Professional Documents
Culture Documents
Lecture 1
As a consumer, you have instant access to millions of pieces of data. With a few
clicks of the mouse button, you can find anything from current stock prices and video
clips of current movies. You can get product descriptions, pictures, and prices from
thousands of companies across India and around the world. Trying to sell services and
products? You can purchase demographic, economic, consumer buying pattern, and
market-analysis data. Your firm will have internal financial, marketing, production,
and employee data for past years. This tremendous amount of data provides
opportunities to managers and consumers who know how to obtain it and analyze it to
make better decisions.
Today information systems are everywhere; from supermarkets to airline reservations,
libraries and banking operations they have become part of our daily lives.
The first step in learning how to apply information technology to solve problems is to
get a broader picture of what is meant by the term information system. Computers are
only one component of an information system. A computer information system (CIS)
consists of related components like hardware, software, people, procedures, and
collections of data.
The goal of Information System is to enable managers to make better decisions by
providing quality information.
The term information technology (IT) represents the various types of hardware and
software used in an information system, including computers and networking
equipment.
The physical equipment used in computing is called hardware.
The set of instructions that controls the hardware is known as software.
In the early days of computers, the people directly involved in are tended to be
programmers, design analysts, and a few external users. Today, almost everyone in
the firm is involved with the information system.
Procedures are instructions that help people use the systems. They include items such
as user manuals, documentation, and procedures to ensure that backups are made
regularly.
Databases are collections of related data that can be retrieved easily and processed by
the computers.
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• Technology: Major concepts, developments, and Management issues in IT –
software, hardware, network, database mgmt etc…
• Applications: Using emails for fast communication, internet, intranet, & extranet
to gather the information, for operations and management.
• Development: How end users or information specialists develop information
systems solutions to business problems using fundamental problem – solving and
development methodologies.
• Management: Effectively managing the resources and business strategies involved
in using IT at end user, enterprise and global level of business.
Characteristics of Information
Now, let us discuss about the characteristics of good information
• Timeliness: Information must reach the user in a timely manner, just when it is
needed; not too early, because by the time it is used it would be out-of-date; not too
late because the user will not be able to incorporate it into his/her decision-making.
• Conciseness: Information should always contain the minimum amount of detail that
is appropriate for the user. Too much detail causes information overload.
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Some people prefer tabular information, whereas others may need it in a graphical
form. Also the use of colors enhances the understandability of what is presented.
• Relevant: It pertains to the particular problem. What data is relevant depends on the
decision-making model used. E.g. university admissions officials may choose to
consider the results of some high-school test irrelevant, if they believe that it does not
improve the chances of some applicant later becoming a successful student.
• Complete: All the relevant parts are included. E.g. marketing data about household
incomes may lead to bad decisions, if not accompanied by consumption habits of the
target population.
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Lecture 2
What is a System?
A system is a group of interrelated components working together toward a common
goal by accepting inputs and producing outputs in an organized transformation
process. System will have the following basic interacting components (functions):
1. Input
2. Processing
3. Output
4. Feedback
5. Control
We talk about the input, processing, output and feedback processes. Most important is
the feedback process; unfortunately it's the one most often overlooked. Just as in the
triangle above, the hardware (input and output) and the software (processing) receive
the most attention. With those two alone, you have computer literacy. But if you don't
use the "persware" side of the triangle to complete the feedback loop, you don't
accomplish much. Add the "persware" angle with good feedback and you have the
beginnings of information literacy. An information system differs from other kinds of
systems in that its objective is to monitor/document the operations of some other
system, which we can call a target system. An information system cannot exist
without such a target system. For example, production activities would be the target
system for a production scheduling system, human resources in the business
operations would be the target system of a human resource information system, and so
on. It is important to recognise that within a vending machine there is a
component/sub-system that can be considered an information system. In some sense,
every reactive system will have a subsystem that can be considered an information
system whose objective is to monitor and control such a reactive system.
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Information Systems are more than computers. Using Information Systems effectively
requires an understanding of the management, organization, and information
technology for shaping the systems.
Management
Managers perceive business challenges in the environment; set the organizational
strategy for responding, allocate human and financial resources to achieve the strategy
and coordinate the work. Different levels of managers are:
Senior Managers: make long-range strategic decisions about products and services to
produce.
Middle Managers: Carry out the programs and plans of Senior Managers
Operational Managers: Responsible for monitoring the firm’s daily activities.
ORGANIZATION TECHNOLOGY
INFORMA
TION
SYSTEMS
MANAGEMENT
INFORMATION SYSTEMS
Organization
The key elements of an organization are its people, structure, and operating
procedures, politics, and culture. Major functions of an organization are:
Function Purpose
Sales and marketing Selling the organization’s products and services
Manufacturing Producing products and services
Finance Managing the organization’s financial assets (cash,
stocks, bonds, etc.)
Accounting Maintaining the organization’s financial records
(receipts, paychecks, etc) accounting for flow of funds.
Human Resources Attracting, developing, and maintaining the
organization’s labor force; maintaining employee
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records.
Technology
Computer Based Information Systems (CBIS) utilize the following IT technologies:
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• A major source of information and support needed to promote effective
decision making by managers.
• An important ingredient in developing competitive products and services that
give an organization a strategic advantage in the global marketplace.
• A major part of the resources of an enterprise and its cost of doing business,
thus posing a major resource management challenges.
• A vital, dynamic, and challenging career opportunity for millions of men and
women.
Lecture – 3
Components of an IS
In an organization, information systems consist of the following components. These
components will formulate a system, which will help us to gather the required
information for making decision in various levels of management.
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• Data Resources:
o Data vs. Information
1. Data:
Raw facts, observations, business transactions Objective measurements of the
attributes (characteristics) of entities (people, places, things, events, etc.)
Attributes can be last name, first name, gender, etc. for an entity of "people."
2. Information:
Data that have been converted into a meaningful and useful context for specific end
users.
Processed data placed in a context that gives it value for specific end users.
1. Its form is aggregated, manipulated, and organized.
2. Its content is analyzed and evaluated.
3. It is placed in a proper context for a human user.
• Network Resources:
o Communications media
o Communications processors
o Network access & control software
Types of Transactions
Note that the transactions can be internal or external.
When a department orders office supplies from the purchasing department, an
internal transaction occurs, when a customer places an order for a product, an
external transaction occurs.
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• Internal Transactions: Those transactions, which are internal to the
company and are related with the internal working of any organization. For example
Recruitment Policy, Promotion Policy, Production policy etc
• External Transactions: Those transactions, which are external to the
organization and are related with the external sources, are regarded as External
Transaction. For example sales, purchase etc.
Features of TPS
1. A TPS supports different tasks by imposing a set of rules and guidelines that
specify how to record, process, and store a given transaction. There are many uses of
transaction processing systems in our everyday lives, such as when we make a
purchase at retail store, deposit or withdraw money at a bank, or register for classes at
a university. Almost all organizations, regardless of the industry in which they
operate, have a manual or automated TPS
2. A TPS is the data lifeline for a company because it is the source of data for other
information systems, such as MIS and DSS (Decision Support Systems). Hence, if the
TPS shuts down, the consequences can be serious for the organization
3. A TPS is also the main link between the organization and external entities, such as
customers, suppliers, distributors, and regulatory agencies
4. TPS exist for the various functional areas in an organization, such as finance,
accounting, manufacturing, production, human resources, marketing quality control,
engineering, and research and development.
a. Data Entry
To be processed, transaction data must first be entered into the system. There
are a number of input devices for entering data, including the keyboard and the
mouse. Documents generated at the point where a transaction occurs are called source
documents and become input data for the system. For example, when a customer
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returns an item at a store, the sales receipt becomes the source document for the
transaction "return item for refund".
The use of automated methods of data entry is known as source data
automation.
b. Data Capture
We could capture transaction data as close as possible to the source that
generates the data. Salespersons capture data that rarely changes by prerecording it on
machine-readable media, or by storing it on the computer system.
c. Data Validation
There are two steps in validation: error detection and error correction,
Error detection is performed by one set of control mechanism, and error correction is
done by another.
Some commonly used error detection procedures are checking the data for
appropriate font (text, numbers, etc), checking for aberrations (abnormalities) (values
that are too low or too high), and checking for missing data, invalid data, and
inconsistent data. Missing data refers to fields that are missing a mandated data value.
For example, if the number of hours worked by a part-time employee is
missing on a payroll form; that is a missing-data error.
Invalid data is data that is outside the range
For example, if the number of hours worked by a part-time employee is 72
hours per week instead of the 1120 hours, then we have invalid data
Inconsistent data means that the same data item assumes different values in
different places without a valid reason.
