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CHAPTER OUTLINE
8.1 Transaction Processing Systems
8.2 Functional Area Information Systems
8.3 Enterprise Resource Planning Systems
LEARNING OBJECTIVES
� Describe transaction processing systems.
� Describe functional area information systems
and the support they provide for each
functional area of the organization.functional area of the organization.
� Describe enterprise resource planning
systems.
8.1 Transaction Processing Systems
(TPS)
Rudy Giuliani checking out of a
Wal-Mart using a bar code
scanner that produces data
captured by a transaction
processing system
Note: the barcode scanner is an example of source data
automation.
Source data automation involves collecting data from sensors (e.g.,
barcode scanners) and entering the data directly into a computer
without human intervention.
8.1 Transaction Processing Systems
(TPS) (continued)
Transaction Processing System (TPS) – monitors, collects, stores,
and processes data generated from all business transactions.
� Batch Processing is when the firm collects data from
transactions as they occur, placing them in groups or batches,transactions as they occur, placing them in groups or batches,
then prepares and process the batches periodically i.e. every
night
� Online Transaction Processing (OLTP) is when business
transactions are processed online as soon as they occur.
8.2 Functional Area Information Systems
� Functional Area Information Systems are designed
to support a functional area by increasing its internal
effectiveness and efficiency in the following areas:
� Accounting
� Finance� Finance
� Marketing
� Operations (POM)
� Human Resources Management
� Provide information mainly to lower- and middle-level
managers in the functional areas via a variety of
reports.
Functional Area Information Systems Reports
Functional area information systems generate a
wide variety of reports:
� Routine reports
� Ad hoc (on demand) reports� Ad hoc (on demand) reports
� Drill-down reports
� Key-indicator reports
� Comparative reports
� Exception reports
Summary Report
A summary
report is one
type of routine
report
Summary reports provide summarized information, with less detail.
Detailed Report
A detailed
report is
another type of
routine report
Detailed reports provide high levels of detailed data, often in support of summary
reports.
Drill-Down Report
Drill-down
report is a
type of ad-
hoc reporthoc report
A drill-down report allows users to click on an item in a report and be able to
access underlying details about that item.
Key-Indicator Report
Key-indicator
report is a
type of ad-hoc type of ad-hoc
report
A key indicator report summarizes the performance of critical activities.
The key indicator in this report is the number of prison inmates per 100,000
of population in 1996-1997.
Comparative Report
Comparative report is one type
of ad-hoc report.This comparative report compares managed
health care to traditional fee-for-service
healthcare. Let’s use one example: Advice to
smokers to quit.
* Fee-for-service has a 37% compliance rate on * Fee-for-service has a 37% compliance rate on
seven Healthcare Effectiveness Data and
Information Set (HEDIS) preventive measures.
See purple arrow.
* The minimum managed care plans have a
30% compliance rate. (left end of bar)
* The maximum managed care plans have a
85% compliance rate. (right end of bar)
* The average of all managed care plans
(National Health Plan average) is 61%
compliance. (see red arrow).
We can see that there is quite a bit of
information in this graphical comparative report.
Exception Report
Exception reports include only information that falls outside certain threshold
standards (outside norm).
This image shows a financial transaction exception report using SAP from the
University of Toronto in 2003.
8.3 Enterprise Resource Planning
Systems (ERP)
Enterprise Resource Planning (ERP) systems
integrate the planning, management and use of all
resources of the organization. That is, ERP systems are
designed to break down the information silos of an
organization. organization.
Many information systems were developed for specific
functional areas and did not communicate with systems
in other functional areas. Therefore, these systems are
referred to as information silos.
8.3 Enterprise Resource Planning
Systems (ERP)
The major objective of ERP systems: integrate the functional
areas of the organization by enabling seamless information flows
across them.
SAP Modules
SAP is moving away from
describing their system
as a set of modules, and
now is using the term
“solutions.”
FI – Financial Acctg
CO – Controlling
HR – Human Resources
MM – Materials Mgmt
PP – Production Planning
QM – Quality Mgmt
WF - Workflow
ERP Systems (continued)
A business process is a set of related steps or
procedures designed to produce a specific outcome.
The image
shows an
example of a
business
process,
namely an
order process.
Manufacturing
& Production
ModuleAccounting
and
Financial
Module
Human
Resources
Module
Core ERP Modules
Suppliers Customers
ERP
ERP II
SYSTEM
Also known e-
business suites.
