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.


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

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

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

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

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

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

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

Common collection methods include • Point-of sale services • Process control • Electronic data interchange • Electronic commerce websites.The last step in processing a transaction is querying the system. Typically. intranets. 12 . and providing access to the basic data of the organization. The goal is to capture the transaction data as soon as possible. For example. extranets. Query facilities allow users to process data and information that may otherwise not be readily available. responses are displayed in a variety of pre-specified formats or screens. Examples of queries include: • Checking on the status of a sales order • Checking on the balance in an account • Checking on the amount of stock in inventory Transaction processing systems are responsible for capturing. storing. and web browsers or database management query languages to make inquiries and receive responses concerning the results of transaction processing activity. 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.

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

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

configuring network components. transforms & disseminates information in an organization. Communication Channels (Networks) & Store Data (Data Resources). hardware. provisioning services. • 15 . communication networks & data resources that collects. People have relied on information systems to communicate with each other using a variety of physical devices (Hardware). analyze and manage a telephone or computer network. control. 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. • An OSS supports processes such as maintaining network inventory. and managing faults.Lecture 6 An Information System is an organized combination of people. software. Information Processing Instructions & Procedures (Software). Produce a variety of information products for internal & external use.

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

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

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

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

Strategic Management: Typically. This creates strategic information systems. strategies.      20 . policies. 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. transforms and disseminates information in an organization. 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. They also monitor the strategic performance of an organization and its overall direction in the political. This strategic role of information systems involves using information technology to develop products. hardware. communications networks and data resources that collects.Lecture 8 Information System: An information system can be any organized combination of people. economic and competitive business environment. 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. a board of directors and an executive committee of the CEO and top executives develop overall organizational goals.

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 .

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

Other competitive strategies There are many other competitive strategies in addition to the five basic strategies. Innovate    Create new products and services that include IT components. subcontractors and others. suppliers.  Use IT to diversify and integrate into other products and services. improve quality. These are:    Locking in customers or suppliers Building switching costs Raising barriers to entry Leveraging investment in information technology. Promote Growth  Use IT to manage regional and global business expansion. 23 . they can also be implemented with information technology. Many companies are using Internet technologies as the foundation for such strategies.  Develop inter-enterprise information systems linked by the Internet and extranets that support strategic business relationships with customers. Develop unique new markets or market niches with the help of IT.  Use IT features to focus products and services at selected market niches. efficiency or customer service or shorten time to market. Make radical changes to business processes with IT that dramatically cut costs. Use IT features to reduce the differentiation advantages of competitors. Differentiate   Develop new IT features to differentiate products and services. Develop Alliances  Use IT to create virtual organizations of business partners.Lecture 10 The following table gives a summary of how information technology can be used to implement the five basic competitive strategies. Basic Strategies in the Business Use of Information Technology Lower Costs  Use IT to substantially reduce the cost of business processes.  Use IT to lower the costs of customers or suppliers.

Product.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. Marketing Strategies. Evaluates the Results and Exercise Control Achieve Goals and Objectives 24 . Breakthrough Overall Company Growth. Operational Control Through Strategy Revise Strategies Survival.

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 chain consists of a series of activities that create and build value. two broad categories of value activities: Primary Activities and Support Activities. The value chain is a systematic approach to examining the development of competitive advantage. 25 . 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.

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

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

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.

