Chapter 7
Transaction Processing, Innovative
Functional Systems, CRM &
Integration
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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 and the Web to each of these
functional areas: production/operations, marketing and sales, accounting
and finance, and human resources management.
 Describe the role of IT in facilitating CRM.
 Describe the benefits & issues of integrating functional information
systems.
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Case: Integrated Solutions for Building Supply
Problem:
 Colonial is a small building supply company in Utah. To remain
competitive, they needed a technology to provide information about
inventory levels & customer buying trends.
Solution:
 Colonial purchased an integrated system, point-of-sale (POS)
terminals, hand-held automatic product identification & data collection.
 Sold items are deducted from the inventory instantly.
 Purchase orders are sent electronically via the Internet.
Results:
 Lower costs for data entry labor, reductions in inventory/ storage space,
fast access to information, better customer service, & higher employee
satisfaction
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Lessons from the Case
 IT supports the routine processes of a retailer, enabling it to be efficient
and effective and to satisfy its customers.
 The software helped to modernize & redesign the company’s major
business processes.
 The software supports several business processes, not just one.
 The system’s major applications are in logistics. However, the same
software vendor provides ready-made accounting, marketing, &
operations modules.
 IT can be beneficial to a relatively small company.
 The integration includes connection to business partners using the
Internet.
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Functional Information Systems
 Traditionally, information systems were designed within each functional
area to increase their internal effectiveness & efficiency.
 This may not suit some organizations, because certain processes
may involve activities that are performed in several functional areas.
Solution 1: Reengineer the organization.
 For example, the company can create cross-functional teams, each
responsible for performing a complete business process.
Solution 2: The integrated approach (e.g. Colonial).
 Keeps the functional departments but creates a supportive
information system to help communication, coordination, and
control.
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Functional Departments & the Value Chain
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Characteristics of Functional Information Systems
1. A functional information system consists of several smaller information
systems that support specific activities performed in the functional area.
2. The specific IS applications in any functional area can be integrated to
form a coherent departmental functional system, or they can be
completely independent.
3. Functional information systems interface with each other to form the
organization-wide information system.
4. Some organizational information systems interface with the
environment.
5. Information systems applications support the three levels of an
organization’s activities: operational, managerial, and strategic.
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Transaction Processing Systems
 Transaction Processing Systems (TPS) =
“the information system that support business processes, mainly
accounting & finance transactions, with some sales, personnel, &
production activities as well.”
 TPS is the backbone of an organization’s information systems.
 It monitors, collects, stores, processes & disseminates information
for all routine core business transactions.
 These data are input data to functional information systems
applications, DSS, and CRM.
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Objectives of TPS
Primary goal of TPS = to provide all the information needed by law
and/or by organizational policies to keep the business running
properly and efficiently.
Specific objectives of a TPS=
to allow for efficient & 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 & strategic systems, such as
Web-based applications.
 to ensure accuracy & integrity of data & information.
 to safeguard assets & security of information.
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Activities of TPS
 First, data are collected & entered into the computer via any input device.
 The system then processes data in one of the following ways:
Batch processing= the firm collects data from transactions as they
occur, placing them in groups or batches. The system then
processes the batches periodically
Online processing = data are processed as soon as a transaction
occurs.
Hybrid system (a combination of batch & online processing) collects
data as they occur but process them at specified intervals.
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Benefits of Internet Transaction Processes
 Flexibility to accommodate unpredictable growth in processing demand.
 Cost effectiveness for small dollar amounts.
 Interactive, automatic billing, enabling companies to offer services to
anyone, not just subscribers.
 Timely search and analysis of large databases.
 Ability to handle multimedia data such as pictures and sound effectively
and efficiently.
 High data throughput to support inquiries requiring massive file size.
 Fast response time.
 Effective storage of huge graphics and video databases.
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Case: Taxis in Singapore
 Taxis in Singapore are tracked by a global positioning system (GPS).
This provides users with an instant fix on the geographical position of
each taxi.
 Customer orders are usually received via telephone, fax & e-mail.
Frequent users enter orders from their offices or homes by keying in
a PIN number.
 The system completely reengineered the taxi order processing.
