Global EBusiness: How Businesses Use Information Systems

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Global E-Business How Businesses Use Information
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Management Information Systems Chapter 2 Global
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LEARNING OBJECTIVES

• Define and describe business processes and their
  relationship to information systems.
• Describe the information systems supporting the
  major business functions sales and marketing,
  manufacturing and production, finance and
  accounting, and human resources.
• Evaluate the role played by systems serving the
  various levels of management in a business and
  their relationship to each other.

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Management Information Systems Chapter 2 Global
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LEARNING OBJECTIVES (Continued)

• Explain how enterprise applications and intranets
  promote business process integration and improve
  organizational performance.
• Assess the role of the information systems
  function in a business.

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Management Information Systems Chapter 2 Global
E-Business How Businesses Use Information Systems
Information Systems Join the Tupperware Party

• Problem Continuing expansion and transition to
  multilevel compensation structure.
• Solutions Revised ordering processes and
  monitoring service levels and sales increase
  sales.
• Oracle Collaboration Suite and Portal enable
  order entry via Web interface, access to
  integrated corporate systems, and personal
  e-commerce sites.
• Demonstrates ITs role in designing compensation
  structure and system integration.
• Illustrates the benefits of revising internal and
  customer-related business processes.

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Management Information Systems Chapter 2 Global
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Business Processes and Information Systems

• Business processes
• Workflows of material, information, knowledge
• Sets of activities, steps
• May be tied to a functional area or be
  cross-functional

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Management Information Systems Chapter 2 Global
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Business Processes and Information Systems

• Examples of functional business processes
• Manufacturing and production
• Assembling the product
• Sales and marketing
• Identifying customers
• Finance and accounting
• Creating financial statements
• Human resources
• Hiring employees

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Management Information Systems Chapter 2 Global
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Business Processes and Information Systems
The Order Fulfillment Process
Fulfilling a customer order involves a complex
set of steps that requires the close coordination
of the sales, accounting, and manufacturing
functions.
Figure 2-1
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Management Information Systems Chapter 2 Global
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Business Processes and Information Systems

• Information technology enhances business
  processes in two main ways
• Increasing efficiency of existing processes
• Automating steps that were manual
• Enabling entirely new processes that are capable
  of transforming the businesses
• Change flow of information
• Replace sequential steps with parallel steps
• Eliminate delays in decision making

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Management Information Systems Chapter 2 Global
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Types of Business Information Systems

• Systems from a functional perspective
• Sales and marketing systems
• Manufacturing and production systems
• Finance and accounting systems
• Human resources systems

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Management Information Systems Chapter 2 Global
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Types of Business Information Systems

• Sales and marketing systems
• Functional concerns include
• Sales management, customer identification market
  research, advertising and promotion, pricing, new
  products
• Examples of systems
• Order processing (operational level)
• Pricing analysis (middle mgmt)
• Sales trend forecasting (senior mgmt)

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Management Information Systems Chapter 2 Global
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Types of Business Information Systems
Example of a Sales Information System
This system captures sales data at the moment the
sale takes place to help the business monitor
sales transactions and to provide information to
help management analyze sales trends and the
effectiveness of marketing campaigns.
Figure 2-2
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Management Information Systems Chapter 2 Global
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Types of Business Information Systems

• Manufacturing and production systems
• Functional concerns include
• Managing production facilities, production goals,
  production materials, and scheduling
• Examples of systems
• Machine control (operational mgmt)
• Production planning (middle mgmt)
• Facilities location (senior mgmt)

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Management Information Systems Chapter 2 Global
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Types of Business Information Systems
Overview of an Inventory System
This system provides information about the number
of items available in inventory to support
manufacturing and production activities.
Figure 2-3
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Types of Business Information Systems
Information Systems Help Kia Solve Its Quality
Problems

• Read the Interactive Session Organizations, and
  then discuss the following questions
• Why was it so difficult for Kia to identify
  sources of defects in the cars it produced?
• What was the business impact of Kia not having an
  information system to track defects? What other
  business processes besides manufacturing and
  production were affected?
• How did Kias new defect-reporting system improve
  the way it ran its business?
• What management, organization, and technology
  issues did Kia have to address when it adopted
  its new quality control system?
• What new business processes were enabled by Kias
  new quality control system?

