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  • Lecture 1
  • Meaning and Role of Information Systems
  • Framework for Business End Users
  • Characteristics of Information
  • Lecture 2
  • What is a System?
  • What is an Information System?
  • Management
  • Organization
  • Function Purpose
  • Technology
  • Lecture – 3
  • Components of an IS
  • Information System Resources
  • Role of information systems
  • Types of Information Systems
  • Types of Transactions
  • Characteristics of Transaction Processing Systems
  • Features of TPS
  • Process of Transaction Processing System
  • automation
  • Methods for Data Entry:
  • Tips for Data Capturing
  • Lecture 4
  • Lecture 6
  • There are four key elements of OSS:
  • Functions of an OSS may include the following components:
  • OSS can be classified into three categories:
  • 4.Transaction Processing Systems
  • 5.Process Control System
  • 6.Enterprise Collaboration Systems
  • Lecture 7
  • 1.Management Information Systems:
  • 2.Decision Support Systems:
  • 3.Executive Information Systems (EIS)
  • Lecture 8
  • Information System for Strategic Management
  • Lecture 9
  • Competitive Forces
  • Lecture 10
  • Basic Strategies in the Business Use of Information Technology Lower Costs
  • Differentiate
  • Innovate
  • Promote Growth
  • Develop Alliances
  • Other competitive strategies
  • Lecture 11
  • Lecture 12
  • Value Chain Analysis
  • Lecture 13
  • Activities in Value chain
  • Primary Activities
  • Support Activities
  • Lecture 14
  • Lecture 15
  • LECTURE 16
  • Business Planning Systems:
  • LECTURE 17
  • Critical Success Factor
  • Threats to Computerized Information Systems
  • LECTURE 21
  • LECTURE 22
  • LECTURE 23
  • Computer Software
  • LECTURE 24
  • Supplier shortlist
  • LECTURE 26
  • What is ERP?
  • How can ERP improve a company's business performance?
  • LECTURE 27
  • ERP Features
  • What will ERP fix in my business?
  • LECTURE 28
  • ERP and Business
  • What does ERP really cost?
  • When will I get payback from ERP—and how much will it be?
  • What are the hidden costs of ERP?
  • 1. Training
  • 2. Integration and testing
  • 3. Customization
  • 5. Data analysis
  • 6. Consultants ad infinitum
  • 7. Replacing your best and brightest
  • System Quality Problems: Software and Data
  • The Maintenance Nightmare
  • Data Quality Problems
  • LECTURE 30
  • Supply chain management
  • Strategic
  • Tactical
  • Operational
  • LECTURE 31
  • LECTURE 32
  • LECTURE 34
  • Customer Relationship Management
  • Aspects of CRM
  • Operational CRM
  • Collaborative CRM
  • Analytical CRM
  • Strategy
  • Technology Considerations
  • LECTURE 35 Key Functionalities
  • Marketing
  • Sales
  • Service
  • Channels of communication
  • Communication Channel
  • Direct Internet Call Center
  • Successes
  • Privacy and Data Security
  • LECTURE 36
  • Data warehouse
  • History
  • LECTURE 37
  • Architecture
  • Storage
  • Advantages
  • Concerns
  • LECTURE 38
  • Data Mining: What is Data Mining? Overview
  • Continuous Innovation
  • Example
  • LECTURE 39
  • What can data mining do?
  • LECTURE 40 How does data mining work?
  • Lecture 41 - 45

INFORMATION SYSTEM MANAGEMENT Lecture 1 Meaning and Role of Information Systems 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. Quality is an important issue in business today, particularly as it relates to information systems. The quality of an information system is measured by its ability to provide exactly the information needed by managers in a timely manner. The information must be accurate and up-to-date. Users should be able to receive the information in a variety of formats: tables of data, graphs, summary statistics, or even pictures or sound: Framework for Business End Users The field of information systems encompassses many complex technologies, abstract behavioral concepts, and specialized applications in countless business and non business areas. Thus, you should concentrate your efforts in five areas of knowledge: • Foundation Concepts: Fundamental behavioral and technical concepts 1

• • • •

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.

Key Terms Used In Information System Data, Information, Knowledge, and Wisdom Let us consider the case of a retail store that is trying to increase sales. Some of the data available includes sales levels for the last 36 months, advertising expenses, and customer comments from surveys. By itself, this data may be interesting, but it must be organized and analyzed to be useful in making a decision. For example, a manager might use economic and marketing models to forecast patterns and determine relationships among various advertising expenses and sales. The resulting information (presented in equations, charts, and tables) would clarify relationships among the data and would be used to decide how to proceed It requires knowledge to determine how to analyze data and make decisions. Education and experience create knowledge in humans. A manager learns which data to collect, the proper models to apply, and ways to analyze results for making better decisions. In some cases, this knowledge can be transferred to specialized computer programs (expert systems). Wisdom is more difficult to define but represents the ability to learn from experience and adapt to changing conditions. In this example, wisdom would enable a manager to spot trends, identify potential problems, and develop new techniques to analyze the data. 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. • Appropriateness: Information must be relevant to the person who is using it. It must be within the sphere of his/her activities so that it can be used to reduce uncertainty in 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. • Frequency: Frequency is related to timeliness. Too often the information presented is linked to the calendar (end of the week, beginning of the month); its frequency should be synchronized with the timing of the decision making of the user. • Understandability: The format and presentation of information are very important. 2

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. • Current: Decisions are often based on the latest information available • Economical: The costs of gathering information should be justified by the overall benefits


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 What is an Information System? Now, it is time to see the real meaning and concept of Information Systems. Too often you hear someone say, "Oh yeah, I know how to use a computer. I can surf the Web with the best of them and I can play Solitaire for hours. I'm really good at computers." Okay. So that person can pound a keyboard, use a mouse at lightning speed, and has a list of favorite Web sites a mile long. But the real question is "Is that person information literate?" Just because you can pound the keyboard doesn't necessarily mean you can leverage the technology to your advantage or the advantage of your organization. An organization can gather and keep all the data on its customers that a hard drive can hold. You can get all the output reports that one desk can physically hold. You can have the fastest Internet connection created to date. But if the organization doesn't take advantage of customer data to create new opportunities, then all it has is useless information. If the output report doesn't tell the management that it has a serious problem on the factory floor, then all that's been accomplished is to kill a few more trees. If you don't know how to analyze the information from a Web site to take advantage of new sales leads, then what have you really done for yourself today? Most of us think only of hardware and software when we think of an Information System. There is another component of the triangle that should be considered, and that's the people side, or "persware." Think of it this way: 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.


set the organizational strategy for responding. ORGANIZATION TECHNOLOGY INFORMA TION SYSTEMS MANAGEMENT INFORMATION SYSTEMS Organization The key elements of an organization are its people. Using Information Systems effectively requires an understanding of the management. structure. Middle Managers: Carry out the programs and plans of Senior Managers Operational Managers: Responsible for monitoring the firm’s daily activities. Major functions of an organization are: Function Sales and marketing Manufacturing Finance Accounting Human Resources Purpose Selling the organization’s products and services Producing products and services Managing the organization’s financial assets (cash. and maintaining the organization’s labor force. and information technology for shaping the systems.) Maintaining the organization’s financial records (receipts. Different levels of managers are: Senior Managers: make long-range strategic decisions about products and services to produce. bonds. etc) accounting for flow of funds. paychecks. politics. developing. and culture. organization. stocks. Management Managers perceive business challenges in the environment. etc. and operating procedures. allocate human and financial resources to achieve the strategy and coordinate the work.Information Systems are more than computers. maintaining employee 5 . Attracting.

• An important contribution to operational efficiency. emails. Entrepreneur. or scientists) Design products of services. spreadsheets. An End User Perspective of Information System Anyone who uses the information system or the information it produces is an end user. An Enterprise Perspective of Information Systems From an enterprise perspective. tape drives. Technology Computer Based Information Systems (CBIS) utilize the following IT technologies: Computer Hardware: Various physical equipments Computer Software: Preprogrammed instructions. Today the success of any enterprise not only depends on the efficiency on minimizing costs.. an information system us an organizational and management solutions. and the business software to support specific work activity. • Production or Service Workers: (Machinists. and Clerks) Process the organization’s paperwork. • Data Workers: (Secretaries. They are • People of the organization • Information System Specialist: System Analysts or Professional Computer Programmer. The managerial end users use spread sheets. Bookkeepers. and customer service and satisfaction. It is desired today that every person in the organization must be able to use internet and emails. time. and human resource management. employee productivity and morale. An organization requires many different kinds of skills and people: • Managers: Decision Makers • Knowledge Workers: (Engineers. DVD. application software. • Managerial End User: Managers. etc. or Packers) Produce the products or services of the organization. Storage Technology: Using media for storage such as hard disk. and use of information resources but also depends on the effectiveness of the information technology in supporting the organization business.. 6 .records. links the various pieces of hardware and transfers data from one physical location to other. operations management. finance. Assemblers. database management packages. marketing. system software. Telecommunication Technology: Consists of both physical devices and software. or Managerial level Professional. etc. The Information Systems function represents: • A major functional area of business that is as important to business success as the functions of accounting. CD. architects. based on information technology to a challenge possessed by the environment.

The goals of information systems can be easily achieved by employing these resources to their optimum level by keeping in view that the purpose of using IS in an organization. etc.IS professionals and users who design. A major part of the resources of an enterprise and its cost of doing business. storage devices. e. Information System Resources Every Information System is equipped with the following resources. priorities in running different applications. Access.Input that the system takes to produce information • Hardware . Lecture – 3 Components of an IS In an organization. and challenging career opportunity for millions of men and women. includes data communication equipment • Software . information systems consist of the following components. MS-Word.Rules to process data. operate and maintain IS • Procedures . construct. dynamic. Example: email system.g. Application Software Examples: Excel. process. To use an email system (software). o Procedures: Operating instructions for the people who will use an information system. output and store data • Communication networks . Unix. • Data .Computer itself and its peripheral equipment: input. thus posing a major resource management challenges. etc. Examples: Instructions for filling out a paper form or using a software package. 7 . Application software that makes people buy computers that can run the software. These components will formulate a system. people buy computers. routines for malfunctioning IS.Sets of instructions that tell the computer how to input. A vital. etc. security measures. output. which will help us to gather the required information for making decision in various levels of management.• • • • A major source of information and support needed to promote effective decision making by managers.Hardware and software specializing in transmission and reception of electronic data • People . An important ingredient in developing competitive products and services that give an organization a strategic advantage in the global marketplace. • People Resources o End users o IS specialists • Hardware Resources o Machines o Media • Software Resources o Program Operating Systems (OS) Examples: Windows.

and store transactions that take place in the various functional areas of a business for future retrieval and use. etc.• Data Resources: o Data vs. Their primary purpose is to record. etc. gender. 1. deposits. events. things. the kind and quantity of items purchased. a transaction occurs and a transaction system records relevant information. purchases. A transaction processing system (TPS) is an information system that records company transactions (a transaction is defined as an exchange between two or more business entities). Information 1. • Network Resources: o Communications media o Communications processors o Network access & control software Role of information systems Information systems perform three vital roles in any type of organization: • Support of business operations. Its form is aggregated. for an entity of "people. or the operations of a business would grind to a halt. first name. refunds. manipulated. and the invoice amount. Its content is analyzed and evaluated. Transaction processing activities are needed to capture and process data. Processed data placed in a context that gives it value for specific end users. Data: Raw facts. such as the supplier's name. process. observations.) Attributes can be last name. and payments. an external transaction occurs. orders raw materials from its suppliers. 2. When a department orders office supplies from the purchasing department. Information: Data that have been converted into a meaningful and useful context for specific end users. Let us look at a simple example of a business transaction. address. withdrawals. Transaction processing systems (TPS) are cross-functional information systems that process data resulting from the occurrence of business transactions. • Support of strategic competitive advantage. such as sales. validate. Each time the company places an order with a supplier. when a customer places an order for a product. which sells a large number of hamburgers every day. Types of Transactions Note that the transactions can be internal or external. and credit rating. 3. and organized. It is placed in a proper context for a human user. business transactions Objective measurements of the attributes (characteristics) of entities (people. 8 . Transactions are events that occur as part of doing business. Types of Information Systems Transaction processing systems were among the earliest computerized systems. • Support of managerial decision making." 2. McDonald's. places. an internal transaction occurs.

data validation. They are data entry. distributors. A TPS records internal and external transactions for a company. data processing and revalidation. process. Storage f. in online mode. such as customers. Data validation d.• Internal Transactions: Those transactions. which are external to the organization and are related with the external sources. Documents generated at the point where a transaction occurs are called source documents and become input data for the system. regardless of the industry in which they operate. the files are updated periodically. . There are a number of input devices for entering data. marketing quality control. purchase etc. Production policy etc • External Transactions: Those transactions. suppliers. Process of Transaction Processing System The six steps in processing a transaction are: a. For example Recruitment Policy. human resources. which are internal to the company and are related with the internal working of any organization.output generation. repetitive tasks. and store a given transaction. if the TPS shuts down. Data Entry To be processed. Query support a. A TPS performs routine. such as when we make a purchase at retail store. Hence. such as finance. Features of TPS 1. Characteristics of Transaction Processing Systems 1. In batch mode. storage. There are many uses of transaction processing systems in our everyday lives. Data Capture c. including the keyboard and the mouse. It is mostly used by lower-level managers to make operational decisions 3. or register for classes at a university. Output generation g. TPS exist for the various functional areas in an organization. transaction data must first be entered into the system. It is a repository of data that is frequently accessed by other systems 2. when a customer 9 . Promotion Policy. such as MIS and DSS (Decision Support Systems). A TPS is the data lifeline for a company because it is the source of data for other information systems. the consequences can be serious for the organization 3. and query support. For example. and research and development. A TPS is also the main link between the organization and external entities. engineering. manufacturing. For example sales. Almost all organizations. deposit or withdraw money at a bank. accounting. and regulatory agencies 4. There are six steps in processing a transaction. 4. Processing and revalidation e. A TPS supports different tasks by imposing a set of rules and guidelines that specify how to record. each transaction is recorded as it occurs. Transactions can be recorded in batch mode or online. Data entry b. have a manual or automated TPS 2. are regarded as External Transaction. production.

