How businesses use information systems (Part 1) By: Zeeshan A. Bhatti

Intro.. Business Processes & MIS In order to operate, businesses must deal with different pieces of information abt. Suppliers, customers, employees, invoices and payments etc. Info must be organized E.g., Student enrollment in University Business Processes The manner in which work is organized, coordinated, and focused to produce a valuable product/service Concrete workflows of material, information, and knowledge – set of activities Performance of a firm largely depends upon how well the business processes are designed and coordinated They can be a competitive advantage if they enable it to innovate or execute better than rivals They can also be liabilities as well if they are based on outdated ways of working

Every business is a collection of business processes

Example Process: Manual Customer Order can be complicated – can cross many different functional areas: Step 1: Sales dept receives sales order Step 2: Check availability Step 3: Order passes to accounting to ensure customer can pay: Credit or Immediate payment Step 4: Production dept. pulls the product from inventory Step 5: Shipping (Logistics such as UPS or FedEx) Step 6: Invoice generation and notifying the customer The process requires a lot Information and this information should be managed

How IT enhances Business Performance Ordering a book from Amazon or ITunes store are completely different models not possible without IT

Types of Information Systems Organizations can have hundreds of different processes Each process requires different types of systems No single system can provide all the info. an organization needs Functional systems that operated independently of each other are obsolete now

1) Transaction Processing Systems (TPS) TPS provide info about basic activities such as sales, receipts, cash deposits, payroll etc. A computerized system that performs and records the daily routine transactions to conduct business Answers questions such as: How many parts are in inventory? What happened to Mr. X’s payment? Operated by the Operation Level staff Since tasks, resources and goals are predefined and highly structured E.g., decision to grant credit to a customer is made by lower-level supervisor

Ex: A Payroll TPS Figure 2-2 illustrates a TPS for payroll processing. A payroll system keeps track of money paid to employees. An employee time sheet with the employee’s name, social security number, and number of hours worked per week represents a single transaction for this system. Once this transaction is input into the system, it updates the system’s master file (or database—see Chapter 6) that permanently maintains employee information for the organization. The data in the system are combined in different ways to create reports of interest to management and government agencies and to send paychecks to employees. Managers need TPS to monitor the status of internal operations and the firm’s relations with the external environment. TPS are also major producers of information for the other systems and business functions. For example, the payroll system illustrated in Figure 2-2, along with other accounting TPS, supplies data to the company’s general ledger system, which is responsible for maintaining records of the firm’s income and expenses and for producing reports such as income statements and balance sheets. It also supplies employee payment history data for insurance, pension, and other benefits calculations to the firm’s human resources function and employee payment data to government agencies such as the U.S. Internal Revenue Service and Social Security Administration. Transaction processing systems are often so central to a business that TPS failure for a few hours can lead to a firm’s demise and perhaps that of other firms linked to it. Imagine what would happen to UPS if its package tracking system were not working! What would the airlines do without their computerized reservation systems?

2) Business Intelligence Systems for Decision Support Middle mgmt needs systems to help with monitoring, controlling, decision-making & administrative tasks MIS provide middle managers with reports on organization’s current performance MIS summarize and report on the company’s operations using data supplied by TPS Basic data from TPS are compressed and usually represented in the form of reports on regular basis

Decision Support Systems support non-routine decision making for middle management Focus on problems that are unique and rapidly changing E.g., What would be the impact on production schedules if we were to double the sales in the month of December? Inventory DSS Example of an online Decision Support System (For Car Purchase) http://home.autos.msn.com/ www.viamichelin.com

Executive Support Systems (ESS) Designed for senior management to make decisions Non routine decisions requiring judgment, evaluation and insight because there is no agreed-on procedure for arriving at a solution E.g., CEO of Leiner Health products has an ESS that provides a minute-to-minute update of its firm’s financial performance in the stock market, inventory, A/Cs receivables etc. Executive Dashboard Systems