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

The virus is now on your computer and spreads to files other than the original. Or they look for areas of the system that have been “left open. You then send the same or even a different file to a few friends and their computers are infected. which they can use to enter the system. The weakest link in the chain is poor management of the system. Other hackers attack systems because they don’t like the company.1 The above list points out some of the technical. Those people spread it to two or three more people each. Pretty soon it seems that everyone on campus or at work is sick. Password theft is the easiest way for hackers to gain access to a system. Many companies don’t report hackers attempts to enter their systems because they don’t want people to realize their systems are vulnerable. Let us see why. though. use the file. then the threats to an Information Systems can easily become real. erase data. The longer the password. the more potential for fraud and abuse of the information maintained in that system. it’s hard to control everyone’s actions. That’s why you should use odd combinations of letters and numbers not easily associated with your name to create your password. Sometimes they don’t do any damage. but far too often they destroy files. and environmental threats to Information Systems. That is how computer viruses are spread. No. You then spread it to two or three other people through touch or association. which can make attacking the system easy. and maybe send it to friends or associates. the harder it is to replicate. That is why you have to make it everybody’s business to protect the system. organizational. Nevertheless. It is a huge problem. Hackers. That makes gathering real statistics about hacking attempts and successes hard.” so to speak. it only takes one person to disable a system or destroy data. You copy a file from an infected source. The more people you have using the system. With distributed computing used extensively in network systems.LECTURE 18 Threats to Computerized Information Systems • Hardware failure • Fire • Software failure • Electrical problem • Personnel actions • User errors • Terminal access penetration • Program changes • Theft of data. services. they don’t come into your office at night and look at the piece of paper in your desk drawer that has your password written on it. They use special computer systems that continually check for password files that can be copied. In March 1999 a virus called Melissa was written by a hacker and sent out 34 . They generally use specially written software programs that can build various passwords to see if any of them will work. If managers at all levels do not make security and reliability their number one priority. those who intentionally create havoc or do damage to a computer system. Have you ever picked up a cold or the flu from another human? Probably. or steal data for their own use. Yes. Some hackers penetrate systems just to see if they can. you have more points of entry. It is easy for people to say that they are only one person and therefore they will not make much difference. have been around for a long time. equipment • Telecommunications problems TABLE 16.

By Monday. This type of software checks every incoming file for viruses. you receive an infected file. you’re just asking for trouble if you don’t have antivirus software.000 copies of mail messages containing Melissa on their systems within 45 minutes. The first confirmed reports of Melissa were received on Friday. Some sites had to take their mail systems off-line. One site reported receiving 32. March 26. While the virus didn’t damage any computer files or data. Make sure you update your antivirus software every 30 to 60 days because new viruses are constantly being written and passed around. 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. March 29. but when. 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.” Whether you use a standalone PC or your computer is attached to a network. the software alerts you to its presence.000 computers. 1999.via an email attachment. LECTURE 19 Concerns for System Builders and Users 35 . Not if. it had reached more than 100.

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

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

Performs most of the calculations which enable a computer to function. Random Access Memory (RAM) . • parallel port • serial port • USB • firewire A case that holds a transformer. such as printers and input devices. Control hard disk. CD-ROM and other drives.Fast-access memory that is cleared when the computer is powered-down. These ports may also be based upon expansion cards.Connections to various internal components. the controllers sit directly on the motherboard (on-board) or on expansion cards. and the computer case will generally have several fans to maintain a constant airflow. This will either be built into the motherboard or attached in its own separate slot (PCI.Inside a Custom Computer The motherboard is the "heart" of the computer.Used to lower the temperature of the computer. PCI-E or AGP). voltage control. • PCI • PCI-E • USB • HyperTransport • CSI (expected in 2008) • AGP (being phased out) • VLB (outdated) • ISA (outdated) • EISA (outdated) • MCA (outdated) External Bus Controllers . through which all other components interface. and (usually) a cooling fan. Firmware usually Basic Input-Output System (BIOS) based or in newer systems Extensible Firmware Interface (EFI) compliant Internal Buses . and supplies power to the rest of the computer. in the form of a Graphics Card.used to connect to external peripherals. RAM attaches directly to the motherboard. Produces the output for the computer display. and is used to store programs that are currently running. floppy disk. Central processing unit (CPU) . Computer fan . a fan is almost always attached to the CPU. 38 . such as a Disk array controller. attached to the internal buses.

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

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

which is costly and often wasteful. equipment and materials. or producing new products. This is a more moderate strategy. In the context of capacity planning. but it may result in the loss of possible customers. The goal of capacity planning is to minimize this discrepancy. and match strategy. Lead strategy is an aggressive strategy with the goal of luring customers away from the company’s competitors. either in under-utilized resources or unfulfilled customers. This is a more conservative strategy. Lead strategy is adding capacity in anticipation of an increase in demand. The broad classes of capacity planning are lead strategy. 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.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. increasing the number of shifts. 41 . such as increasing or decreasing the production quantity of an existing product. It decreases the risk of waste. In the context of systems engineering. Capacity is calculated: (number of machines or workers) x (number of shifts) x (utilization) x (efficiency). 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. capacity planning is used during system design and system performance monitoring. or acquiring additional production facilities. The possible disadvantage to this strategy is that it often results in excess inventory. 2006). Match strategy (also known as the tracking strategy) is adding capacity in small amounts in response to changing demand in the market. Capacity can be increased through introducing new techniques. increasing the number of workers or machines. lag strategy. A discrepancy between the capacity of an organization and the demands of its customers results in an inefficiency.