checking for aberrations (abnormalities) (values that are too low or too high). Missing data refers to fields that are missing a mandated data value. magnetic stripe cards. Data Capture We could capture transaction data as close as possible to the source that generates the data. and error correction is done by another. For example. Some commonly used error detection procedures are checking the data for appropriate font (text. such as MICR reader/sorters used in banking for check • Other technologies. the sales receipt becomes the source document for the transaction "return item for refund". and tactile. and inconsistent data. Error detection is performed by one set of control mechanism. etc). then we have invalid data Inconsistent data means that the same data item assumes different values in different places without a valid reason. invalid data. The use of automated methods of data entry is known as source data automation. including electronic mice. Invalid data is data that is outside the range For example. Tips for Data Capturing • Captures data directly without the use of data media by optical scanning of bar codes printed on product packaging.returns an item at a store. if the number of hours worked by a part-time employee is missing on a payroll form. • Magnetic ink character recognition (MICR) devices. Data Validation There are two steps in validation: error detection and error correction. Processing and Revalidation Once the accuracy and reliability of the data are validated. the data are ready for processing. d. or by storing it on the computer system. numbers. if payroll records show that an employee worked 25 hours per day. Salespersons capture data that rarely changes by prerecording it on machine-readable media. such as optical scanning wands and grocery check-out scanners. light pens. It ensures the accuracy and reliability of data by comparing c. voice input. Input also be used as input device depending upon the application requirement b. that is a missing-data error. For example. and checking for missing data. Methods for Data Entry: • Keyboard/video display terminals • Optical character recognition (OCR) devices. if the number of hours worked by a part-time employee is 72 hours per week instead of the 1120 hours. There are two ways to process the transactions: online and batch mode Following methods are available for Data Processing: 10 .

the next step is to update the master file. processed. A transaction file contains information about a group of transactions that occurred in a given period of time. A report. Data Storage Processed data must be carefully and properly stored for future use. a document) from a supplier indicating the quantity and type of each item ordered and the total cost of the order. and printouts). student registration for classes. validated. Each time the master file is updated with information from the transaction file. Data storage is a critical consideration-for many organizations because the value and usefulness of data diminish if data are not properly stored. either to generate additional information or to present the same information in a different format. sales receipts. merging. weekly. e. The next step in the processing of a transaction is to output the results of the transaction to the decision maker. Computer output need not always be presented in hard-copy form (such as reports. Query Support 11 . whereas a report is a summary of two or more transactions. • Batch Processing: Transactions are accumulated over time and processed identically. Output Generation Once data has been input. purchase. Batch processing may be done on a daily. Such soft-copy presentations are known as forms g. revalidated and stored.. They can be processed further. and job orders What is the difference between documents and reports? A document is usually a record of one transaction. Input device may be at a remote location and be linked to the system by networks or by telecommunications systems. documents.• Online transaction processing (OLTP) is the almost instantaneous processing of data. Documents are a popular output method. invoices. but can also appear on computer screens and panels. including most current transaction data. It is processed using techniques such as sorting. the output can be communicated to decision makers in two ways: • Documents and reports • Forms: screens or panels. f. paychecks. on the other hand. and so on. For example. Once the transaction file has been processed. Some examples of online transaction processing are ATM transactions. which is permanent record of all transactions that have occurred. into groups called batches. 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. flight reservations.. the manager of a retail store may receive an invoice (i. whereas batch processing usually involves gathering source documents originated by business transactions. is generated. such as sales orders and invoices. For example. a new master file. a company may process the travel expenses of its employees on a monthly basis. Some examples of documents are invoices. may summarize all the invoices from a given supplier. or monthly basis or any other time period appropriate to the application.e.

For example. intranets. Typically. 12 . and providing access to the basic data of the organization. and web browsers or database management query languages to make inquiries and receive responses concerning the results of transaction processing activity.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. extranets. The goal is to capture the transaction data as soon as possible. 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. storing. Common collection methods include • Point-of sale services • Process control • Electronic data interchange • Electronic commerce websites. 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.

g. • • They do not emphasize on producing specific information products that can best be used by managers. Relative (Online Processing). Point of scale (POS) system at retail stores may use electronic cash register terminals to capture & transmit sales data over telecommunication links to regional computer centers for immediate (Real Time) or nightly (Batch) Processing. • These databases then provide the data resources that can be processed & used by Management Information System. Transaction Processing Systems • Record & process data resulting from business transactions. software. transforms & disseminates information in an organization.Lecture 4 An Information System is an organized combination of people. data is processed immediately after a transaction occurs. It is Classified into three categories: 1. purchases & inventory changes. Decision Support System & Executive Information System. • Process transactions in two basic ways: i. Communication Channels (Networks) & Store Data (Data Resources). E. support enterprise communications & collaboration & update corporate databases. control industrial processes. People have relied on information systems to communicate with each other using a variety of physical devices (Hardware). In this. • Also produce A variety of information products for internal or external use. Information Systems are conceptually classified into two categories: • Operations Support System • Management Support System OPERATION SUPPORT SYSTEM: • Produce a variety of information products for internal & external use. hardware. Information Processing Instructions & Procedures (Software). Transaction data is accumulated over a period of time & is processed periodically. • 13 . In this. • Typical examples are information systems that process sales. Batch Processing. • The results of such processing are used to update customer. Its role is to efficiently process business transactions. inventory & other organizational databases. communication networks & data resources that collects. ii.

data & videoconferencing & multimedia project Websites on the company’s intranet. share resources & coordinate our cooperative work efforts as members of the many formal and informal process & project teams and other workgroups that are a vital part of today’s organizations. marketing specialists. • This includes a category of information systems called process control systems. to continually monitor chemical processes. of automation automatic inventory reorder decisions & production control decisions. They then could easily collaborate via electronic mail. Enterprise Collaboration Systems • are information systems that use a variety of information technologies to help people work together. • E.g. • Example: Many businesses form teams of engineers. Process Control System • Operation support system also makes routine decisions that control operational processes. a product development team could efficiently communicate with each other and coordinate their work activities. They may form virtual teams of people from several departments and locations within a company and include outside consultants as team members. and effectively collaborate in the development or improvement of products and services. The computers monitor a chemical process. in which decisions adjusting a physical production processes are automatically made by computers. • Its goal is to use information technology to enhance the productivity and creativity of teams and workgroups in the modern business enterprise. A petroleum refiner uses electronic sensors linked to computer.2. corporate intranets and extranets and collaboration software known as groupware. 3. • Help us collaborate to communicate ideas. In this way. Such teams would make heavy use of Internet. E. capture & process data detected by sensors & make instant (Real Time) adjustments to appropriate refinery processes. discussion forums.g. 14 . and other knowledge workers to develop new products or improve existing ones.

control. hardware. analyze and manage a telephone or computer network. configuring network components. Information Systems are broadly classified into two categories: • Operations Support System • Management Support System INFORMATION SYSTEMS Support of Business Operations Support of Managerial Decision Making OPERATIONS SUPPORT SYSTEMS MANAGEMENT SUPPORT SYSTEMS TRANSACTION PROCESSING SYSTEMS Processing Business PROCESS Transactions CONTROL SYSTEMS Control of Industrial Processes ENTERPRISE COLLABORATION SYSTEMS Team and Workgroup Collaboration MANAGEMENT EXECUTIVE INFORMATION INFORMATION SYSTEMS SYSTEMS Prespecified Information Reporting for DECISION Tailored for Managers SUPPORT Executives SYSTEMS Interactive Decision Support OPERATION SUPPORT SYSTEM: • An operational support system (OSS) is a set of programs that help a communications service provider monitor. Information Processing Instructions & Procedures (Software). provisioning services. software. and managing faults. • An OSS supports processes such as maintaining network inventory. Communication Channels (Networks) & Store Data (Data Resources). Produce a variety of information products for internal & external use. • 15 . People have relied on information systems to communicate with each other using a variety of physical devices (Hardware). transforms & disseminates information in an organization. communication networks & data resources that collects.Lecture 6 An Information System is an organized combination of people.

field service management OSS can be classified into three categories: 4. control industrial processes.• • They do not emphasize on producing specific information products that can best be used by managers. asset and equipment management. trouble and fault management. purchases & inventory changes. Decision Support System & Executive Information System. billing and cost management Network inventory. design and assign Network discovery and reconciliation. inventory & other organizational databases. Relative (Online Processing). service provision. • These databases then provide the data resources that can be processed & used by Management Information System. Point of scale (POS) system at retail stores may use electronic cash register terminals to capture & transmit sales data over telecommunication links to regional 16 . support enterprise communications & collaboration & update corporate databases. capacity management Network elements. Transaction data is accumulated over a period of time & is processed periodically. accounting. • Process transactions in two basic ways: i. • Also produce a variety of information products for internal or external use. In this. data is processed immediately after a transaction occurs. E. • Typical examples are information systems that process sales.g. There are four key elements of OSS: • • • • 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 Functions of an OSS may include the following components: • • • • Order processing. Transaction Processing Systems • Record & process data resulting from business transactions. Batch Processing. • The results of such processing are used to update customer. In this. Its role is to efficiently process business transactions. ii.

project management tools and others. process control equipment. capture & process data detected by sensors & make instant (Real Time) adjustments to appropriate refinery processes. • A system consisting of a computer. Enterprise Collaboration Systems is a type of information system (IS). • E. The computers monitor a chemical process. Process Control System • Operation support system also makes routine decisions that control operational processes. extranets and other networks needed to support enterprise-wide communications.g. videoconferencing. 17 . 6. and possibly a process interface system. share resources & coordinate our cooperative work efforts as members of the many formal and informal process & project teams and other workgroups that are a vital part of today’s organizations. • It uses information technology to enhance the productivity and creativity of teams and workgroups in the modern business enterprise. • Some examples of enterprise communication tools include email. in which decisions adjusting a physical production processes are automatically made by computers. It is a category of information systems.computer centers for immediate (Real Time) or nightly (Batch) Processing. tools.g. documents and other information that individuals need to manage their own tasks efficiently in their departments. such as the sharing of documents and knowledge to specific teams and individuals within the enterprise. • ECS is a combination of groupware. Enterprise Collaboration Systems • Abbreviated as ECS. 5. collaborative document sharing. Internet. • The objective of an ECS is to provide each user with the tools for managing communications. A petroleum refiner uses electronic sensors linked to computer. to continually monitor chemical processes. ECS are information systems that use a variety of information technologies to help people work together. E. • Help us collaborate to communicate ideas. of automation are automatic inventory reorder decisions & production control decisions.

18 . Management Information Systems 2. e. A major goal of computer based information systems should be the support of management decisionmaking. Several major types of information systems are needed to support a variety of managerial end user responsibilities: 1. MSS was introduced when the concept of MIS originated in the 1960’s. • It provides information about business operations. project management. 2.g. Decision Support Systems. Business applications of information technology viewed as interrelated and integrated computer-based information systems and not as independent data processing jobs. It's also used to refer to the people who manage these systems. • Receive information about internal operations from databases that have been updated by transaction processing systems. Decision Support Systems 3. It emphasizes management orientation of information technology in business. • Used broadly in a number of contexts and includes (but is not limited to): decision support systems. Expert systems. Management Information Systems: • The most common form of Management Support System • Management Information Systems (MIS) is a general name for the academic discipline covering the application of people. • Provide a variety of reports and displays to management. Executive Information Systems 1. not merely the processing of data generated by business operations. • Provide managerial end users with information products that support much of their day-to-day decision making needs. technologies. • Content of these information products are specified in advance by managers so that they contain information that managers need. MIS became buzzword of almost all attempts to relate computer technology and systems theory to data processing in organizations. MIS concept is recognized as vital to efficient and effective information systems in organizations for two reasons: 1. It emphasizes that a system framework should be used for organizing information systems applications. and Executive information systems. and procedures — collectively called information systems — to solve business problems.Lecture 7 MANAGEMENT SUPPORT SYSTEMS (MSS) • • • • When information systems focus on providing information and support for effective decision making by managers. and database retrieval applications. resource and people management applications. they are called Management Support System.

managerial end users donot have to specify their information needs in advance. 19 . data retrieval. or whenever exceptional conditions occur. simulation. Decision Support Systems: • Are a natural progression from information reporting systems and transaction processing systems. • EIS have become so popular in recent years that the use is spreading information ranks of middle management. and reports produced manually as well as by computer systems. and social activities • Goal of computer based executive information systems is to provide top management with immediate and easy access to selective information about key factors that are critical to accomplishing a firm’s strategic objectives. • Are interactive. Executive Information Systems (EIS) Tailored to the strategic information needs of top management. • • 3. Information products provided to managers include displays and reports that can be furnished on demand. So. telephone calls. computer based information systems that use decision models and specialized databases to assist the decision making processes of managerial end users. • Managers generate the information they need for more unstructured types of decisions in an interactive. periodicals. simulation-based process. So EIS are easy to operate and understand. Top executives get the information they need from many sources including letters. • EIS provide information about the current status and projected trends for key factors selected by top executives. managers are simulating and exploring possible alternatives and receiving tentative information based on alternative sets of assumptions. • Graphic displays are used extensively. and information presentation capabilities. • Other sources are meetings. • Provides managers with analytical modeling. memos.• • Obtain data about business environment from external sources. periodically according to a predetermined schedule. 2. • When using a decision support system. • Provide managerial end users with information in an interactive session on an adhoc (as needed) basis. • Decision Support Systems interactively help them find the information they need. & immediate access to internal and external databases is provided.

and objectives as part of a strategic planning process. information systems that support or shape the competitive position and strategies of a business enterprise. services and capabilities that gives a company major advantages over the competitive forces it faces in the global marketplace. Information System for Strategic Management The major role of information systems applications in business was to provide effective support of a company’s strategies for gaining competitive advantage. economic and competitive business environment. policies. a board of directors and an executive committee of the CEO and top executives develop overall organizational goals. transforms and disseminates information in an organization. A company can survive and succeed in the long run only if it successfully develops strategies to confront five competitive forces that shape the structure of competition in its industry. This creates strategic information systems.Lecture 8 Information System: An information system can be any organized combination of people. software. Michael Porter gave a classic model of competitive strategy in which any business that wants to survive and succeed must develop ad implement strategies to effectively counterThe rivalry of competitors within the industry The threat of new entrants The threat of substitutes The bargaining power of customers The bargaining power of suppliers. Strategic Management: Typically. They also monitor the strategic performance of an organization and its overall direction in the political. communications networks and data resources that collects. strategies. This strategic role of information systems involves using information technology to develop products. hardware.      20 .

