Global E-Business: How Businesses Use Information Systems CHAPTER 2

Business Processes and Information Systems How information technology enhances business processes: Efficiency and Transformation

Examples of Functional Business Processes Major Functional Area Business Process Manufacturing & Production Assembling product, checking quality, producing bills of materials Sales & Marketing Identifying customers, creating customer awareness, generating sales order Finance & Accounting Credit reporting, Creating Financial Statements, Managing cash accounts Human Resources Hiring employees, Evaluating performance, Developing benefit plans

Cross-Functional Business Processes Transcend boundary between sales, manufacturing, finance and accounting etc. Group of employees from different functional specialties complete a piece of work Example: Order Fulfillment Process

Cross-Functional Business Processes Order Fulfillment Process Fulfilling a customer order involves a complex set of steps that requires coordination of different functions.

Management Level

Management Level & Functional Areas

Types of Business Information Systems Systems from a functional perspective Sales and marketing systems Manufacturing and production systems Finance and accounting systems Human resources systems Systems from a constituency perspective Transaction processing systems Management information systems Decision support systems Executive support systems

Systems from a Functional Perspective Sales and Marketing Systems Help identify customers Develop products and services Promote products and services Sell products and services Provide ongoing customer support

Systems from a Functional Perspective (Contd.) Example of Sales & Marketing Information systems SYSTEM DESCRIPTION GROUPS SERVED Order processing Enter, process and track orders Operational management Pricing analysis Determine prices for products and services Middle management Sales trend forecasting Prepare five-year sales forecasts Senior management

Systems from a Functional Perspective (Contd.) Example of Sales Information systems

Systems from a Functional Perspective (Contd.) Manufacturing and Production Systems Planning, development, production of products and services Maintenance of production facilities Acquisition, storage, availability of materials Scheduling materials, facilities, labor Controlling the flow of production

Systems from a Functional Perspective (Contd.) Example of Manufacturing & Production Information systems SYSTEM DESCRIPTION GROUPS SERVED Machine control Controls the actions of machines and equipment Operational management Production planning Decides when and how many products should be produced Middle management Facilities location Decides where to locate production facilities Senior management

Systems from a Functional Perspective (Contd.) Inventory Management System for Manufacturing & Production Information systems This system provides information about available inventory to support production process

Systems from a Functional Perspective (Contd.) Finance & Accounting Systems Manage firm’s assets: cash, stocks, investments etc. Manage capitalization of firm and finding new financial assets Maintain and manage financial records

Systems from a Functional Perspective (Contd.) Example of Finance & Accounting Information systems SYSTEM DESCRIPTION GROUPS SERVED Accounts receivable Tracks money owed the firm Operational management Budgeting Prepares short-term budgets Middle management Profit planning Plans long-term profits Senior management

Systems from a Functional Perspective (Contd.) An Accounts Receivable System

Systems from a Functional Perspective (Contd.) Human Resources Systems Identify potential employees Maintain employee records Track employee skills, job performance, and training Support planning for employee compensation and career development

Systems from a Functional Perspective (Contd.) Example of Human Resources Information systems SYSTEM DESCRIPTION GROUPS SERVED Training and development Tracks employee training, skills and performance appraisals Operational management Compensation analysis Monitors the range and distribution of employee wages, salaries and benefits Middle management Human resources planning Plans the long-term labor force needs of the organization Senior management

Systems from a Functional Perspective (Contd.) Employee Record Keeping System for HRIS

Systems from a constituency perspective Transaction Processing Systems (TPS) Management Information Systems (MIS) Decision-Support Systems (DSS) Executive Support Systems (ESS)

Systems from a constituency perspective (Contd.) TPS Basic business systems that serve the operational level Input: Transactions, events Processing: Sorting, listing, merging, updating Output: Detailed reports, lists, summaries User: Operations personnel, supervisors

Systems from a constituency perspective (Contd.) A Symbolic Representation for a Payroll TPS

Systems from a constituency perspective (Contd.) MIS Input: High volume transaction level data Processing: Simple models Output: Summary reports User: Middle managers Example: Annual budgeting

