1. Chapter 11 Information Systems Within the Organization

2. Chapter Outline 11.1 Transaction Processing Systems 11.2 Functional Area Information Systems 11.3 Enterprise Resource Planning Systems 11.4 Reports © Toh Kheng Ho/Age Fotostock America, Inc.

3. Learning Objectives 1.Explain the purpose of transaction processing systems. 2.Explain the types of support information systems can provide for each functional area of the organization. 3.Identify advantages and drawbacks to businesses implementing an enterprise resource planning system. 4.Discuss the three major types of reports generated by the functional area information systems and enterprise resource planning systems, providing examples of each type.

4. Introduction Opening Case: Henthorn Mower & Engine Service and ADP Have you used any information systems? How about business-oriented information systems? © Stockbroker/Age Fotostock America, Inc.

5. 11.1 Transaction Processing Systems Transaction Business event that generates data worthy of being captured and stored in a database Transaction processing systems (TPSs) Monitor, collect, store, and process data generated from all business transactions Collect and store data continuously (real time) Provide inputs to other information systems Must be able to handle high volume of data efficiently Must avoid errors and downtime, record results accurately and securely, and maintain privacy and security Process data using the following techniques: Batch processing Stored data from TPS are grouped into batches. Organizations then prepare and process the batches periodically (e.g., hourly, nightly) Online Transaction Processing (OLTP) Business transactions are processed online as soon as they occur

6. Figure 11.1 How Transaction Processing Systems Manage Data

7. 11.2 Functional Area Information Systems Functional Area Information Systems (FAISs) Designed to support a functional area by increasing its internal effectiveness and efficiency Provide information mainly to lower- and middle-level managers in the functional areas via a variety of reports Examples: Information systems for accounting and finance Information systems for marketing Information systems for production/operations management (POM) Information systems for human resources management

8. Information Systems for Accounting and Finance Goal: To manage money flows into, within, and out of organizations Supported activities Financial planning and budgeting Managing financial transactions Investment management Control and auditing

9. Information Systems for Marketing A successful organization must understand its customers’ needs and wants in order to develop its marketing and advertising strategies around them. Information systems provide numerous types of support to the marketing function. See Chapter 12 for more information.

10. Information Systems for Production and Operations Management (POM) Goal: To transform inputs into useful outputs and manage the organization’s supply chain POM activities In-house logistics and materials management Inventory management Quality control Planning production and operation Computer-integrated manufacturing (CIM) Product life cycle management (PLM) Product life cycle

11. Information Systems for Human Resources Management Human Resource Information System (HRIS) Utilizes TPSs to manage benefits, keep records of vacation days, etc. Following other FAIS, HRIS moves to Intranet and the Web, delivering information through HR portal HR activities Recruitment HR maintenance and development HR planning and management

12. Figure 11.2 Examples of Information Systems Supporting Functional Areas

13. 11.3 Enterprise Resource Planning Systems Enterprise resource planning (ERP) systems Integrate the planning, management, and use of all organizational resources Are designed to break down the information silos of an organization by integrating the functional areas of the organization and enabling seamless information flows across them Have the same functionality as FAIS and produce the same reports but in a more integrated form Major ERP vendors SAP, Oracle, PeopleSoft (owned by Oracle)

14. ERP II Systems Interorganization ERP systems Web-enabled system of integrated software that links between a company’s key business systems and its customer, suppliers, distributors, etc. Examples: Oracle’s e-Business Suite, SAP’s mySAP Available in “modules” Core ERP Modules Financial Management Operations Management Human Resource Management Extended ERP Modules Customer Relationship Management Supply Chain Management Business Intelligence E-Business

15. Benefits and Limitations of ERP Systems Benefits Make organizations more flexible, agile, and adaptive Improve managers’ ability to make better, more timely decisions Improve quality of customer service, production, and distribution Limitations May require organizations to change existing business processes to fit the predefined business processes of the ERP software Implementing ERP can be complex, expensive, and time consuming

16. Figure 11.3 ERP II System

17. Enterprise Application Integration Enterprise application integration (EAI) Allows isolated information systems to connect with one another Also called middleware Alternative solution for organizations where ERP system is too difficult, time consuming, or expensive

18. 11.4 Reports All information systems generate reports Routine reports Produced at scheduled intervals Ad hoc (on-demand) reports Drill-down reports Users can click on an item in a report to see underlying details Key-indicator reports Summarize the performance of critical activities Comparative reports Provide comparisons across units and/or within the same unit over time Exception reports Include only information that falls outside certain threshold standards

19. What’s in IT for ME? Accounting Accounting information systems are a central component in any ERP package Finance Finance activities and modeling are key components of ERP systems Marketing ERP systems help reduce cost and improve customer service Production/Operations Management ERP supports collaboration in design, manufacturing, and logistics Human Resources Management HR managers use IT for some routine functions MIS MIS provides support for TPSs and other database applications at all levels of the organization in all functional areas

20. Closing Case 1: Truck Manufacturer Incorporates Information Systems in Trucks The Problem The IT Solution The Results Questions Why did PACCAR commit such a large amount of resources to electronic systems during the recession? What are the benefits of PACCAR’s new navigation system and diagnostic system to truck drivers? What are the benefits to PACCAR of collaborating with outside companies in building new systems?

21. Closing Case 2: Hilton Embraces Collaboration with Information Technology Partners The Problem The IT Solution The Results Questions Describe the reasons that Hilton decided to collaborate with IT partners rather than develop its own information systems in house. What are the problems associated with collaborating with five large strategic IT partners? Provide specific examples to support your answer