3.1 prepared by t. wafaa mustafa 2 chapter global e-business: how businesses use information systems...

3.1 Prepared by T. Wafaa Mustafa

22ChapterChapter

Global E-Business: Global E-Business: How Businesses How Businesses Use Information Use Information

SystemsSystems

Global E-Business: Global E-Business: How Businesses How Businesses Use Information Use Information

SystemsSystems

Part 1Part 1

Lecture 3Lecture 3


• Business must deal with many different pieces of

Information about Suppliers, Customers,

Invoices and Payments, and of course their

Products and Services In order to operate.

• Information Systems make it possible for

Businesses to manage all their information,

make better decisions, and improve the

execution of their Business Processes.

2.1 Business Processes and Information Systems


• What would happen if you walked into

work one day and the management told

the employees they could do anything,

anything at all, that they wanted to do

that day.

Scenario



• If Jimmy from production decided he wanted to work in

sales and marketing he could.

• If Sally, who normally works in accounting, wanted to

spend the day in shipping she could do that too.

• No one would have to follow any rules or any set

procedures.

• They could accomplish the work any way that they chose.

2.1 Business Processes and Information SystemsScenario


• Sally decides that she doesn’t want to use FedEx to

ship out the products that day even though the

company has a contract that saves them lots of

money. She decides to use an alternate shipping

service that will cost the company more and slow

down the shipment significantly. She doesn’t see a

need to tell accounting about the change.



• Jimmy decides not to use the same old packing

materials when he’s preparing glass bowls for

movement across the country. He determines that

it is faster if he just plops the bowls into a box,

closes the lid, and sends it down the line.

Unfortunately, his co-worker Tim (who doesn’t

know anything about Jimmy’s decision) is

responsible for answering customer complaints.



• Bill in accounting decides that he needs a pay raise to help

pay for his upcoming vacation. Normally he would be

required to get his supervisor’s approval to change any

pay record but since there aren’t any established

procedures he can just go ahead and enter the new salary

data in the system. While he’s at it, he gives ten of his

friends pay raises also. While Bill’s friends may like the

idea, the rest of the employees in the company are pretty

upset.



• As we discussed in Chapter 1, The digital firm must connect each functional area and each management level to one another. Data input to the system in manufacturing must be made available to sales, accounting, and shipping. Managers in the human resources department must have access to appropriate information regardless of its origin. Information integration is the key to the digital firm.



• As we go through this chapter, we’ll look at

the types of information systems

organizations use at each management level.



• Business processes:

• Workflows of material, information, knowledge

• Sets of activities, steps

• May be tied to functional area or be cross-functional

• Businesses: Can be seen as collection of business processes

• Business processes may be assets or liabilities


BUSINESS PROCESSES


• Examples of functional business processes– Manufacturing and production

• Assembling the product

– Sales and marketing• Identifying customers

– Finance and accounting• Creating financial statements

– Human resources• Hiring employees

BUSINESS PROCESSES



• Information technology enhances business processes in two main ways:

• Increasing efficiency of existing processes• Automating steps that were manual

• Enabling entirely new processes that are capable of transforming the businesses• Change flow of information• Replace sequential steps with parallel steps• Eliminate delays in decision making

HOW INFORMATION SYSTEMS ENHANCE BUSINESS PROCESSES



- Although there are many different Business Systems, We can categorize all these different Systems from two different perspectives:

1. Systems from a Functional Perspective

Functional Perspective identifies Systems by their major Business Functions– Sales and Marketing Systems

– Manufacturing and Production Systems

– Finance and Accounting Systems

– Human Resources Systems

2. Systems from a Constituency Perspective

Constituent Perspective identifies Systems in terms of major Organizational Groups that they serve.

– Transaction Processing Systems

– Management Information Systems and Decision-Support Systems

– Executive Support Systems

2.2 Types of Business Information Systems


– Sales and marketing systems

– Manufacturing and production systems

– Finance and accounting systems

– Human resources systems


SYSTEMS FROM A FUNCTIONAL PRESPECTIVE


SALES AND MARKETING SYSTEMS

The Sales and Marketing Function is responsible for selling the organization’s Product and Services.

Marketing Department is concerned with:-

- Identifying potential Customers need and want, - Planning for developing product and services to meet customer needs - Advertising and promoting these product and services.

Sales Department is concerned with:

- Contacting customers, - Selling the products and services,

- Taking Orders, and following up on sales.

Sales And Marketing Information Systems support all Sales and Marketing Business functions.




