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Management Information Systems, Sixth Edition


Management Information Systems, Sixth Edition Chapter 3: Business Functions and Supply Chains ... – PowerPoint PPT presentation

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Title: Management Information Systems, Sixth Edition

Management Information Systems, Sixth Edition
  • Chapter 3
  • Business Functions and Supply Chains

  • Identify various business functions and the role
    of ISs in these functions
  • Explain how ISs in the basic business functions
    relate to each other
  • Articulate what supply chains are and how
    information technology supports management of
    supply chains

Objectives (continued)
  • Enumerate the purposes of customer relationship
    management systems
  • Explain enterprise resource planning systems

Effectiveness and Efficiency
  • Information technology makes work more effective,
    more efficient, or both
  • Effectiveness the degree to which a goal is
  • Efficiency the relationship between resources
    expended and benefits gained in achieving a goal
  • Efficiency Benefit / Costs
  • One system is more efficient if its operating
    costs are lower for the same or better quality

Effectiveness and Efficiency (continued)
  • Productivity efficiency of human resources
  • Productivity improves when fewer workers are
    required to achieve the same goal
  • Productivity tools software applications that
    improve productivity
  • ISs contribute to both effectiveness and
    efficiency of businesses

Effectiveness and Efficiency (continued)
  • Customer relationship management (CRM) system
    system that serves customers better and faster
  • Service continues after delivery of goods as
    customer service and more marketing
  • Often combined with supply chain management (SCM)
    systems to create an enterprise resource planning
    (ERP) system

Effectiveness and Efficiency (continued)
Effectiveness and Efficiency (continued)
  • Accountings purpose is to track every financial
  • Accounting systems are required by law and for
    proper management
  • Needed to ensure company is making a profit
  • Accounts payable and accounts receivable track
    who owes who what
  • Balance sheet picture of financial situation
  • Includes profit-and-loss report

Accounting (continued)
  • Accounting information system receives
    information from transaction processing systems
  • Automatically routes purchases to accounts
  • Automatically routes sales to accounts receivable
  • Generates reports on demand or on schedule
  • Work order an authorization to perform work for
    a specific purpose

Accounting (continued)
  • Cost-accounting systems accumulate data about
    costs involved in producing specific products
  • Accounting ISs are used for managerial purposes
    for budgeting and cost control

Accounting (continued)
  • Firms health is measured by its finances
  • Information systems can improve financial
  • Financial managers goal is to manage money as
    efficiently as possible by
  • Collecting payables as soon as possible
  • Making payments at the latest time allowed
  • Ensuring funds are available for daily operations
  • Investing funds not used for current activities

Finance (continued)
Cash Management
  • Financial information systems help managers track
    company finances
  • Cash management systems systems that deal
    specifically with cash
  • Electronic funds transfer electronic transfer of
    cash from one bank account to another

Investment Analysis and Service
  • Investors goal is to buy an asset and sell it
    for a higher value
  • When investing in securities, you must know
    current prices in real time
  • Nearly instantaneous information systems can
    provide investors and clients with financial
    news, stock prices, commodity prices, and
    currency exchange rates

Investment Analysis and Service (continued)
  • Some important factors to consider in investing
  • Variability of the securitys past yield
  • Expected return
  • Liquidity (how fast an investment can be turned
    into cash)

  • Time to market time between generating an idea
    for a product and completing a prototype
  • Brainstorming process of a group of colleagues
    meeting and collaborating to generate creative
    solutions and new ideas
  • Minimizing time to market is key to maintaining
    competitive edge
  • Information systems can contribute significantly
    to minimizing time to market

Engineering (continued)
  • Computer-aided design (CAD) tools to create,
    modify, and store designs and drawings
  • Rapid prototyping creating one-of-a-kind
    products to test design in three dimensions
  • Allows a model to be produced in hours rather
    than days or weeks
  • Computer-aided manufacturing (CAM) systems that
    instruct machines how to manufacture parts and
    assemble products

Engineering (continued)
Supply Chain Management
  • Supply chain consists of procurement of raw
    materials, processing materials into goods, and
    delivering goods
  • Processing raw materials into goods is also known
    as manufacturing
  • Supply chain management monitoring, controlling,
    and facilitating supply chains
  • CAD systems often transfer data automatically to
    CAM systems

