Information Technology Foundations-BIT 112
CHAPTER 8
Organizational Information
Systems
Information Technology Foundations-BIT 112
Chapter Outline
8.1 Transaction Processing Systems
8.2 Functional Area Information Systems
8.3 Enterprise Resource Planning Systems
8.4 Customer Relationship Management Systems
8.5 Supply Chain Management Systems
8.6 Electronic Data Interchange and Extranets
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Learning Objectives
• Describe Transaction Processing Systems.
• Describe Functional Area Information Systems and
the support they provide for each functional area of
the organization.
• Describe Enterprise Resource Planning Systems.
• Describe Customer Relationship Management
Systems.
• Describe Supply Chain Management Systems.
• Discuss Electronic Data Interchange and Extranets.
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Chapter Opening Case P. 232
Toyota Production System
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Toyota Production System (continued)
Electronic dashboard showing
status of assembly line
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Toyota Production System (continued)
• The light curtain is bounded by
the striped yellow/black line.
• The image on the right shows an
actual light curtain. The light
curtain is bounded by the yellow
line around the mat.
Clicking on either image will show a
30-second movie of how a light
curtain works.
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8.1 Transaction Processing Systems
(TPS)
• Transaction processing system (TPS) monitors, collects,
stores and processes data generated from all business
transactions.
– A transaction is any business event that generates data worthy of
being captured and stored in a database.
• There are two major types of TPSs.
– Batch Processing
• When the firm collects data from transactions as they occur,
placing them in groups or batches, then prepares and
processes the batches periodically (e.g., every night).
– Online Transaction Processing (OLTP)
• When business transactions are processed online as soon as
they occur.
• Source data automation is automated TPS
– Involves collecting data from sensors (e.g., barcode scanners) and
entering the data directly into a computer without human
intervention. Example: the barcode scanner.
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How Transaction Processing Systems
Manage Data
Batch Processing
When the firm collects data from transactions as they occur,
placing them in groups or batches, then prepares and processes the
batches periodically (e.g., every night).
Online Transaction Processing (OLTP)
When business transactions are processed online as soon as they
occur.
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8.2 Functional Area Information Systems
• Functional Area Information Systems are designed to
support a functional area by increasing its internal
effectiveness and efficiency in the following areas:
–
–
–
–
–
Accounting
Finance
Marketing
Operations (POM)
Human Resources Management
• Provide information mainly to operational managers
in the functional areas via a variety of reports.
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Examples of Information Systems
Supporting the Functional Areas
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Table 8.1
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Functional Area Information Systems
Generate a Wide Variety of Reports
• Routine reports
• Ad hoc (on demand) reports
– Drill-down reports
– Key-indicator reports
– Comparative reports
• Exception reports
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Routine - Summary Report
• Provides summarized information, with less
detail.
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Routine - Detailed Report
• Provides high levels of detailed data, often in support
of summary reports. Note that this detailed report
provides the
underlying
data for
“Remove
Catch Basin”,
which is the
second item
on the
preceding
summary
report.
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Drill-Down Report
• Allows users to click on an item in a report and be
able to access underlying details about that item.
• A type of ad-hoc report.
• RSSbus is a mashup
tool that gives you
the tools to quickly
create structured
drill-downs out of
anything.
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Key-Indicator Report
• Summarizes the performance of critical activities.
• A type of ad-hoc report.
• The key indicator
in this report is the
number of prison
inmates per
100,000 of
population in
1996-1997.
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Comparative Report
• Compare different business units
and or time periods.
• A type of ad-hoc report.
• This report compares managed
health care to traditional fee-forservice healthcare. For example:
Advice to smokers to quit.
– Fee-for-service has a 37% compliance rate.
See purple arrow.
– The minimum managed care plans have a
30% compliance rate. (left end of bar)
– The maximum managed care plans have a
85% compliance rate. (right end of bar)
– The average of all managed care plans
(National Health Plan average) is 61%
compliance.