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 21 .

acquisitions. These linkages may include mergers. manufacturing or distribution agreements between a business and its trading partners.      22 . diversifying into new products and services. joint ventures. consultants and other companies. or entry into unique markets or market niches. competitors. Also. expanding into global markets. Innovation Strategy: Finding new ways of doing business. This may involve the development of unique products and services.The figure illustrates that business can counter the threats of competitive forces that they face by implementing five basic competitive strategies. Alliance Strategy: Establishing new business linkages and alliances with customers. Cost Leadership Strategy: Becoming a low-cost producer of products and services in the industry. suppliers. or integrating into related products or services. 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. a firm can find ways to help its suppliers or customers reduce their costs or to increase the costs of their competitors. Differentiation Strategy: Developing ways to differentiate a firm’s products and services from its competitors’ or reduce the differentiation advantages of competitors. This may allow a firm to focus its products or services to give it advantage in particular segments or niches of a market. Growth Strategy: Significantly expanding a company’s capacity to produce goods and services. or other marketing. forming of “virtual companies”.

efficiency or customer service or shorten time to market. improve quality. suppliers.  Use IT to diversify and integrate into other products and services.  Develop inter-enterprise information systems linked by the Internet and extranets that support strategic business relationships with customers. Develop Alliances  Use IT to create virtual organizations of business partners. Differentiate   Develop new IT features to differentiate products and services. 23 . Other competitive strategies There are many other competitive strategies in addition to the five basic strategies. subcontractors and others. Promote Growth  Use IT to manage regional and global business expansion. they can also be implemented with information technology. Make radical changes to business processes with IT that dramatically cut costs. Innovate    Create new products and services that include IT components. Develop unique new markets or market niches with the help of IT. These are:    Locking in customers or suppliers Building switching costs Raising barriers to entry Leveraging investment in information technology.  Use IT to lower the costs of customers or suppliers. Basic Strategies in the Business Use of Information Technology Lower Costs  Use IT to substantially reduce the cost of business processes. Use IT features to reduce the differentiation advantages of competitors.  Use IT features to focus products and services at selected market niches.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.

Breakthrough Overall Company Growth. Marketing Strategies.Lecture 11 INFORMATION SYSTEMS AND PLANNING AND CONTROL PROCESS IN THE ORGANIZATION Strategic Planning Management Control Tactical Planning Information System Helps to Implement Pure and Mixed Strategies. Evaluates the Results and Exercise Control Achieve Goals and Objectives 24 . Operational Control Through Strategy Revise Strategies Survival. Product.

two broad categories of value activities: Primary Activities and Support Activities. 25 . 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. for most business enterprises. The value chain is a systematic approach to examining the development of competitive advantage. The chain consists of a series of activities that create and build value. They culminate in the total value delivered by an organization.Lecture 12 Value Chain Analysis Michael Porter suggested an approach of analysis of internal and external resources across distinct functional areas which consisted of identifying the series of 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. There are.

Support Activities Supporting activities which provide the infrastructure for primary activities are also required to be identified by isolating them on the basis of technological and strategic distinctiveness. Operations: . Outbound Logistics: . Four categories of support activities are generally distinguished as follows: 26 .Activities involved are transformation of inputs into outputs with the help of Computer Aided Flexible Manufacturing assembly.These include activities which are associated with Online Point of Sale and Order Processing. channel selection and pricing etc. the Primary Activities are generally divisible into five basic categories: 1.These are activities associated with automated procurement. 4. 3. Marketing and Sales: . Customer Service: . Just-In-Time warehousing. 5.Lecture 13 Activities in Value chain Primary Activities Based on technological and strategic distinctness. 2. online sales promotion. Inbound Logistics: .This category includes activities such as Interactive Targeted Marketing.These are activities aimed at providing service to enhance and maintain the value of product through Customer Relationship Management. inventory control and return to suppliers etc. packaging. warehousing of finished goods. storage. scheduling deliveries etc. testing etc.

using IT and web-based technologies to achieve procurement aims through E-commerce Auctions and Exchanges for Suppliers. training and development by developing a Career Development Intranet for employees. Administrative Collaboration and Support Services: .This activity is responsible for all purchasing of goods. They will be responsible for outsourcing. and E-Purchasing.1. 4. 27 . Technology Development: .Employees are an expensive and vital resource. An organization would manage recruitment and selection. Procurement of Resources: . and many other technological developments. The aim is to secure the lowest possible price for purchases of the highest possible quality. design of Extranets for Partners. 2. services and materials.This activity includes and is driven by corporate or strategic planning and involves developing of Collaborative Workflow Intranet Based System. lean manufacturing. This could include production technology like Computer Aided Engineering. 3. 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. The mission and objectives of the organization would be driving force behind the HRM strategy. and rewards and remuneration. Companies need to innovate to reduce costs and to protect and sustain competitive advantage.Technology is an important source of competitive advantage. Internet marketing activities. Human Resource Management: .

Lecture 14
Planning for Information Systems

The plan for development and implemantatin is te basic neccessity for MIS . With the advancement of coputer technology , it is now possible to recognise information as a valuable resources like money and capacity. It is necessary to link its acquisition , storage, use , and disposal as per the business needs for meeting the business objectives . Such a broad-based activity can be executed only when it is conceived as a system . We need a Management Information System flexible enough to deal with the changing nformation needs of the organisaton .It should be conceived as an open system continuosly interacting with the business enviroment with a built-in mechanism to provide the desired informatin as per the new requirements of the managemnet. The designing of such an open system is a complex task. It can be achieved only if the MIS is planned , keeping in view , the plan of the business management of the organsation. The paln of MIS is concurrent o the business plan of the organisation . The information needs for the implementation of the business plan should find places in the MIS. To ensure such an alignment possibility , it is necessary that the business paln – strategic or otherwise , states the information needs. The information needs are then traced to the source data and the systems in the organisation which generates such data . The system of information generation is so planned that strategic information is provided for the strategic planning , control information is provided for a short term plannng and execution . The details of information are provided to the operations management to assess the status of an activity and to find ways to make up , if necessary . Once the management needs are translated into information needs , it is left for the designer to evolve a paln of develeopment and implemantation .

The Factors involved are – 1. MIS goals and objectives The MIS goals and objectives will consider managemnent philosophy , policy

constraints , business risk , internal and external enviroment of the organisation and


the buisness . The goals and the objectives of the MIS would be so stated that they can be measured . 2. Strategy for the plan achievemnet 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 3. The architecture of the MIS 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 . 4. The system development schedule A schedule is made for the development of the system . While preparing the schedule due consideratin is given to the importance of the system in the overall information requirement . Due regard is also given to logical system development . For example , it is necessary to develop the accounting system first and then the analysis . 5. Hardware and software plan Giving due regard to the technical and operational feasibility , the economics of investment is worked out . Then the plan of procument is made after selecting the handware and software . One can take the phased approach of investment starting from the lower congfiguration of hardware going over to higher as develoment takes place . The process is to match the technical decisions with the financial decisions . The system development schedule is linked with the information requirements which in turn , are linked with the goals and objectives of the business . 29

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 .


Lecture 15 THE CLASSES OF INFORMATION Organisational - The number of employees , products , services , locations , the type of business , turnover ad variety of the details of each one of these entities Functional –- Purchases , sales , production , stocks , receivables , payables , outstandings , budgets statutory information. 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 . Decision support – Status information on a particular aspect , such as utilisation , profitability standard , requirement versus availability . Information for problem solving and modelling . Quantitative information on the business status . Non-living inventory , overdue payments and receiveables. Operational – Information on the production , sales , purchase , despatches consumptions , etc. in the form of planned versus actual . The information for monitoring of execution schedules .

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. The goals of a Business Systems Plan (BSP) are to:

Understand the issues and opportunities with the current applications and technical architecture


32 .   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 The result of a BSP project is an actionable roadmap that aligns technology investments to business strategy.

your ability to do extend your reach. [1] The concept of "success factors" was developed by D. For example: KPI = number of new customers CSF = installation of a call centre for providing quotations 33 . Rockart in 1986. Johnson and Michael Friesen applied it to many sector settings.how happy are they? Quality -. a CSF for a successful Information Technology (IT) project is user involvement.[3] In 1995 James A. Critical success factors are elements that are vital for a strategy to be successful. including health care. Ronald Daniel of McKinsey & Company in 1961. A plan should be implemented that considers a platform for growth and profits as well as takes into consideration the following critical success factors: Money factors: positive cash flow.your future. Customer satisfaction -.LECTURE 17 Critical Success Factor                Critical Success Factor (CSF) is a business term for an element which is necessary for an organization or project to achieve its mission.how good is your product and service? Product or service development -.increasing what you know that's profitable. KPIs are measures that quantify objectives and enable the measurement of strategic performance. Strategic relationships -. products and outside revenue.your personal ability to keep it all going A critical success factor is not a key performance indicator (KPI).what's new that will increase business with existing customers and attract new ones? Intellectual capital -. Acquiring new customers and/or distributors -. and profit margins. Sustainability -. Employee attraction and retention -. For example.The process was refined by Jack F.new sources of business. revenue growth.

Those people spread it to two or three more people each. That is how computer viruses are spread. the more potential for fraud and abuse of the information maintained in that system. use the file. have been around for a long time. the harder it is to replicate. which they can use to enter the system. or steal data for their own use. though. In March 1999 a virus called Melissa was written by a hacker and sent out 34 . 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. The virus is now on your computer and spreads to files other than the original. That makes gathering real statistics about hacking attempts and successes hard. and environmental threats to Information Systems. services. erase data. but far too often they destroy files. No. Hackers. You then spread it to two or three other people through touch or association. The more people you have using the system. If managers at all levels do not make security and reliability their number one priority. The weakest link in the chain is poor management of the system. you have more points of entry. those who intentionally create havoc or do damage to a computer system. It is a huge problem. You then send the same or even a different file to a few friends and their computers are infected. That’s why you should use odd combinations of letters and numbers not easily associated with your name to create your password. Password theft is the easiest way for hackers to gain access to a system. Sometimes they don’t do any damage. Nevertheless. Other hackers attack systems because they don’t like the company. Many companies don’t report hackers attempts to enter their systems because they don’t want people to realize their systems are vulnerable. It is easy for people to say that they are only one person and therefore they will not make much difference. You copy a file from an infected source. Let us see why. The longer the password. Some hackers penetrate systems just to see if they can. and maybe send it to friends or associates. which can make attacking the system easy.” so to speak. They use special computer systems that continually check for password files that can be copied. it only takes one person to disable a system or destroy data.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. That is why you have to make it everybody’s business to protect the system. Yes. equipment • Telecommunications problems TABLE 16. it’s hard to control everyone’s actions. Have you ever picked up a cold or the flu from another human? Probably. They generally use specially written software programs that can build various passwords to see if any of them will work. organizational.1 The above list points out some of the technical. Or they look for areas of the system that have been “left open. With distributed computing used extensively in network systems. then the threats to an Information Systems can easily become real. Pretty soon it seems that everyone on campus or at work is sick.

you’re just asking for trouble if you don’t have antivirus software. March 29. Some sites had to take their mail systems off-line. Make sure you update your antivirus software every 30 to 60 days because new viruses are constantly being written and passed around. the software alerts you to its presence. it severely hampered normal operations of many companies and Internet Service Providers through the increased number of emails it generated. You can choose to delete the file or “clean” it. it had reached more than 100.” Whether you use a standalone PC or your computer is attached to a network.via an email attachment.000 copies of mail messages containing Melissa on their systems within 45 minutes. By Monday. One site reported receiving 32.000 computers. you receive an infected file. This type of software checks every incoming file for viruses. 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. Not if. The first confirmed reports of Melissa were received on Friday. While the virus didn’t damage any computer files or data. LECTURE 19 Concerns for System Builders and Users 35 . 1999. March 26. but when.

many companies create fault-tolerant systems that are used as back-ups to help keep operations running if the main system should go out. A spilled cup of coffee can also do some damage! As the lesson points out. 36 . security. Add the cost of lost productivity by the employees to the lost transactions and unhappy customers. procedures. We can’t stress this point enough. Natural disasters such as fires and earthquakes can strike at any time. You must be cognizant of these error points when designing and building a system. These back-up systems add to the overall cost of the system. and technical measures the company uses to keep out unauthorized users or prevent physical damage to the hardware. you do the math. 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. Garbage Out. Just imagine what would happen if an airline reservation system (a typical online transaction processing system) went down. Surely you’ve heard the saying.” What may seem like a simple error to you may not be to the customer. Here the security is in the policies. but think about the losses if the company’s system goes down. and errors. Let us look at three concerns: disasters. Companies spend a lot of money on physical security such as locks on doors or fences around supply depots. 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. They need to do the same thing on their Information Systems. especially an end-user developed system.Every user must be concerned about potential destruction of the Information Systems on which they rely. “Garbage In.

