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Introduction to Information Technology Turban, Rainer and Potter John Wiley & Sons, Inc.Copyright 2005

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APPLYING IT FORCOMPETITIVE ADVANTAGE

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Transaction Processing,Functional Application,

and Integration“ Copyright 2005 John Wiley & Sons Inc.”

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Chapter Outline

Functional information systemsTransaction processing information systemsManaging the accounting and finance systemsManaging production/ operations and logisticsManaging human resource systems Integrating functional information systems

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Learning ObjectivesDescribe the drivers and characteristics of functional information systems. Describe MISs .Describe the transaction processing system and how it is supported by ITDescribe the support provided by IT and the Web to accounting and finance. Describe the support provided by IT and the Web to marketing and sales. Describe the support provide by IT and the Web to production / operations management, including logistic Describe the support provided by IT and the Web to human resources management Describe the benefits and issues of integrating functional information systems.

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7.1 Functional Information Systems

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Functional Information Systems cont…

Functional information Systems can be divided into two general categories: function-specific and function- general . The most common type of function-general system, is management information systems (MISs)

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Management Information System (MIS)

A system that provides information to managers in the functional areas, in order to support managerial tasks of planning, organizing, and controlling operations.

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An MIS produces routine, ad-hoc (on-demand) and exception report:

Ad-hoc ( on- demand) reports: Nonroutine reports.Drill- down report: Reports that show a greater level of detail than is included in routine reports.Key- indicator reports. Reports that summarize the performance of critical activities .Comparative reports. Reports that compare performance of different business units or time periods.Exception report. Report that include only information that exceeds certain threshold standard

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Information systems can also be function-specific

Typical function- specific system are accounting, finance, marketing, operations (POM), and human resources management

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Major characteristic of functional information systems

Frequently composed of smaller systemsIntegrated or independentInterfacing Supportive of different organizational levels

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7.2 Transaction ProcessingInformation Systems (TPS)

Information system that supports routine, core business transactions.

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Objectives of a TPS

To provide all the information needed by law, by management and / or by organizational policies to keep the business running properly and efficientlyto efficiently handle high volume of data,to avoid errors due to concurrent operationsto handle large variations in volume To avoid downtime, never lose results, and maintain privacy and securityTo interface with many IT applications, including e-payment, e-procurement and e-marketing.

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Activities and Methods of TPSs

First, data are collected by people or sensors and entered into the computer via any input device. Next the system processes data in one of two basic ways: batch or online processing.Batch processing: processes data in batches at fixed periodic intervals.Online processing: processes data as soon as a transaction occurs.

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The Major Characteristics of a TPSTypically . Large amounts of data are processed.

The source of data are mostly internal , and the outputs is intended mainly for an internal audience . This characteristic is changing somewhat, since trading partners may contribute data and may be permitted to use TPS output directly .

The TPS processes information on a regular basis: daily, weekly, biweekly and so on.

Large storage (database) capacitv is required.

High processing speed is needed due to the high volume.

The TPS monitors and collects past data

Input and output data are structured. Since the processed data are fairly stable, they are formatted in a standard fashion.

A high level of detail (raw data, not summarized) is usually observable,especially in input data but often in output as well.

Low computation complexity (simple mathematical and statistical operations) is usuallv evident in a TPS.

A high level of accuracy, data integrity, and security is needed. Sensitive issues such as privacy of personal data are strongly related to TPSs.

High reliability is required. The TPS can be viewed as the lifeblood of the organization . Interruption in the flow of TPS data can be fatal to the organization .

Inquiry processing is a must . The TPS enables users to query files and databases ( even online and in real time)

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The flow of information in TPS

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Web–Based and Online TPS

In online transaction processing (OLTP) business transaction are processed online as soon as they occur.

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Typical TPS ActivitiesActivities Description

The ledger The entire financial accounts: all of the assets, liabilities, and owner’s (stockholders') equity accounts

Accounts payable and receivable Record of all account to be paid and those owed by customers.

Receiving and shipping records Transaction records of all item send or received and returns

Inventory-on-hand records Record of inventory levels. Use of barcodes improves ability to count inventory periodically

Fixed-assets management Record of the value of an organization’s fixed assets ( e.g. buildings, cars, machine ), including depreciation rate and major improvements made in assets, for taxation purposes

Payroll All raw and summery payroll records.

Personnel files and skills inventory

Files of employee’s history, evaluations, and record of training and performance.

Reports to government Report on compliance with government regulations , taxes , etc

Other periodic reports and statements

Financial, tax, production, sales and routine reports

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7.3 Managing The Accounting and Finance Systems

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Financial planning and budgeting

Financial and economic forecasting Budgeting Capital budgeting

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Managing financial transactions

E-commerce applications of financial transactions (global stock exchange, multiple currencies, E-bonds, etc.)Virtual close . The ability of a company to close its accounting records quickly and on short noticeExpense Management Automation (EMA). Systems that automate data entry and processing of travel and entertainment expenses.

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Investment Management

Access to financial and economic reportsFinancial analysis

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Control and auditing

Budgetary control Auditing Financial ratio analysis.Product pricing Contract managementProfitability analysis and cost control

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7.4 Managing marketing and sales systems

Channel systems. The systems involved in the process of getting a product or services to customers and dealing with all customers’needs.

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Marketing Channel Systems

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Customer relations “The Customer is King /Queen”

Customer profile and preference analysisProspective customer lists and marketing Databases Mass customizationPersonalization Advertising and promotions

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Distribution channels andIn-store innovations

New IT-support distribution channel

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Marketing Management

Pricing of products or servicesSalesperson productivity (sales force automation, sales productivity software)Profitability analysisSales Analysis and trendsNew products, services and marketing planning Web-based systems in marketing

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7.5 Managing production/ operations and logistics

In-house logistics and materials managementInventory managementQuality control

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Planning production and operations

Material requirement planning: A planning process that integrates production, purchasing and inventory management of interdependent items.Manufacturing resource planning: A planning process that integrates an enterprise’s production, inventory management, purchasing, financing and labor activities.Just- in- time systems: An inventory scheduling system in which materials and parts arrive at a workplace just when needed.Other areas.

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Computer-integrated manufacturing

Computer-integrated manufacturing (CIM). Manufacturing approach that integrates several computerized systems such as CAD, CAM, MRP and JIT into a whole, in a factory.

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The CIM model

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Product lifecycle management (PLM)

A business strategy that enables manufacturers to collaborate on product design and development efforts, using web-based strategies.

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How product life cycle management works?

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7.6 Managing Human Resources Systems: Recruitment

Using he web for recruitment, HRM portals and salary surveys.

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Human Resources Maintenance and Development

Performance evaluation Training and HR development

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Human Resources Planning and Management

Payroll and employees’ records Benefit administration Employee relationship management

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7.7 Integrating Functional Information Systems

Approaches to integrationIntegrating front- office and back-office operationsProcess-centric integration: System integrating solutions designed, developed and managed from a business- process perspective

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