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Exception Report
• Includes only information that falls outside certain
threshold standards.
• This image
shows a
financial
transaction
exception
report using
SAP from the
University of
Toronto in
2003.
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8.3 Enterprise Resource Planning
Systems (ERP)
• The major objective of ERP systems is to tightly integrate the
functional areas of the organization and to enable seamless
information flows across the functional areas.
• Integrate the planning,
management and use of all
organization resources.
• ERP systems break down
the information silos of an
organization.
• Information Silos: Database
systems developed for a
specific functional area that does not communicate with
systems in other functional areas. Typically, older IT solutions.
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Problems with information silos
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ERP Systems (continued)
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ERP Systems – Business Process
Support
• ERP systems provide the information necessary to
control the business processes of the organization.
• A business process is a set of related steps or
procedures
designed to
produce a
specific
outcome.
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SAP Modules
• SAP, a leading ERP vendor, is moving away from
describing their system as a set of modules, and now
is using the term “solutions.” On their Website, SAP
has structured their Solutions tab as follows:
–
–
–
–
–
–
–
Financials
Human Resources
Customer Relationship Mgmt
Supplier Relationship Mgmt
Product Lifecycle Management
Supply Chain Management
Business Intelligence
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8.4 Customer Relationship Management
(CRM)
• An enterprisewide effort to acquire and retain
customers.
• CRM systems enable a one-to-one relationship
between a customer and a seller to be established.
– One simple idea “Treat different customers differently.”
– Helps keep profitable customers and maximizes lifetime
revenue from them.
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The Need for CRM
• It costs six times more to sell to a new customer than
to sell to an existing one.
• A typical dissatisfied customer will tell 8-10 people.
• By increasing the customer retention rate by 5%,
profits could increase by 85%.
• Odds of selling to new customers = 15%, compared
to the odds of selling to existing customers (50%).
• 70% of complaining customers will remain loyal if
problem is solved.
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The Customer Life Cycle
• The customer life cycle is a term used to describe the
progression of steps a customer goes through when
considering, purchasing, using, and maintaining
loyalty to a product or service.
• The customer life cycle:
–
–
–
–
engage,
transact,
fulfill, and
support.
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The Value of A Customer To A Company
Depends on Three Dimensions
1. Duration of the relationship,
2. Number of relationships (e.g., the quanty of
customer
purchased
products ),
3. Profitability
of the
relationship.
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Customer Touch Points
• Methods of interaction with a customer.
E-mail
Telephone
Conventional mail
Web site
Store
Help desk
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CRM Systems Provide Applications
In 3 Major Areas
• Sales Force Automation (SFA)
– functions provide such data as sales prospect and contact
information, product information, product configurations and
sales quotes.
• Marketing – support marketing campaigns & provide
opportunities for cross-selling, up-selling and bundling.
– Cross-selling is the marketing of complementary products to
customers.
– Up-selling is the marketing of higher-value products or services
to customers.
– Bundling is a type of cross-selling in which a vendor sells a
combination of products together at a lower price than the
combined costs of the individual products.
• Customer Service – can take many Web-based forms.
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The Many Forms of Customer Service
• Technical and other information and services
• Customized products and services
• Tracking account or order status
• Personalized Web pages
• FAQs
• E-mail and automated response
• Call centers
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Software as a Service for CRM (IT’s
About Business 8.2)
P. 241
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8.5 Supply Chain Management Systems
(SCM)
• Supply Chain
– Refers to the flow of materials, information, money, and
services from raw material suppliers, through factories and
warehouses, to the end customers.
• Supply Chain Management (SCM)
– The function of planning, organizing and optimizing the
supply chain’s activities.
• Interorganizational Information System (IOS)
– Involves information flows among two or more
organizations.
• Global Information Systems
– Interorganizational information systems that connect
companies located in two or more countries.
