Transaction Processing, Innovative Functional Systems, CRM

1
Chapter 7

• Transaction Processing, Innovative Functional
  Systems, CRM Integration

2
Learning Objectives

• Relate functional areas and business processes to
  the value chain model.
• Identify functional management information
  systems.
• Describe the transaction processing system and
  demonstrate how it is supported by IT.
• Describe the support provided by IT and the Web
  to each of these functional areas
  production/operations, marketing and sales,
  accounting and finance, and human resources
  management.
• Describe the role of IT in facilitating CRM.
• Describe the benefits issues of integrating
  functional information systems.

3
Case Integrated Solutions for Building Supply

• Problem
• Colonial is a small building supply company in
  Utah. To remain competitive, they needed a
  technology to provide information about inventory
  levels customer buying trends.
• Solution
• Colonial purchased an integrated system,
  point-of-sale (POS) terminals, hand-held
  automatic product identification data
  collection.
• Sold items are deducted from the inventory
  instantly.
• Purchase orders are sent electronically via the
  Internet.
• Results
• Lower costs for data entry labor, reductions in
  inventory/ storage space, fast access to
  information, better customer service, higher
  employee satisfaction

4
Lessons from the Case

• IT supports the routine processes of a retailer,
  enabling it to be efficient and effective and to
  satisfy its customers.
• The software helped to modernize redesign the
  companys major business processes.
• The software supports several business processes,
  not just one.
• The systems major applications are in logistics.
  However, the same software vendor provides
  ready-made accounting, marketing, operations
  modules.
• IT can be beneficial to a relatively small
  company.
• The integration includes connection to business
  partners using the Internet.

5
Functional Information Systems

• Traditionally, information systems were designed
  within each functional area to increase their
  internal effectiveness efficiency.
• This may not suit some organizations, because
  certain processes may involve activities that are
  performed in several functional areas.
• Solution 1 Reengineer the organization.
• For example, the company can create
  cross-functional teams, each responsible for
  performing a complete business process.
• Solution 2 The integrated approach (e.g.
  Colonial).
• Keeps the functional departments but creates a
  supportive information system to help
  communication, coordination, and control.

6
Functional Departments the Value Chain
7
Characteristics of Functional Information Systems

• 1. A functional information system consists of
  several smaller information systems that support
  specific activities performed in the functional
  area.
• 2. The specific IS applications in any functional
  area can be integrated to form a coherent
  departmental functional system, or they can be
  completely independent.
• 3. Functional information systems interface with
  each other to form the organization-wide
  information system.
• 4. Some organizational information systems
  interface with the environment.
• 5. Information systems applications support the
  three levels of an organizations activities
  operational, managerial, and strategic.

8
Transaction Processing Systems

• Transaction Processing Systems (TPS)
• the information system that support business
  processes, mainly accounting finance
  transactions, with some sales, personnel,
  production activities as well.
• TPS is the backbone of an organizations
  information systems.
• It monitors, collects, stores, processes
  disseminates information for all routine core
  business transactions.
• These data are input data to functional
  information systems applications, DSS, and CRM.

9
Objectives of TPS

• Primary goal of TPS to provide all the
  information needed by law and/or by
  organizational policies to keep the business
  running properly and efficiently.
• Specific objectives of a TPS
• to allow for efficient effective operation of
  the organization.
• to provide timely documents and reports.
• to increase the competitive advantage of the
  corporation.
• to provide the necessary data for tactical
  strategic systems, such as Web-based
  applications.
• to ensure accuracy integrity of data
  information.
• to safeguard assets security of information.

10
Activities of TPS

• First, data are collected entered into the
  computer via any input device.
• The system then processes data in one of the
  following ways
• Batch processing the firm collects data from
  transactions as they occur, placing them in
  groups or batches. The system then processes the
  batches periodically
• Online processing data are processed as soon as
  a transaction occurs.
• Hybrid system (a combination of batch online
  processing) collects data as they occur but
  process them at specified intervals.

11
Benefits of Internet Transaction Processes

• Flexibility to accommodate unpredictable growth
  in processing demand.
• Cost effectiveness for small dollar amounts.
• Interactive, automatic billing, enabling
  companies to offer services to anyone, not just
  subscribers.
• Timely search and analysis of large databases.
• Ability to handle multimedia data such as
  pictures and sound effectively and efficiently.
• High data throughput to support inquiries
  requiring massive file size.
• Fast response time.
• Effective storage of huge graphics and video
  databases.

