1. Copyright © 2016 Pearson Canada Inc.
Part 1: MIS and You
Chapter 2
Business Processes and
Decision Making
Experiencing MIS, Fourth Canadian Edition
Copyright © 2016 Pearson Canada Inc.

2. Running Case
Josie is helping his grandparents with running their coffee shop
His grandparents are worried about franchise while Josie is thinking of competitive advantage
There is idea of introducing Internet service to the coffee shop
Josie’s grandparents seek to understand the benefits of Wi-Fi
Josie is thinking on introducing innovations to their coffee shop in order to have competitive advantage.
There was one last thing on Josie’s mind. His grandparents wanted to know about the benefits of Wi-Fi. How could these be estimated? He thought a customer survey might provide some good information. Thinking about the survey also made Josie think about how customers would get access to the Wi-Fi. Usually, a password was needed. What would be the process for identifying customers and allowing them access? How would customers know what the password was? How often would it have to be changed, and who would do this? Not having password protection seemed risky, as it might encourage people to just drop by without making any purchase at the cafe. There was also the risk of people using the Internet access inappropriately. The more Josie looked at it, the more he realized that providing wireless access was not so much a technical problem as it was a business problem.

3. Study Questions “How did this stuff get here?”
What is a business process?
What are the components of a business process?
What is information?
What is the role of information in business processes?
How do information systems support business processes?
How do information systems support decision making?
What is your role?
Q1 “How did this stuff get here?”
Q2 What is a business process?
Q3 What are the components of a business process?
Q4 What is information?
Q5 What is the role of information in business processes?
Q6 How do information systems support business processes?
Q7 How do information systems support decision making?
Q8 What is your role?

4. “How did this stuff get here?”
Business processes must work together
Each business must
Obtain payment
Cover costs
Make profit
A cup of coffee and a muffin at the Tim Hortons
Ordering
Receiving
Storing
Paying
Q1 “How did this stuff get here?”
The reality is that all of this activity comes through the interaction of business
processes. Tim Hortons has processes for ordering, receiving, storing, and paying for
ingredients such as milk and coffee. The coffee roaster has a process for assessing
demand, ordering its raw materials, and making deliveries. All the other businesses
have processes for conducting their affairs as well. Organizations make use of these
processes to deliver goods and services to customers. So, business processes are central
to what every organization does. That is why understanding business processes is
critical to understanding how business works.

5. What is a business process?
A business process is a series of activities, tasks or steps designed to produce a product or service
The example of business process includes sales, purchasing, and inventory management processes
These elements are often considered part of an overall “supply chain” for an organization
Q2 What is a business process?
A business process is a series of activities, tasks or steps designed to produce a product or service. A business process is best thought of as a system and is sometimes also referred to as a business system. In this book, we will use the term business process.
The example business process we introduce below include sales, purchasing, and inventory management. These elements are often considered part of an overall “supply chain” for an organization.

6. Business System
A business process is a system, and sometimes business processes are also referred to as business systems
Examples:
inventory management processes
manufacturing processes
sales processes
customer support processes
Q2 What is a business process?
A business process is a system, and sometimes business processes are also referred to as business systems.
In this text, we will use the term business process.

7. Model of an Inventory Management Business Process
Q2 What is a business process?
Figure 2-1 Model of an Inventory Management Business Process

8. What are the components of a business process?
A business process consists of:
Activities
Resources
Facilities
Information
Q3 What are the components of a business process?
A business process consists of activities, resources, facilities, and information. Activities transform resources and information of one type into resources and information of another type. The payment activity transforms quantity received and shipping invoice information into a supplier payment (resource). The payment activity has rules and procedures that it follows for doing this.