For example, if payroll records show that an employee worked 25 hours per
day.
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• Online transaction processing (OLTP) is the almost instantaneous
processing of data. The term online means that the input device is directly
linked to the TPS and therefore the data are processed as soon as it is entered
into the system. Input device may be at a remote location and be linked to the
system by networks or by telecommunications systems. Some examples of
online transaction processing are ATM transactions, student registration for
classes, flight reservations.
e. Data Storage
Processed data must be carefully and properly stored for future use. Data
storage is a critical consideration-for many organizations because the value and
usefulness of data diminish if data are not properly stored.
The next step in the processing of a transaction is to output the results of the
transaction to the decision maker.
f. Output Generation
Once data has been input, validated, processed, revalidated and stored, the
output can be communicated to decision makers in two ways:
• Documents and reports
• Forms: screens or panels.
Documents are a popular output method. They can be processed further, either
to generate additional information or to present the same information in a different
format. Some examples of documents are invoices, paychecks, purchase, invoices.,
sales receipts, and job orders
What is the difference between documents and reports? A document is
usually a record of one transaction, whereas a report is a summary of two or more
transactions. For example, the manager of a retail store may receive an invoice (i.e., a
document) from a supplier indicating the quantity and type of each item ordered and
the total cost of the order. A report, on the other hand, may summarize all the invoices
from a given supplier.
Computer output need not always be presented in hard-copy form (such as
reports, documents, and printouts), but can also appear on computer screens and
panels. Such soft-copy presentations are known as forms
g. Query Support
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The last step in processing a transaction is querying the system. Query
facilities allow users to process data and information that may otherwise not be
readily available. For example, a sales manager may query the system for the number
of damaged items in a given store
Many transaction-processing systems allow you to use the Internet, intranets,
extranets, and web browsers or database management query languages to make
inquiries and receive responses concerning the results of transaction processing
activity. Typically, responses are displayed in a variety of pre-specified formats or
screens. Examples of queries include:
• Checking on the status of a sales order
• Checking on the balance in an account
• Checking on the amount of stock in inventory
Transaction processing systems are responsible for capturing, storing, and providing
access to the basic data of the organization. The goal is to capture the transaction data
as soon as possible. Common collection methods include
• Point-of sale services
• Process control
• Electronic data interchange
• Electronic commerce websites.
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Lecture 4
People have relied on information systems to communicate with each other using a
variety of physical devices (Hardware), Information Processing Instructions &
Procedures (Software), Communication Channels (Networks) & Store Data (Data
Resources).
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2. Process Control System
• Operation support system also makes routine decisions that control
operational processes.
• E.g. of automation automatic inventory reorder decisions & production
control decisions.
• This includes a category of information systems called process control
systems, in which decisions adjusting a physical production processes
are automatically made by computers.
E.g. A petroleum refiner uses electronic sensors linked to computer, to
continually monitor chemical processes. The computers monitor a
chemical process, capture & process data detected by sensors & make
instant (Real Time) adjustments to appropriate refinery processes.
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Lecture 6
People have relied on information systems to communicate with each other using a
variety of physical devices (Hardware), Information Processing Instructions &
Procedures (Software), Communication Channels (Networks) & Store Data (Data
Resources).
INFORMATION
SYSTEMS
Support of
Support of Managerial
Business OPERATIONS MANAGEMENT
SUPPORT SYSTEMS SUPPORT SYSTEMS Decision
Operations Making
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• They do not emphasize on producing specific information products that can
best be used by managers.
• Processes
o the sequence of events
• Data
o the information that is acted upon
• Applications
o the components that implement processes to manage data
• Technology
o how we implement the applications
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computer centers for immediate (Real Time) or nightly
(Batch) Processing.
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Lecture 7
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• Obtain data about business environment from external sources.
• Information products provided to managers include displays and
reports that can be furnished on demand, periodically according to a
predetermined schedule, or whenever exceptional conditions occur.
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Lecture 8
Information System:
An information system can be any organized combination of people, hardware,
software, communications networks and data resources that collects, transforms and
disseminates information in an organization.
Strategic Management:
Typically, a board of directors and an executive committee of the CEO and top
executives develop overall organizational goals, strategies, policies, and objectives as
part of a strategic planning process. They also monitor the strategic performance of an
organization and its overall direction in the political, economic and competitive
business environment.
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Lecture 9
Competitive Forces
Bargaining Bargaining Rivalry of Threat Threat of
Power of Power of Competitors of New Substitutes
Customers Suppliers Entrants
Cost
Leadership
Differentiation
C
O
M
P
E Innovation
T
I
T
I
V
E Growth
S
T
R
A
T Alliance
E
G
I
E
S
Other Strategies
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The figure illustrates that business can counter the threats of competitive forces that
they face by implementing five basic competitive strategies.
Innovation Strategy: Finding new ways of doing business. This may involve
the development of unique products and services, or entry into unique markets
or market niches. It may also involve radical changes to the business processes
for producing or distributing products and services that are so different from
the way the business has been conducted that they alter the fundamental
structure of an industry.
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Lecture 10
The following table gives a summary of how information technology can be used to
implement the five basic competitive strategies. Many companies are using Internet
technologies as the foundation for such strategies.
Basic Strategies in the Business Use of Information Technology
Lower Costs
Use IT to substantially reduce the cost of business processes.
Use IT to lower the costs of customers or suppliers.
Differentiate
Develop new IT features to differentiate products and services.
Use IT features to reduce the differentiation advantages of competitors.
Use IT features to focus products and services at selected market niches.
Innovate
Create new products and services that include IT components.
Develop unique new markets or market niches with the help of IT.
Make radical changes to business processes with IT that dramatically cut
costs, improve quality, efficiency or customer service or shorten time to
market.
Promote Growth
Use IT to manage regional and global business expansion.
Use IT to diversify and integrate into other products and services.
Develop Alliances
Use IT to create virtual organizations of business partners.
Develop inter-enterprise information systems linked by the Internet and
extranets that support strategic business relationships with customers,
suppliers, subcontractors and others.
Other competitive strategies
There are many other competitive strategies in addition to the five basic strategies;
they can also be implemented with information technology. These are:
Locking in customers or suppliers
Building switching costs
Raising barriers to entry
Leveraging investment in information technology.
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Lecture 11
Strategic
Planning
Management Information
Control Tactical Planning
System
Helps to
Operational
Control Implement Pure
and Mixed
Strategies.
Survival,
Through Strategy Breakthrough
Overall
Company
Evaluates the Results
Growth,
and Exercise Control
Product,
Revise Strategies
Marketing
Strategies.
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Lecture 12
steps/activities which are undertaken by the firm and are strategically relevant for
meeting customer demand and in respect of which the firm may potentially have an
edge over its competitors. Thus the internal factors of key importance are sought to be
linked with the chain of value activities through systematic identification of the
discrete activities as potential sources of strength and weaknesses. The chain consists
of a series of activities that create and build value. They culminate in the total value
There are, for most business enterprises, two broad categories of value activities:
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Lecture 13
Primary Activities
Based on technological and strategic distinctness, the Primary Activities are generally
to suppliers etc.
testing etc.
Targeted Marketing, online sales promotion, channel selection and pricing etc.
Management.
Support Activities
Supporting activities which provide the infrastructure for primary activities are also
follows:
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1. Procurement of Resources: - This activity is responsible for all purchasing of
goods, services and materials. The aim is to secure the lowest possible price
for purchases of the highest possible quality. They will be responsible for
Suppliers.
developments.
and rewards and remuneration. The mission and objectives of the organization
The Value Chain Analysis helps in achieving competitive advantage by the firm over
its competitors and delivering products and services of greater value to its customers.
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Lecture 14
The MIS goals and objectives will consider managemnent philosophy , policy
constraints , business risk , internal and external enviroment of the organisation and
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the buisness . The goals and the objectives of the MIS would be so stated that they
can be measured .
The designer has to take a number of strategic decisions for the achievement of the
MIS goals and obejectives . They are :
a) Development strateg
b) System develelopment strateg
c) Resoureces for the system development
d) Manpower composition
The architecture of the MIS plan provides a system and subsystem structure and their
input , output and linkages . It also provides a way to handle the systems or subsystem
by way of simplification , coupling and decoupling of susbsystems . It spells out in
detail the subsystems from the data entry to processing , analysis to modelling , and
storage to printing .
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6. Ascertainng the class of information
The design of the MIS should consider the class of information as a whole and
provide suitable information system architecture to generate the information for
various users in the organisation . Let us now proceed to ascertain the information
needs of each class .
