INFORMATION SYSTEM MANAGEMENT Lecture 1 Meaning and Role of Information Systems As a consumer, you have instant access to millions

of pieces of data. With a few clicks of the mouse button, you can find anything from current stock prices and video clips of current movies. You can get product descriptions, pictures, and prices from thousands of companies across India and around the world. Trying to sell services and products? You can purchase demographic, economic, consumer buying pattern, and market-analysis data. Your firm will have internal financial, marketing, production, and employee data for past years. This tremendous amount of data provides opportunities to managers and consumers who know how to obtain it and analyze it to make better decisions. Today information systems are everywhere; from supermarkets to airline reservations, libraries and banking operations they have become part of our daily lives. The first step in learning how to apply information technology to solve problems is to get a broader picture of what is meant by the term information system. Computers are only one component of an information system. A computer information system (CIS) consists of related components like hardware, software, people, procedures, and collections of data. The goal of Information System is to enable managers to make better decisions by providing quality information. The term information technology (IT) represents the various types of hardware and software used in an information system, including computers and networking equipment. The physical equipment used in computing is called hardware. The set of instructions that controls the hardware is known as software. In the early days of computers, the people directly involved in are tended to be programmers, design analysts, and a few external users. Today, almost everyone in the firm is involved with the information system. Procedures are instructions that help people use the systems. They include items such as user manuals, documentation, and procedures to ensure that backups are made regularly. Databases are collections of related data that can be retrieved easily and processed by the computers. Quality is an important issue in business today, particularly as it relates to information systems. The quality of an information system is measured by its ability to provide exactly the information needed by managers in a timely manner. The information must be accurate and up-to-date. Users should be able to receive the information in a variety of formats: tables of data, graphs, summary statistics, or even pictures or sound: Framework for Business End Users The field of information systems encompassses many complex technologies, abstract behavioral concepts, and specialized applications in countless business and non business areas. Thus, you should concentrate your efforts in five areas of knowledge: • Foundation Concepts: Fundamental behavioral and technical concepts 1

• • • •

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

Key Terms Used In Information System Data, Information, Knowledge, and Wisdom Let us consider the case of a retail store that is trying to increase sales. Some of the data available includes sales levels for the last 36 months, advertising expenses, and customer comments from surveys. By itself, this data may be interesting, but it must be organized and analyzed to be useful in making a decision. For example, a manager might use economic and marketing models to forecast patterns and determine relationships among various advertising expenses and sales. The resulting information (presented in equations, charts, and tables) would clarify relationships among the data and would be used to decide how to proceed It requires knowledge to determine how to analyze data and make decisions. Education and experience create knowledge in humans. A manager learns which data to collect, the proper models to apply, and ways to analyze results for making better decisions. In some cases, this knowledge can be transferred to specialized computer programs (expert systems). Wisdom is more difficult to define but represents the ability to learn from experience and adapt to changing conditions. In this example, wisdom would enable a manager to spot trends, identify potential problems, and develop new techniques to analyze the data. Characteristics of Information Now, let us discuss about the characteristics of good information • Timeliness: Information must reach the user in a timely manner, just when it is needed; not too early, because by the time it is used it would be out-of-date; not too late because the user will not be able to incorporate it into his/her decision-making. • Appropriateness: Information must be relevant to the person who is using it. It must be within the sphere of his/her activities so that it can be used to reduce uncertainty in his/her decision-making. • Conciseness: Information should always contain the minimum amount of detail that is appropriate for the user. Too much detail causes information overload. • Frequency: Frequency is related to timeliness. Too often the information presented is linked to the calendar (end of the week, beginning of the month); its frequency should be synchronized with the timing of the decision making of the user. • Understandability: The format and presentation of information are very important. 2