Most computer hardware is not seen by normal users. therefore. compact disc players.LECTURE 20 Computer Hardware Computer hardware is the physical part of a computer. in comparison with software and data. if ever. microwave ovens. which are "soft" in the sense that they are readily created. Personal computers. "firm" rather than just "soft"). A typical Personal computer consists of a case or chassis in a tower shape (desktop) and the following parts: Internals of typical personal computer Typical Motherboard found in a computer 37 . form only a small minority of computers (about 0. Firmware is a special type of software that rarely. the computer hardware familiar to most people. It is in embedded systems in automobiles. and other devices. modified or erased on the computer. electrocardiograph machines. See Market statistics. including the digital circuitry. 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.2% of all new computers produced in 2003). The hardware of a computer is infrequently changed. as distinguished from the computer software that executes within the hardware.

Performs most of the calculations which enable a computer to function. Produces the output for the computer display. Computer fan . Control hard disk. such as a Disk array controller. through which all other components interface. and the computer case will generally have several fans to maintain a constant airflow.Inside a Custom Computer The motherboard is the "heart" of the computer. such as printers and input devices. These ports may also be based upon expansion cards. RAM attaches directly to the motherboard. and (usually) a cooling fan. Firmware usually Basic Input-Output System (BIOS) based or in newer systems Extensible Firmware Interface (EFI) compliant Internal Buses . PCI-E or AGP). and supplies power to the rest of the computer. the controllers sit directly on the motherboard (on-board) or on expansion cards.Fast-access memory that is cleared when the computer is powered-down. • 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 lower the temperature of the computer. CD-ROM and other drives. Central processing unit (CPU) . • parallel port • serial port • USB • firewire A case that holds a transformer. Random Access Memory (RAM) .Connections to various internal components. 38 . in the form of a Graphics Card. voltage control. This will either be built into the motherboard or attached in its own separate slot (PCI. attached to the internal buses. floppy disk.used to connect to external peripherals. and is used to store programs that are currently running. a fan is almost always attached to the CPU.

for example to achieve performance improvement. Hardware that keeps data inside the computer for later use and remains persistent even when the computer has no power. In addition. and/or connecting to other computers. Solid state drive . The following are either standard or very common. Disk array controller .mainly for backup and long-term storage. hardware can include external components of a computer system. Connects the computer to the Internet and/or other computers.for medium-term storage of data. usually external to the computer system 39 . Modem .a device to manage several hard disks. • Wheel Mouse Includes various input and output devices.similar in use to a hard disk. as well as accept input from a microphone.AKA a Pen Drive. but using more recent technology. a portable form of storage. inexpensive but has a short life-span.for dial-up connections Network card .for DSL/Cable internet.CD . • Tape drive .the most common type of removable media. Most modern computers have sound cards built-in to the motherboard. Hard disk . • 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 . Enables the computer to output sound to audio devices. though it is common for a user to install a separate sound card as an upgrade.

Audio output devices • Speakers A device that converts analog audio signals into the equivalent air vibrations in order to make audible sound. • 40 . Video output devices • Printer Peripheral device that produces a hard copy of a document. similar to a television. • Monitor Device that displays a video signal.LECTURE 21 Input • • • • • • • • • • • • • • Text input devices Keyboard Pointing devices Mouse Trackball Gaming devices Joystick Gamepad Game controller Image. • Headset A device similar in functionality to computer speakers used mainly to not disturb others nearby. to provide the user with information and an interface with which to interact. Video input devices Image scanner Webcam Audio input devices Microphone Output • Image.

In the context of systems engineering. Capacity is calculated: (number of machines or workers) x (number of shifts) x (utilization) x (efficiency). such as increasing or decreasing the production quantity of an existing product. capacity planning is used during system design and system performance monitoring. increasing the number of shifts. Lead strategy is adding capacity in anticipation of an increase in demand. Lag strategy refers to adding capacity only after the organization is running at full capacity or beyond due to increase in demand (North Carolina State University. It decreases the risk of waste. or producing new products. Demand for an organization's capacity varies based on changes in production output. "capacity" is the maximum amount of work that an organization is capable of completing in a given period of time. 2006). but it may result in the loss of possible customers. or acquiring additional production facilities. increasing the number of workers or machines. The possible disadvantage to this strategy is that it often results in excess inventory.LECTURE 22 Capacity planning Capacity planning is the process of determining the production capacity needed by an organization to meet changing demands for its products. lag strategy. This is a more conservative strategy. equipment and materials. Capacity can be increased through introducing new techniques. Lead strategy is an aggressive strategy with the goal of luring customers away from the company’s competitors. which is costly and often wasteful. In the context of capacity planning. Match strategy (also known as the tracking strategy) is adding capacity in small amounts in response to changing demand in the market. The goal of capacity planning is to minimize this discrepancy. either in under-utilized resources or unfulfilled customers. 41 . The broad classes of capacity planning are lead strategy. A discrepancy between the capacity of an organization and the demands of its customers results in an inefficiency. This is a more moderate strategy. and match strategy.

utilities and more. device drivers. The tools include text editors. records. which encompasses the physical interconnections and devices required to store and execute (or run) the software. linkers. The concept of reading different sequences of instructions into the memory of a device to control computations was invented by Charles Babbage as part of his difference engine. The term includes application software such as word processors which perform productive tasks for users. 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. The term "software" is sometimes used in a broader context to describe any electronic media content which embodies expressions of ideas such as film. computer software is all computer programs. and etc. a mnemonic representation of a machine language using a natural language alphabet. diagnostic tools.LECTURE 23 Computer Software Computer software consisting of programs. Software is an ordered sequence of instructions for changing the state of the computer hardware in a particular sequence. which interface with hardware to run the necessary services for user-interfaces and applications. High-level languages are compiled or interpreted into machine language object code. In computers.[2] In computer science and software engineering. At the lowest level. enables a computer to perform specific tasks. interpreter. and middleware which controls and co-ordinates distributed systems. which change the state of the computer from its preceding state. The term "software" was first used in this sense by John W.[1] Computer software is so called in contrast to computer hardware. and so on. Programming software usually provides tools to assist a programmer in writing computer programs and software using different programming languages in a more convenient way. software consists of a machine language specific to an individual processor. 42 . printers. tracing. Assembly language must be assembled into object code via an assembler. software is loaded into RAM and executed in the central processing unit. keyboards. readers. A machine language consists of groups of binary values signifying processor instructions (object code). It includes operating systems. Software may also be written in an assembly language. etc. especially memory and other hardware features. debuggers. because the IDE usually has an advanced graphical user interface. An Integrated development environment (IDE) merges those tools into a software bundle. debugging. tapes. interpreters. servers. system software such as operating systems.. and such accessory devices as communications. etc. Tukey in 1958. displays. compilers. essentially. and a programmer may not need to type multiple commands for compiling. The theory that is the basis for most modern software was first proposed by Alan Turing in his 1935 essay Computable numbers with an application to the Entscheidungsproblem. windowing systems.[3] System software helps run the computer hardware and computer system. It is usually written in high-level programming languages that are easier and more efficient for humans to use (closer to natural language) than machine language. or GUI. as opposed to its physical components (hardware) which can only do the tasks they are mechanically designed for.

It is used to automate all sorts of functions. scientific simulations. Businesses are probably the biggest users of application software.) usually see three layers of software performing a variety of tasks: platform. On a PC you will usually have the ability to change the platform software. it may require additional software from a software library in order to be complete. and scripts for graphics and animations. but which cannot work on their own. Such a library may include software components used by stand-alone programs. Thus. though they are often tailored for specific platforms. Even email filters are a kind of user software. and other "system software" as applications. extracted from these libraries. [edit] Three layers Starting in the 1980s. analog computers. Users often see things differently than programmers. and computer games. word processor macros. User-written software User software tailors systems to meet the users specific needs. but that does not change the fact that they run as independent applications. People who use modern general purpose computers (as opposed to embedded systems. business software. User software include spreadsheet templates. Platform software often comes bundled with the computer. Programs may be called by one to many other programs. an operating system. and user software. programs may include standard routines that are common to many programs. application software has been sold in mass-produced packages through retailers. Most users think of compilers. databases. and typically a graphical user interface which. etc. In particular. databases. Platform software Platform includes the firmware.g. supercomputers. Users create 43 . A program may not be sufficiently complete for execution by a computer. allow a user to interact with the computer and its peripherals (associated equipment). medical software. Typical applications include industrial automation.. in total. Applications are almost always independent programs from the operating system. Typical examples include office suites and video games. Application software Application software or Applications are what most people think of when they think of software. Sometimes applications are bundled with the computer. but almost every field of human activity now uses some form of application software. application. device drivers. of computer 'housekeeping') but do not return data to their calling program. Application software is often purchased separately from computer hardware. educational software. programs may call zero to many other programs.Application software allows end users to accomplish one or more specific (noncomputer related) tasks. Libraries may also include 'stand-alone' programs which are activated by some computer event and/or perform some function (e.

many users may not be aware of the distinction between the purchased packages. and what has been added by fellow co-workers.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. 44 .

and UK. processes. The globalization of outsourcing operating models has resulted in new terms such as nearshoring and rightshoring that reflect the changing mix of locations. Outsourcing and offshoring are used interchangeably in public discourse despite important technical differences. human resources. Under the new contractual agreement the supplier acquires the means of production which may include people. 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. This is evident in the increasing presence of Indian outsourcing companies in the U. facilities and real estate management. The client agrees to procure the services from the supplier for the term of the contract. and accounting. This is seen in the opening of offices and operations centers by Indian companies in the U.[5] Multisourcing refers to large (predominantly IT) outsourcing agreements. and UK. this may or may not involve some degree of offshoring. clearly defines responsibility and has end-to-end integration. Under the agreement the supplier acquires the means of production in the form of a transfer of people. technology and resources. With the globalization of outsourcing companies the distinction between outsourcing and offshoring will become less clear over-time. technology. [7] LECTURE 25 Process of outsourcing 45 . manufacturing and engineering. This requires a governance model that communicates strategy. intellectual property and assets. or to make more efficient use of labor.[4]. The decision to outsource is often made in the interest of lowering firm costs. regardless of whether the work is outsourced or stays within the same corporation[2][3] .S. Many companies also outsource customer support and call center functions. [6] Multisourcing is a framework to enable different parts of the client business to be sourced from different suppliers. assets and other resources from the client. Offshoring is the transfer of an organizational function to another country.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.[1] The client organization and the supplier enter into a contractual agreement that defines the transferred services. The process of outsourcing formalizes the description of the non-core operation into a contractual relationship between the client and the supplier. Overview Outsourcing involves the transfer of the management and/or day-to-day execution of an entire business function to an external service provider. redirecting or conserving energy directed at the competencies of a particular business. capital.S. Business segments typically outsourced include information technology. Outsourcing involves contracting with a supplier.

Termination or renewal Near the end of the contract term a decision will be made to terminate or renew the contract. 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. Supplier competition A competition is held where the Client marks and scores the supplier proposals. Supplier proposals A Request for Proposal(RFP) is issued to the shortlist suppliers requesting a proposal and a price. It is not unusual for two suppliers to go into competitive negotiations. Outsourcing is the divestiture of a business function involving the transfer of people and the sale of assets to the Supplier. the supplier proposals. There are three significant dates that each party signs up to the contract signature date. BAFO submissions and convert these into the contractual agreement between the Client and the Supplier. 46 . 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 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. Screening can be enhanced by issuing a Request for Information (RFI) to a wider audience. This is a legally binding document and is core to the governance of the relationship. Termination may involve taking back services insourcing or the transfer of services to another supplier. Transition The transition will begin from the effective date and normally run until four months after service commencement date.Deciding to outsource The decision to outsource is taken at a strategic level and normally requires board approval. Only once a high level business case has been established for the scope of services will a search begin to choose an outsourcing partner. It is normal to go into the due diligence stage with two suppliers to maintain the competition. 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. This may involve a number of face-to-face meetings to clarify the client requirements and the supplier response. This is known as down select in the industry. Ongoing service delivery This is the execution of the agreement and lasts for the term of the contract. Negotiations The negotiations take the original RFP. The suppliers will be qualified out until only a few remain. This stage finalizes the documentation and the final pricing structure. These projects make the changes to the environment required to meet the commitments in the proposal. the effective date when the contract terms become active and a service commencement date when the supplier will take over the services. The process begins with the Client identifying what is to be outsourced and building a business case to justify the decision.