12
Case Taxis in Singapore

• Taxis in Singapore are tracked by a global
  positioning system (GPS). This provides users
  with an instant fix on the geographical position
  of each taxi.
• Customer orders are usually received via
  telephone, fax e-mail. Frequent users enter
  orders from their offices or homes by keying in a
  PIN number.
• The system completely reengineered the taxi order
  processing.
• The transaction time for processing an order is
  much shorter.
• The system increased the capacity for taking
  incoming calls by 1,000.

13
Production Operations Management (POM)

• The Production and Operations Management (POM)
  function in an organization is responsible for
  the processes that transform inputs into useful
  outputs.
• Four IT-supported POM topics be discussed
• In-house logistics and material management.
• Planning production/operations.
• Automating design work and manufacturing.
• Computer-integrated manufacturing (CIM).

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In-House Logistics Material Management

• Logistics Management deals with ordering,
  purchasing, inbound logistics (receiving), and
  outbound logistics (shipping) activities.
• All of these activities can be supported by
  information systems. For example, many companies
  today are moving to some type of e-procurement
• Inventory management determines how much
  inventory to keep.
• Three costs play important roles in inventory
  decisions
• cost of maintaining inventories
• cost of ordering (a fixed cost per order)
• cost of not having inventory when needed.

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Planning Procedures/ Operations

• Material Requirements Planning (MRP) The
  software that facilitates the plan for acquiring
  (or producing) parts, subassemblies, or
  materials.
• Manufacturing Resource Planning (MRP II)
  connects the regular MRP to other functional
  areas.
• In addition to the output similar to that of MRP,
  MRP II determines the costs of parts and the cash
  flow needed to pay for parts.
• Just-in-time (JIT) an approach that attempts
  to minimize waste of all kinds (space, labor,
  materials, energy, and so on) and continuously
  improve processes and systems.

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Planning Procedures/ Operations (cont.)

• The management of a project is complicated by
  the following characteristics
• Most projects are unique undertakings, and
  participants have little prior experience in the
  area.
• Uncertainty exists due to the long completion
  times.
• There can be significant participation of
  outsiders, which is difficult to control.
• Extensive interaction may occur among
  participants.
• Projects often carry high risk but also high
  profit potential.

17
Automated Design Work Manufacturing

• Computer-aided design (CAD) is a system that
  enables industrial drawings to be constructed on
  a computer screen stored, manipulated
  updated electronically.
• Computer-aided engineering (CAE) software enables
  designers to analyze the design and determine
  whether it will work the way the designer thought
  it would.

• Computer-Aided Manufacturing (CAM) encompasses
  computer-aided techniques that facilitate
  planning, operation control of a production
  facility.
• Enhanced product realization (EPR) is a
  Web-based, distributed system that allows
  manufacturers to make product modifications
  anywhere in the world in as few as five days.

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Computer-Integrated Manufacturing (CIM

• Computer-integrated manufacturing (CIM)
• is a philosophy about the implementation of
  various integrated computer systems in factory
  automation.

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Computer-Integrated Manufacturing (CIM

• Computer-integrated manufacturing (CIM) has three
  basic goals
• Simplification of all manufacturing technologies
  techniques.
• Automation of as many of the manufacturing
  processes as possible by the integration of many
  information technologies.
• ?Integration and coordination of all aspects of
  design, manufacturing related functions via
  computer hardware and software.

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The CIM Model
21
Channel Systems

• CHANNEL SYSTEMS are all the systems involved in
  the process of getting a product or service to
  customers dealing with all customers needs.
• FOUR MAIN CHANNEL SYSTEM ACTIVITIES
• The Customer is King/ Queen.
• Telemarketing.
• Distribution channels.
• Marketing management.

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The Customer is King/ Queen

• Innovative products services and superb
  customer service are becoming a necessity for
  many organizations. For example
• Customer Profiles and Preference Analysis. 
• Prospective Customer Lists Marketing
  Databases. 
• Mass Customization. 
• Personalization.

• It is essential for companies today to be aware
  of their customers and treat them like royalty.

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Telemarketing Online Shopping

• Lately, telemarketing has been moving to cell
  phones, using Short message service (SMS), which
  consists of messages you can receive on your cell
  phone.
• A telemarketing process can be divided into five
  major activities, all of which are supported by
  IT can be done on the Web, even in a wireless
  environment.
• Advertisement and reaching customers
• Order processing
• Customer service
• Sales support
• Account management

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Distribution Channels

• Organizations can distribute their products
  services through several available delivery
  channels.
• A company may use its own outlets or
  distributors. The company also needs to decide on
  the delivery mode (trains, planes, trucks).
• Distribution Channels Management. Once products
  are in the distribution channels, firms need to
  monitor and track them to guarantee customer
  satisfaction.
• Improving Sales at Retail Stores. Using
  information technology, it is possible to improve
  sales by reengineering the checkout process.

