Transaction Processing, Innovative Functional Systems, and Supply Chain Integration

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Transaction Processing, Innovative Functional
Systems,and Supply Chain Integration
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Functional Information Systems (FIS)

• Cross functional boundaries
• IS were traditionally designed to support
  functional areas to increase their
  efficiency/effectiveness
• IT can aid in crossing functional boundaries of
  stove-pipe functional IS
• One solution to integrating activities across
  functional areas is to reengineer the
  organization by creating cross-functional teams,
  with each responsible for performing a complete
  business process
• We can use IT to create a change in the business
  processes and organizational structure
• Many companies use incremental improvements and
  ad hoc problem solving
• Porters value chain model and supply chain
• The supply chain links all the primary
  procurement activities inside a manufacturing
  firm and may be extended to include customers,
  suppliers, wholesalers, retailers, and any other
  business partners
• Functional area links to the supply chain (Figure
  8.1, Page 328)

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Major Characteristics of FIS

• Federation of smaller systems
• A functional information system comprises several
  smaller information systems that support specific
  activities performed by each functional area
• Integrated / independent systems
• Specific functional area IS applications can be
  integrated to form a coherent departmental
  functional IS, or be completely independent
• FIS interface together as the organization-wide
  IS
• Corporate systems interface
• Environmental interface
• IS applications support three managerial levels
• Operational
• Managerial
• Strategic

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Porters Value Chain Model Revisited

• Note that Engineering is considered a Support
  activity
• Note that Logistics is considered a primary
  activity
• Note that primary activities represent the FLOW
  OF GOODS AND SERVICES

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Cross-Functional Processes
Field Service
Marketing
Manufacturing
Logistics
Departmental Stovepipes
New Product Development
Customer
Customer
Order Fulfillment
Customer
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TPS --gt MIS --gt DSS

• TPS--Transaction processing systems
• MIS--Management Information Systems--provides
  routine middle management support to improve
  productivity and quality
• DSS--Decision Support Systems

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TPS Characteristics

• The primary goal of TPS is to provide all the
  information needed by law and/or by
  organizational policies to keep the business
  running properly and efficiently
• TPS mostly involves capture, collection and
  storage of the data associated with a transaction
  (Primarily event data processing)
• Not much processing involved
• TPSs are traditionally centralized and run on a
  mainframe
• Can be done in a batch mode or in real time
  (giving rise to ON-LINE TRANSACTIOIN PROCESSING
  SYSTEMS
• Necessary to accommodate ATMs, for example

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Transaction Processing Information Systems

• Computerization of routine transaction processes
• Objectives of TPS
• Activities and methods of TPS (See Table 8.1,
  Page 331)
• Client / server and internet-based TPS
• Online transaction processing (OLTP) created on a
  client/server architecture can save money by
  allowing suppliers to enter the TPS and look at
  the firms inventory level or production schedule
• OLTP has broadened to become interactive Internet
  transaction processing.
• Internet transaction processing software and
  servers allow multimedia data transfer, fast
  response time, and storage of large databases of
  graphics and videoall in real time and at low
  cost
• Typical tasks

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TPS can be found in

• Accounting/finance--most of them are here
• Management
• Marketing
• Engineering
• Human Resources

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Objectives of TPS

• Efficient and effective operation of the
  organization
• Provide timely documents and reports
• Increase the competitive advantage
• Data for tactical and strategic systems
• Safeguard assets
• Security of information

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Internet Transaction Processing

• Flexibility to accommodate unpredictable growth
• Cost effectiveness
• Interactive automatic billing
• Timely search
• Multimedia data

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Internet Transaction Processing

• High data throughput to support queries requiring
  massive file size
• Fast response time
• Effective storage