That is why ERP is often referred to as back-office software. Many companies. 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. or ERP. But ERP combines them all together into a single. Typically. All that lounging around in inbaskets causes delays and lost orders. for example. when a customer places an order. How can ERP improve a company's business performance? ERP's best hope for demonstrating value is as a sort of battering ram for improving the way your company takes a customer order and processes it into an invoice and revenue— otherwise known as the order fulfillment process. When one department finishes with the order it is automatically routed via the ERP system to the next department. to get into the warehouse's computer system to see whether the item has been shipped. often being keyed and rekeyed into different departments' computer systems along the way. That integrated approach can have a tremendous payback if companies install the software correctly. doesn't live up to its acronym. ERP vanquishes the old standalone computer systems in finance. that order begins a mostly paper-based journey from in-basket to in-basket around the company. 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. for example). Take a customer order. Each of those departments typically has its own computer system optimized for the particular ways that the department does its work.LECTURE 26 What is ERP? Enterprise resource planning software. Meanwhile. he has all the information necessary to complete the order (the customer's credit rating and order history from the finance module. "You'll have to call the warehouse" is the familiar refrain heard by frustrated customers. rather. People in these different departments all see the same information and can update it. That is a tall order. Most vendors' ERP software is flexible enough that you can install some modules without buying the whole package. HR. the company's inventory levels from the warehouse moduleand the shipping dock's trucking schedule from the logistics module. and all the keying into different computer systems invites errors. manufacturing and the warehouse all still get their own software. for example. This is ERP's true ambition. But remember the enterprise part. manufacturing and the warehouse. ERP takes a customer order and provides a software road map for automating the different steps along the path to fulfilling it. integrated software program that runs off a single database so that the various departments can more easily share information and communicate with each other. for example. Forget about planning—it doesn't do much of that—and forget about resource. To find out where the order is at any point. It doesn't handle the up-front selling process (although most ERP vendors have recently developed CRM software to do this). a throwaway term. and replaces them with a single unified software program divided into software modules that roughly approximate the old standalone systems. When a customer service representative enters a customer order into an ERP system. you need only log in to the 47 . 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. will just install an ERP finance or HR module and leave the rest of the functions for another day. Finance. 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.

Let's go back to those inboxes for a minute. the customer service representatives are no longer just typists entering someone's name into a computer and hitting the return key. The software is less important than the changes companies make in the ways they do business. That is why the value of ERP is so hard to pin down. manufacture goods. responsibility and communication have never been tested like this before. but it was simple. 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. If they don't. and customers get their orders faster and with fewer errors than before. the warehouse did its job. People don't like to change. People in the warehouse who used to keep inventory in their heads or on scraps of paper now need to put that information online. Not anymore. That process may not have been efficient. Finance did its job. customer service reps will see low inventory levels on their screens and tell customers that their requested item is not in stock. The reality is much harsher. If you use ERP to improve the ways your people take orders. such as employee benefits or financial reporting. and ERP asks them to change how they do their jobs. But it's not just the customer service representatives who have to wake up. ERP can apply that same magic to the other major business processes. you will see value from the software. is the dream of ERP. With ERP. and if anything went wrong outside of the department's walls.ERP system and track it down. It flickers with the customer's credit ra ting from the finance department and the product inventory levels from the warehouse. The ERP screen makes them businesspeople. That. it was somebody else's problem. If you simply install the software without changing the ways people do their jobs. at least. and the answers affect the customer and every other department in the company. 48 . the order process moves like a bolt of lightning through the organization. With luck. Accountability. 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. ship them and bill for them.

And that kind of change doesn't come without pain. the ways you do business will need to change and the ways people do their jobs will need to change too. in which case there is no reason to even consider ERP. and the different business units may each have their own version of how much they contributed to revenues. By having this information in one software system. That can lead to reduced inventories of the stuff used to make products (work-in-progress inventory). and it improves visibility of the order fulfillment process inside the company. on average— but rather to understand why you need it and how you will use it to improve your business. customers completely satisfied). companies can keep track of orders more easily. inventory and shipping among many different locations at the same time. reducing the finished good inventory at the warehouses and shipping docks. Integrate financial information—As the CEO tries to understand the company's overall performance. The important thing is not to focus on how long it will take—real transformational ERP efforts usually run between one and three years. but ERP helps too. Finance has its own set of revenue numbers. What will ERP fix in my business? There are five major reasons why companies undertake ERP. To really improve the flow of your supply chain. or the implementation was limited to a small area of the company. • Standardize and speed up manufacturing processes—Manufacturing companies —especially those with an appetite for mergers and acquisitions—often find that multiple business units across the company make the same widget using different methods and computer systems. ERP creates a single version of the truth that cannot be questioned because everyone is using the same system. and coordinate manufacturing. integrated computer system can save time. and it can help users better plan deliveries to customers. six months is short) implementations all have a catch of one kind or another: The company was small. your ways of doing business are working extremely well (orders all shipped on time. 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). Standardizing those processes and using a single. To do ERP right. Don't be fooled when ERP vendors tell you about a three or six month average implementation time. of course. ERP systems come with standard methods for automating some of the steps of a manufacturing process. he may find many different versions of the truth. • 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.LECTURE 27 ERP Features Companies that install ERP do not have an easy time of it. sales has another version. 49 . Those short (that's right. Unless. you need supply chain software. productivity higher than all your competitors. rather than scattered among many different systems that can't communicate with one another. increase productivity and reduce head count. • Reduce inventory—ERP helps the manufacturing process flow more smoothly.

• Standardize HR information—Especially in companies with multiple business units. In the race to fix these problems. While most packages are exhaustively comprehensive. Most ERP systems were designed to be used by discrete manufacturing companies (that make physical things that can be counted). ERP can fix that. Each of these industries has struggled with the different ERP vendors to modify core ERP programs to their needs. simple method for tracking employees' time and communicating with them about benefits and services. which immediately left all the process manufacturers (oil. companies often lose sight of the fact that ERP packages are nothing more than generic representations of the ways a typical company does business. each industry has its quirks that make it unique. chemical and utility companies that measure their products by flow rather than individual units) out in the cold. HR may not have a unified. 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. medium and large companies in a range of industries—the average TCO was $15 million (the highest was $300 million and lowest was $400.6 million. 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. Among the 63 companies surveyed—including small. Or they can modify the software to fit the process. which is when the real costs of maintaining. The TCO numbers include getting the software installed and the two years afterward.000). financial executives should plan to write checks to cover consulting. What are the hidden costs of ERP? Although different companies will find different land mines in the budgeting process. integration testing and a long laundry list of other expenses before the benefits of ERP start to manifest themselves. software. But the median annual savings from the new ERP system were $1. including hardware. When will I get payback from ERP—and how much will it be? Don't expect to revolutionize your business with ERP. Underestimating the price of teaching users their new job processes can lead to a rude shock down the line. process rework. which will slow down the project. While it's hard to draw a solid number from that kind of range of companies and ERP efforts. Meta came up with one statistic that proves that ERP is expensive no matter what kind of company is using it. What does ERP really cost? Meta Group recently did a study looking at the total cost of ownership (TCO) of ERP. 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. At that point there are two things they can do: They can change the business process to accommodate the software. the move to ERP is a project of breathtaking scope. upgrading and optimizing the system for your business are felt. In addition to budgeting for software costs.320. and so can failure to consider data warehouse integration requirements and the cost of extra software to duplicate the old report formats. The TCO for a "heads-down" user over that period was a staggering $53. professional services and internal staff costs. those who have implemented ERP packages agree that certain costs are more 51 . 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. It is a navel-gazing exercise that focuses on optimizing the way things are done internally rather than with customers. 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). suppliers or partners. and the price tags on the front end are enough to make the most placid CFO a little twitchy. 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.

You're playing with fire. not just a new software interface. The customizations can affect every module of the ERP system because they are all so tightly linked together. Training expenses are high because workers almost invariably have to learn a new set of processes. finance people will be using the same software as warehouse people and they will both be entering information that affects the other. Veterans recommend that instead of plugging in dummy data and moving it from one application to the next. Much more costly. You will have to hire extra staffers to do the customization work. To do this accurately. 4. Data conversion 52 . ERP pros vote the following areas as most likely to result in budget overrun. from order entry through shipping and receipt of payment—the whole order-to-cash banana— preferably with the participation of the employees who will eventually do those jobs. and keep them on for good to maintain it. it will be up to your IT and businesspeople to provide that training. Ultimately. you're better off. Worse. 1. Training Training is the near-unanimous choice of experienced ERP implementers as the most underestimated budget item. maybe it won't. It will be the best ERP investment you ever make. If you need to build the links yourself. One enterprising CIO hired staff from a local business school to help him develop and teach the ERP business-training course to employees. not on educating people about the particular ways you do business. Integration and testing Testing the links between ERP packages and other corporate software links that have to be built on a case-by-case basis is another often-underestimated cost. run a real purchase order through the system. As with training. 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. 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. 3. Prepare to develop a curriculum yourself that identifies and explains the different business processes that will be affected by the ERP system. If you can buy addons from the ERP vendor that are pre-integrated. the vendor will not be there to support you. So take whatever you have budgeted for ERP training and double or triple it up front. They are focused on telling people how to use software. No matter what. is actual customization of the core ERP software itself. Armed with insights from across the business.commonly overlooked or underestimated than others. outside training companies may not be able to help you. they have to have a much broader understanding of how others in the company do their jobs than they did before ERP came along. Customization Add-ons are only the beginning of the integration costs of ERP. All require integration links to ERP. expect things to get ugly. andsomething to be avoided if at all possible. Maybe it will work. 2. Remember that with ERP. testing ERP integration has to be done from a process-oriented perspective. A typical manufacturing company may have add-on applications from the major—e-commerce and supply chain—to the minor— sales tax computation and bar coding.

Users are in a pickle here: Refreshing all the ERP data every day in a big corporate data warehouse is difficult. such as customer and supplier records. The software is too complex and the business changes too dramatic to trust the project to just anyone. But even clean data may demand some overhaul to match process modifications necessitated—or inspired—by the ERP implementation. a specific number of the user company's staff should be able to pass a projectmanagement leadership test—similar to what Big Five consultants have to pass to lead an ERP engagement. Consultants ad infinitum When users fail to plan for disengagement. 53 . Although few CIOs will admit it. The bad news is a company must be prepared to replace many of those people when the project is over. and ERP systems do a poor job of indicating which information has changed from day to day. the data from the ERP system must be combined with data from external systems for analysis purposes. 6. companies should identify objectives for which its consulting partners must aim when training internal staff. If you let them go. making selective warehouse updates tough. The upshot is that the wise will check all their data analysis needs before signing off on the budget. you'll wind up hiring them—or someone like them —back as consultants for twice what you paid them in salaries. 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. product design data and the like. Replacing your best and brightest It is accepted wisdom that ERP success depends on staffing the project with the best and brightest from the business and IS divisions. Include metrics in the consultants' contract. To avoid this. Consequently. 7. 5. for example. consultancies and other companies that have lost their best people will be hounding yours with higher salaries and bonus offers than you can afford—or that your HR policies permit. Huddle with HR early on to develop a retention bonus program and create new salary strata for ERP veterans.It costs money to move corporate information. 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. Though the ERP market is not as hot as it once was. from old systems to new ERP homes. Data analysis Often. most data in most legacy systems is of little use. One expensive solution is custom programming. those companies are more likely to underestimate the cost of the move. consulting fees run wild.

With millions of lines of code. computers were powered by vacuum tubes hundreds and thousands of them. That's why its a good idea not to buy the original version of a new software program but to wait until some of the major bugs have been found b y others and fixed by the company. they found a moth had landed on one of the tubes and burned it out.LECTURE 29 System Quality Problems: Software and Data It would be nice to have a perfect world. but we donÕt. What if the person updating your college records fails to record your grade correctly for this course and gives you a D instead of a B or an A? What if your completion of this course isn't even recorded? Think of the time and difficulty you'll experience getting the data corrected. If you did a poor job analyzing and designing the system. Bugs and Defects The term bug. maintenance will be reduced. It needs constant and continual attention. you can reduce the number of them in your programs by using the tools discussed in other chapters to design good programs from the beginning. You as an end user can't do much about the software. Grace Hopper. The "it won't happen to me" attitude is trouble. maintenance will be a far more difficult task. Many bugs originate in poorly defined and designed programs and just keep infiltrating all parts of the program. 54 . Many system quality problems can be solved by instituting measures to decrease the bugs and defects in software and data entry. The Maintenance Nightmare You simply can't build a system and then ignore it. Most software manufacturers know their products contain bugs when they release them to the marketplace. Defects in software and data are real. an early pioneer. it's impossible to have a completely error-free program. So the term "bug" came to describe problems with computers and software. Back then. How well you did back then will play out in the maintenance of the system. Use antivirus software on your computer and update it every 30-60 days. They provide free updates and fixes on their Web sites. has been around since the 1940s and 1950s. When her team opened the back of the computer to see what was wrong. most unintentionally. used to describe a defect in a software program. but you can do something about the data you input. You just might have to search through thousands or millions of lines of code to find one small error that can cause major disruptions to the smooth functioning of the system. Because bugs are so easy to create. Data Quality Problems Let's bring the problem of poor data quality closer to home. If you did a good job. When you're considering organizational changes. you must consider what changes need to be made to the systems that support the business unit. no matter how minor they may seem. was troubleshooting a computer that had quit running. Keep in mind that software is very complex nowadays. In the SDLC lesson. Information Systems security is everyone's business. The fact is that half of a company's technology staff time is devoted to maintenance. we stress good system analysis and design.

