Chapter 8: Functional, Enterprise, and Interorganizational Systems Introduction to Information Technology 2nd Edition Turban, Rainer & Potter © 2003 John Wiley & Sons, Inc. Chapter 8: Functional, Enterprise, and Interorganizational Systems Prepared by: Roberta M. Roth, Ph.D. University of Northern Iowa

Chapter Preview In this chapter, we will study: The role and function of Management Information Systems (MIS) and Transaction Processing Systems (TPS) in organizations How functional information systems support Accounting & Finance; Sales and Marketing; Production and Operations; and Human Resource Management How and why information systems should be integrated The role of interorganizational systems

Functional Information Systems Characteristics: Comprised of several small information system focused on specific activities Specific IS applications can be completely independent, or integrated to form a coherent departmental functional system also, can be integrated across departmental lines to support a broad business process (cross-departmental) Interface with each other to form the organization wide information system Interface with the environment

Functional Information Systems (continued) Management Information Systems Provide routine information to managers in the functional areas Business Transactions TPS Management Information System Data Warehouse Databases Internal External Reports Scheduled Demand Exception

Transaction Processing Systems What is a transaction? Every business event that occurs during business operations Business events (transactions) can trigger other business events Each event (transaction) can be described by a number of data items Transaction processing systems (TPS) are designed to record and store the data that describes every business event that occurs

Transaction Processing Systems (continued) TPSs were the first to be automated – repetitive, consistent, high-volume tasks are ideal candidates for computerization TPSs provide foundation for all other information systems Many TPSs are outward-reaching and convey impressions to the customers about the quality of the business Customer makes a purchase POS system Transaction file Update files Inventory file Sales file

Transaction Processing System (continued) Some characteristics of TPSs Process large volume of data Data sources mostly internal, and output intended mainly for internal audience TPS operate regularly (on demand, daily, weekly, etc.) Require large storage (database) capacity Require high processing speed (due to the high volume) Input and output data known and well-understood (highly structured) Involves high level of detail but low computation complexity Requires high level of accuracy, data integrity, and security Requires high processing reliability; organizations cannot function for long without TPSs Inquiry processing supported

Methods of Processing Transactions Batch Processing: simple, inexpensive Employee timecards Data entry of timecard data Payroll transactions Employee data: Pay rate Withholdings Etc. Employee paychecks Process payroll Cash on hand Payroll summary

Methods of Processing Transactions Online Processing: complex, expensive Customer makes a purchase POS system Transaction history file Inventory file Sales file

Methods of Processing Transactions Hybrid Processing: simple, inexpensive, more accurate Badge reader collects employee work data Payroll transactions Whenever employees arrive / leave work Process payroll Employee data: Pay rate Withholdings Etc. Employee paychecks Cash on hand Payroll summary Normal payroll schedule: weekly, monthly, etc.

TPS Today Traditionally, TPS were implemented on mainframe systems using batch processing Online Transaction Processing (OLTP) can be built on a client/server architecture can save money Internet (Intranet) Transaction Processing allows multimedia data transfer fast response time storage of large databases of graphics and videos real time low cost

Typical TPS Tasks Order processing General ledger Accounts payable and receivable Inventory management, shipping, and receiving Payroll Periodic reports and statements

Accounting and Finance Systems Financial Planning and Budgeting Financial and economic forecasting Budgeting Investment Management Access to financial and economic reports Financial analysis Financial and Economic Forecasting indicators are available on the Internet many software packages available Planning for Cash Management build a decision support model project cash inflows and outflows Budgeting express financial plans allocate resources Access to financial and economic reports hundreds of sources for the financial and economic reports and news Financial analysis Executed with a spreadsheet program or with commercially available, ready-made decision support software Performance analysis Risk analysis Investment strategy analysis

Accounting and Finance Systems Financial Controls Budgetary Controls Auditing Financial Health Analysis Profitability Analysis and Cost Control Budgetary Controls Summarize actual expenditures and compare to budget Auditing Software helps ensure the accuracy of financial records Financial Health Analysis Assess financial performance and interpret results, sometimes with help of an expert system Profitability Analysis and Cost Control Compute accurate profitability for individual products and for entire organization

Marketing & Sales Systems Distribution Channel (definition) providing the goods or services to the customer; may extend through various intermediaries such as wholesalers and retailers Manufacturing Distribution R&D/Design Accounting/Finance Company Other Channel Systems support all marketing linkages, such as after-sales customer support Dealer Systems Delivery Systems Customer Support Systems Sales Systems Target Marketing Market Intelligence Channel

