1. Information Systems Within Organizations
Chapter 7
Information Systems Within Organizations

2. Agenda Internal IS Types Types of Functional Systems
Problems of Functional Systems
Competitive Strategy and Value Chains
Business Process Design
Problems of Business Process Design
Inherent Process and Software
Types of Integrated, Cross-Functional Information System
Discuss and Case Study

3. Internal IS Types Calculation Systems Functional Systems
Integrated, Cross-Functional Systems

4. Calculation Systems
Purpose: to relieve workers of tedious, repetitive calculations.
Examples: payroll; general ledger, inventory
Problem: very little information

5. Functional Systems
Purpose: facilitate the work and generate information for a single department or function
Example: human resources from payroll system, financial reporting from general ledger, manufacturing system from inventory
As a natural expansion of the capabilities from the calculation systems
Problem: islands of automation

6. Integrated, Cross-Function Systems
Cross-departmental or cross-functional systems since they (cross department boundaries
Purpose: to integrate the activities in an entire business process for efficiency
Problems:difficulty to coordinate between department activities

7. Types of Functional Systems
Human resources systems
Accounting and finance systems
Sales and marketing systems
Operations systems
Manufacturing systems
Manufacturing-planning systems
Manufacturing-scheduling systems
Manufacturing operations systems

8. Human Resources Systems
Recruitment
Compensation
Evaluation (assessment)
Development and training
Human resource planning

9. Functions Supported by Human Resources System

10. Accounting and Finance Systems - I
Financial reporting applications: use the general ledger data to produce financial statements and reports for management, investors, and federal reporting agencies
Cost accounting applications: determine the marginal cost and relative profitability of products
Budgeting applications: allocate and schedule revenues and expenses and compares actual financial results to the plan

11. Accounting and Finance Systems - II
Accounts receivable applications: record receivables, payments against receivables, and manage account aging and collections
Cash management applications: schedule payments and receivables and plan cash usage to balance the cash needs against cash availability

12. Accounting and Finance Systems

13. Sales and Marketing Systems
Lead-tracking systems: store data about potential customers, contact history, and their product interests
Sales forecasting systems: to predict future sales
Customer management systems: maintain customer contact data, credit status, past orders, and other data
Product management systems: evaluate the success of products and assess the effectiveness of marketing activities such as promotions, advertising, sales channels, etc.

14. Sales and Marketing System

15. Operations Systems
Finished-goods inventory applications: manage the movement of goods from the inventory to the customer
Order entry systems: record customer purchases
Order management systems: track orders, arrange and schedule shipping, process exceptions (out of stock), inform customers of order status, and schedule delivery dates
Customer service applications: allow customers to call and ask questions about products, order status, problems, and make complaints

16. Operations Systems

17. Manufacturing Systems - I
Purpose: facilitate the production of goods
Inventory systems
Inventory control: and policy (track goods and materials into, out of, and between inventories use UPC and RFID)
Inventory management: use past data to compute stocking levels, reorder levels, and reorder quantities in accordance with inventory policy
Just-in-time (JIT) inventory policy: have production inputs (both raw materials and work in process) delivered to the production site whenever is needed to reduce the inventory to the minimum
Manufacturing planning systems: plan materials, equipment, people, and facilities for manufacturing
Bill of material (BOM): a list of every materials that comprise a product

18. Manufacturing Systems - II
Manufacturing scheduling systems: create a master production schedule (MPS)
Push Manufacturing process
Pull Manufacturing process
Material requirement planning (MRP): only for materials
Manufacturing resource planning (MRP II): for materials, personnel, and machinery and what-if analyses on variance in schedules
Manufacturing operations: to control machinery and production process (robots)

19. Manufacturing Activities Supported by Information Systems

20. Problems of Functional Systems
Duplicated data: each application with its own database
Disjointed business applications
Limited information due to lack of integrated enterprise data
Inefficient overall activities because of isolated decisions
Costly

21. Competitive Strategy
Michael Porter’s “Competitive Advantage” in the mid-1980 to choose the information system applications
Competitive advantage
Differentiation across an industry
Differentiation on a particular industry segment
Low cost across an industry
Low cost on a particular industry segment

