laudon ch02.ppt

2.1

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

2.2

LEARNING OBJECTIVES

Management Information SystemsManagement Information SystemsChapter 2 Global E-Business: How Businesses Use Information SystemsChapter 2 Global E-Business: How Businesses Use Information Systems

• Define and describe business processes and their relationship to information systems.

• Describe the information systems supporting the major business functions: sales and marketing, manufacturing and production, finance and accounting, and human resources.

• Evaluate the role played by systems serving the various levels of management in a business and their relationship to each other.

2.3

• Explain how enterprise applications and intranets promote business process integration and improve organizational performance.

• Assess the role of the information systems function in a business.

LEARNING OBJECTIVES (Continued)


2.4

Information Systems Join the Tupperware Party

• Problem: Continuing expansion and transition to multilevel compensation structure.

• Solutions: Revised ordering processes and monitoring service levels and sales increase sales.

• Oracle Collaboration Suite and Portal enable order entry via Web interface, access to integrated corporate systems, and personal e-commerce sites.

• Demonstrates IT’s role in designing compensation structure and system integration.

• Illustrates the benefits of revising internal and customer-related business processes.


2.5

Business Processes and Information Systems

• Business processes:

• Workflows of material, information, knowledge

• Sets of activities, steps

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


2.6

• 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



2.7

The Order Fulfillment ProcessThe Order Fulfillment Process

Figure 2-1

Fulfilling a customer order involves a complex set of steps that requires the close coordination of the sales, accounting, and manufacturing functions.



2.8


• 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


2.9

• Systems from a functional perspective

– Sales and marketing systems

– Manufacturing and production systems

– Finance and accounting systems

– Human resources systems

Types of Business Information Systems


2.10

• Sales and marketing systems– Functional concerns include:

• Sales management, customer identification market research, advertising and promotion, pricing, new products

– Examples of systems: • Order processing (operational level)• Pricing analysis (middle mgmt)• Sales trend forecasting (senior mgmt)



2.11

Example of a Sales Information SystemExample of a Sales Information System

Figure 2-2

This system captures sales data at the moment the sale takes place to help the business monitor sales transactions and to provide information to help management analyze sales trends and the effectiveness of marketing campaigns.



2.12

• Manufacturing and production systems– Functional concerns include:

• Managing production facilities, production goals, production materials, and scheduling

– Examples of systems: • Machine control (operational mgmt)• Production planning (middle mgmt)• Facilities location (senior mgmt)



2.13

Overview of an Inventory SystemOverview of an Inventory System

Figure 2-3

This system provides information about the number of items available in inventory to support manufacturing and production activities.



2.14

• Read the Interactive Session: Organizations, and then discuss the following questions: • Why was it so difficult for Kia to identify sources of defects in the

cars it produced?

• What was the business impact of Kia not having an information system to track defects? What other business processes besides manufacturing and production were affected?

• How did Kia’s new defect-reporting system improve the way it ran its business?

• What management, organization, and technology issues did Kia have to address when it adopted its new quality control system?

• What new business processes were enabled by Kia’s new quality control system?

Information Systems Help Kia Solve Its Quality Problems



2.15

• Finance and accounting systems– Functional concerns include:

• Managing financial assets (cash, stocks, etc.) and capitalization of firm, and managing firm’s financial records

– Examples of systems: • Accounts receivable (operational mgmt)• Budgeting (middle mgmt)• Profit planning (senior mgmt)



2.16

An Accounts Receivable SystemAn Accounts Receivable System

Figure 2-4

An accounts receivable system tracks and stores important customer data, such as payment history, credit rating, and billing history.



2.17

• Human resource systems– Functional concerns include:

• Identifying potential employees, maintaining employee records, creating programs to develop employee talent and skills

– Examples of systems: • Training and development (operational mgmt)• Compensation analysis (middle mgmt)• Human resources planning (senior mgmt)



2.18

An Employee Record Keeping SystemAn Employee Record Keeping System

Figure 2-5

This system maintains data on the firm’s employees to support the human resources function.



