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. BUSINESS OPPORTUNITIES: More transaction detail can be collected and analyzed, improving decision-making. BUSINESS RISKS: Transaction processing is late or inaccurate, causing decision errors.

LEARNING OBJECTIVES (continued) Describe functional area information systems. BUSINESS OPPORTUNITIES: Systems geared to specific functions can improve operational effectiveness. BUSINESS RISKS: Information between functions may differ, causing problems in data analysis.

LEARNING OBJECTIVES (continued) Describe enterprise resource planning systems. BUSINESS OPPORTUNITIES: Data redundancy (duplication of data) can be minimized, resulting in more effective integration of data within the organization. BUSINESS RISKS: Integrated ERP systems may create the loss of a competitive advantage if the organization changes its methods to match the ERP system.

LEARNING OBJECTIVES (continued) Describe customer relationship management systems. BUSINESS OPPORTUNITIES: More revenue can be obtained from existing (or new) customers by providing them with better service or tailored pricing. BUSINESS RISKS: Customers may be lost due to changing standards of customer service or due to pricing that is no longer competitive.

LEARNING OBJECTIVES (continued) Describe supply chain management systems. BUSINESS OPPORTUNITIES: Improved communication among trading partners provides information to maintain inventory at optimum levels. BUSINESS RISKS: Goods are received or shipped late and at excessive cost.

LEARNING OBJECTIVES (continued) Discuss electronic data interchange and extranets. BUSINESS OPPORTUNITIES: Detailed, accurate information will enable better supply chain management. BUSINESS RISKS: Data received could be incomplete or inaccurate.

8.1 Transaction Processing Systems (TPS) Transaction processing system (TPS): monitors, collects, stores, and processes data generated from all business transactions Batch Processing: the firm collects data from transactions as they occur, placing them in groups or batches, then processes the batches periodically Online Transaction Processing (OLTP): business transactions are processed online (real time)

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

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

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.

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

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

8.5 Supply Chain Management Systems (SCM) Supply chain Supply chain management (SCM) Inter-organizational information system (IOS) Global information system

The Structure & Components of Supply Chains A supply chain involves three segments: Upstream where sourcing or procurement from external suppliers occurs. Internal where packaging, assembly or manufacturing takes place. Downstream where distribution takes place, frequently by external distributors. Tiers of suppliers a supplier may have one or more subsuppliers, and the subsupplier may have its own subsupplier(s) and so on.

The Flows of the Supply Chain Material flows the physical products, raw materials, supplies and so forth that flow along the chain Information flows are all data related to demand, shipments, orders, returns and schedules as well as changes in any of these data. Financial flows are all transfers of money, payments and credit-related data. A supply chain involves a product life cycle approach, from “dirt to dust”.

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.

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) a communication standard that enables business partners to exchange routine documents, such as purchase orders, electronically Extranets link business partners to one another over the Internet by providing access to certain areas of each other’s corporate intranets.

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

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.

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