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Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
CHAPTER 9
FUNCTIONAL AND
ENTERPRISE SYSTEMS
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Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
Learning Objectives
 Describe the role and characteristics of functional
information systems
 State the objective and operations of transaction
processing and how it is supported by IT
 Discuss the managerial and strategic applications
in the accounting and finance areas that are
supported by IT
 Understand the marketing and sales applications
provided by IT
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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Learning Objectives
(continued …)
 List the various production and operations
management activities and describe how they
are supported by IT
 Discuss the human resources management
activities and how they can be improved by IT
 Discuss the need for integrating functional
information systems and describe the role of
ERP and supported software such as SAP
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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Chapter Overview
Information
Systems to
Support Business
Functions
Transaction
Processing
Information
Systems
•Characteristic of
• functional
• Information
• Systems
•Functional
Support for
Managers;
Management
Information
Systems
• Tracking Business
•Financial
Transactions
Planning and
•Objectives of TPS
Budgeting
•The Process of TPS
•Investment
•Modernized TPS:
Management
From Online
•Financial
Processing to Intranet
Controls
•Typical TPS Tasks and
Modules
Accounting
and Finance
Systems
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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Chapter Overview (continued …)
Marketing and Sales
Systems
•Customer Service
•Telemarketing
•Distribution Channels
Management
•Marketing Management
•Ethical and Societal Issues in
IT-supported Sales Activities
Human Resources
Management Systems
•Recruitment
•HRM and Development
•HRM and Planning
•Intranet Applications in HRS
Production and
Operations Systems
•Supply-Chain Management
•Logistics and Materials
Management
•Planning Production/Operations
•Automatic Design Work and
Manufacturing
Integrated Information Systems
and Enterprise Resource Planning
•Why Integrate?
•How to Integrate?
•Extreme Integration: Putting it
All Together
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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Case : Colonial Building Supply
 The Business Problem
 Needed a technology
 to monitor inventory and support-related decisions
 to provide it with current information about inventory
levels and customer buying trends
 to show the price of the lumber fluctuates daily
 The Solution
 integrated system
 Point-of-sales (POS) terminals with hand-held
automatic identification and data collection devices
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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Case (continued…)
The Results







Lower costs for data entry labor
Reduction in inventory and storage space
Fast access to information
Better customer service
Higher employee satisfaction
Stay competitive
Increase its market share and profitability
What have we learned from this case??
 The system’s major applications are in logistics
 IT can be beneficial to a relatively small company
 An integration includes connection to business partners
using the Internet
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Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
Characteristics of
Functional Information Systems
Comprises of several smaller information system
Specific IS applications
 can be integrated to form a coherent departmental
function system
 can be completely independent
 can be integrated across departmental lines
Interface with each other to form the organization
wide information system
Interface with the environment
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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Management Information Systems
Provide routine information to managers in
the functional areas
Provide information in exception reports
and ad hoc (demand) reports
Business
Transactions
TPS
A Management
Information
System
Databases
Internal,
External
Data
Warehouse
Reports
Scheduled,
Exception,
Demand,
Others
Functional
applications,
DSS
Enterprise
Application
such as
EIS
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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Transaction Processing
Information Systems
Transaction Processing





major business processes
provide the mission-critical activities
transaction may generate additional transaction
simple transactions
large volume and repetitive transactions
Transaction Processing System (TPS)
 computerized information system
 supports the transaction processes
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Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
Characteristics of TPS
 Large amounts of data are processed
 The sources of data are mostly internal, and the output is
intended mainly for an internal audience
 The TPS processes information on a regular basis
 Large storage (database) capacity is required
 High processing speed is needed due to the high volume
 Input and output data are structured
 High level of detail is usually observable
 Low computation complexity is usually evident
 High level of accuracy, data integrity, and security is needed
 High processing reliability is required
 Inquiry processing is a must
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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TPS (continued…)
Customer
makes a
purchase
of an item
POS
Terminal
Payment
Processing
Transaction
File
Overview of typical
transaction processing
Queries,
Answers 
The Items’
Processing
System
Master
Files
Inventory
File
Sales
Files
Report
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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The Process of TPS
Data are collected
and entered automatically
Batch
Processing
Online
Processing
Hybrid System
Modernized TPS: from OLTP to the Internet
 Online Transaction Processing (OLTP)
 created on a client/server architecture can save money
 Internet (Intranet) transaction Processing
 allow multimedia data transfer, fast response time,
and storage of large databases of graphics and videos
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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Accounting & Finance Systems
Financial Planning and Budgeting
 Financial and Economic Forecasting
 much of the interrelated indicators are available on the Internet
 many software packages conducting forecasting and planning
 Planning for Cash Management
 build a decision support model
 make decisions about when and how much to refinance
 Budgeting
 Budget 2000 and Comshare BudgetPlus are available to
support budgeting and to facilitate communication among all
participants in the preparation process
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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Accounting & Finance Systems
(continued …)
Major activities
STRATEGIC SYSTEMS
a. Strategic Planning b. Ratios and Financial Health
c. Merger and Acquisition Analysis
INTERNAL
ENVIRONMENT
Top Management
Operation/
Production
Marketing
HRM
Engineering
TACTIAL SYSTEMS
a.
b.
c.
e.
g.
