Management Information Systems, Sixth Edition

1
Management Information Systems, Sixth Edition

• Chapter 3
• Business Functions and Supply Chains

2
Objectives

• 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

3
Objectives (continued)

• Enumerate the purposes of customer relationship
  management systems
• Explain enterprise resource planning systems

4
Effectiveness and Efficiency

• Information technology makes work more effective,
  more efficient, or both
• Effectiveness the degree to which a goal is
  achieved
• 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
  product

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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

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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

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Effectiveness and Efficiency (continued)
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Effectiveness and Efficiency (continued)
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Accounting

• Accountings purpose is to track every financial
  transaction
• 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

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Accounting (continued)

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

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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

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Accounting (continued)
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Finance

• Firms health is measured by its finances
• Information systems can improve financial
  management
• 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

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Finance (continued)
15
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

16
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

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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)

18
Engineering

• 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

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Engineering (continued)

• Computer-aided design (CAD) tools to create,
  modify, and store designs and drawings
  electronically
• 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

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Engineering (continued)
21
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
• Instrumental in reducing manufacturing cost
• In retail the manufacturing phase does not exist
  and in service industries the term
  manufacturing is not applicable or meaningless.
• CAD systems often transfer data automatically to
  CAM systems

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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

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Supply Chain Management (continued)
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Material Requirements Planningand Purchasing

• Material requirements planning (MRP) inventory
  control
• Inventory based on future need not on past use
• 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

25
Material Requirements Planningand Purchasing
(continued)

• Bill of materials (BOM) list of all raw
  materials and subcomponent demands to produce a
  product
• 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.

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Manufacturing Resource Planning

• Manufacturing resource planning (MRP II)
  combines MRP with other related activities to
  plan the entire manufacturing process
• Can quickly modify schedules to accommodate
  orders, track production in real time fix
  quality slippage
• Uses master production schedule
• Master production schedule specifies how
  production capacity is to be used to meet
  customer demands and maintain inventory
• It helps balance production economies, customer
  demands, manufacturing capacity, inventory levels
  over a planning horizon of several months.
• Just-in-time manufacturing suppliers ship parts
  directly to assembly lines as needed
• Avoids warehousing costs (e.g. Cisco)

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Group Activity Mini Project 1

• Using the link below learn about forecasting
  technique for consumer demands.
• http//www.purchasesmarter.com/articles/consumer-d
  emand-forecasting-popular-techniques-part2-exponen
  tial-smoothing.aspx
• Using C and based on the assigned items for
  consumer demand assigned to you, create a
  forecast with Smoothing Parameter a values of 0.1
  and 0.2 respectively.

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Monitoring and Control

• Information systems are designed to control
  manufacturing processes as well as monitor them
• Controlling processes helps ensure quality
• Example Ford Motor Companys Project Execution.

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Shipping

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

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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

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Shipping (continued)
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RFID in SCM

• 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

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RFID in SCM (continued)
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RFID in SCM (continued)
35
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

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Customer Relationship Management (continued)
37
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
  retailers
• Building statistical models to predict sales
  volumes of different products

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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

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Targeted Marketing (continued)
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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
  groups

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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

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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

43
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
  location

44
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

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Human Resource Management (continued)
F
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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

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Employee Record Management (continued)
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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

49
Training

• One important HR function is improving employee
  skills
• 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
  dramatically

50
Evaluation

• 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

51
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
  Internet

52
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
  elsewhere
• 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

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Supply Chain Management Systems (continued)
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The Importance of Trust

• Supply chain systems work best when all
  businesses in the chain are sharing information
• Trust between allied companies facilitates
  collaboration
• Risk of disclosing important information to
  competitors is present
• Risk of taking advantage of demand figures by
  charging higher prices is present

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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
  chairs

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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

57
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

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Challenges and Disadvantages of ERP Systems

• ERP systems pose many challenges
• They are complex
• They often require special tailoring for specific
  organizations
• 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

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Providing the Missing Reengineering

• Although most reengineering projects of the 1990s
  failed, ERP systems helped realize many of those
  ideas
• 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

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Summary

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

61
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

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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