2.19 © 2004 by Prentice Hall

Management Information Systems 8/eManagement Information Systems 8/eChapter 2 Information Systems in the EnterpriseChapter 2 Information Systems in the Enterprise

Types of Information Systems

Figure 2-1

KEY SYSTEM APPLICATIONS IN THE ORGANIZATION

Management Information Systems 8/eManagement Information Systems 8/eChapter 2 Information Systems in the EnterpriseChapter 2 Information Systems in the Enterprise

2.20

Systems from a constituency perspective

– Transaction processing systems: supporting operational level employees

– Management information systems:supporting middle managers

– Decision-Support Systems: supporting managers

– Executive support systems: supporting executives



2.21

• Transaction processing systems– Perform and record daily routine transactions

necessary to conduct business• E.g. sales order entry, payroll, shipping

– Allow managers to monitor status of operations and relations with external environment

– Serve operational levels

– Serve predefined, structured goals and decision making



2.22

• Management information systems– Serve middle management

– Provide reports on firm’s current performance, based on data from TPS

– Provide answers to routine questions with predefined procedure for answering them

– Typically have little analytic capability



2.23

How Management Information Systems Obtain their How Management Information Systems Obtain their Data from the Organization’s TPSData from the Organization’s TPS

Figure 2-6

In the system illustrated by this diagram, three TPS supply summarized transaction data to the MIS reporting system at the end of the time period. Managers gain access to the organizational data through the MIS, which provides them with the appropriate reports.



2.24

Sample MIS ReportSample MIS Report

Figure 2-7

This report, showing summarized annual sales data, was produced by the MIS in Figure 2-6.



2.25

• Read the Interactive Session: Management, and then discuss the following questions:

• What kinds of systems are described here? What valuable information do they provide for employees and managers? What decisions do they support?

• What problems do automated expense reporting systems solve for companies? How do they provide value for companies that use them?

• Compare MarketStar’s manual process for travel and entertainment expense reporting with its new process based on Concur Expense Service. Diagram the two processes.

• What management, organization, and technology issues did MarketStar have to address when adopting Concur Expense Service?

• Are there any disadvantages to using computerized expense processing systems? Explain your answer.

Managing Travel Expenses: New Tools, New Savings



2.26

• Decision support systems– Serve middle management

– Support nonroutine decision making• E.g. What is impact on production schedule if December

sales doubled?

– Often use external information as well as information from TPS and MIS

– Model driven DSS• Voyage-estimating systems

– Data driven DSS• Intrawest’s marketing analysis systems



2.27

Voyage-Estimating Decision-Support SystemVoyage-Estimating Decision-Support System

Figure 2-8

This DSS operates on a powerful PC. It is used daily by managers who must develop bids on shipping contracts.



2.28

• Executive support systems

– Support senior management– Address nonroutine decisions requiring judgment,

evaluation, and insight– Incorporate data about external events (e.g. new

tax laws or competitors) as well as summarized information from internal MIS and DSS

– E.g. ESS that provides minute-to-minute view of firm’s financial performance as measured by working capital, accounts receivable, accounts payable, cash flow, and inventory.



2.29

Model of an Executive Support SystemModel of an Executive Support System

Figure 2-9

This system pools data from diverse internal and external sources and makes them available to executives in an easy-to-use form.



2.30

• 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 are only loosely integrated



2.31

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.



2.32

Enterprise applications• Span functional areas

• Execute business processes across firm

• Include all levels of management

• Four major applications:

• Enterprise systems• Supply chain management systems• Customer relationship management systems• Knowledge management systems

Systems That Span the Enterprise


2.33

Enterprise Application ArchitectureEnterprise Application Architecture

Figure 2-11

Enterprise applications automate processes that span multiple business functions and organizational levels and may extend outside the organization.