9. Activities
Activities transform resources and information of one type into resources and information of another type
Follow rules and procedures
Can be manual, automated, or combination
Example:
Payment (activity) transforms quantity received (information) and shipping invoice (information) into supplier payment (resource)
Q3 What are the components of a business process?
Activities transform resources and information of one type into resources and information of another type. The payment activity transforms quantity received and shipping Invoice information into a supplier payment (resource). The payment activity has rules and procedures that it follows for doing this.
Activities can consist of purely manual actions (people following procedures), automated or controlled procedures used by computers (hardware directed by software), or, as is often the case, a combination of manual and automated procedures.

10. Resources Resources are items of value Can be external to organization
Examples:
Cash
Workers
Customers
Suppliers
Q3 What are the components of a business process?
Resources are items of value. A case of milk is a resource, a person working is a resource, and the customer’s cash is a resource. In Figure 2-1, both supplier and customer are also considered resources because they have value in this process. They are not considered activities, because they are external and hence are not under the restaurant’s direction and control.

11. Facilities Facilities are structures used within the business process
Resources can be stored within facilities
Examples:
Factories
Equipment
Inventories
Databases
Q3 What are the components of a business process?
Facilities are structures used within the business process. Resources can be stored within facilities. Examples of facilities include factories, pieces of equipment, trucks, filing cabinets, and the like. In the case of digital resources, facilities might include inventories and databases (as in Figure 2-1).

12. Information Information is the fourth element of a business process
Activities use information to determine how to transform the inputs received into the outputs produced
Business processes create information
Q3 What are the components of a business process?
Information is the fourth element of a business process. Activities use information to determine how to transform the inputs received into the outputs produced.
Because this book is about information systems, and understanding the nature of information and ways of defining it are crucial, information created in processes will be our focus.

13. What is information? Knowledge derived from data
Data presented in a meaningful context
Processed data
Processed by summing, ordering, averaging, grouping, comparing, or other similar operations
A difference that makes a difference
If you get new information and it does not make a difference to your decision, is what you received really information?
Q4 What is information?
In this text, we will avoid the technical issues of defining information and will use common, intuitive definitions instead. The most common definition is that information is knowledge derived from data; the term data is defined as recorded facts or figures. Thus, the facts that employee James Smith earns $17.50 per hour and that Mary Jones earns $25 per hour are, of themselves, examples of data. The statement that the average hourly wage of all employees in the Garden Department is $22.37 per hour is information. Average wage is knowledge that is derived from the data of individual wages.

14. Data Recorded facts or figures Not meaningful on its own
Q4 What is information?
The most common definition is that information is knowledge derived from data; the term data is defined as recorded facts or figures. Thus, the facts that employee James Smith earns $17.50 per hour and that Mary Jones earns $25 per hour are, of themselves, examples of data.

15. Characteristics of Good Information
Accurate
Correct and complete
Crucial for management
Cross-check information to ensure accuracy
Timely
Produced in time for intended use
Relevant
To context
To subject
Q4 What is information?
All information is not equal: Some information is better than other information. Figure 2-2 lists the characteristics of good information.

16. Characteristics of Good Information, continued
Just Barely Sufficient
Sufficient for purpose for which generated
Do not need additional, extraneous information
Knowing what information to ignore is difficult
Worth Its Cost
Relationship between cost and value
Information systems cost money to develop, maintain, and use
Must be worth the cost
Q4 What is information?
All information is not equal: Some information is better than other information. Figure 2-2 lists the characteristics of good information.

