CHAPTER 9 FUNCTIONAL AND ENTERPRISE SYSTEMS

Learning Objectives Describe the role and characteristics of functional information systems State the objective and operations of transaction processing and how it is supported by IT Discuss the managerial and strategic applications in the accounting and finance areas that are supported by IT Understand the marketing and sales applications provided by IT

Learning Objectives (continued …) List the various production and operations management activities and describe how they are supported by IT Discuss the human resources management activities and how they can be improved by IT Discuss the need for integrating functional information systems and describe the role of ERP and supported software such as SAP

Chapter Overview Information Systems to Support Business Functions Characteristic of functional Information Systems Functional Support for Managers; Management Transaction Processing Information Systems Tracking Business Transactions Objectives of TPS The Process of TPS Modernized TPS: From Online Processing to Intranet Typical TPS Tasks and Modules Accounting and Finance Systems Financial Planning and Budgeting Investment Management Controls

Chapter Overview (continued …) Marketing and Sales Systems Customer Service Telemarketing Distribution Channels Management Marketing Management Ethical and Societal Issues in IT-supported Sales Activities Production and Operations Systems Supply-Chain Management Logistics and Materials Management Planning Production/Operations Automatic Design Work and Manufacturing Human Resources Management Systems Recruitment HRM and Development HRM and Planning Intranet Applications in HRS Integrated Information Systems and Enterprise Resource Planning Why Integrate? How to Integrate? Extreme Integration: Putting it All Together

Case : Colonial Building Supply The Business Problem Needed a technology to monitor inventory and support-related decisions to provide it with current information about inventory levels and customer buying trends to show the price of the lumber fluctuates daily The Solution integrated system Point-of-sales (POS) terminals with hand-held automatic identification and data collection devices

Case (continued…) The Results What have we learned from this case?? Lower costs for data entry labor Reduction in inventory and storage space Fast access to information Better customer service Higher employee satisfaction Stay competitive Increase its market share and profitability What have we learned from this case?? The system’s major applications are in logistics IT can be beneficial to a relatively small company An integration includes connection to business partners using the Internet

Characteristics of Functional Information Systems Comprises of several smaller information system Specific IS applications can be integrated to form a coherent departmental function system can be completely independent can be integrated across departmental lines Interface with each other to form the organization wide information system Interface with the environment

Management Information Systems Provide routine information to managers in the functional areas Provide information in exception reports and ad hoc (demand) reports Business Transactions TPS Databases Internal, External Reports Scheduled, Exception, Demand, Others Functional applications, DSS Enterprise Application such as EIS A Management Information System Data Warehouse

Transaction Processing Information Systems major business processes provide the mission-critical activities transaction may generate additional transaction simple transactions large volume and repetitive transactions Transaction Processing System (TPS) computerized information system supports the transaction processes

Characteristics of TPS Large amounts of data are processed The sources of data are mostly internal, and the output is intended mainly for an internal audience The TPS processes information on a regular basis Large storage (database) capacity is required High processing speed is needed due to the high volume Input and output data are structured High level of detail is usually observable Low computation complexity is usually evident High level of accuracy, data integrity, and security is needed High processing reliability is required Inquiry processing is a must

Overview of typical transaction processing TPS (continued…) Customer makes a purchase of an item POS Terminal Transaction File Payment Processing  Queries, Answers Inventory File Sales Files The Items’ Processing System Master Files Report Overview of typical transaction processing

and entered automatically The Process of TPS Data are collected and entered automatically Batch Processing Online Processing Hybrid System Modernized TPS: from OLTP to the Internet Online Transaction Processing (OLTP) created on a client/server architecture can save money Internet (Intranet) transaction Processing allow multimedia data transfer, fast response time, and storage of large databases of graphics and videos

Accounting & Finance Systems Financial Planning and Budgeting Financial and Economic Forecasting much of the interrelated indicators are available on the Internet many software packages conducting forecasting and planning Planning for Cash Management build a decision support model make decisions about when and how much to refinance Budgeting Budget 2000 and Comshare BudgetPlus are available to support budgeting and to facilitate communication among all participants in the preparation process

