Chapter 3
Information Systems in Business
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Learning Objectives
• Identify various business functions and the role of
ISs in these functions
• Explain how ISs in the basic business functions
relate to each other
• Show how ISs of different business functions
support each other
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Learning Objectives (Cont.)
• Explain how information technology is used in the
most common business functions to make business
processes more effective and more efficient
• Explain the notion of enterprise resource planning
(ERP) systems
• Identify business areas where information
technology facilitates the work of managers and
knowledge workers
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Effectiveness and Efficiency
• ISs can help companies attain more effective and efficient
business processes
– Effectiveness
• The degree to which a task is accomplished
• The degree to which the company achieves outcomes better than
the competitors do
• “To get the right things done” by Peter F. Drucker
– Efficiency
• Determined by the relationship between resources expended and
benefits gained in achieving a goal
• To do the things right
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Effectiveness and Efficiency (Cont.)
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Effectiveness and Efficiency (Cont.)
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Accounting
• AISs automatically post transactions in the books
and automate generation of reports for management
and legal requirements
• Three types of AISs
– Transaction processing systems (TPS)
– Cost accounting systems
– Managerial accounting systems
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Accounting (Cont.)
• Electronic Data Processing (EDP) Audits
– Ensure electronic systems comply with standard
regulations and acceptable rules
– Ensure systems cannot be manipulated to
circumvent acceptable principles
– To be an EDP auditor ($)
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Accounting (Cont.)
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Finance
• The job of financial managers is to manage money
as efficiently as possible by:
– Collecting payables as soon as possible
– Making payments by the latest time allowed by
contract or law
– Ensuring sufficient funds are available for day-today operations
– Taking advantage of opportunities to accrue the
highest yield on funds not used for current
activities
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Finance (Cont.)
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Cash Management
• Financial ISs help balance the need to accrue
interest against the need to have cash available
• Cash management systems (CMS):
– Handle cash transactions specifically
• Electronic fund transfer (EFT):
– Electronic transfer of cash from one bank account
to another
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Investment Analysis and Service
• Analyze and project prices of a specific stock or
bond in real time
• Transmit buy and sell orders electronically
• Provide clients with a detailed statement
• Monitor account information and news online
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Engineering
• ISs reduce engineering lead time or time to market
– Key to maintaining a competitive edge
– Computer-Aided Design (CAD) Systems
• Help engineers and technicians design new products and quickly
modify and store drawings electronically
– Rapid Prototyping:
• Creating one-of-a-kind products to test design in three dimensions
• Concurrent engineering and communication through Internet
• Product Data Management (PDM)
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Engineering (Cont.)
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Manufacturing & Inventory Control
• IT helps in these manufacturing activities:
– Plant activity scheduling
– Material Requirement Planning/assessment
– Material reallocation between orders
– Dynamic inventory management
– Grouping work orders by “characteristics”
– Resource qualification for task completion
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Manufacturing & Inventory Control
(Cont.)
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Materials Requirement Planning (MRP)
• Take customer demand as initial input
– Deployment according to the bill of materials (BOM)
– Number of product units needed and when they are
needed (Main Production Scheduling)
• Use long-range forecasts to put long-lead material on
order
• Help reduce inventory cost while ensuring availability
– EOQ inventory under a specific lead time and a
consumption rate
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Materials Requirement Planning
(MRP) (Cont.)
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Manufacturing Resource Planning
(MRP II)
• Combines MRP with other manufacturing-related
activities to plan the manufacturing process such as:
– Shop activity control and purchasing
– Source of demand
– Customer order entry and forecasting
• MPS (master production scheduling)
– Support functions such as financial management, sales
analysis, and data collection
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7-row MRP table (example)
Part: A Past
Period
Due
OH 20
AL 0
1
2
3
80
50 100
LT 1
4
5
ST 0
6
60 100
7
SS 25
8
70 100
9
10
60 100
11
50 100
12
1.GR
0
50
2.SR
0 100
0
0
0
0
0
0
0
0
0
0
0
3.POH
X
40
-10
-75
-35
-75
-45
-75
-35
-75
-25
-75
-25
4.PAB
X
40
25
25
25
25
25
25
25
25
25
25
25
5.NR
X
0
35 100
60 100
70 100
60 100
50 100
50
0
35 100
60 100
70 100
60 100
50 100
50
6.PORC
7.POR
0
35 100
60 100
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70 100
60 100
50 100
50
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0
The algorithm of MRP
•
•
•
•
Procedure MRP;
單階BOM 展開 MPS 之PORt, 加入其子件成為其GRt
LLC1;
While MPS 有未被處理項 Do
– While BOM中 LLC 有任一項未被處理 Do
• PAB0 OH-AL+max(SR0,0);
• For t=1 to T Do
– IF t=1 then POH1PAB0+SR1-GR1-max(GR0,0)
» Else POHtPABt-1+SRt-GRt;
– Endif
– IF POHt<SS then NRtSS-POHt, PORCt=max(NRt,LS);
» Else NRt0, PORCt0;
– Endif
Management
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The algorithm of MRP (cont.)
