Lecture-2- The Strategic Role of
Information Systems
Thepul Ginige
1
LEARNING OBJECTIVES
• Analyze roles of 6 types of
information systems
• Describe types of information
systems
• Analyze relationships between
business processes
2
LEARNING OBJECTIVES
• Explain how systems & networks
create new efficiencies
• Evaluate benefits & limitations of
systems & networks
3
MANAGEMENT CHALLENGES
• Key system applications
• Functional perspective of systems
• Integrating functions & processes
4
MANAGEMENT CHALLENGES
1.
INTEGRATION: Different systems serve
variety of functions, connecting
organizational levels difficult, costly
2. ENLARGING SCOPE OF MANAGEMENT
THINKING: Huge system investments,
long development time must be guided
by common objectives
5
TYPES OF INFORMATION SYSTEMS
KIND OF SYSTEM
GROUPS SERVED
STRATEGIC LEVEL
SENIOR
MANAGERS
MANAGEMENT LEVEL
MIDDLE
MANAGERS
KNOWLEDGE LEVEL
KNOWLEDGE &
DATA WORKERS
OPERATIONAL
LEVEL
SALES &
MARKETING
OPERATIONAL
MANAGERS
MANUFACTURING
FINANCE
ACCOUNTING
HUMAN
RESOURCES
6
MAJOR TYPES OF SYSTEMS
1.
2.
3.
4.
5.
6.
EXECUTIVE SUPPORT SYSTEMS (ESS)
DECISION SUPPORT SYSTEMS (DSS)
MANAGEMENT INFORMATION SYSTEMS (MIS)
KNOWLEDGE WORK SYSTEMS (KWS)
OFFICE AUTOMATION SYSTEMS (OAS)
TRANSACTION PROCESSING SYSTEMS (TPS)
7
TYPICAL TPS APPLICATIONS
Sales & Marketing Systems
MAJOR FUNCTIONS OF SYSTEMS:
• Sales management, market research,
promotion, pricing, new products
MAJOR APPLICATION SYSTEMS:
• Sales order info system, market
research system, pricing system
8
TYPICAL TPS APPLICATIONS
Manufacturing & Production Systems
MAJOR FUNCTIONS OF SYSTEMS:
• Scheduling, purchasing, shipping,
receiving, engineering, operations
MAJOR APPLICATION SYSTEMS:
• Materials resource planning systems,
purchase order control systems,
engineering systems, quality control
systems
9
TYPICAL TPS APPLICATIONS
Finance & Accounting Systems
MAJOR FUNCTIONS OF SYSTEMS:
• Budgeting, general ledger, billing,
cost accounting
MAJOR APPLICATION SYSTEMS:
• General ledger, accounts receivable,
accounts payable, budgeting, funds
management systems
10
TYPICAL TPS APPLICATIONS
Human Resources Systems
MAJOR FUNCTIONS OF SYSTEMS:
• Personnel records, benefits,
compensation, labor relations, training
MAJOR APPLICATION SYSTEMS:
• Payroll, employee records, benefit
systems, career path systems, personnel
training systems
11
TYPICAL TPS APPLICATIONS
Other Types (e.g., University)
MAJOR FUNCTIONS OF SYSTEMS:
• Admissions, grade records, course
records, alumni
MAJOR APPLICATION SYSTEMS:
• Registration system, student transcript
system, curriculum class control system,
alumni benefactor system
12
OFFICE AUTOMATION SYSTEMS (OAS)
• Toward a “paperless” office
• Redesign of work flow
• Integrated software
• Ergonomic design
• Bright, cheerful work space
EXAMPLE: PRESENTATION GRAPHICS
13
KNOWLEDGE WORK SYSTEMS (KWS)
KNOWLEDGE LEVEL
• INPUTS: DESIGN SPECS
• PROCESSING: MODELLING
• OUTPUTS: DESIGNS, GRAPHICS
• USERS: TECHNICAL STAFF
EXAMPLE: ENGINEERING WORK STATION
14
MANAGEMENT INFORMATION SYSTEMS (MIS)
MANAGEMENT LEVEL
• INPUTS: HIGH VOLUME DATA
• PROCESSING: SIMPLE MODELS
• OUTPUTS: SUMMARY REPORTS
• USERS: MIDDLE MANAGERS
EXAMPLE: ANNUAL BUDGETING
15
MANAGEMENT INFORMATION SYSTEMS (MIS)
• Structured & semi-structured
decisions
• Report control oriented
• Past & present data
• Internal orientation