Example of Sales and Marketing Information Systems

SYSTEM DESCRIPTION GROUP SERVED

Order Processing Enter, Process & Track Orders Operational Mgmt, and staff

Pricing Analysis Determine Price for products Middle Management

Sales trend Forecasting Prepare 5 year Sales plan Senior Management






• MANUFACTURING AND PRODUCTION SYSTEMS

• Manufacturing and Production Function is responsible for actually producing the firm’s goods and services.

• Manufacturing and Production Systems deal with the:– Planning, Development, and Maintenance of Production facilities; – Establishment of Production goals; – Acquisition, Storage, and availability of materials; – Scheduling of equipment, facilities , material , and labour required to fashion

finished products.

• Manufacturing and Production Information Systems support these activities.


Examples of Manufacturing and Production Information Systems

SYSTEM DESCRIPTION GROUPS SERVEDMachine Control Controls the actions of machines Operational Management

Production Planning Decides when and how many Middle Management Products should be produced .

Facilities Location Decides where to locate new Senior Management Production facilities

Quality Control Identify source of defects

Inventory system will be discussed in details next slide




OVERVIEW OF AN INVENTORY SYSTEM

• Most Manufacturing and Production Systems use some sort of Inventory System.

• An Inventory System produces a Report that gives information about number of each item available in inventory, the number to be reorder replenished in each item to support Production activities.

• Companies can Estimate the number of items to reorder, or use a formula to calculate the least expensive quantity called ‘Economic Order Quantity’ to reorder. See fig 2-3 p47






• FINANCE AND ACCOUNTING SYSTEMS

• The Finance Function is responsible for managing Firm's Financial Assets such as cash , stocks, bonds, and other investments to maximize return on the Financial assets.

• Accounting Function is responsible for maintaining and managing the Firm’s Financial Records such as Receipts, Disbursements, Depreciation, and Payroll in order to account for the flow of funds in a firm.

• To determine whether a firm is getting the best Return on its investment , the Financial Function must obtain a considerable amount of Information from sources external to the firm (i.e. from the external sources).

• Finance And Accounting Information Systems support these activities


Example of Finance and Accounting Information Systems

SYSTEM DESCRIPTION GROUPS SERVED

Accounts Receivables Tracks money owed the firm Operational Management

Budgeting Prepares short term Budget Middle Management

Profit Planning Plans long term Profits Senior Management






HUMAN RESOURCES SYSTEMS

The Human Resources Function is responsible for attracting,developing, and maintaining the firm’s workforce.

Human Resources Information Systems support activities

such as:-

- Identifying potential employees, - Maintaining complete record of existing Employees,

- Creating programs to develop employees’ talents and skills.


Examples of Human Resources Information Systems

SYSTEM DESCRIPTION GROUPS SERVED

Training and Development Tracks employees’ Training skills Operational Mgmt

and Performance appraisals

Compensation Analysis Monitors the range of distribution Middle Management

Wages, Salaries and Benefits

Human Resource Planning Plans the long term labour force Senior Management

needs of the Organization

AN EMPLOYEE RECORD KEEPING SYSTEM

The System maintains basic employee data that can be used to produce a variety of

Reports, such as ‘’List of Newly hired employees’’, Employees Classified by Job Type

and Educational Level’’, ‘’Employee Job Performance Evaluation Report’’ etc…

- Such Systems are typically designed to provide data that can satisfy Government (State) record keeping requirements.




• Although Functional Perspective is very useful for understanding how BusinessSystems serve specific Business Functions, it does not tell us how Systems helpMangers manage the Firm.

• The Constituency Perspective examines in terms of the various Levels of Management and Types of Decisions that they support.


SYSTEMS FROM A CONSTITUENCY PRESPECTIVE


• Each Management Level has different information needs given their different responsibilities, and each can be seen as major Information Constituents.

– Senior Managers need Summary Information that can quickly inform them about the Overall Performance of the Firm, such as Gross Sales Revenue, Sales By Product Group Range, and Overall Profitability.

– Middle Managers need more specific information on the results of specific Functional areas and Departments of the Firm, such as contacts by Sales Force, Production Statistics for specific Factories or Product Lines, Employment Levels and Costs, and Sales Revenues for each Month or even each Day.

– Operational Managers need Transaction Level Information, such as the number of Parts in Inventory each day or the number of hours logged on say Monday by each Employee.

– Knowledge Workers may need access to external Scientific Database or Internal Databases with Organizational Knowledge

– Production and Service Workers need access to Customer Records in order to take Order and Answer queries from Customers.




