1. CHAPTER 8 Transaction Processing, Innovative Functional Systems, and Integration
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2. Learning Objectives
Relate functional areas and business processes to the value chain model
Identify functional management information systems
Describe the transaction processing system and demonstrate how it is supported by IT
Describe the support provided by IT to each of these: production/operations, marketing and sales, accounting, finance, and human resources management
Describe the benefits and issues of integrating functional information systems
Describe the role of IT in facilitating customer relationship management (CRM)

3. Integrated Solutions Help Colonial Building Supply, Stay Competitive
The Problem
to remain competitive, Colonial Building Supply needed a technology to provide it with information about inventory levels and customer buying trends
The Solution
purchased a integrated system that includes: accounting, POS terminal, inventory control, purchasing/receiving, employee time control and attendance, hand-held automatic identification and data collection, and several others
The Results
Lower cost for data entry, reduction in inventory and storage space, fast access to information, better customer service, and higher employee satisfaction

4. Crossing Functional Boundaries at Colonial
IT support the routine processes of a retailer, enabling it to be efficient and effective and to satisfy its customers
IT software helped the modernization and reengineering of the company’s major business processes
The software supports several business processes, not just one
The system’s major applications were in logistics. However, a vendor provides integrated software
IT can be beneficial to a relatively small company
The integration includes connection to business partners using the Internet

5. Porter’s Value Chain Model and The Supply Chain
Typical functional areas mapped on
the value chain of a manufacturing company
Margin
Profit
Firm Infrastructure
(Accounting, Finance, General Management)
Human Resource Management
(Human Resources)
Technology Development
(Engineering)
Procurement
(Material Management-Operations)
Support Activities
Service
(Service or
Marketing)
Inbound
Logistics
(Material
Managaement-
Operations)
Operations
(Operations)
Outbound
Managemnet-
Marketing
and Sales
(Marketing)
Primary Activities

6. Major Characteristics of Functional Information Systems
A functional information systems comprises several smaller information systems that support specific activities performed by each functional area
The specific IS applications in any functional area can be integrated to form a coherent departmental functional, or they can be completely independent
Functional information systems interface with each other to form the organization-wide information system
Some organizational information systems interface with the business environment
Information systems applications support the three levels of an organization’s activities: operational, managerial, and strategic

7. Computerization of Routine Transaction Processes
Transaction Processing System (TPS)
supports transaction processes
monitors, collects, stores, processes, and disseminates information for all routine core business transactions
includes accounting and finance transactions and some sales, personnel, and production activities

8. Objectives of TPS
To provide all the information needed by law and/or by organizational policies to keep the business running properly and efficiently
To allow for efficient and effective operation of the organization
To provide timely documents and reports
To increase the competitive advantage of the corporation
To provide the necessary data for tactical and strategic systems such as DSS applications
To assure accuracy and integrity of data and information
To safeguard assets and security of information

9. Major Characteristics of TPS
Large amount of data are processed
The sources of data are mostly internal, and the output is intended mainly for an internal audience
The TPS processes information on a regular basis
Large storage (database) capacity is required
High processing speed is needed due to the high volume
TPS basically monitors and collects past data
Input and output data are structured
High level of detail is usually observed
Low computation complexity
High level of accuracy, data integrity, and security is needed
High reliability is required
Inquiry processing is a must

10. Benefits of Internet Transaction Processing
Flexibility to accommodate unpredictable growth in processing demands
Cost effectiveness even for small dollar amounts
Interactive, automatic billing, enabling companies to offer services to anyone, not just subscribers
Timely search and analysis of large databases
Multimedia data such as pictures and sound are handled effectively and efficiently
High data throughput to support inquiries requiring massive file size
Fast response time
Effective storage of huge graphics and video databases

11. Typical Tasks in Transaction Processing
POS
Terminal
File
Product
Processing
System
Inventory
Files
Department
Sales Files
Customer
Makes a
Purchase
Master

12. Innovative IT Applications in the Functional Areas
Managing Production/Operations and Logistics
transform inputs into useful outputs
very diversified, and so its supporting information systems
related to finance and sales, engineering and design, and purchasing and logistics

13. Typical TPS of a Manufacturer
Vendors
Customers
General
Ledger
Periodic
Statements
Manufac-
turing
Purchasing
Order
Receiving
Goods
Accounts
Payable
Shipping
Receivable
Inventory
Customer
Taxes
Payroll
Fixed
Assets

14. Innovative IT Applications in the Functional Areas
Supply-Chain Management
objective is to support the flow of goods and materials from the original supplier through multiple production and logistic operations to the ultimate consumer
extensive integrated software is available for managing portions of the supply chain as well as the entire process

15. Supply-Chain Management
Suppliers
Inbound Logistics
Production
Transaction
Delivery
Customer
a) Supply Chain direct to customer
Suppliers
Manufacturing
Distribution
Retail Outlet
Customer
Transfer
Supply Chain Organization
Information Flow
Cash
Flow
b) Supply Chain including wholesalers and retailers

16. In-House Logistics and Material Management
Inventory Management
Quality Control

17. Planning Production/Operations
Material Requirements Planning (MRP)
Manufacturing Resource Planning (MRP II)
Just-in-Time Systems
Project Management
Short-Term Schedules

18. Automatic Design Work and Manufacturing
Computer-aided Design (CAD)
Computer-aided Engineering (CAE)
Computer-aided Manufacturing (CAM)

19. Computer-integrated Manufacturing (CIM)
Three basic goals:
simplification
automation
integration and coordination
The CIM model
made up by general business management, product and process definition, manufacturing planning and control, factory automation, and information resource management

