1. Management Information Systems by Prof. Park Kyung-Hye Chapter 3 (4th Week) Business Functions and Supply Chains 03

2. Objectives Business Functions and Supply Chains 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 2 Enumerate the purposes of customer relationship management systems Explain enterprise resource planning systems

3. Effectiveness and Efficiency Information technology makes work more effective, more efficient, or both 3 Business Functions and Supply Chains Effectiveness Efficiency : the degree to which a goal is achieved : the relationship between resources expended and benefits gained in achieving a goal Efficiency = Benefit / Costs One system is more efficient if its operating costs are lower for the same or better quality product

4. Effectiveness and Efficiency (continued) 4 Business Functions and Supply Chains Productivity Productivity tools : efficiency of human resources : software applications that improve productivity Productivity improves when fewer workers are required to achieve the same goal ISs contribute to both effectiveness and efficiency of businesses

5. Effectiveness and Efficiency (continued) 5 Business Functions and Supply Chains Customer relationship management (CRM) system : system that serves customers better and faster Service continues after delivery of goods as customer service and more marketing Often combined with supply chain management (SCM) systems to create an enterprise resource planning (ERP) system

6. Effectiveness and Efficiency (continued) 6 Business Functions and Supply Chains

7. Effectiveness and Efficiency (continued) 7 Business Functions and Supply Chains

8. Accounting 8 Business Functions and Supply Chains Accounting’s purpose is to track every financial transaction Accounting systems are required by law and for proper management Needed to ensure company is making a profit Accounts payable and accounts receivable track who owes who what Balance sheet: picture of financial situation Includes profit-and-loss report

9. Accounting (continued) 9 Business Functions and Supply Chains Accounting information system : receives information from transaction processing systems (TPSs) Automatically routes purchases to accounts payable Automatically routes sales to accounts receivable Generates reports on demand or on schedule Work order : an authorization to perform work for a specific purpose

10. Accounting (continued) 10 Business Functions and Supply Chains Cost-accounting systems : accumulate data about costs involved in producing specific products Accounting ISs are used for managerial purposes for budgeting and cost control

11. Accounting (continued) 11 Business Functions and Supply Chains

12. Finance 12 Business Functions and Supply Chains Firm’s health is measured by its finances Information systems can improve financial management Financial managers’ goal is to manage money as efficiently as possible by: Collecting payables as soon as possible Making payments at the latest time allowed Ensuring funds are available for daily operations Investing funds not used for current activities

13. Finance 13 Business Functions and Supply Chains

14. Cash Management 14 Business Functions and Supply Chains Financial information systems help managers track company finances Cash management systems : systems that deal specifically with cash Electronic funds transfer : electronic transfer of cash from one bank account to another

15. Investment Analysis and Service 15 Business Functions and Supply Chains Investor’s goal is to buy an asset and sell it for a higher value When investing in securities, you must know current prices in real time Nearly instantaneous information systems can provide investors and clients with financial news, stock prices, commodity prices, and currency exchange rates

16. Investment Analysis and Service (continued) 16 Business Functions and Supply Chains Some important factors to consider in investing Variability of the security’s past yield Expected return Liquidity (how fast an investment can be turned into cash)

17. Engineering 17 Business Functions and Supply Chains Time to market : time between generating an idea for a product and completing a prototype Brainstorming : process of a group of colleagues meeting and collaborating to generate creative solutions and new ideas Minimizing time to market is key to maintaining competitive edge

18. Engineering (continued) 18 Business Functions and Supply Chains Information systems can contribute significantly to minimizing time to market Computer-aided design (CAD) : tools to create, modify, and store designs and drawings electronically

19. Engineering (continued) 19 Business Functions and Supply Chains Rapid prototyping Computer-aided manufacturing (CAM) : systems that instruct machines how to manufacture parts and assemble products : creating one-of-a-kind products to test design in three dimensions Allows a model to be produced in hours rather than days or weeks

20. Engineering (continued) 20 Business Functions and Supply Chains

21. Engineering (continued) 21 Business Functions and Supply Chains

22. Engineering (continued) 22 Business Functions and Supply Chains

23. Supply Chain Management 23 Business Functions and Supply Chains Supply chain : consists of procurement of raw materials, processing materials into goods, and delivering goods Processing raw materials into goods is also known as manufacturing Supply chain management : monitoring, controlling, and facilitating supply chains

24. Supply Chain Management (continued) 24 Business Functions and Supply Chains CAD systems often transfer data automatically to CAM systems IT helps in manufacturing activities Scheduling plant activities to optimize the use of resources Planning material requirements based on current and forecasted demand Reallocating materials and resources from one order to another Managing inventories Grouping similar work orders for efficiency

