1. © Pearson Prentice Hall 2009 7-1 Using MIS 2e Chapter 7 Information Systems within Organizations David Kroenke 10/16 – 5:30AM

2. © Pearson Prentice Hall 2009 7-2 Study Questions Q1 – What are the differences between functional and cross- functional systems? Q2 – How do functional systems relate to the value chain? Q3 – What are the functions of the five basic functional systems? Q4 – What are the problems of functional systems? Q5 – What is business process design? Q6 – What are the functions and characteristics of the three major cross-functional systems?

3. © Pearson Prentice Hall 2009 7-3 Q1 – What are the differences between functional and cross-functional systems? Q2 – How do functional systems relate to the value chain? Q3 – What are the functions of the five basic functional systems? Q4 – What are the problems of functional systems? Q5 – What is business process design? Q6 – What are the functions and characteristics of the three major cross- functional systems?

4. © Pearson Prentice Hall 2009 7-4 Q1 – What are the differences between functional and cross-functional systems? Fig 7-1 History of IS Within Organizations This chart depicts the history of information systems beginning with calculation systems (non-computer-based), moving to functional systems (asynchronous, autonomous) that served a single department or function, and ending with integrated systems (systemic, synchronous) that span an entire organization.

5. © Pearson Prentice Hall 2009 7-5 Q1 – What are the differences between functional and cross-functional systems? Many companies are moving to integrated, cross-functional, or cross- departmental, systems that integrate activities of an entire business process, like a customer order. This type of system may also be called a process-based system. The purpose is to create holistic synergies across symbiotic agents to avoid sub-optimization. These systems are systemic and synchronous. Most organizations use a mixture of old-styled functional systems and newer, integrated systems. Old-styled autonomous, functional systems can work when the system does not need real-time data from other systems or does not provide real-time data to other systems. These systems are islands of automation. They do not provide the synergies from real-time communication, coordination, collaboration, and control across the value-added chain in the firm for visibility and velocity. These systems are autonomous and asynchronous. Integrated, cross-functional systems work best when the system needs real-time data from other systems or provides real-time data to other systems.

6. © Pearson Prentice Hall 2009 7-6 Q1 – What are the differences between functional and cross-functional systems? Q2 – How do functional systems relate to the value chain? Q3 – What are the functions of the five basic functional systems? Q4 – What are the problems of functional systems? Q5 – What is business process design? Q6 – What are the functions and characteristics of the three major cross- functional systems?

7. © Pearson Prentice Hall 2009 7-7 Q2 – How do functional systems relate to the value chain? Fig 7-3 Reorganized Porter Value Chain Model & Its Relationship to Functional Systems Porter’s value chain model from Chapter 3 is reorganized to show primary and support activities from a customer’s perspective, beginning with Marketing and Sales on the left, to Service and Support on the right. The five primary activities can be supported by five or more functional information systems. Systemic Synchronous Autonomous Asynchronous

8. © Pearson Prentice Hall 2009 7-8 Q1 – What are the differences between functional and cross-functional systems? Q2 – How do functional systems relate to the value chain? Q3 – What are the functions of the five basic functional systems? Q4 – What are the problems of functional systems? Q5 – What is business process design? Q6 – What are the functions and characteristics of the three major cross- functional systems?

9. © Pearson Prentice Hall 2009 7-9 Q3 – What are the functions of the five basic functional systems? It’s important to understand that a functional application is a computer program with features and functions to support a particular business activity. A functional system, on the other hand, is a complete information system that uses five components — hardware, software, data, procedures, and people. You can buy hardware and license software. But you cannot buy data, procedures, and people. You must develop and grow data, procedures, and people.

10. © Pearson Prentice Hall 2009 7-10 Q3 – What are the functions of the five basic functional systems? Fig 7-4 Functions of Sales & Marketing Systems This figure shows five functions of a Sales and Marketing System:  Lead-generation  Lead-tracking  Customer- management  Sales forecasting  Product and brand management Without this data, there is no feedback (visibility), and you cannot measure the effectiveness of the sales & marketing systems to make adjustments (velocity).