2.34

• Enterprise systems• Collect data from different functions and store data in

single central data repository• Resolve problem of fragmented, redundant data sets

and systems• Enable:

• Coordination of daily activities• Efficient response to customer orders (production,

inventory)• Provide valuable information for improving

management decision making



2.35

• Traditional View



2.36

Enterprise SystemsEnterprise Systems

Figure 2-12

Enterprise systems integrate the key business processes of an entire firm into a single software system that enables information to flow seamlessly throughout the organization. These systems focus primarily on internal processes but may include transactions with customers and vendors.

Systems that Span the Enterprise


2.37

Enterprise Systems

• Enterprise systems

• Based on suite of integrated software modules and common

central database

• Integrate information from across company’s divisions,

departments, key business processes in the four functional

areas

• Updated information made available to all business processes

• Generate enterprise-wide data for management analyses

Management Information SystemsManagement Information SystemsChapter 9 Achieving Operational Excellence and Customer Intimacy: Chapter 9 Achieving Operational Excellence and Customer Intimacy:

Enterprise ApplicationsEnterprise Applications

2.38

How Enterprise Systems WorkHow Enterprise Systems Work

Figure 9-1

Enterprise systems feature a set of integrated software modules and a central database that enables data to be shared by many different business processes and functional areas throughout the enterprise.

Enterprise Systems



2.39

Enterprise Systems

• Enterprise software

• Built around thousands of predefined business processes that

reflect best in industry practices

• Companies map business processes to enterprise system’s

processes for desired functions

• Configuration tables allow tailoring of system

• System software can be rewritten in part, but may degrade

performance and process integration



2.40

Enterprise Systems

• Business value of enterprise systems

• Increasing operational efficiency

• Helping respond to customer requests rapidly

• Producing, procuring, shipping right amounts

• Enforcing standard practices and data throughout company

• Providing firm-wide information to help managers make better decisions

• Allowing senior management to easily find out at any moment how a particular organizational unit is performing or to determine which products are most or least profitable



2.41

Challenges of Enterprise Systems

• Difficult to build: Require fundamental changes in the way the business operates

• Technology: Require complex pieces of software and large investments of time, money, and expertise

• Centralized organizational coordination and decision making: Not the best way for the firms to operate

2.42

• Supply chain management systems• Manage firm’s relationships with suppliers• Share information about

• Orders, production, inventory levels, delivery

of products and services• Goal: Right amount of products to destination

with least amount of time and lowest cost



2.43

Supply Chain Management Systems

• Supply chain:

• Network of organizations and business processes for:• Procuring raw materials

• Transforming them into intermediate and finished products

• Distributing finished products to customers

• Includes secondary and tertiary suppliers

• Upstream portion: Suppliers

• Downstream portion: Distributors



2.44

Nike’s Supply ChainNike’s Supply Chain

Figure 9-2

This figure illustrates the major entities in Nike’s supply chain and the flow of information upstream and downstream to coordinate the activities involved in buying, making, and moving a product. Shown here is a simplified supply chain, with the upstream portion focusing only on the suppliers for sneakers and sneaker soles.




2.45


• Information and supply chain management

• Bullwhip effect

• Demand for product gets distorted as it is estimated by successive members in supply chain, causing excess stockpiling of inventory, warehousing, shipping costs

• Just-in-time strategy

• Perfect information about supply and demand so that components arrive at moment they are needed and finished goods are shipped as they leave assembly line



2.46

The Bullwhip EffectThe Bullwhip Effect

Figure 9-3Inaccurate information can cause minor fluctuations in demand for a product to be amplified as one moves further back in the supply chain. Minor fluctuations in retail sales for a product can create excess inventory for distributors, manufacturers, and suppliers.




