
• Sales Analysis and Trends - geographical
  information system (GIS) analyzes customers and
  competitors and examines potential strategies
• New Products, Services, and Market Planning - IT
  evaluates large number of factors and
  uncertainties and conducts survey

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Marketing Sales (continued ...)

• Ethical and Social Issues in IT-supported Sales
  Activities

• Example of Privacy Policy 3M Corp.
• Information Collection
• personally identifiable information that you
  voluntarily provide through 3Ms website or
  e-mail correspondence
• general information (such as the type of browser
  you use, the files you request, and the domain
  name and country from which you submit the
  request for information)
• Use of Information
• responding to your inquires
• tracking orders you place with 3M
• supplying you with requested information on 3M
  products

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Production Operations Logistics

• Supply-Chain Management (SCM)

INFORMATION FLOW

• SCM plans and controls the flow of information
  and cash

CASH FLOW
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Production Operations Logistics (continues )

• Logistics and Material Management

• Inventory Management
• determining how much inventory to keep
• what to order, from whom, when to order and how
  much
• inventory model economic order quantity (EOQ)
• many low cost commercial inventory software
  packages
• Quality Control
• providing information about the quality of
  incoming material and parts, as well as the
  quality of in-process semi-finished, and finished
  products
• standard quality control information systems and
  expert systems

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Production Operations Logistics (continues )

• Planning Production/Operations

• Material Requirements Planning (MRP) -
  facilitates the plan for acquiring parts,
  subassemblies, or material
• Manufacturing Resource Planning (MRPII) -
  connects the regular MRP to other functional
  areas
• Just-in-Time Systems - minimizes waste of all
  kinds, improves processes and systems, and
  maintains respect for all workers
• Project Management - Program Evaluation and
  Review Technique (PERT) and Critical Path Method
  (CPM)
• Short-Term Schedules - schedule jobs and
  employees on a daily or weekly basis

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Production Operations Logistics (Continues )

• Automatic Design Work and Manufacturing

• Computer-Aided Design (CAD)
• enables drawings to be constructed on a computer
  screen and subsequently stored, manipulated, and
  updated electronically
• Computer-Aided Manufacturing (CAM)
• facilitates planning, operation, and control of
  production jobs
• Computer-Integrated Manufacturing (CIM)
• concept or philosophy about the implementation of
  various integrated computer systems in factory
  automation

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Human Resources Management Systems

• Recruitment

• finding, testing, and deciding which employees to
  hire
• Positions inventory
• matching open positions with available personnel
• allowing data to be viewed by an employee over
  the intranet
• Employee Selection
• conducting interviews by video teleconferencing
• expediting the testing and evaluation process,
  assuring consistency in selection by using expert
  systems
• Using the Internet
• advertising position openings on the Internet

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Human Resources Management Systems (continued )

• Human Resources Maintenance and Development

• Training and Human Resources Development
• digital video-editing system - produces training
  videotapes

• Performance Evaluation
• online evaluations - supports many decisions,
  ranging from rewards to transfer to layoffs
• expert systems - provide an unbiased and
  systematic interpretation of performance over
  time
• paperless wage system (PWS) - tracks employee
  review dates and automatically initiates the wage
  review process

• Turnover, Tardiness, and Absenteeism Analyses
• DSS models - identifies causes and patterns

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Human Resources Management Systems (continued )

• Human Resources Management and Planning

• Personal files and skills inventory -
  computerized personnel files identify qualified
  employees within the company for open positions,
  promotion, transfer, special training programs,
  and layoffs
• Benefits administration - Networks and voice
  technology, or the intranets, specifying the
  value of each benefit and the available benefits
  balance of each employee
• Government reports - Availability of computerized
  personnel records greatly eases the reporting
  process
• Personnel planning - IT is used to collect,
  update, and process the information
• Succession planning and implementation - expert
  systems and personnel databases supporting and
  implementing planning
• Labor-Management Negotiations - DSS improve the
  negotiation climate and considerably reduce the
  time needed for reaching an agreement

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Human Resources Management Systems (continued )

• Intranet Applications in HRM

• Edify Corp.s employee service system
• Oracle Corp.s flexible benefits enrollment
  program on the intranet
• Aetna health Plans online directory of primary
  care physicians, hospitals, medical services, and
  health information
• Apple Computers extensive education and
  development activities on the intranet
• Merck Inc.s intranet for HR transactions

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Integrated Information Systems

• Reasons for Integration

• using twentieth-century computer technology,
  which is functionally oriented
• cannot give employees all the information they
  need
• do not let different departments communicate
  effectively with each other in the same language
• crucial sales, inventory, and production data
  often have to be painstakingly entered manually
  into separate computer systems every time a
  person who is not a member of a specific
  department needs ac hoc information related to
  the specific department

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How to Integrated Information Systems

• Connect existing systems
• maximize the use of existing systems and minimize
  the changes in them
• allows the addition of new applications to
  existing ones and the connection of systems to
  intranets and the Internet
• Using supply chain management software
• use one integrated package in one or several
  functional areas
• overcomes the isolation of the traditional
  departmental structure where the functional areas
  are separated from one another

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How to Integrated Information Systems (continued
)

• Enterprise resource planning (ERP)
• control all major business processes with a
  single software architecture in real time
• increased efficiency to improved quality,
  productivity, and profitability
• SAP software (R3 my SAP.com)
• crosses functional departments and can be
  extended along the supply chain to both suppliers
  and customers
• composed of four major parts accounting,
  manufacturing, sales and human resources

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ERP

• SAP concept

Central SAP Database Servers
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Whats in IT for Me?

• For Accounting
• Executing TPS effectively is a major concern of
  any accountant
• For Finance
• The use of IT helps financial analysts and
  managers perform their difficult tasks better
• For Marketing
• By understanding how ERP software operates,
  marketing people can greatly improve the software
  utilization by developing challenging corporate
  applications

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Whats in IT for Me? (continued )

• For Production/Operations Management
• Supply chain management and ERP are critical
  today for any medium and large manufacturing
  company, and for service organizations such as
  banks
• For Human Resources Management
• IT can improve the efficiency and effectiveness
  of the HRM activities
• conducting training on the intranet

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Whats in IT for Me? (continued )

• For Human Resource Management
• Human resource managers utilize their corporate
  networks extensively for posting job openings,
  and use internal corporate networks to publish
  corporate policies, company newsletters and job
  openings