• Lengthy design process
16
TPS DATA FOR MIS APPLICATIONS
TPS
Order Processing
MIS
SALES
DATA
System
ORDER FILE
Materials Resource
Planning System
PRODUCTION MASTER FILE
General Ledger
System
ACCOUNTING FILES
UNIT
PRODUCT
COST
MIS
REPORTS
PRODUCT
CHANGE
DATA
EXPENSE
DATA
MANAGERS
MIS FILES
17
DECISION SUPPORT SYSTEMS (DSS)
MANAGEMENT LEVEL
• Inputs: low volume data
• Processing: interactive
• Outputs: decision analysis
• Users: professionals, staff
EXAMPLE: CONTRACT COST ANALYSIS
18
DECISION SUPPORT SYSTEMS (DSS)
• Flexible, adaptable, quick
• User controls inputs/outputs
• No professional programming
• Supports decision process
• Sophisticated modeling tools
19
EXECUTIVE SUPPORT SYSTEMS (ESS)
STRATEGIC LEVEL
• Inputs: aggregate data
• Processing: interactive
• Outputs: projections
• Users: senior managers
EXAMPLE: 5 YEAR OPERATING PLAN
20
EXECUTIVE SUPPORT SYSTEMS (ESS)
• Top level management
• Designed to the individual
• Ties CEO to all levels
• Very expensive to keep up
• Extensive support staff
21
INTERRELATIONSHIPS AMONG SYSTEMS
ESS
MIS
KWS
DSS
TPS
OAS
22
SYSTEMS FROM A FUNCTIONAL PERSPECTIVE
• Sales & marketing systems
• Manufacturing & production
systems
• Finance & accounting systems
• Human resources systems
23
SALES & MARKETING INFORMATION SYSTEM
SALES
SYSTEM
DESCRIPTION
ORDER PROCESSING ENTER, PROCESS, TRACK ORDERS
ORGANIZATIONAL LEVEL
OPERATIONAL
MARKET ANALYSIS
IDENTIFY CUSTOMERS & MARKETS KNOWLEDGE
PRICING ANALYSIS
DETERMINE PRICES
MANAGEMENT
SALES TRENDS
PREPARE 5-YEAR FORECASTS
STRATEGIC
24
MANUFACTURING
INFORMATION SYSTEM
MFG
SYSTEM
MACHINE CONTROL
DESCRIPTION
CONTROL ACTIONS OF EQUIPMENT
ORGANIZATIONAL LEVEL
OPERATIONAL
COMPUTER-AIDED-DESIGN DESIGN NEW PRODUCTS
KNOWLEDGE
PRODUCTION PLANNING
DECIDE NUMBER, SCHEDULE OF PRODUCTS
MANAGEMENT
FACILITIES LOCATION
DECIDE WHERE TO LOCATE FACILITIES
STRATEGIC
25
FINANCE & ACCOUNTING INFORMATION
SYSTEM
FINANCE
SYSTEM
DESCRIPTION
ORGANIZATIONAL LEVEL
ACCOUNTS RECEIVABLE TRACK MONEY OWED TO FIRM
OPERATIONAL
PORTFOLIO ANALYSIS
DESIGN FIRM'S INVESTMENTS
KNOWLEDGE
BUDGETING
PREPARE SHORT TERM BUDGETS MANAGEMENT
PROFIT PLANNING
PLAN LONG-TERM PROFITS
STRATEGIC
26
HUMAN RESOURCES INFORMATION SYSTEM
HUMAN RESOURCES
SYSTEM
DESCRIPTION
ORGANIZATIONAL LEVEL
TRAINING & DEVELOPMENT
TRACK TRAINING, SKILLS, APPRAISALS
OPERATIONAL
CAREER PATHING
DESIGN EMPLOYEE CAREER PATHS
KNOWLEDGE
COMPENSATION ANALYSIS
MONITOR WAGES, SALARIES, BENEFITS
MANAGEMENT
HUMAN RESOURCES PLANNING PLAN LONG-TERM LABOR FORCE NEEDS
STRATEGIC
27
EXAMPLES OF BUSINESS PROCESSES
• MANUFACTURING & PRODUCTION:
Assembling product, checking
quality, producing bills of materials
• SALES & MARKETING: Identifying
customers, creating customer
awareness, selling
28
EXAMPLES OF BUSINESS PROCESSES
• FINANCE & ACCOUNTING: Paying
creditors, creating financial
statements, managing cash
accounts
• HUMAN RESOURCES: Hiring
employees, evaluating performance,
enrolling employees in benefits
plans
29
SUPPLY-CHAIN MANAGEMENT
CUSTOMERS
ORDER
PROCESSING
PLANNING &
FORECASTING
SUPPLIERS
PROCUREMENT
ACCOUNTING
INTRANET
PRODUCTION
LOGISTICS
SERVICES
SHIPPING
INVENTORY
DISTRIBUTORS
30
Supply Chain Management
Supply chain management is the
streamlining of a business' supply-side
activities to maximize customer value and to
gain a competitive advantage in the
marketplace.