Supply Chain Management (continued)
  • IT helps in manufacturing activities
  • Scheduling plant activities to optimize the use
    of resources
  • Planning material requirements based on current
    and forecasted demand
  • Reallocating materials and resources from one
    order to another
  • Managing inventories
  • Grouping similar work orders for efficiency

Supply Chain Management (continued)
Material Requirements Planningand Purchasing
  • Material requirements planning (MRP) inventory
  • Determines when inventory needs to be restocked
  • Can predict future need based on demand forecasts
  • Takes customer demand as input, then works back
    to calculate resources needed to produce goods

Material Requirements Planningand Purchasing
  • Bill of materials (BOM) list of all raw
    materials and subcomponent demands to produce a
  • Economic order quantity (EOQ) optimal quantity
    of a raw material that minimizes overstocking and
    saves cost, without missing production deadlines
  • Considers cost, discounts for large quantities,
    cost of warehousing material, cost of alternative
    uses of money, etc.

Manufacturing Resource Planning
  • Manufacturing resource planning (MRP II)
    combines MRP with other related activities to
    plan the entire manufacturing process
  • Uses master production schedule
  • Master production schedule specifies how
    production capacity is to be used to meet
    customer demands
  • Just-in-time manufacturing suppliers ship parts
    directly to assembly lines as needed
  • Avoids warehousing costs

Monitoring and Control
  • Information systems are designed to control
    manufacturing processes as well as monitor them
  • Controlling processes helps ensure quality

  • Performed by manufacturer or shipping company
  • Many variables affect cost and speed of shipping,
  • Length of routes
  • Sequence of loading and unloading
  • Type of shipped materials (e.g., perishable,
    hazardous, fragile)
  • Fuel prices
  • Road tolls

Shipping (continued)
  • Sophisticated software that optimizes shipping
    efficiency helps a company stay competitive
  • Need to optimize
  • Shipping time
  • Cost of labor
  • Use of equipment
  • Maintenance
  • Vehicles equipped with computers, global
    positioning systems (GPS), and satellite
    communication have increased efficiency

Shipping (continued)
  • Radio frequency identification (RFID) a
    technology containing circuitry that allows
    recording of information about a product
  • Electronic product code (EPC) a code on an RIFD
    tag that provides more information than the
    universal product code (UPC)
  • Information may include date of manufacturing,
    plant location, expiration date, destination
  • Ensures genuineness of products

RFID in SCM (continued)
RFID in SCM (continued)
Customer Relationship Management
  • Customer relationship management (CRM) systems
    designed to support any and all relationships
    with customers
  • Supports three areas
  • Marketing
  • Sales
  • Customer service
  • CRM systems capture the entire customer
    experience with an organization
  • All company employees who deal with the customer
    have access to this information

Customer Relationship Management (continued)
Market Research
  • To promote products successfully, organizations
    must perform market research
  • Market research helps discover populations and
    regions that are most likely to purchase product
  • Activities may include
  • Conducting interviews with consumers and
  • Building statistical models to predict sales
    volumes of different products

Targeted Marketing
  • Targeted marketing promotes to people most
    likely to purchase products
  • Database technology allows all companies to use
    targeted marketing, even small companies
  • Can direct promotional dollars to customers most
    likely to buy
  • Spam cheap method of advertising involving
    sending mass e-mail communications

Targeted Marketing (continued)
Targeted Marketing (continued)
  • Database management systems sort consumers based
    on demographic information
  • Telemarketing marketing over the telephone
  • Caller has large database of consumer data
  • Computer telephony integration allows computer
    to use telephone line as input
  • Caller ID can be used to locate customer data
  • Data mining uses large data warehouses to find
    trends and shopping habits of various demographic

Targeted Marketing (continued)
  • Targeted marketing and Web technologies enable
    retailers to personalize online shopping
  • Software can track Web page click streams to
    determine customer preferences

Customer Service
  • Web-based customer service provides automated
    customer service 24/7
  • Saves labor costs
  • Saves paper costs
  • Includes FAQs, tracking systems, maintenance of
    customer profiles
  • Artificial intelligence may be used to emulate a
    real-life customer service representative

Salesforce Automation
  • Equips traveling salespeople with information
    technology to improve productivity
  • Laptops and personal digital assistants (PDAs)
  • Makes sales presentations more efficient
  • Allows salespeople to present different options
    for products and services at the customer

Human Resource Management
  • Human resource management (HRM) can be classified
    into five main activities
  • Employee record management
  • Promotion and recruitment
  • Training
  • Evaluation
  • Compensation and benefits management