55 .

third-party service providers. including demand signals. conversion. Cash-Flow: Arranging the payment terms and the methodologies for exchanging funds across entities within the supply chain.LECTURE 30 Supply chain management Supply chain management (SCM) is the process of planning. direct shipment. 56 . Cross docking. production facilities. procurement. work-in-process and finished goods. while others consider the terms to be interchangeable. The term supply chain management was coined by consultant Keith Oliver. which can be suppliers. and logistics management activities. information and funds across the supply chain. distribution centers. it also includes coordination and collaboration with channel partners. implementing. Supply chain execution is managing and coordinating the movement of materials. and customers. Importantly. inventory and transportation etc. Information: Integrate systems and processes through the supply chain to share valuable information. pull or push strategies. and controlling the operations of the supply chain as efficiently as possible. Inventory Management: Quantity and location of inventory including raw materials. intermediaries. Supply Chain Management spans all movement and storage of raw materials. forecasts. Supply Chain Management integrates supply and demand management within and across companies. The definition one America professional association put forward is that Supply Chain Management encompasses the planning and management of all activities involved in sourcing. In essence. Supply chain management problems Supply chain management must address the following problems: • • • • • Distribution Network Configuration: Number and location of suppliers. Distribution Strategy: Centralized versus decentralized. warehouses and customers. third party logistics. and finished goods from point-of-origin to point-of-consumption. of strategy consulting firm Booz Allen Hamilton in 1982. work-in-process inventory. With SCEM possible scenarios can be created and solutions can be planned. The flow is bi-directional. Supply Chain Management is also a category of software products. Supply chain event management (abbreviated as SCEM) is a consideration of all possible occurring events and factors that can cause a disruption in a supply chain. Some experts distinguish Supply Chain Management and logistics.

so that new and existing products can be optimally integrated into the supply chain. 57 . The effect has been to increase the number of companies involved in satisfying consumer demand. they have reduced their ownership of raw materials sources and distribution channels. and quality of inventory. load management Information Technology infrastructure. and customers. and operational levels of activities. while reducing management control of daily logistics operations.Activities/functions Supply chain management is a cross-functional approach to managing the movement of raw materials into an organization and the movement of finished goods out of the organization toward the end-consumer. to support supply chain operations. locations. Another model is the SCM Model proposed by the Global Supply Chain Forum (GSCF). and planning process definition. Production decisions. These functions are increasingly being outsourced to other corporations that can perform the activities better or more cost effectively. thus improving inventory visibility and improving inventory velocity. including the number. including quantity. Several models have been proposed for understanding the activities required to manage material movements across organizational and functional boundaries. and size of warehouses. Inventory decisions. including all nodes in the supply chain. Strategic • • • • • • Strategic network optimization. location. Transportation strategy. Strategic partnership with suppliers. scheduling. Where to make and what to make or buy decisions Align overall organizational strategy with supply strategy Tactical • • • • • • Sourcing contracts and other purchasing decisions. creating communication channels for critical information and operational improvements such as cross docking. including contracting. distributors. distribution centers and facilities. including frequency. The purpose of supply chain management is to improve trust and collaboration among supply chain partners. SCOR is a supply chain management model promoted by the Supply Chain Management Council. location. Supply chain activities can be grouped into strategic. Milestone payments Operational • Daily production and distribution planning. direct shipping. and third-party logistics. routes. Benchmarking of all operations against competitors and implementation of best practices throughout the enterprise. tactical. Product design coordination. Less control and more supply chain partners led to the creation of supply chain management concepts. and contracting. As corporations strive to focus on core competencies and become more flexible.

companies in a supply network concentrate on the inputs and outputs of the processes. Therefore. following the earlier "Just-In-Time". Order promising. including current inventory and forecast demand. including all suppliers. This inter-organizational supply network can be acknowledged as a new form of organization. outsourcing and information technology have enabled many organizations such as Dell and Hewlett Packard. Demand planning and forecasting. particularly the dramatic fall in information communication costs. this concept of business relationships extends beyond traditional enterprise boundaries and seeks to organize entire business processes throughout a value chain of multiple companies.[1] In Peter Drucker's (1998) management's new paradigms. 2004). technological changes. globalization. with little concern for the internal management working of other individual players. distribution centers. in collaboration with all suppliers. Production operations. and other customers. It is not clear what kind of performance impacts different supply network structures could have on firms.[2] Second. accounting for all constraints in the supply chain. coordinating the demand forecast of all customers and sharing the forecast with all suppliers. 1990). 1993). has led to changes in coordination among the members of the supply chain network (Coase. From a system's point of view. However. Traditionally. Outbound operations. including all fulfillment activities and transportation to customers. 1979). joint ventures. During the past decades. Inbound operations. the network structure fits neither "market" nor "hierarchy" categories (Powell. with the complicated interactions among the players. and little is known about the coordination conditions and trade-offs that may exist among the players.• • • • • • • Production scheduling for each manufacturing facility in the supply chain (minute by minute). to successfully compete in the global market and networked economy. Sourcing planning. [edit] Supply chain management Organizations increasingly find that they must rely on effective supply chains. the choice of internal management control structure is known to impact local firm performance (Mintzberg. a complex network structure can be decomposed into individual component firms (Zhang and Dilts. as an outcome of globalization and proliferation of multi-national companies. including transportation from suppliers and receiving inventory. In the 21st century. a paramount component of transaction costs. First. there have been a few changes in business environment that have contributed to the development of supply chain networks. or networks. including the consumption of materials and flow of finished goods. strategic alliances and business partnerships were found to be significant success factors. 1998). 58 . "Lean Management" and "Agile Manufacturing" practices. to successfully operate solid collaborative supply networks in which each specialized business partner focuses on only a few key strategic activities (Scott. manufacturing facilities.

such a structure can be defined as "a group of semiindependent organizations. "Virtual Corporation". using terms such as "Keiretsu". and "Next Generation Manufacturing System". 2001).Many researchers have recognized these kinds of supply network structure as a new organization form. "Extended Enterprise". Global Production Network".[3] In general. which collaborate in everchanging constellations to serve one or more markets in order to achieve some business goal specific to that collaboration" (Akkermans. each with their capabilities. 59 .

common systems and shared information. Customer service management Procurement Product development and commercialization Manufacturing flow management/support Physical distribution Outsourcing/partnerships Performance measurement a) Customer service management process Customer Relationship Management concerns the relationship between the organization and its customers. Supply chain business process integration involves collaborative work between buyers and suppliers. and attempts to satisfy this demand. An example scenario: the purchasing department places orders as requirements become appropriate. b.LECTURE 31 Supply chain business process integration Successful SCM requires a change from managing individual functions to integrating activities into key supply chain processes. However. According to Lambert and Cooper (2000) operating an integrated supply chain requires continuous information flows.Customer service provides the source of customer information. The key supply chain processes stated by Lambert (2004) are: • • • • • • • • Customer relationship management Customer service management Demand management Order fulfillment Manufacturing flow management Supplier relationship management Product development and commercialization Returns management One could suggest other key critical supply business processes combining these processes stated by Lambert such as: a. management has reached the conclusion that optimizing the product flows cannot be accomplished without implementing a process approach to the business. g. communicates with several distributors and retailers. f. d. responding to customer demand. Marketing. Shared information between supply chain partners can only be fully leveraged through process integration. Successful organizations use following steps to build customer relationships: • • determine mutually satisfying goals between organization and customers establish and maintain customer rapport 60 . in many companies. c. which in turn assist to achieve the best product flows. joint product development. It also provides the customer with real-time information on promising dates and product availability through interfaces with the company's production and distribution operations. e.

This requires performing resource planning. supply continuity. Also. such as work-in-process storage. 2. customers and suppliers must be united into the product development process. As product life cycles shorten. c) Product development and commercialization Here. changes in the manufacturing flow process lead to shorter cycle times. coordinate with customer relationship management to identify customerarticulated needs. the customer is the final destination of a marketing channel. and must accommodate mass customization. and 3. meaning improved responsiveness and efficiency of demand to customers. develop production technology in manufacturing flow to manufacture and integrate into the best supply chain flow for the product/market combination. transportation. select materials and suppliers in conjunction with procurement. Activities related to planning. inbound transportation. handling. and research to new sources or programmes. Activities related to obtaining products and materials from outside suppliers. In firms where operations extend globally. Also. managers of the product development and commercialization process must: 1. and the 61 . The desired outcome is a win-win relationship. order placement. In physical distribution. negotiation. and reduction times in the design cycle and product development is achieved. the purchasing function develops rapid communication systems. Orders are processes operating on a just-in-time (JIT) basis in minimum lot sizes. hedging. such as electronic data interchange (EDI) and Internet linkages to transfer possible requirements more rapidly. and time phasing of components. e) Physical distribution This concerns movement of a finished product/service to customers. supply sourcing.• 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. d) Manufacturing flow management process The manufacturing process is produced and supplies products to the distribution channels based on past forecasts. Also. thus to reduce time to market. scheduling and supporting manufacturing operations. storage and handling and quality assurance. sourcing should be managed on a global basis. inventory at manufacturing sites and maximum flexibility in the coordination of geographic and final assemblies postponement of physical distribution operations. Manufacturing processes must be flexible to respond to market changes. the appropriate products must be developed and successfully launched in ever shorter time-schedules to remain competitive. According to Lambert and Cooper (2000). includes the responsibility to coordinate with suppliers in scheduling. where both parties benefit.

f) Outsourcing/partnerships This is not just outsourcing the procurement of materials and components.T. Cost Customer Service Productivity measures Asset measurement. This movement has been particularly evident in logistics where the provision of transport. 2. Postponement 3. thus it links a marketing channel with its customers (e. 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. According to experts internal measures are generally collected and analyzed by the firm including 1. By taking advantage of supplier capabilities and emphasizing a long-term supply chain perspective in customer relationships can be both correlated with firm performance. but also outsourcing of services that traditionally have been provided in-house. to manage and control this network of partners and suppliers requires a blend of both central and local involvement. links manufacturers. warehousing and inventory control is increasingly subcontracted to specialists or logistics partners. retailers). Customisation 62 . A. Also. and Quality. External performance measurement is examined through customer perception measures and "best practice" benchmarking. 5. 3.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. and includes 1) customer perception measurement. 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. Components of Supply Chain Management are 1. g) Performance measurement Experts found a strong relationship from the largest arcs of supplier and customer integration to market share and profitability. Kearney Consultants (1985) noted that firms engaging in comprehensive performance measurement realized improvements in overall productivity. and 2) best practice benchmarking. 4.g. As logistics competency becomes a more critical factor in creating and maintaining competitive advantage. Standardisation 2. logistics measurement becomes increasingly important because the difference between profitable and unprofitable operations becomes more narrow. wholesalers.

and then transported to distribution centers. On the other hand. strategic decisions are made typically over a longer time horizon. Supply chains exist in both service and manufacturing organizations. transformed into finished goods in a single step. Cooper and Ellram [1993] compare supply chain management to a well-balanced and well-practiced relay team. where raw material is procured from vendors. The flow of materials is not always along an arborescent network. Supply chain management is typically viewed to lie between fully vertically integrated firms. and guide supply chain policies from a design perspective. Realistic supply chains have multiple end products with shared components. manufacturing. and those where each channel member operates independently. operational decisions are short term. and ultimately. These organizations have their own objectives and these are often conflicting.LECTURE 32 A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials. Purchasing contracts are often negotiated with very little information beyond historical buying patterns. Supply Chain Decisions We classify the decisions for supply chain management into two broad categories -strategic and operational. transformation of these materials into intermediate and finished products. where the entire material flow is owned by a single firm. and the distribution of these finished products to customers. The result of these factors is that there is not a single. marketing. Clearly. The relationships are the strongest between players who directly pass the baton. Many manufacturing operations are designed to maximize throughput and lower costs with little consideration for the impact on inventory levels and distribution capabilities. there is a need for a mechanism through which these different functions can be integrated together. although the complexity of the chain may vary greatly from industry to industry and firm to firm. but the entire team needs to make a coordinated effort to win the race. and the purchasing organizations along the supply chain operated independently. and focus on activities over a day-to-day basis. Below is an example of a very simple supply chain for a single product. 63 . integrated plan for the organization---there were as many plans as businesses. customers. distribution. These are closely linked to the corporate strategy (they sometimes {\it are} the corporate strategy). facilities and capacities. As the term implies. Marketing's objective of high customer service and maximum sales dollars conflict with manufacturing and distribution goals. The effort in these type of decisions is to effectively and efficiently manage the product flow in the "strategically" planned supply chain. Traditionally. Supply chain management is a strategy through which such an integration can be achieved. Such a team is more competitive when each player knows how to be positioned for the hand-off. various modes of transportation may be considered. Therefore coordination between the various players in the chain is key in its effective management. and the bill of materials for the end items may be both deep and large. planning.

2) production. However. These levels are critical. tariffs. they also have implications on an operational level.) Although location decisions are primarily strategic. since they are primary determinants of customer service levels. Since holding of inventories can cost anywhere between 20 to 40 percent of their value. These decisions include the construction of the master production schedules. These decisions are of great significance to a firm since they represent the basic strategy for accessing customer markets. Their primary purpose to buffer against any uncertainty that might exist in the supply chain. so are the possible paths by which the product flows through to the final customer. most researchers have approached the management of inventory from an operational perspective. local content. costs and customer service levels of the firm. and which plants to produce them in. number. (See Arntzen. and level of service. Inventory Decisions These refer to means by which inventories are managed. and sourcing points is the natural first step in creating a supply chain. at each stocking location. production limitations.LECTURE 33 There are four major decision areas in supply chain management: 1) location. Location Decisions The geographic placement of production facilities. these decisions have a big impact on the revenues. As before. taxes. and equipment maintenance. their efficient management is critical in supply chain operations. Transportation Decisions The mode choice aspect of these decisions are the more strategic ones. Brown. Once the size. The location of facilities involves a commitment of resources to a long-term plan. but determine the exact path(s) through which a product flows to and from these facilities.the determination of the optimal levels of order quantities and reorder points. and there are both strategic and operational elements in each of these decision areas. and setting safety stock levels. It is strategic in the sense that top management sets goals. cost. These decisions should be determined by an optimization routine that considers production costs. Inventories exist at every stage of the supply chain as either raw materials. and quality control measures at a production facility. and 4) transportation (distribution). These decisions assume the existence of the facilities. plants to DC's. and DC's to customer markets. semi-finished or finished goods. These include deployment strategies (push versus pull). 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 64 . These are closely linked to the inventory decisions. Production Decisions The strategic decisions include what products to produce. stocking points. control policies --. 3) inventory. etc. and location of these are determined. Other considerations include workload balancing. Harrison and Trafton [1995] for a thorough discussion of these aspects. They can also be in-process between locations. Operational decisions focus on detailed production scheduling. scheduling production on machines. distribution costs. and will have a considerable impact on revenue. Another critical issue is the capacity of the manufacturing facilities-and this largely depends the degree of vertical integration within the firm. allocation of suppliers to plants. duties and duty drawback.

