1. Business and IS Performance (IS 6010) MBS BIS 2010 / 2011 7 th October 2010 Fergal Carton (f.carton@ucc.ie) Accounting Finance and Information Systems

2. Last week Organisational goals Soft versus hard goals Anglo Irish example of hard vs. soft data Types of data Example of organisational metrics – UCC An integration framework Class exercise

3. This week Organisational performance and co-ordination strategies Collaboration / conflict arises Basic flows of information: how can data be shared and virtualisation Basic flows of information – manufacturing An example closer to home of organisational metrics – UCC Types of data Apple reporting example Class exercise How can they be quantified Where is there conflict An integration framework

4. Organisational performance Organisations are organised in a number of functional areas They carry out complementary missions They interact and collaborate in managing the organisation

5. Co-ordination strategies Co-ordination consists of: –Protocols, tasks and decision mechanisms to achieve concerted action between interdependent units (Thompson, 1967) –Decomposing goals to activities (Malone & Crowston, 1990) –People, resources and systems (Hepp & Roman, 07) Two key co-ordination strategies: –Centralisation of decision making (purpose agenda) –Standardisation of process (efficiency agenda) Inherent tension between individual and organisation Strategies impact flexibility of organisation differently IT only provides means of co-ordination, not reason

6. Goals constrained by time and cost Sales Revenue target achievement within budget Order processingBooked orders within sales period Production planningMinimise inventory levels but avoid stock outs Warehouse mgtRight product available at right time and right place ManufacturingFulfil production schedule with available resources Distribution / logisticsDeliver on time / complete with available resources Customer ServiceCustomer repairs, and on site service within budget Accounting /FinanceRevenue targets within expenditure limits Information SystemsApplication and server uptime with resources Human resourcesAdequate resources available with right skills

7. Examples: Finance: managing the cash flows, providing resources to the firm –sub area: Accounting (books and legal reporting) –sub area: Accounts receivable and payable: deal with suppliers and customers Marketing: promoting the firm and its products Sales: selling the products; dealing with customers –sub area: sales orders –sub area: returns Production: manufacture goods –sub area: purchasing raw material –sub area: quality control

8. Collaboration / Conflict All areas of the firm must exchange info with the others (just like organisations must interact with the outside) Divergence of viewpoints means opportunities for conflict are great Managing same resources / using the same assets but with radically different goals

9. Examples: Quality control versus production: –production want to increase volumes and keep productivity at highest levels –QC want to prevent any “faulty” product to come out of the door In an environment where zero defect is only a remote target => conflict is likely in one organisation, QC were referred to as the Sales Prevention department

10. Basic flows Basic flows of information in business Finance – cash Sales – orders, customers Manufacturing – suppliers, raw materials

11. Sales vs. Finance views Sale concluded, revenue = € x Cash collected, receipt = € y Discount level? Good payer? Paid in full? Paid when?

12. How can data be shared –Face to face –Hard copy –Soft copy or email –Interface between applications –Access to a shared database –…

13. Virtualisation Virtualisation: capturing & storing data relating to changes in the physical environment in an information system A measure of the degree to which information systems can reflect business reality Pre-supposes a structure (database), as data captured is related to a logical entity

14. Basic flows Finance Sales Manufacturing

15. Basic flows Finance Sales Manufacturing

16. Inventory = common denominator Finance Sales Manufacturing

17. ERP integration: demand & supply Production Distribution Sales X X X

19. Student Dashboard

20. Types of data 1 Volume data (production) consumption data (raw material, packaging…) personnel data maintenance data time related measurements productivity data … All form the basis of the calculations used to monitor manufacturing activities

21. Type of data 2 Primary data: –taken straight from the floor (input and output) –e.g. production, consumption, labour, maintenance –ad-hoc reports - e.g. accidents, defects Secondary data or calculated data: –allocated costs –productivity –pay bonuses –variances High level data: –investigations of variances –soft information about staff morale etc...

22. Type of data: soft information Data collection - –Grapevine –factory tours (talking and observing) Data storage - –managers’ minds –special reports Data usage: –ad-hoc basis –decision making

23. Apple sales process An increasing range of channels –Apple stores (eg. ATMac, Penrose Wharf) –Apple.com –Major accounts (Dixons, Curry’s, Fnac, HMV, Virgin, …) –Retailer (Tesco, O2 stores, Argos, …) –Indirect distributor (Russian market?) –… An increasing range of products –iTunes –iTunes gift cards –iPods –iTouch –Accessories for all media players and phones –Notebooks –Desktops –iPhones –Service –Software –…

24. Model names (sales)

25. Model numbers (manufacturing)

26. Production planning and forecast In theory, it’s simple –Sales forecast future demand for products –Production plan to meet forecast sales But, in real life, there are many contingencies: –Sales tend to be optimistic –Most businesses exhibit seasonality –Customers are unpredictable –Forecasts are based on average prices –Yield may be poor due to quality issues –…

27. How managers do their work What is happening? Actual What should be happening? Plan What therefore would happen if? What-if? Adjust plan and/or change actual Manage

28. Criteria for information sharing –Integrity –Timing of information exchange –Knowing information is up to date –Ownership of data –Accountability if information is incorrect, incomplete –Decision responsibility

29. Why is “one truth” so hard? Eg. Up to date picture of revenue? –Easy bit: all product shipped to date –Hard bit: Spares, loaners, replacement machines, … Deduct any current credit notes Add any outstanding debts from previous invoices Apportion revenue from service contract (12 months) Allow for discount to be applied if paid on time Currency exchange rate fluctuations … … –Revenue recognition “rules”

30. What does integration mean? Dearden 72 –As computer use expands, control is vital –Single group of experts design a completely integrated supersystem = absurd –Specialist expertise is functional by nature –Finance, logistics, sales = different expertise –Centralisation of control of systems = dangerous –Examine the interfaces Vizard 06 –Data used to be in disparate databases –Data now in databases, file systems, applications, … –“One truth” concerning the state of a business process –Interdependent business processes (eg. sales & service) –Meta-data structures –Enterprise Application Integration vs. BI tools

31. Who benefits? Finance gain greater visibility Manufacturing? –Demand may be too unstable for MRP –Production planning needs more “nuance” –ERP is too literal –Much planning still done on Spreadsheets Sales: need of integration

32. Integration downsides Response times Vulnerability: single point of failure Limitations on expansion Dependence on single vendor Flexibility to change system … Access to basic information is complicated

33. Co-ordination strategies Co-ordination consists of: –Protocols, tasks and decision mechanisms to achieve concerted action between interdependent units (Thompson, 1967) –Decomposing goals to activities (Malone & Crowston, 1990) –People, resources and systems (Hepp & Roman, 07) Two key co-ordination strategies: –Centralisation of decision making (purpose agenda) –Standardisation of process (efficiency agenda) Inherent tension between individual and organisation Strategies impact flexibility of organisation differently IT only provides means of co-ordination, not reason

34. Fig 7.2 Control objectives of ERP undermined (p. 398)

35. Fig 7.3 Integration framework (p.400) ExecuteSchedule Measure Performance control SupplyDemand Resource visibility Physical Virtual Plan