1. Chapter 8: Functional, Enterprise, and Interorganizational Systems
Introduction to Information Technology 2nd Edition Turban, Rainer & Potter © 2003 John Wiley & Sons, Inc.
Chapter 8:
Functional, Enterprise, and Interorganizational Systems
Prepared by:
Roberta M. Roth, Ph.D.
University of Northern Iowa

2. Chapter Preview In this chapter, we will study:
The role and function of Management Information Systems (MIS) and Transaction Processing Systems (TPS) in organizations
How functional information systems support Accounting & Finance; Sales and Marketing; Production and Operations; and Human Resource Management
How and why information systems should be integrated
The role of interorganizational systems

3. Functional Information Systems
Characteristics:
Comprised of several small information system focused on specific activities
Specific IS applications can be
completely independent, or
integrated to form a coherent departmental functional system
also, can be integrated across departmental lines to support a broad business process (cross-departmental)
Interface with each other to form the organization wide information system
Interface with the environment

4. Functional Information Systems (continued)
Management Information Systems
Provide routine information to managers in the functional areas
Business
Transactions
TPS
Management
Information
System
Data Warehouse
Databases
Internal
External
Reports
Scheduled
Demand
Exception

5. Transaction Processing Systems
What is a transaction?
Every business event that occurs during business operations
Business events (transactions) can trigger other business events
Each event (transaction) can be described by a number of data items
Transaction processing systems (TPS) are designed to record and store the data that describes every business event that occurs

6. Transaction Processing Systems (continued)
TPSs were the first to be automated – repetitive, consistent, high-volume tasks are ideal candidates for computerization
TPSs provide foundation for all other information systems
Many TPSs are outward-reaching and convey impressions to the customers about the quality of the business
Customer
makes a
purchase
POS
system
Transaction file
Update
files
Inventory file
Sales file

7. Transaction Processing System (continued)
Some characteristics of TPSs
Process large volume of data
Data sources mostly internal, and output intended mainly for internal audience
TPS operate regularly (on demand, daily, weekly, etc.)
Require large storage (database) capacity
Require high processing speed (due to the high volume)
Input and output data known and well-understood (highly structured)
Involves high level of detail but low computation complexity
Requires high level of accuracy, data integrity, and security
Requires high processing reliability; organizations cannot function for long without TPSs
Inquiry processing supported

8. Methods of Processing Transactions
Batch Processing: simple, inexpensive
Employee
timecards
Data entry
of timecard
data
Payroll transactions
Employee data:
Pay rate
Withholdings
Etc.
Employee
paychecks
Process
payroll
Cash on hand
Payroll summary

9. Methods of Processing Transactions
Online Processing: complex, expensive
Customer
makes a
purchase
POS
system
Transaction history file
Inventory file
Sales file

10. Methods of Processing Transactions
Hybrid Processing: simple, inexpensive, more accurate
Badge reader
collects employee
work data
Payroll transactions
Whenever employees
arrive / leave work
Process
payroll
Employee data:
Pay rate
Withholdings
Etc.
Employee
paychecks
Cash on hand
Payroll summary
Normal payroll
schedule:
weekly, monthly,
etc.

11. TPS Today
Traditionally, TPS were implemented on mainframe systems using batch processing
Online Transaction Processing (OLTP)
can be built on a client/server architecture
can save money
Internet (Intranet) Transaction Processing
allows multimedia data transfer
fast response time
storage of large databases of graphics and videos
real time
low cost

12. Typical TPS Tasks Order processing General ledger
Accounts payable and receivable
Inventory management, shipping, and receiving
Payroll
Periodic reports and statements

13. Accounting and Finance Systems
Financial Planning and Budgeting
Financial and economic forecasting
Budgeting
Investment Management
Access to financial and economic reports
Financial analysis
Financial and Economic Forecasting
indicators are available on the Internet
many software packages available
Planning for Cash Management
build a decision support model
project cash inflows and outflows
Budgeting
express financial plans
allocate resources
Access to financial and economic reports
hundreds of sources for the financial and economic reports and news
Financial analysis
Executed with a spreadsheet program or with commercially available, ready-made decision support software
Performance analysis
Risk analysis
Investment strategy analysis

14. Accounting and Finance Systems
Financial Controls
Budgetary Controls
Auditing
Financial Health Analysis
Profitability Analysis and Cost Control
Budgetary Controls
Summarize actual expenditures and compare to budget
Auditing
Software helps ensure the accuracy of financial records
Financial Health Analysis
Assess financial performance and interpret results, sometimes with help of an expert system
Profitability Analysis and Cost Control
Compute accurate profitability for individual products and for entire organization

15. Marketing & Sales Systems
Distribution Channel (definition)
providing the goods or services to the customer; may extend through various intermediaries such as wholesalers and retailers
Manufacturing
Distribution
R&D/Design
Accounting/Finance
Company
Other Channel Systems
support all marketing linkages, such as after-sales customer support
Dealer Systems
Delivery Systems
Customer Support
Systems
Sales Systems
Target Marketing
Market Intelligence
Channel