– PABtPOHt+PORCt;
– PORt-LTPORCt;
– 單階 BOM展開之PORt, 加入其子件之GRt;
• Endfor
• Print the item MRP report
– Endwhile;
– LLCLLC+1;
• Endwhile;
• Endprocedure;
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Manufacturing Execution Systems (MES)
• Track, schedule, and control manufacturing
processes
• Collect data such as:
– Hours machine operates every day of the month
– Hours the machine is idle and why
– Optimization, rationalization
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Monitoring and Control
• Supply chain management (SCM)
– Managers know status of product during
manufacturing
– Recent IS control/adjustment as well as monitor
manufacturing process
– System at Ford Motor Company designed to ensure no
assemble steps are missed
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Marketing, Sales, & Customer Service
• Market Research
– Statistical (data mining) models help market
researchers find the best populations for new and
existing products
• Targeted Marketing
– Database management systems (DBMS) help define
potential customers as narrowly as possible
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Marketing, Sales, & Customer
Service (Cont.)
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Marketing, Sales, & Customer Service
(Cont.)
• The Internet as a Marketing and Selling Medium
– Web lets companies reach more shoppers and serve them better
– Mobile Commerce (M-Commerce) is the newest form of
marketing
• Location-based, timely, impulse-purchasing, killing-time info-tainment
– Commercial announcements/Internet advertisements pervade the
Web
• Annoying but effective
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Sales Force Automation
• Equipping salespeople with information technology
to facilitate productivity
– IT allows salespeople to present different options for
products and services on the spot
– Instantly mobile dispatching
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Customer Relationship Management
• Customer Relationship Management (CRM)
software for companies to better serve and know
customer needs
– Track past purchase and payments
– Update online answers to frequently asked questions
(FAQs)
– Analyze customer’s contact with company
• Web-based Customer Service available 24/7/365
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Human Resources
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Human Resources (Cont.)
• Employee Record Management
– Reduce space needed to store records, time to
retrieve them, and costs of both
• Promotion and Recruitment
– Search databases for qualified personnel
– Use intranet to post job vacancies
– Use the Web to recruit
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Human Resources (Cont.)
• Training
– Multimedia software training is replacing
classrooms and teachers
– Training software simulates an actual task or
situation and includes evaluation tools
• Evaluation
– Evaluation software helps standardize the
evaluation process and adds a certain measure of
objectivity and consistency (MBO)
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Human Resources (Cont.)
• Compensation and Benefits Management
– ISs can help manage compensation efficiently and
effectively
• Calculate salaries, hourly pay, commissions, and
taxes
• Automatically generate paychecks or direct deposits
– Special software helps manage benefits, such as
health insurance, life insurance, retirement plans,
and sick and leave days
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Enterprise Resource Planning (ERP)
• All business functions served by one system that
supports different activities for internal different
departments
• Support the external-oriented material/information
flow of supply chain management upward and
downward, the series of main and supporting
activities from order to delivery
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Enterprise Resource Planning (ERP)
(Cont.)
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Groupware and
Collaborative Work
• GroupWare lets workers in different locations
communicate ideas, brainstorm, and work together as if
they were in the same place, esp., the engineering task
• Document Control
– Users can distribute and track electronic documents
without working with outdated information
– PDM
• Collaborative Projects
– Users can coordinate work on a single document from
many different terminals
– Collaborative Production Commerce (CPC)
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Ethical and Societal Issues
Privacy? What Privacy?
• What is Privacy?
– One’s right to control information about oneself
– Not a constitutional right per se; secured by laws or
convention
– Increasing number of organizations may access
information via better IT hardware and software
– Business and civil rights advocates dispute degree of
privacy vs. utility of information access
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Ethical and Societal Issues
Privacy? What Privacy?
• Business Arguments
– Necessary to collect basic financial and personal
information as cheaply as possible
– Consumers benefit eventually from competitive
environment augmented by readily available
information
– Customization possibility
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Ethical and Societal Issues
Privacy? What Privacy?
• Consumer Arguments
– Resent unsolicited mail and telephone calls
– Resent being refused credit because of credit bureau
mistakes
– Frightened by “dossier phenomenon”
– Loss of control over information unfair—information
gathered for a particular purpose with permission
should remain restricted
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Ethical and Societal Issues
Privacy? What Privacy?
• Seven Commandments of Personal Data Collection
and Maintenance
– Purpose: Companies should inform people who
provide information of specific, exclusive purpose
– Relevance: Companies should record and use only data
necessary to fulfill their own purposes
– Accuracy: Companies should ensure that their data are
accurate
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Ethical and Societal Issues
Privacy? What Privacy?
– Currency: Companies should make sure that all data
about an individual are current
– Security: Companies should limit data access to only
those who need to know
– Time Limitation: Companies should retain data only
for the time period necessary
– Scrutiny: Companies should establish procedures to
let individuals review their records and correct
inaccuracies
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Summary
• There are various business functions and ISs have
a role in these functions
• ISs relate to each other in basic business functions
• IT is used in business functions to make business
more effective and more efficient
• ERP systems help run different functions upon a
common platform
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