1. McGraw-Hill-Ryerson ©2011 The McGraw-Hill Companies, All Rights Reserved CHAPTER 2 Decision Making and Business Processes Opening Case: Information Systems Improve Business Processes at Grocery Gateway

2. 2-2 Copyright © 2011 McGraw-Hill Ryerson Limited Chapter Two Overview SECTION 2.1 - DECISION-MAKING AND INFORMATION SYSTEMS –Decision Making –Transactional Data & Analytical Information –TPS, DSS, and ESS –Artificial Intelligence –AI VS, TPS, DSS, and EIS SECTION 2.2 – BUSINESS PROCESSES –Understanding the Importance of Business Processes –Business Process Improvement –Business Process Reengineering –Business Process Modelling –Business Process Management

3. 2-3 Copyright © 2011 McGraw-Hill Ryerson Limited LEARNING OUTCOMES 1.Explain the difference between transactional data and analytical information, and between OLTP and OLAP. 2.Define TPS, DSS, and EIS and explain how organizations use these types of information systems to make decisions. 3.Understand what AI is and the four types of artificial intelligence systems used by organizations today.

4. 2-4 Copyright © 2011 McGraw-Hill Ryerson Limited LEARNING OUTCOMES 4.Describe how AI differs from TPS, DSS and EIS. 5.Describe the importance of business process improvement, business process reengineering, business process modelling, and business process management to an organization and how information systems can help in these areas.

5. McGraw-Hill-Ryerson ©2011 The McGraw-Hill Companies, All Rights Reserved SECTION 2.1 DECISION-MAKING SYSTEMS

6. 2-6 Copyright © 2011 McGraw-Hill Ryerson Limited Decision Making Decision-Making, Problem-Solving, and Opportunity-Seizing Information Systems

7. 2-7 Copyright © 2011 McGraw-Hill Ryerson Limited DECISION MAKING Reasons for the growth of decision-making information systems –People need to analyze large amounts of information –People must make decisions quickly –People must apply sophisticated analysis techniques, such as modeling and forecasting, to make good decisions –People must protect the corporate asset of organizational information

8. 2-8 Copyright © 2011 McGraw-Hill Ryerson Limited TRANSACTIONAL DATA & ANALYTICAL INFORMATION Moving up through the organizational pyramid, users move from requiring transactional information to analytical information

9. 2-9 Copyright © 2011 McGraw-Hill Ryerson Limited Transactional data & analytical information (Contd.) Online transaction processing (OLTP) – the capturing of transaction and event information using technology to (1) process the information according to defined business rules, (2) store the information, (3) update existing information to reflect the new information Online analytic processing (OLAP) – this is the analysis of summarized or aggregated information sourced form transaction processing systems, and sometimes from sources external to the organization.

10. 2-10 Copyright © 2011 McGraw-Hill Ryerson Limited Transaction Processing Systems Transaction processing system (TPS) - the basic business system that serves the operational level (analysts) in an organization A TPS performs OLTP and handles transactional data such as order-entry.

11. 2-11 Copyright © 2011 McGraw-Hill Ryerson Limited Decision Support Systems Decision support system (DSS) – models information to support managers and business professionals during the decision-making process. DSS are examples of management information systems. A DSS can be used on transactional data or analytic information depending of the depth of analysis desired.

12. 2-12 Copyright © 2011 McGraw-Hill Ryerson Limited Decision Support Systems Three quantitative models used by DSSs include: 1.Sensitivity analysis – the study of the impact that changes in one (or more) parts of the model have on other parts of the model 2.What-if analysis – checks the impact of a change in an assumption on the proposed solution 3.Goal-seeking analysis – finds the inputs necessary to achieve a goal such as a desired level of output

13. 2-13 Copyright © 2011 McGraw-Hill Ryerson Limited Decision Support Systems “What-if” analysis

14. 2-14 Copyright © 2011 McGraw-Hill Ryerson Limited Decision Support Systems Goal-seeking analysis

15. 2-15 Copyright © 2011 McGraw-Hill Ryerson Limited Decision Support Systems Interaction between a TPS and a DSS

16. 2-16 Copyright © 2011 McGraw-Hill Ryerson Limited Executive Information Systems Executive information system (EIS) – a specialized DSS that supports senior level executives within the organization EIS differs from DSS as the former typically contains information from external sources as well as information from internal data sources.

