Chapter 2: Information Systems in the Enterprise
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1 Chapter 2: Information Systems in the Enterprise 1 Reading Notes for Chapter 2 in the textbook The chapter introduces six types of information systems. Figure 2.1 and table 2.1 give an overall picture of organizations and how different types of information systems serve them. Figure 2.2 depicts different types of information systems and how they relate to one another (Figure 2.9 as well). Section 2.2 examines information systems from a functional view of an organization: Sales and marketing systems, manufacturing and production systems, finance and accounting systems, and human resources systems. Read this section carefully to develop an understanding of how information systems serve different functions of an organization. 2 1
2 Reading Notes for Chapter 2 in the textbook - Continued Read section 2.3 carefully to understand integration of functions and business processes. Figure 2.12 illustrates a cross-functional business process. Pay also attention to customer relationship management and enterprise systems that are current trends in business. Contrast Figure 2.15 and Extended enterprises and industrial networks are also recent trends and would not be possible without the support of information technology. 3 KINDS OF INFORMATION SYSTEMS Organizational Hierarchy Organizational Levels Information Systems 4 2
3 KINDS OF INFORMATION SYSTEMS KIND OF SYSTEM GROUPS SERVED STRATEGIC LEVEL SENIOR MANAGERS MANAGEMENT LEVEL MIDDLE MANAGERS KNOWLEDGE LEVEL KNOWLEDGE & DATA WORKERS OPERATIONAL LEVEL OPERATIONAL MANAGERS SALES & MANUFACTURING FINANCE ACCOUNTING HUMAN MARKETING & ENGINEERING RESOURCES 5 Four General Kinds of IS Operational-level systems support operational managers by monitoring the day-to-day s elementary activities and transactions of the organization. e.g. TPS. Knowledge-level systems support knowledge and data workers in designing products, distributing information, and coping with paperwork in an organization. e.g. KWS, OAS Management-level systems support the monitoring, controlling, decisionmaking, and administrative activities of middle managers. e.g. MIS, DSS Strategic-level systems support long-range planning activities of senior management. e.g. ESS 6 3
4 A Framework for IS (with respect to support provided) Executive Support Systems (ESS) Management Information Systems (MIS) Decision Support Systems (DSS) Knowledge Work Systems (KWS) Office Automation Systems (OAS) Transaction Processing Systems (TPS) 7 Transaction Processing Systems (TPS) Computerized system that performs and records the daily routine transactions necessary to conduct the business; these systems serve the operational level of the organization TYPE: Operational-level level INPUTS: transactions, events PROCESSING: updating OUTPUTS: detailed reports USERS: operations personnel, supervisors DECISION-MAKING: highly structured EXAMPLE: payroll, accounts payable 8 4
5 A Symbolic Representation for a payroll TPS Employee data (various departments) To general ledger: wages and salaries Payroll System Management Reports Payroll master file On-line queries Government documents Employee checks 9 Typical Applications of TPS TYPE OF TPS SYSTEM Sales/ Manufacturing! Finance/ Human Other types marketing production accounting resources (e.g., university) systems systems systems systems Major functions Sales management Scheduling Budgeting Personnel recard Admissions of system Market research Purchasing General ledger Benefits Grade records Promotion Shipping/receiving Billing Cornpensation Course records Pricing Engineering Cost accounting Labor relations Alumni New products Operations Training Major Sales order Materials resource General ledger Payroll Registration system application information system planning systems systems Market research Purchase order Accounts Employee records Student transcript system control systems receivable/payable system Pricing system Engineering Budgeting Benefit systems Curriculum class systems control systems Quality control Funds managementcareer path Alumni benefactor systems systems systems system 10 5
6 Office Automation Systems (OAS) Computer system, such as word processing, electronic mail system, and scheduling system, that is designed to increase the productivity of data workers in the office. TYPE: Knowledge-level level INPUTS: documents, schedules PROCESSING: document management, scheduling, communication OUTPUTS: documents; schedules USERS: clerical workers EXAMPLE: document imaging system 11 Knowledge Work Systems (KWS) Information system that aids knowledge workers in the creation and integration of new knowledge in the organization. TYPE: Knowledge-level level INPUTS: design specifications PROCESSING: modelling OUTPUTS: designs, graphics USERS: technical staff; professionals EXAMPLE: Engineering workstations 12 6
