Chp 2 Information Systems in the Enterprise

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Chapter
INFORMATION SYSTEMS IN THE ENTERPRISE
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Management Information Systems 8/e Chapter 2
Information Systems in the Enterprise
OBJECTIVES

• What are the major types of systems in a
  business? What role do they play?
• How do information systems support the major
  business functions?
• Why should managers pay attention to business
  processes?

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Management Information Systems 8/e Chapter 2
Information Systems in the Enterprise
OBJECTIVES

• What are the benefits and challenges of using
  enterprise systems?
• What are the benefits of using systems to support
  supply chain management and collaborative
  commerce?
• What are the benefits of using information
  systems for customer relationship management and
  knowledge management?

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FAST-TRACK FASHIONS AT ZARA

• In the fast-paced world of fashion retailing,
  nothing is as important as time to market.
• No company knows that better than Zara, a
  worldwide women's apparel chain headquartered in
  La Coruna, Spain.
• Apparel companies have farmed out their
  production to low-wage countries, hoping to
  benefit from lower labor costs.
• Zara decided against this because its management
  believed that the ability to respond quickly to
  shifts in customer tastes would prove much more
  efficient and profitable than outsourcing to
  low-cost contract manufacturers.

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FAST-TRACK FASHIONS AT ZARA

• By meticulously coordinating the entire
  production process, Zara can react much more
  quickly than its competitors to percolating
  fashion trends.
• Zara has what many believe is the world's most
  responsive supply chain.
• About half the items it sells are made in its own
  factories the rest are outsourced.
• Zara restocks its stores twice a week, delivering
  both reordered items and completely new styles

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FAST-TRACK FASHIONS AT ZARA

• Rival apparel chains, in contrast, only receive
  new designs once or twice a season.
• Zara's design department likewise outstrips the
  competition by churning out more than 10,000
  fresh new designs each year.
• No competitor comes close. "It's like you walk
  into a new store every two weeks," observes Tracy
  Mullin, president and CEO of the National Retail
  Federation.

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FAST-TRACK FASHIONS AT ZARA

• Every working day, the manager of a Zara store
  reports exactly what has been sold to corporate
  headquarters via the Internet.
• This information is quickly relayed to the Zara's
  design department, which can create or alter
  products in a matter of days.
• Within days, the new garments are cut, dyed,
  stitched, and pressed. In just 3 weeks the
  clothes will be hanging in Zara stores all over
  the world. Zara's time to market is 12 times
  faster than rivals such as the Gap

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FAST-TRACK FASHIONS AT ZARA

• Zara maintains a gigantic 9 million square foot
  warehouse in La Coruna that is connected to 14 of
  its factories through a maze of tunnels, each
  with a rail hanging from its ceiling. Along these
  rails, cables transport bunches of clothes on
  hangers or in suspended racks into the warehouse.
  
• Each bundle is supported by a metal bar with a
  series of tabs coded to indicate exactly where in
  the warehouse that bundle should be placed.
  There, the merchandise is sorted, rerouted, and
  resorted until it gets to the staging area of the
  distribution center.

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FAST-TRACK FASHIONS AT ZARA

• Zara's manufacturing costs run 15 to 20 percent
  higher than those of rivals, but they are more
  than offset by the advantages of split-second
  time to market. In 2001, when many clothing
  chains saw sales and profits slide, Zara's
  profits climbed 31 percent, and the company has
  historically maintained steady profit margins
  that are among the best in the industry.

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Management Information Systems 8/e Chapter 2
Information Systems in the Enterprise
MANAGEMENT CHALLENGES

1. Integration Different systems serve variety of
   functions, connecting organizational levels
   difficult, costly
2. Enlarging scope of management thinking Most
   managers are trained to manage a product line, a
   division, or an office. They are rarely trained
   to optimize the performance of the organization
   as a whole, and often are not given the means to
   do so.
3. ES are Huge system investments, long development
   time must be guided by common objectives

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Management Information Systems 8/e Chapter 2
Information Systems in the Enterprise
KEY SYSTEM APPLICATIONS IN THE ORGANIZATION
Types of Information Systems
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Different Kinds of Systems

• Operational-level systems support operational
  managers by keeping track of the elementary
  activities and transactions of the organization,
  such as sales, receipts, cash deposits, payroll,
  credit decisions, and the flow of materials in a
  factory. The principal purpose of systems at this
  level is to answer routine questions and to track
  the flow of transactions through the
  organization.
• How many parts are in inventory?
• What happened to Mr. Williams's payment?
• How many hours worked each day by employees on a
  factory floor.