Business
Intelligence
Module
Supply
Chain
Management
Module
E-Business
Module
Customer
Relationship
Management
Module
Extended ERP Modules
ERPPlatform &
DatabaseInterorganizational
ERP systems that
provide Web-
enabled links
between a
company’s key
business systems
and its customers,
suppliers,
distributors, and
others.
ERP Systems (Continued)
� Best practices are the most successful solutions or problem-solving methods for achieving a business objective.
� Drawbacks to ERP systems are that they can � Drawbacks to ERP systems are that they can be extremely complex, expensive and time-consuming to implement.
� Leading ERP software vendors include SAP (SAP R/3), Oracle and PeopleSoft.
CHAPTER OUTLINE
9.1 Defining Customer Relationship
Management
9.2 Operational Customer Relationship
ManagementManagement
9.3 Analytical Customer Relationship
Management
9.4 Other Types of Customer Relationship
Management Applications
LEARNING OBJECTIVES
� Define customer relationship management
and discuss the objectives of CRM.
� Describe operational CRM and its major
components.components.
� Describe analytical CRM.
� Discuss mobile CRM, on-demand CRM, and
open-source CRM.
The Need for CRM
� It costs six times more to sell to a new customer than to sell to an existing one.
� A typical dissatisfied customer will tell 8-10 people.
� By increasing the customer retention rate by 5%, profits could increase by 85%.by 5%, profits could increase by 85%.
� Odds of selling to new customers = 15%, compared to the odds of selling to existing customers (50%)
� 70% of complaining customers will remain loyal if their problem is solved
9.1 Defining Customer Relationship Management
Customer relationship management
(CRM) is an organizational strategy
that is customer-focused and
customer-driven.
Tenets of CRM
� One-to-one relationship between a customer and a
seller.
� “Treat different customers differently.”
Keep profitable customers and maximize � Keep profitable customers and maximize
lifetime revenue from them.
Customer Touch Points (Continued)
� Customer touch point is a method ofinteraction with a customer, such astelephone, e-mail, a customer service or helpdesk, conventional mail, Web site and store.desk, conventional mail, Web site and store.
Customer Touch Points
Smart
Phone
Web ComputerPhysical
Store
Customer
Service
CUSTOMERSales
Representative
Service
Service
Center
Direct
Field
Service
Technician
9.2 Operational CRM
Operational CRM is the component of CRM that
supports the front-office business processes.
That is, those processes that directly interact with
customers; i.e., sales, marketing, and service.
Two major components of operational CRM:
� Customer-facing applications
� Customer-touching applications
customers; i.e., sales, marketing, and service.
Customer-Facing Applications
Customer service and support
Sales force
automationautomation
Marketing
Campaign management
Customer-Facing Applications (Continued)
Customer-facing applications are those applications where an
organization’s sales, field service, and customer interaction center
representatives actually interact with customers.
Customer service and support refers to systems that automate Customer service and support refers to systems that automate
requests, complaints, product returns, and requests for information.
Sales force automation automatically records all the aspects in a
sales transaction process.
Campaign management applications help organizations plan
campaigns so that the right messages are sent to the right people
through the right channels.
Marketing (Continued)
Cross selling is the practice of marketing additional, related
products to customers based on their previous purchases.
Up selling is a sales strategy in which the sales person will
provide customers the opportunity to purchase higher-valueprovide customers the opportunity to purchase higher-value
related products or services as opposed to, or along with, the
consumer’s initial product or service selection.
Bundling is a form of cross selling in which a business sells
a group of products or services together at a price that is
lower than the combined individual prices of the products.
Customer-Touching Applications
Search and comparison capabilities
In customer-touching applications, customers interact
directly with online technologies and applications rather than
interact with a company representative.
Technical and other information and
services
Customized products and services
Loyalty programs
Personalized Web Pages,
FAQs,
E-mail and Automated Response
9.3 Analytical CRM
Analytical CRM systems analyze customer
behavior and perceptions in order to provide
actionable business intelligence.
The Relationship Between Operational
CRM and Analytical CRM
• Sales
• Marketing
• Customer Service and
Support
• Campaign Management
Customer-facing Applications
Customer
Data
Warehouse• Campaign Management• Campaign Management
• Search and Comparison
• Customized Products
• Technical Information
• Personalized Web Pages
• FAQ
• E-mail / Auto Response
• Loyalty Programs
Customer-touching Applications
• Data Mining
• Decision Support
• Business Intelligence
• OLAP
WarehouseWarehouse
9.4 Other Types of CRM (Continued)
On-demand CRM is a CRM system that is hosted by an
external vendor in the vendor’s data center.
