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Organizational Information Systems

8.1 Transaction Processing Systems 8.2 Functional Area Information Systems 8.3 Enterprise Resource Planning Systems

Describe transaction processing systems. Describe functional area information systems and the support they provide for each functional area of the organization. Describe enterprise resource planning systems.

8.1 Transaction Processing Systems (TPS)

Rudy Giuliani checking out of a Wal-Mart using a bar code scanner that produces data captured by a transaction processing system

Note: the barcode scanner is an example of source data automation. Source data automation involves collecting data from sensors (e.g., barcode scanners) and entering the data directly into a computer without human intervention.

8.1 Transaction Processing Systems (TPS) (continued)

Transaction Processing System (TPS) monitors, collects, stores, and processes data generated from all business transactions. Batch Processing is when the firm collects data from transactions as they occur, placing them in groups or batches, then prepares and process the batches periodically i.e. every night Online Transaction Processing (OLTP) is when business transactions are processed online as soon as they occur.

How Transaction Processing Systems Manage Data

8.2 Functional Area Information Systems

Functional Area Information Systems are designed to support a functional area by increasing its internal effectiveness and efficiency in the following areas: Accounting Finance Marketing Operations (POM) Human Resources Management Provide information mainly to lower- and middle-level managers in the functional areas via a variety of reports.

Examples of Information Systems Supporting the Functional Areas

Functional Area Information Systems Reports

Functional area information systems generate a wide variety of reports: Routine reports Ad hoc (on demand) reports
Drill-down reports Key-indicator reports Comparative reports

Exception reports

Summary Report
A summary report is one type of routine report

Summary reports provide summarized information, with less detail.

Detailed Report
A detailed report is another type of routine report

Detailed reports provide high levels of detailed data, often in support of summary reports.

Drill-Down Report
Drill-down report is a type of adhoc report

A drill-down report allows users to click on an item in a report and be able to access underlying details about that item.

Key-Indicator Report

Key-indicator report is a type of ad-hoc report

A key indicator report summarizes the performance of critical activities. The key indicator in this report is the number of prison inmates per 100,000 of population in 1996-1997.

Comparative Report
Comparative report is one type of ad-hoc report.
This comparative report compares managed health care to traditional fee-for-service healthcare. Lets use one example: Advice to smokers to quit. * Fee-for-service has a 37% compliance rate on seven Healthcare Effectiveness Data and Information Set (HEDIS) preventive measures. See purple arrow. * The minimum managed care plans have a 30% compliance rate. (left end of bar) * The maximum managed care plans have a 85% compliance rate. (right end of bar) * The average of all managed care plans (National Health Plan average) is 61% compliance. (see red arrow). We can see that there is quite a bit of information in this graphical comparative report.

Exception Report

Exception reports include only information that falls outside certain threshold standards (outside norm). This image shows a financial transaction exception report using SAP from the University of Toronto in 2003.

8.3 Enterprise Resource Planning Systems (ERP)

Enterprise Resource Planning (ERP) systems integrate the planning, management and use of all resources of the organization. That is, ERP systems are designed to break down the information silos of an organization. Many information systems were developed for specific functional areas and did not communicate with systems in other functional areas. Therefore, these systems are referred to as information silos.

8.3 Enterprise Resource Planning Systems (ERP)

The major objective of ERP systems: integrate the functional areas of the organization by enabling seamless information flows across them.

Problems with information silos

SAP Modules
SAP is moving away from describing their system as a set of modules, and now is using the term solutions. FI Financial Acctg CO Controlling HR Human Resources MM Materials Mgmt PP Production Planning QM Quality Mgmt WF - Workflow

ERP Systems (continued)

A business process is a set of related steps or procedures designed to produce a specific outcome.

The image shows an example of a business process, namely an order process.

Also known ebusiness suites.
Accounting and Financial Module

Core ERP Modules


& Production Module Human Resources Module

Supply Chain Management Interorganizational Module


Platform & Database

ERP systems that provide Webenabled links between a companys key business systems and its customers, suppliers, distributors, and others.

