Chapter 2: Information Systems in
the Enterprise
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Reading Notes for Chapter 2 in the textbook
The chapter introduces six types of information systems.
Figure 2.1 and table 2.1 give an overall picture of organizations
and how different types of information systems serve them.
Figure 2.2 depicts different types of information systems and how
they relate to one another (Figure 2.9 as well).
Section 2.2 examines information systems from a
functional view of an organization: Sales and marketing systems,
manufacturing and production systems, finance and accounting
systems, and human resources systems. Read this section
carefully to develop an understanding of how information systems
serve different functions of an organization.
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Reading Notes for Chapter 2 in the textbook - Continued
Read section 2.3 carefully to understand integration of
functions and business processes. Figure 2.12 illustrates a
cross-functional business process. Pay also attention to
customer relationship management and enterprise systems
that are current trends in business. Contrast Figure 2.15 and
2.16. Extended enterprises and industrial networks are also
recent trends and would not be possible without the support
of information technology.
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KINDS OF INFORMATION SYSTEMS
Organizational Hierarchy
Organizational Levels
Information Systems
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2
KINDS OF INFORMATION SYSTEMS
KIND OF SYSTEM
STRATEGIC LEVEL
MANAGEMENT LEVEL
GROUPS SERVED
SENIOR MANAGERS
MIDDLE MANAGERS
KNOWLEDGE LEVEL
KNOWLEDGE &
DATA WORKERS
OPERATIONAL
LEVEL
SALES &
MARKETING
OPERATIONAL
MANAGERS
MANUFACTURING FINANCE
& ENGINEERING
ACCOUNTING HUMAN
RESOURCES
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Four General Kinds of IS
Operational-level systems
support operational managers by monitoring
the day-to-day’s elementary activities and
transactions of the organization. e.g. TPS.
Knowledge-level systems
support knowledge and data workers in
designing products, distributing information, and
coping with paperwork in an organization. e.g.
KWS, OAS
Management-level systems
support the monitoring, controlling, decisionmaking, and administrative activities of middle
managers. e.g. MIS, DSS
Strategic-level systems
support long-range planning activities of senior
management. e.g. ESS
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3
A Framework for IS
(with respect to support provided)
Executive Support Systems (ESS)
Management Information Systems (MIS)
Decision Support Systems (DSS)
Knowledge Work Systems (KWS)
Office Automation Systems (OAS)
Transaction Processing Systems (TPS)
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•
•
•
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Transaction Processing Systems (TPS)
Computerized system that performs and records
the daily routine transactions necessary to
conduct the business; these systems serve the
operational level of the organization
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•
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•
•
•
TYPE: OperationalOperational-level
INPUTS: transactions, events
PROCESSING: updating
OUTPUTS: detailed reports
USERS: operations personnel, supervisors
DECISIONDECISION-MAKING: highly structured
EXAMPLE: payroll, accounts payable
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4
A Symbolic Representation for a payroll
TPS
Employee data (various departments)
To general ledger: wages and salaries
Payroll System
Management
Reports
Government documents
Payroll
master
file
Employee checks
On-line
queries
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Typical Applications of TPS
Sales/
marketing
systems
Major functions Sales management
of system
Market research
Promotion
Pricing
New products
Major
Sales order
application
information system
systems
Market research
system
Pricing system
TYPE OF TPS SYSTEM
Manufacturing!
Finance/
Human
Other types
production
accounting
resources
(e.g., university)
systems
systems
systems
Scheduling
Budgeting
Personnel recard Admissions
Purchasing
General ledger
Benefits
Grade records
Shipping/receiving Billing
Cornpensation Course records
Engineering
Cost accounting Labor relations Alumni
Operations
Training
Materials resource General ledger
Payroll
Registration system
planning systems
Purchase order
Accounts
Employee records Student transcript
control systems receivable/payable
system
Engineering
Budgeting
Benefit systems Curriculum class
systems
control systems
Quality control
Funds managementCareer path
Alumni benefactor
systems
systems
systems
system
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Office Automation Systems (OAS)
Computer system, such as word processing,
electronic mail system, and scheduling system,
that is designed to increase the productivity of
data workers in the office.
• TYPE: KnowledgeKnowledge-level
• INPUTS: documents, schedules
• PROCESSING: document management,
scheduling, communication
• OUTPUTS: documents; schedules
• USERS: clerical workers
EXAMPLE: document imaging system
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Knowledge Work Systems (KWS)
Information system that aids knowledge workers in
the creation and integration of new knowledge in
the organization.
•TYPE: KnowledgeKnowledge-level
• INPUTS: design specifications
• PROCESSING: modelling
• OUTPUTS: designs, graphics
• USERS: technical staff; professionals
EXAMPLE: Engineering workstations
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6
Decision Support Systems (DSS)
Information system at the management level of an
organization that combines data and sophisticated
analytical models or data analysis tools to support
semi-structured and unstructured decision making.
