1 Chapter 3a: Business Functions and Supply Chains Business Functions Role of ISs in Bus. Functions Supply Chains ERP

Background: (page 64) TheTrainline Co. – Sell rail tickets over the phone (1997) – 1999: see the opportunity created by Internet – Launched TheTrainline Website Success! – Enhance services to customers by providing Timetable Information Information on ticket prices Special deals 2

TheTrainline: cont. The company form alliances with three other rail companies This expansion of services lead to incremental growth in the IT system: it was in response to short-term business needs rather than long term planning In 2002 they decided to migrate to a newer more appropriate technology: – To support growth & reduce maintenance costs. 3

Problems: Even having the web site services, customers preferred to use the telephone! They were receiving calls per week 40% of the calls received an engaged tone Average call length was 6 minutes 65% of calls did not convert into a sale 4

Solution: It’s all about ‘efficiency’ Calls are answered by an automated system, collecting information from the customer Speech recognition sw records the detail and feeds it into data format within the IT system The ‘data’ demand then trigger automatic and instantly retrieve all ‘supply side’ information from the database Data are sent to the screen of a sales agent, and at the same time the customer call is patched through to the same agent 5

Benefits: Operating costs have been reduced by 10% that translates into million pounds Conversation rates have increased by extra calls per week Customer satisfaction has improved Resources usage has improved “The TrainLine” company has been able to grow its business in a very competitive market place 6

7 Introduction: Our economy produces/consumes Information – You as professionals must know how to use ISs in every business activity Managers must have an overall understanding of all elements of a system to control Quality, Costs and Resources

8 Outcomes: Identify various business functions and the role of ISs in these functions Explain how ISs in the basic business functions relate to each other Articulate what supply chains are and how information technology supports management of supply chains Explain the notion of enterprise resource planning systems (ERP systems)

Effectiveness/Efficiency (Intro.): The better a person performs a job, the more effective he/she is. Efficiency is measured as the ratio of OUTPUT to INPUT or Output/Input. It will increase when – More output with the same input or – Less input with the same output IS’s can help companies attain more effective and efficient business processes 9

10 Effectiveness and Efficiency: It all relates to ‘Productivity’, because introducing IS in any business function, productivity increases! Example: Productivity Tools? Effectiveness: the degree to which a goal is achieved – How much of a goal is achieved? – The degree to which it achieves better outcomes

11 Efficiency: Efficiency: the relationship between resources expended and benefits gained in achieving a goal Efficiency = Benefits/Costs = Output/Input Example: Operating costs are lower for a better quality product Productivity: efficiency of human resources

12 Productivity Tools: Productivity increased with software applications Workers produce more in less time.

13 Business Functions: Accounting Finance Engineering HR Marketing – Let’s look at these functions (supporting systems) in terms of a typical business cycle: – Beginning with marketing and sales  Customer placing an Order  Supply Chain

16 CRM, SCM Customer relationship management system: serves customers better and faster – Service continues after delivery of goods as customer service Supply Chain: The activities performed from the purchase of raw material to the shipping of goods Supply Chain Management: The coordination of the above activities

17 Accounting: Purpose is to track every financial transaction Make sure company is pulling a profit Accounts payable and receivable track who owes who what Balance sheet: picture of financial situation – Includes profit-and loss report

18 Accounting IS: Accounting information system pulls information from transaction processing system – Automatically routes purchases to accounts payable (cheques/fund transfer) and – Sales to accounts receivable (invoices). Generates reports on demand or on schedule Cost-accounting systems accumulate data about costs involved in producing specific products

20 Finance: Firm’s health is measured by its finances Financial managers try to manage money as efficiently as possible Information systems improve financial management

21 Finance (continued): Financial managers have many goals – Collect payables as soon as possible – Making payments at the latest time allowed by contract or law – Ensuring that sufficient funds are available for day- to-day operations – Taking advantage of opportunities to accrue highest yield on funds possible

23 Cash Management: Financial information systems help managers track company finances – Record every payment/cash receipt  cash movement Cash management systems: deal specifically with cash – IS reduces interest and fees/increases the yield Electronic funds transfer: huge cash transactions – From one bank to another

24 Investment Analysis and Service Investor’s goal is to buy asset and sell higher – Must know current prices of securities in real time Information systems provide investors and clients with financial news, stock prices, and exchange rates – Real time analysis, therefor using online system Factors to consider in investing are variability, expected return, and liquidity – IS will calculate these factors

25 Engineering: Time to market: time between generating an idea for product and completing a prototype Engineering includes designing and building the prototype Brainstorming: group meeting and collaborating to generate ideas Minimizing time to market is key to maintain competitive edge Information systems contribute significantly to minimizing time to market. See next slide

26 Engineering (continued): Computer-aided design: tools to create, modify and store designs and drawings Rapid prototyping: creating one-of-a-kind products to test design in three dimensions Takes hours rather than days or weeks to produce product Computer-aided manufacturing: systems that instruct machines to manufacture parts and assemble product

28 Supply Chain Management Supply Chain: procurement of raw materials, processing materials, and delivering goods Processing goods also known as manufacturing Supply Chain Management: monitoring, controlling, facilitating supply chains CAD systems often automatically transfer data to CAM systems IT helps scheduling, planning, allocating, analyzing manufacturing operations  ERP

29 Material Requirements and Purchasing Material requirements planning: Inventory control – Determines when inventory needs to be restocked – Can predict future need based on demand forecasts – Bill of materials: raw material and subcomponent demands Economic order quantity: optimal quantity to be bought

30 Manufacturing Resource Planning MRP II: plans entire manufacturing process Uses master production schedule Master production schedule: specifies how production capacity must be used to meet customer demands AND maintain inventory – Balances production economics, demand, manufacturing capacity and inventory levels – Just-in-time manufacturing: suppliers ship parts directly to assembly lines

31 Monitoring and Control Information systems help control manufacturing processes Controlling processes ensures quality

32 Shipping IS help speed up delivery and cutting costs – Many variables that affect cost and speed of shipping. See page 99 – Sophisticated software to optimize shipping efficiency necessary to stay competitive Examples: – Vehicles equipped with computers and satellite communication – See Fig 3.8

33 RFID in SCM: Self study!! Radio frequency identification: allows recording of information about product Electronic product code: replaces universal product code with much more information Info includes date of manufacturing, plant location, expiring date, destination Ensures genuineness of products Read page 100 – 101, especially Fig 3.9