Accounting & Finance Systems (continued …) Major activities STRATEGIC SYSTEMS a. Strategic Planning b. Ratios and Financial Health c. Merger and Acquisition Analysis OPERATIONAL AND TRANSACTION PROCESSING SYSTEMS a. The General Ledger b. Sales Order Processing c. Accounts Payable and Receivable d. Receiving and Shipping e. Payroll f. Inventory Management g. Periodical Reports & Statements INTERNAL ENVIRONMENT Top Management Operation/ Production Marketing HRM Engineering EXTERNAL IRS SEC Vendors Clients CPA Companies Suppliers Customers Business Partners TACTIAL SYSTEMS a. Budgeting Preparation and Control b. Investment Management c. Capital Budgeting d. Cost Analysis and Control e. Tax Management f. Auditing g. Financial Planning

Accounting & Finance Systems (continued …) Investment Management Access to financial and economic reports hundreds of sources for the financial and economic reports and news Financial analysis is executed with a spreadsheet program, or with commercially available, ready-made decision support software

Accounting & Finance Systems (continued …) Financial Controls Budgetary Controls more sophisticated software attempts to tie expenditures to program accomplishment Auditing auditing software is especially suitable when computerized information systems are audited Financial Health Analysis supported by expert systems Profitability Analysis and Cost Control profitability analysis software allows accurate computation of profitability for individual products and for entire organizations

Marketing & Sales Systems Distribution Channel provide the goods or services to the customer, and may extend through various intermediaries such as wholesalers and retailers Channel Systems support all marketing linkages, such as after-sales customer support

Marketing & Sales Systems (continued ...) CHANNEL SYSTEMS Market Intelligence Systems Target Marketing Sales Systems Customer Support Delivery Systems Dealer Systems COMPANY Manufacturing R & D/Design Distribution Accounting/ Finance

Marketing & Sales (continued ...) Customer Service Customer Profiles and Preference Analysis IT creates customer database and merges computerized lists Mass Customization Dell computers assembles computers according to the specifications of the buyers J.C. Penny measures you and transfers the data directly to the production floor Targeted Advertisement on the Web match appropriate ads with specific groups of customers Customer Inquiry Systems and Automated Help Desk expert systems and intelligent agents

Marketing & Sales (continued ...) Telemarketing Five major activities which are supported by IT : advertisement and reaching customers order processing  customer service sales support  account management Distribution Channels Delivery management DSS models are used to support decisions like use own outlets or distributors, and transportation mode Improving sales at retail stores IT reduces the long lines in stores by reengineering the checkout process

Marketing & Sales (continued ...) Marketing Management Pricing of Products or Services - online analytical processing is supporting pricing decisions Salesperson Productivity - sales-force automation provides salespeople in the field with portable computers, access to databases, and to the web Product-Customer Profitability Analysis - a cost-accounting system identifies profitable customers and frequency Sales Analysis and Trends - geographical information system (GIS) analyzes customers and competitors and examines potential strategies New Products, Services, and Market Planning - IT evaluates large number of factors and uncertainties and conducts survey

Marketing & Sales (continued ...) Ethical and Social Issues in IT-supported Sales Activities Example of Privacy Policy : 3M Corp. Information Collection personally identifiable information that you voluntarily provide through 3M’s website or e-mail correspondence general information (such as the type of browser you use, the files you request, and the domain name and country from which you submit the request for information) Use of Information responding to your inquires tracking orders you place with 3M supplying you with requested information on 3M products

Production Operations & Logistics Supply-Chain Management (SCM) INFORMATION FLOW Supplier Manufacturing Transfer Distribution Transfer Retail Outlet Retail Transfer Consumer Transfer SCM plans and controls the flow of information and cash CASH FLOW

Production Operations & Logistics (continues …) Logistics and Material Management Inventory Management determining how much inventory to keep what to order, from whom, when to order and how much inventory model : economic order quantity (EOQ) many low cost commercial inventory software packages Quality Control providing information about the quality of incoming material and parts, as well as the quality of in-process semi-finished, and finished products standard quality control information systems and expert systems

Production Operations & Logistics (continues …) Planning Production/Operations Material Requirements Planning (MRP) - facilitates the plan for acquiring parts, subassemblies, or material Manufacturing Resource Planning (MRPII) - connects the regular MRP to other functional areas Just-in-Time Systems - minimizes waste of all kinds, improves processes and systems, and maintains respect for all workers Project Management - Program Evaluation and Review Technique (PERT) and Critical Path Method (CPM) Short-Term Schedules - schedule jobs and employees on a daily or weekly basis

