Lecture 2

Information Systems in the enterprise

Overview

Different ways of classifying IS based :

organization level,
business functions,
business processes
Enterprise applications
• supply chain management,
• CRM,
• knowledge management systems
Objectives
1. Evaluate the role played by major types of IS in
business and their relationships to each other
2. Describe IS supporting major business functions: sales
and marketing, manufacturing and production, finance
and accounting, human resources
3. Analyze relationships between organization IS and
business processes
4. Explain how enterprise applications promote business
process integration and improve organizational
performance
5. Asses the challenges posed by IS in the enterprise and
management solutions
 Major types of system
Organization has different interests, specialties and
levels
There is no single system that provides all needs
Organization is divided into:
1. Strategic
2. Management
3. Operational levels
 Operational levels have functional areas such as
1. Sales and marketing
2. Manufacturing and production
3. Finance and accounting
4. Human resources
organization levels
 Operational level systems – support operational
managers keep track of elementary transactions e.g.
sales, receipts, cash, deposits, payroll, credit
decisions.
 provide transaction information
 Management level systems – support middle level
managers with in monitoring, controlling, decision
making, administrative activities.
 provide periodic reports
 Strategic level systems – help senior managers
address long term issues and trends both in the firm
and external environment e.g. employment level in
five years, long term industry cost trends, products to
be launched in five years
Major types of system
Major types of system from management perspective
1. Transaction processing systems(TPS)
Record daily business operations e.g sales order entry, hotel
reservations, payroll, employee record keeping
Major types of system from management perspective
2. Management information systems(MIS)
 Generate scheduled/ periodic reports on organization
performance for planning, controlling and decision making by
middle level managers. Provide answers to routine questions,
specified with predefined answering procedure. MIS gets data
from TPS
Major types of system from management perspective
3. Decision support systems
 Generate information that helps managers make decisions that
are unique, rapidly changing and unspecified in advance.
 Gets data from TPS, MIS and external sources e.g. current
stock prices. Uses mathematical models to analyze data – user
can change assumptions, ask questions and include new data
 Example is voyage estimating system: which voyage to be
assigned based on rate to maximize profit
Major types of system from management perspective
4. Executive support systems (ESS)
 Generate information for none routine decisions requiring
judgements, evaluation and insight because there is no agreed
procedure for arriving at solution
 Gets data from external sources such new tax laws, competitors.
They also draw summarized information from MIS and DSS
 Filter , track critical data and display only significant information to
managers
 Employ graphic software
 Information delivered to a manager through a portal interface
 ESS provide generalized computing and communications capacity
that can be used to address array of problems
 Example: ESS that provides minute to minute view of financial
performance against working capital, account receivable, accounts
payable, cash flow and inventory
 Designed for senior managers with little computer knowledge –
incorporate easy to use graphic interface
Major types of system from management perspective

4. Executive support systems (ESS)

Relations of 4 systems
 Data flow relationship
TPS – source of data for other systems
ESS – receive data from lower level systems
MIS exchange data with DSS
 It is advantageous to integrate these systems so that information
can flow freely between different parts of the organization
Major types of system from
functional perspective
IS can be classified by organization functions
they serve
Sales and marketing
Manufacturing and production systems
Finance and accounting
Human resources
We describe each in the next slides
Sales and marketing systems
 Sales – contacting customers, sell product or services,
taking orders and follow-up
 Market – identify customers for product and services,
determining what they need, develop product and
services matching their needs, advertising and
promoting the products and services
 The system supports above activities
Strategic level – monitor trends affecting new
products, performance of competitors
Management level – market research, advertising,
promotional campaigns, pricing
Operational level – locating and contacting
customers, tracking sales, processing orders,
providing customer service support
Manufacturing and production systems
Produce firm’s goods and services
Planning, development and maintenance of
production facilities, establishment of production
goals, acquisition, storage and availability of
materials, scheduling equipment, facilities and
labor
The system supports above activities
Strategic level – long term manufacturing goals e.g.
where to locate new plants and whether to invest
new technology
Management level – analyze and monitor production
costs, resources
Operational level – check status of production tasks
Manufacturing and production systems
Examples:
1. Product life cycle management (PLM)
Data repository
Organizes each piece of information that goes into making a
particular product such as packaging information
Companies can select and combine the data they need to
serve specific functions once available
For example: designers and engineers can use the data to
determine which parts are needed for new design; retailers
can use them to determine shelf height and how materials
should be stored in warehouse
2. Computer Aided Design (CAD) – for automatic
design of products
 Create digital design of a product or structure
Finance and accounting system
 Finance - Manage firms monetary assets such as cash, stock, bonds
and other investments
 Accounting - Managing and maintaining firms financial records such
as receipts, disbursement, depreciation, payroll,
 The system supports above activities
Strategic level – establish long term investment goals; long-
range forecast of firms financial performance
Management level – oversee and control financial resources
Operational level – track flow of funds in the firm through
transactions such as paychecks, payments to vendors, security
reports, receipts
Example: any software for HR and payroll
management
Human resources systems
Attracting, developing and maintaining the firm’s
workforce
Potential employees
Maintaining complete records of available employees
Create programs to develop employee talent and
skills
The system supports above activities
Strategic level – identify manpower requirements for meeting
long term business plans (skills, education, types of
positions,cost)
Management level – monitor and analyze recruitment, allocation
and compensation, of employees
Operational level – track recruitment and placement of the firms
employees
Integrating functions and business processes