2.47


• Supply chain management applications

• Two main categories

• Supply chain planning systems

• Supply chain execution systems

• Supply chain planning systems

• Demand planning

• Order planning

• Advanced scheduling and manufacturing planning

• Distribution planning

• Transportation planning



2.48


• Supply chain management applications

• Supply chain execution systemsManage flow of products through distribution centers and warehouses to ensure products delivered to right locations in most efficient manner

• Order commitments

• Final production

• Replenishment

• Distribution management

• Reverse distribution



2.49


• Supply chain management and the Internet

• Before Internet, difficult to share supply chain information with external partners or internally because of incompatible technology platforms

• Internet enables:

• Intranets and extranets for sharing information

• Web-based tools and interfaces to suppliers’, partners’ systems

• Coordination of overseas suppliers, communications, transport, compliance, etc.



2.50

Intranets and Extranets for Supply Chain ManagementIntranets and Extranets for Supply Chain Management

Figure 9-4Intranets integrate information from isolated business processes within the firm to help manage its internal supply chain. Access to these private intranets can also be extended to authorized suppliers, distributors, logistics services, and, sometimes, to retail customers to improve coordination of external supply chain processes.




2.51


• Push-based model (Build-to-stock)

• Production master schedules based on forecasts or best guesses of product demand; products “pushed” to customers

• Pull-based model (Demand-driven, build-to-order)

• With IT, manufacturers can use only order demand information to drive schedules and procurement of components or raw materials

• Sequential supply chains

• Information, materials move sequentially

• Concurrent supply chains

• With IT, information moves in many directions simultaneously



2.52

Push- Versus Pull-Based Supply Chain ModelsPush- Versus Pull-Based Supply Chain Models

Figure 9-5

The difference between push- and pull-based models is summarized by the slogan “Make what we sell, not sell what we make.”




2.53

The Future Internet-Driven Supply ChainThe Future Internet-Driven Supply Chain

Figure 9-6

The future Internet-driven supply chain operates like a digital logistics nervous system. It provides multidirectional communication among firms, networks of firms, and e-marketplaces so that entire networks of supply chain partners can immediately adjust inventories, orders, and capacities.




2.54


• Business value of supply chain management systems

• Matching supply to demand and reducing inventory levels

• Improving delivery service and speeding product time to market

• Using assets more effectively

• Increasing sales by assuring availability of products

• Increased profitability

• Supply chain costs can approach 75% of total operating budgets



2.55

• Customer relationship management systems:• Provide information to coordinate all of the business

processes that deal with customers in sales,

marketing, and service to optimize revenue,

customer satisfaction, and customer retention.

• Integrate firm’s customer-related processes and

consolidate customer information from multiple

communication channels



2.56

Customer Relationship Management Systems

• Customer relationship management (CRM) systems

• Capture, consolidate, analyze customer data and distribute results to various systems and customer touch points (contact points) across enterprise

• Provide single enterprise view of customers

• Provide customers single view of enterprise at touch points

• Provide analytical tools for determining value, loyalty, profitability of customers

• Assist in acquiring new customers, providing better service and support to customers, customize offerings to customer preferences, provide ongoing value to retain profitable customers



2.57

Customer Relationship Management (CRM)Customer Relationship Management (CRM)

Figure 9-7

CRM systems examine customers from a multifaceted perspective. These systems use a set of integrated applications to address all aspects of the customer relationship, including customer service, sales, and marketing.




2.58


• CRM software

• Ranges from niche tools to large-scale enterprise applications

• More comprehensive CRM packages have:

• Partner relationship management (PRM) modules

• Enhances collaboration between company and selling partners

• Employee relationship management (ERM) modules

• Deals with employee issues closely related to CRM, e.g. setting objectives, employee performance management

• Typically include tools for sales, customer service, and marketing



2.59


• Sales force automation (SFA) modules• Enable focusing efforts on most profitable customers

