2-1

Chapter Two Overview

• Decision-enabling, problem-solving, and opportunity-seizing systems

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DECISION MAKING

• Reasons for the growth of decision-making information systems– People need to analyze large amounts of

information – Wouldn’t it be better to analyze the pertinent information? That may only be two or three numbers.

– People must make decisions quickly – Why? – People must apply sophisticated analysis

techniques, such as modeling and forecasting, to make good decisions - Why? Is flipping a coin a good technique?

2-3

Transactions

• What is a transaction?

• If I buy 5 items at the store, how many transactions have I completed? – Inventory system– Accounts Payable system– Accounts Receivable system– Bank Balance

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TRANSACTION PROCESSING SYSTEMS

• Moving up through the organizational pyramid users move from requiring transactional information to analytical information

2-5

TRANSACTION PROCESSING SYSTEMS

• Transaction processing system (TPS) - the basic business system that serves the operational level (analysts) in an organization

• Online transaction processing (OLTP) – the capturing of transaction and event information using technology to (1) process the information according to defined business rules, (2) store the information, (3) update existing information to reflect the new information

• Online analytical processing (OLAP) – the manipulation of information to create business intelligence in support of strategic decision making

2-6

DECISION SUPPORT SYSTEMS

• Decision support system (DSS) – models information to support managers and business professionals during the decision-making process

• Three quantitative models used by DSSs include:1. Sensitivity analysis – the study of the impact that

changes in one (or more) parts of the model have on other parts of the model

2. What-if analysis – checks the impact of a change in an assumption on the proposed solution

3. Goal-seeking analysis – finds the inputs necessary to achieve a goal such as a desired level of output

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DECISION SUPPORT SYSTEMS

• What-if analysis

2-8

DECISION SUPPORT SYSTEMS

• Goal-seeking analysis

2-9

DECISION SUPPORT SYSTEMS

• Interaction between a TPS and a DSS

2-10

EXECUTIVE INFORMATION SYSTEMS

• Executive information system (EIS) – a specialized DSS that supports senior level executives within the organization

• Most EISs offering the following capabilities:– Consolidation – involves the aggregation of

information and features simple roll-ups to complex groupings of interrelated information

– Drill-down – enables users to get details, and details of details, of information

– Slice-and-dice – looks at information from different perspectives

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EXECUTIVE INFORMATION SYSTEMS

• Interaction between a TPS and an EIS

2-12

Digital Dashboards

• Digital dashboard – integrates information from multiple components and presents it in a unified display

2-13

Artificial Intelligence (AI)

• Intelligent system – various commercial applications of artificial intelligence

• Artificial intelligence (AI) – simulates human intelligence such as the ability to reason and learn

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Artificial Intelligence (AI)

• The ultimate goal of AI is the ability to build a system that can mimic human intelligence

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Artificial Intelligence (AI)

• Four most common categories of AI include:1. Expert system – computerized advisory

programs that imitate the reasoning processes of experts in solving difficult problems

2. Neural Network – attempts to emulate the way the human brain works– Fuzzy logic – a mathematical method of handling

imprecise or subjective information

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Artificial Intelligence (AI)

• Four most common categories of AI include:3. Genetic algorithm – an artificial intelligent

system that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem

4. Intelligent agent – special-purposed knowledge-based information system that accomplishes specific tasks on behalf of its users

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Data Mining

• Data-mining systems sift instantly through information to uncover patterns and relationships

• Data-mining systems include many forms of AI such as neural networks and expert systems

McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved

SECTION 2.2SECTION 2.2

ENTERPRISE SYSTEMS

ENTERPRISE SYSTEMS

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ENTERPRISE SYSTEMS

• Organizations can undertake high-profile strategic initiatives including:– Supply chain management (SCM)– Customer relationship management (CRM)– Business process reengineering (BPR)– Enterprise resource planning (ERP)

2-20

SUPPLY CHAIN MANAGEMENT

• Supply Chain Management (SCM) – involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability

2-21

SUPPLY CHAIN MANAGEMENT

• Four basic components of supply chain management include:

1. Supply chain strategy – strategy for managing all resources to meet customer demand

2. Supply chain partner – partners throughout the supply chain that deliver finished products, raw materials, and services.

3. Supply chain operation – schedule for production activities

4. Supply chain logistics – product delivery process

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SUPPLY CHAIN MANAGEMENT

• Wal-Mart and Procter & Gamble (P&G) SCM

2-23

CUSTOMER RELATIONSHIP

MANAGEMENT • Customer relationship management

(CRM) – involves managing all aspects of a customer’s relationship with an organization to increase customer loyalty and retention and an organization's profitability

2-24

CUSTOMER RELATIONSHIP MANAGEMENT

• CRM is not just technology, but a strategy, process, and business goal that an organization must embrace on an enterprisewide level

• CRM can enable an organization to:– Identify types of customers– Design individual customer marketing campaigns – Treat each customer as an individual– Understand customer buying behaviors

2-25

CUSTOMER RELATIONSHIP MANAGEMENT

• CRM overview

2-26

BUSINESS PROCESS REENGINEERING

• Business process – a standardized set of activities that accomplish a specific task, such as processing a customer’s order

• Business process reengineering (BPR) – the analysis and redesign of workflow within and between enterprises– The purpose of BPR is to make all business

processes best-in-class

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BUSINESS PROCESS REENGINEERING

• Reengineering the Corporation – by Michael Hammer and James Champy - recommends seven BPR principles

2-28

Finding Opportunity Using BPR

• A company can improve the way it travels the road by moving from foot to horse and then horse to car

• BPR looks at taking a different path, such as an airplane which ignore the road completely

2-29

Finding Opportunity Using BPR

• Progressive Insurance mobile claims process

2-30

Finding Opportunity Using BPR

• Types of change an organization can achieve, along with the magnitudes of change and the potential business benefit

2-31

ENTERPRISE RESOURCE PLANNING

• Enterprise resource planning (ERP) – integrates all departments and functions throughout an organization into a single IT system so that employees can make decisions by viewing enterprisewide information on all business operations

• Keyword in ERP is “enterprise”

2-32

ERP SOFTWARE

• ERP functions offered by all ERP vendors include:– Finance, accounting, sales, marketing, human

resources, operations, and logistics

• ERP vendors differentiate themselves by offering unique components including:– CRM, SCM, and BI

• According to Gartner, the average failure rate for an ERP project is 66 percent

2-33

Finding The Right ERP Solution

• Successful ERP projects share 3 attributes1. Overall fit

• Off the rack• Off the rack and tailored to fit• Custom made

2. Proper business analysis• Successful companies spend up to 10 percent of the

project budget on a business analysis

3. Solid implementation plans• A plan is needed to monitor the quality, objectives,

and timelines