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Different Kinds of Systems

• Knowledge-level systems support the
  organization's knowledge and data workers. The
  purpose of knowledge-level systems is to
• Help the business firm integrate new knowledge
  into the business.
• Help the organization control the flow of
  paperwork.
• Knowledge-level systems, especially in the form
  of workstations and office systems, are among the
  most widely used applications in business today.

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Different Kinds of Systems

• Management-level systems serve the monitoring,
  controlling, decision-making, and administrative
  activities of middle managers.
• The principal question addressed by such systems
  is Are things working well? Management-level
  systems typically provide periodic reports rather
  than instant information on operations.
• Some management-level systems support nonroutine
  decision making.
• They tend to focus on less-structured decisions
  for which information requirements are not always
  clear. These systems often answer "what if"
  questionsExternal Internal Data.

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Different Kinds of Systems

• Strategic-level systems help senior management
  TACKLE and ADDRESS STRATEGIC issues and LONG-TERM
  trends, both in the FIRM and in the EXTERNAL
  environment.
• Their principal concern is matching changes in
  the external environment with existing
  organizational capability.
• What will EMPLOYMENT LEVELS be in FIVE YEARS?
• What are the LONG-TERM INDUSTRY COST trends?
• What PRODUCTS should we be making in FIVE YEARS?

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Management Information Systems 8/e Chapter 2
Information Systems in the Enterprise
MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

• Executive Support Systems (ESS) at the strategic
  level
• Decision Support Systems (DSS) at the management
  level
• Management Information Systems (MIS) at the
  management level
• Knowledge Work Systems (KWS) at the knowledge
  level
• Office Automation Systems at the (OAS)knowledge
  level
• Transaction Processing Systems (TPS) at the
  operational level

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Management Information Systems 8/e Chapter 2
Information Systems in the Enterprise
MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS
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Management Information Systems 8/e Chapter 2
Information Systems in the Enterprise
Transaction Processing Systems (TPS)

• Basic business systems that serve the operational
  level
• A computerized system that performs and records
  the daily routine transactions necessary to the
  conduct of the business.
• Examples are sales order entry, hotel reservation
  systems, payroll, employee record keeping, and
  shipping.
• At the operational level, tasks, resources, and
  goals are predefined and highly structured.

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Transaction Processing Systems (TPS)

• Transaction processing systems are often so
  central to a business that TPS failure for a few
  hours can spell a firm's end and perhaps other
  firms linked to it.
• TPS are also major producers of information for
  the other types of systems. For example, the
  payroll system along with other accounting TPS,
  supplies data to the company's general ledger
  system, which is responsible for maintaining
  records of the firm's income and expenses and for
  producing reports such as income statements and
  balance sheets.

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Management Information Systems 8/e Chapter 2
Information Systems in the Enterprise
MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS
Payroll TPS
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Management Information Systems 8/e Chapter 2
Information Systems in the Enterprise
MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS
Types of TPS Systems
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KNOWLEDGE WORK SYSTEMS (KWS)

• Knowledge work systems (KWS) and office systems
  serve the information needs at the knowledge
  level of the organization.
• Knowledge work systems aid knowledge workers,
  whereas Office Automation systems primarily aid
  data workers (although they are also used
  extensively by knowledge workers).

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OFFICE AUTOMATION SYSTEMS

• TOWARD A PAPERLESS OFFICE
• Typical office systems handle and manage
  documents through
• Word processing
• Desktop publishing
• Document imaging
• Scheduling (electronic calendars)
• Communication (through electronic mail, voice
  mail, or videoconferencing).

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KNOWLEDGE WORK SYSTEMS (KWS)

• Knowledge Work Systems (KWS)
• Knowledge level
• Inputs Design specs
• Processing Modeling
• Outputs Designs, graphics
• Users Technical staff and professionals
• Example Engineering work station

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Management information systems

• Management information systems (MIS) serve the
  management level of the organization, providing
  managers with reports or with on-line access to
  the organization's current performance and
  historical records.
• They are oriented almost exclusively to internal,
  not environmental or external, events.
• MIS primarily serve the functions of planning,
  controlling, and decision making at the
  management level.
• They depend on underlying transaction processing
  systems for their data.

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AL- ALAWI DEFINITION OF MANAGEMENTINFORMATION
SYSTEMS (MIS)
MIS is a system which provides historical,
present and predictive information derived from
both the internal operation of the organization
and the external environment. MIS supplies
accurate, selective and timely information and
supports the information needs of management
activity to assist in decision-making. The
authors working definition of MIS will apply to
both profit making organization as well as
non-profit organization as it provides and
supplies all different types of all levels of
management activity in order to help them in
their decision-making.
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Management information systems

• MIS usually serve managers interested in weekly,
  monthly, and yearly resultsnot day-to-day
  activities.
• MIS reports might compare total annual sales
  figures for specific products to planned targets.
  
