CHAPTER 8
Transaction Processing,
Innovative Functional Systems,
and Integration
4-1
IT for Management
Prof. Efraim Turban
Learning Objectives
4-2
• 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 to each of these:
production/operations, marketing and sales,
accounting, finance, and human resources
management
• Describe the benefits and issues of integrating
functional information systems
• Describe the role of IT in facilitating customer
relationship management (CRM)
IT for Management
Prof. Efraim Turban
Integrated Solutions Help Colonial
Building Supply, Stay Competitive
• The Problem
– to remain competitive, Colonial Building Supply needed a
technology to provide it with information about inventory
levels and customer buying trends
• The Solution
– purchased a integrated system that includes: accounting,
POS terminal, inventory control, purchasing/receiving,
employee time control and attendance, hand-held automatic
identification and data collection, and several others
• The Results
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– Lower cost for data entry, reduction in inventory and
storage space, fast access to information, better customer
service, and higher employee satisfaction
IT for Management
Prof. Efraim Turban
Crossing Functional
Boundaries at Colonial
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• IT support the routine processes of a retailer,
enabling it to be efficient and effective and to satisfy
its customers
• IT software helped the modernization and
reengineering of the company’s major business
processes
• The software supports several business processes,
not just one
• The system’s major applications were in logistics.
However, a vendor provides integrated software
• IT can be beneficial to a relatively small company
• The integration includes connection to business
partners using the Internet
IT for Management
Prof. Efraim Turban
Porter’s Value Chain Model
and The Supply Chain
Primary Activities
Support Activities
Typical functional areas mapped on
the value chain of a manufacturing company
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Firm Infrastructure
(Accounting, Finance, General Management)
Human Resource Management
(Human Resources)
Technology Development
(Engineering)
Procurement
(Material Management-Operations)
Inbound
Logistics
Operations
(Material
(Operations)
ManagaementOperations)
Outbound
Logistics
Marketing
and Sales
Service
(Material
ManagemnetOperations)
(Marketing)
(Service or
Marketing)
IT for Management
Prof. Efraim Turban
Major Characteristics of
Functional Information Systems
4-6
• A functional information systems comprises several
smaller information systems that support specific
activities performed by each functional area
• The specific IS applications in any functional area can
be integrated to form a coherent departmental
functional, or they can be completely independent
• Functional information systems interface with each
other to form the organization-wide information system
• Some organizational information systems interface
with the business environment
• Information systems applications support the three
levels of an organization’s activities: operational,
managerial, and strategic
IT for Management
Prof. Efraim Turban
Computerization of
Routine Transaction Processes
• Transaction Processing System (TPS)
– supports transaction processes
– monitors, collects, stores, processes, and
disseminates information for all routine
core business transactions
– includes accounting and finance
transactions and some sales, personnel,
and production activities
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IT for Management
Prof. Efraim Turban
Objectives of TPS
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• To provide all the information needed by law
and/or by organizational policies to keep the
business running properly and efficiently
• To allow for efficient and 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 and
strategic systems such as DSS applications
• To assure accuracy and integrity of data and
information
• To safeguard assets and security of information
IT for Management
Prof. Efraim Turban
Major Characteristics of TPS
4-9
• Large amount 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
• TPS basically monitors and collects past data
• Input and output data are structured
• High level of detail is usually observed
• Low computation complexity
• High level of accuracy, data integrity, and security is needed
• High reliability is required
• Inquiry processing is a must
IT for Management
Prof. Efraim Turban
Benefits of
Internet Transaction Processing
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• Flexibility to accommodate unpredictable growth in
processing demands
• Cost effectiveness even for small dollar amounts
• Interactive, automatic billing, enabling companies to
offer services to anyone, not just subscribers
• Timely search and analysis of large databases
• Multimedia data such as pictures and sound are handled
effectively and efficiently
• High data throughput to support inquiries requiring
massive file size
• Fast response time
• Effective storage of huge graphics and video databases
IT for Management
Prof. Efraim Turban
Typical Tasks in
Transaction Processing
Customer
Makes a
Purchase
POS
Terminal
Terminal
File
Product
Processing
System
Master
Files
4-11
Inventory
Files
Department
Sales Files
IT for Management
Prof. Efraim Turban
Innovative IT Applications
in the Functional Areas
• Managing Production/Operations and
Logistics
– transform inputs into useful outputs
– very diversified, and so its supporting
information systems
– related to finance and sales, engineering and