• Enables sharing customer and prospect information

• Helps reduce cost per sale and cost of acquiring, retaining customers

• Customer service modules• Assigning and managing customer service requests

• E.g. managing advice phone lines, Web site support



2.60


• Marketing modules• Capturing prospect and customer data,

• Providing product and service information

• Qualifying leads for targeted marketing

• Scheduling and tracking direct-marketing mailings or e-mail

• Analyzing marketing and customer data:• Identifying profitable and unprofitable customers

• Designing products and services to satisfy specific customer needs and interests

• Identifying opportunities for cross-selling



2.61

How CRM Systems Support MarketingHow CRM Systems Support Marketing

Figure 9-8

Customer relationship management software provides a single point for users to manage and evaluate marketing campaigns across multiple channels, including e-mail, direct mail, telephone, the Web, and wireless messages.




2.62

CRM Software CapabilitiesCRM Software Capabilities

Figure 9-9The major CRM software products support business processes in sales, service, and marketing, integrating customer information from many different sources. Included are support for both the operational and analytical aspects of CRM.




2.63

Customer Loyalty Management Process MapCustomer Loyalty Management Process Map

Figure 9-10

This process map shows how a best practice for promoting customer loyalty through customer service would be modeled by customer relationship management software. The CRM software helps firms identify high-value customers for preferential treatment.




2.64


• Two main categories of CRM

• Operational CRM

• Customer-facing applications, e.g. tools for sales force automation, call center and customer service support, marketing automation

• Analytical CRM

• Applications that analyze (OLAP, data mining, etc.) customer data

• Based on data warehouses consolidating data from operational CRM systems and customer touch points

• One important output: Customer lifetime value (CLTV)

• Value based on revenue produced by a customer, expenses incurred in acquiring and servicing customer, and expected life of relationship between customer and company



2.65

Analytical CRM Data WarehouseAnalytical CRM Data Warehouse

Figure 9-11Analytical CRM uses a customer data warehouse and tools to analyze customer data collected from the firm’s customer touch points and from other sources.




2.66


• Business value of CRM systems• Increased customer satisfaction

• Reduced direct marketing costs

• More effective marketing

• Lower costs for customer acquisition and retention

• Increased sales revenue • By identifying profitable customers and segments for focused

marketing and cross-selling

• Reduced churn rate (number of customers who stop using or purchasing products or services)



2.67

• Knowledge management systems• Support processes for acquiring, creating, storing,

distributing, applying, integrating knowledge• Collect internal knowledge and link to external

knowledge• Include enterprise-wide systems for:

• Managing documents, graphics and other digital

knowledge objects• Directories of employees with expertise



2.68

Enterprise Applications: New Opportunities and Challenges

• Enterprise application challenges

• Expensive to purchase and implement

• Total implementation cost may be four to five times of cost of software

• Deep-seated technological change

• Fundamental changes to organization, business processes

• New functions and responsibilities for employees

• SCM systems require business process change for multiple organizations

• Introduce “switching costs”, dependency on enterprise software vendor

• Require understanding firm’s data and cleansing data



2.69

• Information systems department: • Formal organizational unit responsible for

information technology services• Includes programmers, systems analysts, project

leaders, information systems managers• Often headed by chief information officer (CIO)

• End-users: • Representatives of other departments, for whom

applications are developed

The Information Systems Function in Business


2.70

• Small firm may not have formal information systems group

• Larger companies typically have separate department which may be organized along one of several different lines:

• Decentralized (within each functional area)• Separate department under central control• Each division has separate group but all under

central control

The Information Systems Function in Business


2.71

Organization of the Information Systems FunctionOrganization of the Information Systems Function

Figure 2-14

There are alternative ways of organizing the information systems function within the business: within each functional area (A), as a separate department under central control (B), or represented in each division of a large multidivisional company but under centralized control (C).



2.72


Figure 2-14 (cont)

B: A separate department under central control



2.73


Figure 2-14 (cont) C: Represented in each division of a large multidivisional company but under centralized control



laudon ch02.ppt

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