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Transaction Processing, Innovative Functional Systems, CRM


Chapter 7 Transaction Processing, Innovative Functional Systems, CRM & Integration Learning Objectives Relate functional areas and business processes to the value ... – PowerPoint PPT presentation

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Title: Transaction Processing, Innovative Functional Systems, CRM

Chapter 7
  • Transaction Processing, Innovative Functional
    Systems, CRM Integration

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Automated Design Work Manufacturing
  • Computer-aided design (CAD) is a system that
    enables industrial drawings to be constructed on
    a computer screen stored, manipulated
    updated electronically.
  • Computer-aided engineering (CAE) software enables
    designers to analyze the design and determine
    whether it will work the way the designer thought
    it would.
  • Computer-Aided Manufacturing (CAM) encompasses
    computer-aided techniques that facilitate
    planning, operation control of a production
  • Enhanced product realization (EPR) is a
    Web-based, distributed system that allows
    manufacturers to make product modifications
    anywhere in the world in as few as five days.

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

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

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

The Customer is King/ Queen
  • Innovative products services and superb
    customer service are becoming a necessity for
    many organizations. For example
  • Customer Profiles and Preference Analysis. 
  • Prospective Customer Lists Marketing
  • Mass Customization. 
  • Personalization.
  • It is essential for companies today to be aware
    of their customers and treat them like royalty.

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

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

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

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

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

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

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

Access to Financial Economic Reports
To cope with the large amount of financial online
data, investors use three supporting tools
Internet search engines for finding financial
Internet directories and yellow pages.
Software for monitoring, interpreting, analyzing
financial data, alerting management.
Control Auditing
  • Specific forms of financial control are
  • Budgetary controls
  • Internal and External audits
  • Financial Ratio Analysis
  • Profitability Analysis Cost Control
  • Product Pricing

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

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

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

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

Customer Relationship Management
  • Customer relationship management (CRM) is an
    approach that recognizes that customers are the
    core of the business and that the companys
    success depends on effectively managing
    relationships with them.
  • Customer service is a series of activities
    designed to enhance the level of customer
  • Relationship marketing is the overt attempt of
    exchange partners to build a long-term
    association, characterized by purposeful
    cooperation and mutual dependence on the
    development of social, as well as structural,
    bonds (Mowen Minor, 1998).
  • E-Service is customer service that is performed
    on the Web, sometimes automatically.

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

Information Technology in CRM
Customer Service on the Web
  • Providing Search and Comparison Capabilities.
  • Providing Free Products and Services.
  • Providing Technical and Other Information and
  • Allowing Customers to Order Customized Products
    and Services Online.
  • Letting Customers Track Accounts or Order Status

Tools for Customer Service
  • Personalized Web Pages
  • FAQs
  • Tracking Tools
  • Chat Rooms
  • E-mail and Automated Response
  • Help Desks and Call Centers
  • Troubleshooting Tools

Justifying CRM programs
One way to determine how much customer service to
provide is to compare your company against a
set of standards known as metrics. Metrics to
evaluate Web-related customer service
  • Security and privacy.
  • Fulfillment.
  • Return policy.
  • Navigability.
  • Response time.
  • Site availability.
  • Download time.
  • Timeliness.

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

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

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

Managerial Issues
  • Integration of functional information systems.
    Integration of existing stand-alone functional
    information systems is a major problem for many
  • Priority of transaction processing. Transaction
    processing may not be an exotic application, but
    it deals with the core processes of
  • The customer is king/queen. In implementing IT
    applications, management must remember the
    importance of the customer, whether external or

Managerial Issues (cont.)
  • Finding innovative applications. Tools such as
    Lotus Notes, intranets, and the Internet enable
    the construction of many applications that can
    increase productivity and quality.
  • System integration. Although functional systems
    are necessary, they may not be sufficient if they
    work independently.
  • Using the Web. Web-based systems should be
    considered in all functional areas. They are
    effective, inexpensive user friendly.
  • Ethical Issues. Many ethical issues are related
    to the code of ethics followed in CRM and
    privacy policies.