The challenge is putting together data from all

systems
Putting data together enables information flow
across enterprise
Require systems that can integrate information from
many different functional areas and organizational
units
Can coordinate firms activities
Business processes and IS
 Business process
 logically related activities for accomplishing a specific
business result
Unique ways in which management and organization
coordinate such activities
Can be a source of competitive advantage if they
enable a company to execute better than its rivals
Can be liability if based on outdated ways of working
that impede organization efficiency
 Are cross-functional cutting across boundaries such as
sales, marketing, manufacturing, research and
development
 Cut across organization structure grouping employees
from different departments
Enterprise application
 Firms become more flexible and productive by
coordinating and integrating their business processes,
 Enterprise applications support organization wide range
coordination and integration
 They include:
1. Enterprise systems
2. Supply chain management systems
3. Customer relationship management systems
4. Knowledge management systems
 Each integrates a related set of functions and business
processes to enhance organization performance
 Run on corporate intranets and web technologies to
enable transfer of information
Enterprise application
1. Enterprise systems

IS are that support different business functions,

management levels and business processes
cannot change information with ease – difficult
to assemble information needed to make quick
decision
Enterprise systems or enterprise resource
planning (ERP)
Single information system for organization wide
coordination and integration of key business
processes
Information can flow and be shared through the firm
Collect data from key business processes and store in
a comprehensive data repository
1. Enterprise systems

Integrate key business processes of entire firm

into a single software
Enable information flow freely
Focus on internal processes
Enterprise system

Traditional view of systems

Enterprise system

ERP
2. Supply chain management systems
 Help firm manage its relationship with suppliers to optimize
planning, sourcing, manufacturing and delivery of products
and services
 Provide information to enable suppliers, purchasing firms,
distributors and logistic companies coordinate, schedule
and control business processes
 Inter-organizational systems – automate flow of information
across organization boundaries
Exchange information with suppliers on availability of
materials, delivery date, production requirements
Exchange information with distributors on inventory
levels, delivery dates, shipment of goods
 Objective is to get the right amount of products from their
source to point of consumption within a shortest time and
low cost
Supply chain
Enterprise Applications

Supply Chain Management and Collaborative Commerce

Collaborative Commerce

 Uses digital technologies to enable multiple

organizations to collaboratively design, develop,
build, move, and manage products

 Increases efficiencies in reducing product design

life cycles, minimizing excess inventory,
forecasting demand, and keeping partners and
customers informed
Enterprise Applications
Collaborative commerce