• These systems are generally not flexible and have
  little analytical capability.
• Most MIS use simple routines such as summaries
  and comparisons, as opposed to sophisticated
  mathematical models or statistical techniques.

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Management information systems

• Management level
• Inputs High volume data
• Processing Simple models
• Outputs Summary reports
• Users Middle managers
• Example Annual budgeting

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TPS DATA FOR MIS APPLICATIONS
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Management information systems
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DECISION SUPPORT SYSTEMS

• DSS help managers make decisions that are unique,
  rapidly changing, and not easily specified in
  advance.
• They address non-routine problems DSS use
  internal information from TPS and MIS bring in
  information from external sources, such as
  product prices of competitors.
• DSS have more analytical power than other
  systems.
• They are built explicitly with a variety of
  models to analyze data
• DSS include user-friendly software.
• DSS are interactive the user can change
  assumptions, ask new questions

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DECISION SUPPORT SYSTEMS (DSS)

• MANAGEMENT LEVEL
• INPUTS LOW VOLUME DATA
• PROCESSING INTERACTIVE
• OUTPUTS DECISION ANALYSIS
• USERS PROFESSIONALS, STAFF
• EXAMPLE CONTRACT COST ANALYSIS

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DECISION SUPPORT SYSTEMS (DSS)

• FLEXIBLE, ADAPTABLE, QUICK
• USER CONTROLS INPUTS/OUTPUTS
• NO PROFESSIONAL PROGRAMMING
• SUPPORTS DECISION PROCESS
• SOPHISTICATED MODELING TOOLS

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VOYAGE-ESTIMATING SYSTEM

• The system can answer questions such as the
  following Given a customer delivery schedule and
  an offered freight rate, which Truck should be
  assigned at what rate to maximize profits?
• What is the optimum speed at which a particular
  Truck can optimize its profit and still meet its
  delivery schedule?
• What is the optimal loading pattern for a ship
  bound for the U.S. West Coast from Malaysia?

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DECISION SUPPORT SYSTEMS (DSS)
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EXECUTIVE SUPPORT SYSTEMS (ESS)

• ESS serve the strategic level of the
  organization.
• They address long term non-routine decisions
  requiring judgment, evaluation, and insight
  because there is no agreed-on procedure for
  arriving at a solution.
• ESS are designed to incorporate data about
  external events such as new tax laws or
  competitors, but they also draw summarized
  information from internal MIS and DSS.

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EXECUTIVE SUPPORT SYSTEMS (ESS)

• STRATEGIC LEVEL
• INPUTS AGGREGATE DATA
• PROCESSING INTERACTIVE
• OUTPUTS PROJECTIONS
• USERS SENIOR MANAGERS
• EXAMPLE 5 YEAR OPERATING PLAN

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EXECUTIVE SUPPORT SYSTEMS (ESS)

• TOP LEVEL MANAGEMENT
• DESIGNED TO THE INDIVIDUAL
• VERY EXPENSIVE TO KEEP UP
• EXTENSIVE SUPPORT STAFF
• TIES CEO TO ALL LEVELS

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Management Information Systems 8/e Chapter 2
Information Systems in the Enterprise
MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS
Executive Support System (ESS)
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Relationship of Systems to One Another

• Systems serving different levels in the
  organization are related to one another.
• TPS are typically a major source of data for
  other systems.
• ESS are primarily a recipient of data from
  lower-level systems.
• The other types of systems may exchange data with
  each other as well.
• Data may also be exchanged among systems serving
  different functional areas. For example, an order
  captured by a sales system may be transmitted to
  a manufacturing system as a transaction for
  producing or delivering the product specified in
  the order.

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INTERRELATIONSHIPS AMONG SYSTEMS
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SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

• SALES MARKETING SYSTEMS
• MANUFACTURING PRODUCTION SYSTEMS
• FINANCE ACCOUNTING SYSTEMS
• HUMAN RESOURCES SYSTEMS

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SALES AND MARKETING INFORMATION 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

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SALES AND MARKETING INFORMATION SYSTEMS

• Selling the organization's products or services.
• Sales Marketing is concerned with
• Identifying the customers for the firm's
  products or services
• Determining what they need or want
• Advertising and promoting these products and
  services.
• Sales is concerned with
• Contacting customers
• Selling the products and services
• Taking orders, and following up on sales.