The network design methods. for the most part. on the other hand. routing and scheduling of equipment are key in effective management of the firm's transport strategy. although the term "supply chain" was not in vogue. they are expensive. where and how to produce it. Therefore the models that describe them are often very specific in nature. However. Shipment sizes (consolidated bulk shipments versus Lot-for-Lot). Consequently. one can only evaluate the effectiveness of a pre-specified policy rather than develop new ones. give guiding policies for the operational decisions. for the most part. as with all simulation models. While air shipments may be fast. It is the traditional question of "What If?" versus "What's Best?". which markets to pursue and what 65 . and used generally at the inception of the supply chain. They introduce a multicommodity logistics network design model for optimizing annualized finished product flows from plants to the DC's to the final customers. The earliest work in this area. these models often consider great detail and provide very good. The operational decisions. and sourcing facilities. These models typically assume a "single site" (i. global or "all encompassing" in that they try to integrate various aspects of the supply chain. and warrant lesser safety stocks. such as explicitly considering the site's relation to the others in the network. Geoffrion and Powers [1993] later give a review of the evolution of distribution strategies over the past twenty years. "PLANETS". ignore the network) and add supply chain characteristics to it. the establishment of the network and the associated flows on them. meanwhile.Network Design. Since transportation is more than 30 percent of the logistics costs.. each of the above two levels of decisions require a different perspective. address the day to day operation of the supply chain. Often due to the enormity of data requirements. These models typically cover the four major decision areas described earlier. and paths the product(s) take through them. describing how the descendants of the above model can accommodate more echelons and cross commodity detail.of inventory associated with that mode. considering both strategic and operational elements. operating efficiently makes good economic sense. and simulation based methods. stocking. solutions to the operational decisions. Meanwhile shipping by sea or rail may be much cheaper. ``Rough Cut" methods. reliable.e. Therefore customer service levels. but they necessitate holding relatively large amounts of inventory to buffer against the inherent uncertainty associated with them. these methods determine the location of production. Breitman and Lucas [1987] attempt to provide a framework for a comprehensive model of a production-distribution system. To facilitate a concise review of the literature. Supply Chain Modeling Approaches Clearly. provide normative models for the more strategic decisions. was by Geoffrion and Graves [1974]. these models provide approximate solutions to the decisions they describe. we divide the modeling approaches into three areas --. if not optimal. The strategic decisions are. and geographic location play vital roles in such decisions. that is used to decide what products to produce. and focus more on the design aspect of the supply chain. the models that describe these decisions are huge. and the broad scope of decisions. "Rough cut" methods. Network Design Methods As the very name suggests. Such methods tend to be large scale. and require a considerable amount of data. Due to their narrow perspective. Simulation methods is a method by which a comprehensive supply chain model can be analyzed. and at the same time attempting to accommodate the above polarity in modeling.

The cost structure consists of variable and fixed costs for material procurement. Global after-tax profit (profit-local taxes) is maximized through the design of facility network and control of material flows within the network.resources to use. They validate the model by applying it to analyze the global manufacturing strategies of a personal computer manufacturer. The objective function minimizes a combination of cost and time elements. Parts of this ambitious project were successfully implemented at General Motors. Cohen and Lee [1989] present a normative model for resource deployment in a global manufacturing and distribution network. and transportation. they are not without their shortcomings. pipeline inventory. These models have come to be known as "multi-level" or "multi-echelon" inventory control models. Their very nature forces these problems to be of a very large scale. Implementation of this model at the Digital Equipment Corporation has produced spectacular results --.models. For a review the reader is directed to Vollman et al. production. there does not seem to yet be a comprehensive model that is representative of the true nature of material flows in the supply chain. Finally. In sum. They are often difficult to solve to optimality. The thrust of the rough cut models is the development of inventory control policies. and Trafton [1995] provide the most comprehensive deterministic model for supply chain management. Examples of cost elements include purchasing. considering several levels or echelons together. that considers annualized product flows from raw material vendors via intermediate plants and distribution echelons to the final customers. In fact. They later give an integrated and readable exposition of their models and methods in Cohen and Lee [1988]. Arntzen. and such models are therefore indispensable. inventory. Although the above review shows considerable potential for these models as strategic determinants in the future. location. encompassing production. the term "Supply Chain" first appears in the literature as an inventory management approach. Cohen and Lee [1985] develop a conceptual framework for manufacturing strategy analysis. manufacturing. It is imperative that firms at one time or another make such integrated decisions. 66 . Unique to this model was the explicit consideration of duty and their recovery as the product flowed through different countries. They use heuristic methods to link and optimize these sub. Time elements include manufacturing lead times and transit times. Brown. where they describe a series of stochastic sub. distribution and transportation. Harrison. [1992]. Clearly. most of the models in this category are largely deterministic and static in nature. and taxes. Most of the integrative research (from a supply chain context) in the literature seem to take on an inventory management perspective. transportation costs between various sites.models. and typically deal with the more operational or tactical decisions. these network-design based methods add value to the firm in that they lay down the manufacturing and distribution strategies far into the future. Rough Cut Methods These models form the bulk of the supply chain literature. those that consider stochastic elements are very restrictive in nature.savings in the order of $100 million dollars. duties. Additionally. Furthermore.

and effectively build relationships between the company. According to one industry view. its customer base. and streamlining existing processes (for example. remind customers of service requirements. taking orders using mobile devices) Allowing the formation of individualized relationships with customers. including sales. Aspects of CRM There are three aspects of CRM which can each be implemented in isolation from each other: • • • Operational CRM. CRM consists of: • • • • Helping an enterprise to enable its marketing departments to identify and target their best customers. understand their needs.analysis of customer data for a broad range of purposes META Group (acquired by Gartner in April 2005) developed this conceptual architecture in the late 1990s. identifying the most profitable customers and providing them the highest level of service. people providing service.direct communication with customers that does not include a company’s sales or service representative (“self service”) Analytical CRM. and perhaps the customer directly could access information.LECTURE 34 Customer Relationship Management What is CRM (customer relationship management)? CRM (customer relationship management) is an information industry term for methodologies. Providing employees with the information and processes necessary to know their customers. and generate quality leads for the sales team. with the aim of improving customer satisfaction and maximizing profits. salespeople. and usually Internet capabilities that help an enterprise manage customer relationships in an organized way. account. match customer needs with product plans and offerings. and so forth. For example. software. and sales management by optimizing information shared by multiple employees. and distribution partners. marketing and service. manage marketing campaigns with clear goals and objectives.automation or support of customer processes that include a company’s sales or service representative Collaborative CRM. Assisting the organization to improve telesales. Each interaction with a customer is generally added to a 67 . an enterprise might build a database about its customers that described relationships in sufficient detail so that management. know what other products a customer had purchased. and dubbed it the “CRM Ecosystem” Operational CRM Operational CRM provides support to "front office" business processes.

including customer acquisition. The objectives of Collaborative CRM can be broad.g. automated phone (Automated Voice Response AVR) or SMS. cross-selling. front-of-house customer service. but furthermore the broader organizational requirements.g. including feedback and issue-reporting. e. for a variety of different purposes. Strategy Several commercial CRM software packages are available which vary in their approach to CRM. Consequently. Analytical CRM generally makes heavy use of predictive analytics. CRM is not just a technology. including cost reduction and service improvements. marketing. This includes policies and processes.customer's contact history. Analytical CRM Analytical CRM analyses customer data for a variety of purposes including • • • • • design and execution of targeted marketing campaigns to optimise marketing effectiveness design and execution of specific customer campaigns. email. up-selling. such as web pages. Hence. new product development etc. Interaction can be through a variety of channels. The objectives of a CRM strategy must consider a company’s specific situation and its customers needs and expectations. employee training. 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. retention analysis of customer behaviour to aid product and service decision making (e. 68 . but rather a holistic approach to an organization's philosophy in dealing with its customers. Collaborative CRM Collaborative CRM covers the direct interaction with customers. However.) management decisions. pricing. many call centers use some kind of CRM software to support their call centre agents. systems and information management. and staff can retrieve information on customers from the database as necessary. financial forecasting and customer profitability analysis prediction of the probability of customer defection (churn). it is important that any CRM implementation considers not only technology.

Technology Considerations The technology requirements of a CRM strategy can be complex and far reaching. Each of these can be implemented in a basic manner or in a high end complex installation. automated phone systems etc. This can be a CRM specific database or an Enterprise Data warehouse. 69 . eg an interactive website. The basic building blocks include • • • • A database to store customer information. Analytical CRM requires statistical analysis software as well as software that manages any specific marketing campaigns. Operational CRM requires customer agent support software. Collaborative CRM requires customer interaction systems.

Marketing 2. Service Marketing Marketing sub module primarily deals with providing functionalities of Long-term planning and Short-term execution of Marketing related Activities within an organization. geographies etc. carrying out a sanity check. monitoring against the targets and proactively alerting the sales person with recommended further actions based on company's sales policy. Sales Sales functionalities are focused on helping the Sales team to execute and manage the presales process better and in an organized manner. any leads or opportunities they are working on etc. there is a lot of information that is gathered during Marketing Campaigns it becomes necessary to screen these leads). Campaign Management Short-Term execution includes running Marketing campaigns via different communication channels targeting a pre-defined group of potential buyers with a specific message referring to a product or a group of products. The system helps by processing this data. These are then monitored based on the actual performance throughout the defined period. Sales team is responsible for regularly capturing key customer interactions. Marketing Planning Long-term Market Plans can be made and Quantitative as well as Qualitative measures (targets) can be set for a defined period and for different product groups. and finally converting them to Hot Leads or Cold Leads. Lead management deals with processing these Leads. evaluating the genuineness of the information (Since. 70 . in CRM system.LECTURE 35 Key Functionalities A typical CRM system is subdivided into three basic sub modules: 1. which finally get converted into Sales Revenues for the company. Sales 3. Lead Management One key objective of the Marketing function is to generate sales related leads. Marketing campaigns with the specific objective of generating leads (Prospective customers who may be interested in a product).

g. and the deal size is more than (say) 50.000 USD. 3. helping to build a 360 degree view of customer. Activity Management Activities represent various Sales or Service related interactions with the customer (meetings. initiation. if they reach a Quotation phase. Activities can be synchronized to MS Outlook/Lotus Notes Calendar items (Meetings and Tasks) Service Service related functionalities are focused on effectively managing the customer service (Planned or Unplanned). won or lost. emails).g. Activity Management provides a platform to consolidate all the interactions with customer into a single platform. e. qualification. Of course these phases can be defined based on individual company needs. e. It creates reminders and planned activities within the system. It is characterized by the details such as Prospective customer. 4. Standard features of creating a "linked" Quotation or Sales Order from opportunities are provided. 9. Opportunities can be directly converted into Quotations or Sales Orders.Opportunity Management Opportunities help the Sales team by organizing all the relevant data regarding a prospective deal into one place. telephone calls. How to guides) Call Center Support 71 . Service Order Management Service Contract Management Planned Services management Warranty Management Installed Base (Equipment) Management SLA Management Resource Planning and Scheduling Knowledge Management (FAQs. quotation sent. Quotation and Sales Order Management Opportunities. and provide first and Second Level support to Customers. Key players in the deal and their key characteristics. This is often referred as "Guided Sales Methodology". can be converted to a quotation. The Opportunity has several phases. expected closing date. 5. 8. expected budget. and. These Sales orders then flow to the Back-End (ERP) system for further execution and Delivery. 2. 6. if won gets converted to a Sales order. 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. Several functionalities are mentioned below: 1. discussions. final stage. products interested in. total spending. RFP received. important dates and milestones etc. 7. the system can prompt the representative to hold a review discussion with a senior manager. identification. avoid "leakage" of Warranty based services. if the Opportunity has reached "RFP received" stage. avoid "Penalties" arising due to Non conformity of SLA (Service Level Agreements).

Online (Internet) 3. [1] [2] Privacy and Data Security The data gathered as part of CRM must consider customer privacy and data security. These channels can be: 1. Based on these criteria. CRM offerings can be further sub divided into following: Communication Channel / CRM Module Marketing Sales Service Online Marketing Web Shop Web Marketing Tele Marketing Direct Internet Call Center Tele Sales Customer Self Service Online Service Portal Successes Tele Service While there are numerous reports of "failed" implementations of various types of CRM projects. 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. Customers want the assurance that their data is not shared with third parties without their consent and not accessed illegally by third parties. Direct 2. Call Center (via Phone/FAX/Email etc) All the three CRM Sub Modules (Marketing. these are often the result of unrealistic high expectations and exaggerated claims by CRM vendors. 72 . an increase in unsolicited telemarketing calls is generally resented by customers while a small number of relevant offers is generally appreciated by customers. For instance. Sales and Service) can be executed across these Communication channels.10. In contrast there are a growing number of successes. 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. Customers also want their data used by companies to provide a benefit for them.