 The transaction time for processing an order is much shorter.
 The system increased the capacity for taking incoming calls by
1,000%.
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Production & Operations Management (POM)
 The Production and Operations Management (POM) function in
an organization is responsible for the processes that transform
inputs into useful outputs.
 Four IT-supported POM topics be discussed:
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In-house logistics and material management.
Planning production/operations.
Automating design work and manufacturing.
Computer-integrated manufacturing (CIM).
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In-House Logistics & Material Management
Logistics Management deals with ordering, purchasing, inbound
logistics (receiving), and outbound logistics (shipping) activities.
 All of these activities can be supported by information systems. For
example, many companies today are moving to some type of eprocurement
Inventory management determines how much inventory to keep.
 Three costs play important roles in inventory decisions:
 cost of maintaining inventories
 cost of ordering (a fixed cost per order)
 cost of not having inventory when needed.
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Planning Procedures/ Operations
Material Requirements Planning (MRP) = The software that facilitates
the plan for acquiring (or producing) parts, subassemblies, or materials.
Manufacturing Resource Planning (MRP II) = connects the regular MRP
to other functional areas.
 In addition to the output similar to that of MRP, MRP II determines the
costs of parts and the cash flow needed to pay for parts.
Just-in-time (JIT) = an approach that attempts to minimize waste of all
kinds (space, labor, materials, energy, and so on) and continuously
improve processes and systems.
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Planning Procedures/ Operations (cont.)
The management of a project is complicated by the following
characteristics:
 Most projects are unique undertakings, and participants have
little prior experience in the area.
 Uncertainty exists due to the long completion times.
 There can be significant participation of outsiders, which is
difficult to control.
 Extensive interaction may occur among participants.
 Projects often carry high risk but also high profit potential.
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Automated Design Work & Manufacturing
Computer-aided design (CAD) is a
system that enables industrial
drawings to be constructed on a
computer screen & stored,
manipulated & updated
electronically.
Computer-Aided Manufacturing
(CAM) encompasses computeraided techniques that facilitate
planning, operation & control of a
production facility.
Computer-aided engineering
(CAE) software enables
designers to analyze the design
and determine whether it will
work the way the designer
thought it would.
Enhanced product realization
(EPR) is a Web-based,
distributed system that allows
manufacturers to make product
modifications anywhere in the
world in as few as five days.
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Computer-Integrated Manufacturing (CIM]
 Computer-integrated
manufacturing (CIM)
is a philosophy about the
implementation of various
integrated computer
systems in factory
automation.
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Computer-Integrated Manufacturing (CIM]
 Computer-integrated manufacturing (CIM) has three basic
goals;
 Simplification of all manufacturing technologies &
techniques.
 Automation of as many of the manufacturing processes
as possible by the integration of many information
technologies.
 Integration and coordination of all aspects of design,
manufacturing & related functions via computer hardware
and software.
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The CIM Model
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Channel Systems
 CHANNEL SYSTEMS are all the systems involved in the process of
getting a product or service to customers & dealing with all customers’
needs.
 FOUR MAIN CHANNEL SYSTEM ACTIVITIES:
 The Customer is King/ Queen.
 Telemarketing.
 Distribution channels.
 Marketing management.
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The Customer is King/ Queen
 Innovative products & services
and superb customer service
are becoming a necessity for
many organizations. For
example;
 It is essential for companies
today to be aware of their
customers and treat them like
royalty.
 Customer Profiles and
Preference Analysis.
 Prospective Customer Lists
& Marketing Databases.
 Mass Customization.
 Personalization.
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Telemarketing & Online Shopping
 Lately, telemarketing has been moving to cell phones, using Short
message service (SMS), which consists of messages you can receive
on your cell phone.
 A telemarketing process can be divided into five major activities, all of
which are supported by IT & can be done on the Web, even in a
wireless environment.
 Advertisement and reaching customers
 Order processing
 Customer service
 Sales support
 Account management
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Distribution Channels
 Organizations can distribute their products & services through
several available delivery channels.
 A company may use its own outlets or distributors. The
company also needs to decide on the delivery mode (trains,
planes, trucks).