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

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

this software themselves and often overlook how important it is. and what has been added by fellow co-workers. many users may not be aware of the distinction between the purchased packages. Depending on how competently the user-written software has been integrated into purchased application packages. 44 .

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

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

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

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

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

ERP can fix that. While most packages are exhaustively comprehensive. simple method for tracking employees' time and communicating with them about benefits and services. Most ERP systems were designed to be used by discrete manufacturing companies (that make physical things that can be counted). chemical and utility companies that measure their products by flow rather than individual units) out in the cold. each industry has its quirks that make it unique. 50 . Each of these industries has struggled with the different ERP vendors to modify core ERP programs to their needs.• Standardize HR information—Especially in companies with multiple business units. companies often lose sight of the fact that ERP packages are nothing more than generic representations of the ways a typical company does business. HR may not have a unified. which immediately left all the process manufacturers (oil. In the race to fix these problems.

professional services and internal staff costs. suppliers or partners. Needless to say. When will I get payback from ERP—and how much will it be? Don't expect to revolutionize your business with ERP. In addition to budgeting for software costs. 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. medium and large companies in a range of industries—the average TCO was $15 million (the highest was $300 million and lowest was $400.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. What are the hidden costs of ERP? Although different companies will find different land mines in the budgeting process. upgrading and optimizing the system for your business are felt. financial executives should plan to write checks to cover consulting. the move to ERP is a project of breathtaking scope. including hardware. those who have implemented ERP packages agree that certain costs are more 51 . The TCO numbers include getting the software installed and the two years afterward. But the median annual savings from the new ERP system were $1. process rework. What does ERP really cost? Meta Group recently did a study looking at the total cost of ownership (TCO) of ERP. 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). software. which will slow down the project. 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. 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 $53.6 million. integration testing and a long laundry list of other expenses before the benefits of ERP start to manifest themselves. Or they can modify the software to fit the process. Underestimating the price of teaching users their new job processes can lead to a rude shock down the line. 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.320.000). While it's hard to draw a solid number from that kind of range of companies and ERP efforts. Among the 63 companies surveyed—including small. It is a navel-gazing exercise that focuses on optimizing the way things are done internally rather than with customers. At that point there are two things they can do: They can change the business process to accommodate the software. 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. Meta came up with one statistic that proves that ERP is expensive no matter what kind of company is using it. which is when the real costs of maintaining.

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

To avoid this. 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. most data in most legacy systems is of little use. Include metrics in the consultants' contract. Consultants ad infinitum When users fail to plan for disengagement. Huddle with HR early on to develop a retention bonus program and create new salary strata for ERP veterans. Consequently. 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. If you let them go. 5. making selective warehouse updates tough. Users with heavy analysis needs should include the cost of a data warehouse in the ERP budget—and they should expect to do quite a bit of work to make it run smoothly. Users are in a pickle here: Refreshing all the ERP data every day in a big corporate data warehouse is difficult. The software is too complex and the business changes too dramatic to trust the project to just anyone. the data from the ERP system must be combined with data from external systems for analysis purposes. from old systems to new ERP homes. 6. Though the ERP market is not as hot as it once was. The bad news is a company must be prepared to replace many of those people when the project is over. Data analysis Often. Although few CIOs will admit it. for example. 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. consulting fees run wild. you'll wind up hiring them—or someone like them —back as consultants for twice what you paid them in salaries. and ERP systems do a poor job of indicating which information has changed from day to day. 7. such as customer and supplier records. The upshot is that the wise will check all their data analysis needs before signing off on the budget. 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. product design data and the like. companies should identify objectives for which its consulting partners must aim when training internal staff. One expensive solution is custom programming. those companies are more likely to underestimate the cost of the move.It costs money to move corporate information. 53 .

