1. CHAPTER 8 Information Systems within the Organization
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2. Chapter 8: Information Systems within the Organization
8.1 Transaction Processing Systems 8.2 Functional Area Information Systems 8.3 Enterprise Resource Planning Systems 8.4 Reports
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LEARNING OBJECTIVES
Explain the purposes of transaction processing systems. Provide at least one example of how businesses use these systems.
Define functional area information systems. Provide an example of the support they provide for each functional area of the organization.
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4. LEARNING OBJECTIVES (continued)
Explain the purpose of enterprise resource planning systems. Identify four advantages and four drawbacks to implementing an ERP system.
Discuss the three major types of reports generated by the functional area information systems and enterprise resource planning systems. Provide an example of each type.
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5. 8.1 Opening Case: Is Baseball a Science?
The Problem
John Dewan, the owner of Baseball Info Solutions (BIS; www2.baseballinfosolutions.com), has made collecting data on fielding statistics his latest mission. The BIS data, however, are not perfect. For example, they do not indicate where a fielder was standing when the ball was hit. In addition, the data are susceptible to human error, and could be off by 15 to 20 feet (4.5 to 6 m) on some plays. Dewan estimated that BIS and its video scouts could measure only 60 percent of a fielder’s ability.
BIS employs about 20 video scouts to record data on every batted ball: its direction, distance, speed, and type. Major league teams pay to see these numbers.
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6. 8.1 Opening Case: Is Baseball a Science?
The Solution
Sportvision created Fieldf/x, a motion-capture, or optical tracking system that helps eliminate human error and the need to be in the right place at the right time. Fieldf/x uses four cameras placed high above the field to track players and the ball, and to log their movements. The system generates more than 2.5 million records per game, or 2 terabytes of data.
The system collects movement data and produces valuable information such as a fielder’s reaction time, his path to the ball, the base runner’s speed, and the arc of a fly ball. When installed at all Major League Baseball parks, Fieldf/x will create a digital catalogue of virtually every movement of every fielder at every game.
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7. 8.1 Opening Case: Is Baseball a Science?
The Results
Ultimately, Fieldf/x will generate new baseball metrics, such as degree-of-difficulty fielding ratings. Fieldf/x also will make coaching more precise; for example, coaches will be able to better position their fielders, depending on the hitter and the pitch being thrown (e.g., fast ball versus slow curve ball). Finally, the system will enhance the process by which clubs evaluate—and pay—their players.
In mid-2011, Fieldf/x was in place at San Francisco’s AT&T Park, and it was installed in four more parks by October The goal was to install the system in every major league park in the United States by the end of Tom Tippett, the director of baseball information services for the Boston Red Sox, is responsible for gathering and analyzing data to put together a winning team in Boston. He asserts that Fieldf/x will essentially make all other fielding statistics irrelevant.
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8. 8.1 Opening Case: Is Baseball a Science?
Discussion
What is the major attribute of Fieldf/x?
What was the significant difference between the 2 systems that mitigated human error?
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9. 8.1 IT’s about [small and big] business
Pizza Pizza’s Customer App
created an iPhone app for ordering customized pizza
app is free and fun
won several design awards
brings in more sales
convenient for customers
reduces costs and saves the potential for error
Pizza Pizza is continuing to use apps to innovate and draw customers. For example, it has enabled students from some universities to pay for their pizza with their student meal plan cards. This shows how e-payment systems can work seamlessly with the smart phone as the intermediary. It has also provided version of the app for iPads and iPods.
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10. 8.1 Transaction Processing Systems (TPS)
Grocery store clerks use a bar code scanner that produces data captured by a transaction processing system
The TPS collects data continuously, in real time, as soon as the data are generated, and it provides the input data for the corporate databases.
Transaction processing system (TPS) are inputs for functional area information systems and business intelligence systems, as well as for business operations such as customer relationship management, knowledge management, and e-commerce. TPS supports the monitoring, collection, storage, and processing of data generated by each of the organization’s basic business transactions.
Transaction is any business event that generates data worth being captured and stored in a database. Examples: a product manufactured, a service sold, a person hired, and a payroll cheque generated.
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11. Figure 8.1 How TPS Manage Data
First, people or sensors collect the data, which are entered into the computer via any input device.
Next, the system processes the data in one of two basic ways: batch processing, and on-line transaction processing.
The system then prepares and processes the batches periodically.
Batch processing: data are collected from transactions as they occur and are placed in groups or batches.
On-line transaction processing (OLTP): business transactions are processed on-line as soon as they occur.
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12. 8.2 Functional Area Information Systems
Functional Area Information Systems (FAIS) provide support for the various functional areas (below) in an organization by increasing each area’s internal efficiency and effectiveness
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.
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13. Information Systems for Accounting and Finance
Financial Planning and Budgeting
Financial and economic forecasting
Planning and Budgeting
Managing Financial Transactions
Global stock exchanges
Multiple currency management
Virtual close
Expense management automation
Click on the link to review IS for accounting and finance provided by Sage (sales ledger, purchase ledger, cash book, sales order processing, invoicing, stock control, fixed assets register).
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14. Information Systems for Accounting and Finance (continued)
Investment Management
Control and Auditing
Budgetary control
Internal auditing
Financial ratio analysis
Click on the link to access the website of the Institute of Internal Auditors
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15. Information Systems for Marketing
Customer relations
Customer profiles and preferences
Sales force automation
It is impossible to overestimate the importance of customers to any organization. Therefore, any successful organization must understand its customers’ needs and wants and then develop its marketing and advertising strategies around them. Information systems provide numerous types of support to the marketing function.