Supply chain management (SCM)
represents an effort by suppliers to develop
and implement supply chains that are as
efficient and economical as possible.
31
HOW INFORMATION SYSTEMS FACILITATES
SUPPLY CHAIN MANAGEMENT
Decide when, what to produce, store, move…
rapidly communicate orders, track order status, check
inventory availability, monitor levels, track shipments,
plan production based on actual demand…rapidly
communicate product design changes…provide product
specifications… share information about defect rates,
returns...
32
TRADITIONAL VIEW OF SYSTEMS
• WITHIN THE BUSINESS: There are
functions, each having its uses of
information systems
• OUTSIDE THE ORGANIZATION’S
BOUNDARIES: There are customers and
vendors
FUNCTIONS TEND TO WORK IN
ISOLATION
33
BENEFITS OF ENTERPRISE SYSTEMS
• FIRM STRUCTURE & ORGANIZATION: One
organization
• MANAGEMENT: Firm wide knowledgebased management processes
• TECHNOLOGY: Unified platform
• BUSINESS: More efficient operations &
customer-driven business processes
34
CHALLENGES OF ENTERPRISE SYSTEMS
• Daunting implementation
• High up front costs & future
benefits
• Inflexibility
• Hard to realize strategic value
35
INDUSTRIAL NETWORKS
LINK FIRMS INTO INDUSTRY-WIDE
SYSTEM
• HORIZONTAL: Link firms in same
industry, including competitors
• VERTICAL: Link firm with suppliers
in same industry
36
Emerging information system
trends in organisations
37
Enterprise Resource Planning systems
Enterprise Resource Planning systems(ERP) are
software systems for businesses management
encompassing modules supporting functional
areas such as Manufacturing , Accounting,
Finance, Sales & Marketing, Human Resource,
ect.
38
ENTERPRISE SYSTEM
Manufacturing
Accounting
Business Processes
Vendors
Enterprise-wide
Business Processes
Human
Resources
Sales &
Marketing
Customers
Finance
39
ERP system contd..
• ERP is a commodity -- product in the form of
software
• SAP, Oracle Applications, PeopleSoft, JD
Edwards, Greatplains etc. are world’s leading
ERP packages
• The market leader is “SAP”
40
Features of an ERP system
• Architecture of ERP system facilitates
transparent integration of modules providing
flow of information between all function
within enterprise in real time.
• Many different software are replaced by one
integrated system.
• Reliable information access through common
DBMS
• Eliminates data and operational redundancies
(no duplication of work or data entries etc.)
41
Features of an ERP system contd..
• Cost reduction through time saving, improved control by
organizational wise analysis of organizational decisions.
• Delivery and cycle time reduction
• Scalable systems
• Global outreach through extended modules such as CRM or
SCM
• E-Business
• Providing business solutions in support of core processes
• Process-oriented view cutting across functions of an
enterprise
• Huge potential for customizing
42
Business and Technical Benefits
• Automation of business transactions
• Flexibility in changing the system catering to
newer business processes.