Mobile CRM is an interactive CRM system that enables an
organization to conduct communications related to sales,organization to conduct communications related to sales,
marketing, and customer service activities through a mobile
medium for the purpose of building and maintaining
relationships with its customers.
Open-source CRM is CRM software whose source code is
available to developers and users.
CHAPTER OUTLINE
10.1 Supply Chains
10.2 Supply Chain Management
10.3 Information Technology Support for Supply
Chain ManagementChain Management
LEARNING OBJECTIVES
� Define the term supply chain, and discuss the
three components of a supply chain.
� Define supply chain management, and
understand its goals.understand its goals.
� Identify various problems that can occur
along supply chains.
� Explain how information technology supports
supply chain management.
Generic Supply Chain
Supply chain: refers to the flow of materials, information, money, and services
from raw material suppliers, through factories and warehouses, to the end
consumers.
Upstream component of a supply chain: sourcing or procurement takes
place.
Internal component of a supply chain: packaging, assembly, or
manufacturing takes place.
Downstream component of a supply chain: distribution takes place.
The Flows of the Supply Chain
Material flows are the physical products, raw materials,
supplies and so forth that flow along the chain.Reverse flows – returned products, recycled products
and disposal of materials or products.
Information flows are all data related to demand, Information flows are all data related to demand,
shipments, orders, returns and schedules as well as
changes in any of these data.
Financial flows are all transfers of money, payments and
credit-related data. A supply chain involves a product life
cycle approach, from “dirt to dust”.
10.2 Supply Chain Management
� Supply chain management (SCM) is the
function of planning, organizing and
optimizing the supply chain’s activities.
� Interorganizational information system
(IOS) involves information flows among two
or more organizations.
Issues in Global IOS Design
� Cultural differences
� Localization
� Economic and Political Differences
� Legal issuesLegal issues
� Cross-border data transfer which refers to the flow of corporate data across nations’ borders.
Problems Along the Supply Chain
Poor customer service
Poor quality product
High inventory costs
Loss of revenues
New technologies
The Bullwhip Effect
Order
Quantity
Order
Quantity
Order
Quantity
Order
Quantity
Bullwhip effect refers to erratic shifts in orders up and down the supply chain.
Time
Customer
Sales
Time
Retail Orders
To Wholesaler
Time
Wholesaler
Orders to
Manufacturer
Time
Manufacturer
Orders to
Supplier
Solutions to Supply Chain Problems
Using inventories
� Just-in-time inventory: a system in which a supplier
delivers the precise number of parts to be assembled
into a finished product at precisely the right time.
Information sharing
� Vendor-managed inventory: an inventory strategy
where the supplier monitors a vendor’s inventory for
a product or group of products and replenishes
products when needed.
10.3 Information Technology Support
for Supply Chain Management
� Electronic data interchange (EDI) - is a
communication standard that enables
business partners to exchange routine
documents, such as purchase orders,
electronically.
� Extranets - link business partners to one
another over the Internet by providing access to
certain areas of each other’s corporate
intranets.
EDI Benefits
� Minimize data entry errors
� Length of messages are shorter
� Messages are secured
� Reduces cycle time� Reduces cycle time
� Increases productivity
� Enhances customer service
� Minimizes paper usage and storage
EDI Limitations
� Significant initial investment to implement
� Ongoing operating costs are high due to the
use of expensive, private VANs
� Traditional EDI system is inflexible� Traditional EDI system is inflexible
� Long startup period
� Multiple EDI standards exist
Extranets
� Extranets link business partners to one
another over the Internet by providing access
to certain areas of each other’s corporate
intranets.
� The main goal of extranets is to foster
collaboration between business partners.
� An extranet is open to selected B2B
suppliers, customers and other business
partners.
Types of Extranets
A company and its dealers, customers or
suppliers
An industry’s extranet
Joint ventures and other business partnerships
Types of Extranets (Continued)
A company and its dealers, customers or suppliers –
centers around one company.
An industry’s extranet – major players in an industry team
up to create an extranet.up to create an extranet.
Joint ventures and other business partnerships –
partners in a joint venture use extranet as a vehicle for
communications and collaboration.