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

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Technology: Major concepts, developments, and Management issues in IT – software, hardware, network, database mgmt etc… Applications: Using emails for fast communication, internet, intranet, & extranet to gather the information, for operations and management. Development: How end users or information specialists develop information systems solutions to business problems using fundamental problem – solving and development methodologies. Management: Effectively managing the resources and business strategies involved in using IT at end user, enterprise and global level of business.

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

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Lecture 2 What is a System? A system is a group of interrelated components working together toward a common goal by accepting inputs and producing outputs in an organized transformation process. System will have the following basic interacting components (functions): 1. Input 2. Processing 3. Output 4. Feedback 5. Control 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.

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

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

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

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

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

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

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

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

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

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. to continually monitor chemical processes. capture & process data detected by sensors & make instant (Real Time) adjustments to appropriate refinery processes. marketing specialists. • Its goal is to use information technology to enhance the productivity and creativity of teams and workgroups in the modern business enterprise. A petroleum refiner uses electronic sensors linked to computer. In this way. in which decisions adjusting a physical production processes are automatically made by computers. • Example: Many businesses form teams of engineers.g. 3.2. Process Control System • Operation support system also makes routine decisions that control operational processes. and other knowledge workers to develop new products or improve existing ones. The computers monitor a chemical process.g. • E. • Help us collaborate to communicate ideas. 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. E. They may form virtual teams of people from several departments and locations within a company and include outside consultants as team members. Such teams would make heavy use of Internet. discussion forums. corporate intranets and extranets and collaboration software known as groupware. They then could easily collaborate via electronic mail. 14 . a product development team could efficiently communicate with each other and coordinate their work activities. of automation automatic inventory reorder decisions & production control decisions. data & videoconferencing & multimedia project Websites on the company’s intranet. • This includes a category of information systems called process control systems.

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

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

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

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

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

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

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 .

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

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

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

for most business enterprises. There are. They culminate in the total value delivered by an organization. The chain consists of a series of activities that create and build value. The value chain is a systematic approach to examining the development of competitive advantage. 25 . two broad categories of value activities: Primary Activities and Support Activities.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. 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.

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

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

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

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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 .

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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

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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.

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

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

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

Let us look at three concerns: disasters. and technical measures the company uses to keep out unauthorized users or prevent physical damage to the hardware. A spilled cup of coffee can also do some damage! As the lesson points out. Natural disasters such as fires and earthquakes can strike at any time. and errors. Just imagine what would happen if an airline reservation system (a typical online transaction processing system) went down. what if you wanted to fly to Dallas on March 15 and the reservation clerk booked you on a flight for April 15? The potential for error exists all through the processing cycle. “Garbage In. Here the security is in the policies. especially an end-user developed system. Garbage Out. Add the cost of lost productivity by the employees to the lost transactions and unhappy customers. procedures. but think about the losses if the company’s system goes down. security.Every user must be concerned about potential destruction of the Information Systems on which they rely. They need to do the same thing on their Information Systems. many companies create fault-tolerant systems that are used as back-ups to help keep operations running if the main system should go out. These back-up systems add to the overall cost of the system. 36 . Surely you’ve heard the saying. You must be cognizant of these error points when designing and building a system.” What may seem like a simple error to you may not be to the customer. 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. you do the math. Companies spend a lot of money on physical security such as locks on doors or fences around supply depots. We can’t stress this point enough. Let’s flip that around.

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

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

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

similar to a television. to provide the user with information and an interface with which to interact. Video input devices Image scanner Webcam Audio input devices Microphone Output • Image. • 40 . Video output devices • Printer Peripheral device that produces a hard copy of a document. 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.LECTURE 21 Input • • • • • • • • • • • • • • Text input devices Keyboard Pointing devices Mouse Trackball Gaming devices Joystick Gamepad Game controller Image. • Headset A device similar in functionality to computer speakers used mainly to not disturb others nearby.

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

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

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

this software themselves and often overlook how important it is. 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. and what has been added by fellow co-workers. 44 .