22. Value Chain - I
Value chains: networks of business activity within an organization with five primary activities and four support activities
Primary activities
Inbound logistics
Operations
Outbound logistics
Marketing and sales
Service
Four support activities
Firm infrastructure: department
Human Resources
Technology Development: research and development
Procurement
Value: the total revenue that a customer is willing to spend for a product or service

23. Porter’s Value Chain Model

24. Value Chain - II
Each primary activity accumulates costs and adds value to the product
Total margin of the chain: the difference between the total value added and the total costs incurred
Linkages
Interactions across value activities
Important sources of efficiencies
Supported by information systems
Examples: MRP and MRP II use linkages to reduce inventory costs

25. Business Process Design
Business process design (business process redesign)
Based on the value chain as a network of value-creating activities
Does not automate or improve existing functional systems
Create new, more efficient, business processes to integrate the activities of all departments in a value chain
Take advantage of as many activities of all departments involved in a value chain

26. Problems of Business Process Design
Expensive and difficult
Highly trained systems analysts for interviewing key personnel and documenting the existing system as well as one or more systems alternatives
Managers reviewing the results of the analysts’ activity, usually many times, and attempting to develop new, improved information systems and implement those new business processes
Employees resistance to change
Unknown about the effective of the ultimate outcome

27. Inherent Processes and Software
The process build in software such as SAP or Oracle
Pros
Save the organization the time, expense, and agony of process design
Enable the organization to benefit immediately from the tried and tested cross-departmental processes
Cons
Organization must conform its activities to those processes in order to use the software
Such change will be disruptive to ongoing operations and disturbing to employees

28. Types of Integrated, Cross-Functional Information System
Customer relationship management (CRM)
Enterprise resource planning (ERP)
Enterprise application integration (EAI)

29. Customer relationship management
The set of business processes for attracting, selling, managing, and supporting customers
Addresses all activities and events relating to the customer and providing a single repository for data about all customer interactions
Components
Solicitation: Web, , direct mail, catalog, and etc.
Lead tracking (presale): strategies for sales calls and follow-ups
Relationship management (postsale): sales management applications and customer support applications

30. CRM Components

31. Enterprise Resource Planning - I
Integrate all of the organization’s principal processes such as SAP
Outgrowth of MRP II manufacturing systems for manufacturing company
Characteristics
A cross-functional, process view of the entire organization
A collection of interrelated activities within the entire organization
A formal approach based on documented and tested business models
A comprehensive set of inherent processes for all organizational activities
SAP defines the set as the process blueprint and documents each process with diagrams with standardized symbols
A centralized database

32. Enterprise Resource Planning - II
Problems
Difficult to implementing
Process change challenges
Cost: new hardware, software, procedures, employee training, converting data, and Other developmental expenses
Time
Benefits
Efficient business processes
Inventory reduction
Lead time reduction
Improved customer service
Greater, real-time insight into organization
Higher profitability

33. Enterprise Resource Planning - III
Implementation
Top executive total support
Model the current business processes
Compare these processes to the ERP blueprint processes and note the differences
Eliminate the differences by either changing the existing business process to match the ERP process or altering the ERP system
Train users on the new processes, procedures, and to use of the ERP system features and functions
Conduct a simulation test of the new system to identify problems
Convert its data, procedures, and personnel to the new ERP system

34. Enterprise Application Integration
Functions
Integrate existing applications by providing layers of software that connect applications
Enable existing applications to communicate and share data
Provide integrated information
Leverage existing system
Enable a gradual move to ERP

35. Discussion Ethics (205a-b) Problem Solving (211a-b) Security (217a-b)
State the impacts on the overall operations of the organization generated by that particular salesperson?
Problem Solving (211a-b)
Summarize the strategies to reduce the employee’s resistance from implementing and using a new information system.
Security (217a-b)
State the strategies to prevent any disaster and crime to a centralized database.
Reflections (219a-b)
State your solution to gain the competitive advantages by using the ERP that has become a standard information system for operating efficiency in the industry.

36. Case Study
Case 7-1 (223 – 225) questions 2, 3, 4, and 5a

37. Points to Remember Internal IS Types Types of Functional Systems
Problems of Functional Systems
Competitive Strategy and Value Chains
Business Process Design
Problems of Business Process Design
Inherent Process and Software
Types of Integrated, Cross-Functional Information System
Discuss and Case Study