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Lecture 15
Knowledge – The trends in sales , production technology . The devations from the
budgets , targets , norms etc . Competitors information , industry and business
information plan performance and target; and its analysis .
LECTURE 16
Business Planning Systems:
The Business Systems Planning offering defines and plans the applications and
technical architecture within an enterprise.
•Its focus on data and especially on processes was an entirely new way to view the
firm and to build systems; this process approach has since been copied by many
others.
•BSP is very comprehensive – and thus time consuming and expensive.
Understand the issues and opportunities with the current applications and
technical architecture
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Develop a future state and migration path for the technology that supports the
enterprise
Provide business executives with a direction and decision making framework
for IT capital expenditures
Provide IS with a blueprint for development
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LECTURE 17
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LECTURE 18
Threats to Computerized Information Systems
• Hardware failure
• Fire
• Software failure
• Electrical problem
• Personnel actions
• User errors
• Terminal access penetration
• Program changes
• Theft of data, services, equipment
• Telecommunications problems
TABLE 16.1
The above list points out some of the technical, organizational, and environmental
threats to
Information Systems. The weakest link in the chain is poor management of the
system. If managers at all levels do not make security and reliability their number one
priority, then the threats to an Information Systems can easily become real. With
distributed computing used extensively in network systems, you have more points of
entry, which can make attacking the system easy. The more people you have using the
system, the more potential for fraud and abuse of the information maintained in that
system. Yes, it’s hard to control everyone’s actions. That is why you have to make it
everybody’s business to protect the system. It is easy for people to say that they are
only one person and therefore they will not make much difference. Nevertheless, it
only takes one person to disable a system or destroy data. Let us see why.
Hackers, those who intentionally create havoc or do damage to a computer system,
have been around for a long time. Many companies don’t report hackers attempts to
enter their systems because they don’t want people to realize their systems are
vulnerable. That makes gathering real statistics about hacking attempts and successes
hard. It is a huge problem, though. Some hackers penetrate systems just to see if they
can. They use special computer systems that continually check for password files that
can be copied. Or they look for areas of the system that have been “left open,” so to
speak, which they can use to enter the system. Sometimes they don’t do any damage,
but far too often they destroy files, erase data, or steal data for their own use. Other
hackers attack systems because they don’t like the company. Password theft is the
easiest way for hackers to gain access to a system. No, they don’t come into your
office at night and look at the piece of paper in your desk drawer that has your
password written on it. They generally use specially written software programs that
can build various passwords to see if any of them will work. That’s why you should
use odd combinations of letters and numbers not easily associated with your name to
create your password. The longer the password, the harder it is to replicate.
Have you ever picked up a cold or the flu from another human? Probably. You then
spread it to two or three other people through touch or association. Those people
spread it to two or three more people each. Pretty soon it seems that everyone on
campus or at work is sick. That is how computer viruses are spread. You copy a file
from an infected source, use the file, and maybe send it to friends or associates. The
virus is now on your computer and spreads to files other than the original. You then
send the same or even a different file to a few friends and their computers are
infected. In March 1999 a virus called Melissa was written by a hacker and sent out
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via an email attachment. While the virus didn’t damage any computer files or data, it
severely hampered normal operations of many companies and Internet Service
Providers through the increased number of emails it generated. Here’s what CERT
(Computer Emergency Response Team) said about it: “Melissa was different from
other macro viruses because of the speed at which it spread. The first confirmed
reports of Melissa were received on Friday, March 26, 1999. By Monday, March 29,
it had reached more than 100,000 computers. Some sites had to take their mail
systems off-line. One site reported receiving 32,000 copies of mail messages
containing Melissa on their systems within 45 minutes.” Whether you use a stand-
alone PC or your computer is attached to a network, you’re just asking for trouble if
you don’t have antivirus software. This type of software checks every incoming file
for viruses. Not if, but when, you receive an infected file, the software alerts you to its
presence. You can choose to delete the file or “clean” it. Make sure you update your
antivirus software every 30 to 60 days because new viruses are constantly being
written and passed around.
LECTURE 19
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Every user must be concerned about potential destruction of the Information Systems
on which they rely. We can’t stress this point enough. Let us look at three concerns:
disasters, security, and errors. Natural disasters such as fires and earthquakes can
strike at any time. A spilled cup of coffee can also do some damage!
As the lesson points out, many companies create fault-tolerant systems that are used
as back-ups to help keep operations running if the main system should go out. These
back-up systems add to the overall cost of the system, but think about the losses if the
company’s system goes down. Add the cost of lost productivity by the employees to
the lost transactions and unhappy customers; you do the math. Just imagine what
would happen if an airline reservation system (a typical online transaction processing
system) went down. Have you ever called a company to place an order for a new
dress and it couldn’t take your order because the computer was down? Maybe you
called back later and maybe you didn’t.
Companies spend a lot of money on physical security such as locks on doors or fences
around supply depots. They need to do the same thing on their Information Systems.
Here the security is in the policies, procedures, and technical measures the company
uses to keep out unauthorized users or prevent physical damage to the hardware.
Surely you’ve heard the saying, “Garbage In, Garbage Out.” What may seem like a
simple error to you may not be to the customer. Let’s flip that around; what if you
wanted to fly to Dallas on March 15 and the reservation clerk booked you on a flight
for April 15? The potential for error exists all through the processing cycle. You must
be cognizant of these error points when designing and building a system, especially an
end-user developed system.
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LECTURE 20
Computer Hardware
Computer hardware is the physical part of a computer, including the digital circuitry,
as distinguished from the computer software that executes within the hardware. The
hardware of a computer is infrequently changed, in comparison with software and
data, which are "soft" in the sense that they are readily created, modified or erased on
the computer. Firmware is a special type of software that rarely, if ever, needs to be
changed and so is stored on hardware devices such as read-only memory (ROM)
where it is not readily changed (and is, therefore, "firm" rather than just "soft").
Most computer hardware is not seen by normal users. It is in embedded systems in
automobiles, microwave ovens, electrocardiograph machines, compact disc players,
and other devices. Personal computers, the computer hardware familiar to most
people, form only a small minority of computers (about 0.2% of all new computers
produced in 2003). See Market statistics.
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Inside a Custom Computer
The motherboard is the "heart" of the computer, through which all other components
interface.
Central processing unit (CPU) - Performs most of the calculations which enable a
computer to function.
Computer fan - Used to lower the temperature of the computer; a fan is almost always
attached to the CPU, and the computer case will generally have several fans to
maintain a constant airflow.
Random Access Memory (RAM) - Fast-access memory that is cleared when the
computer is powered-down. RAM attaches directly to the motherboard, and is used to
store programs that are currently running.
Firmware usually Basic Input-Output System (BIOS) based or in newer systems
Extensible Firmware Interface (EFI) compliant
Internal Buses - Connections to various internal components.
• PCI
• PCI-E
• USB
• HyperTransport
• CSI (expected in 2008)
• AGP (being phased out)
• VLB (outdated)
• ISA (outdated)
• EISA (outdated)
• MCA (outdated)
External Bus Controllers - used to connect to external peripherals, such as printers and
input devices. These ports may also be based upon expansion cards, attached to the
internal buses.
• parallel port
• serial port
• USB
• firewire
A case that holds a transformer, voltage control, and (usually) a cooling fan, and
supplies power to the rest of the computer.
Control hard disk, floppy disk, CD-ROM and other drives; the controllers sit directly
on the motherboard (on-board) or on expansion cards, such as a Disk array controller.
Produces the output for the computer display. This will either be built into the
motherboard or attached in its own separate slot (PCI, PCI-E or AGP), in the form of
a Graphics Card.
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• CD - the most common type of removable media, inexpensive but has a short
life-span.
• CD-ROM Drive
• CD Writer
• DVD
• DVD-ROM Drive
• DVD Writer
• DVD-RAM Drive
• Blu-ray
• BD-ROM Drive
• BD Writer
• Floppy disk (outdated)
• Zip drive (outdated)
• USB flash drive - AKA a Pen Drive, a portable form of storage.
• Tape drive - mainly for backup and long-term storage.
Hardware that keeps data inside the computer for later use and remains persistent
even when the computer has no power.
Hard disk - for medium-term storage of data.
Solid state drive - similar in use to a hard disk, but using more recent technology.
Disk array controller - a device to manage several hard disks, for example to achieve
performance improvement.
Enables the computer to output sound to audio devices, as well as accept input from a
microphone. Most modern computers have sound cards built-in to the motherboard,
though it is common for a user to install a separate sound card as an upgrade.
Connects the computer to the Internet and/or other computers.
Modem - for dial-up connections
Network card - for DSL/Cable internet, and/or connecting to other computers.