Production Operations & Logistics (Continues …) Automatic Design Work and Manufacturing Computer-Aided Design (CAD) enables drawings to be constructed on a computer screen and subsequently stored, manipulated, and updated electronically Computer-Aided Manufacturing (CAM) facilitates planning, operation, and control of production jobs Computer-Integrated Manufacturing (CIM) concept or philosophy about the implementation of various integrated computer systems in factory automation

Human Resources Management Systems Recruitment finding, testing, and deciding which employees to hire Positions inventory matching open positions with available personnel allowing data to be viewed by an employee over the intranet Employee Selection conducting interviews by video teleconferencing expediting the testing and evaluation process, assuring consistency in selection by using expert systems Using the Internet advertising position openings on the Internet

Human Resources Management Systems (continued …) Human Resources Maintenance and Development Training and Human Resources Development digital video-editing system - produces training videotapes Performance Evaluation online evaluations - supports many decisions, ranging from rewards to transfer to layoffs expert systems - provide an unbiased and systematic interpretation of performance over time paperless wage system (PWS) - tracks employee review dates and automatically initiates the wage review process Turnover, Tardiness, and Absenteeism Analyses DSS models - identifies causes and patterns

Human Resources Management Systems (continued …) Human Resources Management and Planning Personal files and skills inventory - computerized personnel files identify qualified employees within the company for open positions, promotion, transfer, special training programs, and layoffs Benefits administration - Networks and voice technology, or the intranets, specifying the value of each benefit and the available benefits balance of each employee Government reports - Availability of computerized personnel records greatly eases the reporting process Personnel planning - IT is used to collect, update, and process the information Succession planning and implementation - expert systems and personnel databases supporting and implementing planning Labor-Management Negotiations - DSS improve the negotiation climate and considerably reduce the time needed for reaching an agreement

Human Resources Management Systems (continued …) Intranet Applications in HRM Edify Corp.’s employee service system Oracle Corp.’s flexible benefits enrollment program on the intranet Aetna health Plan’s online directory of primary care physicians, hospitals, medical services, and health information Apple Computers’ extensive education and development activities on the intranet Merck Inc.’s intranet for HR transactions

Integrated Information Systems Reasons for Integration using twentieth-century computer technology, which is functionally oriented : cannot give employees all the information they need do not let different departments communicate effectively with each other in the same language crucial sales, inventory, and production data often have to be painstakingly entered manually into separate computer systems every time a person who is not a member of a specific department needs ac hoc information related to the specific department

How to Integrated Information Systems Connect existing systems maximize the use of existing systems and minimize the changes in them allows the addition of new applications to existing ones and the connection of systems to intranets and the Internet Using supply chain management software use one integrated package in one or several functional areas overcomes the isolation of the traditional departmental structure where the functional areas are separated from one another

How to Integrated Information Systems (continued …) Enterprise resource planning (ERP) control all major business processes with a single software architecture in real time increased efficiency to improved quality, productivity, and profitability SAP software (R|3; my SAP.com) crosses functional departments and can be extended along the supply chain to both suppliers and customers composed of four major parts : accounting, manufacturing, sales and human resources

ERP SAP concept Sales Offices Central SAP Database & Servers The factory automati- cally receives the sales order and can begin production. FACTORY The warehouse is si- multaneously informed about the order and can schedule shipping. WAREHOUSE Accounting gets up- dated sales and pro- duction data at every step of the process ACCOUNTING Headquarters can tap into up-to-the-minute data on sales, inven- tory, and production HEAD QUARTERS Central SAP Database & Servers

What’s in IT for Me? For Accounting For Finance For Marketing Executing TPS effectively is a major concern of any accountant For Finance The use of IT helps financial analysts and managers perform their difficult tasks better For Marketing By understanding how ERP software operates, marketing people can greatly improve the software utilization by developing challenging corporate applications

What’s in IT for Me? (continued …) For Production/Operations Management Supply chain management and ERP are critical today for any medium and large manufacturing company, and for service organizations such as banks For Human Resources Management IT can improve the efficiency and effectiveness of the HRM activities conducting training on the intranet

What’s in IT for Me? (continued …) For Human Resource Management Human resource managers utilize their corporate networks extensively for posting job openings, and use internal corporate networks to publish corporate policies, company newsletters and job openings