Business and IS Performance (IS 6010) MBS BIS 2010 / th November 2010 Fergal Carton Accounting Finance and Information Systems

Last week Linking the physical to the virtual: data integrity Decoupling point is where systems and reality become disconnected Research on impact of ERP on management decision making –Decoupling of MRP logic in two cases studied –Demand uncertainty means formalised processes break down –ERP integration fails to support management decision making Data that does not reflect the reality it represents? –Half-filled Coke cans at SuperValu –Poor labelling of goods on receipt –Workaround to scan goods using set aside product –Latency in mobile phone operations and billing (buying credit / roaming) Credit card transactions not processed

This week Decoupling point Control objectives undermined Performance visibility is a design question Builder quotation exercise Apple case study

Decoupling point Inability of planners to deal with demand uncertainty, so responsibility for make or break performance decisions was pushed downwards to operations managers Instead of the planning role protecting operations from fluctuations in demand, managers had to take personal risks in operational decision making (Planning, Buying, Making and Delivering) In so doing, managers were obliged to take control of the means of decision making, including the implementation and use of appropriate decision support tools. Hence the predominance of the “soft” vocabularly

Soft vocabulary Decisions were made “intellectually”, “in the brain”, “on the fly”, “off-line” or “by the seat of the pants”. Such managerial observations represented the “decoupling point” where the physical and the virtual diverged. Information that was structured in a system was no longer adequate to support decision making.

Control objectives of integration undermined

Performance visibility =design issue Mason and Swanson Managers require information about resources and their relative effectiveness for achieving the organisation’s purpose Resources = people, materias, plant and equipment, money and information Managerial accounting systems –Resources and costs –Relationship between costs and performance Precision of measure only to “discriminate between critical magnitudes”

Builder quotation system Enters supplier invoice once Requires allocation against projects Visibility required of performance to plan Level of detail = design question Automation and visibility = 2 objectives

Apple processes (Cork source) Apple sell direct to distributor i.e HMV –NB. What we know about distribution! Sales order (SO) entered on SAP Accounting doc created automatically Revenue reported at different levels: –on an entity / company level –at a corporate level –in various Revenue Management reports: revenue by country, by product, by Distributor etc etc )

Apple annual report Revenue recognised on shipment Except: “the Company defers recognition of revenue until the customer receives the product because the Company retains a portion of the risk of loss on these sales during transit.” “The Company records deferred revenue upon the sale of the card, which is relieved upon redemption of the card by the customer.”