Chapter 7, 8
Basic Information Systems
Information Technology For Management 4th Edition
Turban, McLean, Wetherbe
John Wiley & Sons, Inc.
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Functional Areas in a Business
•Compensation
•Vacation
•Skills/Training
Human Resources
•A/R
•A/P
•Payroll
•General Ledger
Accounting
•Receiving
•Fulfillment
•Process control
•Purchasing
•Cash Management
•Asset Management
•Budgeting
Business
Funtion
Operations
Financing
•Order Taking
•CRM
•Self-service
Sales
Marketing
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•Retail Pricing
•Sales Promotions
•Sales Force Management.
•Customer Loyalty
•Interactive Marketing
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Functional Areas – Value Chain Perspective
The value chain model, views activities in organizations as either
primary (reflecting the flow of goods and services) or secondary
(supporting the primary activities). The organizational structure of
firms is intended to support both of these types of activities.
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Functional Areas – Supply Chain Perspective
The supply chain is a business process that links all the
procurement from suppliers, the transformation activities inside a
firm (the value chain) and the distribution of goods or services to
customers via wholesalers and retailers.
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Functional Information Systems
Functional information systems support the organization,
processes and business model.
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Composed of smaller systems: A functional information system
consists of several smaller information systems that support
specific activities performed in the functional area.
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Integrated or independent: The specific IS applications in any
functional area can be integrated to form a coherent departmental
functional system, they can be integrated across departmental
lines to match a business process or be completely independent.
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Interfacing: Functional information systems may interface
internally with each other to form the organization-wide
information system or externally systems outside the organization.
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Supportive of different levels: Information systems applications
support the three levels of an organization’s activities: operational,
managerial, and strategic
Enterprise Wide Environment – All business units.
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Functional Information Systems
Strategic
Datamining ops
that support
management
Dynamic and what-if
features.
Decision Support
Back office
administrative
tasks and ops.
Operation Level of the
company is normally highly
structured and predefined.
Data Analysis
and statistical
forecasting.
Office
Integrated
Clerical documents,
schedules, mail,
manuals, etc.
Business transactions, events
and processes. Support of the
business and customers.
Transactional
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Supply and Value Chains
Supply chain refers to the flow of materials, information,
payments, and services from raw material suppliers, through
factories and warehouses (Value Chain), to the final consumer
(Demand Chain). It includes tasks such as purchasing, payment
flow, materials handling, production planning & control, logistics
& warehousing, inventory control, and distribution. When it is
managed electronically it is referred to as an e-supply chain.
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Supply Chain Flows
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Materials flows are all physical products, new materials, and
supplies that flow along the chain.
Information flows relates to all data associated with
demand, shipments, orders, returns and schedules.
Financial flows include all transfers of money, payments,
credit card information, payment schedules, e-payments and
credit-related data.
Supply Chains contribute to increased profitability and competitiveness
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Supply Chains Components
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The supply chain involves three segments:
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Upstream, where sourcing or procurement from external
suppliers occur
Internal, where packaging, assembly, or manufacturing take
place
Downstream, where distribution or dispersal take place,
frequently by external distributors.
It also includes the movement of information and money
and the procedures that support the movement of a product
or a service.
Organizations and individuals are also part of the chain.
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Supply Chains Classifications
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There are several major types of supply chain
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Integrated make-to-stock
Continuous replenishment
Build-to-order
Channel assembly.
“Supply” Chain
Value Chain
Demand Chain
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Supply Chain Problems
Adding value along the chain is essential for competitiveness,
however problems exist especially in complex or long chains
and in cases where many business partners are involved. These
problems are due to uncertainties and the need to coordinate
several activities, internal units, and business partners.
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Demand forecasts are a major source of uncertainties
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Uncertainties exist in delivery times
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Competition
Prices
Weather conditions
Technological development
Customer confidence
Machine failures
Road conditions
Shipments
Quality problems may also create production delays
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Supply Chain Problems continued
The bullwhip effect refers to erratic shifts in orders up and down
the supply chain because of poor demand forecasting,
price fluctuation, order batching, and rationing within the chain.
Even slight demand uncertainties and variability become magnified
if each distinct entity, on the chain, makes ordering and inventory
decisions with respect to its own interest above those of the chain.
Distorted information can lead to tremendous inefficiencies,
excessive inventories, poor customer service, lost revenues,
ineffective shipments, and missed production schedules.
A common way to solve the bullwhip problem is by sharing
information along the supply chain through EDI, extranets, and
groupware technologies. For example employing a vendormanaged inventory (VMI) strategy, the vendor monitors
inventory levels and when it falls below the threshold for each
product this automatically triggers an immediate shipment.
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Supply Chain Solutions
Information sharing among supply chain partners (c-commerce)
sometimes referred to as the collaboration supply chain is one
method to overcome problems in the flow. Others are:
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Optimal Inventory Levels
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Supply Chain Coordination and Collaboration
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Supply Chain Teams
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Performance Measurement and Metrics
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Various IT-Assisted Solutions
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wireless technology
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optimal shipping plans
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strategic partnerships with suppliers
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just-in-time
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Enterprise Resource Planning
ERP and Supply Chains
ERP or enterprise systems control all major business
processes with a single software architecture in real time.
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It is comprised of a set of applications that automate
routine back-end operations:
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It includes front-end operations such as:
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such as financial management
inventory management
Scheduling
order fulfillment
cost control
accounts payable and receivable,
POS
Field Sales
Service
It also increases efficiency, improves quality, productivity,
and profitability.
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ERP Reality
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Complete systems can cost tens
of millions of dollars
Implementation can take
several years
Companies may lose flexibility
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What is SAP?
Systems Applications and Products in Data Processing
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SAP is the leading global provider of
client/server business application
solutions
SAP is the number one vendor of
standard business applications software
SAP is the fifth largest independent
software supplier in the world
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Electronic Commerce
Interorganizational Systems:
 Business-to-business
 Electronic storefront
Market Exchange
Interorganizational Structure
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Vertical integration
Multiple activities in the same firm
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Risk: range of expertise required
Selective sourcing
Some outsourced activities
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Risk: control of outsourcer
Virtual corporation
Coordination of separate activities
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Risk: loss of core competency
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Questions
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Do we benefit from electronic commerce?
Do we use information to add value to
customers?
Are we managing the product/service channel?
Have we redesigned business with our partners
to take advantage of technology and provide
security
Do we have partners with shared vision and
common purpose?
Do we have the right infrastructure?
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External / Internal Hosting
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Outside (Cheaper)
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minimize bandwidth and hardware problems
use external experts
installed infrastructure
little additional staffing required
Inside (More Control)
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dependent on third party reliability
possible single vendor software solutions
possible single vendor payment scheme
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External / Internal Hosting
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External better at storefronts
but requires close integration with core
business
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Internal better at business to
business
but often creates a self-contained
replicated system that can be
outsourced
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Payment
 Credit
Cards
SET (Secure Electronic Transaction) with http
 Electronic
Checks
Public/private key transactions with banks
 Electronic
Cash
3rd party software to create virtual cash
 EDI/EFT
Value added network using 3rd party.
Common in business to business.
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Infrastructure Drivers
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