In addition, hardware can include external components of a computer system. The
following are either standard or very common.
Wheel Mouse
Includes various input and output devices, usually external to the computer system
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LECTURE 21
Input
• Text input devices
• Keyboard
• Pointing devices
• Mouse
• Trackball
• Gaming devices
• Joystick
• Gamepad
• Game controller
• Image, Video input devices
• Image scanner
• Webcam
• Audio input devices
• Microphone
Output
• Image, Video output devices
• Printer Peripheral device that produces a hard copy of a document.
• Monitor Device that displays a video signal, similar to a television, to
provide the user with information and an interface with which to interact.
• Audio output devices
• Speakers A device that converts analog audio signals into the
equivalent air vibrations in order to make audible sound.
• Headset A device similar in functionality to computer speakers used
mainly to not disturb others nearby.
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LECTURE 22
Capacity planning
41
LECTURE 23
Computer Software
Computer software consisting of programs, enables a computer to perform specific
tasks, as opposed to its physical components (hardware) which can only do the tasks
they are mechanically designed for. The term includes application software such as
word processors which perform productive tasks for users, system software such as
operating systems, which interface with hardware to run the necessary services for
user-interfaces and applications, and middleware which controls and co-ordinates
distributed systems.
The term "software" is sometimes used in a broader context to describe any electronic
media content which embodies expressions of ideas such as film, tapes, records, etc.[1]
System software helps run the computer hardware and computer system. It includes
operating systems, device drivers, diagnostic tools, servers, windowing systems,
utilities and more. The purpose of systems software is to insulate the applications
programmer as much as possible from the details of the particular computer complex
being used, especially memory and other hardware features, and such accessory
devices as communications, printers, readers, displays, keyboards, etc.
42
Application software allows end users to accomplish one or more specific (non-
computer related) tasks. Typical applications include industrial automation, business
software, educational software, medical software, databases, and computer games.
Businesses are probably the biggest users of application software, but almost every
field of human activity now uses some form of application software. It is used to
automate all sorts of functions.
Starting in the 1980s, application software has been sold in mass-produced packages
through retailers.
Users often see things differently than programmers. People who use modern general
purpose computers (as opposed to embedded systems, analog computers,
supercomputers, etc.) usually see three layers of software performing a variety of
tasks: platform, application, and user software.
Platform software
Platform includes the firmware, device drivers, an operating system, and typically a
graphical user interface which, in total, allow a user to interact with the computer and
its peripherals (associated equipment). Platform software often comes bundled with
the computer. On a PC you will usually have the ability to change the platform
software.
Application software
Application software or Applications are what most people think of when they think
of software. Typical examples include office suites and video games. Application
software is often purchased separately from computer hardware. Sometimes
applications are bundled with the computer, but that does not change the fact that they
run as independent applications. Applications are almost always independent
programs from the operating system, though they are often tailored for specific
platforms. Most users think of compilers, databases, and other "system software" as
applications.
User-written software
User software tailors systems to meet the users specific needs. User software include
spreadsheet templates, word processor macros, scientific simulations, and scripts for
graphics and animations. Even email filters are a kind of user software. Users create
43
this software themselves and often overlook how important it is. Depending on how
competently the user-written software has been integrated into purchased application
packages, many users may not be aware of the distinction between the purchased
packages, and what has been added by fellow co-workers.
44
LECTURE 24
Outsourcing
Outsourcing became part of the business lexicon during the 1980s and refers to the
delegation of non-core operations from internal production to an external entity
specializing in the management of that operation.
The process of outsourcing formalizes the description of the non-core operation into a
contractual relationship between the client and the supplier. Under the new
contractual agreement the supplier acquires the means of production which may
include people, processes, technology, intellectual property and assets. The structure
of the client organization changes as the client agrees to procure the services of the
outsourcer for the term of the contractual agreement.
The decision to outsource is often made in the interest of lowering firm costs,
redirecting or conserving energy directed at the competencies of a particular business,
or to make more efficient use of labor, capital, technology and resources.
Overview
Outsourcing involves the transfer of the management and/or day-to-day execution of
an entire business function to an external service provider.[1] The client organization
and the supplier enter into a contractual agreement that defines the transferred
services. Under the agreement the supplier acquires the means of production in the
form of a transfer of people, assets and other resources from the client. The client
agrees to procure the services from the supplier for the term of the contract. Business
segments typically outsourced include information technology, human resources,
facilities and real estate management, and accounting. Many companies also
outsource customer support and call center functions, manufacturing and engineering.
Outsourcing and offshoring are used interchangeably in public discourse despite
important technical differences. Outsourcing involves contracting with a supplier, this
may or may not involve some degree of offshoring. Offshoring is the transfer of an
organizational function to another country, regardless of whether the work is
outsourced or stays within the same corporation[2][3] . With the globalization of
outsourcing companies the distinction between outsourcing and offshoring will
become less clear over-time. This is evident in the increasing presence of Indian
outsourcing companies in the U.S. and UK. The globalization of outsourcing
operating models has resulted in new terms such as nearshoring and rightshoring that
reflect the changing mix of locations. This is seen in the opening of offices and
operations centers by Indian companies in the U.S. and UK.[4].[5]
Multisourcing refers to large (predominantly IT) outsourcing agreements. [6]
Multisourcing is a framework to enable different parts of the client business to be
sourced from different suppliers. This requires a governance model that
communicates strategy, clearly defines responsibility and has end-to-end integration.
[7]
LECTURE 25
Process of outsourcing
45
Deciding to outsource
The decision to outsource is taken at a strategic level and normally requires board
approval. Outsourcing is the divestiture of a business function involving the transfer
of people and the sale of assets to the Supplier. The process begins with the Client
identifying what is to be outsourced and building a business case to justify the
decision. Only once a high level business case has been established for the scope of
services will a search begin to choose an outsourcing partner.
Supplier shortlist
A short list of potential suppliers is drawn-up from companies that are capable of
providing the services and match the screening criteria. Screening can be enhanced by
issuing a Request for Information (RFI) to a wider audience.
Supplier proposals
A Request for Proposal(RFP) is issued to the shortlist suppliers requesting a proposal
and a price.
Supplier competition
A competition is held where the Client marks and scores the supplier proposals. This
may involve a number of face-to-face meetings to clarify the client requirements and
the supplier response. The suppliers will be qualified out until only a few remain. This
is known as down select in the industry. It is normal to go into the due diligence stage
with two suppliers to maintain the competition. Following due diligence the suppliers
submit a Best and Final Offer (BAFO) for the client to make the final down select
decision to one supplier. It is not unusual for two suppliers to go into competitive
negotiations.
Negotiations
The negotiations take the original RFP, the supplier proposals, BAFO submissions
and convert these into the contractual agreement between the Client and the Supplier.
This stage finalizes the documentation and the final pricing structure.
Contract finalization
At the heart of every outsourcing deal is a contractual agreement that defines how the
Client and the Supplier will work together. This is a legally binding document and is
core to the governance of the relationship. There are three significant dates that each
party signs up to the contract signature date, the effective date when the contract
terms become active and a service commencement date when the supplier will take
over the services.
Transition
The transition will begin from the effective date and normally run until four months
after service commencement date. This is the process for the staff transfer and the
take-on of services.
Transformation
The transformation is the term normally applied to the program of projects that are
included in the contract. These projects make the changes to the environment required
to meet the commitments in the proposal.
Ongoing service delivery
This is the execution of the agreement and lasts for the term of the contract.
Termination or renewal
Near the end of the contract term a decision will be made to terminate or renew the
contract. Termination may involve taking back services insourcing or the transfer of
services to another supplier.
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LECTURE 26
What is ERP?
Enterprise resource planning software, or ERP, doesn't live up to its acronym. Forget
about planning—it doesn't do much of that—and forget about resource, a throwaway
term. But remember the enterprise part. This is ERP's true ambition. It attempts to
integrate all departments and functions across a company onto a single computer
system that can serve all those different departments' particular needs. That is a tall
order, building a single software program that serves the needs of people in finance as
well as it does the people in human resources and in the warehouse. Each of those
departments typically has its own computer system optimized for the particular ways
that the department does its work. But ERP combines them all together into a single,
integrated software program that runs off a single database so that the various
departments can more easily share information and communicate with each other.
That integrated approach can have a tremendous payback if companies install the
software correctly.
Take a customer order, for example. Typically, when a customer places an order, that
order begins a mostly paper-based journey from in-basket to in-basket around the
company, often being keyed and rekeyed into different departments' computer
systems along the way. All that lounging around in inbaskets causes delays and lost
orders, and all the keying into different computer systems invites errors. Meanwhile,
no one in the company truly knows what the status of the order is at any given point
because there is no way for the finance department, for example, to get into the
warehouse's computer system to see whether the item has been shipped. "You'll have
to call the warehouse" is the familiar refrain heard by frustrated customers.
