Chapter 9

Introduction to Information Technology
Turban, Rainer and Potter

Chapter 9 Functional and Enterprise Systems
CHAPTER 9
FUNCTIONAL AND
ENTERPRISE SYSTEMS
Learning Objectives
Describe the role and characteristics of functional
information systems
State the objective and operations of transaction
processing and how it is supported by IT
Discuss the managerial and strategic applications
in the accounting and finance areas that are
supported by IT
Understand the marketing and sales applications
provided by IT
Learning Objectives
(continued …)
List the various production and operations
management activities and describe how they
are supported by IT
Discuss the human resources management
activities and how they can be improved by IT
Discuss the need for integrating functional
information systems and describe the role of
ERP and supported software such as SAP
Chapter Overview
Information Transaction
Systems to Processing Accounting
Support Business Information and Finance
Functions Systems Systems
•Characteristic of • Tracking Business •Financial
• functional Transactions Planning and
• Information •Objectives of TPS Budgeting
• Systems •The Process of TPS •Investment
•Functional •Modernized TPS: Management
Support for From Online •Financial
Managers; Processing to Intranet Controls
Management •Typical TPS Tasks and
Information Modules
Systems
Chapter Overview (continued …)

Marketing and Sales Production and
Systems Operations Systems
•Customer Service •Supply-Chain Management
•Telemarketing •Logistics and Materials
•Distribution Channels Management
Management •Planning Production/Operations
•Marketing Management •Automatic Design Work and
•Ethical and Societal Issues in Manufacturing
IT-supported Sales Activities
Human Resources Integrated Information Systems
Management Systems and Enterprise Resource Planning
•Recruitment •Why Integrate?
•HRM and Development •How to Integrate?
•HRM and Planning •Extreme Integration: Putting it
•Intranet Applications in HRS All Together
Case : Colonial Building Supply

 The Business Problem
Needed a technology
to monitor inventory and support-related decisions
to provide it with current information about inventory
levels and customer buying trends
to show the price of the lumber fluctuates daily
 The Solution
integrated system
Point-of-sales (POS) terminals with hand-held
automatic identification and data collection devices
Case (continued…)
The Results
Lower costs for data entry labor
Reduction in inventory and storage space
Fast access to information
Better customer service
Higher employee satisfaction
Stay competitive
Increase its market share and profitability
What have we learned from this case??
The system’s major applications are in logistics
IT can be beneficial to a relatively small company
An integration includes connection to business partners
using the Internet
Characteristics of
Functional Information Systems
Comprises of several smaller information system
Specific IS applications
can be integrated to form a coherent departmental
function system
can be completely independent
can be integrated across departmental lines
Interface with each other to form the organization
wide information system
Interface with the environment
Management Information Systems

Provide routine information to managers in
the functional areas
Provide information in exception reports
and ad hoc (demand) reports
Business
Transactions
Reports
Enterprise
A Management Scheduled,
Application
TPS Information Exception,
such as
System Demand,
EIS
Others
Databases Functional
Data
Internal, applications,
Warehouse
External DSS
0 Introduction to Information Technology
Transaction Processing
Information Systems
Transaction Processing
major business processes
provide the mission-critical activities
transaction may generate additional transaction
simple transactions
large volume and repetitive transactions
Transaction Processing System (TPS)
computerized information system
supports the transaction processes
Characteristics of TPS
Large amounts of data are processed
The sources of data are mostly internal, and the output is
intended mainly for an internal audience
The TPS processes information on a regular basis
Large storage (database) capacity is required
High processing speed is needed due to the high volume
Input and output data are structured
High level of detail is usually observable
Low computation complexity is usually evident
High level of accuracy, data integrity, and security is needed
High processing reliability is required
Inquiry processing is a must
TPS (continued…)
Customer
makes a Payment Queries,
purchase Processing Answers 
of an item
Inventory
The Items’ File
POS Transaction Processing
Terminal File System Sales
Files
Overview of typical
transaction Master
processing Report
Files
The Process of TPS

Data are collected Batch Online
and entered automatically Processing Processing
Hybrid System
Modernized TPS: from OLTP to the Internet

Online Transaction Processing (OLTP)
created on a client/server architecture can save money
Internet (Intranet) transaction Processing
allow multimedia data transfer, fast response time,
and storage of large databases of graphics and videos
Accounting & Finance Systems

Financial Planning and Budgeting
Financial and Economic Forecasting
much of the interrelated indicators are available on the
Internet
many software packages conducting forecasting and planning
Planning for Cash Management
build a decision support model
make decisions about when and how much to refinance
Budgeting
Budget 2000 and Comshare BudgetPlus are available to
support budgeting and to facilitate communication among all