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

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

no one in the company truly knows what the status of the order is at any given point because there is no way for the finance department. for example). 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. ERP vanquishes the old standalone computer systems in finance. Many companies. When a customer service representative enters a customer order into an ERP system. and replaces them with a single unified software program divided into software modules that roughly approximate the old standalone systems. for example. you need only log in to the 47 . "You'll have to call the warehouse" is the familiar refrain heard by frustrated customers. when a customer places an order. Most vendors' ERP software is flexible enough that you can install some modules without buying the whole package. 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. It doesn't handle the up-front selling process (although most ERP vendors have recently developed CRM software to do this). for example. ERP takes a customer order and provides a software road map for automating the different steps along the path to fulfilling it. the company's inventory levels from the warehouse moduleand the shipping dock's trucking schedule from the logistics module. That is a tall order. Take a customer order. All that lounging around in inbaskets causes delays and lost orders.LECTURE 26 What is ERP? Enterprise resource planning software. rather. to get into the warehouse's computer system to see whether the item has been shipped. he has all the information necessary to complete the order (the customer's credit rating and order history from the finance module. for example. will just install an ERP finance or HR module and leave the rest of the functions for another day. a throwaway term. That is why ERP is often referred to as back-office software. But ERP combines them all together into a single. manufacturing and the warehouse all still get their own software. When one department finishes with the order it is automatically routed via the ERP system to the next department. manufacturing and the warehouse. People in these different departments all see the same information and can update it. Typically. This is ERP's true ambition. It attempts to integrate all departments and functions across a company onto a single computer system that can serve all those different departments' particular needs. Finance. Meanwhile. 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. integrated software program that runs off a single database so that the various departments can more easily share information and communicate with each other. doesn't live up to its acronym. or ERP. Each of those departments typically has its own computer system optimized for the particular ways that the department does its work. To find out where the order is at any point. That integrated approach can have a tremendous payback if companies install the software correctly. and all the keying into different computer systems invites errors. Forget about planning—it doesn't do much of that—and forget about resource. that order begins a mostly paper-based journey from in-basket to in-basket around the company. often being keyed and rekeyed into different departments' computer systems along the way. HR. But remember the enterprise part.

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

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

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

including hardware.6 million. The TCO for a "heads-down" user over that period was a staggering $53. But the median annual savings from the new ERP system were $1. medium and large companies in a range of industries—the average TCO was $15 million (the highest was $300 million and lowest was $400. 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. those who have implemented ERP packages agree that certain costs are more 51 . suppliers or partners. At that point there are two things they can do: They can change the business process to accommodate the software. financial executives should plan to write checks to cover consulting. 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. The TCO numbers include getting the software installed and the two years afterward. It is a navel-gazing exercise that focuses on optimizing the way things are done internally rather than with customers. 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. Meta came up with one statistic that proves that ERP is expensive no matter what kind of company is using it. process rework. the move to ERP is a project of breathtaking scope. software. Among the 63 companies surveyed—including small. upgrading and optimizing the system for your business are felt. 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).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 does ERP really cost? Meta Group recently did a study looking at the total cost of ownership (TCO) of ERP. While it's hard to draw a solid number from that kind of range of companies and ERP efforts. integration testing and a long laundry list of other expenses before the benefits of ERP start to manifest themselves. When will I get payback from ERP—and how much will it be? Don't expect to revolutionize your business with ERP. which is when the real costs of maintaining. and the price tags on the front end are enough to make the most placid CFO a little twitchy.000).320. Or they can modify the software to fit the process. and so can failure to consider data warehouse integration requirements and the cost of extra software to duplicate the old report formats. In addition to budgeting for software costs. professional services and internal staff costs. Needless to say. What are the hidden costs of ERP? Although different companies will find different land mines in the budgeting process. Underestimating the price of teaching users their new job processes can lead to a rude shock down the line. 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.

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

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

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

55 .