– TRANSACTION PROCESSING SYSTEMS (TPS)

– MANAGEMENT INFORMATION SYSTEM (MIS)

– DECISION SUPPORT SYSTEMS (DSS)

– EXECUTIVE SUPPORT SYSTEMS (ESS)




Transaction processing systems• A Transaction Processing System is a Computerized System that performs and records the daily routine transactions necessary to conduct business Such as Sales Order Entry, Hotel Reservation, Payroll, Student Registration System etc..

• The principle purpose of TPS at this level is to answer routine questions and to track the flow of transactions through the Organization. Eg. TPS must make information easily available, current and accurate to answer questions like How many parts are in inventory, What happened to XYZ companies payments?




Transaction processing systems• Managers need TPS to monitor the status of internal

Operations and the firm’s relationships with the external environment.

• TPS are also major producers of information for the other types of Systems such as MIS, DSS Systems.

• TPS are often so central to a business that failure for a few hours can lead to a firm’s demise and perhaps that of other firms linked to it.




Management information systemsMiddle Management needs Systems to help with Monitoring , Controlling, Decision making, and Administrative activities.

• The term Management Information Systems (MIS) are a specific category of information Systems serving the Middle Management.

• MIS provides Middle Managers with reports on the Organization’s current performance.

• The information is used to monitor and control the business and predict future performance.




• MIS Summarise and Report on the company’s basic operations using data supplied by Transaction Processing Systems (TPS).

• The data from TPS are compressed and usually presented in reports that are produced on a regular schedule. i.e. Weekly, Monthly , Yearly Reports..

• Today, many MIS Reports are delivered Online.

• Some MIS enable Managers to ‘’Drill Down’’ reports to see daily or hourly data if required.

• MIS generally provides answer to routine questions that have been specified in advance and have a predefined procedures for answering them.

• MIS generally are not flexible and have little analytical capacity.

• Most MIS use simple routines such as Summaries and Comparison, as opposed to sophisticated Mathematical Modules or Statistical techniques.




• Decision support systems

• Decision Support Systems (DSS) support Non-routine Decision making of Middle Management.

• DSS focus on problems that are unique and rather changing, for which the procedure for arriving at a solution may not be predefined in advance

• DSS try answer ‘’What-IF’’ type of Questions. e.g. What would be the impact on Production Schedules if we

were to double sales in the month of December.

• Although DSS use internal information from Transaction Processing Systems and the Management Information Systems, they often take in information from External Sources, such as Current Stock Prices from Stock Market Databases .




• DSS use a variety of Models to analyze data , they condense large amounts of data into a form in which Decision makers analyze them.

• DSS are designed so that Users can work with them directly and thus these Systems explicitly include User-friendly Software.

e.g. Voyage-Estimating System a small but powerful example of DSS.

• DSS is also referred to as ‘’ Business Intelligence Systems’’ because they focus on helping Users make better business decisions




• Executive support systems• The nature of Senior Managers role involves with strategic issues and

long-term trends, both in the firm and in the external environment.

• Senior Managers are concerned with questions such as:-

- What will employment levels be in the next five years? - What are the long term industry cost trends, and where does our firm fit in? - How well our competitors performing - What product should we be making in 5 years? - What new acquisitions would protect us from cynical business swings?




• Executive Support Systems (ESS) also referred to as Executive Information System (EIS) help senior Managers make Strategic and Long term trend decisions.

• ESS address nonroutine decisions that required judgement, evaluation, and insight because there is no agreed-on procedure for arriving at a solution.

• ESS provide a generalized computing and communications capacity that can be applied to a changing array of problems.




• ESS are designed to incorporate data from external sources , but they also draw summarized information from internal MIS and DSS. ESS filter, compress, and track critical data, displaying the data of greatest importance to senior managers.

• ESS presents graphs and data from many sources through an interface that is easy for senior Managers to use. Often the information is delivered to a PORTAL, which uses a Web interface to present integrated personalized business content.




• Relationship of systems to one another

– TPS: Major source of data for other systems

– ESS: Recipient of data from lower-level systems

– Data may be exchanged between systems

– In reality, most businesses’ systems only loosely integrated




Interrelationships Among SystemsInterrelationships Among Systems

Figure 2-10

The various types of systems in the organization have interdependencies. TPS are major producers of information that is required by many other systems in the firm, which, in turn, produce information for other systems. These different types of systems are loosely coupled in most business firms, but increasingly firms are using new technologies to integrate information that resides in many different systems.



3.1 prepared by t. wafaa mustafa 2 chapter global e-business: how businesses use information systems...

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