25
Marketing Management

• Many marketing management activities are
  supported by computerized information systems.
  Some areas where this is being done include
• Pricing of Products or Services. 
• Salesperson Productivity. 
• Productivity Software (Sales automation software)
• Product-Customer Profitability Analysis.
• Sales Analysis and Trends. 
• New Product, Service, and Market Planning. 
• Web-Based Systems in Marketing.

26
Managing Accounting Finance Systems
27
Managing Accounting Finance Systems

• An accounting/finance information system is
  responsible for
• Gathering the raw data necessary for the
  accounting/finance TPS
• Ttransforming the data into information
• Making the information available to users
• Many packages exist to execute routine accounting
  transaction processing activities.
• Some software packages are integrated, e.g. MAS
  90 and MAS 200
• The accounting/finance TPS also provides a
  complete, reliable audit trail of all
  transactions transmitted through the network.

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Financial Planning Budgeting

• Appropriate management of financial assets is a
  major task in financial planning and budgeting.
• Financial and Economic Forecasting.
• Knowledge about the availability and cost of
  money is a key ingredient for successful
  financial planning.
• Planning for Incoming Funds. 
• Funds for organizations come from several
  sources.
• Using the information generated by financial and
  economic forecasts, the organization can build a
  decision support model for planning incoming
  funds.

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Investment Management

• Investment management is a difficult task for the
  following reasons
• 1. There are thousands of investment
  alternatives.
• 2. Investment decisions are based on economic and
  financial forecasts, which are frequently
  unreliable.
• 3. The investment environment includes
  opportunities in other countries, providing both
  high potential rewards and high risks.
• 4. Investments made by many organizations are
  subject to complex regulations and tax laws.
• 5. Investment decisions need to be made quickly
  frequently.
• 6. Several multiple and conflicting objectives
  exist in making investments, including high
  yield, safety, and liquidity.

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CASE Equity Portfolios at Daiwa Securities

• Daiwa Securities of Japan is one of the worlds
  largest and most profitable multinational
  securities firms.
• They believe that identifying mispricings in the
  stock markets holds great profit potential.
• Daiwa uses leading-edge computerized quantitative
  analysis which compares stock price performance
  of individual companies to that of other
  companies in the same market sector.
• The recommendations are generated by a system
  called MATLAB.
• MATLAB attempts to minimize the risk of the
  portfolio yet maximize its profit.

31
Access to Financial Economic Reports
To cope with the large amount of financial online
data, investors use three supporting tools
Internet search engines for finding financial
data.
Internet directories and yellow pages.
Software for monitoring, interpreting, analyzing
financial data, alerting management.
32
Control Auditing

• Specific forms of financial control are
• Budgetary controls
• Internal and External audits
• Financial Ratio Analysis
• Profitability Analysis Cost Control
• Product Pricing

33
Managing Human Resource Systems

• Developments in Web-based systems increased the
  popularity of human resources information systems
  (HRISs) as of the late 1990s.
• Initial HRIS applications were mainly related to
  transaction processing systems.
• However, in the last decade we have seen
  considerable computerization activities in the
  managerial and even strategic areas.

34
HRISs Recruitment

• Using the Web for Recruitment. With millions of
  resumes available online, companies are trying to
  find appropriate candidates on the Web.
• Position Inventory. Large organizations need to
  fill vacant positions frequently. An advanced
  intranet-based position inventory system keeps
  the position inventory list current matches
  openings.
• Employee Selection. To expedite the testing and
  evaluation process and ensure consistency in
  selection, companies use information technologies
  such as expert systems.

35
Human Resources Maintenance Development

• Performance Evaluation. Once digitized,
  evaluations can be used to support many
  decisions, ranging from rewards to transfers to
  layoffs.
• Training and Human Resources Development.  IT can
  support the planning, monitoring, and control of
  training and retraining activities by using
  workflow applications.
• Intelligent computer-aided instruction (ICAI) and
  application of multimedia support for
  instructional activities.
• Training can be improved using Web-based video
  clips virtual reality.