design, and purchasing and logistics
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IT for Management
Prof. Efraim Turban
Typical TPS of a Manufacturer
Purchasing
Order
Vendors
Receiving
Goods
Manufacturing
Payroll
Inventory
Accounts
Payable
Shipping
Taxes
Customer
Order
Customers
General
Ledger
Accounts
Receivable
4-13
Periodic
Statements
Fixed
Assets
IT for Management
Prof. Efraim Turban
Innovative IT Applications
in the Functional Areas
• Supply-Chain Management
– objective is to support the flow of goods
and materials from the original supplier
through multiple production and logistic
operations to the ultimate consumer
– extensive integrated software is available
for managing portions of the supply chain
as well as the entire process
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IT for Management
Prof. Efraim Turban
Supply-Chain Management
Suppliers
Inbound Logistics
Transaction
Production
Delivery
Customer
a) Supply Chain direct to customer
Information Flow
Transfer
Suppliers
Transfer
Manufacturing
Transfer
Distribution
Transfer
Retail Outlet
Customer
Cash
Flow
Supply Chain Organization
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b) Supply Chain including wholesalers and retailers
IT for Management
Prof. Efraim Turban
In-House Logistics and
Material Management
• Inventory Management
• Quality Control
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IT for Management
Prof. Efraim Turban
Planning
Production/Operations
• Material Requirements Planning (MRP)
• Manufacturing Resource Planning (MRP II)
• Just-in-Time Systems
• Project Management
• Short-Term Schedules
4-17
IT for Management
Prof. Efraim Turban
Automatic Design Work
and Manufacturing
• Computer-aided Design (CAD)
• Computer-aided Engineering (CAE)
• Computer-aided Manufacturing (CAM)
4-18
IT for Management
Prof. Efraim Turban
Computer-integrated
Manufacturing (CIM)
• Three basic goals:
– simplification
– automation
– integration and coordination
• The CIM model
– made up by general business management,
product and process definition, manufacturing
planning and control, factory automation, and
information resource management
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IT for Management
Prof. Efraim Turban
Channel Systems
• The customer is king (queen)
– Customer profiles and preference analysis
– Prospective customer lists and marketing
databases
– Mass customization
– Targeted Advertisement on the Web
– customer inquiry systems and Automated
Help Desk (EC application)
4-20
IT for Management
Prof. Efraim Turban
Channel Systems
• Telemarketing
– Capabilities
• personalized contact with the customers
• allows customers to buy at their convenience
• effective in informing customers about a
company’s products and services
– Limitations
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•
•
•
•
cost can be high
difficult to find good telemarketers
may be seen by many as a nuisance
challenges in reaching people
IT for Management
Prof. Efraim Turban
Distribution Channels
• Distribution channels management
– DSS models are frequently used to support
the decision of accomplishing by a company,
or by a subcontractor
• Improving sales at retail stores
– using IT, it is possible to improve the
situation by reengineering the checkout
process
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IT for Management
Prof. Efraim Turban
Marketing Management
• Pricing of products or services
• Salesperson productivity
• Productivity software
• Products and customers profitability analysis
• Sales analysis and trends
• New products, services, and market planning
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IT for Management
Prof. Efraim Turban
Managing the Accounting and
Finance Systems
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.
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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
IT for Management
Prof. Efraim Turban
Managing the Accounting and
Finance Systems
Strategic Systems
Internal
Environment
Tactical Systems
Operational and
Transaction
Processing System
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External
Environment
IT for Management
Prof. Efraim Turban
Financial Planning and
Budgeting
• Financial and economic forecasting
• Planning for incoming funds
• Budgeting preparation and operation
• Capital budgeting decision
4-26
IT for Management
Prof. Efraim Turban
Investment Management
• Access to financial and economical reports
– Internet meta-search engines for finding financial
data
– Internet directories and yellow pages
– Software for monitoring, interpreting, analyzing
financial data, and alerting management
• Financial analysis
– Treasury risk management systems (TRMS)
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IT for Management
Prof. Efraim Turban
Control and Auditing
• Budgetary control
• Auditing
• Financial health analysis
• Profitability analysis and cost control
• Product pricing
4-28
IT for Management
Prof. Efraim Turban
Recruitment
• Position inventory
• Employee selection
• Using the Internet
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IT for Management
Prof. Efraim Turban
Human Resources
Maintenance and Development
• Performance evaluation
• Training and human resources
development
• Turnover, tardiness, and
absenteeism analyses
4-30
IT for Management
Prof. Efraim Turban
Human Resources
Planning and Management
• Personnel planning
• Succession planning
• Labor-management negotiations
• Benefits administration
4-31
IT for Management
Prof. Efraim Turban
Internet Applications
• Eddify Corporation’s employee service systems
allows users to access information via PCs, voicerecognition phone, kiosks, or faxes.
