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Chapter 6anew

Chapter 6anew

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Chapter 6
Transaction Processing, Functional Applications, and IntegrationGoals of the Chapter
This chapter describes the facts and issues related to transaction processing systems, innovative systems, andfunctional systems in an organization. It discusses how IT supports customer relationship management, as well ashow the various support systems are integrated in an organization. Functional areas and business processes arerelated to the value chain and the close linkage between functional areas and IT are explored. The benefits and issuesof integrating functional information systems are covered.
An Overview
Section 6.1 -
 Functional Information Systems
– This section defines functional information systems that are designedto handle traditional functional areas, as well as the major characteristics of the systems.Section 6.2 -
Transaction Processing Information Systems
– This section covers the definition, objectives, activities,and methods of transaction processing systems (TPS). Client/server and Web-based TPS are discussed, includingOLAP, object oriented transaction processing, and Web-based transaction processing. Some typical tasks areexplained, and transaction processing software is introduced.Section 6.3 – 
Managing Production/Operations and Logistics
Systems to handle production and operationsmanagement (POM), logistics, inventory management, MRP, and project management activities are explored,including the decisions that must be made by each functional area.Section 6.4 – 
Managing Marketing and Sales Systems
This section explores channel systems, allowing for marketing and distribution improvements, and the tracking and analysis of sales trends and profitability.Section 6.5 – 
Managing the Accounting and Finance Systems
– These systems handle the money that flows into,through, and out from the organization. This section also looks at financial and economic forecasting, budgeting, ande-commerce in terms of management and software applications. Control and auditing are explored.Section 6.6 – 
Managing Human Resources Systems
- Systems developed to handle recruiting, training, performanceevaluation, payroll, and benefits are examined. Personnel planning and labor-management relations are visited.Section 6.7 -
 Integrating Functional Information Systems
– Reasons for integration of functional information systemsare proposed, and front- and back-office integration are discussed. Managerial and ethical issues are presented.
Questions for Review1.
What is a functional information system?A functional information system is a system that supports a functional area in an organization. Functional areas likeaccounting, finance, general management, human resources, etc. are associated with support activities that includethe firm's infrastructure, human resource management, technology development, and procurement. Other functionalareas like material management, operations, marketing, and services are associated with primary activities such as:inbound logistics, operations, outbound logistics, marketing and sales, and service. The hierarchical organizationalstructure is built on such functional areas.
2.
List the major characteristics of a functional information system.
 
The four major characteristics of functional information systems are: (Why change to letters instead of bullets or numbers?)1. A functional information system is comprised of several smaller information systems (or modules) that supportspecific activities performed by each functional area. For example, computerized shipping and inventory controlssupport the logical system at DHMC.2. The specific IS applications in any functional area can be integrated to form a coherent, department-basedfunctional system, or they can be completely independent. Many of the applications can and should be integratedacross departmental lines to match a business process. Several applications in the information system of DHMC wereintegrated with the inventory and the purchasing systems in the opening case.3. Functional information systems interface with each other to form an organizational or enterprise-wide informationsystem. The greater the degree of integration across functional lines, the greater the potential information systemshave for supporting the company cost-effectively and for helping to identify significant strategic initiatives. Some of these systems interface with the environment, like governmental agencies, suppliers, customers, and evencompetitors.4. Functional information systems can be viewed as supporting three traditional ways of looking at an organization'sactivities: the operational, managerial, and strategic levels of an organization.
3.
What are the objectives of a TPS?The primary objective of TPS is to provide all the information required by law and/or the organizational policies tokeep a business running properly and efficiently.Some specific objectives include the following: supporting the efficient use of resources and the attainment of organizational goals, providing timely documents and reports, increasing the competitive advantage of theorganization, providing data necessary for tactical and strategic systems such as DSS applications, assuring accuracyand integrity of data and information, and safeguarding assets and security of information. This (this what?) makesTPSs the most likely candidates for reengineering, which will usually yield the most tangible benefits of ITinvestments.
4.
List the major characteristics of a TPS.The major characteristics of a TPS include: (Use either bullets or numbers, not letters.)1. Large amounts of data are collected, stored, processed, and used in other types of information systems.2. The sources of data are mostly internal, and the output is intended mainly for an internal audience.3. It processes information on a regular and repetitive basis.4. A large amount of storage capacity is required.5. High processing speed is required due to the high volume.6. Historical orientation of information is prevalent.7. Input and output data conform to structured formats.8. High levels of detail are featured, especially in input data but often in output as well.9. Low computation complexity is usually evident.10. High levels of accuracy, data integrity, and security are required.11. A high level of reliability is required; the flow of TPS data is mission critical.12. Inquiry processing is a must.
5.
Distinguish between batch and online TPS.In batch processing, a firm collects transactions as they occur, placing them in groups or latches. The system then prepares and processes the batches periodically. (For example, cookies are individually prepared from the dough and
 
 baked in a batch. In online processing, data is processed as soon as a transaction occurs. For example, in any store,once merchandise is sold, the inventory system is notified immediately.
6.
Explain how the Web enables mass customization.Mass customization refers to a situation in which a company produces a large volume of products (as in mass production), but they also customize the products according to the specifications made by individual customers. TheWeb enables mass customization by allowing customers to pick and choose the products they want customized andalso to correspond with the company's sales force.
7.
Describe MRP.Material requirements planning (MRP) systems facilitate planning for acquiring or producing parts, subassemblies,and materials in a manufacturing environment. MRP deals only with production scheduling and inventories. MRP iscomputerized because of the complex interrelationship among products and their components and because of theneed to alter plans each time a delivery date or an order quantity is changed. For example, if a company makes threetypes of chairs that all use the same screws, MRP maintains the demand for screws along with the shipment scheduleof the chairs.
8.
Describe MRP II.Manufacturing resource planning (MRP II) systems are integrated applications that connect regular MRP with other functional areas. In addition to the outputs of MRP, MRP II includes the costs of parts and the cash flow needed to pay for them. It also estimates the cost of labor, tools, equipment repair, and energy, producing a computerized,detailed budget.
9.
Describe VMI.Vendor managed inventory systems are used to allow the suppliers to monitor supply levels and to place reorders asnecessary. These systems are employed frequently in grocery markets and at large discounters like Wal-Mart. Thesesystems free the retailer from the time consuming work of inventory maintenance, and places the responsibility for the proper maintenance of supply levels on the suppliers.
10.
Define CIM and list its major benefits.Computer integrated manufacturing (CIM) is a concept or philosophy on the implementation of various integratedcomputer systems in factory automation.Three basic goals (and benefits) of CIM are:· simplification of all manufacturing technologies and techniques· automation of as many of the manufacturing processes as possible by integrating many information technologies,including flexible-manufacturing systems (FMS), JIT, MRP, CAD, CAE, and Group Technology (GT)· Integration and coordination via computer hardware and software of all aspects of design, manufacturing, andrelated functions
11.
Describe PLM and list its benefits.Product lifecycle management
 
is a strategy that enables manufacturers to control and share product-relatedinformation as part of product design and development.
12.
Define channel systems.Channel systems are all the systems that are involved in the process of getting a product or service to customers andmeeting all their needs. They can link and transform marketing, sales, supply, and other activities and systems.Added market power comes from the integration of channel systems with the corporate functional areas.

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