•TYPE: ManagementManagement-level
• INPUTS: low volume data
• PROCESSING: simulations, analysis
• OUTPUTS: decision analysis
• USERS: professionals, staff managers
• DECISIONDECISION-MAKING: semisemi-structured
EXAMPLE: sales region analysis
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Characteristics of Decision-Support
Systems
1. DSS offer users flexibility, adaptability, and a
quick response.
2. DSS operate with little or no assistance from
professional programmers.
3. DSS provide support for decisions and problems
whose solutions cannot be specified in advance.
4. DSS use sophisticated data analysis and
modelling tools.
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7
Management Information Systems
(MIS)
Information system at the management level of an
organization that serves the functions of planning,
controlling, and decision making by providing routine
summary and exception reports.
TYPE: ManagementManagement-level
INPUTS: high volume data
PROCESSING: simple models
OUTPUTS: summary reports
USERS: middle managers
DECISIONDECISION-MAKING: structured to semisemi-structured
EXAMPLE:
EXAMPLE: annual budgeting
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•
•
•
•
•
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Characteristics of Management information
Systems
1. MIS support structured decisions at the
operational and management control levels.
However, they are also useful for planning
purposes of senior management staff.
2. MIS are generally reporting and control oriented.
They are designed to report on existing operations
and therefore to help provide day-to-day control of
operations.
3. MIS rely an existing corporate data-and data flows.
4. MIS have little analytical capability.
5. MIS generally aid in decision making using past
and present data.
6. MIS are relatively inflexible.
7. MIS have an internal rather than an external 16
orientation.
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Executive Support Systems (ESS)
Information system at the strategic level of an
organization that address unstructured decision
making through advanced graphics and
communications.
TYPE: Strategic level
• INPUTS: aggregate data; internal and external
• PROCESSING: interactive
• OUTPUTS: projections
• USERS: senior managers
• DECISIONDECISION-MAKING: highly unstructured
EXAMPLE:
EXAMPLE: 5 year operating plan
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Model of a Typical Executive Support
System
ESS
workstation
Menus
Graphics
Communications
Local processing
ESS
workstation
Menus
Graphics
Communications
Local processing
Internal Data
External Data
TPS/MIS Data
Financial Data
Office Systems
Modeling/
analysis
Dow Jones
Gallup Poll
Standard &
Poor's
ESS
workstation
Menus
Graphics
Communications
Local processing
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Major Types of Information Systems
TYPES OF SYSTEM S
Strate g ic Le v e l Sys te ms
5-ye ar
5-ye ar
5-ye ar
Profit
ope rating budge t
s ale s tre nd planning
plan
fore cas ting fore cas ting
ESS
M IS
Sale s
manag e me nt
DSS
Sale s re g io n
analys is
KWS
Engine e ring
work s tations
OAS
Wo rd
pro ce s s ing
Inve nto ry
Control
Productio n
Sche duling
Orde r Track ing
M anage me nt-Le ve l Sys te ms
Capital
Annual
Re location
Inve s tme nt analys is analys is
budg e ting
Cos t
analys is
Plant s che duling
Knowle dge -Le ve l Sys te ms
Graphics
work s tatio ns
M anage rial
wo rk s tations
M anufacturing
Ele ctronic
Cale ndars
Ope ratio nal Le ve l Sys te ms
Se curitie s
Payroll
trading
Acco unts payable
Orde r proce s s ing M ate rial mo ve me nt Cas h
manage me nt
co ntro l
Sale s and
mark e ting
Pricing/profitability Contract cos t
analys is
analys is
Docume nt
Imaging
M achine control
TPS
M anpo we r
planning
Finance
Co mpe ns ation
Training & de ve lopme nt
Accounts re ce iv able Employe e re cord k e e ping
Acco unting
Human
Re s o urce s
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Relationship between different IS
ESS
MIS
KWS/
OAS
DSS
TPS
TPS is a major producer of information for other systems
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Classification of IS
by Organizational Structure
Departmental Information Systems
Enterprise Information System
Inter-organizational Systems
NYCE
SABRE or APOLLO
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Classification of IS
by Functional Area
The accounting information system
The finance information system
The manufacturing (operations, production)
information system
The marketing information system
The human resources information system
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Sales & Marketing Systems
Systems that help the firm identify customers
for the firm’s products or services, develop
products and services to meet customer’s
needs, promote products and services, sell
the products and services, and provide
ongoing customer support.
System
Order processing
Market analysis
Pricing analysis
EXAMPLES
Description
Enter, process, and track orders
Identify customers and markets using
data on demographics, markets,
consumer behavior, and trends
Determine prices for products
and services
Organizational Level
Operational
Knowledge
Management
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Manufacturing and Production Systems
Systems that deal with the planning,
development, and production of
products and services and with
controlling the flow of production.
