Chapter 1
Organizations, Processes and Information Systems
Objectives
 Understand that work in organizations is completed in
processes that consist of many steps
 Compare and contrast the functional and process views
of organizations and identify the negative consequences
of the traditional functional organizational structure
 Discuss and describe the various flows in a process –
physical, data, document, and information
 Explain how enterprise systems enable organizations to
execute and manage processes
Modern global Business
Environment
Understanding the modern business
world needs understanding of:
Global Competition
Information Revolution
Knowledge worker
Global competition
 Design, manufacturing, materials, assembly, service, etc.
 In different parts of the world
 Why? Politics and policies, business efficiencies (less expensive
labour, supply of educated scientists and engineers)
 Increased competition
 Global markets vs. local
 Pressures to be more efficient and effective
Information revolution
 Increased use of ICT to create, deliver and use information
 data, documents, voice, video
 Global enterprise needs to share information quickly
 Design, forecasts, material availability, etc.
 Monitoring
 Is ICT the cause or result of globalization?
Knowledge worker
 Increasing dependence on information to do their work
 Create, acquire, process, synthesize, disseminate, analyze and
use information
 Who are knowledge workers
 Sales executive, production managers, product manager,
financial analyst
 Use structured and unstructured information
 Structured information – well defined, knows what information
is needed and where to find it.
 Unstructured information - not well defined, does not know
what information is needed or where to find it.
Knowledge worker
 Knowledge work is non-routine, non repetitive
 Understand data and impact of work on others and impact of
others’ work; big picture
 Task workers: routine, structured tasks
 Customer service representatives, accounting clerks, insurance
claims processor
 Very narrowly focused
Knowledge worker
 Key skills
 Strategic thinking: Able to see the big picture and understand
how the organization works as a whole.
 Information literacy: able to determine what information is
needed, where to find it, and how to use it.
 Communication and collaboration: able to function as an
effective part of a project team where own role as well as the
roles of others are understood.
Business processes
 Sequence of tasks or activities that take a set of inputs and
convert them into desired outputs
 Key processes
 Procurement
 Fulfillment (Sales and Marketing)
 Production
Figure 1: A generic process
Process Steps
Input
Step 1
Step 2
Step 3
Output
Business process - example
 Make skateboards
 What are some parts of a skateboard (Boards, wheels, nuts and
bolts)
 Buy parts
 What are some steps in the buying process ( PR, PO, GR, INV,
Pay)
 Who performs these steps
 Sell skateboards
 What are some steps in the selling process ( OR, Ship, Inv, Rec
Pay)
 Who performs these steps
Procurement Process
Create Purchase
Requisition
Create & Send
Purchase Order
(PO)
Receive
Goods
Receive Invoice
From Supplier
Send Payment
To Supplier
Fulfillment Process (Sales and
Marketing)
Receive
Customer Order
Prepare
Shipment
Send
Shipment
Send Invoice
To Customer
Receive
Payment
Business Processes
 Important to recognize that activities involved in processes
are carried out by individuals located in different parts of the
organization.
 Companies group their employees into different units.
 The manner in which people are grouped is determined by
the organization’s structure and design
 This structure has significant implications for how well the
various processes are executed.
Functional structure
 Perform common functions (Purchasing, Warehouse, Sales
etc)
 Performs typical tasks in each functional area
 Review steps in procurement – PR, PO, GR, INV, PAY
 Who does what where? Clearly procurement processes consist
of activities that occur in different functions or departments.
 Characterize processes - who is responsible for the process?
 Why functional structure? Growing size of companies and
the need to perform one or more activities well led to
companies adopting this structure.
Information Technology
Human Resources
Finance & Accounting
Research & Development
Sales & Marketing
Warehouse
Operations
Purchasing
Functional organizational
Functions vs. processes
The Silo effect
 Communication and collaboration between functions
 What must be communicated?
 What information must be exchanged?