Customer Relationship Management Module

Business Intelligence Module

E-Business Module

Extended ERP Modules

ERP Systems (Continued)

Best practices are the most successful solutions or problem-solving methods for achieving a business objective. Drawbacks to ERP systems are that they can be extremely complex, expensive and timeconsuming to implement. Leading ERP software vendors include SAP (SAP R/3), Oracle and PeopleSoft.


Customer Relationship Management

9.1 Defining Customer Relationship Management 9.2 Operational Customer Relationship Management 9.3 Analytical Customer Relationship Management 9.4 Other Types of Customer Relationship Management Applications

Define customer relationship management and discuss the objectives of CRM. Describe operational CRM and its major components. Describe analytical CRM. Discuss mobile CRM, on-demand CRM, and open-source CRM.

From Neighborhood Stores.


To Today..

Mobile population

The Web Giant malls


Customer Intimacy?

Your competition Your customer

Your problem

The Need for CRM

It costs six times more to sell to a new customer than to sell to an existing one. A typical dissatisfied customer will tell 8-10 people. By increasing the customer retention rate by 5%, profits could increase by 85%. Odds of selling to new customers = 15%, compared to the odds of selling to existing customers (50%) 70% of complaining customers will remain loyal if their problem is solved

9.1 Defining Customer Relationship Management

Customer relationship management (CRM) is an organizational strategy that is customer-focused and customer-driven.

Tenets of CRM
One-to-one relationship between a customer and a seller. Treat different customers differently. Keep profitable customers and maximize lifetime revenue from them.

Lifetime Customer Value

The value of a customer to a company depends on three dimensions:

Customer Touch Points (Continued)

Customer touch point is a method of interaction with a customer, such as telephone, e-mail, a customer service or help desk, conventional mail, Web site and store.

Customer Touch Points

Web Smart Phone Computer Physical Store

Customer Service

Service Center

Sales Representative Field Service Technician


Direct Mail

360-Degree View of Customers

Data Consolidation
Accounting POM

Finance Customer




9.2 Operational CRM

Operational CRM is the component of CRM that supports the front-office business processes. That is, those processes that directly interact with customers; i.e., sales, marketing, and service.

Two major components of operational CRM:

Customer-facing applications Customer-touching applications

Customer-Facing Applications
Customer service and support

Sales force automation Marketing Campaign management

Customer-Facing Applications (Continued)

Customer-facing applications are those applications where an organizations sales, field service, and customer interaction center representatives actually interact with customers. Customer service and support refers to systems that automate requests, complaints, product returns, and requests for information. Sales force automation automatically records all the aspects in a sales transaction process. Campaign management applications help organizations plan campaigns so that the right messages are sent to the right people through the right channels.


A configurator is an online product-building feature.

Cross selling Up selling Bundling

Marketing (Continued)
Cross selling is the practice of marketing additional, related products to customers based on their previous purchases. Up selling is a sales strategy in which the sales person will provide customers the opportunity to purchase higher-value related products or services as opposed to, or along with, the consumers initial product or service selection. Bundling is a form of cross selling in which a business sells a group of products or services together at a price that is lower than the combined individual prices of the products.

Customer-Touching Applications
In customer-touching applications, customers interact directly with online technologies and applications rather than interact with a company representative.
Search and comparison capabilities Technical and other information and services Customized products and services Loyalty programs Personalized Web Pages, FAQs, E-mail and Automated Response

9.3 Analytical CRM

Analytical CRM systems analyze customer behavior and perceptions in order to provide actionable business intelligence.

The Relationship Between Operational CRM and Analytical CRM

Customer-facing Applications Sales Marketing Customer Service and Support Campaign Management Customer-touching Applications Search and Comparison Customized Products Technical Information Personalized Web Pages FAQ E-mail / Auto Response Loyalty Programs

Customer Data Warehouse

Data Mining Decision Support Business Intelligence OLAP

9.4 Other Types of CRM

On-demand CRM

Mobile CRM: Pal Mickey at Disneyworld

Open-source CRM

9.4 Other Types of CRM (Continued)

On-demand CRM is a CRM system that is hosted by an external vendor in the vendors data center. Mobile CRM is an interactive CRM system that enables an organization to conduct communications related to sales, marketing, and customer service activities through a mobile medium for the purpose of building and maintaining relationships with its customers. Open-source CRM is CRM software whose source code is available to developers and users.