25. Supply Chain Management (continued) 25 Business Functions and Supply Chains

26. Material Requirements Planning and Purchasing 26 Business Functions and Supply Chains Material requirements planning (MRP) : inventory control Determines when inventory needs to be restocked Can predict future need based on demand forecasts Takes customer demand as input, then works back to calculate resources needed to produce goods Bill of materials (BOM) : list of all raw materials and subcomponent demands to produce a product

27. Material Requirements Planning and Purchasing (continued) 27 Business Functions and Supply Chains Economic order quantity (EOQ) : optimal quantity of a raw material that minimizes overstocking and saves cost, without missing production deadlines Considers cost, discounts for large quantities, cost of warehousing material, cost of alternative uses of money, etc.

28. Manufacturing Resource Planning 28 Business Functions and Supply Chains Manufacturing resource planning (MRP II) : combines MRP with other related activities to plan the entire manufacturing process Uses master production schedule Master production schedule : specifies how production capacity is to be used to meet customer demands Just-in-time manufacturing : suppliers ship parts directly to assembly lines as needed Avoids warehousing costs

29. 29 Business Functions and Supply Chains Manufacturing Resource Planning (cont.)

30. Monitoring and Control 30 Business Functions and Supply Chains Information systems are designed to control manufacturing processes as well as monitor them Controlling processes helps ensure quality

31. Shipping 31 Business Functions and Supply Chains Performed by manufacturer or shipping company Many variables affect cost and speed of shipping, including : Length of routes Sequence of loading and unloading Type of shipped materials (e.g., perishable, hazardous, fragile) Fuel prices Road tolls

32. Shipping (continued) 32 Business Functions and Supply Chains Sophisticated software that optimizes shipping efficiency helps a company stay competitive Need to optimize : Shipping time Cost of labor Use of equipment Maintenance Vehicles equipped with computers, global positioning systems (GPS), and satellite communication have increased efficiency

33. Shipping (continued) 33 Business Functions and Supply Chains

34. Shipping (continued) 34 Business Functions and Supply Chains

35. Shipping (continued) 35 Business Functions and Supply Chains

36. RFID in SCM 36 Business Functions and Supply Chains Radio frequency identification (RFID) Electronic product code (EPC) : a technology containing circuitry that allows recording of information about a product : a code on an RIFD tag that provides more information than the universal product code (UPC) Information may include date of manufacturing, plant location, expiration date, destination Ensures genuineness of products

37. RFID in SCM (continued) 37 Business Functions and Supply Chains

38. RFID in SCM (continued) 38 Business Functions and Supply Chains

39. Customer Relationship Management 39 Business Functions and Supply Chains Customer relationship management (CRM) systems : designed to support any and all relationships with customers Supports three areas Marketing Sales Customer service CRM systems capture the entire customer experience with an organization All company employees who deal with the customer have access to this information

40. Customer Relationship Management (continued) 40 Business Functions and Supply Chains

41. Market Research 41 Business Functions and Supply Chains To promote products successfully, organizations must perform market research Market research : helps discover populations and regions that are most likely to purchase product Activities may include : Conducting interviews with consumers and retailers Building statistical models to predict sales volumes of different products

42. Targeted Marketing 42 Business Functions and Supply Chains Targeted marketing : promotes to people most likely to purchase products Database technology allows all companies to use targeted marketing, even small companies Can direct promotional dollars to customers most likely to buy Spam : cheap method of advertising involving sending mass e-mail communications

43. Targeted Marketing (continued) 43 Business Functions and Supply Chains

44. Targeted Marketing (continued) 44 Business Functions and Supply Chains Database management systems sort consumers based on demographic information Telemarketing : marketing over the telephone Caller has large database of consumer data Computer telephony integration : allows computer to use telephone line as input Caller ID can be used to locate customer data Data mining : uses large data warehouses to find trends and shopping habits of various demographic groups

45. Targeted Marketing (continued) 45 Business Functions and Supply Chains Targeted marketing and Web technologies enable retailers to personalize online shopping Software can track Web page click streams to determine customer preferences

46. Customer Service 46 Business Functions and Supply Chains Web-based customer service provides automated customer service 24/7 - Saves labor costs - Saves paper costs Includes FAQs, tracking systems, maintenance of customer profiles Artificial intelligence may be used to emulate a real-life customer service representative

47. Salesforce Automation 47 Business Functions and Supply Chains Equips traveling salespeople with information technology to improve productivity Makes sales presentations more efficient Allows salespeople to present different options for products and services at the customer location Laptops and personal digital assistants (PDAs)