 Distribution Channels Management. Once products are in the
distribution channels, firms need to monitor and track them to
guarantee customer satisfaction.
 Improving Sales at Retail Stores. Using information technology, it
is possible to improve sales by reengineering the checkout
process.
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Marketing Management
Many marketing management activities are supported by computerized
information systems. Some areas where this is being done include;
 Pricing of Products or Services.
 Salesperson Productivity.
 Productivity Software (Sales automation software)
 Product-Customer Profitability Analysis.
 Sales Analysis and Trends.
 New Product, Service, and Market Planning.
 Web-Based Systems in Marketing.
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Managing Accounting & Finance Systems
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Managing Accounting & Finance Systems
 An accounting/finance information system is responsible for:
 Gathering the raw data necessary for the accounting/finance TPS
 Ttransforming the data into information
 Making the information available to users
 Many packages exist to execute routine accounting transaction
processing activities.
 Some software packages are integrated, e.g. MAS 90 and MAS 200
 The accounting/finance TPS also provides a complete, reliable
audit trail of all transactions transmitted through the network.
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Financial Planning & Budgeting
 Appropriate management of financial assets is a major task in financial
planning and budgeting.
 Financial and Economic Forecasting.
 Knowledge about the availability and cost of money is a key
ingredient for successful financial planning.
 Planning for Incoming Funds.
 Funds for organizations come from several sources.
 Using the information generated by financial and economic
forecasts, the organization can build a decision support model for
planning incoming funds.
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Investment Management
Investment management is a difficult task for the following reasons:
1. There are thousands of investment alternatives.
2. Investment decisions are based on economic and financial forecasts,
which are frequently unreliable.
3. The investment environment includes opportunities in other countries,
providing both high potential rewards and high risks.
4. Investments made by many organizations are subject to complex
regulations and tax laws.
5. Investment decisions need to be made quickly & frequently.
6. Several multiple and conflicting objectives exist in making investments,
including high yield, safety, and liquidity.
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CASE: Equity Portfolios at Daiwa Securities
 Daiwa Securities of Japan is one of the world’s largest and most
profitable multinational securities firms.
 They believe that identifying mispricings in the stock markets
holds great profit potential.
 Daiwa uses leading-edge computerized quantitative analysis
which compares stock price performance of individual
companies to that of other companies in the same market sector.
 The recommendations are generated by a system called
MATLAB.
 MATLAB attempts to minimize the risk of the portfolio yet maximize
its profit.
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Access to Financial & Economic Reports
To cope with the large amount of financial online data, investors use
three supporting tools:
Internet search
engines for
finding financial
data.
Internet
directories and
yellow pages.
Software for
monitoring,
interpreting,
analyzing financial
data, & alerting
management.
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Control & Auditing
Specific forms of financial control are;
 Budgetary controls
 Internal and External audits
 Financial Ratio Analysis
 Profitability Analysis &Cost Control
 Product Pricing
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Managing Human Resource Systems
 Developments in Web-based systems increased the popularity of
human resources information systems (HRISs) as of the late
1990s.
 Initial HRIS applications were mainly related to transaction
processing systems.
 However, in the last decade we have seen considerable
computerization activities in the managerial and even strategic
areas.
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HRISs & Recruitment
 Using the Web for Recruitment. With millions of resumes
available online, companies are trying to find appropriate
candidates on the Web.
 Position Inventory. Large organizations need to fill vacant
positions frequently. An advanced intranet-based position
inventory system keeps the position inventory list current &
matches openings.
 Employee Selection. To expedite the testing and evaluation
process and ensure consistency in selection, companies use
information technologies such as expert systems.
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Human Resources Maintenance & Development
 Performance Evaluation. Once digitized, evaluations can be
used to support many decisions, ranging from rewards to
transfers to layoffs.
 Training and Human Resources Development. IT can support
the planning, monitoring, and control of training and retraining
activities by using workflow applications.
 Intelligent computer-aided instruction (ICAI) and application of
multimedia support for instructional activities.
 Training can be improved using Web-based video clips & virtual
reality.
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Human Resources Planning & Management
 Personnel Planning. Large companies develop qualitative and
quantitative workforce planning models, which can be enhanced if IT is
used to collect, update, and process the information.