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SALES AND MARKETING INFORMATION SYSTEMS
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MANUFACTURING AND PRODUCTION INFORMATION 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

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MANUFACTURING AND PRODUCTION INFORMATION SYSTEMS

• Producing the firm's goods and services.
  Manufacturing and production activities deal
  with
• The planning, development, and maintenance of
  production facilities
• The acquisition, storage, and availability of
  production materials
• The scheduling of equipment, facilities,
  materials, and labor required to fashion finished
  products.

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MANUFACTURING AND PRODUCTION INFORMATION SYSTEMS
Table 2-3
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Management Information Systems 8/e Chapter 2
Information Systems in the Enterprise
SYSTEMS FROM A FUNCTIONAL PERSPECTIVE
Most manufacturing and production systems use
some sort of inventory system
Overview of Inventory Systems
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FINANCE AND ACCOUNTING INFORMATION SYSTEMS

• The finance function is responsible for
• Managing the firm's financial assets, such as
  cash, stocks, bonds, and other investments, in
  order to maximize the return on these financial
  assets.
• Managing the capitalization of the firm (finding
  new financial assets in stocks, bonds, or other
  forms of debt). In order to determine whether the
  firm is getting the best return on its
  investments,

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FINANCE AND ACCOUNTING INFORMATION SYSTEMS

• The accounting function is responsible for
• Maintaining and managing the firm's financial
  recordsreceipts,expenses, payroll
• Accounting account for the flow of funds in a
  firm.

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FINANCE AND ACCOUNTING INFORMATION SYSTEMS

• Major functions of systems
• Budgeting, general ledger, billing, cost
  accounting
• Major application systems
• General ledger, accounts receivable, accounts
  payable, budgeting, funds management systems

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Management Information Systems 8/e Chapter 2
Information Systems in the Enterprise
SYSTEMS FROM A FUNCTIONAL PERSPECTIVE
Financing and Accounting Systems
Table 2-4
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Human resources information systems

• The human resources function is responsible for
  Attracting, developing, and maintaining the
  firm's workforce.
• Human resources information systems support
  activities such as
• Identifying potential employees
• Maintaining complete records on existing
  employees
• Creating programs to develop employees' talents
  and skills.

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Human resources information 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

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Human resources information systems
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Human resources information systems
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ENTERPRISE APPLICATIONS Business Processes and
Information Systems

• Electronic commerce, electronic business, and
  intensifying global competition are forcing firms
  to focus on speed to market, improving customer
  service, and more efficient execution. The flow
  of information and work needs to be orchestrated
  so that the organization can perform like a
  well-oiled machine. These changes require
  powerful new systems that can integrate
  information from many different functional areas
  and organizational units and coordinate firm
  activities with those of suppliers and other
  business partners.

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ENTERPRISE APPLICATIONS Business Processes and
Information Systems

• One solution is to build a separate "middleware"
  software bridge to each of these specialized
  systems to link them all together. (expensive and
  unsatisfactory solution).
• Another solution, now more common, is to build or
  buy entirely new enterprise applications that can
  coordinate activities, decisions, and knowledge
  across many different functions, levels, and
  business units in a firm.

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ENTERPRISE APPLICATIONS Business Processes and
Information Systems

• The new digital firm business environment and
  the deployment of enterprise applications
  requires companies to think more strategically
  about their business processes
• Business processes Manner in which work is
  organized, coordinated, and focused to produce a
  valuable product or service
• Concrete work flows of material, information, and
  knowledgesets of activities

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ENTERPRISE APPLICATIONS Business Processes and
Information Systems

• Unique ways to coordinate work,
• information, and knowledge
• Ways in which management chooses
• to coordinate work

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ENTERPRISE APPLICATIONS Business Processes and
Information Systems

• Information systems help organizations
• Achieve great efficiencies by automating parts
  of processes
• Rethink and streamline processes

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ENTERPRISE APPLICATIONS Business Processes and
Information Systems
Examples of Business Processes

• Manufacturing and production Assembling product,
  checking quality, producing bills of materials
• Sales and marketing Identifying customers,
  creating customer awareness, selling

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ENTERPRISE APPLICATIONS Business Processes and
Information Systems
Examples of Business Processes

• Finance and accounting Paying creditors,
  creating financial statements, managing cash
  accounts
• Human Resources Hiring employees, evaluating
  performance, enrolling employees in benefits
  plans

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ENTERPRISE APPLICATIONS Business Processes and
Information Systems

• Cross-Functional Business Processes
• Transcend boundary between sales, marketing,
  manufacturing, and research and development
• Group employees from different functional
  specialties to a complete piece of work
• Example Order Fulfillment Process

