03 Chapter

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Management Information Systems, 3rd EditionEffy Oz

Chapter 3Information Systemsin Business Functions

Learning Objectives

• When you finish this chapter, you will:– Recognize different business functions and the

role of ISs in these functions. – Understand how ISs in the basic business

functions relate to each other. – Be able to show how ISs of different business

functions support each other.

Learning Objectives

– Understand how IT is used in the most common business functions to make business processes more effective and more efficient.

– Understand the notion of Enterprise Resource Planning systems.

– Recognize business areas where information technology facilitates the work of managers and knowledge workers.

Effectiveness and Efficiency• ISs can help companies attain more effective

and efficient business processes.– Effectiveness

• The degree to which a goal is accomplished, or how much is the actual performance output (achievement) compared to the planned goal. Sometimes effectiveness is viewed as better performance.

– Efficiency• Determined by the relationship between resources

expended and benefits gained (in terms of saving money and/or time) in achieving a goal

Effectiveness and Efficiency

Figure 3.1 Information technology supports a variety of business functions

Effectiveness And Efficiency

Figure 3.2 Information systems in different business functions are interdependent.

Accounting

• AISs automatically post transactions in the books and automate generation of reports for management and legal requirements.

• Three types of AISs– Transaction processing systems (TPS)

– Cost accounting systems

– Managerial accounting systems

Accounting

• Electronic Data Processing (EDP) Audits– Ensure electronic systems comply with

standard regulations and acceptable rules– Ensure systems cannot be manipulated to

circumvent acceptable principles– In recent years EDP auditors job title has

changed to information systems auditors.

Accounting

Figure 3.3 Accounting information systems include features that reflect up-to-date performance of the organization in financial terms.

Finance

• The job of financial managers is to manage money as efficiently as possible by: – Collecting payables as soon as possible

– Making payments by the latest time allowed by contract or law

– Ensuring that sufficient funds are available for day-to-day operations

– Taking advantage of opportunities to accrue the highest yield on funds not used for current activities

Finance

Figure 3.4 Financial information systems help manage cash and investment portfolios.

Finance• Cash Management

– Financial ISs help balance the need to accrue interest against the need to have cash available.

– Cash management systems (CMS): Handle cash transactions specifically.

– Electronic fund transfer (EFT): The electronic transfer of cash from one bank account to another.

Finance

• Investment Analysis and Service – Analyze and project the prices of a specific

stock or bond.– Transmit buy and sell orders electronically.– Provide clients with a detailed statement.– Monitor account information and news

online.

Engineering• ISs reduce engineering lead time or time-to-

market.– Key to maintaining a competitive edge– Computer-Aided Design (CAD) Systems

• Help engineers and technicians design new products and quickly modify and store drawings electronically.

– Rapid Prototyping: Creating one-of-a-kind products to test design in three dimensions.

Engineering

Figure 3.5 Engineering information systems aid engineers in

designing new products and simulating operations.

Manufacturing and Inventory Control

• IT helps in these manufacturing activities:– Plant activity scheduling– Material requirement assessment– Material reallocation between orders– Dynamic inventory management– Grouping work orders by “characteristics” – Resource qualification for task completion

Figure 3.6 Manufacturing and inventory control information systems

help reduce cycle times and the cost of maintaining inventory.

• Materials Requirement Planning (MRP)– Take customer demand as initial input

• Number of product units needed and when they are needed

– Use long-range forecasts to put long-lead material on order

– Help reduce inventory cost while ensuring availability

Manufacturing andInventory Control

Figure 3.7 Materials requirement planning and manufacturing resource planning

• Manufacturing Resource Planning (MRP II)– Combines MRP with other manufacturing-related

activities to plan the manufacturing process such as• Shop activity control and purchasing

• Source of demand

• Customer order entry and forecasting

• Support functions such as financial management, sales analysis, and data collection

• Manufacturing Execution Systems (MES)– Track, schedule, and control manufacturing

processes– Collect data such as

• Hours machine operates every day of the month

• Hours the machine is idle and why

Marketing, Sales, and Customer Service

• Market Research– Statistical models help market researchers find the

best populations for new and existing products.

• Targeted Marketing– Database management systems (DBMS) help

define potential customers as narrowly as possible.

Figure 3.8 Marketing and sales information systems help target

potential buyers and serve clients.

• The Computer as a Marketing and Selling Medium– Companies send customers promotional disks

with information on their products and services.– Commercial announcements are posted on

public bulletin board systems.– The Web lets companies reach more shoppers

and serve them better.

• Sales Force Automation– Equipping salespeople with information

technology to facilitate productivity.• IT allows salespeople to present different options for

products and services on the spot.

• Customer Relationship Management (CRM)– Customer service via the Web is available 24

hours/day, 7 days/week.• Saves companies labor hours and telephone expenses

Human Resources

Figure 3.9 Human resource management information systems help managers optimize the assignment of employees and provide

payroll, benefits, and other employee-related services.

Human Resources

• Employee Record Management– Reduce space needed to store records, time to

retrieve them, and costs of both

• Promotion and Recruitment– Search databases for qualified personnel– Use intranet to post job vacancies– Use the Web to recruit

Human Resources

• Training– Multimedia software training is replacing

classrooms and teachers.– Training software simulates an actual task or

situation and includes evaluation tools.

• Evaluation– Evaluation software helps standardize the

evaluation process and adds a certain measure of objectivity and consistency.

Human Resources• Compensation and Benefits Management

– ISs can help manage compensation efficiently and effectively.

• Calculate salaries, hourly pay, commissions, and taxes

• Automatically generate paychecks or direct deposits

– Special software helps manage benefits, such as health insurance, life insurance, retirement plans, and sick and leave days.

Enterprise Resource Planning

• Enterprise Resource Planning (ERP)– All business functions served by one system that

supports different activities for different departments

– Support supply chain management, the series of main and supporting activities from order to delivery.

Groupware and Collaborative Work

• GroupWare lets workers in different locations communicate ideas, brainstorm, and work together as if they were in the same place.

• Document Control– Users can distribute and track electronic documents

without working with outdated information.

• Collaborative Projects– Users can coordinate work on a single document from

many different terminals.

Groupware and Collaborative Work

• Brainstorming– A group meeting and working collaboratively to

generate creative solutions and new ideas.– Groupware software can facilitate this process

• Eliminates the expense of bringing everyone to the same physical location.

Ethical and Societal IssuesPrivacy? What Privacy?

• What is Privacy?– One’s right to control information about oneself.– Not a constitutional right per se; secured by laws

or convention.– Increasing number of organizations may access

information via better IT hardware and software.– Business and civil rights advocates dispute degree

of privacy vs. utility of information access.

• Business Arguments– Necessary to collect basic financial and personal

information as cheaply as possible– Consumers benefit eventually from competitive

environment augmented by readily available information

• Consumer Arguments– Resent unsolicited mail and telephone calls – Resent being refused credit because of credit

bureau mistakes– Frightened by “dossier phenomenon”– Loss of control over information unfair—

information gathered for a particular purpose with permission should remain restricted

• Seven Commandments of Personal Data Collection and Maintenance– Purpose. Companies should inform people who

provide information of specific, exclusive purpose.

– Relevance. Companies should record and use only data necessary to fulfill their own purposes.

– Accuracy. Companies should ensure that their data are accurate.

– Currency. Companies should make sure that all data about an individual are current.

– Security. Companies should limit data access to only those who need to know.

– Time Limitation. Companies should retain data only for the time period necessary.

– Scrutiny. Companies should establish procedures to let individuals review their records and correct inaccuracies.

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