Some people prefer tabular information, whereas others may need it in a graphical form. Also the use of colors enhances the understandability of what is presented. • Relevant: It pertains to the particular problem. What data is relevant depends on the decision-making model used. E.g. university admissions officials may choose to consider the results of some high-school test irrelevant, if they believe that it does not improve the chances of some applicant later becoming a successful student. • Complete: All the relevant parts are included. E.g. marketing data about household incomes may lead to bad decisions, if not accompanied by consumption habits of the target population. • Current: Decisions are often based on the latest information available • Economical: The costs of gathering information should be justified by the overall benefits


Lecture 2 What is a System? A system is a group of interrelated components working together toward a common goal by accepting inputs and producing outputs in an organized transformation process. System will have the following basic interacting components (functions): 1. Input 2. Processing 3. Output 4. Feedback 5. Control What is an Information System? Now, it is time to see the real meaning and concept of Information Systems. Too often you hear someone say, "Oh yeah, I know how to use a computer. I can surf the Web with the best of them and I can play Solitaire for hours. I'm really good at computers." Okay. So that person can pound a keyboard, use a mouse at lightning speed, and has a list of favorite Web sites a mile long. But the real question is "Is that person information literate?" Just because you can pound the keyboard doesn't necessarily mean you can leverage the technology to your advantage or the advantage of your organization. An organization can gather and keep all the data on its customers that a hard drive can hold. You can get all the output reports that one desk can physically hold. You can have the fastest Internet connection created to date. But if the organization doesn't take advantage of customer data to create new opportunities, then all it has is useless information. If the output report doesn't tell the management that it has a serious problem on the factory floor, then all that's been accomplished is to kill a few more trees. If you don't know how to analyze the information from a Web site to take advantage of new sales leads, then what have you really done for yourself today? Most of us think only of hardware and software when we think of an Information System. There is another component of the triangle that should be considered, and that's the people side, or "persware." Think of it this way: We talk about the input, processing, output and feedback processes. Most important is the feedback process; unfortunately it's the one most often overlooked. Just as in the triangle above, the hardware (input and output) and the software (processing) receive the most attention. With those two alone, you have computer literacy. But if you don't use the "persware" side of the triangle to complete the feedback loop, you don't accomplish much. Add the "persware" angle with good feedback and you have the beginnings of information literacy. An information system differs from other kinds of systems in that its objective is to monitor/document the operations of some other system, which we can call a target system. An information system cannot exist without such a target system. For example, production activities would be the target system for a production scheduling system, human resources in the business operations would be the target system of a human resource information system, and so on. It is important to recognise that within a vending machine there is a component/sub-system that can be considered an information system. In some sense, every reactive system will have a subsystem that can be considered an information system whose objective is to monitor and control such a reactive system.


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

policies.Lecture 8 Information System: An information system can be any organized combination of people.      20 . information systems that support or shape the competitive position and strategies of a business enterprise. a board of directors and an executive committee of the CEO and top executives develop overall organizational goals. Strategic Management: Typically. transforms and disseminates information in an organization. They also monitor the strategic performance of an organization and its overall direction in the political. economic and competitive business environment. hardware. 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. services and capabilities that gives a company major advantages over the competitive forces it faces in the global marketplace. A company can survive and succeed in the long run only if it successfully develops strategies to confront five competitive forces that shape the structure of competition in its industry. This creates strategic information systems. and objectives as part of a strategic planning process. software. communications networks and data resources that collects. This strategic role of information systems involves using information technology to develop products. strategies. 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.

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 .

