1. © Pearson Prentice Hall 2009 7-1 Using MIS 2e Chapter 7 Information Systems within Organizations David Kroenke

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, moving to functional systems that served a single department or function, and ending with integrated systems 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 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 Most organizations use a mixture of old-styled functional systems and newer, integrated 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 7-2 Reorganized Porter Value Chain Model 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.

8. © Pearson Prentice Hall 2009 7-8 Q2 – How do functional systems relate to the value chain? Fig 7-3 Reorganized Porter Value Chain Model & Its Relationship to Functional Systems This view of Porter’s value chain model shows five functional systems that support the primary and support activities.

9. © Pearson Prentice Hall 2009 7-9 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?

10. © Pearson Prentice Hall 2009 7-10 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.

11. © Pearson Prentice Hall 2009 7-11 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

12. © Pearson Prentice Hall 2009 7-12 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.

13. © Pearson Prentice Hall 2009 7-13 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—inventory, manufacturing planning, manufacturing scheduling, and manufacturing operations.

14. © Pearson Prentice Hall 2009 7-14 Q3 – What are the functions of the five basic functional systems? Fig 7-8 Examples of RFID Tags Radio frequency identification tags (RFID) are becoming a popular way to 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.

15. © Pearson Prentice Hall 2009 7-15 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.

16. © Pearson Prentice Hall 2009 7-16 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.

17. © Pearson Prentice Hall 2009 7-17 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 in this figure—recruiting, compensation, assessment, planning, and development and training.

18. © Pearson Prentice Hall 2009 7-18 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.

19. © Pearson Prentice Hall 2009 7-19 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?

20. © Pearson Prentice Hall 2009 7-20 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

21. © Pearson Prentice Hall 2009 7-21 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?

22. © Pearson Prentice Hall 2009 7-22 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. There are a lot of challenges in designing and redesigning business processes.  It’s expensive, time consuming, and difficult to keep up with normal business activities.  Employees resist the changes in work responsibilities and normal habits.  The ultimate outcome is always uncertain. Will the new processes work better than the old ones?

23. © Pearson Prentice Hall 2009 7-23 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. Inherent processes can also cause disruptions to operations and employees. This figure provides an example of inherent processes in an ordering process.

24. © Pearson Prentice Hall 2009 7-24 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?

25. © Pearson Prentice Hall 2009 7-25 Q6 – What are the functions and characteristics of the three major cross- functional systems? There are three major cross-functional systems: customer relationship management, enterprise resource planning, and enterprise application integration. A Customer Relationship Management (CRM) system offers these benefits: Integration of primary business activities Tracking of all customer interactions Storage of customer data in single a database Support of customer life cycle.

26. © Pearson Prentice Hall 2009 7-26 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.

27. © Pearson Prentice Hall 2009 7-27 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).

28. © Pearson Prentice Hall 2009 7-28 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.

29. © Pearson Prentice Hall 2009 7-29 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 and accounting support activities across the enterprise. Fig 7-20 ERP Systems and the Value Chain

30. © Pearson Prentice Hall 2009 7-30 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.

31. © Pearson Prentice Hall 2009 7-31 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  implement the ERP system.

32. © Pearson Prentice Hall 2009 7-32 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, it 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.

33. © Pearson Prentice Hall 2009 7-33 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.

34. © Pearson Prentice Hall 2009 7-34 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.