17. 2-17 Copyright © 2011 McGraw-Hill Ryerson Limited Executive Information Systems Interaction between a TPS and an EIS

18. 2-18 Copyright © 2011 McGraw-Hill Ryerson Limited Digital Dashboards Digital dashboard – integrates information from multiple components and presents it in a unified display

19. 2-19 Copyright © 2011 McGraw-Hill Ryerson Limited ARTIFICIAL INTELLIGENCE (AI) Intelligent system – various commercial applications of artificial intelligence Artificial intelligence (AI) – simulates human intelligence such as the ability to reason and learn

20. 2-20 Copyright © 2011 McGraw-Hill Ryerson Limited ARTIFICIAL INTELLIGENCE (AI) The ultimate goal of AI is the ability to build a system that can mimic human intelligence

21. 2-21 Copyright © 2011 McGraw-Hill Ryerson Limited ARTIFICIAL INTELLIGENCE (AI) Four most common categories of AI include: 1.Expert system – computerized advisory programs that imitate the reasoning processes of experts in solving difficult problems 2.Neural Network – attempts to emulate the way the human brain works –Fuzzy logic – a mathematical method of handling imprecise or subjective information

22. 2-22 Copyright © 2011 McGraw-Hill Ryerson Limited ARTIFICIAL INTELLIGENCE (AI) Four most common categories of AI include: 3.Genetic algorithm – an artificial intelligent system that mimics the evolutionary, survival- of-the-fittest process to generate increasingly better solutions to a problem 4.Intelligent agent – special-purposed knowledge-based information system that accomplishes specific tasks on behalf of its users

23. 2-23 Copyright © 2011 McGraw-Hill Ryerson Limited OPENING CASE QUESTIONS Information Systems are Central at Grocery Gateway 1.What information systems are used at Grocery Gateway? Would you classify these systems as TPS, DSS, or EIS? 2.How do these systems support operational, analytical or strategic level decisions? 3.What steps could the company take to leverage the transactional information that is collected by the information systems outlined in the case to help make analytical and strategic decisions for the company? 4.Identify a few key metrics that Grocery Gateway marketing executives might want to monitor.

24. McGraw-Hill-Ryerson ©2011 The McGraw-Hill Companies, All Rights Reserved SECTION 2.2 BUSINESS PROCESSES

25. 2-25 Copyright © 2011 McGraw-Hill Ryerson Limited UNDERSTANDING THE IMPORTANCE OF BUSINESS PROCESSES Sample Business Processes

26. 2-26 Copyright © 2011 McGraw-Hill Ryerson Limited UNDERSTANDING THE IMPORTANCE OF BUSINESS PROCESSES Business process – a standardized set of activities that accomplish a specific task, such as processing a customer’s order Customer facing processes – result in a product or service that is received by an organization’s external customer. Business facing processes – are invisible to the external customer but are essential to the effective management of the business

27. 2-27 Copyright © 2011 McGraw-Hill Ryerson Limited UNDERSTANDING THE IMPORTANCE OF BUSINESS PROCESSES Customer Facing, Industry-Specific, and Business Facing Processes

28. 2-28 Copyright © 2011 McGraw-Hill Ryerson Limited BUSINESS PROCESS IMPROVEMENT Business process improvement – attempts to understand and measure the current process and make performance improvement accordingly. The purpose of BPI is to obtain gradual, incremental improvement to the process under focus. There are five basic steps associated with BPI.

29. 2-29 Copyright © 2011 McGraw-Hill Ryerson Limited BUSINESS PROCESS REENGINEERING Business process reengineering (BPR) – the analysis and redesign of workflow within and between enterprises. BPR is radically different from BPI. It assumes the current state to be irrelevant, inefficient, or broken and must be overhauled from the scratch. The purpose of BPR is to: - advocate a clean slate approach - make all business processes best-in-class

30. 2-30 Copyright © 2011 McGraw-Hill Ryerson Limited Finding Opportunity Using BPR A company can improve the way it travels the road by moving from foot to horse and then horse to car BPR looks at taking a different path, such as an airplane which ignores the road completely

31. 2-31 Copyright © 2011 McGraw-Hill Ryerson Limited Finding Opportunity Using BPR Progressive Insurance mobile claims process

32. 2-32 Copyright © 2011 McGraw-Hill Ryerson Limited Finding Opportunity Using BPR Types of change an organization can achieve, along with the magnitudes of change and the potential business benefit

33. 2-33 Copyright © 2011 McGraw-Hill Ryerson Limited Pitfalls of BPR Shift in focus Employee resistance

34. 2-34 Copyright © 2011 McGraw-Hill Ryerson Limited BUSINESS PROCESS MODELLING Business process modelling (or mapping) – is the activity of creating a detailed flow-chart or process map of a work process showing its inputs, tasks, and activities, in a structured sequence. Business process model – is a graphic description of a process, showing the sequence of process tasks, which is developed for a specific purpose and from a selected viewpoint.