17. What is the role of information in business processes?
Business process of moving actual goods and providing services to real people
Data and information are always created
For any physical flow, there is potential to capture a flow of information
For any flows of service, there is potential flow of data and information
Business process generates information
Brings together important items of data in a context
Information is useful to manage business processes
Q5 What is the role of information in business processes?
The first thing to realize is that any time a good is moved or a service is provided,
data and information are always created. Moving something from one place to another
place creates new information about the location of that thing. During the move, the
thing may change ownership (data) or may itself be modified (data). Any time there
is a physical flow, there is the potential to capture a flow of information. We do not
always collect the information, but we have the potential to do so if we need to. The
same is true of a service. Flows of service are always accompanied by a potential flow
of data and information.
As noted earlier, Gregory Bateson’s definition of information suggested, “Information is
a difference that makes a difference.” If the quantity received indicates we received five
cases of milk, but the shipping invoice is billing us for eight cases, we have a difference
that makes a difference. By comparing records of the amount we received to records of
the amount we were billed, we are presenting data in a meaningful context, which is a
definition of information. Thus, a business process generates information by bringing
together important items of data in a context.
The information generated by a business process is important for several reasons.
For example, it lets us know when we need to make payments for goods or services
received. Information also helps us keep track of what we have delivered and what
has not been delivered; it keeps our inventory up to date. But information can take
us beyond just collecting facts. Information becomes even more useful when we start
using information to manage business processes.

18. Business Process Management (BPM)
A field of management that promotes the development of effective and efficient processes through continuous improvement and innovation
Methods of BPM
Total Quality Management (TQM)
Six Sigma
Lean Production
Information about the process helps to better manage the process itself
Q5 What is the role of information in business processes?
BPM is a field of management that promotes the development of effective and efficient processes through continuous improvement and innovation. Often, innovations in business process are developed by integrating information technology into the business process. There are many methods that organizations have developed to support their improvements in business processes, including Total Quality Management (TQM), Six Sigma, and Lean Production. If you are interested in finding out more about these methods, two collaborative exercises at the end of this chapter ask you to explore these methods and use Business Process Simulation to better understand how to manage business processes.
We will not go into detail about the different methods of BPM, but what is important for you to remember is that information about the process provides the ability to better manage the process itself. Organizations are constantly looking for better ways of providing goods and services to their customers. Information about the business process is always the starting point for understanding what can and should be changed. So whether you work in marketing, human resources, finance, or accounting, remember that as a manager you will need to understand how to collect and use the information that is generated by business processes within your organization. The better you are able to understand business processes, the better you will be able to successfully manage the process. Information is therefore an important part of effective management.

19. How do information systems support business processes?
Used by activities in a business process
Several activities may use one system
Activity may have own system
Activity may use several systems
Systems designers determine relationship of activities to information systems
Relationship determined during systems analysis
Q6 How do information systems support business processes?
Information systems are used by the activities in a business process, but the particular relationship varies among business processes. In some processes, several activities use one information system. In other processes each activity has its own information system, and in still other processes some activities use several different information systems. During systems analysis, the systems designers determine the relationship of activities to information systems.

20. What Does It Mean to Automate a Process Activity?
The outermost components of information system, hardware and people, are both actors; they can take actions
The software and procedure components are both sets of instructions: software is instructions for hardware, and procedures are instructions for people
Finally, data is the bridge between the computer side on the left and the human side on the right
Q6 How do information systems support business processes?
The outermost components, hardware and people, are both actors; they can take actions.
The software and procedure components are both sets of instructions: Software is instructions for hardware, and procedures are instructions for people.
Finally, data is the bridge between the computer side on the left and the human side on the right.

21. Characteristics of the Five Components
Q6 How do information systems support business processes?
Figure 2-3 Characteristics of the Five Components

22. Automation of Process Activity
Automation of processes
Transfer work done by people to computers
People follow procedures
Computers follow software instructions
Moving work from human side to computer side
Q6 How do information systems support business processes?
When an activity in a business process is handled by an automated system, it means that work formerly done by people following procedures has been changed so that computers now do that work by following instructions in software. Thus, the automation of a process activity consists of moving work from the right-hand side of Figure 2-3 to the left.

