CHAPTER 8 Organizational Information Systems

CHAPTER OUTLINE 8.1 Transaction Processing Systems 8.2 Functional Area Information Systems 8.3 Enterprise Resource Planning Systems 8.4 Customer Relationship Management Systems 8.5 Supply Chain Management Systems 8.6 Electronic Data Interchange and Extranets

LEARNING OBJECTIVES Describe transaction processing systems. Describe functional area information systems and the support they provide for each functional area of the organization. Describe enterprise resource planning systems.

LEARNING OBJECTIVES (continued) Describe customer relationship management systems. Describe supply chain management systems. Discuss electronic data interchange and extranets.

Chapter Opening Case Toyota Production System

Toyota Production System (continued) Electronic dashboard showing status of assembly line

Toyota Production System (continued)

How light curtains work

8.1 Transaction Processing Systems (TPS) Batch Processing Online Transaction Processing (OLTP) Rudy Giuliani checking out of a Wal-Mart using a bar code scanner that produces data captured by a transaction processing system Note: the barcode scanner is an example of source data automation

How Transaction Processing Systems Manage Data

8.2 Functional Area Information Systems Functional area information Systems are designed to support a functional area by increasing its internal effectiveness and efficiency in the following areas: Accounting Finance Marketing Operations (POM) Human Resources Management

Examples of Information Systems Supporting the Functional Areas

Functional Area Information Systems Reports Routine reports Ad hoc (on demand) reports Drill-down reports Key-indicator reports Comparative reports Exception reports

Summary Report A summary report is one type of routine report

Detailed Report A detailed report is another type of routine report

Drill-Down Report Drill-down report is a type of ad- hoc report

Key-Indicator Report Key-indicator report is a type of ad-hoc report

Comparative Report Comparative report is one type of ad-hoc report.

Exception Report

8.3 Enterprise Resource Planning Systems (ERP) The major objective of ERP systems is to tightly integrate the functional areas of the organization and to enable seamless information flows across the functional areas.

Problems with information silos

ERP Systems (continued)

SAP Modules

ERP Systems (continued) A business process is a set of related steps or procedures designed to produce a specific outcome.

8.4 Customer Relationship Management Includes a one-to-one relationship between a customer and a seller. One simple idea “Treat different customers differently.” Helps keep profitable customers and maximizes lifetime revenue from them.

The Need for CRM It costs six times more to sell to a new customer than to sell to an existing one. A typical dissatisfied customer will tell 8-10 people. By increasing the customer retention rate by 5%, profits could increase by 85%. Odds of selling to new customers = 15%, compared to the odds of selling to existing customers (50%) 70% of complaining customers will remain loyal if problem is solved

The Customer Life Cycle

Customer Value

Customer Touch Points Telephone Conventional mailHelp desk Web site Store

CRM Applications CRM systems provide applications in 3 major areas: Sales - sales force automation (SFA). Marketing – support marketing campaigns & provide opportunities for cross-selling, up-selling and bundling. Customer Service – can take many Web-based forms.

Customer Service Customer service can take many forms and includes: Technical and other information and services Customized products and services Tracking account or order status Personalized Web pages FAQs and automated response Call centers

Software as a Service for CRM (IT’s About Business 8.2)

Putting it all together The relationships among SCM, ERP, and CRM

8.5 Supply Chain Management Systems (SCM) Supply chain Supply chain management (SCM) Interorganizational information system (IOS) Global information system

Supply Chain (recall Figure 2.2)

Warner’s Digital Supply Chain (IT’s About Business 8.3)

The Structure & Components of Supply Chains A supply chain involves three segments: Upstream Internal Downstream Tiers of suppliers

Generic Supply Chain

The Flows of the Supply Chain Material flows Information flows Financial flows

Problems Along the Supply Chain Poor customer service Poor quality product High inventory costs Loss of revenues New technologies

Problems Along the Supply Chain (continued) Problems stem mainly from two sources: Uncertainties due to demand forecast, delivery times, quality problems in materials and parts that can create production delays; The need to coordinate several activities, internal units and business partners. Bullwhip effect refers to erratic shifts in orders up and down the supply chain.

The Bullwhip Effect

Issues of Global IOS Design Cultural differences Localization Economic and Political Differences Legal issues Cross-border data transfer which refers to the flow of corporate data across nations’ borders.

8.6 Electronic Data Interchange (EDI) and Extranets Electronic data interchange (EDI) Extranets

EDI Benefits Minimize data entry errors Length of messages are shorter Messages are secured Reduces cycle time Increases productivity Enhances customer service Minimizes paper usage and storage

EDI Limitations Significant initial investment to implement Ongoing operating costs are high due to the use of expensive, private VANs Traditional EDI system is inflexible Long startup period Multiple EDI standards exist

Comparing Purchase Order Fulfillment Without EDI

Comparing Purchase Order Fulfillment With EDI

Extranets The main goal of extranets is to foster collaboration between business partners. An extranet is open to selected B2B suppliers, customers and other business partners.

The Structure of an Extranet

Types of Extranets A company and its dealers, customers or suppliers An industry’s extranet Joint ventures and other business partnerships

Chapter Closing Case The JetBlue Fiasco