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Chapter 2: Information Systems in the Enterprise

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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.

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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 2.16. Extended enterprises and industrial networks are also recent trends and would not be possible without the support of information technology.

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KINDS OF INFORMATION SYSTEMS

Organizational Hierarchy

Organizational Levels

Information Systems

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KINDS OF INFORMATION SYSTEMS

SALES & MANUFACTURING FINANCE ACCOUNTING HUMAN

KIND OF SYSTEM GROUPS SERVED

STRATEGIC LEVEL SENIOR MANAGERS

MANAGEMENT LEVEL MIDDLE MANAGERS

OPERATIONAL OPERATIONALLEVEL MANAGERS

KNOWLEDGE LEVEL KNOWLEDGE &DATA WORKERS

RESOURCESMARKETING & ENGINEERING

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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,

decision-making, and administrative activities of middle managers. e.g. MIS, DSS

Strategic-level systems support long-range planning activities of

senior management. e.g. ESS

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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)

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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• INPUTS: transactions, events• PROCESSING: updating• OUTPUTS: detailed reports• USERS: operations personnel, supervisors• DECISION-MAKING: highly structured

EXAMPLE: payroll, accounts payable

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A Symbolic Representation for a payroll TPS

P ayr o l l S ys t e mM a n a g e m e n t

R e po rt s

O n - lin equ e rie s

P ayr o l lm as t e r

fi l e

Em plo y e e da ta (v a rio u s de pa rtm e n ts ) To g e n e ra l le dg e r: wa g e s a n d s a la rie s

G o v e rn m e n t do cu m e n ts

Em plo y e e ch e ck s

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Typical Applications of TPSTYPE OF TPS SYSTEM

Sales/ Manufacturing! Finance/ Human Other typesmarketing production accounting resources (e.g., university)systems systems systems systems

Major functions Sales management Scheduling Budgeting Personnel recard Admissionsof system Market research Purchasing General ledger Benefits Grade records

Promotion Shipping/receiving Billing Cornpensation Course recordsPricing Engineering Cost accounting Labor relations AlumniNew products Operations Training

Major Sales order Materials resource General ledger Payroll Registration systemapplication information system planning systemssystems Market research Purchase order Accounts Employee records Student transcript

system control systems receivable/payable systemPricing system Engineering Budgeting Benefit systems Curriculum class

systems control systemsQuality control Funds managementCareer path Alumni benefactorsystems systems systems system

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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• INPUTS: documents, schedules• PROCESSING: document management, scheduling, communication

• OUTPUTS: documents; schedules• USERS: clerical workers

EXAMPLE: document imaging system

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Knowledge Work Systems (KWS)

Information system that aids knowledge workers in the creation and integration of new knowledge in the organization.

• TYPE: Knowledge-level• INPUTS: design specifications • PROCESSING: modelling• OUTPUTS: designs, graphics• USERS: technical staff; professionals

EXAMPLE: Engineering workstations

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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

EXAMPLE: sales region analysis

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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.

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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

EXAMPLE: annual budgeting

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Characteristics of Management information Systems1. 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

orientation.

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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

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Model of a Typical Executive Support System

In t e r n a l D at a

TP S /M IS D at aF i n an c i a l D at aO ffi c e S ys t e m sM o d e l i n g /an a l ys i s

E xt e r n a l D at a

D o w J o n e sG al l u p P o l lS t an d ar d &P o o r 's

E S Sw o r k s t a t i o n

E S Sw o r k s t a t i o n

E S Sw o r k s t a t i o n

M e n u sG ra ph icsC o m m u n ica t io n sL o ca l pro ce s s in g

M e n u sG ra ph icsC o m m u n ica t io n sL o ca l pro ce s s in g

M e n u sG ra ph icsC o m m u n ica t io n sL o ca l pro ce s s in g

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Major Types of Information Systems

S tra te g ic L e v e l S y s te m s5 -y e a r

s a le s t re n dfo re c a s t in g

5 -y e a ro p e ra t in g

p la n

5 -y e a rb u d g e t

fo re c a s t in g

P ro fitp la n n in g

M a n p o w e rp la n n in g

M a n a g e m e n t -L e v e l S y s te m sS a le sm a n a g e m e n t

S a le s re g io na n a ly s is

I n v e n to ryC o n tro l

P ro d u c t io nS c h e d u lin g

A n n u a lb u d g e t in g

C o s ta n a ly s is

C a p ita lI n v e s tm e n t a n a ly s is

P ric in g /p ro fita b ilitya n a ly s is

R e lo c a t io na n a ly s is

C o n tra c t c o s ta n a ly s is

K n o w le d g e -L e v e l S y s te m sE n g in e e rin gw o rk s ta t io n s

W o rdp ro c e s s in g

G ra p h ic sw o rk s ta t io n s

D o c u m e n tI m a g in g

M a n a g e ria lw o rk s ta t io n s

E le c tro n icC a le n d a rs

O p e ra t io n a l L e v e l S y s te m s

O rd e r T ra c k in g

O rd e r p ro c e s s in g

M a c h in e c o n tro l

P la n t s c h e d u lin g

M a te ria l m o v e m e n tc o n tro l

S e c u rit ie st ra d in g

C a s hm a n a g e m e n t

P a y ro ll

A c c o u n ts p a y a b le

A c c o u n ts re c e iv a b le

C o m p e n s a t io n

T ra in in g & d e v e lo p m e n t

E m p lo y e e re c o rd k e e p in g

T Y P E S O F S Y S T E M S

E S S

M I S

D S S

K W S

O A S

T P S

S a le s a n dm a rk e t in g

M a n u fa c tu rin g F in a n c e A c c o u n t in g H u m a nR e s o u rc e s

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Relationship between different IS

ESS

MIS DSS

TPSKWS/OAS

TPS is a major producer of information for other systems

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Classification of ISby Organizational Structure

Departmental Information Systems Enterprise Information System Inter-organizational Systems

NYCE SABRE or APOLLO

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Classification of ISby 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

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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 LevelOrder processing Enter, process, and track orders OperationalMarket analysis Identify customers and markets using Knowledge

data on demographics, markets,consumer behavior, and trends

Pricing analysis Determine prices for products Managementand services

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Manufacturing and Production Systems

Systems that deal with the planning, development, and production of products and services and with controlling the flow of production.