Figure 2-17
3. Customer relationship managements

 Coordinate processes on interaction with customers in

sales and marketing to ensure satisfaction and retention
 End-to-end customer care from receipt of an order
through product delivery
 Integrate customer related processes and consolidate
customer information from multiple communication
channels such telephones, emails
 Enable company present one coherent face to customer
 Provide analytical tools to generate information on:
value of a particular customer, loyal customer, profitable
customer
Such information can be used to get new customers, provide
better services, support existing customers, customize their
offering more precisely
Customer relation management
4. Knowledge management systems
Collect relevant know-how and experience in the
firm and make it available when needed to
support business processes and management
decisions
Also link firm to external sources of knowledge
Knowledge management process:
acquiring,
storing, distributing
 applying knowledge
4. Knowledge management systems
Acquiring – creating new knowledge and
integrating in organization
Knowledge discovery systems for generating patterns
or information from large quantities of data
Knowledge work systems – provide workers with
graphics, analytical, communication and document
management tools, as well as access to external data
to help them generate new ideas
Knowledge networks – online directories of
employees with special areas of expertise
4. Knowledge management systems
 storage – knowledge repositories collect documents and
digital media with knowledge from internal and external
sources in a single location
Expert systems gather know-how from human
specialists and store in a knowledge base that can be
accessed by members of the organization
 Distributing knowledge – dissemination and sharing
 office systems and communication tools disseminate
knowledge among information and knowledge
workers
Group collaboration systems help employees access
information and work simultaneously from different
locations
4. Knowledge management systems
 Applying knowledge – using know-how in management
decision making
Through decision support systems
Incorporated into business processes by being
captured by enterprise systems
Management opportunities, challenges and solutions

Opportunities
Higher level of productivity, earnings,
Support all functions at all levels
Enhance decision making by both managers and
employees
Provide information where and when it is
needed in a format that is easily integrated into
daily business life
Management opportunities, challenges and solutions

Challenges
 Integration and the whole firm view – building a system
that serve specific business interests such as marketing
finance and operations or a group of decision makers in
the firm but can also be integrated to provide firm wide
information
 Management and employee training – many systems,
high employee turnover makes it hard to train people
and learn to use new systems thus low usage and
unfavorable return on investment
 Accounting for the cost and managing demand for
systems – ability of managers to understand which
systems are truly necessary, truly productive with high
return on investment
Management opportunities, challenges and solutions

Solutions
Developing inventory of the firm’s information
systems for a 360-degree view of information
List firm wide information requirements – 360-degree
view of most important information needs for your
company as a whole
Examine how exiting information systems provide
this information to corporate wide systems
Create inventory for all exiting and those under
construction
Identify each and understand which group or level in
the firm benefit from the system
Management opportunities, challenges and solutions

Solutions
Employee and management education
IS are unlikely obvious or self taught to most people
Understand how much training is required and
budget accordingly
Identify how :
users learn the new system,
Effective the training is
Well the use the system
Check whether they exploit the potential value built
in the system
Management opportunities, challenges and solutions

Solutions
Accounting for the cost and benefits of
information system
Accounting for IS budgets
Impose charges on units that benefit from the
system
Establish priorities on which systems most deserve
funding and corporate attention
Summary
 ISs are classified based on on organization level, business
functions, business processes the support
management perspective – TPS, MIS, DSS, ESS
business functions -sales and marketing, Manufacturing
and production systems, Finance and accounting,
Human resources
business processes- enterprise systems, supply chain
management systems, customer relationship
management systems, knowledge management
systems
 Management challenges – integration, user and
management training, accounting for cost of IS
 Management solutions –inventory of firms IS, employee
and management education, accounting for costs and
benefits
Review questions
1. Evaluate the role played by the major types of systems
in a business and their relationships with each other
2. Describe the information systems supporting the major
business functions: sales and marketing,
manufacturing and production, finance and accounting,
human resources
3. Analyze the relationship between organization,
information systems and business processes
4. Explain how enterprise applications promote business
process integration and improve organizational
performance
5. Asses the challenges posed by information systems in
the enterprise and management solutions
You run a company that manufactures aircraft components. You have many competitors who are trying to offer
lower prices and better service to customers and you are trying to determine if you can benefit from better
supply chain management. At the Laudon Web site for Chapter 2 you can find a spreadsheet file that contains a
list of all of the items that your firm has ordered from its suppliers over the past three months. The fields on the
spreadsheet file include vendor name, vendor identification number, the purchaser's order number, item
identification number, and item description (for each item ordered from the vendor), the cost per item, number
of units of the item ordered, the total cost of each order, the vendors' accounts payable terms, promised
shipping date, promised transit time, and actual arrival date for each order.Prepare a recommendation of how
you can use the data in this spreadsheet database to improve your supply chain management. You may wish to
look at ways to identify preferred suppliers or other ways of improving the movement and production of your
products. Some criteria you might consider include the supplier's track record for on-time deliveries, suppliers
offering the best accounts payable terms, and suppliers offering lower pricing when the same item can be
provided by multiple suppliers. Use your spreadsheet software to prepare reports and, if appropriate, graphs to
support your recommendations.