(continued …)
Major activities
STRATEGIC SYSTEMS
a. Strategic Planning b. Ratios and Financial Health
c. Merger and Acquisition Analysis
INTERNAL EXTERNAL
ENVIRONMENT TACTIAL SYSTEMS ENVIRONMENT
Top Management a. Budgeting Preparation and Control IRS
Operation/ b. Investment Management SEC
Production c. Capital Budgeting d. Cost Analysis and Control Vendors
Marketing e. Tax Management f. Auditing Clients
HRM g. Financial Planning CPA Companies
Engineering Suppliers
Customers
OPERATIONAL AND Business Partners
TRANSACTION PROCESSING
SYSTEMS
a. The General Ledger b. Sales Order Processing
c. Accounts Payable and Receivable
d. Receiving and Shipping
e. Payroll f. Inventory Management
g. Periodical Reports & Statements

(continued …)
Investment Management
Access to financial and economic reports
hundreds of sources for the financial and
economic reports and news
Financial analysis
is executed with a spreadsheet program, or with
commercially available, ready-made decision
support software

(continued …)
 Financial Controls
Budgetary Controls
more sophisticated software attempts to tie
expenditures to program accomplishment
Auditing
auditing software is especially suitable when
computerized information systems are audited
Financial Health Analysis
supported by expert systems
Profitability Analysis and Cost Control
profitability analysis software allows accurate
computation of profitability for individual
products and for entire organizations
Marketing & Sales Systems

Distribution Channel
provide the goods or services to the
customer, and may extend through various
intermediaries such as wholesalers and
retailers
Channel Systems
support all marketing linkages, such as
after-sales customer support
Marketing & Sales Systems

(continued ...)
Manufacturing R & D/Design
COMPANY
Accounting/
Distribution Finance
Market Intelligence
Dealer Systems
Systems
CHANNEL
SYSTEMS
Delivery Systems
Sales Systems
Target Marketing Customer Support
Systems Systems
Marketing & Sales (continued ...)

Customer Service
Customer Profiles and Preference Analysis
IT creates customer database and merges computerized lists
Mass Customization
Dell computers assembles computers according to the
specifications of the buyers
J.C. Penny measures you and transfers the data directly to the
production floor
Targeted Advertisement on the Web
match appropriate ads with specific groups of customers
Customer Inquiry Systems and Automated Help Desk
expert systems and intelligent agents

 Telemarketing
Five major activities which are supported by IT :
advertisement and reaching customers
order processing customer service
sales support account management
Distribution Channels
Delivery management
DSS models are used to support decisions like use
own outlets or distributors, and transportation mode
Improving sales at retail stores
IT reduces the long lines in stores by reengineering
the checkout process

Marketing Management
Pricing of Products or Services - online analytical processing is
supporting pricing decisions
Salesperson Productivity - sales-force automation provides
salespeople in the field with portable computers, access to databases,
and to the web
Product-Customer Profitability Analysis - a cost-accounting
system identifies profitable customers and frequency
Sales Analysis and Trends - geographical information system
(GIS) analyzes customers and competitors and examines potential
strategies
New Products, Services, and Market Planning - IT evaluates
large number of factors and uncertainties and conducts survey

Ethical and Social Issues in IT-supported
Sales Activities
Example of Privacy Policy : 3M Corp.
Information Collection
» personally identifiable information that you voluntarily
provide through 3M’s website or e-mail correspondence
» general information (such as the type of browser you use,
the files you request, and the domain name and country
from which you submit the request for information)
Use of Information
» responding to your inquires
» tracking orders you place with 3M
» supplying you with requested information on 3M products
Production Operations & Logistics

Supply-Chain Management (SCM)
INFORMATION FLOW
Transfer
Supplier
Transfer
Manufacturing Transfer
Retail
Distribution
Transfer
Retail Outlet
SCM plans and
controls the flow of Consumer
information and cash CASH FLOW
(continues …)
Logistics and Material Management
Inventory Management
determining how much inventory to keep
what to order, from whom, when to order and how much
inventory model : economic order quantity (EOQ)
many low cost commercial inventory software packages
Quality Control
providing information about the quality of incoming
material and parts, as well as the quality of in-process
semi-finished, and finished products
standard quality control information systems and expert
systems
(continues …)
 Planning Production/Operations
Material Requirements Planning (MRP) - facilitates the
plan for acquiring parts, subassemblies, or material
Manufacturing Resource Planning (MRPII) - connects the
regular MRP to other functional areas
Just-in-Time Systems - minimizes waste of all kinds, improves
processes and systems, and maintains respect for all workers
Project Management - Program Evaluation and Review
Technique (PERT) and Critical Path Method (CPM)
Short-Term Schedules - schedule jobs and employees on a
daily or weekly basis
(Continues …)
Automatic Design Work and
Manufacturing
Computer-Aided Design (CAD)
enables drawings to be constructed on a computer screen
and subsequently stored, manipulated, and updated
electronically
Computer-Aided Manufacturing (CAM)
facilitates planning, operation, and control of production
jobs
Computer-Integrated Manufacturing (CIM)
concept or philosophy about the implementation of various
integrated computer systems in factory automation
Human Resources Management
Systems
Recruitment
finding, testing, and deciding which employees to hire
Positions inventory
matching open positions with available personnel
allowing data to be viewed by an employee over the
intranet
Employee Selection
conducting interviews by video teleconferencing
expediting the testing and evaluation process, assuring
consistency in selection by using expert systems
Using the Internet
Systems (continued …)
Human Resources Maintenance and
Training and Human Resources Development
Development
digital video-editing system - produces training videotapes
Performance Evaluation
online evaluations - supports many decisions, ranging from
rewards to transfer to layoffs
expert systems - provide an unbiased and systematic
interpretation of performance over time
paperless wage system (PWS) - tracks employee review dates
and automatically initiates the wage review process
Turnover, Tardiness, and Absenteeism Analyses
DSS models - identifies causes and patterns
 Human Resources Management and Planning
Personal files and skills inventory - computerized personnel
files identify qualified employees within the company for open
positions, promotion, transfer, special training programs, and layoffs
Benefits administration - Networks and voice technology, or the
intranets, specifying the value of each benefit and the available benefits
balance of each employee
Government reports - Availability of computerized personnel
records greatly eases the reporting process
Personnel planning - IT is used to collect, update, and process the
information
Succession planning and implementation - expert systems
and personnel databases supporting and implementing planning
Labor-Management Negotiations - DSS improve the
negotiation climate and considerably reduce the time needed for
reaching an agreement