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16. Information Systems for Production and Operations Management
In-House Logistics and Materials Management
Inventory Management
Quality Control
Planning Production and Operations
Computer-Integrated Manufacturing
Product Life Cycle Management
Production and operations management (POM) function in an organization is responsible for the processes that transform inputs into useful outputs as well as for the overall operation of the business.
Computer-integrated manufacturing ([KT]CIM; also called digital manufacturing) is an approach that integrates various automated factory systems. CIM has three basic goals: (1) to simplify all manufacturing technologies and techniques, (2) to automate as many of the manufacturing processes as possible, and (3) to integrate and coordinate all aspects of design, manufacturing, and related functions via computer systems.
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17. Information Systems for Human Resources
Recruitment
HR Maintenance and Development
HR Planning and Management
Payroll and employees’ records
Benefits administration
Employee relationship management
Human resource information system (HRIS) are usually delivered via an HR portal.
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Figure 8.2 Examples of Information Systems Supporting the Functional Areas
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19. 8.3 Enterprise Resource Planning Systems (ERP)
Enterprise Resource Planning (ERP) system adopts a business process view of the overall organization to integrate the planning, management, and use of all of an organization’s resources, employing a common software platform and database.
The major objectives of ERP systems are to tightly integrate the functional areas of the organization, enabling information to flow seamlessly across them.
ERP systems function much the same as FAISs and produce the same reports.
ERP systems simply integrate the functions of the various FAISs.
ERP systems provide the information necessary to control the business processes of the organization.
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ERP Software Vendors
Most organizations use commercially available ERP software from major vendors including:
SAP
Oracle
PeopleSoft
Click here for up-to-date information on ERP software
Click on SAP and Oracle in this slide to access their websites to review IS solutions.
ERP Software vendors offer solutions for:
Accounting & Finance
Human Resources
Customer Relationship Management
Supplier Relationship Management
Product Lifecycle Management
Supply Chain Management
Business Intelligence
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8.2 IT’s about business
Airgas switched over its hard-goods supply chain operation to SAP in July 2010:
affects nearly every area of Airgas
70 percent of its information systems functional on SAP as of March 2013
expected to have saved up to $125 million by the end of 2013
improved sales, better price management, and leaner operating costs
Airgas, which sells medical, industrial, and specialized gases and related equipment, implemented a “highly customized” version of SAP that the company lauded as a huge success. Airgas chose approximately 300 subject-matter experts from the 14,000-person company to identify which new functionalities were required in the SAP system. These experts worked side-by-side with a 120-member, full-time project team composed of Deloitte consultants and Airgas executives.
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ERP II Systems
ERP II systems are interorganizational ERP systems that provide web-enabled links between a company’s key business systems—such as inventory and production—and its customers, suppliers, distributors, and others. These links integrate internal-facing ERP applications with the external-focused applications of supply chain management and customer relationship management.
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ERP Modules
Core ERP Modules
Financial Management
Operations Management
Human resource management
Extended ERP Modules
Customer relationship management
Supply Chain Management
Business intelligence
E-business
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24. Benefits of ERP Systems
Organizational flexibility and agility
Decision support
Quality and efficiency
• Organizational flexibility and agility. ERP systems break down many former departmental and functional silos of business processes, information systems, and information resources. The organizations therefore can react quickly to changing business conditions as well as capitalize on new business opportunities.
• Decision support. ERP systems provide essential information on business performance across functional areas. This information significantly improves managers’ ability to make better, more timely decisions.
• Quality and efficiency. ERP systems integrate and improve an organization’s business processes, resulting in significant improvements in the quality of customer service, production, and distribution.
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25. Limitations of ERP Systems
Companies may need to change existing business processes to fit the predefined business processes of the software (best practices)
Complex, expensive, and time consuming to implement
Underestimating the complexity of the planning, development, and training required to prepare for a new ERP system
Note that best practices, by definition, are appropriate for most organizations. Organizations differ, however; therefore a “best practice” might not be the “best” one for your company.
E enterprise application integration (EAI) system integrates existing systems by providing software, called middleware, that connects applications together.
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8.4 Reports
Routine reports are produced at scheduled intervals (hourly quality control report, daily reports on absenteeism rates)
Non-routine or Ad hoc (on demand) reports:
Drill-down reports
Key-indicator reports
Comparative reports
Exception reports include only information that falls outside certain threshold standards
Various information systems produce reports: transaction processing systems, functional area information systems, ERP systems, customer relationship management systems, business intelligence systems, and others.
Drill-down reports display a greater level of detail.
Key-indicator reports summarize the performance of critical activities.
Comparative reports may compare, for example, performances of different business units or of a single unit during different time periods.
Exception reports: To implement management by exception, management first creates performance standards. The company then sets up systems to monitor performance (via incoming data about business transactions such as expenditures), compare actual performance with the standards, and identify exceptions to the standards. The system alerts managers to the exceptions via exception reports.
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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.
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Chapter Closing
TPSs monitor, store, collect, and process data generated from all business transactions.
Major business functional areas are production/operations management, marketing, accounting/finance, and human resources management.
Enterprise resource planning (ERP) systems integrate the planning, management, and use of all of the organization’s resources.
Three major types of reports generated by FAIS and ERP systems are: Routine, Nonroutine or ad hoc (on-demand) and Exception.
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