• Oracle corporation conducts its flexible benefits
enrollment program on the intranet
• Apple Computers Inc. conducts extensive education
and development activities on the intranet,
including a remote management-training program
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IT for Management
Prof. Efraim Turban
Reasons for Integration
• Helps to reduce cost
• Helps to increase employees’ productivity
• Helps to facilitate information sharing
and collaboration which are necessary for
improving customer service
• IT helps CRM
4-33
IT for Management
Prof. Efraim Turban
Customer Relationship
Management (CRM)
• The company’s success depends on effectively
managing relationship with customers
• Relationship marketing
– overt attempt of exchange partners to build a longterm association, characterized by purposeful
cooperation and mutual dependence on the
development of social, as well as structural, bongs
– include the concepts of loyalty and trust
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IT for Management
Prof. Efraim Turban
How is CRM Practiced?
4-35
• Know who the company’s current and
potential customers are
• Know who is a good customer, and
who are the most profitable customers
for the business
• Know why a certain customer is in the
market, why he or she does business
with the company, what the customers
like and dislike about he business
IT for Management
Prof. Efraim Turban
The Enabling Role of IT
• Using intelligent agent technology, American Airlines
generates personalized Web pages for each of about
800,000 registered travel-planning customers
• Manchester Metropolitan University tracks a population of
30,000 students, manages modular courses, and keeps the
student management systems updated by databases and
parallel processing
• Charles schwab’s call center handles effectively over 1
million customer calls every day
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• State Farm Insurance Co. manages several initiatives for
retaining customers by a computerized incentives system
IT for Management
Prof. Efraim Turban
CRM Activities and IT Support
CRM Activity (Sample)
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IT Support
Information about choice of
doctors, hospitals, and alternative
medicine offered by HMO’s.
Internet; online customer
survey; groupware; expert
systems for giving advice.
Customized information and
services in many languages;
discounts based on healthy lifestyle;
appointment reminders;
information on doctors; and
medical research. Help center to
solve HMO member problem
E-mail; data warehouse for
customer information; data
mining; intelligent translating
systems; search engines on the
Web help center.
Web-based integrated call centers;
quick reply to customers’ inquiries
Facilitates help-desk activities;
intelligent agents for answering
FAQs
IT for Management
Prof. Efraim Turban
CRM Activities and IT Support
CRM Activity (Sample)
Monitoring of customers’ orders
inside the company.
Appointment of account managers;
creation of specialized teams (BPR)
Seminars and educational activities
for customers
Self-tracking of shipments and
orders.
Segmenting of customers
Matching customers with products
and services.
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IT Support
Workflow software for
planning and monitoring;
intranets
Expert systems for advice;
groupware for collaboration.
Online training; Internet.
Web-based training software;
workflow
Data mining in data
warehouses.
Web-based intelligent agents.
IT for Management
Prof. Efraim Turban
CRM Activities and IT Support
CRM Activity (Sample)
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IT Support
Customizing products to suit
customers’ specific needs.
Intelligent agents to find what
customer wants; CAD/CAM to
reduce cost of customization
Customer discussion forums.
Chat room; sponsored
newsgroups.
Loyalty programs for repeat
customers.
Data warehouses and data
mining of customers’ activities;
smart cards that record
purchasers’ activities.
Customer participation in product
(service) development.
Online surveys; newsgroups;
chat room; e-mail
Proactive approach to customers
based on their activity level.
Data warehouse; data mining.
IT for Management
Prof. Efraim Turban
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