20. Channel Systems The customer is king (queen)
Customer profiles and preference analysis
Prospective customer lists and marketing databases
Mass customization
Targeted Advertisement on the Web
customer inquiry systems and Automated Help Desk (EC application)

21. Channel Systems Telemarketing Capabilities Limitations
personalized contact with the customers
allows customers to buy at their convenience
effective in informing customers about a company’s products and services
Limitations
cost can be high
difficult to find good telemarketers
may be seen by many as a nuisance
challenges in reaching people

22. Distribution Channels
Distribution channels management
DSS models are frequently used to support the decision of accomplishing by a company, or by a subcontractor
Improving sales at retail stores
using IT, it is possible to improve the situation by reengineering the checkout process

23. Marketing Management Pricing of products or services
Salesperson productivity
Productivity software
Products and customers profitability analysis
Sales analysis and trends
New products, services, and market planning

24. Managing the Accounting and Finance Systems
TACTIAL SYSTEMS
a. Budgeting Preparation and Control
b. Investment Management
c. Capital Budgeting d. Cost Analysis and Control
e. Tax Management f. Auditing
g. Financial Planning
INTERNAL
ENVIRONMENT
Top Management
Operation/
Production
Marketing
HRM
Engineering
EXTERNAL
IRS
SEC
Vendors
Clients
CPA Companies
Suppliers
Customers
Business Partners
STRATEGIC SYSTEMS
a. Strategic Planning b. Ratios and Financial Health
c. Merger and Acquisition Analysis
OPERATIONAL AND
TRANSACTION PROCESSING
SYSTEMS
a. The General Ledger b. Sales Order Processing
c. Accounts Payable and Receivable
d. Receiving and Shipping
e. Payroll f. Inventory Management
g. Periodical Reports & Statements

25. Managing the Accounting and Finance Systems
Strategic Systems
Tactical Systems
Operational and Transaction Processing System
Internal Environment
External
Environment

26. Financial Planning and Budgeting
Financial and economic forecasting
Planning for incoming funds
Budgeting preparation and operation
Capital budgeting decision

27. Investment Management
Access to financial and economical reports
Internet meta-search engines for finding financial data
Internet directories and yellow pages
Software for monitoring, interpreting, analyzing financial data, and alerting management
Financial analysis
Treasury risk management systems (TRMS)

28. Control and Auditing Budgetary control Auditing
Financial health analysis
Profitability analysis and cost control
Product pricing

29. Recruitment
Position inventory
Employee selection
Using the Internet

30. Human Resources Maintenance and Development
Performance evaluation
Training and human resources development
Turnover, tardiness, and absenteeism analyses

31. Human Resources Planning and Management
Personnel planning
Succession planning
Labor-management negotiations
Benefits administration

32. Internet Applications
Eddify Corporation’s employee service systems allows users to access information via PCs, voice-recognition phone, kiosks, or faxes.
Oracle corporation conducts its flexible benefits enrollment program on the intranet
Apple Computers Inc. conducts extensive education and development activities on the intranet, including a remote management-training program

33. Reasons for Integration
Helps to reduce cost
Helps to increase employees’ productivity
Helps to facilitate information sharing and collaboration which are necessary for improving customer service
IT helps CRM

34. Customer Relationship Management (CRM)
The company’s success depends on effectively managing relationship with customers
Relationship marketing
overt attempt of exchange partners to build a long-term association, characterized by purposeful cooperation and mutual dependence on the development of social, as well as structural, bongs
include the concepts of loyalty and trust

35. How is CRM Practiced?
Know who the company’s current and potential customers are
Know who is a good customer, and who are the most profitable customers for the business
Know why a certain customer is in the market, why he or she does business with the company, what the customers like and dislike about he business

36. The Enabling Role of IT
Using intelligent agent technology, American Airlines generates personalized Web pages for each of about 800,000 registered travel-planning customers
Manchester Metropolitan University tracks a population of 30,000 students, manages modular courses, and keeps the student management systems updated by databases and parallel processing
Charles schwab’s call center handles effectively over 1 million customer calls every day
State Farm Insurance Co. manages several initiatives for retaining customers by a computerized incentives system

37. CRM Activities and IT Support
CRM Activity (Sample)
IT Support
Information about choice of doctors, hospitals, and alternative medicine offered by HMO’s.
Internet; online customer survey; groupware; expert systems for giving advice.
Customized information and services in many languages; discounts based on healthy lifestyle; appointment reminders; information on doctors; and medical research. Help center to solve HMO member problem
; data warehouse for customer information; data mining; intelligent translating systems; search engines on the Web help center.
Web-based integrated call centers; quick reply to customers’ inquiries
Facilitates help-desk activities; intelligent agents for answering FAQs

38. CRM Activities and IT Support
CRM Activity (Sample)
IT Support
Monitoring of customers’ orders inside the company.
Workflow software for planning and monitoring; intranets
Appointment of account managers; creation of specialized teams (BPR)
Expert systems for advice; groupware for collaboration.
Seminars and educational activities for customers
Online training; Internet.
Self-tracking of shipments and orders.
Web-based training software; workflow
Segmenting of customers
Data mining in data warehouses.
Matching customers with products and services.
Web-based intelligent agents.

39. CRM Activities and IT Support
CRM Activity (Sample)
IT Support
Customizing products to suit customers’ specific needs.
Intelligent agents to find what customer wants; CAD/CAM to reduce cost of customization
Customer discussion forums.
Chat room; sponsored newsgroups.
Loyalty programs for repeat customers.
Data warehouses and data mining of customers’ activities; smart cards that record purchasers’ activities.
Customer participation in product (service) development.
Online surveys; newsgroups; chat room;
Proactive approach to customers based on their activity level.
Data warehouse; data mining.

40. IT for Management
Prof. Efraim Turban
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