 How is this coordinated
 Paper based processes
 Processes supported by functional systems
 Processes supported by enterprise systems
Paper-based process
Sales
Warehouse
Receive
Customer
Order
Create/
Update
Paperwork
Delay!
Prepare
Shipment
Send Paperwork
Delay!
Accounting
Send
Shipment
Create/
Update
Paperwork
Delay!
Send
Invoice
Send Paperwork
Delay!
Receive
Payment
Create/
Update
Paperwork
Delay!
Consequences of delays
 Delays
 Increased lead times
 Increased cycle times
 Excess inventory
 “just in case”
 Lack of visibility across the process
 Status: “where is my order”
 How is the process doing
 Why accept these delays?
Delays are no longer acceptable
 Why?
 Globalization
 Increased competition
 Pressure to do better
 Reliance on technology!
Process using functional systems
Processes using Enterprise Systems
Is this for MIS/IT majors?
 Not just for IT majors!
 Recall skills of a knowledge worker…..
 Strategic thinking / big picture
 How processes work
 How does my work impact the process
 How will my failures impact the process
 How does others’ work impact my work
 What must I do well to ensure that the process is successful
 Communication and collaboration
 Enables working in Project teams!
Framework: Key process flows
Information Flow
Enterprise
Information
System
Data & Document Flow
Physical Flow
Role of ES in organizations
 Execute the process
 Inform, provide data, help complete steps
 Embedded in the process
 ES and the process are intertwined. If the system stops working, the
process cannot complete
 Examples in procurement and fulfillment
 The system generate the purchase requisitions and then informs the
purchasing department that they need to act on these requisitions.
 The accountant will be able to view all shipments received to match an
invoice received.
Role of ES in organizations
 Capture and store process data
 Automatic capture
 Entered from outside the system
 Examples in procurement and fulfillment
 Important advantage of using ES compared to a manual systems
is that the data need to be entered into the system only once.
Role of ES in organizations
 Monitor performance
 Instance level information (status)
 A specific task or activity. i.e.. state of a particular customer order – was
the entire order shipped? And when?
 Process level information (aggregate)
 The process as a whole. i.e..How well is the procurement process being
executed by calculating the lead time, or the time between sending the
purchase order to a vendor and receiving the goods.
Delay Causes
January 08
Q1 Order Summary
January
February
Packing Delay
14%
March
Total Orders
7
11
15
Total Late Orders
4
3
6
On Time Order %
43%
73%
60%
Average Order Time (Days)
2.86
2.12
2.94
Out of Stock
29%
On Time
43%
Shipping Delay
14%
Order Details: January
Order
Number
Customer Name
Order
Date
Ship Date
Order Value
Orderto-Ship
(days)
Reason for Delay
123456
World Wide Skateboard Distributors
01/04/08
01/06/08
$
300.18
1
On Time
123457
Extreme Skateboard Sports, Inc.
01/06/08
01/08/08
$
245.65
2
On Time
123458
"Waldo" Autry
01/08/08
01/11/08
$
123.43
4
Out of Stock
123459
West Michigan Sporting Goods, Inc.
01/10/08
01/12/08
$
342.53
2
On Time
123460
Flying Acrobats, Inc
01/12/08
01/20/08
$
556.43
5
Packing Delay
123461
MI Sporting Company
01/14/08
01/16/08
$
234.22
3
Out of Stock
123462
Saginaw Dawgs
01/16/08
01/18/08
$
653.45
3
Shipping Delay
Financial impact
 Key financial statements
 Balance sheet
 Indicates the financial condition of a company at a specific point in time
 It shows what the company owns (assets), what it owes to others
(liabilities) and how much money shareholders have invested in the
company (Equity)
 Income statement
 Also known as a profit and loss statement is a record of revenue and
expenses for a specific period of time. It shows how much money the
company made (Income) and how much the company had to spend to
produce and sell its goods (Expenses) and how much profit the company
earned (Net Income)
 Statement of cash flows