11. © Pearson Prentice Hall 2009 7-11 Q3 – What are the functions of the five basic functional systems? Fig 7-6 Functions of Operations Information Systems This figure shows the four functions of an operations information system: order entry, order management, finished-goods inventory management, and customer service. Operations activities concern the management of finished-goods inventory and the movement of goods from that inventory to the customer.

12. © Pearson Prentice Hall 2009 7-12 Q3 – What are the functions of the five basic functional systems? Fig 7-7 Functions of Manufacturing Information Systems This figure shows the four functions of a manufacturing information system. Manufacturing inventories include raw materials, work-in-process, and finished goods. Inventories can be viewed as an asset or liability.

13. © Pearson Prentice Hall 2009 7-13 Q3 – What are the functions of the five basic functional systems? Fig 7-8 Examples of RFID Tags Inventory quantities have been entered manually and by scanning with bar codes. Now, radio frequency identification tags (RFID) are becoming a popular way to automatically track inventory items. RFID tags are small computer chips embedded in containers, products, or equipment. Data are transmitted from the tags to sensors that provide computer processing support for inventory management. RFID tags increase your visibility and velocity.

14. © Pearson Prentice Hall 2009 7-14 Q3 – What are the functions of the five basic functional systems? Fig 7-9 Bill of Materials Example This figure shows how a bill of materials helps track various components needed to manufacture a product. You increase your visibility for production planning and inventory management.

15. © Pearson Prentice Hall 2009 7-15 Q3 – What are the functions of the five basic functional systems? Fig 7-10 Sample Manufacturing Plan The figure below is a sample manufacturing plan that a manufacturing information system might produce. This picture increases your visibility and velocity.

16. © Pearson Prentice Hall 2009 7-16 Q3 – What are the functions of the five basic functional systems? Fig 7-11 Functions of Human Resources Information Systems The five human resources information system functions are shown below.

17. © Pearson Prentice Hall 2009 7-17 Q3 – What are the functions of the five basic functional systems? Fig 7-12 Functions of Accounting Information Systems Eight functions of a combined accounting and finance information system are shown below.

18. © Pearson Prentice Hall 2009 7-18 Q1 – What are the differences between functional and cross-functional systems? Q2 – How do functional systems relate to the value chain? Q3 – What are the functions of the five basic functional systems? Q4 – What are the problems of functional systems? Q5 – What is business process design? Q6 – What are the functions and characteristics of the three major cross- functional systems?

19. © Pearson Prentice Hall 2009 7-19 Q4 – What are the problems of functional systems? Fig 7-13 Major Problems of Isolated Functional Systems Here are some of the problems caused by functional information systems that, by their nature, don’t integrate business processes and data throughout an organization. Fig 7-14 Example of System Integration Problem

20. © Pearson Prentice Hall 2009 7-20 Q1 – What are the differences between functional and cross-functional systems? Q2 – How do functional systems relate to the value chain? Q3 – What are the functions of the five basic functional systems? Q4 – What are the problems of functional systems? Q5 – What is business process design? Q6 – What are the functions and characteristics of the three major cross- functional systems?

21. © Pearson Prentice Hall 2009 7-21 Q5 – What is business process design? Companies are redesigning their business processes to take advantage of cross-functional information systems. They are taking advantage of activity linkages and integrating activities in what’s called business process design, sometimes called redesign. The purpose is to create holistic synergies across symbiotic agents to avoid sub-optimization. There are a lot of challenges in designing and redesigning business processes.  It’s expensive, time consuming, and difficult to simultaneously keep up with normal business activities and reengineer processes.  Employees resist the changes in work responsibilities and normal habits because you are moving their cheese.  The ultimate outcome is always uncertain. Will the new processes work better than the old ones? Will employees have a job?

22. © Pearson Prentice Hall 2009 7-22 Q5 – What is business process design? Fig 7-15 Example of SAP R/3 Ordering Process Inherent processes built into business process design software require an organization to conform its activities to the program. That can save a company substantial design costs. However, redesigning processes to fit the inherent processes in the software can also cause disruptions to operations and employees. This figure provides an example of inherent processes in an ordering process.