ERP vanquishes the old standalone computer systems in finance, HR, manufacturing
and the warehouse, and replaces them with a single unified software program divided
into software modules that roughly approximate the old standalone systems. Finance,
manufacturing and the warehouse all still get their own software, except now the
software is linked together so that someone in finance can look into the warehouse
software to see if an order has been shipped. Most vendors' ERP software is flexible
enough that you can install some modules without buying the whole package. Many
companies, for example, will just install an ERP finance or HR module and leave the
rest of the functions for another day.
47
ERP system and track it down. With luck, the order process moves like a bolt of
lightning through the organization, and customers get their orders faster and with
fewer errors than before. ERP can apply that same magic to the other major business
processes, such as employee benefits or financial reporting. That, at least, is the dream
of ERP. The reality is much harsher. Let's go back to those inboxes for a minute. That
process may not have been efficient, but it was simple. Finance did its job, the
warehouse did its job, and if anything went wrong outside of the department's walls, it
was somebody else's problem. Not anymore. With ERP, the customer service
representatives are no longer just typists entering someone's name into a computer
and hitting the return key. The ERP screen makes them businesspeople. It flickers
with the customer's credit ra ting from the finance department and the product
inventory levels from the warehouse. Will the customer pay on time? Will we be able
to ship the order on time? These are decisions that customer service representatives
have never had to make before, and the answers affect the customer and every other
department in the company. But it's not just the customer service representatives who
have to wake up. People in the warehouse who used to keep inventory in their heads
or on scraps of paper now need to put that information online. If they don't, customer
service reps will see low inventory levels on their screens and tell customers that their
requested item is not in stock. Accountability, responsibility and communication have
never been tested like this before. People don't like to change, and ERP asks them to
change how they do their jobs. That is why the value of ERP is so hard to pin down.
The software is less important than the changes companies make in the ways they do
business. If you use ERP to improve the ways your people take orders, manufacture
goods, ship them and bill for them, you will see value from the software. If you
simply install the software without changing the ways people do their jobs, you may
not see any value at all—indeed, the new software could slow you down by simply
replacing the old software that everyone knew with new software that no one does.
48
LECTURE 27
ERP Features
Companies that install ERP do not have an easy time of it. Don't be fooled when ERP
vendors tell you about a three or six month average implementation time. Those short
(that's right, six months is short) implementations all have a catch of one kind or
another: The company was small, or the implementation was limited to a small area of
the company, or the company used only the financial pieces of the ERP system (in
which case the ERP system is nothing more than a very expensive accounting
system). To do ERP right, the ways you do business will need to change and the ways
people do their jobs will need to change too. And that kind of change doesn't come
without pain. Unless, of course, your ways of doing business are working extremely
well (orders all shipped on time, productivity higher than all your competitors,
customers completely satisfied), in which case there is no reason to even consider
ERP. The important thing is not to focus on how long it will take—real
transformational ERP efforts usually run between one and three years, on average—
but rather to understand why you need it and how you will use it to improve your
business.
• Integrate customer order information—ERP systems can become the place where
the customer order lives from the time a customer service representative receives it
until the loading dock ships the merchandise and finance sends an invoice. By having
this information in one software system, rather than scattered among many different
systems that can't communicate with one another, companies can keep track of orders
more easily, and coordinate manufacturing, inventory and shipping among many
different locations at the same time.
• Reduce inventory—ERP helps the manufacturing process flow more smoothly, and
it improves visibility of the order fulfillment process inside the company. That can
lead to reduced inventories of the stuff used to make products (work-in-progress
inventory), and it can help users better plan deliveries to customers, reducing the
finished good inventory at the warehouses and shipping docks. To really improve the
flow of your supply chain, you need supply chain software, but ERP helps too.
49
• Standardize HR information—Especially in companies with multiple business
units, HR may not have a unified, simple method for tracking employees' time and
communicating with them about benefits and services. ERP can fix that. In the race to
fix these problems, companies often lose sight of the fact that ERP packages are
nothing more than generic representations of the ways a typical company does
business. While most packages are exhaustively comprehensive, each industry has its
quirks that make it unique. Most ERP systems were designed to be used by discrete
manufacturing companies (that make physical things that can be counted), which
immediately left all the process manufacturers (oil, chemical and utility companies
that measure their products by flow rather than individual units) out in the cold. Each
of these industries has struggled with the different ERP vendors to modify core ERP
programs to their needs.
50
LECTURE 28
ERP and Business
It's critical for companies to figure out if their ways of doing business will fit within a
standard
ERP package before the checks are signed and the implementation begins. The most
common reason that companies walk away from multimillion-dollar ERP projects is
that they discover the software does not support one of their important business
processes. At that point there are two things they can do: They can change the
business process to accommodate the software, which will mean deep changes in long
established ways of doing business (that often provide competitive advantage) and
shake up important people's roles and responsibilities (something that few companies
have the stomach for). Or they can modify the software to fit the process, which will
slow down the project, introduce dangerous bugs into the system and make upgrading
the software to the ERP vendor's next release excruciatingly difficult because the
customizations will need to be torn apart and rewritten to fit with the new version.
Needless to say, the move to ERP is a project of breathtaking scope, and the price tags
on the front end are enough to make the most placid CFO a little twitchy. In addition
to budgeting for software costs, financial executives should plan to write checks to
cover consulting, process rework, integration testing and a long laundry list of other
expenses before the benefits of ERP start to manifest themselves.
Underestimating the price of teaching users their new job processes can lead to a rude
shock down the line, and so can failure to consider data warehouse integration
requirements and the cost of extra software to duplicate the old report formats. A few
oversights in the budgeting and planning stage can send ERP costs spiraling out of
control faster than oversights in planning almost any other information system
undertaking.
When will I get payback from ERP—and how much will it be?
Don't expect to revolutionize your business with ERP. It is a navel-gazing exercise
that focuses
on optimizing the way things are done internally rather than with customers, suppliers
or partners. Yet the navel gazing has a pretty good payback if you're willing to wait
for it—a Meta Group study of 63 companies found that it took eight months after the
new system was in (31 months total) to see any benefits. But the median annual
savings from the new ERP system were $1.6 million.
What are the hidden costs of ERP?
Although different companies will find different land mines in the budgeting process,
those who have implemented ERP packages agree that certain costs are more
51
commonly overlooked or underestimated than others. Armed with insights from
across the business, ERP pros vote the following areas as most likely to result in
budget overrun.
1. Training
Training is the near-unanimous choice of experienced ERP implementers as the most
underestimated budget item. Training expenses are high because workers almost
invariably have to learn a new set of processes, not just a new software interface.
Worse, outside training companies may not be able to help you. They are focused on
telling people how to use software, not on educating people about the particular ways
you do business. Prepare to develop a curriculum yourself that identifies and explains
the different business processes that will be affected by the ERP system. One
enterprising CIO hired staff from a local business school to help him develop and
teach the ERP business-training course to employees. Remember that with ERP,
finance people will be using the same software as warehouse people and they will
both be entering information that affects the other. To do this accurately, they have to
have a much broader understanding of how others in the company do their jobs than
they did before ERP came along. Ultimately, it will be up to your IT and
businesspeople to provide that training. So take whatever you have budgeted for ERP
training and double or triple it up front. It will be the best ERP investment you ever
make.
3. Customization
Add-ons are only the beginning of the integration costs of ERP. Much more costly,
andsomething to be avoided if at all possible, is actual customization of the core ERP
software itself. This happens when the ERP software can't handle one of your
business processes and you decide
to mess with the software to make it do what you want. You're playing with fire. The
customizations can affect every module of the ERP system because they are all so
tightly linked together. Upgrading the ERP package—no walk in the park under the
best of circumstances— becomes a nightmare because you'll have to do the
customization all over again in the new version. Maybe it will work, maybe it won't.
No matter what, the vendor will not be there to support you. You will have to hire
extra staffers to do the customization work, and keep them on for good to maintain it.
4. Data conversion
52
It costs money to move corporate information, such as customer and supplier records,
product design data and the like, from old systems to new ERP homes. Although few
CIOs will admit it, most data in most legacy systems is of little use. Companies often
deny their data is dirty until they actually have to move it to the new client/server
setups that popular ERP packages require. Consequently, those companies are more
likely to underestimate the cost of the move. But even clean data may demand some
overhaul to match process modifications necessitated—or inspired—by the ERP
implementation.