Budgeting Preparation and Control
Investment Management
Capital Budgeting d. Cost Analysis and Control
Tax Management
f. Auditing
Financial Planning
OPERATIONAL AND
TRANSACTION PROCESSING
SYSTEMS
a.
c.
d.
e.
g.
The General Ledger
b. Sales Order Processing
Accounts Payable and Receivable
Receiving and Shipping
Payroll
f. Inventory Management
Periodical Reports & Statements
EXTERNAL
ENVIRONMENT
IRS
SEC
Vendors
Clients
CPA Companies
Suppliers
Customers
Business Partners
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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Accounting & Finance Systems
(continued …)
Investment Management
 Access to financial and economic reports
 hundreds of sources for the financial and
economic reports and news
 Financial analysis
 is executed with a spreadsheet program, or with
commercially available, ready-made decision
support software
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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Accounting & Finance Systems
(continued …)
 Financial Controls
 Budgetary Controls
 more sophisticated software attempts to tie
expenditures to program accomplishment
 Auditing
 auditing software is especially suitable when
computerized information systems are audited
 Financial Health Analysis
 supported by expert systems
 Profitability Analysis and Cost Control
 profitability analysis software allows accurate
computation of profitability for individual
products and for entire organizations
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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Marketing & Sales Systems
Distribution Channel
 provide the goods or services to the
customer, and may extend through various
intermediaries such as wholesalers and
retailers
Channel Systems
 support all marketing linkages, such as
after-sales customer support
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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Marketing & Sales Systems
(continued ...)
Manufacturing
R & D/Design
COMPANY
Distribution
Market Intelligence
Systems
Accounting/
Finance
Dealer Systems
CHANNEL
SYSTEMS
Delivery Systems
Sales Systems
Target Marketing
Systems
Customer Support
Systems
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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Marketing & Sales (continued ...)
Customer Service
 Customer Profiles and Preference Analysis
 IT creates customer database and merges computerized lists
 Mass Customization
 Dell computers assembles computers according to the
specifications of the buyers
 J.C. Penny measures you and transfers the data directly to the
production floor
 Targeted Advertisement on the Web
 match appropriate ads with specific groups of customers
 Customer Inquiry Systems and Automated Help Desk
 expert systems and intelligent agents
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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Marketing & Sales (continued ...)
 Telemarketing
 Five major activities which are supported by IT :
 advertisement and reaching customers
 order processing
 customer service
 sales support
 account management
Distribution Channels
 Delivery management
 DSS models are used to support decisions like use
own outlets or distributors, and transportation mode
 Improving sales at retail stores
 IT reduces the long lines in stores by reengineering
the checkout process
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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Marketing & Sales (continued ...)
Marketing Management
 Pricing of Products or Services - online analytical processing is
supporting pricing decisions
 Salesperson Productivity - sales-force automation provides
salespeople in the field with portable computers, access to databases,
and to the web
 Product-Customer Profitability Analysis - a cost-accounting
system identifies profitable customers and frequency
 Sales Analysis and Trends - geographical information system
(GIS) analyzes customers and competitors and examines potential
strategies
 New Products, Services, and Market Planning - IT evaluates
large number of factors and uncertainties and conducts survey
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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Marketing & Sales (continued ...)
Ethical and Social Issues in IT-supported
Sales Activities
 Example of Privacy Policy : 3M Corp.