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Supply Chain (recall Figure 2.2)
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Warner’s Digital Supply Chain (IT’s About
Business 8.3) P. 243
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The Structure & Components of Supply
Chains
• A supply chain involves three segments:
– Upstream, where sourcing or procurement from external
suppliers occurs.
– Internal, where packaging, assembly or manufacturing takes
place.
– Downstream, where distribution takes place, frequently by
external distributors.
• Tiers of suppliers, a supplier may have one or more
subsuppliers, and the subsupplier may have its own
subsupplier(s) and so on.
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Generic Supply Chain
• A supply chain involves a product life cycle approach,
from “dirt to dust”.
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Three Flows of the Supply Chain
• Material flows
– the physical products, raw materials, supplies and so forth
that flow along the chain.
• Information flows
– all data related to demand, shipments, orders, returns and
schedules as well as changes in any of these data.
• Financial flows
– all transfers of money, payments and credit-related data.
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Problems Along the Supply Chain
• Poor customer service
• Poor quality product
• High inventory costs
• Loss of revenues
• New technologies
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Problems Stem Mainly From Two
Sources
• Uncertainties due to demand forecast, delivery times,
quality problems in materials and parts that can create
production delays;
– A type of Inventory setting problem is the Bullwhip effect.
It refers to erratic shifts in orders up and down the supply
chain.
• The need to coordinate several activities, internal units
and business partners.
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The Bullwhip Effect
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Issues of Global Interorganizational
system (IOS) Design
• Systems that connect companies located in two or
more countries have unique issues to be addressed:
–
–
–
–
–
Cultural differences
Localization
Economic and Political Differences
Legal issues
Cross-border data transfer which refers to the flow of
corporate data across nations’ borders.
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Putting it all together
• The relationships among SCM, ERP, and CRM
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8.6 Electronic Data Interchange (EDI),
Extensible Markup Language (XML), and
Extranets
Information Technology Foundations-BIT 112
• Electronic data interchange (EDI)
– a communication standard that enables business partners to
exchange routine documents, such as purchase orders,
electronically.
• Extensible Markup Language (XML)
– a general-purpose specification for creating custom markup
languages; the primary purpose is to help information
systems share structured data, particularly via the Internet,
and it is used both to encode documents and to serialize
data.
• Extranets
– link business partners to one another over the Internet by
providing access to certain areas of each other’s corporate
intranets.
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XML and/or EDI Benefits
• Minimize data entry errors
• Length of messages are shorter
• Messages are secured
• Reduces cycle time
• Increases productivity
• Enhances customer service
• Minimizes paper usage and storage
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XML and/or EDI Limitations
• Significant initial investment to implement
• Ongoing operating costs are high due to the use of
expensive, private VANs
• Traditional EDI system is inflexible
• Long startup period
• Multiple EDI standards exist
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Comparing Purchase Order Fulfillment
Without EDI and/or XML
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Comparing Purchase Order Fulfillment
With EDI and/or XML
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Extranets
• A private network that uses Internet protocols, network
connectivity, and possibly the public telecommunication
system to securely share part of an organization's information
or operations with suppliers, vendors, partners, customers or
other businesses.
• An extranet can be viewed as part of a company's intranet that
is extended to users outside the company (e.g.: normally over
the Internet). It has also been described as a "state of mind" in
which the Internet is perceived as a way to do business with a
preapproved set of other companies business-to-business
(B2B), in isolation from all other Internet users. In contrast,
business-to-consumer (B2C) involves known server(s) of one
or more companies, communicating with previously unknown
consumer users. (http://en.wikipedia.org/wiki/Extranet)
• The main goal of extranets is to foster collaboration between
business partners.
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The Structure of an Extranet
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Types of Extranets
• A company and its dealers, customers or suppliers.
– centers around one company.
• An industry’s extranet
– major players in an industry team up to create an extranet.
• Joint ventures and other business partnerships.
– partners in a joint venture use extranet as a vehicle for
communications and collaboration.
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Chapter Closing Case
P. 256
The JetBlue Fiasco
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