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ENTERPRISE APPLICATIONS
The Order Fulfillment Process
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ENTERPRISE APPLICATIONS

• Enterprise Applications
• Enterprise systems
• Supply chain management systems
• Customer relationship management systems
• Knowledge management systems

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ENTERPRISE APPLICATIONS
Traditional View of the Systems

• Within the business There are functions, each
  having its uses of information systems
• Outside the organizations boundaries There are
  customers and vendors
• Functions tend to work in isolation

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ENTERPRISE APPLICATIONS
Traditional View of the Systems
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ENTERPRISE APPLICATIONS
Enterprise Systems
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Enterprise Systems

• The enterprise system collects data from various
  key business processes and stores the data in a
  single comprehensive data repository where they
  can be used by other parts of the business.
  Managers emerge with more precise and timely
  information for coordinating the daily operations
  of the business and a firmwide view of business
  processes and information flows

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Enterprise Systems

• A sales representative in Brussels enters a
  customer order, the data flow automatically to
  others in the company who need to see them.
• The factory in Hong Kong receives the order and
  begins production.
• The warehouse checks its progress on-line and
  schedules the shipment date.
• The warehouse can check its stock of parts and
  replenish whatever the factory has depleted.

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Enterprise Systems

• The enterprise system stores production
  information, where it can be accessed by customer
  service representatives to track the progress of
  the order through every step of the manufacturing
  process. Updated sales and production data
  automatically flow to the accounting department.
  The system transmits information for calculating
  the salesperson's commission to the payroll
  department.

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Enterprise Systems

• The system also automatically recalculates the
  company's balance sheets, accounts receivable and
  payable ledgers, cost-center accounts, and
  available cash.
• Corporate headquarters in London can view
  up-to-the-minute data on sales, inventory, and
  production at every step of the process, as well
  as updated sales and production forecasts and
  calculations of product cost and availability.

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ENTERPRISE APPLICATIONS
Benefits of Enterprise Systems

• OrganizationEnterprise systems integrate the
  corporation across geographic or business unit
  boundaries or to create a more uniform
  organizational culture in which everyone uses
  similar processes and information.
• Management Information supplied by an enterprise
  system is structured around cross-functional
  business processes, and it can improve management
  reporting and decision making
• Technology Unified platform
• Business More efficient operations and
  customer-driven business processes

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ENTERPRISE APPLICATIONS
Challenges of Enterprise Systems

• Difficult to build Require fundamental changes
  in the way the business operates
• Technology Require complex pieces of software
  and large investments of time, money, and
  expertise
• Centralized organizational coordination and
  decision making Not the best way for the firms
  to operate

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ENTERPRISE APPLICATIONS
Supply Chain Management (SCM)

• Supply Chain Management (SCM)
• Close linkage and coordination of activities
  involved in buying, making, and moving a product
• Integrates supplier, manufacturer, distributor,
  and customer logistics time
• Reduces time, redundant effort, and inventory
  costs

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ENTERPRISE APPLICATIONS
Supply Chain Management (SCM)

• Supply Chain
• Network of organizations and business processes
• Helps in procurement of materials, transformation
  of raw materials into intermediate and finished
  products

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ENTERPRISE APPLICATIONS
Supply Chain Management
Figure 2-15
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SUPPLY-CHAIN MANAGEMENT
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ENTERPRISE APPLICATIONS
How Information Systems Facilitate Supply Chain
Management

• Decide when, what to produce, store, move
• Rapidly communicate orders
• Communicate orders, track order status
• Check inventory availability, monitor levels
• Track shipments
• Plan production based on actual demand
• Rapidly communicate product design change
• Provide product specifications
• Share information about defect rates, returns

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ENTERPRISE APPLICATIONS
Supply Chain Management (SCM)

• Supply chain planning system Enables firm to
  generate forecasts for a product and to develop
  sourcing and a manufacturing plan for the product
• Supply chain execution system Manages flow of
  products through distribution centers and
  warehouses

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ENTERPRISE APPLICATIONS
Customer Relationship Management (CRM)

• Customer Relationship Management (CRM)
• Manages all ways used by firms to deal with
  existing and potential new customers
• Business and Technology discipline
• Uses information system to coordinate entire
  business processes of a firm

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ENTERPRISE APPLICATIONS
Customer Relationship Management (CRM)

• Provides end-to-end customer care
• Provides a unified view of customer across the
  company
• Consolidates customer data from multiple sources
  and provides analytical tools for answering
  questions

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ENTERPRISE APPLICATIONS
Customer Relationship Management (CRM)
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Chapter
INFORMATION SYSTEMS IN THE ENTERPRISE