was troubleshooting a computer that had quit running. you must consider what changes need to be made to the systems that support the business unit. If you did a good job. they found a moth had landed on one of the tubes and burned it out. 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. but you can do something about the data you input. 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. Many system quality problems can be solved by instituting measures to decrease the bugs and defects in software and data entry. most unintentionally.LECTURE 29 System Quality Problems: Software and Data It would be nice to have a perfect world. The fact is that half of a company's technology staff time is devoted to maintenance. Defects in software and data are real. used to describe a defect in a software program. 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. maintenance will be reduced. In the SDLC lesson. Keep in mind that software is very complex nowadays. maintenance will be a far more difficult task. Back then. The "it won't happen to me" attitude is trouble. With millions of lines of code. Bugs and Defects The term bug. It needs constant and continual attention. How well you did back then will play out in the maintenance of the system. we stress good system analysis and design. Data Quality Problems Let's bring the problem of poor data quality closer to home. no matter how minor they may seem. computers were powered by vacuum tubes hundreds and thousands of them. Many bugs originate in poorly defined and designed programs and just keep infiltrating all parts of the program. So the term "bug" came to describe problems with computers and software. but we donÕt. Use antivirus software on your computer and update it every 30-60 days. an early pioneer. it's impossible to have a completely error-free program. When you're considering organizational changes. has been around since the 1940s and 1950s. They provide free updates and fixes on their Web sites. Grace Hopper. Information Systems security is everyone's business. Most software manufacturers know their products contain bugs when they release them to the marketplace. 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. When her team opened the back of the computer to see what was wrong. 54 . Because bugs are so easy to create. The Maintenance Nightmare You simply can't build a system and then ignore it.

55 .

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

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

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

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

LECTURE 31 Supply chain business process integration Successful SCM requires a change from managing individual functions to integrating activities into key supply chain processes. Marketing. 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. joint product development. and attempts to satisfy this demand. g. c. responding to customer demand. Shared information between supply chain partners can only be fully leveraged through process integration. d. 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. According to Lambert and Cooper (2000) operating an integrated supply chain requires continuous information flows. Supply chain business process integration involves collaborative work between buyers and suppliers. Successful organizations use following steps to build customer relationships: • • determine mutually satisfying goals between organization and customers establish and maintain customer rapport 60 . e. which in turn assist to achieve the best product flows. in many companies.Customer service provides the source of customer information. management has reached the conclusion that optimizing the product flows cannot be accomplished without implementing a process approach to the business. common systems and shared information. An example scenario: the purchasing department places orders as requirements become appropriate. communicates with several distributors and retailers. However. 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. f. b.

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

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

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

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

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

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

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

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

Technology Considerations The technology requirements of a CRM strategy can be complex and far reaching. eg an interactive website. automated phone systems etc. 69 . Each of these can be implemented in a basic manner or in a high end complex installation. Collaborative CRM requires customer interaction systems. 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. This can be a CRM specific database or an Enterprise Data warehouse. Operational CRM requires customer agent support software.

Sales 3. 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. These are then monitored based on the actual performance throughout the defined period. Lead management deals with processing these Leads. Marketing 2. Marketing campaigns with the specific objective of generating leads (Prospective customers who may be interested in a product). geographies etc. carrying out a sanity check. 70 . Lead Management One key objective of the Marketing function is to generate sales related leads. monitoring against the targets and proactively alerting the sales person with recommended further actions based on company's sales policy. evaluating the genuineness of the information (Since. 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.LECTURE 35 Key Functionalities A typical CRM system is subdivided into three basic sub modules: 1. 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. in CRM system. and finally converting them to Hot Leads or Cold Leads. Sales Sales functionalities are focused on helping the Sales team to execute and manage the presales process better and in an organized manner. which finally get converted into Sales Revenues for the company. Sales team is responsible for regularly capturing key customer interactions. The system helps by processing this data. there is a lot of information that is gathered during Marketing Campaigns it becomes necessary to screen these leads). any leads or opportunities they are working on etc.