Marketing & Sales Systems (continued) Customer Service customer profiles and preference analysis mass customization – high volume production of specialized product targeted advertising customer inquiry systems and automated Help Desk Telemarketing advertisement and reaching customers order processing customer service sales support account management Customer Service Customer Profiles and Preference Analysis Mass Customization – high volume production of specialized product Targeted advertising Customer Inquiry Systems and Automated Help Desk Telemarketing advertisement and reaching customers order processing customer service sales support account management

Marketing & Sales Systems (continued) Distribution Channels Delivery and shipping management Improve retail stores Marketing Management Set and monitor prices of products or services Monitor and evaluate salesperson productivity Evaluate profitability of products / customers Assess sales trends Analyze new products, services, and markets

Marketing & Sales Systems (continued) Ethical and Social Issues in IT-supported Sales Activities Information collection and usage Privacy concerns Current trend – Customer Relationship Management (CRM) Focus is on developing a one-to-one relationship with customers

Production & Operations Management Systems Logistics and Material Management Logistics Management Ordering, purchasing, and inbound and outbound shipping Inventory Management Determine how much inventory to carry Quality Control Monitor and report quality of materials, work in process, and finished goods

Production & Operations Management Systems (continued) Planning Production/Operations Material Requirements Planning; MRP II Just-In-Time Project Management (PERT & CPM) Short-term scheduling Automatic Design Work and Manufacturing Computer Aided Design (CAD) Computer Aided Manufacturing (CAM) Computer Integrated Manufacturing (CIM)

Human Resources Management Systems Recruitment Keep track of all open positions Advertise positions via Internet Employee selection Human Resources Maintenance and Development Training and retraining employees Performance assessment Turnover, tardiness, and absenteeism analysis Recruitment finding, testing, and deciding which employees to hire Human Resources Maintenance and Development Training and Human Resources Development Performance Evaluation Turnover, Tardiness, and Absenteeism Analyses Human Resources Management and Planning Personal files and skills inventory Benefits administration Government reports Personnel planning Succession planning and implementation – Labor-Management Negotiations

Human Resources Management Systems Human Resources Management and Planning Maintain personnel files and skills inventory Administer benefits Comply with government reporting Personnel planning Succession planning Labor negotiations Recruitment finding, testing, and deciding which employees to hire Human Resources Maintenance and Development Training and Human Resources Development Performance Evaluation Turnover, Tardiness, and Absenteeism Analyses Human Resources Management and Planning Personal files and skills inventory Benefits administration Government reports Personnel planning Succession planning and implementation – Labor-Management Negotiations

Integrated Information Systems Reasons for Integration Existing, functionally oriented information systems are deficient: cannot give employees all the information they need do not let different departments communicate effectively crucial sales, inventory, and production data often entered manually into separate computer systems

Integrated Information Systems How to Integrate Information Systems Connect existing systems maximize the use of existing systems and allows the addition of new applications Using supply chain management software Overcomes the isolation of traditional departmental structure by integrating processing across several functional areas Use Enterprise Resource Planning software control all major business processes with a single software architecture in real time increased efficiency to improve quality, productivity, and profitability

Interorganizational Information Systems (IOS) Electronic systems involving information flow among two or more organizations in an on-going relationship Objective – efficient transaction processing Many large businesses require suppliers to be linked to them though IOS applications IOSs may be implemented with Private, third-party networks (value-added networks) Publicly accessible networks (Internet)

Interorganizational Systems (continued) Types of Interorganizational Systems Global systems Electronic data interchange (EDI) Electronic funds transfer (EFT) Extranets Shared databases Integrated messaging Global systems – systems connecting two or more companies in two or more countries Electronic data interchange (EDI) – electronic movement of business documents between business partners Electronic funds transfer (EFT) – transfer of money using telecommunications Extranets – extended Intranets that link business partners Shared databases – databases that business partners both have access to Integrated messaging – delivery of email and fax messages through a single communication system.

Issues in IOS / Global IS Design Cultural differences Economic and political differences Cross-border data transfer concerns Global systems – systems connecting two or more companies in two or more countries Electronic data interchange (EDI) – electronic movement of business documents between business partners Electronic funds transfer (EFT) – transfer of money using telecommunications Extranets – extended Intranets that link business partners Shared databases – databases that business partners both have access to Integrated messaging – delivery of email and fax messages through a single communication system.

Chapter Summary Role and function of TPSs Role and function of MISs In-depth review of how Iss support various business functional areas Need and methods for integrating functional information systems Interorganizational and global information systems provide great opportunities but also great complexity Global systems – systems connecting two or more companies in two or more countries Electronic data interchange (EDI) – electronic movement of business documents between business partners Electronic funds transfer (EFT) – transfer of money using telecommunications Extranets – extended Intranets that link business partners Shared databases – databases that business partners both have access to Integrated messaging – delivery of email and fax messages through a single communication system.

Copyright © 2003 John Wiley & Sons, Inc. All rights reserved Copyright © 2003 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United Stated Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information herein.