Chapter 2: Information Systems in the Enterprise

Computer-based Information System

An Information System is an organized combination of people, hardware, software, communication networks and the data resources that collects, transforms and disseminates information in a organization.

IS Vs IT
INFORMATION TECHNOLOGY Hardware Software Databases are used to build INFORMATION SYSTEMS

Payroll System

Inventory System

Networks
Other related components

Marketing System

Customer Service System

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Expanding Roles of IS
1. Data Processing: 1950s-1960s 2. Management Reporting: 1960s-1970s

3. Decision support: 1970s-1980s

4. Strategic and End User Support: 1980s-1990s 5. Global Internetworking: 1990s-2000s

KINDS OF INFORMATION SYSTEMS

Organizational Hierarchy
Organizational Levels Information Systems

Classification of IS
Information Systems

Operations Support System

Management Support System

Transaction processing systems

Process control systems

Office automation systems

Management information systems

Decision support systems

Executive information systems

KINDS OF INFORMATION SYSTEMS

KIND OF SYSTEM
STRATEGIC LEVEL

GROUPS SERVED
SENIOR MANAGERS

MANAGEMENT LEVEL

MIDDLE MANAGERS

KNOWLEDGE LEVEL

KNOWLEDGE & DATA WORKERS OPERATIONAL MANAGERS

MANUFACTURING FINANCE & ENGINEERING ACCOUNTING HUMAN RESOURCES

OPERATIONAL LEVEL
SALES & MARKETING

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, decisionmaking, and administrative activities of middle managers. e.g. MIS, DSS Strategic-level systems support long-range planning activities of senior management. e.g. ESS 8

Four General Kinds of IS

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
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EXAMPLE: payroll, accounts payable

A Symbolic Representation for a payroll TPS

Employee data (various departments) To general ledger: wages and salaries

Payroll System

Management Reports Government documents

Payroll master file

Employee checks 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

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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
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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 18

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 workstation

Internal Data TPS/MIS Data Financial Data Office Systems Modeling/ analysis

External Data Dow Jones Gallup Poll Standard & Poor's

ESS workstation

Menus Graphics Communications Local processing

Menus Graphics Communications Local processing

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Major Types of Information Systems

TYPES OF SYSTEM S ESS Strate gic Le ve l Sys te ms 5-ye ar 5-ye ar 5-ye ar Profit ope rating budge t s ale s tre nd planning plan fore cas ting fore cas ting M anpowe r planning

M IS DSS

Sale s manage me nt Sale s re gion analys is

Inve ntory Control Production Sche duling

M anage me nt-Le ve l Sys te ms Capital Annual Re location Inve s tme nt analys is analys is budge ting Cos t analys is Pricing/profitability Contract cos t analys is analys is

KWS OAS

Engine e ring work s tations Word proce s s ing

Knowle dge -Le ve l Sys te ms Graphics work s tations Docume nt Imaging

M anage rial work s tations Ele ctronic Cale ndars

M achine control TPS Orde r Track ing Plant s che duling

Ope rational Le ve l Sys te ms Se curitie s Payroll trading Accounts payable

Compe ns ation Training & de ve lopme nt

Orde r proce s s ing M ate rial move me nt Cas h manage me nt control Sale s and mark e ting M anufacturing Finance

Accounts re ce ivable Employe e re cord k e e ping

Accounting

Human Re s ource s

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Relationship between different IS

ESS

MIS

DSS

KWS/ OAS

TPS
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TPS is a major producer of information for other systems

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 Description Enter, process, and track orders Identify customers and markets using data on demographics, markets, consumer behavior, and trends Determine prices for products and services Organizational Level Operational Knowledge

System Order processing Market analysis

Pricing analysis

Management

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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.
Organizational Level Operational Knowledge Management Strategic

Examples System Description Machine control Control the actions of machines and equipment Computer-aided design (CAD) Design new products using the computer Production planning Decide when and how many products should be produced Facilities location Decide where to locate new production facilities

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Finance and Accounting Systems

Systems that keep track of the firms financial assets and fund flows.
Organizational Level Operational Knowledge Management Strategic

Examples System Description Accounts receivable Track money owed the firm Portfolio analysis Design the firm's portfolio of investments Budgeting Prepare short-term budgets Profit planning Plan long-term profits

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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.
Organizational Level Operational Knowledge Management Strategic

Examples System Description Training and development Track employae training, skills, and performance appraisals Career pathing Design career paths for employees Compensation analysis Monitor the range and distribution ofemployee wages, salaries, and bene6cs Human resources planning Plan the long-term labor force needs 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)

Sales

Generate Order

Submit Order

Accounting

Check Credit

Approve Credit

Generate Invoice

Manufact uring & P roduct ion

Assemble Product

Ship Product

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Customer Relationship Management

Sales T elephone sales W eb sales Field sales Ret ail sales Market ing Campaign dat a Cont ent Dat a analysis

Customer relationship management Business and technology discipline to coordinate alt of the business processes for dealing with customers.
Unified view of customers Consistent message to customers End-to-end customer care Long-term customer relationships Identification of best customers

Cust omer Service 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 Supplier Manufacturer Distributor Retail Outlet Customer

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 33 Rapidly communicate changes in product design

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

Vendors

Organizational Boundaries

Organizational Boundaries

Information Systems

Customers

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Enterprise Systems (F. 2.16)

Manufacturing Enterprise System

Organizational Boundaries

Accounting

Vendors

Business Process Business Process Business Process Enterprise-wide business processes

Human Resources

Organizational Boundaries

Customers

Sales and Marketing

Finance
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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 Customerdriven Business Processes
Daunting Implementation High Up-front Costs and Future Benefits Inflexibility
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Challenges

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 in a single industry
Firm 1 Firm 2 Firm 3 Firm 4

Firm value chains and enterprise systems Industrial Networks

Industry value chain

Firms in complementary business

Firm 1

Supplie r 1

Supplie r 2

Supplie r 3

Vertical industrial network

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