initiation. 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. Of course these phases can be defined based on individual company needs. avoid "Penalties" arising due to Non conformity of SLA (Service Level Agreements). qualification. e. helping to build a 360 degree view of customer. These Sales orders then flow to the Back-End (ERP) system for further execution and Delivery. It is characterized by the details such as Prospective customer. and. 9. 4. It creates reminders and planned activities within the system.g. 2. RFP received. products interested in. e. 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). Opportunities can be directly converted into Quotations or Sales Orders. discussions. 8. How to guides) Call Center Support 71 . if won gets converted to a Sales order. Standard features of creating a "linked" Quotation or Sales Order from opportunities are provided. total spending. Activity Management Activities represent various Sales or Service related interactions with the customer (meetings. Key players in the deal and their key characteristics. Several functionalities are mentioned below: 1. 3. expected budget. if they reach a Quotation phase. This is often referred as "Guided Sales Methodology".g. and the deal size is more than (say) 50. won or lost. important dates and milestones etc. and provide first and Second Level support to Customers. The Opportunity has several phases. 7. emails). avoid "leakage" of Warranty based services. can be converted to a quotation. 6. 5.000 USD. final stage. quotation sent. Service Order Management Service Contract Management Planned Services management Warranty Management Installed Base (Equipment) Management SLA Management Resource Planning and Scheduling Knowledge Management (FAQs. the system can prompt the representative to hold a review discussion with a senior manager. if the Opportunity has reached "RFP received" stage. Activity Management provides a platform to consolidate all the interactions with customer into a single platform. Quotation and Sales Order Management Opportunities. telephone calls.Opportunity Management Opportunities help the Sales team by organizing all the relevant data regarding a prospective deal into one place. expected closing date. identification.

Direct 2.10. these are often the result of unrealistic high expectations and exaggerated claims by CRM vendors. 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. an increase in unsolicited telemarketing calls is generally resented by customers while a small number of relevant offers is generally appreciated by customers. Customers want the assurance that their data is not shared with third parties without their consent and not accessed illegally by third parties. 72 . Customers also want their data used by companies to provide a benefit for them. For instance. Sales and Service) can be executed across these Communication channels. Online (Internet) 3. These channels can be: 1. Based on these criteria. 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. Call Center (via Phone/FAX/Email etc) All the three CRM Sub Modules (Marketing. 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. [1] [2] Privacy and Data Security The data gathered as part of CRM must consider customer privacy and data security.

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

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

g. 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. In reporting and analysis. OLTP databases are efficient because they are typically only dealing with the information around a single transaction.) 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. but because of the negative performance impact on the machine and all of its 75 .LECTURE 37 As technology improved (lower cost for more performance) and user requirements increased (faster data load cycle times and more features). 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. an order or a delivery or a booking etc. Given enough time the software can usually return the requested results. Other historical terms include decision support systems (DSS). Less complex information is broken down into its most simple structures (a table) where all of the individual atomic level elements relate to each other and satisfy the normalization rules. Codd defines 5 increasingly stringent rules of normalization and typically OLTP systems achieve a 3rd level normalization. every time an operational system performs a transaction (e. Fully normalized OLTP database designs often result in having information from a business transaction stored in dozens to hundreds of tables. Architecture The term data warehouse architecture is primarily used today to describe the overall structure of a Business Intelligence system. thousands to billions of transactions may need to be reassembled imposing a huge workload on the relational database. management information systems (MIS). and others. Offline Data Warehouse — Data warehouses in this stage of evolution are updated on a regular time cycle (usually daily. 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.

All factors that while improving performance. In addition. In this method. it can result in a rats nest of long term data integration and abstraction complications when used in a data warehouse. 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. customer. geographical location and salesperson.hosted applications. Furthermore. 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. and too many a database is just a collection of cryptic names. 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. In the "dimensional" approach. data warehousing suggests that data be restructured and reformatted to facilitate query and analysis by novice users. the data warehouse tends to operate very quickly. The "normalized" approach uses database normalization. a sales transaction would be broken up into facts such as the number of products ordered. Also. Tables are then grouped together by subject areas that reflect the general definition of the data (customer. 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. 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. 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. product. because of different focus on specific requirements. The goal of a data warehouse is to bring data together from a variety of existing databases to support management and reporting needs. since the segregation of facts and dimensions is not explicit in this type of data model. Add in frequent enhancements. there can be alternative methods for design and implementing data warehouses. finance.) 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. However. seemingly unrelated and obscure structures that store data using incomprehensible coding schemes. As an example. Lastly. it is difficult for users to join the required data elements into meaningful information without a precise understanding of the data structure. 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. etc. and dimensions such as date. and the price paid. Designing the data warehouse data Architecture synergy is the realm of Data Warehouse Architects. it can be rather slow to produce information and reports. complicate use by untrained people. product. 76 . OLTP databases are designed to provide good performance by rigidly defined applications built by programmers fluent in the constraints and conventions of the technology. the data in the data warehouse is stored in third normal form. because the data is pre-joined into the dimensional form.