Most organizations had more than one operational system. or how employee sick leave the week before the winter break differed between California and New York from 2001–2005. Frequently data in data warehouses are heavily denormalised. The database designs of operational systems were not optimized for information analysis and reporting. While operational systems are optimized for simplicity and speed of modification (see OLTP) through heavy use of database normalization and an entity-relationship model. 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. non-volatile. and Development of reports in operational systems often required writing specific computer programs which was slow and expensive 73 . Bill Inmon. The critical factor leading to the use of a data warehouse is that a data analyst can perform complex queries and analysis. 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. time-variant. This is not always required to achieve acceptable query response times. • • • • subject-oriented. meaning that the database contains data from most or all of an organization's operational applications. They were developed to meet a growing demand for management information and analysis that could not be met by operational systems. summarised or stored in a dimension-based model. and that this data is made consistent. on the information without slowing down the operational systems. and integrated. so company-wide reporting could not be supported from a single system. the data warehouse is optimized for reporting and analysis (online analytical processing. read-only. History Data Warehouses became a distinct type of computer database during the late 1980s and early 1990s.LECTURE 36 Data warehouse A data warehouse is the main repository of an organization's historical data. the data is static. or OLAP).once committed. however. meaning that the changes to the data in the database are tracked and recorded so that reports can be produced showing changes over time. meaning that data in the database is never over-written or deleted . It contains the raw material for management's decision support system. an early and influential practitioner. has formally defined a data warehouse in the following terms. A data warehouse might be used to find the day of the week on which a company sold the most widgets in May 1992. such as data mining. its corporate memory. but retained for future reporting.

This capability. has led to a growth of this type of computer system. 74 . such as mainframe computers. as well as personal computers and office automation software such as spreadsheet.As a result. separate computer databases began to be built that were specifically designed to support management information and analysis purposes. coupled with user-friendly reporting tools and freedom from operational impacts. and integrate this information in a single place. minicomputers. These data warehouses were able to bring in data from a range of different data sources.

Fully normalized OLTP database designs often result in having information from a business transaction stored in dozens to hundreds of tables.g. Codd defines 5 increasingly stringent rules of normalization and typically OLTP systems achieve a 3rd level normalization. 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. Given enough time the software can usually return the requested results. Other historical terms include decision support systems (DSS).LECTURE 37 As technology improved (lower cost for more performance) and user requirements increased (faster data load cycle times and more features). Offline Data Warehouse — Data warehouses in this stage of evolution are updated on a regular time cycle (usually daily. and others. Architecture The term data warehouse architecture is primarily used today to describe the overall structure of a Business Intelligence system. In reporting and analysis. management information systems (MIS). data warehouses have evolved through several fundamental stages: • • • • Offline Operational Databases — Data warehouses in this initial stage are developed by simply copying the database of an operational system to an offline server where the processing load of reporting does not impact on the operational system's performance. 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. an order or a delivery or a booking etc. OLTP databases are efficient because they are typically only dealing with the information around a single transaction. every time an operational system performs a transaction (e. but because of the negative performance impact on the machine and all of its 75 . weekly or monthly) from the operational systems and the data is stored in an integrated reporting-oriented data structure Real Time Data Warehouse — Data warehouses at this stage are updated on a transaction or event basis.) Integrated Data Warehouse — Data warehouses at this stage are used to generate activity or transactions that are passed back into the operational systems for use in the daily activity of the organization. thousands to billions of transactions may need to be reassembled imposing a huge workload on the relational database. 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.

since the segregation of facts and dimensions is not explicit in this type of data model. it can be rather slow to produce information and reports.) 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. The main advantages of a dimensional approach is that the data warehouse is easy for business staff with limited information technology experience to understand and use. and too many a database is just a collection of cryptic names. it is difficult for users to join the required data elements into meaningful information without a precise understanding of the data structure. The goal of a data warehouse is to bring data together from a variety of existing databases to support management and reporting needs. Add in frequent enhancements. However. In this method. Also. finance. customer. etc. The main disadvantage of the dimensional approach is that it is quite difficult to add or change later if the company changes the way in which it does business. Lastly. In addition. product. complicate use by untrained people. data warehousing professionals recommend that reporting databases be physically separated from the OLTP database. Whilst the dimension approach is very useful in data mart design. the data in the data warehouse is stored in third normal form. Furthermore. Designing the data warehouse data Architecture synergy is the realm of Data Warehouse Architects. geographical location and salesperson. it can result in a rats nest of long term data integration and abstraction complications when used in a data warehouse. data warehousing suggests that data be restructured and reformatted to facilitate query and analysis by novice users. The "normalized" approach uses database normalization. Tables are then grouped together by subject areas that reflect the general definition of the data (customer. OLTP databases are designed to provide good performance by rigidly defined applications built by programmers fluent in the constraints and conventions of the technology.hosted applications. there can be alternative methods for design and implementing data warehouses. and dimensions such as date. because the data is pre-joined into the dimensional form. seemingly unrelated and obscure structures that store data using incomprehensible coding schemes. a sales transaction would be broken up into facts such as the number of products ordered. the data warehouse needs to support high volumes of data gathered over extended periods of time and are subject to complex queries and need to accommodate formats and definitions inherited from independently designed package and legacy systems. because of different focus on specific requirements. In the "dimensional" approach. 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. All factors that while improving performance. 76 . 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. the data warehouse tends to operate very quickly. As an example. and the price paid. product. transaction data is partitioned into either a measured "facts" which are generally numeric data that captures specific values or "dimensions" which contain the reference information that gives each transaction its context.

For example. you might have customers. some of them are: • • Enhances end-user access to a wide variety of data. e.Subject areas are just a method of organizing information and can be defined along any lines. especially if the data warehouse is web accessible. A data warehouse can be a significant enabler of commercial business applications. in a financial services business. the item with the most sales in a particular area/country within the last two years. An alternative approach is to organize around the business transactions.g. Compatibility problems with systems already in place. The traditional approach has subjects defined as the subjects or nouns within a problem space. most notably customer relationship management (CRM). Advantages There are many advantages to using a data warehouse. Data warehousing project scope must be actively managed to deliver a release of defined content and value. Concerns • • • • • Extracting. transforming and loading data consumes a lot of time and computational resources. products and contracts. Security could develop into a serious issue. Decision support system users can obtain specified trend reports. sales and trades. Data Storage design controversy warrants careful consideration and perhaps prototyping of the data warehouse solution for each project's environments 77 . such as customer enrollment.

They discovered that when men bought diapers on Thursdays and Saturdays. Data. Today. organizations are accumulating vast and growing amounts of data in different formats and different databases. and statistical software are dramatically increasing the accuracy of analysis while driving down the cost. This includes: • operational or transactional data such as. Data mining software is one of a number of analytical tools for analyzing data. such as logical database design or data dictionary definitions • • Information The patterns. and Knowledge Data Data are any facts. The grocery chain could use this newly discovered information in various ways to increase revenue. or relationships among all this data can provide information. 78 .data about the data itself. However. Continuous Innovation Although data mining is a relatively new term. sales. analysis of retail point of sale transaction data can yield information on which products are selling and when. data mining is the process of finding correlations or patterns among dozens of fields in large relational databases. or both. forecast data. Example For example. they also tended to buy beer. one Midwest grocery chain used the data mining capacity of Oracle software to analyze local buying patterns. the technology is not.LECTURE 38 Data Mining: What is Data Mining? Overview Generally. or text that can be processed by a computer. disk storage. And. continuous innovations in computer processing power. they could make sure beer and diapers were sold at full price on Thursdays. On Thursdays. they could move the beer display closer to the diaper display. associations. and macro economic data meta data . and accounting nonoperational data. however. It allows users to analyze data from many different dimensions or angles. cost. Further analysis showed that these shoppers typically did their weekly grocery shopping on Saturdays. cuts costs. The retailer concluded that they purchased the beer to have it available for the upcoming weekend. For example. numbers. For example. data mining (sometimes called data or knowledge discovery) is the process of analyzing data from different perspectives and summarizing it into useful information . categorize it. they only bought a few items. Information. such as industry sales. Companies have used powerful computers to sift through volumes of supermarket scanner data and analyze market research reports for years. Technically. payroll.information that can be used to increase revenue. inventory. and summarize the relationships identified.

Thus. is a relatively new term although the concept itself has been around for years. And. equally dramatic advances in data analysis software are allowing users to access this data freely. processing power. Centralization of data is needed to maximize user access and analysis. 79 . and storage capabilities are enabling organizations to integrate their various databases into data warehouses. For example. data transmission. Data Warehouses Dramatic advances in data capture.Knowledge Information can be converted into knowledge about historical patterns and future trends. Data warehousing. Data warehousing represents an ideal vision of maintaining a central repository of all organizational data. The data analysis software is what supports data mining. a manufacturer or retailer could determine which items are most susceptible to promotional efforts. summary information on retail supermarket sales can be analyzed in light of promotional efforts to provide knowledge of consumer buying behavior. like data mining. Dramatic technological advances are making this vision a reality for many companies. Data warehousing is defined as a process of centralized data management and retrieval.

a coach can automatically bring up the video clips showing each of the jump shots attempted by Williams with Price on the floor. For example. John Williams attempted four jump shots and made each one! Advanced Scout not only finds this pattern. Blockbuster Entertainment mines its video rental history database to recommend rentals to individual customers. product positioning. and "external" factors such as economic indicators. WalMart computers processed over 1 million complex data queries. but explains that it is interesting because it differs considerably from the average shooting percentage of 49. and customer demographics. American Express can suggest products to its cardholders based on analysis of their monthly expenditures. 1995 reveals that when Mark Price played the Guard position. These suppliers use this data to identify customer buying patterns at the store display level. 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. WalMart allows more than 3. competition. financial. The Advanced Scout software analyzes the movements of players to help coaches orchestrate plays and strategies. In 1995. It enables these companies to determine relationships among "internal" factors such as price. customer satisfaction. or staff skills. 80 . And.LECTURE 39 What can data mining do? Data mining is primarily used today by companies with a strong consumer focus retail. WalMart is pioneering massive data mining to transform its supplier relationships. communication.5 terabyte Teradata data warehouse. Finally. it enables them to determine the impact on sales. By using the NBA universal clock. a retailer could use point-of-sale records of customer purchases to send targeted promotions based on an individual's purchase history. the retailer could develop products and promotions to appeal to specific customer segments. By mining demographic data from comment or warranty cards. and marketing organizations. and corporate profits. With data mining.900 stores in 6 countries and continuously transmits this data to its massive 7.30% for the Cavaliers during that game. For example. it enables them to "drill down" into summary information to view detail transactional data.500 suppliers. without needing to comb through hours of video footage. WalMart captures point-of-sale transactions from over 2. They use this information to manage local store inventory and identify new merchandising opportunities. to access data on their products and perform data analyses. The National Basketball Association (NBA) is exploring a data mining application that can be used in conjunction with image recordings of basketball games. an analysis of the play-by-play sheet of the game played between the New York Knicks and the Cleveland Cavaliers on January 6.

Store and manage the data in a multidimensional database system. Several types of analytical software are available: statistical. Associations: Data can be mined to identify associations. and natural selection in a design based on the concepts of natural evolution. a restaurant chain could mine customer purchase data to determine when customers visit and what they typically order. transform. Analyze the data by application software. Sequential patterns: Data is mined to anticipate behavior patterns and trends. Provide data access to business analysts and information technology professionals. • • • Data mining consists of five major elements: • • • Extract. For example. Present the data in a useful format. This information could be used to increase traffic by having daily specials. For example. Clusters: Data items are grouped according to logical relationships or consumer preferences. an outdoor equipment retailer could predict the likelihood of a backpack being purchased based on a consumer's purchase of sleeping bags and hiking shoes. Generally. Genetic algorithms: Optimization techniques that use processes such as genetic combination. Data mining software analyzes relationships and patterns in stored transaction data based on openended user queries. data can be mined to identify market segments or consumer affinities. data mining provides the link between the two. • • Different levels of analysis are available: • Artificial neural networks: Non-linear predictive models that learn through training and resemble biological neural networks in structure. such as a graph or table. • 81 . For example.LECTURE 40 How does data mining work? While large-scale information technology has been evolving separate transaction and analytical systems. machine learning. The beer-diaper example is an example of associative mining. and neural networks. and load transaction data onto the data warehouse system. any of four types of relationships are sought: • Classes: Stored data is used to locate data in predetermined groups. mutation.

Rule induction: The extraction of useful if-then rules from data based on statistical significance.• Decision trees: Tree-shaped structures that represent sets of decisions. Specific decision tree methods include Classification and Regression Trees (CART) and Chi Square Automatic Interaction Detection (CHAID) . Nearest neighbor method: A technique that classifies each record in a dataset based on a combination of the classes of the k record(s) most similar to it in a historical dataset (where k 1). They provide a set of rules that you can apply to a new (unclassified) dataset to predict which records will have a given outcome. These decisions generate rules for the classification of a dataset. Sometimes called the k-nearest neighbor technique. CART typically requires less data preparation than CHAID. • • • 82 . CART and CHAID are decision tree techniques used for classification of a dataset. Data visualization: The visual interpretation of complex relationships in multidimensional data. Graphics tools are used to illustrate data relationships. CART segments a dataset by creating 2way splits while CHAID segments using chi square tests to create multi-way splits.

Lecture 41 . 83 .45 Research projects to be discussed in the class(one project per student).

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