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Management Information Systems Chapter 2 Global
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Types of Business Information Systems

• Finance and accounting systems
• Functional concerns include
• Managing financial assets (cash, stocks, etc.)
  and capitalization of firm, and managing firms
  financial records
• Examples of systems
• Accounts receivable (operational mgmt)
• Budgeting (middle mgmt)
• Profit planning (senior mgmt)

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Types of Business Information Systems
An Accounts Receivable System
An accounts receivable system tracks and stores
important customer data, such as payment history,
credit rating, and billing history.
Figure 2-4
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Management Information Systems Chapter 2 Global
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Types of Business Information Systems

• Human resource systems
• Functional concerns include
• Identifying potential employees, maintaining
  employee records, creating programs to develop
  employee talent and skills
• Examples of systems
• Training and development (operational mgmt)
• Compensation analysis (middle mgmt)
• Human resources planning (senior mgmt)

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An Employee Record Keeping System
This system maintains data on the firms
employees to support the human resources function.
Figure 2-5
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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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Management Information Systems Chapter 2 Global
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Types of Business Information Systems

• Systems from a constituency perspective
• Transaction processing systems supporting
  operational level employees
• Management information systemssupporting middle
  managers
• Decision-Support Systems supporting managers
• Executive support systems supporting executives

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Management Information Systems Chapter 2 Global
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Types of Business Information Systems

• Transaction processing systems
• Perform and record daily routine transactions
  necessary to conduct business
• E.g. sales order entry, payroll, shipping
• Allow managers to monitor status of operations
  and relations with external environment
• Serve operational levels
• Serve predefined, structured goals and decision
  making

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Management Information Systems Chapter 2 Global
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Types of Business Information Systems

• Management information systems
• Serve middle management
• Provide reports on firms current performance,
  based on data from TPS
• Provide answers to routine questions with
  predefined procedure for answering them
• Typically have little analytic capability

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How Management Information Systems Obtain their
Data from the Organizations TPS
In the system illustrated by this diagram, three
TPS supply summarized transaction data to the MIS
reporting system at the end of the time period.
Managers gain access to the organizational data
through the MIS, which provides them with the
appropriate reports.
Figure 2-6
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Sample MIS Report
This report, showing summarized annual sales
data, was produced by the MIS in Figure 2-6.
Figure 2-7
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Managing Travel Expenses New Tools, New Savings

• Read the Interactive Session Management, and
  then discuss the following questions
• What kinds of systems are described here? What
  valuable information do they provide for
  employees and managers? What decisions do they
  support?
• What problems do automated expense reporting
  systems solve for companies? How do they provide
  value for companies that use them?
• Compare MarketStars manual process for travel
  and entertainment expense reporting with its new
  process based on Concur Expense Service. Diagram
  the two processes.
• What management, organization, and technology
  issues did MarketStar have to address when
  adopting Concur Expense Service?
• Are there any disadvantages to using computerized
  expense processing systems? Explain your answer.

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Management Information Systems Chapter 2 Global
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Types of Business Information Systems

• Decision support systems
• Serve middle management
• Support nonroutine decision making
• E.g. What is impact on production schedule if
  December sales doubled?
• Often use external information as well as
  information from TPS and MIS
• Model driven DSS
• Voyage-estimating systems
• Data driven DSS
• Intrawests marketing analysis systems

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Voyage-Estimating Decision-Support System
This DSS operates on a powerful PC. It is used
daily by managers who must develop bids on
shipping contracts.
Figure 2-8
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Management Information Systems Chapter 2 Global
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Types of Business Information Systems

• Executive support systems
• Support senior management
• Address nonroutine decisions requiring judgment,
  evaluation, and insight
• Incorporate data about external events (e.g. new
  tax laws or competitors) as well as summarized
  information from internal MIS and DSS
• E.g. ESS that provides minute-to-minute view of
  firms financial performance as measured by
  working capital, accounts receivable, accounts
  payable, cash flow, and inventory.