23. Information System Supporting Counter Sales
Q6 How do information systems support business processes?
Figure 2-4 Sales Recording Information System Used by Counter Sales in Figure 2-1

24. Information System Supporting Counter Sales, continued
Fully automated
Cashiers do not require extensive training
Cashiers are trained only in how to use cash register
Cashiers do not work directly with programs on computer
Computer in cash register communicates with computer that hosts Inventory Database
Programs record sales and makes changes
Q6 How do information systems support business processes?
Counter sales uses the information system shown in Figure 2-4. This system is automated, however, and the cashiers do not even know they are using an information system. The cash registers contain a computer that communicates with another computer that hosts the inventory database. Programs in the cash register record sales and make appropriate changes to the inventory database whenever the cashier rings up a sale. The cashiers need to be trained only in how to use the cash register; they never need to work directly with the sales-recording programs on the computer.
The designers of this system decided to fully automate it because the cashier’s job is a low-skill-level position with high turnover. (Turnover refers to the rate at which new employees arrive and existing ones depart. Different jobs have different rates of turnover.) The designers wanted to reduce the amount of time that cashiers required before they could productively use the cash registers.

25. Information System to Support Payment
Q6 How do information systems support business processes?
Figure 2-5 Payment System Used by Payment Activity in Figure 2-1

26. Information System to Support Payment, continued
Payment receives Quantity Received and Shipping Invoice and produces Supplier Payment
Mostly manual
Accounts Payable Clerk reads documents and issues payment or investigates discrepancies
Processing exceptions complicated
Programming expensive
Probably not effective
Q6 How do information systems support business processes?

27. Information System to Support Purchasing
Q6 How do information systems support business processes?
Figure 2-6 Purchasing Information System Used by Purchasing Activity in Figure 2-1

28. Information System to Support Purchasing, continued
Purchasing clerk computer runs program that queries database and identifies stock levels and generates Purchase Order
Designers balanced work between automation and manual activity
Searching database is repetitive
Automated process
Selecting suppliers is complicated
Manual process
Q6 How do information systems support business processes?

29. How do information systems support decision making?
Data are an important part of any information system
Data can be transformed into information
Information is an important starting point for decision making in many organizations
IS support decision making by providing the information—the raw material—for many decisions
Decision making in organization is varied and complex
Q7 How do information systems support decision making?
Making decisions is central to managing organizations. We found earlier in this chapter that data are an important part of any information system and that data can be transformed into information. Information is an important starting point for decision making in many organizations. So the first point we can make is that information systems support decision making by providing the information—the raw material—for many decisions.
Decision making in organizations is varied and complex, and before discussing the role of information systems in supporting decision making, we need to investigate the characteristics and dimensions of decision making itself.

30. Decisions Vary by Level
Operational decisions concern day-to-day activities
Supported by transaction processing systems (TPS)
Managerial decisions concern the allocation and utilization of resources
Supported by management information systems (MIS)
Strategic decisions concern broader-scope, organizational issues
Q7 How do information systems support decision making?
Decisions occur at three levels in organizations: operational, managerial, and strategic. The types of decisions vary depending on the level. Operational decisions concern day-to-day activities. Typical operational decisions are: How many widgets should we order from vendor A? Should we extend credit to vendor B? Which invoices should we pay today? Information systems that support operational decision making are called transaction processing systems (TPS).
Managerial decisions concern the allocation and utilization of resources. Typical managerial decisions are: How much should we budget for computer hardware and programs for department A next year? How many engineers should we assign to project B? How many square feet of warehouse space do we need for the coming year? Information systems that support managerial decision making are called management information systems (MIS).
Strategic decisions concern broader-scope, organizational issues. Typical decisions at the strategic level are: Should we start a new product line? Should we open a centralized warehouse in Calgary? Should we acquire company A?
Note that, in general, the decision time frame increases as we move from operational
to managerial to strategic decisions. Operational decisions normally involve
actions in the short term: What should we do today or this week? Managerial decisions
involve longer time frames: What is an appropriate goal for the next quarter
or year? Strategic decisions involve the long term; their consequences may not be
realized for years.

