Chapter 2: Information Systems in

the Enterprise + managing data and

information

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 Reading Notes for Chapter 2 in the textbook

The chapter introduces six types of information systems.

Figure 2.1 and table 2.1 give an overall picture of organizations
and how different types of information systems serve them.
Figure 2.2 depicts different types of information systems and how
they relate to one another (Figure 2.9 as well).
Section 2.2 examines information systems from a functional
view of an organization: Sales and marketing systems,
manufacturing and production systems, finance and accounting
systems, and human resources systems. Read this section
carefully to develop an understanding of how information systems
serve different functions of an organization.
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 Reading Notes for Chapter 2 in the textbook - Continued
Read section 2.3 carefully to understand integration of
functions and business processes. Figure 2.12 illustrates a
cross-functional business process. Pay also attention to
customer relationship management and enterprise systems
that are current trends in business. Contrast Figure 2.15 and
2.16. Extended enterprises and industrial networks are also
recent trends and would not be possible without the support
of information technology.

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 KINDS OF INFORMATION SYSTEMS

Organizational Hierarchy

Organizational Levels

Information Systems

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 KINDS OF INFORMATION SYSTEMS

KIND OF SYSTEM GROUPS SERVED

STRATEGIC LEVEL SENIOR MANAGERS

MANAGEMENT LEVEL MIDDLE MANAGERS

KNOWLEDGE LEVEL KNOWLEDGE &

DATA WORKERS

OPERATIONAL OPERATIONAL
LEVEL MANAGERS

SALES & MANUFACTURING FINANCE ACCOUNTING HUMAN

MARKETING & ENGINEERING RESOURCES
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 Four General Kinds of IS
Operational-level systems
support operational managers by monitoring
the day-to-days elementary activities and
transactions of the organization. e.g. TPS.
Knowledge-level systems
support knowledge and data workers in
designing products, distributing information, and
coping with paperwork in an organization. e.g.
KWS, OAS
Management-level systems
support the monitoring, controlling, decision-
making, and administrative activities of middle
managers. e.g. MIS, DSS
Strategic-level systems
support long-range planning activities of senior
management. e.g. ESS 6
 A Framework for IS
(with respect to support provided)

Executive Support Systems (ESS)

Management Information Systems (MIS)
Decision Support Systems (DSS)
Knowledge Work Systems (KWS)
Office Automation Systems (OAS)
Transaction Processing Systems (TPS)

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 Transaction Processing Systems (TPS)
Computerized system that performs and records
the daily routine transactions necessary to
conduct the business; these systems serve the
operational level of the organization

TYPE: Operational-level
INPUTS: transactions, events
PROCESSING: updating
OUTPUTS: detailed reports
USERS: operations personnel, supervisors
DECISION-MAKING: highly structured

EXAMPLE: payroll, accounts payable 8

 A Symbolic Representation for a payroll
TPS
Employee data (various departments) To general ledger: wages and salaries

Management
Payroll System Reports

Government documents
Payroll
master Employee checks
file On-line
queries

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 Typical Applications of TPS
TYPE OF TPS SYSTEM
Sales/ Manufacturing! Finance/ Human Other types
marketing production accounting resources (e.g., university)
systems systems systems systems
Major functions Sales management Scheduling Budgeting Personnel recard Admissions
of system Market research Purchasing General ledger Benefits Grade records
Promotion Shipping/receiving Billing Cornpensation Course records
Pricing Engineering Cost accounting Labor relations Alumni
New products Operations Training
Major Sales order Materials resource General ledger Payroll Registration system
application information system planning systems
systems Market research Purchase order Accounts Employee records Student transcript
system control systems receivable/payable system
Pricing system Engineering Budgeting Benefit systems Curriculum class
systems control systems
Quality control Funds managementCareer path Alumni benefactor
systems systems systems system

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 Office Automation Systems (OAS)
Computer system, such as word processing,
electronic mail system, and scheduling system,
that is designed to increase the productivity of
data workers in the office.

TYPE: Knowledge-level
INPUTS: documents, schedules
PROCESSING: document management,
scheduling, communication
OUTPUTS: documents; schedules
USERS: clerical workers

EXAMPLE: document imaging system 11

 Knowledge Work Systems (KWS)

Information system that aids knowledge workers in

the creation and integration of new knowledge in
the organization.

TYPE: Knowledge-level
INPUTS: design specifications
PROCESSING: modelling
OUTPUTS: designs, graphics
USERS: technical staff; professionals

EXAMPLE: Engineering workstations

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 Decision Support Systems (DSS)

Information system at the management level of an

organization that combines data and sophisticated
analytical models or data analysis tools to support
semi-structured and unstructured decision making.

