Information systems and management in business Chapter 4 Using Information Systems in Business Operations

4.1 Business Fundamental Concepts Overview  What is a business Basically an organization which is engaged in commercial, industrial or professional activities  For-profit  Non- profit  Generally, a business orientated organization is engaged in either making physical products or delivering services

4.1 Business Fundamental Concepts Overview  Business Revenue, Expenses and Profit Revenue : money generated through the selling of products or services Expenses: The cost incurred as a result of making products or delivering services Profit : The variance between revenue and expenses

4.1 Business Fundamental Concepts Overview  Business Types manufacturing business  Wholesale  Retail  Distribution Service business or service industry

4.1 Business Fundamental Concepts Overview  Business Organization The process of organizing the various activities surrounding producing and selling products and delivering services into individual functional business areas Individual functions have sets of goals and responsibilities associated with it  The sales and marketing function handles promotional and sales activities of the finished manufactured products Collectively these functions results in what is known as an organizational chart

4.2 Increasing business operation’s efficiencies  Business efficiency  In one sense, when talking about business efficiency, we are primarily comparing the speed in which the activities are carried out relative to the resources available to it  In another sense the comparison involves the cost of the transaction

4.2 Increasing business operation’s efficiencies  A typical business transaction  An order entry process  At least four business functions are involved in the completion of the process  Marketing, Finance, Warehouse and manufacturing  The process is likely to be automated through functional specific information systems  Fragmenting process completion in this way creates an efficiency, cost effectiveness and accuracy challenges  Effective deployment of information systems can help to manage such challenges in a very beneficial way  Automating the entire order entry business process

4.3Information Systems Approaches to Supporting Business Operations  Three widely deployed approaches Automating individual functional business areas  Functional specific information systems  Marketing or HR systems Automating an entire business transaction  Transaction processing systems (TPSs) Automating an entire business processes  Enterprise resources planning (ERP)

4.4 Transaction Processing Systems (TPSs)  Business Transaction Overview In a business setting, transactions are repetitive events (activities) that take place as a result of doing business  Processing a customer order  Paying employees Business transaction tends to generate a wealth of business data The manual processing of such information is time challenging  Accuracy, efficiency, cost, etc..

4.4 Transaction Processing Systems (TPSs)  Transaction Processing Systems Definition A special type of information systems which are most suited to dealing with repetitive business activities - processes The system is geared for the collection, storage, modification and retrieval of business data which is associated or required to complete a business transaction or process

4.4 Transaction Processing Systems (TPSs)  Transaction Processing System Architecture The architecture involves three basic functions  Input function, the processing function and the output function

4.4 Transaction Processing Systems (TPSs)  Input function Facilitates data entry, capturing and validation Typically when a business transaction occurs, a document describing the nature of the transaction is generated and it is usually called the source document Source document forms the foundation for the data submitted to the input function Source document submission approaches  Manual  Semi-automated  Fully automated

4.4 Transaction Processing Systems (TPSs)  The Processing Function (PF) Generally, the end-of-data entry (source document presentation) activates the processing function The PF would typically involve a complicated piece of computer programming which is used in order to accomplish a number of programming tasks  Computation  Decision making  Database communication, data storage, and data retrieval

4.4 Transaction Processing Systems (TPSs)  The Output Function Transaction processing systems presents their output to the system’s user or operator in either a printed or screen display format The output data is usually delivered in a style which user friendly and easily comprehendible

4.5Transaction Processing Systems Examples  Examples of widely implemented transaction processing systems Inventory Management Sales Order Entry systems Payroll Account Receivable and Account Payable General Ledger Purchasing

4.5Transaction Processing Systems (PIS) Examples  A Purchasing Information System Material requisition is a very common and frequent activity in many organizations This kind of activity typically involves the participation and co-operation of many business functions in order to complete the purchasing transaction A purchasing system is typically used to keep track of suppliers, identify and select the appropriate supplier and prepare purchase orders The purchasing information system key activities  Facilitating and capturing the order data as entered by the system operator  Processing the order Checking funds availability and committing it to the order Updating account payable Logging order details

4.5Transaction Processing Systems Examples  PIS Advantages Significantly reduces the transaction processing time and paper work Helps to enforce business rules  Permitting purchasing from only approved suppliers  Managing and controlling the purchasing budget Ensures that the requesting department has enough funds to be committed to the transaction prior to issuing the order

4.6Functional Information Systems (FISs)  FISs Overview Cross functional information systems are not designed to serve the overall and specific functional requirement of a business A cross functional information system such as an order entry would serve the accounting function requirement Examples of business functional areas in which information systems are widely implemented  Finance  Marketing  Information services  Manufacturing  Human resources  Accounting

4.6Functional Information Systems (FISs)  Marketing Information Systems Marketing definition  Institute of Marketing (CIM) defines it as “Marketing is the management process that identifies, anticipates and satisfies customer requirements profitably” Marketing Information Systems key activities  Collection, analysis and making available relevant marketing information that aids the marketing decision making process In general there are a number of individual information systems that are specifically designed to assist companies to significantly increase the overall efficiency of the marketing function The current trend is to develop a more integrated system approach to supporting the marketing needs that is centered on the customer  Customer relationship management (CRM) and SFA are cases in point

4.6Functional Information Systems (FISs)  Accounting Information Systems (AIS) Basically accounting information systems employ information technology in conjunction with traditional accounting controls and methods in order to deliver financial information necessary to help users manage their organization [7]

4.6Functional Information Systems (FISs)  Manufacturing Information Systems The primary objectives of a manufacturing function are the planning, designing and the production of new products a manufacturing process involves a number of complicated steps  Product planning and designing, planning the parts required by the manufacturing process, scheduling the use of manufacturing machinery, managing production inventories, automating the use and operation of manufacturing machinery and so on

4.6Functional Information Systems (FISs)  Manufacturing Information Systems examples Computer aided manufacturing - CAM Computer aided design - CAD Material requirements planning - MRP Just in time inventory management

4.6Functional Information Systems (FISs)  Human Resources Information - HRI Systems Key objectives are  Help organizations manage their HR function’s activities in an effective and efficient manner HRI typical usage examples  Manage employee’s recruitment process and keep track of applicant’s applications  Analyze employee on the job performance  Keep track of employee skills  Manage employment termination  Manage employee’s benefits and compensation

4.6Functional Information Systems (FISs)  Financial Information Systems Definition – defined by the Investor dictionary.com as  “An information system, comprised of one or more applications, that is used for any of the following: collecting, processing, maintaining, transmitting, and reporting data about financial events; supporting financial planning or budgeting activities; accumulating and reporting cost information; or supporting the preparation of financial statements”

4.6Functional Information Systems (FISs)  Financial Information Systems examples Capitol budgeting Cash management Credit management Investment management Financial planning and forecasting

Chapter 3 Knowledge Enhancement and Consolidation Tools and Exercises  Visit the book’s Web site & select module 4  Perform Chapter 4 associated demo and case study through their respective demo and case Studies Links

Chapter 3 Problems Solving Skills Development  Visit the book’s Web site & select module 4  Perform Chapter 4 associated skills development through their respective skills development exercises link

Chapter 3 Balancing Knowledge to Practice  Visit the book’s Web site & select module 4  Perform Chapter 4 associated Balancing Knowledge to Practice project through its respective Hands on Project Link