16. Marketing & Sales Systems (continued)
Customer Service
customer profiles and preference analysis
mass customization – high volume production of specialized product
targeted advertising
customer inquiry systems and automated Help Desk
Telemarketing
advertisement and reaching customers
order processing
customer service
sales support
account management
Customer Service
Customer Profiles and Preference Analysis
Mass Customization – high volume production of specialized product
Targeted advertising
Customer Inquiry Systems and Automated Help Desk
Telemarketing
advertisement and reaching customers
order processing
customer service
sales support
account management

17. Marketing & Sales Systems (continued)
Distribution Channels
Delivery and shipping management
Improve retail stores
Marketing Management
Set and monitor prices of products or services
Monitor and evaluate salesperson productivity
Evaluate profitability of products / customers
Assess sales trends
Analyze new products, services, and markets

18. Marketing & Sales Systems (continued)
Ethical and Social Issues in IT-supported Sales Activities
Information collection and usage
Privacy concerns
Current trend – Customer Relationship Management (CRM)
Focus is on developing a one-to-one relationship with customers

19. Production & Operations Management Systems
Logistics and Material Management
Logistics Management
Ordering, purchasing, and inbound and outbound shipping
Inventory Management
Determine how much inventory to carry
Quality Control
Monitor and report quality of materials, work in process, and finished goods

20. Production & Operations Management Systems (continued)
Planning Production/Operations
Material Requirements Planning; MRP II
Just-In-Time
Project Management (PERT & CPM)
Short-term scheduling
Automatic Design Work and Manufacturing
Computer Aided Design (CAD)
Computer Aided Manufacturing (CAM)
Computer Integrated Manufacturing (CIM)

21. Human Resources Management Systems
Recruitment
Keep track of all open positions
Advertise positions via Internet
Employee selection
Human Resources Maintenance and Development
Training and retraining employees
Performance assessment
Turnover, tardiness, and absenteeism analysis
Recruitment
finding, testing, and deciding which employees to hire
Human Resources Maintenance and Development
Training and Human Resources Development
Performance Evaluation
Turnover, Tardiness, and Absenteeism Analyses
Human Resources Management and Planning
Personal files and skills inventory
Benefits administration
Government reports
Personnel planning
Succession planning and implementation –
Labor-Management Negotiations

22. Human Resources Management Systems
Human Resources Management and Planning
Maintain personnel files and skills inventory
Administer benefits
Comply with government reporting
Personnel planning
Succession planning
Labor negotiations
Recruitment
finding, testing, and deciding which employees to hire
Human Resources Maintenance and Development
Training and Human Resources Development
Performance Evaluation
Turnover, Tardiness, and Absenteeism Analyses
Human Resources Management and Planning
Personal files and skills inventory
Benefits administration
Government reports
Personnel planning
Succession planning and implementation –
Labor-Management Negotiations

23. Integrated Information Systems
Reasons for Integration
Existing, functionally oriented information systems are deficient:
cannot give employees all the information they need
do not let different departments communicate effectively
crucial sales, inventory, and production data often entered manually into separate computer systems

24. Integrated Information Systems
How to Integrate Information Systems
Connect existing systems
maximize the use of existing systems and allows the addition of new applications
Using supply chain management software
Overcomes the isolation of traditional departmental structure by integrating processing across several functional areas
Use Enterprise Resource Planning software
control all major business processes with a single software architecture in real time
increased efficiency to improve quality, productivity, and profitability

25. Interorganizational Information Systems (IOS)
Electronic systems involving information flow among two or more organizations in an on-going relationship
Objective – efficient transaction processing
Many large businesses require suppliers to be linked to them though IOS applications
IOSs may be implemented with
Private, third-party networks (value-added networks)
Publicly accessible networks (Internet)

26. Interorganizational Systems (continued)
Types of Interorganizational Systems
Global systems
Electronic data interchange (EDI)
Electronic funds transfer (EFT)
Extranets
Shared databases
Integrated messaging
Global systems – systems connecting two or more companies in two or more countries
Electronic data interchange (EDI) – electronic movement of business documents between business partners
Electronic funds transfer (EFT) – transfer of money using telecommunications
Extranets – extended Intranets that link business partners
Shared databases – databases that business partners both have access to
Integrated messaging – delivery of and fax messages through a single communication system.

27. Issues in IOS / Global IS Design
Cultural differences
Economic and political differences
Cross-border data transfer concerns
Global systems – systems connecting two or more companies in two or more countries
Electronic data interchange (EDI) – electronic movement of business documents between business partners
Electronic funds transfer (EFT) – transfer of money using telecommunications
Extranets – extended Intranets that link business partners
Shared databases – databases that business partners both have access to
Integrated messaging – delivery of and fax messages through a single communication system.

28. Chapter Summary Role and function of TPSs Role and function of MISs
In-depth review of how Iss support various business functional areas
Need and methods for integrating functional information systems
Interorganizational and global information systems provide great opportunities but also great complexity
Global systems – systems connecting two or more companies in two or more countries
Electronic data interchange (EDI) – electronic movement of business documents between business partners
Electronic funds transfer (EFT) – transfer of money using telecommunications
Extranets – extended Intranets that link business partners
Shared databases – databases that business partners both have access to
Integrated messaging – delivery of and fax messages through a single communication system.

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