Examples
Description
Control the actions of machines
and equipment
Computer-aided design (CAD) Design new products using
the computer
Production planning
Decide when and how many
products should be produced
Facilities location
Decide where to locate new
production facilities
System
Machine control
Organizational Level
Operational
Knowledge
Management
Strategic
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12
Finance and Accounting Systems
Systems that keep track of the firm’s
financial assets and fund flows.
System
Accounts receivable
Portfolio analysis
Budgeting
Profit planning
Examples
Description
Track money owed the firm
Design the firm's portfolio of investments
Prepare short-term budgets
Plan long-term profits
Organizational Level
Operational
Knowledge
Management
Strategic
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Human Resources Systems
Systems that maintain employee
records; Track employee skills, job
performance, and training; And support
planning for employee compensation
and career development.
Examples
Description
Track employae training, skills,
and performance appraisals
Career pathing
Design career paths for employees
Compensation analysis
Monitor the range and distribution
ofemployee wages, salaries, and bene6cs
Human resources planning Plan the long-term labor force needs
of the organization
System
Training and development
Organizational Level
Operational
Knowledge
Management
Strategic
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Examples of Business Processes
Functional Area
Business Process
Manufacturing and production Assembling the product
Checking for quality
Producing bills of materials
Sales and marketing
Identifying customers
Making customers aware of the product
Selling the product
Finance and accounting
paying creditors
Creating financial statements
Managing cash accounts
Human resources
Hiring employees
Evaluating employees' job performance
Enrolling employees in benefits plans
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The Order Fulfillment Process (F 2.12)
Sales
Accounting
M anufact uring
& P roduct ion
Generate
Order
Submit
Order
Check
Credit
Approve
Credit
Assemble
Product
Generate
Invoice
Ship
Product
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Customer Relationship Management
Sales
T elephone sales
W eb sales
Field sales
Ret ail sales
Customer relationship management
Business and technology discipline to
coordinate alt of the business processes
for dealing with customers.
Unified view of customers
Consistent message to customers
End-to-end customer care
Long-term customer relationships
Identification of best customers
M arket ing
Cam paign dat a
Cont ent
Dat a analysis
Cust om er Service
Call cent er dat a
W eb self service dat a
Field service dat a
W ireless dat a
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Customer Relationship Management
Supply chain management Integration of
supplier, distributor, and customer logistics
requirements into one cohesive process.
Supply chain Network of facilities for
procuring materials, transforming raw
materials into finished products,' and
distributing finished produce to customers.
Capacity, inventory level, delivery schedule, payment terms
Supplier
Manufacturer
Distributor
Retail
Outlet
Customer
Orders, return requests, repair and service requests, payments
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HOW INFORMATION SYSTEMS CAN
FACILITATE SUPPLY CHAIN
MANAGEMENT
Information systems can help participants in
the supply chain:
Decide when and what to produce, store, and
move
Rapidly communicate orders Track the status of
orders
Check inventory availability and monitor
inventory levels
Track shipments
Plan production based on actual customer demand
Rapidly communicate changes in product design31
Enterprise Systems
Firm wide information systems that
integrate key business processes so
that information can flow freely
between different parts of the firm.
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Traditional View of Systems (F. 2.15)
Business Functions
Accounting
Finance
Marketing and
Sales
Human
Resources
Business
Processes
Business
Processes
Business
Processes
Business
Processes
Business
Processes
Manufacturing
Systems
Accounting
Systems
Finance
Systems
Marketing and
Sales Systems
Human
Resources
Systems
Information Systems
Vendors
O rga n ization a l
B ou n darie s
O rga n ization a l
B ou n darie s
Manufacturing
Customers
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Enterprise Systems (F. 2.16)
Manufacturing
Accounting
Human
Resources
Business Process
Business Process
Business Process
Enterprise-wide business
processes
Sales and
Marketing
Organizational
Boundaries
Vendors
Organizational
Boundaries
Enterprise System
Customers
Finance
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Benefits and Challenges of
Enterprise Systems
Benefits
Firm structure and organization: One Organization
Management: Firm wide Knowledge-based
Management Processes
Technology: Unified Platform
Business: More Efficient Operations and Customerdriven Business Processes
Challenges
Daunting Implementation
High Up-front Costs and Future Benefits
Inflexibility
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Extended Enterprises
Extended Enterprises: Networks linking
systems of multiple firms in an industry. Also
called extended enterprises.
Vertical industrial networks Networks for
integrating the operations of a firm with its
suppliers.
Horizontal industrial networks Networks
for linking firms across an entire industry.
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Industrial Networks (F. 2.17)
Horizontal industrial network
Firms
in a single
industry
Firm
1
Firm
2
Firm
3
Firm
4
Firm value chains and enterprise systems
Industrial Networks
Firms in
complementary
business
Firm
1
Supplie
r
1
Supplie
r
2
Industry
value
chain
Supplie
r
3
Vertical industrial network
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