31. Decisions Vary by Structure
A structured decision is one for which there is an understood and accepted method for making the decision
An unstructured decision process is one for which there is no agreed-on decision-making method
Note: terms structured and unstructured refer to the decision process/method, not to the underlying subject/problem
Example of Structured - weather forecasting
Example of Unstructured – weather itself
Q7 How do information systems support decision making?
Figure 2-8 shows levels of information systems with two decision processes: structured and unstructured. These terms refer to the method by which the decision is to be made, not to the nature of the underlying problem. A structured decision is one for which there is an understood and accepted method for making the decision. A formula for computing the reorder quantity of an item in inventory is an example of a structured decision process. A standard method for allocating furniture and equipment to employees is another structured decision process.
An unstructured decision process is one for which there is no agreed-on decision-making method. Predicting the future direction of the economy or the stock market is a famous example. The prediction method varies from person to person; it is neither standardized nor broadly accepted. (As one wit put it, “If you laid all the economists in the world end to end, they still would not reach a conclusion.”) Another example of an unstructured decision process is assessing how well suited an employee is for performing a particular job. Managers vary in the manner in which they make such assessments. Again, keep in mind that the terms structured and unstructured refer to the decision process, not to the underlying subject. Weather forecasting is a structured decision because the process used to make the decision is standardized among forecasters. Weather itself, however, is an unstructured phenomenon, as tornadoes and hurricanes demonstrate every year.

32. Supporting Decision Making
Q7 How do information systems support decision making?
Figure 2-8 Relationship of Decision Level and Decision Process

33. Decision-Making Steps
Q7 How do information systems support decision making?
Figure 2-9 Decision-Making Steps

34. What is your role? You are part of every information system (people)
Remember the five components of IS
Most important component of IS - people
Must be able to use information system
Quality of your thinking
Q8 What is Your Role?
You are part of every information system that you use. When you consider the five components of an information system, the last component, people, includes you. Your mind and your thinking are not merely a component of the information systems you use; they are the most important component.

35. MIS in Use Helm: Software Making Waves
Several years of work with tugboat companies resulted in developing HELM Marine Operations Software to automate several manual business processes in this industry
The hardware and software are used to save time for the dispatchers, captains, and accounting staff
The case describes how an information system, Helm, was used in the tugboat industry to support several manual business processes.

36. MIS in Use Questions
What are the primary benefits realized by the use of HELM software?
Could HELM also result in increased revenue? Explain your answer.
Can you think of other benefits that might arise from the use of the software? For example, it is hard to find experienced dispatchers in the industry. Could the system help meet this challenge?
1. What are the primary benefits realized by the use of HELM software?
2. Could HELM also result in increased revenue? Explain your answer.
3. Can you think of other benefits that might arise from the use of the software? For example, it is hard to find experienced dispatchers in the industry. Could the system help meet this challenge?

37. What Do YOU Think? Your Personal Competitive Advantage
Create a list of skills that set you apart from the competition
Get on the internet and find examples of the use of IS in the industry you are interested in
Develop a working relationship – co-op or internship
Start networking with your students in your class
Search the web to find out what job opportunities are available in other cities, regions, and countries
Your Personal Competitive Advantage

38. What Do YOU Think?
Summarize the efforts you have taken thus far to build an employment record that will lead to job offers after graduation.
Describe one way in which you have a competitive advantage over your classmates. If you do not have such competitive advantage, describe actions you can take to obtain one.
Your Personal Competitive Advantage

39. What Do YOU Think?
To build your network, you can use your status as a student to approach business professionals. That is, you can contact them for help with an assignment or for career guidance. For example, suppose you want to work in banking and you know that your local bank has a customer information system. You could call the bank manager and ask him or her how that system creates a competitive advantage for the bank. Also, you could ask to interview other employees. Describe two specific ways in which you can use your status as a student to build your network in this way.
Your Personal Competitive Advantage

40. What Do YOU Think?
Describe two ways you can use student alliances to obtain a job. How can you use information systems to build, maintain, and operate such alliances?
Your Personal Competitive Advantage