1. Management Information Systems, Sixth Edition Chapter 3: Business Functions and Supply Chains

2. Management Information Systems, Sixth Edition2 Objectives 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

3. Management Information Systems, Sixth Edition3 Objectives (continued) Enumerate the purposes of customer relationship management systems Explain enterprise resource planning systems

4. Management Information Systems, Sixth Edition4 Effectiveness and Efficiency Information technology makes work more effective, more efficient, or both Effectiveness: the degree to which a goal is achieved Efficiency: 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

5. Management Information Systems, Sixth Edition5 Effectiveness and Efficiency (continued) Productivity: efficiency of human resources –Productivity improves when fewer workers are required to achieve the same goal Productivity tools: software applications that improve productivity ISs contribute to both effectiveness and efficiency of businesses

6. Effectiveness and Efficiency (continued) 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 Management Information Systems, Sixth Edition6

7. 7 Effectiveness and Efficiency (continued)

8. Management Information Systems, Sixth Edition8 Effectiveness and Efficiency (continued)

9. Management Information Systems, Sixth Edition9 Accounting 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

10. Management Information Systems, Sixth Edition10 Accounting (continued) 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

11. Accounting (continued) Cost-accounting systems: accumulate data about costs involved in producing specific products Accounting ISs are used for managerial purposes for budgeting and cost control Management Information Systems, Sixth Edition11

12. Management Information Systems, Sixth Edition12 Accounting (continued)

13. Management Information Systems, Sixth Edition13 Finance 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

14. Management Information Systems, Sixth Edition14 Finance (continued)

15. Management Information Systems, Sixth Edition15 Cash Management 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

16. Management Information Systems, Sixth Edition16 Investment Analysis and Service 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

17. Investment Analysis and Service (continued) 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) Management Information Systems, Sixth Edition17

18. Management Information Systems, Sixth Edition18 Engineering 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 Information systems can contribute significantly to minimizing time to market

19. Management Information Systems, Sixth Edition19 Engineering (continued) Computer-aided design (CAD): tools to create, modify, and store designs and drawings electronically Rapid prototyping: 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 Computer-aided manufacturing (CAM): systems that instruct machines how to manufacture parts and assemble products

20. Management Information Systems, Sixth Edition20 Engineering (continued)

21. Management Information Systems, Sixth Edition21 Supply Chain Management 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 –Instrumental in reducing manufacturing cost –In retail the manufacturing phase does not exist and in service industries the term “manufacturing” is not applicable or meaningless. CAD systems often transfer data automatically to CAM systems

22. Supply Chain Management (continued) 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 Management Information Systems, Sixth Edition22

23. Supply Chain Management (continued) Management Information Systems, Sixth Edition23

24. Management Information Systems, Sixth Edition24 Material Requirements Planning and Purchasing Material requirements planning (MRP): inventory control –Inventory based on future need not on past use –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

25. Material Requirements Planning and Purchasing (continued) Bill of materials (BOM): list of all raw materials and subcomponent demands to produce a product 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. Management Information Systems, Sixth Edition25

26. Management Information Systems, Sixth Edition26 Manufacturing Resource Planning Manufacturing resource planning (MRP II): combines MRP with other related activities to plan the entire manufacturing process –Can quickly modify schedules to accommodate orders, track production in real time & fix quality slippage –Uses master production schedule Master production schedule: specifies how production capacity is to be used to meet customer demands and maintain inventory –It helps balance production economies, customer demands, manufacturing capacity, inventory levels over a planning horizon of several months. Just-in-time manufacturing: suppliers ship parts directly to assembly lines as needed –Avoids warehousing costs (e.g. Cisco)

27. Management Information Systems, Sixth Edition27 Group Activity – Mini Project 1 Using the link below learn about forecasting technique for consumer demands. –http://www.purchasesmarter.com/articles/consum er-demand-forecasting-popular-techniques-part2- exponential-smoothing.aspxhttp://www.purchasesmarter.com/articles/consum er-demand-forecasting-popular-techniques-part2- exponential-smoothing.aspx Using C++ and based on the assigned items for consumer demand assigned to you, create a forecast with Smoothing Parameter a values of 0.1 and 0.2 respectively. Deadline February 29, 2018 ) (Monday)

28. Management Information Systems, Sixth Edition28 Monitoring and Control Information systems are designed to control manufacturing processes as well as monitor them Controlling processes helps ensure quality –Example: Ford Motor Company’s Project Execution.

29. Management Information Systems, Sixth Edition29 RFID in SCM Radio frequency identification (RFID): a technology containing circuitry that allows recording of information about a product Electronic product code (EPC): 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

30. RFID in SCM (continued) Management Information Systems, Sixth Edition30

31. RFID in SCM (continued) Management Information Systems, Sixth Edition31

32. Management Information Systems, Sixth Edition32 Customer Relationship Management 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

33. Management Information Systems, Sixth Edition33 Customer Relationship Management (continued)

34. Management Information Systems, Sixth Edition34 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 Targeted Marketing

35. Targeted Marketing (continued) Management Information Systems, Sixth Edition35

36. Management Information Systems, Sixth Edition36 Targeted Marketing (continued) 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

37. Targeted Marketing (continued) Targeted marketing and Web technologies enable retailers to personalize online shopping Software can track Web page click streams to determine customer preferences Management Information Systems, Sixth Edition37

38. Management Information Systems, Sixth Edition38 Human Resource Management Human resource management (HRM) can be classified into five main activities: –Employee record management –Promotion and recruitment –Training –Evaluation –Compensation and benefits management

39. Management Information Systems, Sixth Edition39 Human Resource Management (continued) F

40. Management Information Systems, Sixth Edition40 Employee Record Management 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

41. Employee Record Management (continued) Management Information Systems, Sixth Edition41

42. Management Information Systems, Sixth Edition42 Promotion and Recruitment 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

43. Management Information Systems, Sixth Edition43 Training 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

44. Management Information Systems, Sixth Edition44 Evaluation 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 Evaluation software tries to solve this problem by standardizing evaluation process –Provides tools to aid in evaluating every employee fairly and objectively

45. Management Information Systems, Sixth Edition45 Compensation and Benefits Management Compensation includes salary, hourly pay, commissions, and bonuses Programs calculate pay and taxes –Automatically generate paychecks and perform direct deposits Software can help manage benefits –Benefits database accessible through intranet or Internet

46. Management Information Systems, Sixth Edition46 Supply Chain Management Systems 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

47. Management Information Systems, Sixth Edition47 Supply Chain Management Systems (continued)

48. Management Information Systems, Sixth Edition48 The Importance of Trust 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

49. Management Information Systems, Sixth Edition49 The Musical Chairs of Inventory Small enterprises do not use SCM systems –Affect more powerful organization to which small enterprise is linked Inventory turns: the number of times the business sells its inventory per year 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

50. Management Information Systems, Sixth Edition50 Collaborative Logistics 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

51. Management Information Systems, Sixth Edition51 Enterprise Resource Planning 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

52. Challenges and Disadvantages of ERP Systems 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 Management Information Systems, Sixth Edition52

53. Providing the Missing Reengineering 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 Management Information Systems, Sixth Edition53

54. Management Information Systems, Sixth Edition54 Summary 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

55. Management Information Systems, Sixth Edition55 Summary (continued) Computer-aided design (CAD) systems help engineers design new projects Computer-aided manufacturing (CAM) systems direct machines that assemble parts 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

56. Management Information Systems, Sixth Edition56 Summary (continued) 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