48. Human Resource Management 48 Business Functions and Supply Chains Human resource management (HRM) can be classified into fi ve main activities : Employee record management Promotion and recruitment Training Evaluation Compensation and benefits management

49. Human Resource Management (continued) 49 Business Functions and Supply Chains

50. Employee Record Management 50 Business Functions and Supply Chains HR departments must keep personnel records To satisfy laws For payroll and tax calculation and deposit For promotion consideration For periodic reporting Human resource ISs are now digitized Saves space to store records, time to retrieve them, and costs of both

51. Employee Record Management (continued) 51 Business Functions and Supply Chains

52. Promotion and Recruitment 52 Business Functions and Supply Chains HR can select best-qualified person for position by searching database of applicants and existing employees for specific criteria Automating the selection process significantly minimizes time and money for recruitment Intranet : inter-organizational network that supports Web applications Allows HR manager to post position vacancy announcements that get wide exposure

53. Training 53 Business Functions and Supply Chains One important HR function is improving employee skills Multimedia software training is replacing classrooms and teachers May include 3D virtual reality simulated environments in which the employee must act Information technology reduces training costs dramatically

54. Evaluation 54 Business Functions and Supply Chains Employee ability must be periodically evaluated by supervisors May include evaluation of technical ability, communication skills, professional conduct, and general behavior Often a subjective process, which is a problem Provides tools to aid in evaluating every employee fairly and objectively Evaluation software tries to solve this problem by standardizing evaluation process

55. Compensation and Benefits Management 55 Business Functions and Supply Chains Compensation includes salary, hourly pay, commissions, and bonuses Programs calculate pay and taxes Software can help manage benefits Benefits database accessible through intranet or Internet Automatically generate paychecks and perform direct deposits

56. Supply Chain Management Systems 56 Business Functions and Supply Chains Overall inventory in the U.S. is decreasing while U.S. gross domestic product (GDP) is increasing Money saved from reduced inventory can be spent elsewhere Reduction in inventory attributed to the use of ISs, especially supply chain management systems Streamline operations throughout chain ERP systems can also serve as SCM systems, connecting multiple organizations

57. Supply Chain Management Systems (cont.) 57 Business Functions and Supply Chains

58. The Importance of Trust 58 Business Functions and Supply Chains Supply chain systems work best when all businesses in the chain are sharing information Trust between allied companies facilitates collaboration Risk of disclosing important information to competitors is present Risk of taking advantage of demand figures by charging higher prices is present

59. The Musical Chairs of Inventory 59 Business Functions and Supply Chains Small enterprises do not use SCM systems Inventory turns : the number of times the business sells its inventory per year Affect more powerful organization to which small enterprise is linked When SCMs of companies are not linked, demand requirements are unknown, so supply companies must overstock inventory One company “sits” with lean inventory while other stands with “overstock,” hence musical chairs

60. Collaborative Logistics 60 Business Functions and Supply Chains Web allows organizations from different industries to collaborate Businesses combine freight and share trucks Can optimize logistics by connecting SCM systems SCM systems can allow collaborative warehousing to share warehouse space

61. Enterprise Resource Planning 61 Business Functions and Supply Chains Many companies replace old, disparate information systems with enterprise applications Enterprise resource planning (ERP) system : manages daily operations and facilitates planning Current ERP market includes four vendors: SAP Oracle Microsoft Sage Software

62. Challenges and Disadvantages of ERP Systems 62 Business Functions and Supply Chains ERP systems pose many challenges : They are complex They often require special tailoring for specific organizations They may not support a company’s unique sets of business processes They are expensive A process that becomes a weak link in one area may negatively affect other integrated processes

63. Providing the Missing Reengineering 63 Business Functions and Supply Chains Although most reengineering projects of the 1990s failed, ERP systems helped realize many of those ideas ERP systems forced changes in processes ERP systems allow better planning and managing of processes at the organizational level instead of at the organizational unit level

64. Summary 64 Effectiveness is the degree to which a task is accomplished Efficiency is the ratio of output to input Productivity is the measure of people’s efficiency Information systems have been integrated into accounting services Financial information systems help managers track cash Computer-aided design (CAD) systems help engineers design new projects Computer-aided manufacturing (CAM) systems direct machines that assemble parts Business Functions and Supply Chains

65. Summary (continued) 65 Supply chain management (SCM) systems optimize workload, speed, and cost in supply chains Customer relationship management (CRM) includes the entire cycle of relationships with customers Human resource management systems facilitate staff selection and record keeping Multiple companies’ SCM systems can be linked, facilitating cooperation, which requires trust An enterprise resource planning (ERP) system can encompass all business processes, but is expensive and challenging Business Functions and Supply Chains