35. 2-35 Copyright © 2011 McGraw-Hill Ryerson Limited BUSINESS PROCESS MODELLING As-Is and To-Be Process Model for Ordering a Hamburger

36. 2-36 Copyright © 2011 McGraw-Hill Ryerson Limited BUSINESS PROCESS MODELLING As-Is and To-Be Process Model for Order Fulfillment

37. 2-37 Copyright © 2011 McGraw-Hill Ryerson Limited BUSINESS PROCESS MODELLING Customer Service As-Is Process Model

38. 2-38 Copyright © 2011 McGraw-Hill Ryerson Limited BUSINESS PROCESS MANAGEMENT Business Process Management (BPM) – integrates all of an organization’s business processes to make individual processes more efficient. Key reasons for using BPM:

39. 2-39 Copyright © 2011 McGraw-Hill Ryerson Limited BUSINESS PROCESS MODELLING EXAMPLES E-business Process Model

40. 2-40 Copyright © 2011 McGraw-Hill Ryerson Limited BUSINESS PROCESS MODELLING EXAMPLES Online Banking Process Model

41. 2-41 Copyright © 2011 McGraw-Hill Ryerson Limited BUSINESS PROCESS MODELLING EXAMPLES Customer Order Business Process Model

42. 2-42 Copyright © 2011 McGraw-Hill Ryerson Limited BUSINESS PROCESS MODELLING EXAMPLES eBay Buyer Business Process Model

43. 2-43 Copyright © 2011 McGraw-Hill Ryerson Limited BUSINESS PROCESS MODELLING EXAMPLES eBay Seller Business Process Model

44. 2-44 Copyright © 2011 McGraw-Hill Ryerson Limited OPENING CASE QUESTIONS Information Systems are Central at Grocery Gateway 5.Describe how Grocery Gateway’s customer Web site improves or supports Grocery Gateway’s business processes. 6.Describe how Descartes’ fleet management software improved Grocery Gateway’s logistics business processes. 7.How do those improvements in business process affect the customer experience? The company’s bottom line?

45. 2-45 Copyright © 2011 McGraw-Hill Ryerson Limited OPENING CASE QUESTIONS Information Systems are Central at Grocery Gateway 8.What other kinds of information systems could be used by Grocery Gateway to improve its business processes? 9.Comment on the need for integration between the various types of information systems at Grocery Gateway. What benefits from integration do you see for the company’s various business processes? What challenges to you think will exist in facilitating such integration?

46. 2-46 Copyright © 2011 McGraw-Hill Ryerson Limited CLOSING CASE ONE Information Systems Are Critical For Take-Off in Canada’s Airline Industry 1.What advantages are there for an airline to use a revenue management system. 2.Are revenue management systems a competitive advantage or simply a new necessity for doing business in the airline industry today? 3.What type of decisions could a revenue management system be used to help make? 4.Is a revenue management system a TSP, DSS, or an EIS?

47. 2-47 Copyright © 2011 McGraw-Hill Ryerson Limited CLOSING CASE ONE Information Systems Are Critical For Take-Off in Canada’s Airline Industry 5.Would the revenue management system described in the case contain transactional data or analytical information? 6.What types of metrics would an airline executive want to see in a digital dashboard displaying revenue information? 7.How could AI enhance the use of an airline’s revenue management system for decision support?

48. 2-48 Copyright © 2011 McGraw-Hill Ryerson Limited CLOSING CASE TWO Leveraging the Power and Avoiding the Pitfalls of BPM 1.How can BPM help improve global outsourcing? Records management? Supply chain management? 2.What other business activities are excellent candidates for BPM? 3.Which of the five pitfalls mentioned above do you think is the most important? Why? 4.Which of the five pitfalls mentioned above do you think is the most common pitfall that organizations face when undergoing BPM? Why? 5.What is the advantage of treating BPM as a project, as opposed to some other type of business activity?

49. 2-49 Copyright © 2011 McGraw-Hill Ryerson Limited CLOSING CASE THREE Improving Business Processes at UK’s Woburn Safari Park 1.What were the benefits of creating “As-Is” models of current business processed at WSP? 2.How did information systems help identify problem areas in the feed logistics process? 3.How did information systems help improve the management of feed logistics? 4.Are information systems necessary for business process improvements? Explain.