Information Systems within the Organization CHAPTER 10 Information Systems within the Organization

CHAPTER OUTLINE 10.1 Transaction Processing Systems 10.2 Functional Area Information Systems 10.3 Enterprise Resource Planning Systems 10.4 Reports

LEARNING OBJECTIVES 1. Explain the purposes of transaction processing systems, and provide at least one example of how businesses use these systems. 2. Define functional area information systems, and provide an example of the support they provide for each functional area of the organization.

LEARNING OBJECTIVES (continued) 3. Explain the purpose of enterprise resource planning systems, and identify four advantages and four drawbacks to implementing an ERP system. 4. Discuss the three major types of reports generated by the functional area information systems and enterprise resource planning systems, and provide an example of each type.

Opening Case: Is Baseball a Science? Source: Fotoline/Shutterstock

10.1 Transaction Processing Systems (TPS) Batch Processing Online Transaction Processing (OLTP) This grocery store clerk is using a bar code scanner that produces data captured by a transaction processing system Note: the barcode scanner is an example of source data automation Transaction processing system (TPS) monitors, collects, stores and processes data generated from all business transactions. Batch Processing is when the firm collects data from transactions as they occur, placing them in groups or batches, then prepares and processes the batches periodically (say, every night). Online Transaction Processing (OLTP) is when business transactions are processed online as soon as they occur. Source data automation involves collecting data from sensors (e.g., barcode scanners) and entering the data directly into a computer without human intervention. © Stockbroker/Age Fotostock America, Inc.

How Transaction Processing Systems Manage Data

10.2 Functional Area Information Systems Functional Area Information Systems are designed to support a functional area by increasing its internal effectiveness and efficiency in the following areas: Accounting Finance Marketing Operations (POM) Human Resources Management Functional area information systems provide information mainly to lower- and middle-level managers in the functional areas via a variety of reports.

Examples of Information Systems Supporting the Functional Areas

10.3 Enterprise Resource Planning Systems (ERP) Enterprise Resource Planning (ERP) systems integrate the planning, management and use of all resources of the organization. That is, ERP systems are designed to break down the information silos of an organization. Many information systems were developed for specific functional areas and did not communicate with systems in other functional areas. Therefore, these systems are referred to as information silos. © Toh Kheng Ho/Age Fotostock America, Inc. ERP systems integrate the functional areas of the organization by enabling seamless information flows across them.

SAP Modules SAP Solutions: Financials Human Resources Customer Relationship Management Supplier Relationship Management Product Lifecycle Management Supply Chain Management Business Intelligence SAP is moving away from describing their system as a set of modules, and now is using the term “solutions.” On their Website, SAP has structured their Solutions tab as follows: Customer Relationship Management Human Resources Financials Product Lifecycle Management Supplier Relationship Management Business Intelligence Supply Chain Management FI Financial Accounting – essentially your regulatory ‘books of record’ SAP modules: Tax Book close General ledger Consolidation Accounts payable Accounts receivable Cost elements CO Controlling – basically your internal cost/management accounting Special ledgers Cost centers Activity based costing Internal orders Profit centers AM Asset Management – track, value and depreciate your assets Product costing Depreciation Sale Purchase PS Project Systems – manage your projects, large and small Tracking Third party billing (on the back of a project) Plant shut downs (as a project) Make to order Employment history HR Human Resources – people Career management Training Payroll Succession planning Material Labor PM Plant Maintenance – maintain your equipment MM Materials Management – underpins the supply chain Down time and outages Goods receipts Purchase orders Requisitions Bills of Material Inventory management Planning QM Quality Management – improve the quality of your goods Master raw materials, finished goods etc Inspections Execution Capacity planning PP Production Planning – manages your production process Certificates Master production scheduling SD Sales and Distribution – from order to delivery Shop floor Material requirements planning Sales orders RFQ Packing Picking (and other warehouse processes) Pricing CA Cross Application – these lie on top of the individual modules Shipping Office – for email BW – business information warehouse WF – workflow Industry solutions Workplace New Dimension products such as CRM, PLM, SRM, APO etc

ERP Systems (continued) A business process is a set of related steps or procedures designed to produce a specific outcome. The image shows an example of a business process, namely an order process. © Toh Kheng Ho/Age Fotostock America, Inc.

ERP Systems (continued)

Benefits of ERP Systems They can make organizations more flexible, agile, and adaptive. They can improve managers’ ability to make better, more timely decisions. They can improve customer service, production, and distribution.

Limitations of ERP Systems May require organizations to change existing business processes to fit the predefined business processes of the ERP software. Can be complex, expensive, and time consuming to implement.

10.4 Functional Area Information Systems Reports Routine reports Ad hoc (on demand) reports Drill-down reports Key-indicator reports Comparative reports Exception reports Functional area information systems generate a wide variety of reports.

Types of Reports Summary Report Detailed report Drill-down report Key-indicator report Comparative report Exception Report Summary reports provide summarized information, with less detail. Detailed reports provide high levels of detailed data, often in support of summary reports. A drill-down report allows users to click on an item in a report and be able to access underlying details about that item. A key indicator report summarizes the performance of critical activities. Exception reports include only information that falls outside certain threshold standards. Monthly sales report.

Chapter Closing Case The Problem The Solution The Results