36
Human Resources Planning Management

• Personnel Planning.  Large companies develop
  qualitative and quantitative workforce planning
  models, which can be enhanced if IT is used to
  collect, update, and process the information.
• LaborManagement Negotiations. Some companies
  have developed computerized DSS models that
  support negotiations.
• These models can simulate financial other
  impacts of fulfilling any demand made by
  employees and provide answers to queries in
  seconds.
• Benefits Administration. Using computers for
  benefits selection can save a tremendous amount
  of labor and time.
• Some companies have automated benefits
  enrollments.

37
Customer Relationship Management

• Customer relationship management (CRM) is an
  approach that recognizes that customers are the
  core of the business and that the companys
  success depends on effectively managing
  relationships with them.
• Customer service is a series of activities
  designed to enhance the level of customer
  satisfaction.

• Relationship marketing is the overt attempt of
  exchange partners to build a long-term
  association, characterized by purposeful
  cooperation and mutual dependence on the
  development of social, as well as structural,
  bonds (Mowen Minor, 1998).
• E-Service is customer service that is performed
  on the Web, sometimes automatically.

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CRM in Action

• According to Seybold and Marshak (1998) there are
  five steps in building IT-supported CRM. These
  are
• 1. Make it easy for customers to do business
  with you.
• 2. Focus on the end customer for your products
  and services.
• 3. Redesign your customer-facing business
  processes from the end customers point of
  view.
• 4. Wire your company for profit design a
  comprehensive, evolving electronic business
  architecture.
• 5. Foster customer loyalty. In e-Commerce,
  especially, this is the key to profitability.

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Information Technology in CRM
40
Customer Service on the Web

• Providing Search and Comparison Capabilities.
• Providing Free Products and Services.
• Providing Technical and Other Information and
  Service.

• Allowing Customers to Order Customized Products
  and Services Online.
• Letting Customers Track Accounts or Order Status

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Tools for Customer Service

• Personalized Web Pages
• FAQs
• Tracking Tools
• Chat Rooms

• E-mail and Automated Response
• Help Desks and Call Centers
• Troubleshooting Tools

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Justifying CRM programs
One way to determine how much customer service to
provide is to compare your company against a
set of standards known as metrics. Metrics to
evaluate Web-related customer service

• Security and privacy.
• Fulfillment.
• Return policy.
• Navigability.

• Response time.
• Site availability.
• Download time.
• Timeliness.

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CRM Failures

• A large percentage of failures have been reported
  in CRM.
• Some of the big issues are
• Failure to identify and focus on specific
  business problems.
• Lack of active senior management (non-IT)
  sponsorship.
• Poor user acceptance, which can occur for a
  variety of reasons such as unclear benefits and
  usability issues.
• Trying to automate a poorly defined process.

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Partner Relationship Management

• Partnership Relationship Management (PRM) refers
  to all of the efforts made to apply CRM to all
  types of business partners.
• Specific functions of PRM applications
• Partner profiles ?Centralized forecasting
• Partner communications ? Group planning
• Lead management ? E-mail/ Web-based alerts
• Targeted information distribution ? Messaging
• Connecting the extended enterprise ? Price lists
• Partner planning ? Community bulletin boards

45
Case Integrated Server System at Europcar

• Problem
• Europcar Internet, the largest European-based car
  rental agency, combined 55 different mainframe
  and minicomputer systems into a single
  client/server center known as Greenway.
• The 55 independent systems needed to be
  integrated.
• Solution
• Key business processes were all integrated into
  Greenway.
• Customer-related benefits include (1) faster
  service (2) reservation desks linked to airline
  reservation systems, and (3) corporate customers
  managed from one location.
• Results
• By 2000, Europcar expanded to 100 countries
  worldwide.

46
Managerial Issues

• Integration of functional information systems.
  Integration of existing stand-alone functional
  information systems is a major problem for many
  organizations.
• Priority of transaction processing. Transaction
  processing may not be an exotic application, but
  it deals with the core processes of
  organizations.

• The customer is king/queen. In implementing IT
  applications, management must remember the
  importance of the customer, whether external or
  internal.

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Managerial Issues (cont.)

• Finding innovative applications. Tools such as
  Lotus Notes, intranets, and the Internet enable
  the construction of many applications that can
  increase productivity and quality.
• System integration. Although functional systems
  are necessary, they may not be sufficient if they
  work independently.

• Using the Web. Web-based systems should be
  considered in all functional areas. They are
  effective, inexpensive user friendly.
• Ethical Issues. Many ethical issues are related
  to the code of ethics followed in CRM and
  privacy policies.