Introduction to Information Technology
Turban, Rainer and Potter
John Wiley & Sons, Inc.
Copyright 2005
Chapter 7 1

APPLYING IT FOR
COMPETITIVE ADVANTAGE
Chapter 7 2

Transaction Processing,
Functional Application, and Integration
“ Copyright 2005 John Wiley & Sons Inc.”
Chapter 7 3

Chapter Outline
Functional information systems
Transaction processing information systems
Managing the accounting and finance systems
Managing production/ operations and logistics
Managing human resource systems
Integrating functional information systems
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 4

Learning Objectives
Describe the drivers and characteristics of functional information systems.
Describe MISs .
Describe the transaction processing system and how it is supported by IT
Describe the support provided by IT and the Web to accounting and finance.
Describe the support provided by IT and the Web to marketing and sales.
Describe the support provide by IT and the Web to production / operations management, including logistic
Describe the support provided by IT and the Web to human resources management
Describe the benefits and issues of integrating functional information systems.
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 5

7.1 Functional Information Systems
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 6

Functional Information Systems cont…
Functional information Systems can be divided into two general categories: functionspecific and function- general . The most common type of function-general system, is management information systems (MISs)
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 7

Management Information System
(MIS)
A system that provides information to managers in the functional areas, in order to support managerial tasks of planning, organizing, and controlling operations.
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 8

An MIS produces routine, ad-hoc (ondemand) and exception report:
Ad-hoc ( on- demand) reports: Nonroutine reports.
Drill- down report: Reports that show a greater level of detail than is included in routine reports.
Key- indicator reports . Reports that summarize the performance of critical activities .
Comparative reports . Reports that compare performance of different business units or time periods.
Exception report . Report that include only information that exceeds certain threshold standard
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 9

Information systems can also be function-specific
Typical function- specific system are accounting, finance, marketing, operations
(POM), and human resources management
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 10

Major characteristic of functional information systems
Frequently composed of smaller systems
Integrated or independent
Interfacing
Supportive of different organizational levels
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 11

7.2 Transaction Processing
Information Systems (TPS)
Information system that supports routine, core business transactions.
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 12

Objectives of a TPS
To provide all the information needed by law, by management and / or by organizational policies to keep the business running properly and efficiently to efficiently handle high volume of data, to avoid errors due to concurrent operations to handle large variations in volume
To avoid downtime, never lose results, and maintain privacy and security
To interface with many IT applications, including epayment, e-procurement and e-marketing.
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 13

Activities and Methods of TPSs
First, data are collected by people or sensors and entered into the computer via any input device. Next the system processes data in one of two basic ways: batch or online processing.
 Batch processing: processes data in batches at fixed periodic intervals.
 Online processing: processes data as soon as a transaction occurs.
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 14

The Major Characteristics of a TPS
 Typically . Large amounts of data are processed.
 The source of data are mostly internal , and the outputs is intended mainly for an internal audience . This characteristic is changing somewhat, since trading partners may contribute data and may be permitted to use
TPS output directly .

The TPS processes information on a regular basis: daily, weekly, biweekly and so on.
 Large storage (database) capacitv is required.
 High processing speed is needed due to the high volume.
 The TPS monitors and collects past data

Input and output data are structured. Since the processed data are fairly stable, they are formatted in a standard fashion.
 A high level of detail (raw data, not summarized) is usually observable, especially in input data but often in output as well.
 Low computation complexity (simple mathematical and statistical operations) is usuallv evident in a TPS.
 A high level of accuracy, data integrity, and security is needed. Sensitive issues such as privacy of personal data are strongly related to TPSs.
 High reliability is required. The TPS can be viewed as the lifeblood of the organization . Interruption in the flow of TPS data can be fatal to the organization .
 Inquiry processing is a must . The TPS enables users to query files and databases ( even online and in real time)
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 15

The flow of information in TPS
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 16

Web–Based and Online TPS
In online transaction processing (OLTP) business transaction are processed online as soon as they occur.
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 17

Typical TPS Activities
Activities
The ledger
Description
The entire financial accounts: all of the assets, liabilities, and owner’s (stockholders') equity accounts
Accounts payable and receivable Record of all account to be paid and those owed by customers.
Receiving and shipping records
Inventory-on-hand records
Fixed-assets management
Transaction records of all item send or received and returns
Record of inventory levels. Use of barcodes improves ability to count inventory periodically
Record of the value of an organization’s fixed assets ( e.g. buildings, cars, machine ), including depreciation rate and major improvements made in assets, for taxation purposes
Payroll
Personnel files and skills inventory
Reports to government
Other periodic reports and statements
All raw and summery payroll records.
Files of employee’s history, evaluations, and record of training and performance.
Report on compliance with government regulations , taxes , etc
Financial, tax, production, sales and routine reports
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 18

7.3 Managing The Accounting and
Finance Systems
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 19

Financial planning and budgeting
Financial and economic forecasting
Budgeting
Capital budgeting
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 20

Managing financial transactions
E-commerce applications of financial transactions (global stock exchange, multiple currencies, E-bonds, etc.)
Virtual close . The ability of a company to close its accounting records quickly and on short notice
Expense Management Automation (EMA).
Systems that automate data entry and processing of travel and entertainment expenses.
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 21

Investment Management
Access to financial and economic reports
Financial analysis
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 22

Control and auditing
Budgetary control
Auditing
Financial ratio analysis.
Product pricing
Contract management
Profitability analysis and cost control
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 23

7.4 Managing marketing and sales systems
Channel systems. The systems involved in the process of getting a product or services to customers and dealing with all customers ’ needs.
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 24

Marketing Channel Systems
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 25

Customer relations “The Customer is
King /Queen”
Customer profile and preference analysis
Prospective customer lists and marketing
Databases
Mass customization
Personalization
Advertising and promotions
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 26

Distribution channels and
In-store innovations
New IT-support distribution channel
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 27

Marketing Management
Pricing of products or services
Salesperson productivity (sales force automation, sales productivity software)
Profitability analysis
Sales Analysis and trends
New products, services and marketing planning
Web-based systems in marketing
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 28

7.5 Managing production/ operations and logistics
In-house logistics and materials management
Inventory management
Quality control
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 29

Planning production and operations
Material requirement planning: A planning process that integrates production, purchasing and inventory management of interdependent items.
Manufacturing resource planning: A planning process that integrates an enterprise ’s production, inventory management, purchasing, financing and labor activities.
Just- in- time systems: An inventory scheduling system in which materials and parts arrive at a workplace just when needed .
Other areas.
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 30

Computer-integrated manufacturing
Computer-integrated manufacturing (CIM).
Manufacturing approach that integrates several computerized systems such as CAD,
CAM, MRP and JIT into a whole, in a factory.
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 31

“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 32

Product lifecycle management (PLM)
A business strategy that enables manufacturers to collaborate on product design and development efforts, using webbased strategies.
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 33

How product life cycle management works?
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 34

7.6 Managing Human Resources
Systems: Recruitment
Using he web for recruitment,
HRM portals and salary surveys.
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 35

Human Resources Maintenance and
Development
Performance evaluation
Training and HR development
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 36

Human Resources Planning and
Management
Payroll and employees ’ records
Benefit administration
Employee relationship management
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 37

7.7 Integrating Functional
Information Systems
Approaches to integration
Integrating front- office and back-office operations
Process-centric integration: System integrating solutions designed, developed and managed from a business- process perspective
“ Copyright 2005 John Wiley & Sons Inc.”`
Chapter 7 38