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Model of an Executive Support System
This system pools data from diverse internal and
external sources and makes them available to
executives in an easy-to-use form.
Figure 2-9
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Management Information Systems Chapter 2 Global
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Types of Business Information Systems

• Relationship of systems to one another
• TPS Major source of data for other systems
• ESS Recipient of data from lower-level systems
• Data may be exchanged between systems
• In reality, most businesses systems are only
  loosely integrated

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Management Information Systems Chapter 2 Global
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Interrelationships Among Systems
The various types of systems in the organization
have interdependencies. TPS are major producers
of information that is required by many other
systems in the firm, which, in turn, produce
information for other systems. These different
types of systems are loosely coupled in most
business firms, but increasingly firms are using
new technologies to integrate information that
resides in many different systems.
Figure 2-10
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Systems That Span the Enterprise

• Enterprise applications
• Span functional areas
• Execute business processes across firm
• Include all levels of management
• Four major applications
• Enterprise systems
• Supply chain management systems
• Customer relationship management systems
• Knowledge management systems

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Management Information Systems Chapter 2 Global
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Systems That Span the Enterprise
Enterprise Application Architecture
Enterprise applications automate processes that
span multiple business functions and
organizational levels and may extend outside the
organization.
Figure 2-11
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Management Information Systems Chapter 2 Global
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Systems That Span the Enterprise

• Enterprise systems
• Collect data from different functions and store
  data in single central data repository
• Resolve problem of fragmented, redundant data
  sets and systems
• Enable
• Coordination of daily activities
• Efficient response to customer orders
  (production, inventory)
• Provide valuable information for improving
  management decision making

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Management Information SystemsChapter 2 Global
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Systems That Span the Enterprise

• Traditional View

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Management Information Systems Chapter 2 Global
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Systems that Span the Enterprise
Enterprise Systems
Enterprise systems integrate the key business
processes of an entire firm into a single
software system that enables information to flow
seamlessly throughout the organization. These
systems focus primarily on internal processes but
may include transactions with customers and
vendors.
Figure 2-12
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Enterprise Systems

• Enterprise systems
• Based on suite of integrated software modules and
  common central database
• Integrate information from across companys
  divisions, departments, key business processes in
  the four functional areas
• Updated information made available to all
  business processes
• Generate enterprise-wide data for management
  analyses

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Enterprise Systems
How Enterprise Systems Work
Enterprise systems feature a set of integrated
software modules and a central database that
enables data to be shared by many different
business processes and functional areas
throughout the enterprise.
Figure 9-1
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Management Information Systems Chapter 9
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Enterprise Systems

• Enterprise software
• Built around thousands of predefined business
  processes that reflect best in industry practices
• Companies map business processes to enterprise
  systems processes for desired functions
• Configuration tables allow tailoring of system
• System software can be rewritten in part, but may
  degrade performance and process integration

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Management Information Systems Chapter 9
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Enterprise Systems

• Business value of enterprise systems
• Increasing operational efficiency
• Helping respond to customer requests rapidly
• Producing, procuring, shipping right amounts
• Enforcing standard practices and data throughout
  company
• Providing firm-wide information to help managers
  make better decisions
• Allowing senior management to easily find out at
  any moment how a particular organizational unit
  is performing or to determine which products are
  most or least profitable

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• 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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Systems That Span the Enterprise

• Supply chain management systems
• Manage firms relationships with suppliers
• Share information about
• Orders, production, inventory levels, delivery of
  products and services
• Goal Right amount of products to destination
  with least amount of time and lowest cost

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Supply Chain Management Systems

• Supply chain
• Network of organizations and business processes
  for
• Procuring raw materials
• Transforming them into intermediate and finished
  products
• Distributing finished products to customers
• Includes secondary and tertiary suppliers
• Upstream portion Suppliers
• Downstream portion Distributors

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Supply Chain Management Systems
Nikes Supply Chain
This figure illustrates the major entities in
Nikes supply chain and the flow of information
upstream and downstream to coordinate the
activities involved in buying, making, and moving
a product. Shown here is a simplified supply
chain, with the upstream portion focusing only on
the suppliers for sneakers and sneaker soles.
Figure 9-2
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Management Information Systems Chapter 9
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Supply Chain Management Systems

• Information and supply chain management
• Bullwhip effect
• Demand for product gets distorted as it is
  estimated by successive members in supply chain,
  causing excess stockpiling of inventory,
  warehousing, shipping costs
• Just-in-time strategy
• Perfect information about supply and demand so
  that components arrive at moment they are needed
  and finished goods are shipped as they leave
  assembly line

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Supply Chain Management Systems
The Bullwhip Effect
Figure 9-3
Inaccurate information can cause minor
fluctuations in demand for a product to be
amplified as one moves further back in the supply
chain. Minor fluctuations in retail sales for a
product can create excess inventory for
distributors, manufacturers, and suppliers.
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Management Information Systems Chapter 9
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Supply Chain Management Systems