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Typical Tasks in TPS

• Order processing
• The ledger
• Entire group of accounts maintained by a company
  is collectively referred to as the ledger
• The ledger keeps all information about changes in
  specific account balances in one place. 
• A general ledger contains all the assets,
  liabilities, and owners equity accounts
• Accounts payable and receivable
• Accounts payable and accounts receivable list the
  credit, debit, and balance of each customer or
  vendor, generated from sales journals or purchase
  orders
• Receiving and shipping
• Transactions occur whenever goods are received or
  shipped
• Fixed assets management
• Organizations own a large amount of fixed assets
  such as buildings, cars, and machines that
  depreciate over time

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Typical Tasks in TPS

• Payroll
• a routine job that involves computing gross
  salary during a given period and determining
  appropriate deductions and reductions
• Personnel files and skills inventory
• All information about a person, including the
  skills and experience of the employee, the tests
  taken and passed by the employee, and performance
  evaluations over time
• Government reports
• Completion of standard state and federal reports
  that indicate compliance with laws and
  regulations
• Periodic reports and statements
• Many periodic reports and statements are
  generated from the TPS data

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Inventory costs--three kinds

• Ordering costs
• Holding costs
• Inventory on Hand ready-to-sell items in a
  merchandising enterprise
• In manufacturing companies, there are three
  categories of inventory finished goods, work in
  progress, and raw materials
• Opportunity costs (of not having it when needed)
• Material requirements planning (MRP) is software
  that facilitates the plan for acquiring (or
  producing) parts, subassemblies, or materials
• Manufacturing Resource Planning (MRP II) is an
  integrated computer system that connects the
  regular MRP to other functional areas (greater
  integration can be achieved with enterprise
  resource planning (ERP).

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Innovative IT Applicationsin the Functional
Areas--Outline

• Managing production/operations and logistics
• Managing marketing and sales
• Managing the accounting and finance systems
• Managing human resource systems

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Which of these transforms input into value-added,
useful output?

• Managing production/operations and logistics
• Managing marketing and sales
• Managing the accounting and finance systems
• Managing human resource systems

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Managing Production/Operations and
Logistics--Outline

• 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 and Material Management

• Logistics management
• Ordering, purchasing, inbound and outbound
  logistics
• Inventory management
• Quality control

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Planning Production / Operations

• Material Requirement Planning (MRP)
• Manufacturing Resource Planning (MRP II)
• Just-In-Time systems (JIT)
• Project management
• Short-term schedules

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MRP --gt MRP II --gt ERP

• These are all information systems
• In each case the system became larger and more
  subsuming

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JIT--Just-In-Time Philosophy

• The major elements of just-in-time (JIT) are low
  inventories, small lot sizes, fixed production
  rates, extensive preventive maintenance and quick
  repairs, few but reliable vendors, high-quality
  material and work, quick setups, skilled
  multifunctional workers, cooperative spirit
  (among departments, employees, and management), a
  problem-solving environment, continual innovation
  and improvements
• The elimination of all forms of waste, but
  especially excessive inventory
• Uses a PULL system that pulls the inventory
  through the shop rather than a PUSH system like
  MRP

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Planning Production / Operations

• Computer-Aided Design (CAD)
• CAD is a system that enables drawings to be
  constructed on a computer screen and subsequently
  stored, manipulated, and updated electronically
• enables product drawings to be created, edited
  and stored
• enables Bills of Material and product structure
  trees to be created
• Computer-Aided Engineering (CAE)
• A designer can use computer-aided engineering
  (CAE) to analyze the design and determine whether
  it will work the way the designer thought it
  would.
• Detailed engineering analysis provides data that
  may be useful when actually manufacturing the
  product
• Computer-Aided Manufacturing (CAM)
• CAM encompasses the computer-aided techniques
  that facilitate planning, operation, and control
  of a production facility
• Computer-Integrated Manufacturing (CIM)

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Computer Integrated Manufacturing (CIM)

• CIM is a concept or philosophy about the
  implementation of various integrated computer
  systems in factory automation
• CIM integrates Sales--CAD--CAM--Distribution
• Outer circle--general business management
• Inner circle
• product and process definition
• manufacturing planning and control
• factory automation
• information resource management
• advantages--comprehensiveness and flexibility

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CIM Involves

• Robotics
• CAD
• CAM
• Automated materials handling
• Manufacturing Planning and Control
• Group Technology

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Three Basic Goals of CIM

• Simplification of all manufacturing technologies
  and techniques.
• Automation of as many of the manufacturing
  processes as possible.
• Integration and coordination via computer
  hardware and software of all aspects of design,
  manufacturing, and related functions.