 Labor–Management Negotiations. Some companies have developed
computerized DSS models that support negotiations.
 These models can simulate financial & other impacts of fulfilling any
demand made by employees and provide answers to queries in seconds.
 Benefits Administration. Using computers for benefits selection can
save a tremendous amount of labor and time.
 Some companies have automated benefits enrollments.
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Customer Relationship Management
 Customer relationship
management (CRM) is an
approach that recognizes that
customers are the core of the
business and that the
company’s success depends on
effectively managing
relationships with them.
 Relationship marketing is the
“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, bonds”
(Mowen & Minor, 1998).
 Customer service is a series of
activities designed to enhance
the level of customer
satisfaction.
 E-Service is customer service that
is performed on the Web,
sometimes automatically.
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CRM in Action
 According to Seybold and Marshak (1998) there are five steps in
building IT-supported CRM. These are:
1.
2.
3.
4.
5.
Make it easy for customers to do business with you.
Focus on the end customer for your products and services.
Redesign your customer-facing business processes from
the end customer’s point of view.
Wire your company for profit: design a comprehensive,
evolving electronic business architecture.
Foster customer loyalty. In e-Commerce, especially, this is
the key to profitability.
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Information Technology in CRM
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Customer Service on the Web
 Providing Search and
Comparison Capabilities.
 Providing Free Products and
Services.
 Allowing Customers to Order
Customized Products and
Services Online.
 Letting Customers Track
Accounts or Order Status
 Providing Technical and Other
Information and Service.
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Tools for Customer Service
 Personalized Web Pages
 E-mail and Automated
Response
 FAQs
 Tracking Tools
 Help Desks and Call
Centers
 Chat Rooms
 Troubleshooting Tools
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Justifying CRM programs
One way to determine how much customer service to provide is to
compare your company against a set of standards known as metrics.
Metrics to evaluate Web-related customer service:
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Response time.
Site availability.
Download time.
Timeliness.
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Security and privacy.
Fulfillment.
Return policy.
Navigability.
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CRM Failures
 A large percentage of failures have been reported in CRM.
 Some of the big issues are;
 Failure to identify and focus on specific business problems.
 Lack of active senior management (non-IT) sponsorship.
 Poor user acceptance, which can occur for a variety of reasons
such as unclear benefits and usability issues.
 Trying to automate a poorly defined process.
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Partner Relationship Management
 Partnership Relationship Management (PRM) refers to all of
the efforts made to apply CRM to all types of business partners.
 Specific functions of PRM applications:
 Partner profiles
 Partner communications
 Lead management
 Targeted information distribution
 Connecting the extended enterprise
Centralized forecasting
 Group planning
 E-mail/ Web-based alerts
 Messaging
 Price lists
 Partner planning
 Community bulletin boards
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Case: Integrated Server System at Europcar
Problem:
 Europcar Internet, the largest European-based car rental agency, combined 55
different mainframe and minicomputer systems into a single client/server
center known as Greenway.
 The 55 independent systems needed to be integrated.
Solution:
 Key business processes were all integrated into Greenway.
 Customer-related benefits include (1) faster service (2) reservation desks
linked to airline reservation systems, and (3) corporate customers managed
from one location.
Results:
 By 2000, Europcar expanded to 100 countries worldwide.
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Managerial Issues
 Integration of functional
information systems.
Integration of existing standalone functional information
systems is a major problem for
many organizations.
 Priority of transaction
processing. Transaction
processing may not be an exotic
application, but it deals with the
core processes of
organizations.
 The customer is king/queen.
In implementing IT applications,
management must remember
the importance of the customer,
whether external or internal.
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Managerial Issues (cont.)
 Finding innovative
 Using the Web. Web-based
applications. Tools such as
systems should be considered
Lotus Notes, intranets, and the
in all functional areas. They are
Internet enable the construction
effective, inexpensive & user
of many applications that can
friendly.
increase productivity and
quality.
 System integration. Although
functional systems are
necessary, they may not be
sufficient if they work
independently.
 Ethical Issues. Many ethical
issues are related to the code of
ethics followed in CRM and
privacy policies.
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