Systems from a constituency perspective (Contd.) MIS (continued)

Systems from a constituency perspective (Contd.) MIS (continued) A sample MIS report

Systems from a constituency perspective (Contd.) DSS Input: Transaction level data Processing: Interactive Output: Decision analysis User: Professionals staff Example: Contract cost analysis

Systems from a constituency perspective (Contd.) ESS Input: Aggregate data Processing: Interactive Output: Projections User: Senior managers Example: 5 years operating plan

Systems from a constituency perspective (Contd.) ESS (continued) Model of a typical ESS

Systems from a constituency perspective (Contd.) Interrelationship among systems The various types of systems in the organization have interdependencies. TPS are major producers of information that is required by many other systems in the firm, which, in turn, produce information for other systems. These different types of systems are loosely coupled in most business firms, but increasingly firms are using new technologies to integrate information that resides in many different systems.

Relationship of Systems to One Another In contemporary digital firms, the different types of systems are closely linked to one another. In traditional firms these systems tend to be isolated from one another, and information does not flow seamlessly from one end of the organization to the other. Efficiency and business value tend to suffer greatly in these traditional firms.

Systems for Enterprise-Wide Process Integration Enterprise applications: Designed to support organization-wide process coordination and integration

Systems for Enterprise-Wide Process Integration (Contd.) Systems that Span the Enterprise consists of : Enterprise systems Supply chain management systems Customer relationship management systems Knowledge management systems

Enterprise Systems Enterprise systems, also known as enterprise resource planning (ERP) systems, provide a single information system for organization-wide coordination and integration of key business processes. Information that was previously fragmented in different systems can seamlessly flow throughout the firm so that it can be shared by business processes in manufacturing, accounting, human resources, and other areas.

Enterprise Systems (Contd.) Enterprise Application Architecture

Functions tend to work in isolation Traditional View Within the business: There are functions, each having its uses of information systems Outside the organization’s boundaries: There are customers and vendors Functions tend to work in isolation

View of Enterprise Systems

Benefits of Enterprise Systems Help to unify the firm’s structure and organization: One organization Management: Firm wide knowledge-based management processes Technology: Unified platform Business: More efficient operations & customer-driven business processes

Challenges of Enterprise Systems Difficult to build: Require fundamental changes in the way the business operates Technology: Require complex pieces of software and large investments of time, money, and expertise

Supply Chain Management (SCM) Close linkage and coordination of activities involved in buying, making, and moving a product Integrates supplier, manufacturer, distributor, and customer logistics time Reduces time, redundant effort, and inventory costs Network of organizations and business processes

Supply Chain Management (Contd.) Helps in procurement of materials, transformation of raw materials into intermediate and finished products Helps in distribution of the finished products to customers Includes reverse logistics - returned items flow in the reverse direction from the buyer back to the seller

Supply Chain Management (Contd.) Information from Supply Chain Management Systems helps firm: Decide when and what to produce, store, and move Rapidly communicate orders Track the status of orders Check inventory availability and monitor inventory levels

Supply Chain Management (Contd.) Information from Supply Chain Management Systems helps firm (contd.): Reduce inventory, transportation, and warehousing costs Track shipments Plan production based on actual customer demand Rapidly communicate changes in product design

Supply Chain Management (Contd.) Example of Supply Chain Management System Customer orders, shipping notifications, optimized shipping plans, and other supply chain information flow among Haworth’s Warehouse Management System (WMS), Transportation Management System (TMS), and its back-end corporate systems.

Customer Relationship Management (CRM) Manages all ways used by firms to deal with existing and potential new customers Uses information system to coordinate entire business processes of a firm Provides end-to-end customer care Provides a unified view of customer across the company Consolidates customer data from multiple sources and provides analytical tools for answering questions

Customer Relationship Management (Contd.) How it works?

Knowledge Management Systems Collects relevant knowledge and make it available wherever and whenever it is needed Support business processes and management decisions Also link the firm to external sources of knowledge Support processes for acquiring, storing, distributing, and applying knowledge