5. Data analysis
Often, the data from the ERP system must be combined with data from external
systems for
analysis purposes. Users with heavy analysis needs should include the cost of a data
warehouse in
the ERP budget—and they should expect to do quite a bit of work to make it run
smoothly. Users
are in a pickle here: Refreshing all the ERP data every day in a big corporate data
warehouse is
difficult, and ERP systems do a poor job of indicating which information has changed
from day
to day, making selective warehouse updates tough. One expensive solution is custom
programming. The upshot is that the wise will check all their data analysis needs
before signing
off on the budget.
6. Consultants ad infinitum
When users fail to plan for disengagement, consulting fees run wild. To avoid this,
companies should identify objectives for which its consulting partners must aim when
training internal staff. Include metrics in the consultants' contract; for example, a
specific number of the user company's staff should be able to pass a project-
management leadership test—similar to what Big Five consultants have to pass to
lead an ERP engagement.
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LECTURE 29
54
55
LECTURE 30
The definition one America professional association put forward is that Supply Chain
Management encompasses the planning and management of all activities involved in
sourcing, procurement, conversion, and logistics management activities. Importantly,
it also includes coordination and collaboration with channel partners, which can be
suppliers, intermediaries, third-party service providers, and customers. In essence,
Supply Chain Management integrates supply and demand management within and
across companies.
Some experts distinguish Supply Chain Management and logistics, while others
consider the terms to be interchangeable.
56
Activities/functions
Several models have been proposed for understanding the activities required to
manage material movements across organizational and functional boundaries. SCOR
is a supply chain management model promoted by the Supply Chain Management
Council. Another model is the SCM Model proposed by the Global Supply Chain
Forum (GSCF). Supply chain activities can be grouped into strategic, tactical, and
operational levels of activities.
Strategic
Tactical
Operational
• Daily production and distribution planning, including all nodes in the supply
chain.
57
• Production scheduling for each manufacturing facility in the supply chain
(minute by minute).
• Demand planning and forecasting, coordinating the demand forecast of all
customers and sharing the forecast with all suppliers.
• Sourcing planning, including current inventory and forecast demand, in
collaboration with all suppliers.
• Inbound operations, including transportation from suppliers and receiving
inventory.
• Production operations, including the consumption of materials and flow of
finished goods.
• Outbound operations, including all fulfillment activities and transportation to
customers.
• Order promising, accounting for all constraints in the supply chain, including
all suppliers, manufacturing facilities, distribution centers, and other
customers.
Organizations increasingly find that they must rely on effective supply chains, or
networks, to successfully compete in the global market and networked economy.[1] In
Peter Drucker's (1998) management's new paradigms, this concept of business
relationships extends beyond traditional enterprise boundaries and seeks to organize
entire business processes throughout a value chain of multiple companies.
During the past decades, globalization, outsourcing and information technology have
enabled many organizations such as Dell and Hewlett Packard, to successfully operate
solid collaborative supply networks in which each specialized business partner
focuses on only a few key strategic activities (Scott, 1993). This inter-organizational
supply network can be acknowledged as a new form of organization. However, with
the complicated interactions among the players, the network structure fits neither
"market" nor "hierarchy" categories (Powell, 1990). It is not clear what kind of
performance impacts different supply network structures could have on firms, and
little is known about the coordination conditions and trade-offs that may exist among
the players. From a system's point of view, a complex network structure can be
decomposed into individual component firms (Zhang and Dilts, 2004). Traditionally,
companies in a supply network concentrate on the inputs and outputs of the processes,
with little concern for the internal management working of other individual players.
Therefore, the choice of internal management control structure is known to impact
local firm performance (Mintzberg, 1979).
In the 21st century, there have been a few changes in business environment that have
contributed to the development of supply chain networks. First, as an outcome of
globalization and proliferation of multi-national companies, joint ventures, strategic
alliances and business partnerships were found to be significant success factors,
following the earlier "Just-In-Time", "Lean Management" and "Agile Manufacturing"
practices.[2] Second, technological changes, particularly the dramatic fall in
information communication costs, a paramount component of transaction costs, has
led to changes in coordination among the members of the supply chain network
(Coase, 1998).
58
Many researchers have recognized these kinds of supply network structure as a new
organization form, using terms such as "Keiretsu", "Extended Enterprise", "Virtual
Corporation", Global Production Network", and "Next Generation Manufacturing
System".[3] In general, such a structure can be defined as "a group of semi-
independent organizations, each with their capabilities, which collaborate in ever-
changing constellations to serve one or more markets in order to achieve some
business goal specific to that collaboration" (Akkermans, 2001).
59
LECTURE 31
Supply chain business process integration
One could suggest other key critical supply business processes combining these
processes stated by Lambert such as:
60
• produce positive feelings in the organization and the customers
b) Procurement process
Strategic plans are developed with suppliers to support the manufacturing flow
management process and development of new products. In firms where operations
extend globally, sourcing should be managed on a global basis. The desired outcome
is a win-win relationship, where both parties benefit, and reduction times in the design
cycle and product development is achieved. Also, the purchasing function develops
rapid communication systems, such as electronic data interchange (EDI) and Internet
linkages to transfer possible requirements more rapidly. Activities related to obtaining
products and materials from outside suppliers. This requires performing resource
planning, supply sourcing, negotiation, order placement, inbound transportation,
storage and handling and quality assurance. Also, includes the responsibility to
coordinate with suppliers in scheduling, supply continuity, hedging, and research to
new sources or programmes.
Here, customers and suppliers must be united into the product development process,
thus to reduce time to market. As product life cycles shorten, the appropriate products
must be developed and successfully launched in ever shorter time-schedules to remain
competitive. According to Lambert and Cooper (2000), managers of the product
development and commercialization process must:
e) Physical distribution
61
availability of the product/service is a vital part of each channel participant's
marketing effort. It is also through the physical distribution process that the time and
space of customer service become an integral part of marketing, thus it links a
marketing channel with its customers (e.g. links manufacturers, wholesalers,
retailers).
f) Outsourcing/partnerships
This is not just outsourcing the procurement of materials and components, but also
outsourcing of services that traditionally have been provided in-house. The logic of
this trend is that the company will increasingly focus on those activities in the value
chain where it has a distinctive advantage and everything else it will outsource. This
movement has been particularly evident in logistics where the provision of transport,
warehousing and inventory control is increasingly subcontracted to specialists or
logistics partners. Also, to manage and control this network of partners and suppliers
requires a blend of both central and local involvement. Hence, strategic decisions
need to be taken centrally with the monitoring and control of supplier performance
and day-to-day liaison with logistics partners being best managed at a local level.
g) Performance measurement
Experts found a strong relationship from the largest arcs of supplier and customer
integration to market share and profitability. By taking advantage of supplier
capabilities and emphasizing a long-term supply chain perspective in customer
relationships can be both correlated with firm performance. As logistics competency
becomes a more critical factor in creating and maintaining competitive advantage,
logistics measurement becomes increasingly important because the difference
between profitable and unprofitable operations becomes more narrow. A.T. Kearney
Consultants (1985) noted that firms engaging in comprehensive performance
measurement realized improvements in overall productivity. According to experts
internal measures are generally collected and analyzed by the firm including
1. Cost
2. Customer Service
3. Productivity measures
4. Asset measurement, and
5. Quality.
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LECTURE 32
A supply chain is a network of facilities and distribution options that performs the
functions of procurement of materials, transformation of these materials into
intermediate and finished products, and the distribution of these finished products to
customers. Supply chains exist in both service and manufacturing organizations,
although the complexity of the chain may vary greatly from industry to industry and
firm to firm.
Below is an example of a very simple supply chain for a single product, where raw
material is procured from vendors, transformed into finished goods in a single step,
and then transported to distribution centers, and ultimately, customers. Realistic
supply chains have multiple end products with shared components, facilities and
capacities. The flow of materials is not always along an arborescent network, various
modes of transportation may be considered, and the bill of materials for the end items
may be both deep and large.
63
LECTURE 33
There are four major decision areas in supply chain management: 1) location, 2)
production, 3) inventory, and 4) transportation (distribution), and there are both
strategic and operational elements in each of these decision areas.
Location Decisions
The geographic placement of production facilities, stocking points, and sourcing
points is the natural first step in creating a supply chain. The location of facilities
involves a commitment of resources to a long-term plan. Once the size, number, and
location of these are determined, so are the possible paths by which the product flows
through to the final customer. These decisions are of great significance to a firm since
they represent the basic strategy for accessing customer markets, and will have a
considerable impact on revenue, cost, and level of service. These decisions should be
determined by an optimization routine that considers production costs, taxes, duties
and duty drawback, tariffs, local content, distribution costs, production limitations,
etc. (See Arntzen, Brown, Harrison and Trafton [1995] for a thorough discussion of
these aspects.) Although location decisions are primarily strategic, they also have
implications on an operational level.