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

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

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

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

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

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

Lecture 14
Planning for Information Systems

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

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

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


the buisness . The goals and the objectives of the MIS would be so stated that they can be measured . 2. Strategy for the plan achievemnet The designer has to take a number of strategic decisions for the achievement of the MIS goals and obejectives . They are : a) Development strateg b) System develelopment strateg c) Resoureces for the system development d) Manpower composition 3. The architecture of the MIS The architecture of the MIS plan provides a system and subsystem structure and their input , output and linkages . It also provides a way to handle the systems or subsystem by way of simplification , coupling and decoupling of susbsystems . It spells out in detail the subsystems from the data entry to processing , analysis to modelling , and storage to printing . 4. The system development schedule A schedule is made for the development of the system . While preparing the schedule due consideratin is given to the importance of the system in the overall information requirement . Due regard is also given to logical system development . For example , it is necessary to develop the accounting system first and then the analysis . 5. Hardware and software plan Giving due regard to the technical and operational feasibility , the economics of investment is worked out . Then the plan of procument is made after selecting the handware and software . One can take the phased approach of investment starting from the lower congfiguration of hardware going over to higher as develoment takes place . The process is to match the technical decisions with the financial decisions . The system development schedule is linked with the information requirements which in turn , are linked with the goals and objectives of the business . 29

6. Ascertainng the class of information The design of the MIS should consider the class of information as a whole and provide suitable information system architecture to generate the information for various users in the organisation . Let us now proceed to ascertain the information needs of each class .


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

LECTURE 16 Business Planning Systems: The Business Systems Planning offering defines and plans the applications and technical architecture within an enterprise. •Its focus on data and especially on processes was an entirely new way to view the firm and to build systems; this process approach has since been copied by many others. •BSP is very comprehensive – and thus time consuming and expensive. The goals of a Business Systems Plan (BSP) are to:

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


   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. 32 .

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

55 .

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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. Online (Internet) 3. 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. these are often the result of unrealistic high expectations and exaggerated claims by CRM vendors. 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. Sales and Service) can be executed across these Communication channels. In contrast there are a growing number of successes. Direct 2. 72 .10. Call Center (via Phone/FAX/Email etc) All the three CRM Sub Modules (Marketing. For instance. Based on these criteria. Resource Planning and Workforce Management Channels of communication It is also important to mention here that a CRM system is capable of executing all the three sub modules via multiple communication Channels. Customers want the assurance that their data is not shared with third parties without their consent and not accessed illegally by third parties. [1] [2] Privacy and Data Security The data gathered as part of CRM must consider customer privacy and data security. These channels can be: 1.

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

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

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

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

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

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

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

competition. but explains that it is interesting because it differs considerably from the average shooting percentage of 49.900 stores in 6 countries and continuously transmits this data to its massive 7. or staff skills. WalMart captures point-of-sale transactions from over 2. 1995 reveals that when Mark Price played the Guard position. and marketing organizations. Finally. John Williams attempted four jump shots and made each one! Advanced Scout not only finds this pattern. it enables them to determine the impact on sales. the retailer could develop products and promotions to appeal to specific customer segments. In 1995. By using the NBA universal clock. Blockbuster Entertainment mines its video rental history database to recommend rentals to individual customers.30% for the Cavaliers during that game. It enables these companies to determine relationships among "internal" factors such as price. it enables them to "drill down" into summary information to view detail transactional data. without needing to comb through hours of video footage. American Express can suggest products to its cardholders based on analysis of their monthly expenditures. By mining demographic data from comment or warranty cards. With data mining. The National Basketball Association (NBA) is exploring a data mining application that can be used in conjunction with image recordings of basketball games. WalMart computers processed over 1 million complex data queries. The Advanced Scout software analyzes the movements of players to help coaches orchestrate plays and strategies.LECTURE 39 What can data mining do? Data mining is primarily used today by companies with a strong consumer focus retail. These suppliers use this data to identify customer buying patterns at the store display level. and customer demographics. product positioning. and corporate profits.5 terabyte Teradata data warehouse. WalMart allows more than 3. 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. 80 . They use this information to manage local store inventory and identify new merchandising opportunities. financial. communication. 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. and "external" factors such as economic indicators. a retailer could use point-of-sale records of customer purchases to send targeted promotions based on an individual's purchase history. to access data on their products and perform data analyses. customer satisfaction. And. a coach can automatically bring up the video clips showing each of the jump shots attempted by Williams with Price on the floor.500 suppliers. WalMart is pioneering massive data mining to transform its supplier relationships. For example.

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

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

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

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