Human Resource Management (continued)
Employee Record Management
  • HR departments must keep personnel records
  • To satisfy laws
  • For payroll and tax calculation and deposit
  • For promotion consideration
  • For periodic reporting
  • Human resource ISs are now digitized
  • Saves space to store records, time to retrieve
    them, and costs of both

Employee Record Management (continued)
Promotion and Recruitment
  • HR can select best-qualified person for position
    by searching database of applicants and existing
    employees for specific criteria
  • Automating the selection process significantly
    minimizes time and money for recruitment
  • Intranet inter-organizational network that
    supports Web applications
  • Allows HR manager to post position vacancy
    announcements that get wide exposure

  • One important HR function is improving employee
  • Multimedia software training is replacing
    classrooms and teachers
  • May include 3D virtual reality simulated
    environments in which the employee must act
  • Information technology reduces training costs

  • Employee ability must be periodically evaluated
    by supervisors
  • May include evaluation of technical ability,
    communication skills, professional conduct, and
    general behavior
  • Often a subjective process, which is a problem
  • Evaluation software tries to solve this problem
    by standardizing evaluation process
  • Provides tools to aid in evaluating every
    employee fairly and objectively

Compensation and Benefits Management
  • Compensation includes salary, hourly pay,
    commissions, and bonuses
  • Programs calculate pay and taxes
  • Automatically generate paychecks and perform
    direct deposits
  • Software can help manage benefits
  • Benefits database accessible through intranet or

Supply Chain Management Systems
  • Overall inventory in the U.S. is decreasing while
    U.S. gross domestic product (GDP) is increasing
  • Money saved from reduced inventory can be spent
  • Reduction in inventory attributed to the use of
    ISs, especially supply chain management systems
  • Streamline operations throughout chain
  • ERP systems can also serve as SCM systems,
    connecting multiple organizations

Supply Chain Management Systems (continued)
The Importance of Trust
  • Supply chain systems work best when all
    businesses in the chain are sharing information
  • Trust between allied companies facilitates
  • Risk of disclosing important information to
    competitors is present
  • Risk of taking advantage of demand figures by
    charging higher prices is present

The Musical Chairs of Inventory
  • Small enterprises do not use SCM systems
  • Affect more powerful organization to which small
    enterprise is linked
  • Inventory turns the number of times the business
    sells its inventory per year
  • When SCMs of companies are not linked, demand
    requirements are unknown, so supply companies
    must overstock inventory
  • One company sits with lean inventory while
    other stands with overstock, hence musical

Collaborative Logistics
  • Web allows organizations from different
    industries to collaborate
  • Businesses combine freight and share trucks
  • Can optimize logistics by connecting SCM systems
  • SCM systems can allow collaborative warehousing
    to share warehouse space

Enterprise Resource Planning
  • Many companies replace old, disparate information
    systems with enterprise applications
  • Enterprise resource planning (ERP) system
    manages daily operations and facilitates planning
  • Current ERP market includes four vendors
  • SAP
  • Oracle
  • Microsoft
  • Sage Software

Challenges and Disadvantages of ERP Systems
  • ERP systems pose many challenges
  • They are complex
  • They often require special tailoring for specific
  • They may not support a companys unique sets of
    business processes
  • They are expensive
  • A process that becomes a weak link in one area
    may negatively affect other integrated processes

Providing the Missing Reengineering
  • Although most reengineering projects of the 1990s
    failed, ERP systems helped realize many of those
  • ERP systems forced changes in processes
  • ERP systems allow better planning and managing of
    processes at the organizational level instead of
    at the organizational unit level

  • Effectiveness is the degree to which a task is
  • Efficiency is the ratio of output to input
  • Productivity is the measure of peoples
  • Information systems have been integrated into
    accounting services
  • Financial information systems help managers track

Summary (continued)
  • Computer-aided design (CAD) systems help
    engineers design new projects
  • Computer-aided manufacturing (CAM) systems direct
    machines that assemble parts
  • Supply chain management (SCM) systems optimize
    workload, speed, and cost in supply chains
  • Customer relationship management (CRM) includes
    the entire cycle of relationships with customers

Summary (continued)
  • Human resource management systems facilitate
    staff selection and record keeping
  • Multiple companies SCM systems can be linked,
    facilitating cooperation, which requires trust
  • An enterprise resource planning (ERP) system can
    encompass all business processes, but is
    expensive and challenging