Production Decisions
The strategic decisions include what products to produce, and which plants to produce
them in, allocation of suppliers to plants, plants to DC's, and DC's to customer
markets. As before, these decisions have a big impact on the revenues, costs and
customer service levels of the firm. These decisions assume the existence of the
facilities, but determine the exact path(s) through which a product flows to and from
these facilities. Another critical issue is the capacity of the manufacturing facilities--
and this largely depends the degree of vertical integration within the firm. Operational
decisions focus on detailed production scheduling. These decisions include the
construction of the master production schedules, scheduling production on machines,
and equipment maintenance. Other considerations include workload balancing, and
quality control measures at a production facility.
Inventory Decisions
These refer to means by which inventories are managed. Inventories exist at every
stage of the supply chain as either raw materials, semi-finished or finished goods.
They can also be in-process between locations. Their primary purpose to buffer
against any uncertainty that might exist in the supply chain. Since holding of
inventories can cost anywhere between 20 to 40 percent of their value, their efficient
management is critical in supply chain operations. It is strategic in the sense that top
management sets goals. However, most researchers have approached the management
of inventory from an operational perspective. These include deployment strategies
(push versus pull), control policies --- the determination of the optimal levels of order
quantities and reorder points, and setting safety stock levels, at each stocking location.
These levels are critical, since they are primary determinants of customer service
levels.
Transportation Decisions
The mode choice aspect of these decisions are the more strategic ones. These are
closely linked to the inventory decisions, since the best choice of mode is often found
by trading-off the cost of using the particular mode of transport with the indirect cost
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of inventory associated with that mode. While air shipments may be fast, reliable, and
warrant lesser safety stocks, they are expensive. Meanwhile shipping by sea or rail
may be much cheaper, but they necessitate holding relatively large amounts of
inventory to buffer against the inherent uncertainty associated with them. Therefore
customer service levels, and geographic location play vital roles in such decisions.
Since transportation is more than 30 percent of the logistics costs, operating
efficiently makes good economic sense. Shipment sizes (consolidated bulk shipments
versus Lot-for-Lot), routing and scheduling of equipment are key in effective
management of the firm's transport strategy.
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resources to use. Parts of this ambitious project were successfully implemented at
General Motors.
Cohen and Lee [1985] develop a conceptual framework for manufacturing strategy
analysis, where they describe a series of stochastic sub- models, that considers
annualized product flows from raw material vendors via intermediate plants and
distribution echelons to the final customers. They use heuristic methods to link and
optimize these sub- models. They later give an integrated and readable exposition of
their models and methods in Cohen and Lee [1988].
Cohen and Lee [1989] present a normative model for resource deployment in a global
manufacturing and distribution network. Global after-tax profit (profit-local taxes) is
maximized through the design of facility network and control of material flows within
the network. The cost structure consists of variable and fixed costs for material
procurement, production, distribution and transportation. They validate the model by
applying it to analyze the global manufacturing strategies of a personal computer
manufacturer.
Finally, Arntzen, Brown, Harrison, and Trafton [1995] provide the most
comprehensive deterministic model for supply chain management. The objective
function minimizes a combination of cost and time elements. Examples of cost
elements include purchasing, manufacturing, pipeline inventory, transportation costs
between various sites, duties, and taxes. Time elements include manufacturing lead
times and transit times. Unique to this model was the explicit consideration of duty
and their recovery as the product flowed through different countries. Implementation
of this model at the Digital Equipment Corporation has produced spectacular results
--- savings in the order of $100 million dollars.
Clearly, these network-design based methods add value to the firm in that they lay
down the manufacturing and distribution strategies far into the future. It is imperative
that firms at one time or another make such integrated decisions, encompassing
production, location, inventory, and transportation, and such models are therefore
indispensable. Although the above review shows considerable potential for these
models as strategic determinants in the future, they are not without their
shortcomings. Their very nature forces these problems to be of a very large scale.
They are often difficult to solve to optimality. Furthermore, most of the models in this
category are largely deterministic and static in nature. Additionally, those that
consider stochastic elements are very restrictive in nature. In sum, there does not seem
to yet be a comprehensive model that is representative of the true nature of material
flows in the supply chain.
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Aspects of CRM
There are three aspects of CRM which can each be implemented in isolation from
each other:
Operational CRM
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customer's contact history, and staff can retrieve information on customers from the
database as necessary.
One of the main benefits of this contact history is that customers can interact with
different people or different contact “channels” in a company over time without
having to repeat the history of their interaction each time.
Consequently, many call centers use some kind of CRM software to support their call
centre agents.
Collaborative CRM
Collaborative CRM covers the direct interaction with customers, for a variety of
different purposes, including feedback and issue-reporting. Interaction can be through
a variety of channels, such as web pages, email, automated phone (Automated Voice
Response AVR) or SMS.
The objectives of Collaborative CRM can be broad, including cost reduction and
service improvements.
Analytical CRM
Strategy
Several commercial CRM software packages are available which vary in their
approach to CRM. However, CRM is not just a technology, but rather a holistic
approach to an organization's philosophy in dealing with its customers. This includes
policies and processes, front-of-house customer service, employee training,
marketing, systems and information management. Hence, it is important that any
CRM implementation considers not only technology, but furthermore the broader
organizational requirements.
The objectives of a CRM strategy must consider a company’s specific situation and
its customers needs and expectations.
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Technology Considerations
The technology requirements of a CRM strategy can be complex and far reaching.
The basic building blocks include
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Key Functionalities
1. Marketing
2. Sales
3. Service
Marketing
Marketing Planning
Campaign Management
Lead Management
One key objective of the Marketing function is to generate sales related leads, which
finally get converted into Sales Revenues for the company. Marketing campaigns with
the specific objective of generating leads (Prospective customers who may be
interested in a product). Lead management deals with processing these Leads,
carrying out a sanity check, evaluating the genuineness of the information (Since,
there is a lot of information that is gathered during Marketing Campaigns it becomes
necessary to screen these leads), and finally converting them to Hot Leads or Cold
Leads.
Sales
Sales functionalities are focused on helping the Sales team to execute and manage the
presales process better and in an organized manner. Sales team is responsible for
regularly capturing key customer interactions, any leads or opportunities they are
working on etc, in CRM system. The system helps by processing this data, monitoring
against the targets and proactively alerting the sales person with recommended further
actions based on company's sales policy.
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Opportunity Management
Opportunities help the Sales team by organizing all the relevant data regarding a
prospective deal into one place. It is characterized by the details such as Prospective
customer, expected budget, total spending, products interested in, expected closing
date, Key players in the deal and their key characteristics, important dates and
milestones etc.
The Opportunity has several phases, e.g. initiation, identification, qualification, RFP
received, quotation sent, final stage, won or lost. Of course these phases can be
defined based on individual company needs. A CRM system helps in each phase by
"Guiding" the Sales representative to carry out certain suggested activities as defined
by the company's sales policy. It creates reminders and planned activities within the
system. e.g. if the Opportunity has reached "RFP received" stage, and the deal size is
more than (say) 50,000 USD, the system can prompt the representative to hold a
review discussion with a senior manager. This is often referred as "Guided Sales
Methodology". Opportunities can be directly converted into Quotations or Sales
Orders.
Activity Management
Activities represent various Sales or Service related interactions with the customer
(meetings, discussions, telephone calls, emails). Activity Management provides a
platform to consolidate all the interactions with customer into a single platform,
helping to build a 360 degree view of customer. Activities can be synchronized to MS
Outlook/Lotus Notes Calendar items (Meetings and Tasks)
Service
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10. Resource Planning and Workforce Management
Channels of communication
It is also important to mention here that a CRM system is capable of executing all the
three sub modules via multiple communication Channels. These channels can be:
1. Direct
2. Online (Internet)
3. Call Center (via Phone/FAX/Email etc)
All the three CRM Sub Modules (Marketing, Sales and Service) can be executed
across these Communication channels. Based on these criteria, CRM offerings can be
further sub divided into following:
Communication
Channel Direct Internet Call Center
/ CRM Module
Online
Marketing Web Marketing Tele Marketing
Marketing
Sales Web Shop Tele Sales
Customer Self Service
Service Online Service Tele Service
Portal
Successes
In contrast there are a growing number of successes. One example is the National
Australia Bank (NAB) which has pursued a CRM strategy for over ten years and has
won numerous awards for its efforts. [1] [2]
The data gathered as part of CRM must consider customer privacy and data security.