7 Decision Support Systems (DSS) Information system at the management level of an organization that combines data and sophisticated analytical models or data analysis tools to support semi-structured and unstructured decision making. TYPE: Management-level INPUTS: low volume data PROCESSING: simulations, analysis OUTPUTS: decision analysis USERS: professionals, staff managers DECISION-MAKING: semi-structured structured EXAMPLE: sales region analysis 13 Characteristics of Decision-Support Systems 1. DSS offer users flexibility, adaptability, and a quick response. 2. DSS operate with little or no assistance from professional programmers. 3. DSS provide support for decisions and problems whose solutions cannot be specified in advance. 4. DSS use sophisticated data analysis and modelling tools. 14 7
8 Management Information Systems (MIS) Information system at the management level of an organization that serves the functions of planning, controlling, and decision making by providing routine summary and exception reports. TYPE: Management-level INPUTS: high volume data PROCESSING: simple models OUTPUTS: summary reports USERS: middle managers DECISION-MAKING: structured to semi-structured structured EXAMPLE: : annual budgeting 15 Characteristics of Management information Systems 1. MIS support structured decisions at the operational and management control levels. However, they are also useful for planning purposes of senior management staff. 2. MIS are generally reporting and control oriented. They are designed to report on existing operations and therefore to help provide day-to-day control of operations. 3. MIS rely an existing corporate data-and data flows. 4. MIS have little analytical capability. 5. MIS generally aid in decision making using past and present data. 6. MIS are relatively inflexible. 7. MIS have an internal rather than an external 16 orientation. 8
9 Executive Support Systems (ESS) Information system at the strategic level of an organization that address unstructured decision making through advanced graphics and communications. TYPE: Strategic level INPUTS: aggregate data; internal and external PROCESSING: interactive OUTPUTS: projections USERS: senior managers DECISION-MAKING: highly unstructured EXAMPLE: : 5 year operating plan 17 Model of a Typical Executive Support System ESS workstation Menus Graphics Communications Local processing ESS workstation Menus Graphics Communications Local processing Internal Data TPS/MIS Data Financial Data Office Systems Modeling/ analysis External Data Dow Jones Gallup Poll Standard & Poor's ESS workstation Menus Graphics Communications Local processing 18 9
10 Major Types of Information Systems TYPES OF SYSTEMS ESS Strategic Level Syste ms 5-ye ar 5-year 5-year Profit operating budge t sales trend planning plan fore casting fore casting Manpowe r planning MIS DSS Sale s management Sales region analysis Management-Level Systems Inve ntory Annual Capital Relocation Control budgeting Investment analysis analysis Pricing/profitability Contract cost Production Cost analysis analysis Scheduling analysis KWS Engine ering workstations Knowledge -Leve l Systems Graphics workstations Manage rial workstations OAS Word proce ssing Document Imaging Ele ctronic Calendars TPS Ope rational Level Systems Machine control Securities Payroll Compensation trading Order Tracking Plant scheduling Accounts payable Training & development Order processing Material movement Cash Accounts receivable Employee record keeping control manageme nt Sales and marketing Manufacturing Finance Accounting Human Re sources 19 Relationship between different IS ESS MIS DSS KWS/ OAS TPS TPS is a major producer of information for other systems 20 10
11 Classification of IS by Organizational Structure Departmental Information Systems Enterprise Information System Inter-organizational Systems NYCE SABRE or APOLLO 21 Classification of IS by Functional Area The accounting information system The finance information system The manufacturing (operations, production) information system The marketing information system The human resources information system 22 11
12 Sales & Marketing Systems Systems that help the firm identify customers for the firm s products or services, develop products and services to meet customer s needs, promote products and services, sell the products and services, and provide ongoing customer support. EXAMPLES System Description Organizational Level Order processing Enter, process, and track orders Operational Market analysis Identify customers and markets using Knowledge data on demographics, markets, consumer behavior, and trends Pricing analysis Determine prices for products Management and services 23 Manufacturing and Production Systems Systems that deal with the planning, development, and production of products and services and with controlling the flow of production. Examples System Description Organizational Level Machine control Control the actions of machines Operational and equipment Computer-aided design (CAD) Design new products using Knowledge the computer Production planning Decide when and how many Management products should be produced Facilities location Decide where to locate new Strategic production facilities 24 12