• Coordination across business functions
• Coordination across geographical distances
resulting in better Managerial control
• Consistent information and interface thus
easier to understand and work in
• Single system
43
Prime Reasons for Implementing ERP
• Need for common platform
• Process improvement.
• Data visibility that could be used to improve
operating decisions.
• Operation cost reductions.
• Increased customer responsiveness.
• Improved strategic decision making
• Personal Improvement
44
Knowledge Management
• Knowledge management is the process of
capturing, distributing, and effectively using
knowledge.
• So it’s a discipline that promotes an integrated
approach to identifying, capturing, evaluating,
retrieving, and sharing all of an enterprise's
information assets.
• These assets may include databases, documents,
policies, procedures, and previously un-captured
expertise and experience in individual workers.
45
Explicit, Implicit and Tacit Knowledge
• Explicit: information or knowledge that is set out in
tangible form. (this is the knowledge that is written
down and is accessible in one way or another.)
• Implicit: information or knowledge that is not set out in
tangible form but could be made explicit.(this is
knowledge that isn’t written down yet but is largely
procedural and not dependent on an individual’s
context)
• Tacit: information or knowledge that one would have
extreme difficulty operationally setting out in tangible
form.(this is the knowledge in our heads that is made
up from experience and personal contexts. It’s not
written down and is hard to articulate)
46
Customer Relationship Management (CRM)
• Customer relationship management (CRM)
refers to the practices, strategies and
technologies that companies use to manage,
record and evaluate customer interactions in
order to drive sales growth by deepening and
enriching relationships with their customer
bases.
47
The CRM Strategy
The CRM strategy allows you to following:
• Understand the customer
• Retain customers through better customer
experience
• Attract new customers
• Win new clients and contracts
• Increase profitably
• Decrease customer management costs
48
The Impact of Technology on CRM
• Technology and the Internet have changed the
way companies approach customer relationship
strategies. Advances in technology have changed
consumer buying behavior, and today there are
many ways for companies to communicate with
customers and to collect data about them. With
each new advance in technology — especially the
proliferation of self-service channels like the Web
and smartphones — customer relationships are
being managed electronically.
49
The Benefits of CRM
• The biggest benefit most businesses realize
when moving to a CRM system comes directly
from having all your business data stored and
accessed from a single location. Before CRM
systems, customer data was spread out over
office productivity suite documents, email
systems, mobile phone data and even paper
note cards and Rolodex entries
50
• Storing all the data from all departments (e.g.,
sales, marketing, customer service and HR) in
a central location gives management and
employees immediate access to the most
recent data when they need it.
• Departments can collaborate with ease, and
CRM systems help organization to develop
efficient automated processes to improve
business processes.
51
• Other benefits include a 360-degree view of
all customer information, knowledge of what
customers and the general market want, and
integration with your existing applications to
consolidate all business information.
52
Electronic Commerce
• Electronic Commerce (EC) is where business transactions
take place via telecommunications networks, especially
the Internet.
– Electronic commerce describes the buying and selling
of products, services, and information via computer
networks including the Internet.
– The infrastructure for EC is a networked computing
environment in business, home, and government.
– E-Business describes the broadest definition of EC. It
includes customer service and intrabusiness tasks. It is
frequently used interchangeably with EC.
53
The Driving Forces of
Electronic Commerce
• The New World of Business
– Business pressures
– Organizational responses
– The role of Information Technology (including
electronic commerce)
54
Electronic Commerce Terms
• Business-to-business (B2B)
– Businesses make online transactions purchases
with other business
• Business-to-consumer (B2C)
– Online transactions between businesses and
consumers
• Consumer-to-Consumer (C2C)
– Online auctions, posting to newspaper sites,
personal websites, e-commerce portals
55
Electronic Commerce Terms (cont.)
• Pure vs. Partial EC: based on the degree of digitization of
– Product
– Process
– Delivery agent
• Traditional commerce: all dimensions are physical
• Pure EC: all dimensions are digital
• Partial EC: all other possibilities include a mix of digital
and physical dimensions
56
The Dimensions of E-Commerce
57
Benefits of ecommerce
• Discuss the benefits to
• Business
• Customer
58