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Title: Chp 2 Information Systems in the Enterprise


1
2
Chapter
INFORMATION SYSTEMS IN THE ENTERPRISE
2
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?

3
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?

4
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.

5
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

6
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.

7
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

8
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.

9
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.

10
(No Transcript)
11
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

12
Management Information Systems 8/e Chapter 2
Information Systems in the Enterprise
KEY SYSTEM APPLICATIONS IN THE ORGANIZATION
Types of Information Systems
13
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.

14
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.

15
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.

16
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?

17
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

18
Management Information Systems 8/e Chapter 2
Information Systems in the Enterprise
MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS
19
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.

20
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.

21
Management Information Systems 8/e Chapter 2
Information Systems in the Enterprise
MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS
Payroll TPS
22
Management Information Systems 8/e Chapter 2
Information Systems in the Enterprise
MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS
Types of TPS Systems
23
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).

24
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).

25
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

26
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.

27
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.
28
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.

29
Management information systems
  • Management level
  • Inputs High volume data
  • Processing Simple models
  • Outputs Summary reports
  • Users Middle managers
  • Example Annual budgeting

30
TPS DATA FOR MIS APPLICATIONS
31
Management information systems
32
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

33
DECISION SUPPORT SYSTEMS (DSS)
  • MANAGEMENT LEVEL
  • INPUTS LOW VOLUME DATA
  • PROCESSING INTERACTIVE
  • OUTPUTS DECISION ANALYSIS
  • USERS PROFESSIONALS, STAFF
  • EXAMPLE CONTRACT COST ANALYSIS

34
DECISION SUPPORT SYSTEMS (DSS)
  • FLEXIBLE, ADAPTABLE, QUICK
  • USER CONTROLS INPUTS/OUTPUTS
  • NO PROFESSIONAL PROGRAMMING
  • SUPPORTS DECISION PROCESS
  • SOPHISTICATED MODELING TOOLS

35
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?

36
DECISION SUPPORT SYSTEMS (DSS)
37
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.

38
EXECUTIVE SUPPORT SYSTEMS (ESS)
  • STRATEGIC LEVEL
  • INPUTS AGGREGATE DATA
  • PROCESSING INTERACTIVE
  • OUTPUTS PROJECTIONS
  • USERS SENIOR MANAGERS
  • EXAMPLE 5 YEAR OPERATING PLAN

39
EXECUTIVE SUPPORT SYSTEMS (ESS)
  • TOP LEVEL MANAGEMENT
  • DESIGNED TO THE INDIVIDUAL
  • VERY EXPENSIVE TO KEEP UP
  • EXTENSIVE SUPPORT STAFF
  • TIES CEO TO ALL LEVELS

40
Management Information Systems 8/e Chapter 2
Information Systems in the Enterprise
MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS
Executive Support System (ESS)
41
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.

42
INTERRELATIONSHIPS AMONG SYSTEMS
43
SYSTEMS FROM A FUNCTIONAL PERSPECTIVE
  • SALES MARKETING SYSTEMS
  • MANUFACTURING PRODUCTION SYSTEMS
  • FINANCE ACCOUNTING SYSTEMS
  • HUMAN RESOURCES SYSTEMS

44
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

45
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.

46
SALES AND MARKETING INFORMATION SYSTEMS
47
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

48
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.

49
MANUFACTURING AND PRODUCTION INFORMATION SYSTEMS
Table 2-3
50
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
51
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,

52
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.

53
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

54
Management Information Systems 8/e Chapter 2
Information Systems in the Enterprise
SYSTEMS FROM A FUNCTIONAL PERSPECTIVE
Financing and Accounting Systems
Table 2-4
55
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.

56
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

57
Human resources information systems
58
Human resources information systems
59
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.

60
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.

61
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

62
ENTERPRISE APPLICATIONS Business Processes and
Information Systems
  • Unique ways to coordinate work,
  • information, and knowledge
  • Ways in which management chooses
  • to coordinate work

63
ENTERPRISE APPLICATIONS Business Processes and
Information Systems
  • Information systems help organizations
  • Achieve great efficiencies by automating parts
    of processes
  • Rethink and streamline processes

64
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

65
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

66
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

67
ENTERPRISE APPLICATIONS
The Order Fulfillment Process
68
ENTERPRISE APPLICATIONS
  • Enterprise Applications
  • Enterprise systems
  • Supply chain management systems
  • Customer relationship management systems
  • Knowledge management systems

69
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

70
ENTERPRISE APPLICATIONS
Traditional View of the Systems
71
ENTERPRISE APPLICATIONS
Enterprise Systems
72
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

73
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.

74
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.

75
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.

76
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

77
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

78
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

79
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

80
ENTERPRISE APPLICATIONS
Supply Chain Management
Figure 2-15
81
SUPPLY-CHAIN MANAGEMENT
82
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

83
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

84
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

85
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

86
ENTERPRISE APPLICATIONS
Customer Relationship Management (CRM)
87
2
Chapter
INFORMATION SYSTEMS IN THE ENTERPRISE
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