• Supply chain management applications
• Two main categories
• Supply chain planning systems
• Supply chain execution systems
• Supply chain planning systems
• Demand planning
• Order planning
• Advanced scheduling and manufacturing planning
• Distribution planning
• Transportation planning

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Management Information Systems Chapter 9
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Supply Chain Management Systems

• Supply chain management applications
• Supply chain execution systemsManage flow of
  products through distribution centers and
  warehouses to ensure products delivered to right
  locations in most efficient manner
• Order commitments
• Final production
• Replenishment
• Distribution management
• Reverse distribution

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Management Information Systems Chapter 9
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Supply Chain Management Systems

• Supply chain management and the Internet
• Before Internet, difficult to share supply chain
  information with external partners or internally
  because of incompatible technology platforms
• Internet enables
• Intranets and extranets for sharing information
• Web-based tools and interfaces to suppliers,
  partners systems
• Coordination of overseas suppliers,
  communications, transport, compliance, etc.

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Supply Chain Management Systems
Intranets and Extranets for Supply Chain
Management
Figure 9-4
Intranets integrate information from isolated
business processes within the firm to help manage
its internal supply chain. Access to these
private intranets can also be extended to
authorized suppliers, distributors, logistics
services, and, sometimes, to retail customers to
improve coordination of external supply chain
processes.
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Supply Chain Management Systems

• Push-based model (Build-to-stock)
• Production master schedules based on forecasts or
  best guesses of product demand products pushed
  to customers
• Pull-based model (Demand-driven, build-to-order)
• With IT, manufacturers can use only order demand
  information to drive schedules and procurement of
  components or raw materials
• Sequential supply chains
• Information, materials move sequentially
• Concurrent supply chains
• With IT, information moves in many directions
  simultaneously

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Management Information Systems Chapter 9
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Supply Chain Management Systems
Push- Versus Pull-Based Supply Chain Models
The difference between push- and pull-based
models is summarized by the slogan Make what we
sell, not sell what we make.
Figure 9-5
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Management Information Systems Chapter 9
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Supply Chain Management Systems
The Future Internet-Driven Supply Chain
The future Internet-driven supply chain operates
like a digital logistics nervous system. It
provides multidirectional communication among
firms, networks of firms, and e-marketplaces so
that entire networks of supply chain partners can
immediately adjust inventories, orders, and
capacities.
Figure 9-6
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Management Information Systems Chapter 9
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Supply Chain Management Systems

• Business value of supply chain management systems
• Matching supply to demand and reducing inventory
  levels
• Improving delivery service and speeding product
  time to market
• Using assets more effectively
• Increasing sales by assuring availability of
  products
• Increased profitability
• Supply chain costs can approach 75 of total
  operating budgets

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Management Information Systems Chapter 2 Global
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Systems That Span the Enterprise

• Customer relationship management systems
• Provide information to coordinate all of the
  business processes that deal with customers in
  sales, marketing, and service to optimize
  revenue, customer satisfaction, and customer
  retention.
• Integrate firms customer-related processes and
  consolidate customer information from multiple
  communication channels

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Customer Relationship Management Systems

• Customer relationship management (CRM) systems
• Capture, consolidate, analyze customer data and
  distribute results to various systems and
  customer touch points (contact points) across
  enterprise
• Provide single enterprise view of customers
• Provide customers single view of enterprise at
  touch points
• Provide analytical tools for determining value,
  loyalty, profitability of customers
• Assist in acquiring new customers, providing
  better service and support to customers,
  customize offerings to customer preferences,
  provide ongoing value to retain profitable
  customers

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Customer Relationship Management Systems
Customer Relationship Management (CRM)
CRM systems examine customers from a multifaceted
perspective. These systems use a set of
integrated applications to address all aspects of
the customer relationship, including customer
service, sales, and marketing.
Figure 9-7
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Management Information Systems Chapter 9
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Customer Relationship Management Systems

• CRM software
• Ranges from niche tools to large-scale enterprise
  applications
• More comprehensive CRM packages have
• Partner relationship management (PRM) modules
• Enhances collaboration between company and
  selling partners
• Employee relationship management (ERM) modules
• Deals with employee issues closely related to
  CRM, e.g. setting objectives, employee
  performance management
• Typically include tools for sales, customer
  service, and marketing