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Opportunities can be directly converted into Quotations or Sales Orders. and the deal size is more than (say) 50. telephone calls. 7. discussions. if the Opportunity has reached "RFP received" stage. if won gets converted to a Sales order. identification. How to guides) Call Center Support 71 .Opportunity Management Opportunities help the Sales team by organizing all the relevant data regarding a prospective deal into one place. Several functionalities are mentioned below: 1. won or lost. helping to build a 360 degree view of customer. Activity Management provides a platform to consolidate all the interactions with customer into a single platform. can be converted to a quotation.g. 9. if they reach a Quotation phase.g. Quotation and Sales Order Management Opportunities. and. products interested in. 8. e. qualification. 2. e. expected budget. These Sales orders then flow to the Back-End (ERP) system for further execution and Delivery. It creates reminders and planned activities within the system. Activity Management Activities represent various Sales or Service related interactions with the customer (meetings. The Opportunity has several phases. It is characterized by the details such as Prospective customer. the system can prompt the representative to hold a review discussion with a senior manager. Standard features of creating a "linked" Quotation or Sales Order from opportunities are provided. final stage. quotation sent. 3. avoid "leakage" of Warranty based services. avoid "Penalties" arising due to Non conformity of SLA (Service Level Agreements). Service Order Management Service Contract Management Planned Services management Warranty Management Installed Base (Equipment) Management SLA Management Resource Planning and Scheduling Knowledge Management (FAQs. Key players in the deal and their key characteristics. RFP received.000 USD. important dates and milestones etc. 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). total spending. 5. This is often referred as "Guided Sales Methodology". expected closing date. Of course these phases can be defined based on individual company needs. 4. and provide first and Second Level support to Customers. 6. 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. initiation. emails).

[1] [2] Privacy and Data Security The data gathered as part of CRM must consider customer privacy and data security. these are often the result of unrealistic high expectations and exaggerated claims by CRM vendors. Customers want the assurance that their data is not shared with third parties without their consent and not accessed illegally by third parties. Direct 2. In contrast there are a growing number of successes. For instance. One example is the National Australia Bank (NAB) which has pursued a CRM strategy for over ten years and has won numerous awards for its efforts. Customers also want their data used by companies to provide a benefit for them. an increase in unsolicited telemarketing calls is generally resented by customers while a small number of relevant offers is generally appreciated by customers. These channels can be: 1. 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. Based on these criteria. Online (Internet) 3.10. Sales and Service) can be executed across these Communication channels. 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. Call Center (via Phone/FAX/Email etc) All the three CRM Sub Modules (Marketing. 72 .

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

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

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

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

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

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

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

WalMart captures point-of-sale transactions from over 2. and marketing organizations. communication. The National Basketball Association (NBA) is exploring a data mining application that can be used in conjunction with image recordings of basketball games. and customer demographics. it enables them to "drill down" into summary information to view detail transactional data. 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. 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. For example. By mining demographic data from comment or warranty cards. to access data on their products and perform data analyses. but explains that it is interesting because it differs considerably from the average shooting percentage of 49.5 terabyte Teradata data warehouse. and "external" factors such as economic indicators. John Williams attempted four jump shots and made each one! Advanced Scout not only finds this pattern. the retailer could develop products and promotions to appeal to specific customer segments. With data mining. In 1995. 1995 reveals that when Mark Price played the Guard position. It enables these companies to determine relationships among "internal" factors such as price.500 suppliers. a retailer could use point-of-sale records of customer purchases to send targeted promotions based on an individual's purchase history. And.30% for the Cavaliers during that game. These suppliers use this data to identify customer buying patterns at the store display level. WalMart allows more than 3.LECTURE 39 What can data mining do? Data mining is primarily used today by companies with a strong consumer focus retail. The Advanced Scout software analyzes the movements of players to help coaches orchestrate plays and strategies. WalMart is pioneering massive data mining to transform its supplier relationships. They use this information to manage local store inventory and identify new merchandising opportunities. and corporate profits. WalMart computers processed over 1 million complex data queries. product positioning. Finally. or staff skills. 80 . customer satisfaction. competition. For example.900 stores in 6 countries and continuously transmits this data to its massive 7. Blockbuster Entertainment mines its video rental history database to recommend rentals to individual customers. American Express can suggest products to its cardholders based on analysis of their monthly expenditures. By using the NBA universal clock. a coach can automatically bring up the video clips showing each of the jump shots attempted by Williams with Price on the floor. financial. without needing to comb through hours of video footage.

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

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

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