23. © Pearson Prentice Hall 2009 7-23 Q1 – What are the differences between functional and cross-functional systems? Q2 – How do functional systems relate to the value chain? Q3 – What are the functions of the five basic functional systems? Q4 – What are the problems of functional systems? Q5 – What is business process design? Q6 – What are the functions and characteristics of the three major cross-functional systems?

24. © Pearson Prentice Hall 2009 7-24 Q6 – What are the functions and characteristics of the three major cross- functional systems? There are three major cross-functional systems: customer relationship management (CRM), enterprise resource planning (ERP), and enterprise application integration (EAI). A Customer Relationship Management (CRM) system offers these benefits in database system and set of reports: Integration of primary business activities directly related to customer orders and service in the value chain Tracking of all customer interactions Storage of customer data in a single database which eliminates possibility of inconsistent data Tracking customer activities across the complete customer life cycle to evaluate efficiency and effectiveness.

25. © Pearson Prentice Hall 2009 7-25 Q6 – What are the functions and characteristics of the three major cross- functional systems? Figure 7-16, to the top right, shows how a CRM system integrates the primary business activities in the value chain model. Figure 7-17, to the bottom right, depicts the four phases of the customer life cycle and shows how a CRM system integrates them into three major processes: solicitation, lead-tracking, and relationship management.

26. © Pearson Prentice Hall 2009 7-26 Q6 – What are the functions and characteristics of the three major cross- functional systems? Fig 7-18 CRM Components The chart below shows the major components of a Customer Relationship Management (CRM) system: solicitation, lead tracking (presale), and relationship management (post sale).

27. © Pearson Prentice Hall 2009 7-27 Q6 – What are the functions and characteristics of the three major cross- functional systems? Fig 7-19 CRM Centered on Integrated Customer Database Customer Relationship Management (CRM) systems store data in a single database and link CRM processes to one another.

28. © Pearson Prentice Hall 2009 7-28 Q6 – What are the functions and characteristics of the three major cross- functional systems? The second type of cross-functional system is an Enterprise Resource Planning (ERP) system that provides more integration than a CRM by integrating primary value chain activities with human resources, accounting and infrastructure, and procurement and technology support activities across the enterprise. Fig 7-20 ERP Systems and the Value Chain

29. © Pearson Prentice Hall 2009 7-29 Q6 – What are the functions and characteristics of the three major cross- functional systems? The characteristics of an ERP system are presented in figure 7-21 to the right. The benefits of an ERP are presented in figure 7-22 below.

30. © Pearson Prentice Hall 2009 7-30 Q6 – What are the functions and characteristics of the three major cross- functional systems? Fig 7-23 ERP Implementation Here are the required tasks to implement an ERP system:  determine current and ERP models  remove inconsistencies between the two models  implement the ERP system.

31. © Pearson Prentice Hall 2009 7-31 Q6 – What are the functions and characteristics of the three major cross- functional systems? An Enterprise Application Integration (EAI) system is the third type of cross-functional system.  When an ERP system is inappropriate for an organization, the organization can still integrate its existing systems through layers of software that connect applications together.  EAI systems enable a business’s existing applications to communicate and share data, providing many of the benefits of a cross-functional system without some of the disadvantages.  A business can leverage its existing systems while enabling a gradual move to a more complicated ERP system.

32. © Pearson Prentice Hall 2009 7-32 Q6 – What are the functions and characteristics of the three major cross- functional systems? Fig 7-24 Enterprise Application Integration (EAI) Architecture An EAI system doesn’t have a central database but uses metadata to provide the organization with a virtual integrated database as this figure shows.

33. © Pearson Prentice Hall 2009 7-33 Q6 – What are the functions and characteristics of the three major cross- functional systems? The benefits an EAI offers to an organization include: Lower costs to implement than a full ERP. Less disruption to operations and employees. Integration of selected parts of the organization. A step-wise implementation process that allows the business eventually to achieve the full benefits of an ERP. The steps for an EAI system implementation include: Identifying sources of major isolation problems. Specifying the scope of the EAI implementation. Developing and implementing selected EAI systems. Assessing the benefits of EAI. Stopping further EAI development, expanding EAI efforts, or switching to ERP.