 Information Collection
» personally identifiable information that you voluntarily
provide through 3M’s website or e-mail correspondence
» general information (such as the type of browser you use,
the files you request, and the domain name and country
from which you submit the request for information)
 Use of Information
» responding to your inquires
» tracking orders you place with 3M
» supplying you with requested information on 3M products
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
24
Production Operations & Logistics
Supply-Chain Management (SCM)
INFORMATION FLOW
Transfer
Supplier
Transfer
Manufacturing
Transfer
Retail
Distribution
 SCM plans and
controls the flow of
information and cash
Transfer
Retail Outlet
Consumer
CASH FLOW
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
25
Production Operations & Logistics
(continues …)
Logistics and Material Management
 Inventory Management




determining how much inventory to keep
what to order, from whom, when to order and how much
inventory model : economic order quantity (EOQ)
many low cost commercial inventory software packages
 Quality Control
 providing information about the quality of incoming
material and parts, as well as the quality of in-process
semi-finished, and finished products
 standard quality control information systems and expert
systems
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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Production Operations & Logistics
(continues …)
 Planning Production/Operations
 Material Requirements Planning (MRP) - facilitates the
plan for acquiring parts, subassemblies, or material
 Manufacturing Resource Planning (MRPII) - connects the
regular MRP to other functional areas
 Just-in-Time Systems - minimizes waste of all kinds, improves
processes and systems, and maintains respect for all workers
 Project Management - Program Evaluation and Review
Technique (PERT) and Critical Path Method (CPM)
 Short-Term Schedules - schedule jobs and employees on a
daily or weekly basis
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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Production Operations & Logistics
(Continues …)
Automatic Design Work and Manufacturing
 Computer-Aided Design (CAD)
 enables drawings to be constructed on a computer screen
and subsequently stored, manipulated, and updated
electronically
 Computer-Aided Manufacturing (CAM)
 facilitates planning, operation, and control of production
jobs
 Computer-Integrated Manufacturing (CIM)
 concept or philosophy about the implementation of various
integrated computer systems in factory automation
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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Human Resources Management
Systems
Recruitment
 finding, testing, and deciding which employees to hire
 Positions inventory
 matching open positions with available personnel
 allowing data to be viewed by an employee over the intranet
 Employee Selection
 conducting interviews by video teleconferencing
 expediting the testing and evaluation process, assuring
consistency in selection by using expert systems
 Using the Internet
 advertising position openings on the Internet
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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Human Resources Management
Systems (continued …)
Human Resources Maintenance and Development
 Training and Human Resources Development
 digital video-editing system - produces training videotapes
 Performance Evaluation
 online evaluations - supports many decisions, ranging from
rewards to transfer to layoffs
 expert systems - provide an unbiased and systematic
interpretation of performance over time
 paperless wage system (PWS) - tracks employee review dates
and automatically initiates the wage review process
 Turnover, Tardiness, and Absenteeism Analyses
 DSS models - identifies causes and patterns
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
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Human Resources Management
Systems (continued …)
 Human Resources Management and Planning
 Personal files and skills inventory - computerized personnel





files identify qualified employees within the company for open
positions, promotion, transfer, special training programs, and layoffs
Benefits administration - Networks and voice technology, or the
intranets, specifying the value of each benefit and the available benefits
balance of each employee
Government reports - Availability of computerized personnel
records greatly eases the reporting process
Personnel planning - IT is used to collect, update, and process the
information
Succession planning and implementation - expert systems
and personnel databases supporting and implementing planning
Labor-Management Negotiations - DSS improve the
negotiation climate and considerably reduce the time needed for
reaching an agreement
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Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
Human Resources Management
Systems (continued …)
Intranet Applications in HRM
 Edify Corp.’s employee service system
 Oracle Corp.’s flexible benefits enrollment
program on the intranet
 Aetna health Plan’s online directory of primary
care physicians, hospitals, medical services, and
health information
 Apple Computers’ extensive education and
development activities on the intranet
 Merck Inc.’s intranet for HR transactions
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Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
Integrated Information Systems
Reasons for Integration
 using twentieth-century computer technology,
which is functionally oriented :
 cannot give employees all the information they need
 do not let different departments communicate
effectively with each other in the same language
 crucial sales, inventory, and production data often
have to be painstakingly entered manually into
separate computer systems every time a person who
is not a member of a specific department needs ac hoc
information related to the specific department
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Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
How to Integrated Information
Systems
Connect existing systems
 maximize the use of existing systems and minimize
the changes in them
 allows the addition of new applications to existing
ones and the connection of systems to intranets and
the Internet
Using supply chain management software
 use one integrated package in one or several
functional areas
 overcomes the isolation of the traditional
departmental structure where the functional areas
are separated from one another
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Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
How to Integrated Information
Systems (continued …)
Enterprise resource planning (ERP)
 control all major business processes with a single
software architecture in real time
 increased efficiency to improved quality,
productivity, and profitability
 SAP software (R|3; my SAP.com)
 crosses functional departments and can be
extended along the supply chain to both
suppliers and customers
 composed of four major parts : accounting,
manufacturing, sales and human resources
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
35
ERP
 SAP concept
Sales
Offices
Central SAP
Database &
Servers
FACTORY
The factory automatically receives the
sales order and can
begin production.
WAREHOUSE
The warehouse is simultaneously informed
about the order and
can schedule shipping.
ACCOUNTING
Accounting gets updated sales and production data at every
step of the process
HEAD QUARTERS
Headquarters can tap
into up-to-the-minute
data on sales, inventory, and production
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
36
What’s in IT for Me?
For Accounting
 Executing TPS effectively is a major concern of
any accountant
For Finance
 The use of IT helps financial analysts and
managers perform their difficult tasks better
For Marketing
 By understanding how ERP software operates,
marketing people can greatly improve the
software utilization by developing challenging
corporate applications
37
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
What’s in IT for Me? (continued …)
For Production/Operations Management
 Supply chain management and ERP are critical
today for any medium and large manufacturing
company, and for service organizations such as
banks
For Human Resources Management
 IT can improve the efficiency and effectiveness of
the HRM activities
 conducting training on the intranet
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Introduction to Information Technology
Turban, Rainer and Potter
Chapter 9 Functional and Enterprise Systems
What’s in IT for Me? (continued …)
 For Human Resource Management
 Human resource managers utilize their
corporate networks extensively for posting
job openings, and use internal corporate
networks to publish corporate policies,
company newsletters and job openings