TYPE: Management-level
INPUTS: low volume data
PROCESSING: simulations, analysis
OUTPUTS: decision analysis
USERS: professionals, staff managers
DECISION-MAKING: semi-structured

EXAMPLE: sales region analysis 13

 Characteristics of Decision-Support
Systems
1. DSS offer users flexibility, adaptability, and a
quick response.
2. DSS operate with little or no assistance from
professional programmers.
3. DSS provide support for decisions and problems
whose solutions cannot be specified in advance.
4. DSS use sophisticated data analysis and
modelling tools.
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 Management Information Systems
(MIS)

Information system at the management level of an

organization that serves the functions of planning,
controlling, and decision making by providing routine
summary and exception reports.

TYPE: Management-level
INPUTS: high volume data
PROCESSING: simple models
OUTPUTS: summary reports
USERS: middle managers
DECISION-MAKING: structured to semi-structured
EXAMPLE: annual budgeting
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Characteristics of Management information
Systems
1. MIS support structured decisions at the
operational and management control levels.
However, they are also useful for planning
purposes of senior management staff.
2. MIS are generally reporting and control oriented.
They are designed to report on existing operations
and therefore to help provide day-to-day control of
operations.
3. MIS rely an existing corporate data-and data flows.
4. MIS have little analytical capability.
5. MIS generally aid in decision making using past
and present data.
6. MIS are relatively inflexible.
7. MIS have an internal rather than an external 16
 Executive Support Systems (ESS)

Information system at the strategic level of an

organization that address unstructured decision
making through advanced graphics and
communications.
TYPE: Strategic level
INPUTS: aggregate data; internal and external
PROCESSING: interactive
OUTPUTS: projections
USERS: senior managers
DECISION-MAKING: highly unstructured

EXAMPLE: 5 year operating plan

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 Model of a Typical Executive Support
System
ESS
workstation

Menus
Graphics
Communications
Local processing

ESS Internal Data External Data

ESS
workstation
TPS/MIS Data Dow Jones workstation
Financial Data Gallup Poll
Office Systems Standard &
Modeling/ Poor's
Menus analysis Menus
Graphics Graphics
Communications Communications
Local processing Local processing
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 Major Types of Information Systems
TYPES OF SYSTEM S

Strate gic Le ve l Sys te ms

ESS 5-ye ar 5-ye ar 5-ye ar Profit M anpowe r
ope rating budge t s ale s tre nd planning planning
plan fore cas ting fore cas ting

M anage me nt-Le ve l Sys te ms

Sale s Inve ntory Annual Capital Re location
M IS
manage me nt Control budge ting Inve s tme nt analys is analys is
Pricing/profitability Contract cos t
DSS Sale s re gion Production Cos t
analys is analys is
analys is Sche duling analys is

Knowle dge -Le ve l Sys te ms

KWS Engine e ring Graphics M anage rial
work s tations work s tations work s tations
OAS Word Docume nt Ele ctronic
proce s s ing Imaging Cale ndars

Ope rational Le ve l Sys te ms

M achine control Se curitie s Payroll Compe ns ation
TPS trading
Orde r Track ing Plant s che duling Accounts payable Training & de ve lopme nt
Orde r proce s s ing M ate rial move me nt Cas h Accounts re ce ivable Employe e re cord k e e ping
control manage me nt

Sale s and
mark e ting
M anufacturing Finance Accounting Human
Re s ource s
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Relationship between different IS

ESS

MIS DSS

KWS/
TPS
OAS
TPS is a major producer of information for other systems 20
 Classification of IS
by Organizational Structure
Departmental Information Systems
Enterprise Information System
Inter-organizational Systems
NYCE
SABRE or APOLLO

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 Classification of IS
by Functional Area
The accounting information system
The finance information system
The manufacturing (operations, production)
information system
The marketing information system
The human resources information system

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 Sales & Marketing Systems
Systems that help the firm identify customers
for the firms products or services, develop
products and services to meet customers
needs, promote products and services, sell
the products and services, and provide
ongoing customer support.
EXAMPLES
System Description Organizational Level
Order processing Enter, process, and track orders Operational
Market analysis Identify customers and markets using Knowledge
data on demographics, markets,
consumer behavior, and trends
Pricing analysis Determine prices for products Management
and services

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 Manufacturing and Production Systems
Systems that deal with the planning,
development, and production of
products and services and with
controlling the flow of production.
Examples
System Description Organizational Level
Machine control Control the actions of machines Operational
and equipment
Computer-aided design (CAD) Design new products using Knowledge
the computer
Production planning Decide when and how many Management
products should be produced
Facilities location Decide where to locate new Strategic
production facilities