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

the technology is about the data itself. or relationships among all this data can provide information. analysis of retail point of sale transaction data can yield information on which products are selling and when. inventory. and accounting nonoperational data. associations. The retailer concluded that they purchased the beer to have it available for the upcoming weekend. data mining (sometimes called data or knowledge discovery) is the process of analyzing data from different perspectives and summarizing it into useful information . however. numbers. disk storage. payroll. 78 . Today. they also tended to buy beer. Example For example. or both. It allows users to analyze data from many different dimensions or angles. sales. such as industry sales. This includes: • operational or transactional data such as. organizations are accumulating vast and growing amounts of data in different formats and different databases. For example. On Thursdays. Continuous Innovation Although data mining is a relatively new term. data mining is the process of finding correlations or patterns among dozens of fields in large relational databases. However. and macro economic data meta data . The grocery chain could use this newly discovered information in various ways to increase revenue.information that can be used to increase revenue. continuous innovations in computer processing power. they only bought a few items. Information. cuts costs.LECTURE 38 Data Mining: What is Data Mining? Overview Generally. cost. or text that can be processed by a computer. they could move the beer display closer to the diaper display. For example. Data. they could make sure beer and diapers were sold at full price on Thursdays. categorize it. Data mining software is one of a number of analytical tools for analyzing data. one Midwest grocery chain used the data mining capacity of Oracle software to analyze local buying patterns. Companies have used powerful computers to sift through volumes of supermarket scanner data and analyze market research reports for years. such as logical database design or data dictionary definitions • • Information The patterns. They discovered that when men bought diapers on Thursdays and Saturdays. forecast data. and Knowledge Data Data are any facts. and summarize the relationships identified. Further analysis showed that these shoppers typically did their weekly grocery shopping on Saturdays. And. Technically. and statistical software are dramatically increasing the accuracy of analysis while driving down the cost.

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

the retailer could develop products and promotions to appeal to specific customer segments. John Williams attempted four jump shots and made each one! Advanced Scout not only finds this pattern. or staff skills. By mining demographic data from comment or warranty cards. In 1995. product positioning.LECTURE 39 What can data mining do? Data mining is primarily used today by companies with a strong consumer focus retail. communication. These suppliers use this data to identify customer buying patterns at the store display level. American Express can suggest products to its cardholders based on analysis of their monthly expenditures. competition. It enables these companies to determine relationships among "internal" factors such as price. They use this information to manage local store inventory and identify new merchandising opportunities. and corporate profits. 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 is pioneering massive data mining to transform its supplier relationships. and "external" factors such as economic indicators. The National Basketball Association (NBA) is exploring a data mining application that can be used in conjunction with image recordings of basketball games. it enables them to determine the impact on sales. an analysis of the play-by-play sheet of the game played between the New York Knicks and the Cleveland Cavaliers on January 6. and customer demographics. Blockbuster Entertainment mines its video rental history database to recommend rentals to individual customers. financial. WalMart allows more than 3.500 suppliers. For example. With data mining. WalMart computers processed over 1 million complex data queries. a retailer could use point-of-sale records of customer purchases to send targeted promotions based on an individual's purchase history.900 stores in 6 countries and continuously transmits this data to its massive 7. but explains that it is interesting because it differs considerably from the average shooting percentage of 49. without needing to comb through hours of video footage. For example. Finally. customer satisfaction. The Advanced Scout software analyzes the movements of players to help coaches orchestrate plays and strategies. it enables them to "drill down" into summary information to view detail transactional data.5 terabyte Teradata data warehouse. and marketing organizations. By using the NBA universal clock. 80 . WalMart captures point-of-sale transactions from over 2.30% for the Cavaliers during that game. to access data on their products and perform data analyses. 1995 reveals that when Mark Price played the Guard position. a coach can automatically bring up the video clips showing each of the jump shots attempted by Williams with Price on the floor. And.

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

Graphics tools are used to illustrate data relationships. Rule induction: The extraction of useful if-then rules from data based on statistical significance. Data visualization: The visual interpretation of complex relationships in multidimensional data. CART segments a dataset by creating 2way splits while CHAID segments using chi square tests to create multi-way splits. These decisions generate rules for the classification of a dataset. CART and CHAID are decision tree techniques used for classification of a dataset.• 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) . CART typically requires less data preparation than CHAID. • • • 82 . They provide a set of rules that you can apply to a new (unclassified) dataset to predict which records will have a given outcome. Sometimes called the k-nearest neighbor technique. 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).

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

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