Chapter 3 Information Systems in Business Functions

Learning Objectives When you finish this chapter, you will: Recognize different business functions and the role of ISs in these functions. Understand how ISs in the basic business functions relate to each other. Be able to show how ISs of different business functions support each other.

Learning Objectives Understand how IT is used in the most common business functions to make business processes more effective and more efficient. Understand the notion of Enterprise Resource Planning systems. Recognize business areas where information technology facilitates the work of managers and knowledge workers.

Effectiveness and Efficiency ISs can help companies attain more effective and efficient business processes. Effectiveness The degree to which a goal is accomplished Efficiency Determined by the relationship between resources expended and benefits gained in achieving a goal

Effectiveness and Efficiency Figure 3.1 Information technology supports a variety of business functions

Accounting AISs automatically post transactions in the books and automate generation of reports for management and legal requirements. Three types of AISs Transaction processing systems (TPS) Cost accounting systems Managerial accounting systems

Accounting Electronic Data Processing (EDP) Audits Ensure electronic systems comply with standard regulations and acceptable rules Ensure systems cannot be manipulated to circumvent acceptable principles In recent years EDP auditors job title has changed to information systems auditors.

Accounting Figure 3.3 Accounting information systems include features that reflect up-to-date performance of the organization in financial terms.

Finance The job of financial managers is to manage money as efficiently as possible by: Collecting payables as soon as possible Making payments by the latest time allowed by contract or law Ensuring that sufficient funds are available for day-to-day operations Taking advantage of opportunities to accrue the highest yield on funds not used for current activities

Finance Figure 3.4 Financial information systems help manage cash and investment portfolios.

Finance Cash Management Financial ISs help balance the need to accrue interest against the need to have cash available. Cash management systems (CMS): Handle cash transactions specifically. Electronic fund transfer (EFT): The electronic transfer of cash from one bank account to another.

Finance Investment Analysis and Service Analyze and project the prices of a specific stock or bond. Transmit buy and sell orders electronically. Provide clients with a detailed statement. Monitor account information and news online.

Engineering ISs reduce engineering lead time or time-to-market. Key to maintaining a competitive edge Computer-Aided Design (CAD) Systems Help engineers and technicians design new products and quickly modify and store drawings electronically. Rapid Prototyping: Creating one-of-a-kind products to test design in three dimensions.

Engineering Figure 3.5 Engineering information systems aid engineers in designing new products and simulating operations.

Manufacturing and Inventory Control IT helps in these manufacturing activities: Plant activity scheduling Material requirement assessment Material reallocation between orders Dynamic inventory management Grouping work orders by “characteristics” Resource qualification for task completion

Manufacturing and Inventory Control Figure 3.6 Manufacturing and inventory control information systems help reduce cycle times and the cost of maintaining inventory.

Manufacturing and Inventory Control Materials Requirement Planning (MRP) Take customer demand as initial input Number of product units needed and when they are needed Use long-range forecasts to put long-lead material on order Help reduce inventory cost while ensuring availability

Manufacturing and Inventory Control Figure 3.7 Materials requirement planning and manufacturing resource planning

Manufacturing and Inventory Control Manufacturing Resource Planning (MRP II) Combines MRP with other manufacturing-related activities to plan the manufacturing process such as Shop activity control and purchasing Source of demand Customer order entry and forecasting Support functions such as financial management, sales analysis, and data collection

Manufacturing and Inventory Control Manufacturing Execution Systems (MES) Track, schedule, and control manufacturing processes Collect data such as Hours machine operates every day of the month Hours the machine is idle and why

Marketing, Sales, and Customer Service Market Research Statistical models help market researchers find the best populations for new and existing products. Targeted Marketing Database management systems (DBMS) help define potential customers as narrowly as possible.

Marketing, Sales, and Customer Service Figure 3.8 Marketing and sales information systems help target potential buyers and serve clients.

Marketing, Sales, and Customer Service The Computer as a Marketing and Selling Medium Companies send customers promotional disks with information on their products and services. Commercial announcements are posted on public bulletin board systems. The Web lets companies reach more shoppers and serve them better.

Marketing, Sales, and Customer Service Sales Force Automation Equipping salespeople with information technology to facilitate productivity. IT allows salespeople to present different options for products and services on the spot. Customer Relationship Management (CRM) Customer service via the Web is available 24 hours/day, 7 days/week. Saves companies labor hours and telephone expenses

Human Resources Figure 3.9 Human resource management information systems help managers optimize the assignment of employees and provide payroll, benefits, and other employee-related services.

Human Resources Employee Record Management Promotion and Recruitment Reduce space needed to store records, time to retrieve them, and costs of both Promotion and Recruitment Search databases for qualified personnel Use intranet to post job vacancies Use the Web to recruit

Human Resources Training Evaluation Multimedia software training is replacing classrooms and teachers. Training software simulates an actual task or situation and includes evaluation tools. Evaluation Evaluation software helps standardize the evaluation process and adds a certain measure of objectivity and consistency.

Human Resources Compensation and Benefits Management ISs can help manage compensation efficiently and effectively. Calculate salaries, hourly pay, commissions, and taxes Automatically generate paychecks or direct deposits Special software helps manage benefits, such as health insurance, life insurance, retirement plans, and sick and leave days.

Enterprise Resource Planning Enterprise Resource Planning (ERP) All business functions served by one system that supports different activities for different departments Support supply chain management, the series of main and supporting activities from order to delivery.

Groupware and Collaborative Work GroupWare lets workers in different locations communicate ideas, brainstorm, and work together as if they were in the same place. Document Control Users can distribute and track electronic documents without working with outdated information. Especially useful for legal revisions. Collaborative Projects Users can coordinate work on a single document from many different terminals.

Groupware and Collaborative Work Brainstorming A group meeting and working collaboratively to generate creative solutions and new ideas. Groupware software can facilitate this process Eliminates the expense of bringing everyone to the same physical location.

Debate Time permitting… Refer to pgs 90-91 in your text Class divided in two groups Business Civil Rights advocates Refer to rules on pg. 91 Business: Do these rules impede the free flow of information? What are the impacts? Civil Rights: Are these rules critical for privacy? Are the technical and financial arguments strong enough to set aside privacy issues?

Ethical and Societal Issues Privacy? What Privacy? What is Privacy? One’s right to control information about oneself. Not a constitutional right per se; secured by laws or convention. Increasing number of organizations may access information via better IT hardware and software. Business and civil rights advocates dispute degree of privacy vs. utility of information access.

Ethical and Societal Issues Privacy? What Privacy? Business Arguments Necessary to collect basic financial and personal information as cheaply as possible Consumers benefit eventually from competitive environment augmented by readily available information

Ethical and Societal Issues Privacy? What Privacy? Consumer Arguments Resent unsolicited mail and telephone calls Resent being refused credit because of credit bureau mistakes Frightened by “dossier phenomenon” Loss of control over information unfair—information gathered for a particular purpose with permission should remain restricted

Ethical and Societal Issues Privacy? What Privacy? Seven Commandments of Personal Data Collection and Maintenance Purpose. Companies should inform people who provide information of specific, exclusive purpose. Relevance. Companies should record and use only data necessary to fulfill their own purposes. Accuracy. Companies should ensure that their data are accurate.

Ethical and Societal Issues Privacy? What Privacy? Currency. Companies should make sure that all data about an individual are current. Security. Companies should limit data access to only those who need to know. Time Limitation. Companies should retain data only for the time period necessary. Scrutiny. Companies should establish procedures to let individuals review their records and correct inaccuracies.