ExamplesSystem Description Organizational LevelMachine control Control the actions of machines Operational

and equipmentComputer-aided design (CAD) Design new products using Knowledge

the computerProduction planning Decide when and how many Management

products should be producedFacilities location Decide where to locate new Strategic

production facilities

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Finance and Accounting Systems

Systems that keep track of the firm’s financial assets and fund flows. Examples

System Description Organizational LevelAccounts receivable Track money owed the firm OperationalPortfolio analysis Design the firm's portfolio of investments KnowledgeBudgeting Prepare short-term budgets ManagementProfit planning Plan long-term profits Strategic

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Human Resources Systems Systems that maintain employee

records; Track employee skills, job performance, and training; And support planning for employee compensation and career development.

ExamplesSystem Description Organizational Level

Training and development Track employae training, skills, Operationaland performance appraisals

Career pathing Design career paths for employees KnowledgeCompensation analysis Monitor the range and distribution Management

ofemployee wages, salaries, and bene6csHuman resources planning Plan the long-term labor force needs Strategic

of the organization

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Examples of Business Processes

Functional Area Business ProcessManufacturing and production Assembling the product

Checking for qualityProducing bills of materials

Sales and marketing Identifying customersMaking customers aware of the productSelling the product

Finance and accounting paying creditorsCreating financial statementsManaging cash accounts

Human resources Hiring employeesEvaluating employees' job performanceEnrolling employees in benefits plans

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The Order Fulfillment Process (F 2.12)

S ales

Ac c ounting

M a n u f a c t u r in g& P r o d u c t io n

G enerateO rder

S ubm itO rder

Chec kCredit

ApproveCredit

G enerateInvoic e

As s em bleP roduc t

S hipP roduc t

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Customer Relationship Management

Customer relationship management Business and technology discipline to coordinate alt of the business processes for dealing with customers.Sa le s

T e le p h o n e s a le s W e b s a le s F ie ld s a le s R e t a i l s a le s

M a r k e t in g C a m p a ig n d a t a C o n t e n t D a t a a n a ly s i s

C u s t o m e r Se r v ic e C a l l c e n t e r d a t a W e b s e l f s e r v ic e d a t a F ie ld s e r v ic e d a t a W ir e le s s d a t a

Unif ied v iew of c us tom ersCons is ten t m es s age to c us tom ersEnd-to-end c us tom er c areLong-term c us tom er relations hipsIdentif ic ation of bes t c us tom ers

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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.

S upplier M anufac turer D is tr ibutorRetailO utlet

Cus tom er

Capac ity , inventory level, delivery s c hedule, paym ent term s

O rders , return reques ts , repair and s erv ic e reques ts , paym ents

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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 design Provide product specifications Share information about defect rates and returns

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Enterprise Systems

Firm wide information systems that integrate key business processes so that information can flow freely between different parts of the firm.

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Traditional View of Systems (F. 2.15)

M a n u fa ctu rin g A cco u n t in g Fin a n ceM a rk e t in g a n d

S a le sH u m a n

R e s o u rce s

M a n u fa ctu rin gS y s te m s

A cco u n t in gS y s te m s

Fin a n ceS y s te m s

M a rk e t in g a n dS a le s S y s te m s

HumanRes ources

S ys tems

B u s in e s sPro ce s s e s

B u s in e s sPro ce s s e s

B u s in e s sPro ce s s e s

B u s in e s sPro ce s s e s

B u s in e s sPro ce s s e s

B u s in e s s Fu n ct io n s

I n fo rm a t io n S y s te m s

OrganizationalBoundaries

OrganizationalBoundaries

V e n do rs C u s to m e rs

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Enterprise Systems (F. 2.16)

B u s in e s s Pro ce s sB u s in e s s Pro ce s sB u s in e s s Pro ce s s

En te rpris e -wide bu s in e s spro ce s s e s

M a n u fa ctu rin g A cco u n t in g

H u m a nR e s o u rce s

S a le s a n dM a rk e t in g

Fin a n ce

En te rpris e S y s te m

V e n do rs C u s to m e rs

Org

aniz

atio

nal

Bou

nda

ries

Org

aniz

atio

nal

Bou

nda

ries

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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

Customer-driven Business Processes Challenges

Daunting Implementation High Up-front Costs and Future Benefits Inflexibility

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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.

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Industrial Networks (F. 2.17)

F ir m1

F i r m4

F i r m3

F i r m2

F i r m1

S u p p l ier1

S u p p l ier3

S u p p l ier2

Indus tr ial N etw orks

H o rizo n ta l in du s tria l n e two rk

V e rt ica l in du s tria l n e two rk

F irm value c hains and enterpr is e s ys tem s

F irm sin a s in g lein d u s t ry

F irm s inc om plem entarybus ines s

Indus tryvaluec hain