Supply Chain Management

10.1 Supply Chains 10.2 Supply Chain Management 10.3 Information Technology Support for Supply Chain Management

Define the term supply chain, and discuss the three components of a supply chain. Define supply chain management, and understand its goals. Identify various problems that can occur along supply chains. Explain how information technology supports supply chain management.

10.1 Supply Chains

Generic Supply Chain

Supply chain: refers to the flow of materials, information, money, and services from raw material suppliers, through factories and warehouses, to the end consumers. Upstream component of a supply chain: sourcing or procurement takes place. Internal component of a supply chain: packaging, assembly, or manufacturing takes place. Downstream component of a supply chain: distribution takes place.

Supply Chain (recall Figure 2.2)

The Flows of the Supply Chain

Material flows

Information flows

Financial flows

The Flows of the Supply Chain

Material flows are the physical products, raw materials, supplies and so forth that flow along the chain.
Reverse flows returned products, recycled products and disposal of materials or products.

Information flows are all data related to demand, shipments, orders, returns and schedules as well as changes in any of these data. Financial flows are all transfers of money, payments and credit-related data. A supply chain involves a product life cycle approach, from dirt to dust.

10.2 Supply Chain Management

Supply chain management (SCM) is the function of planning, organizing and optimizing the supply chains activities. Interorganizational information system (IOS) involves information flows among two or more organizations.

Issues in Global IOS Design

Cultural differences Localization Economic and Political Differences Legal issues Cross-border data transfer which refers to the flow of corporate data across nations borders.

Push Model

Mass production



Happy customer

Pull Model

Dell factory Dell customer order

Dell customer

Problems Along the Supply Chain

Poor customer service Poor quality product High inventory costs Loss of revenues New technologies

The Bullwhip Effect

Bullwhip effect refers to erratic shifts in orders up and down the supply chain. Order Quantity Order Quantity Order Quantity Order Quantity

Time Customer Sales

Time Retail Orders To Wholesaler

Time Wholesaler Orders to Manufacturer

Time Manufacturer Orders to Supplier

Solutions to Supply Chain Problems

Using inventories Just-in-time inventory: a system in which a supplier delivers the precise number of parts to be assembled into a finished product at precisely the right time. Information sharing Vendor-managed inventory: an inventory strategy where the supplier monitors a vendors inventory for a product or group of products and replenishes products when needed.

10.3 Information Technology Support for Supply Chain Management

Electronic data interchange (EDI) - is a communication standard that enables business partners to exchange routine documents, such as purchase orders, electronically. Extranets - link business partners to one another over the Internet by providing access to certain areas of each others corporate intranets.

EDI Benefits
Minimize data entry errors Length of messages are shorter Messages are secured Reduces cycle time Increases productivity Enhances customer service Minimizes paper usage and storage

EDI Limitations
Significant initial investment to implement Ongoing operating costs are high due to the use of expensive, private VANs Traditional EDI system is inflexible Long startup period Multiple EDI standards exist

Comparing Purchase Order Fulfillment Without EDI

Comparing Purchase Order Fulfillment With EDI

Extranets link business partners to one another over the Internet by providing access to certain areas of each others corporate intranets. The main goal of extranets is to foster collaboration between business partners. An extranet is open to selected B2B suppliers, customers and other business partners.

The Structure of an Extranet

Types of Extranets
A company and its dealers, customers or suppliers

An industrys extranet Joint ventures and other business partnerships

Types of Extranets (Continued)

A company and its dealers, customers or suppliers centers around one company. An industrys extranet major players in an industry team up to create an extranet. Joint ventures and other business partnerships partners in a joint venture use extranet as a vehicle for communications and collaboration.