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Customer Relationship Management Systems

• Sales force automation (SFA) modules
• Enable focusing efforts on most profitable
  customers
• Enables sharing customer and prospect
  information
• Helps reduce cost per sale and cost of acquiring,
  retaining customers
• Customer service modules
• Assigning and managing customer service requests
• E.g. managing advice phone lines, Web site
  support

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Customer Relationship Management Systems

• Marketing modules
• Capturing prospect and customer data,
• Providing product and service information
• Qualifying leads for targeted marketing
• Scheduling and tracking direct-marketing mailings
  or e-mail
• Analyzing marketing and customer data
• Identifying profitable and unprofitable customers
• Designing products and services to satisfy
  specific customer needs and interests
• Identifying opportunities for cross-selling

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Customer Relationship Management Systems
How CRM Systems Support Marketing
Customer relationship management software
provides a single point for users to manage and
evaluate marketing campaigns across multiple
channels, including e-mail, direct mail,
telephone, the Web, and wireless messages.
Figure 9-8
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CRM Software Capabilities
Figure 9-9
The major CRM software products support business
processes in sales, service, and marketing,
integrating customer information from many
different sources. Included are support for both
the operational and analytical aspects of CRM.
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Customer Loyalty Management Process Map
This process map shows how a best practice for
promoting customer loyalty through customer
service would be modeled by customer relationship
management software. The CRM software helps firms
identify high-value customers for preferential
treatment.
Figure 9-10
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Customer Relationship Management Systems

• Two main categories of CRM
• Operational CRM
• Customer-facing applications, e.g. tools for
  sales force automation, call center and customer
  service support, marketing automation
• Analytical CRM
• Applications that analyze (OLAP, data mining,
  etc.) customer data
• Based on data warehouses consolidating data from
  operational CRM systems and customer touch points
• One important output Customer lifetime value
  (CLTV)
• Value based on revenue produced by a customer,
  expenses incurred in acquiring and servicing
  customer, and expected life of relationship
  between customer and company

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Customer Relationship Management Systems
Analytical CRM Data Warehouse
Figure 9-11
Analytical CRM uses a customer data warehouse and
tools to analyze customer data collected from
the firms customer touch points and from other
sources.
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Customer Relationship Management Systems

• Business value of CRM systems
• Increased customer satisfaction
• Reduced direct marketing costs
• More effective marketing
• Lower costs for customer acquisition and
  retention
• Increased sales revenue
• By identifying profitable customers and segments
  for focused marketing and cross-selling
• Reduced churn rate (number of customers who stop
  using or purchasing products or services)

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Systems That Span the Enterprise

• Knowledge management systems
• Support processes for acquiring, creating,
  storing, distributing, applying, integrating
  knowledge
• Collect internal knowledge and link to external
  knowledge
• Include enterprise-wide systems for
• Managing documents, graphics and other digital
  knowledge objects
• Directories of employees with expertise

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Enterprise Applications New Opportunities and
Challenges

• Enterprise application challenges
• Expensive to purchase and implement
• Total implementation cost may be four to five
  times of cost of software
• Deep-seated technological change
• Fundamental changes to organization, business
  processes
• New functions and responsibilities for employees
• SCM systems require business process change for
  multiple organizations
• Introduce switching costs, dependency on
  enterprise software vendor
• Require understanding firms data and cleansing
  data

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The Information Systems Function in Business

• Information systems department
• Formal organizational unit responsible for
  information technology services
• Includes programmers, systems analysts, project
  leaders, information systems managers
• Often headed by chief information officer (CIO)
• End-users
• Representatives of other departments, for whom
  applications are developed

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The Information Systems Function in Business

• Small firm may not have formal information
  systems group
• Larger companies typically have separate
  department which may be organized along one of
  several different lines
• Decentralized (within each functional area)
• Separate department under central control
• Each division has separate group but all under
  central control

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Types of Business Information Systems
Organization of the Information Systems Function
There are alternative ways of organizing the
information systems function within the business
within each functional area (A), as a separate
department under central control (B), or
represented in each division of a large
multidivisional company but under centralized
control (C).
Figure 2-14
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Organization of the Information Systems Function
B A separate department under central control
Figure 2-14 (cont)
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Types of Business Information Systems
Organization of the Information Systems Function
C Represented in each division of a large
multidivisional company but under centralized
control
Figure 2-14 (cont)