Intranet Applications in HRM
Edify Corp.’s employee service system
Oracle Corp.’s flexible benefits enrollment
program on the intranet
Aetna health Plan’s online directory of primary
care physicians, hospitals, medical services, and
health information
Apple Computers’ extensive education and
development activities on the intranet
Merck Inc.’s intranet for HR transactions
Integrated Information Systems

Reasons for Integration
using twentieth-century computer technology,
which is functionally oriented :
cannot give employees all the information they need
do not let different departments communicate
effectively with each other in the same language
crucial sales, inventory, and production data often
have to be painstakingly entered manually into
separate computer systems every time a person who
is not a member of a specific department needs ac
hoc information related to the specific department
How to Integrated Information

Systems
Connect existing systems
maximize the use of existing systems and minimize
the changes in them
allows the addition of new applications to existing
ones and the connection of systems to intranets and
the Internet
Using supply chain management software
use one integrated package in one or several
functional areas
overcomes the isolation of the traditional
departmental structure where the functional areas are
separated from one another
How to Integrated Information
Enterprise resource planning (ERP)
control all major business processes with a single
software architecture in real time
increased efficiency to improved quality,
productivity, and profitability
SAP software (R|3; my SAP.com)
crosses functional departments and can be
extended along the supply chain to both
suppliers and customers
composed of four major parts : accounting,
manufacturing, sales and human resources
ERP
 SAP concept
Sales
Offices
Central SAP
Database &
Servers
FACTORY WAREHOUSE ACCOUNTING HEAD QUARTERS

The factory automati- The warehouse is si- Accounting gets up- Headquarters can tap
cally receives the multaneously informed dated sales and pro- into up-to-the-minute
sales order and can about the order and duction data at every data on sales, inven-
begin production. can schedule shipping. step of the process tory, and production
What’s in IT for Me?

For Accounting
Executing TPS effectively is a major concern of
any accountant
For Finance
The use of IT helps financial analysts and
managers perform their difficult tasks better
For Marketing
By understanding how ERP software operates,
marketing people can greatly improve the
software utilization by developing challenging
corporate applications
What’s in IT for Me? (continued …)
For Production/Operations Management

Supply chain management and ERP are critical
today for any medium and large manufacturing
company, and for service organizations such as
banks
For Human Resources Management
IT can improve the efficiency and effectiveness of
the HRM activities
conducting training on the intranet
What’s in IT for Me? (continued …)
 For Human Resource Management

Human resource managers utilize their
corporate networks extensively for posting
job openings, and use internal corporate
networks to publish corporate policies,
company newsletters and job openings

Chapter 9

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Chapter 9

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Introduction to Information Technology

Turban, Rainer and Potter

Chapter Overview (continued …)

Case : Colonial Building Supply

Management Information Systems

The Process of TPS

Modernized TPS: from OLTP to the Internet

Accounting & Finance Systems

Accounting & Finance Systems

Accounting & Finance Systems

Accounting & Finance Systems

Marketing & Sales Systems

Marketing & Sales Systems

Marketing & Sales (continued ...)

Marketing & Sales (continued ...)

Marketing & Sales (continued ...)

Marketing & Sales (continued ...)

Production Operations & Logistics

Human Resources Management

Integrated Information Systems

How to Integrated Information

FACTORY WAREHOUSE ACCOUNTING HEAD QUARTERS

What’s in IT for Me?

What’s in IT for Me? (continued …)

For Production/Operations Management

What’s in IT for Me? (continued …)

 For Human Resource Management

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