13 Finance and Accounting Systems Systems that keep track of the firm s financial assets and fund flows. Examples System Description Organizational Level Accounts receivable Track money owed the firm Operational Portfolio analysis Design the firm's portfolio of investments Knowledge Budgeting Prepare short-term budgets Management Profit planning Plan long-term profits Strategic 25 Human Resources Systems Systems that maintain employee records; Track employee skills, job performance, and training; And support planning for employee compensation and career development. Examples System Description Organizational Level Training and development Track employae training, skills, Operational and performance appraisals Career pathing Design career paths for employees Knowledge Compensation analysis Monitor the range and distribution Management ofemployee wages, salaries, and bene6cs Human resources planning Plan the long-term labor force needs Strategic of the organization 26 13
14 Examples of Business Processes Functional Area Business Process Manufacturing and production Assembling the product Checking for quality Producing bills of materials Sales and marketing Identifying customers Making customers aware of the product Selling the product Finance and accounting paying creditors Creating financial statements Managing cash accounts Human resources Hiring employees Evaluating employees' job performance Enrolling employees in benefits plans 27 The Order Fulfillment Process (F 2.12) Sales Generate Order Submit Order Accounting Check Credit Approve Credit Generate Invoice M anufact uring & P roduct ion Assemble Product Ship Product 28 14
15 Customer Relationship Management Sales T elephone sales W eb sales Field sales Retail sales Market ing Campaign data Cont ent Data analysis Customer Service Call center data W eb self service data Field service data W ireless data Customer relationship management Business and technology discipline to coordinate alt of the business processes for dealing with customers. Unified view of customers Consistent message to customers End-to-end customer care Long-term customer relationships Identification of best customers 29 Customer Relationship Management Supply chain management Integration of supplier, distributor, and customer logistics requirements into one cohesive process. Supply chain Network of facilities for procuring materials, transforming raw materials into finished products,' and distributing finished produce to customers. Capacity, inventory level, delivery schedule, payment terms Supplier Manufacturer Distributor Retail Outlet Customer Orders, return requests, repair and service requests, payments 30 15
16 HOW INFORMATION SYSTEMS CAN FACILITATE SUPPLY CHAIN MANAGEMENT Information systems can help participants in the supply chain: Decide when and what to produce, store, and move Rapidly communicate orders Track the status of orders Check inventory availability and monitor inventory levels Track shipments Plan production based on actual customer demand Rapidly communicate changes in product design31 Enterprise Systems Firm wide information systems that integrate key business processes so that information can flow freely between different parts of the firm
17 Traditional View of Systems (F. 2.15) Business Functions O rganizational B o u n da rie s Manufacturing Accounting Finance Business Processes Manufacturing Systems Business Processes Accounting Systems Business Processes Finance Systems Marketing and Sales Business Processes Marketing and Sales Systems Human Resources Business Processes Human Resources Systems O rganizational B o u n da rie s Vendors Information Systems Customers 33 Enterprise Systems (F. 2.16) Manufacturing Accounting Enterprise System Vendors Organizational Boundaries Business Process Business Process Business Process Enterprise-wide business processes Organizational Boundaries Customers Human Resources Sales and Marketing Finance 34 17
18 Benefits and Challenges of Enterprise Systems Benefits Firm structure and organization: One Organization Management: Firm wide Knowledge-based Management Processes Technology: Unified Platform Business: More Efficient Operations and Customerdriven Business Processes Challenges Daunting Implementation High Up-front Costs and Future Benefits Inflexibility 35 Extended Enterprises Extended Enterprises: Networks linking systems of multiple firms in an industry. Also called extended enterprises. Vertical industrial networks Networks for integrating the operations of a firm with its suppliers. Horizontal industrial networks Networks for linking firms across an entire industry
19 Industrial Networks (F. 2.17) Horizontal industrial network Firms in a single industry Firm 1 Firm 2 Firm 3 Firm 4 Firm value chains and enterprise systems Industrial Networks Industry value chain Firms in complementary business Firm 1 Supplie r 1 Supplie r 2 Vertical industrial network Supplie r
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