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 Finance and Accounting Systems

Systems that keep track of the firms

financial assets and fund flows.
Examples
System Description Organizational Level
Accounts receivable Track money owed the firm Operational
Portfolio analysis Design the firm's portfolio of investments Knowledge
Budgeting Prepare short-term budgets Management
Profit planning Plan long-term profits Strategic

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 Human Resources Systems
Systems that maintain employee
records; Track employee skills, job
performance, and training; And support
planning for employee compensation
and career development.
Examples
System Description Organizational Level
Training and development Track employae training, skills, Operational
and performance appraisals
Career pathing Design career paths for employees Knowledge
Compensation analysis Monitor the range and distribution Management
ofemployee wages, salaries, and bene6cs
Human resources planning Plan the long-term labor force needs Strategic
of the organization

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 Examples of Business Processes

Functional Area Business Process

Manufacturing and production Assembling the product
Checking for quality
Producing bills of materials
Sales and marketing Identifying customers
Making customers aware of the product
Selling the product
Finance and accounting paying creditors
Creating financial statements
Managing cash accounts
Human resources Hiring employees
Evaluating employees' job performance
Enrolling employees in benefits plans

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The Order Fulfillment Process (F 2.12)

Generate Submit
Sales
Order Order

Accounting Check Approve Generate

Credit Credit Invoice

Manufact uring Assemble Ship

& P roduct ion Product Product

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 Customer Relationship Management

Customer relationship management

Business and technology discipline to
coordinate alt of the business processes
Sales
T elephone sales for dealing with customers.
W eb sales
Field sales
Ret ail sales
Unified view of customers
Market ing
Campaign dat a
Consistent message to customers
Cont ent End-to-end customer care
Dat a analysis Long-term customer relationships
Cust omer Service Identification of best customers
Call cent er dat a
W eb self service dat a
Field service dat a
W ireless dat a

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 Customer Relationship Management
Supply chain management Integration of
supplier, distributor, and customer logistics
requirements into one cohesive process.
Supply chain Network of facilities for
procuring materials, transforming raw
materials into finished products,' and
distributing finished produce to customers.

Capacity, inventory level, delivery schedule, payment terms

Retail
Supplier Manufacturer Distributor Customer
Outlet

Orders, return requests, repair and service requests, payments

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HOW INFORMATION SYSTEMS CAN
FACILITATE SUPPLY CHAIN
MANAGEMENT
Information systems can help participants in
the supply chain:
Decide when and what to produce, store, and
move
Rapidly communicate orders Track the status of
orders
Check inventory availability and monitor
inventory levels
Track shipments
Plan production based on actual customer demand
Rapidly communicate changes in product design31
Enterprise Systems

Firm wide information systems that

integrate key business processes so
that information can flow freely
between different parts of the firm.

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 Traditional View of Systems (F. 2.15)

Business Functions

Marketing and Human

Manufacturing Accounting Finance
Sales Resources
Organizational

Organizational
Boundaries

Boundaries
Business Business Business Business Business
Processes Processes Processes Processes Processes
Human
Manufacturing Accounting Finance Marketing and
Resources
Systems Systems Systems Sales Systems Systems

Vendors Information Systems Customers

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 Enterprise Systems (F. 2.16)

Manufacturing Accounting

Enterprise System
Organizational

Organizational
Business Process
Boundaries

Boundaries
Business Process
Vendors Business Process Customers
Enterprise-wide business
processes

Human
Sales and Finance
Resources
Marketing
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Benefits and Challenges of
Enterprise Systems
Benefits
Firm structure and organization: One Organization
Management: Firm wide Knowledge-based
Management Processes
Technology: Unified Platform
Business: More Efficient Operations and Customer-
driven Business Processes
Challenges
Daunting Implementation
High Up-front Costs and Future Benefits
Inflexibility

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Extended Enterprises

Extended Enterprises: Networks linking

systems of multiple firms in an industry. Also
called extended enterprises.
Vertical industrial networks Networks for
integrating the operations of a firm with its
suppliers.
Horizontal industrial networks Networks
for linking firms across an entire industry.

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 Industrial Networks (F. 2.17)

Horizontal industrial network

Firms Firm Firm Firm Firm
in a single 1 2 3 4
industry
Firm value chains and enterprise systems
Industry
value
Industrial Networks chain

Firms in Firm Supplie Supplie Supplie

complementary 1
r r r
1 2 3
business
Vertical industrial network

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