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Managing Marketing and Sales--Outline

• Channel systems
• Channel systems are all the systems involved in
  the process of getting a product or service to
  customers and dealing with all customers needs
• Customer profiles and preference analysis
• Sophisticated information systems being developed
  to collect data on customers, demographics, and
  preferences
• Prospective customer lists and marketing
  databases
• Customer inquiry systems and automated help desk

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Managing Marketing and Sales

• Telemarketing
• Telemarketing is a process that uses
  telecommunications and information systems to
  execute a marketing program for customers who
  want to shop from their homes
• A telemarketing process can be divided into five
  major activities advertisement and reaching
  customers, order processing, customer service,
  sales support, and account management
• Distribution channels
• A company may use its own outlets or distributors
  and needs to decide on the transportation mode
• Need to monitor and track products
• Improving sales at retail stores
• Marketing management

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Marketing Management

• Pricing
• Salesperson productivity
• Product profitability analysis
• Sales analysis and trends
• New product, service and market planning
• Sales Automation Software
• manages phone, written contacts, email,
  scheduling, appointments, word processing faxes

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Managing the Accounting and Finance
Systems--Outline

• Managing financial transactions
• Financial planning and budgeting
• Financial and economic forecasting
• Planning for incoming funds
• Budgeting

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Managing the Accounting and Finance Systems

• Capital budgeting
• Investment management
• Access to financial and economic reports
• Financial analysis
• Control and auditing
• Budgetary control
• Auditing

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Managing the Accounting and Finance Systems

• Financial health analysis
• Profitability analysis and cost control
• Product pricing

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Managing Human Resource Systems--Outline

• Recruitment
• Position inventory
• Employee selection
• Human resource maintenance and development

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Managing Human Resource Systems

• Performance evaluation
• Training and human resource development
• Turnover, tardiness, and absenteeism analysis

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Human Resource Planning and Management - Labor
Negotiations

• Personnel planning
• Succession planning
• Labor - management negotiations
• Benefits administration
• Intranet applications

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ERP and Integrated Information Systems

• SAP AG
• PeopleSoft
• J.D. Edwards
• Oracle
• Computer Associates
• Baan
• PRODUCTS INCLUDE WEB MODULES

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SAP

• Several hundred applications have been integrated
  into it
• Uses a client/server architecture
• Has four basic modules--accounting,
  manufacturing, sales and human resources
• Empowers employees to make complex decisions
  instantaneously
• Database contains more than 8000 tables

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SAP, Contd

• Forces organizations to operate along business
  processes
• Supports BPR
• Implementations are very complex and expensive
• 200 million for a large company
• Entails significant changes in organizational
  structure, job descriptions, business processes,
  and organizational strategy

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SAP Implementations

• Very expensive
• 200 million for a large company
• J.C. Penny, TI, Exxon, Motorola
• Consultation fees run 1600/person/day
• Very difficult for companies to train their
  systems people and still retain them

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Customer Relationship Management (CRM)

• Diversity of customers needs.
• Customer valuation is the measure of the
  customers value to the organization
• Relationship MarketingIs 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
• To build enduring one-to-one relationships, a
  company must continuously interact with customer,
  individually

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Strategies for Conducting CRM

• Customer asset management, customer service,
  help-desk management, customer-centric system,
  sales force automation, etc.
• Enabling Role of IT in CRM - See table 8.4, page
  374

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Managerial Issues

• Integration of Information Systems
• Layoffs and Change Management
• Priority of Transaction Processing
• The Customer is King
• Finding Innovative Applications
• Handling SAP and Other Integrated Software
• Modeling Decision Making