Customers want the assurance that their data is not shared with third parties without
their consent and not accessed illegally by third parties.
Customers also want their data used by companies to provide a benefit for them. For
instance, an increase in unsolicited telemarketing calls is generally resented by
customers while a small number of relevant offers is generally appreciated by
customers.
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Data warehouse
Bill Inmon, an early and influential practitioner, has formally defined a data
warehouse in the following terms;
• subject-oriented, meaning that the data in the database is organized so that all
the data elements relating to the same real-world event or object are linked
together;
• time-variant, meaning that the changes to the data in the database are tracked
and recorded so that reports can be produced showing changes over time;
• non-volatile, meaning that data in the database is never over-written or deleted
- once committed, the data is static, read-only, but retained for future
reporting; and
• integrated, meaning that the database contains data from most or all of an
organization's operational applications, and that this data is made consistent.
A data warehouse might be used to find the day of the week on which a company sold
the most widgets in May 1992, or how employee sick leave the week before the
winter break differed between California and New York from 2001–2005.
While operational systems are optimized for simplicity and speed of modification (see
OLTP) through heavy use of database normalization and an entity-relationship model,
the data warehouse is optimized for reporting and analysis (online analytical
processing, or OLAP). Frequently data in data warehouses are heavily denormalised,
summarised or stored in a dimension-based model. This is not always required to
achieve acceptable query response times, however.
History
Data Warehouses became a distinct type of computer database during the late 1980s
and early 1990s. They were developed to meet a growing demand for management
information and analysis that could not be met by operational systems. Operational
systems were unable to meet this need for a range of reasons:
• The processing load of reporting reduced the response time of the operational
systems,
• The database designs of operational systems were not optimized for
information analysis and reporting,
• Most organizations had more than one operational system, so company-wide
reporting could not be supported from a single system, and
• Development of reports in operational systems often required writing specific
computer programs which was slow and expensive
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As a result, separate computer databases began to be built that were specifically
designed to support management information and analysis purposes. These data
warehouses were able to bring in data from a range of different data sources, such as
mainframe computers, minicomputers, as well as personal computers and office
automation software such as spreadsheet, and integrate this information in a single
place. This capability, coupled with user-friendly reporting tools and freedom from
operational impacts, has led to a growth of this type of computer system.
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As technology improved (lower cost for more performance) and user requirements
increased (faster data load cycle times and more features), data warehouses have
evolved through several fundamental stages:
Architecture
The term data warehouse architecture is primarily used today to describe the overall
structure of a Business Intelligence system. Other historical terms include decision
support systems (DSS), management information systems (MIS), and others.
Storage
In OLTP — online transaction processing systems relational database design use the
discipline of data modeling and generally follow the Codd rules of data normalization
in order to ensure absolute data integrity. Less complex information is broken down
into its most simple structures (a table) where all of the individual atomic level
elements relate to each other and satisfy the normalization rules. Codd defines 5
increasingly stringent rules of normalization and typically OLTP systems achieve a
3rd level normalization. Fully normalized OLTP database designs often result in
having information from a business transaction stored in dozens to hundreds of tables.
Relational database managers are efficient at managing the relationships between
tables and result in very fast insert/update performance because only a little bit of data
is affected in each relational transaction.
OLTP databases are efficient because they are typically only dealing with the
information around a single transaction. In reporting and analysis, thousands to
billions of transactions may need to be reassembled imposing a huge workload on the
relational database. Given enough time the software can usually return the requested
results, but because of the negative performance impact on the machine and all of its
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hosted applications, data warehousing professionals recommend that reporting
databases be physically separated from the OLTP database.
Designing the data warehouse data Architecture synergy is the realm of Data
Warehouse Architects. The goal of a data warehouse is to bring data together from a
variety of existing databases to support management and reporting needs. The
generally accepted principle is that data should be stored at its most elemental level
because this provides for the most useful and flexible basis for use in reporting and
information analysis. However, because of different focus on specific requirements,
there can be alternative methods for design and implementing data warehouses. There
are two leading approaches to organizing the data in a data warehouse: the
dimensional approach advocated by Ralph Kimball and the normalized approach
advocated by Bill Inmon. Whilst the dimension approach is very useful in data mart
design, it can result in a rats nest of long term data integration and abstraction
complications when used in a data warehouse.
The "normalized" approach uses database normalization. In this method, the data in
the data warehouse is stored in third normal form. Tables are then grouped together
by subject areas that reflect the general definition of the data (customer, product,
finance, etc.) The main advantage of this approach is that it is quite straightforward to
add new information into the database — the primary disadvantage of this approach is
that because of the number of tables involved, it can be rather slow to produce
information and reports. Furthermore, since the segregation of facts and dimensions is
not explicit in this type of data model, it is difficult for users to join the required data
elements into meaningful information without a precise understanding of the data
structure.
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Subject areas are just a method of organizing information and can be defined along
any lines. The traditional approach has subjects defined as the subjects or nouns
within a problem space. For example, in a financial services business, you might have
customers, products and contracts. An alternative approach is to organize around the
business transactions, such as customer enrollment, sales and trades.
Advantages
There are many advantages to using a data warehouse, some of them are:
Concerns
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Data are any facts, numbers, or text that can be processed by a computer. Today,
organizations are accumulating vast and growing amounts of data in different formats
and different databases. This includes:
• operational or transactional data such as, sales, cost, inventory, payroll, and
accounting
• nonoperational data, such as industry sales, forecast data, and macro economic
data
• meta data - data about the data itself, such as logical database design or data
dictionary definitions
Information
The patterns, associations, or relationships among all this data can provide
information. For example, analysis of retail point of sale transaction data can yield
information on which products are selling and when.
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Knowledge
Information can be converted into knowledge about historical patterns and future
trends. For example, summary information on retail supermarket sales can be
analyzed in light of promotional efforts to provide knowledge of consumer buying
behavior. Thus, a manufacturer or retailer could determine which items are most
susceptible to promotional efforts.
Data Warehouses
Dramatic advances in data capture, processing power, data transmission, and storage
capabilities are enabling organizations to integrate their various databases into data
warehouses. Data warehousing is defined as a process of centralized data
management and retrieval. Data warehousing, like data mining, is a relatively new
term although the concept itself has been around for years. Data warehousing
represents an ideal vision of maintaining a central repository of all organizational
data. Centralization of data is needed to maximize user access and analysis. Dramatic
technological advances are making this vision a reality for many companies. And,
equally dramatic advances in data analysis software are allowing users to access this
data freely. The data analysis software is what supports data mining.
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Data mining is primarily used today by companies with a strong consumer focus -
retail, financial, communication, and marketing organizations. It enables these
companies to determine relationships among "internal" factors such as price, product
positioning, or staff skills, and "external" factors such as economic indicators,
competition, and customer demographics. And, it enables them to determine the
impact on sales, customer satisfaction, and corporate profits. Finally, it enables them
to "drill down" into summary information to view detail transactional data.
With data mining, a retailer could use point-of-sale records of customer purchases to
send targeted promotions based on an individual's purchase history. By mining
demographic data from comment or warranty cards, the retailer could develop
products and promotions to appeal to specific customer segments.
For example, Blockbuster Entertainment mines its video rental history database to
recommend rentals to individual customers. American Express can suggest products
to its cardholders based on analysis of their monthly expenditures.
By using the NBA universal clock, a coach can automatically bring up the video clips
showing each of the jump shots attempted by Williams with Price on the floor,
without needing to comb through hours of video footage. Those clips show a very
successful pick-and-roll play in which Price draws the Knick's defense and then finds
Williams for an open jump shot.
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How does data mining work?
While large-scale information technology has been evolving separate transaction and
analytical systems, data mining provides the link between the two. Data mining
software analyzes relationships and patterns in stored transaction data based on open-
ended user queries. Several types of analytical software are available: statistical,
machine learning, and neural networks. Generally, any of four types of relationships
are sought:
• Extract, transform, and load transaction data onto the data warehouse system.
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• Decision trees: Tree-shaped structures that represent sets of decisions. These
decisions generate rules for the classification of a dataset. Specific decision
tree methods include Classification and Regression Trees (CART) and Chi
Square Automatic Interaction Detection (CHAID) . CART and CHAID are
decision tree techniques used for classification of a dataset. They provide a set
of rules that you can apply to a new (unclassified) dataset to predict which
records will have a given outcome. CART segments a dataset by creating 2-
way splits while CHAID segments using chi square tests to create multi-way
splits. CART typically requires less data preparation than CHAID.
• Rule induction: The extraction of useful if-then rules from data based on
statistical significance.
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Lecture 41 - 45
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