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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Lecture 9 Competitive Forces Bargaining Bargaining Rivalry of Threat Threat of Power of Power of Competitors of New Substitutes Customers Suppliers Entrants Cost Leadership Differentiation C O M P E Innovation T I T I V E Growth S T R A T Alliance E G I E S Other Strategies 21 .

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

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

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

The chain consists of a series of activities that create and build value. Thus the internal factors of key importance are sought to be linked with the chain of value activities through systematic identification of the discrete activities as potential sources of strength and weaknesses. for most business enterprises. 25 . There are. The value chain is a systematic approach to examining the development of competitive advantage.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. two broad categories of value activities: Primary Activities and Support Activities. They culminate in the total value delivered by an organization.

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

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

Lecture 14
Planning for Information Systems

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

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

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

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

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

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

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

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

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   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 .

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

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

You can choose to delete the file or “clean” it.” Whether you use a standalone PC or your computer is attached to a network. 1999. This type of software checks every incoming file for viruses. Not if.via an email attachment. it severely hampered normal operations of many companies and Internet Service Providers through the increased number of emails it generated. Some sites had to take their mail systems off-line. March 26.000 copies of mail messages containing Melissa on their systems within 45 minutes. One site reported receiving 32. 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. the software alerts you to its presence. While the virus didn’t damage any computer files or data. you’re just asking for trouble if you don’t have antivirus software. but when.000 computers. you receive an infected file. March 29. LECTURE 19 Concerns for System Builders and Users 35 . The first confirmed reports of Melissa were received on Friday. Make sure you update your antivirus software every 30 to 60 days because new viruses are constantly being written and passed around. By Monday. it had reached more than 100.

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

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

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

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

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

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

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

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

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

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

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

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

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

The important thing is not to focus on how long it will take—real transformational ERP efforts usually run between one and three years. reducing the finished good inventory at the warehouses and shipping docks. and it can help users better plan deliveries to customers. By having this information in one software system. you need supply chain software. ERP creates a single version of the truth that cannot be questioned because everyone is using the same system. he may find many different versions of the truth. customers completely satisfied). To really improve the flow of your supply chain. And that kind of change doesn't come without pain. Unless. on average— but rather to understand why you need it and how you will use it to improve your business. Finance has its own set of revenue numbers. companies can keep track of orders more easily. productivity higher than all your competitors. and the different business units may each have their own version of how much they contributed to revenues. or the company used only the financial pieces of the ERP system (in which case the ERP system is nothing more than a very expensive accounting system). • 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. Standardizing those processes and using a single. Don't be fooled when ERP vendors tell you about a three or six month average implementation time. the ways you do business will need to change and the ways people do their jobs will need to change too. sales has another version. inventory and shipping among many different locations at the same time. rather than scattered among many different systems that can't communicate with one another. Those short (that's right. your ways of doing business are working extremely well (orders all shipped on time. in which case there is no reason to even consider ERP. and it improves visibility of the order fulfillment process inside the company. increase productivity and reduce head count. and coordinate manufacturing. ERP systems come with standard methods for automating some of the steps of a manufacturing process. integrated computer system can save time. but ERP helps too. of course. or the implementation was limited to a small area of the company. • Reduce inventory—ERP helps the manufacturing process flow more smoothly. 49 . • 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. To do ERP right. What will ERP fix in my business? There are five major reasons why companies undertake ERP. That can lead to reduced inventories of the stuff used to make products (work-in-progress inventory). Integrate financial information—As the CEO tries to understand the company's overall performance.LECTURE 27 ERP Features Companies that install ERP do not have an easy time of it. six months is short) implementations all have a catch of one kind or another: The company was small.

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

6 million. medium and large companies in a range of industries—the average TCO was $15 million (the highest was $300 million and lowest was $400.000). process rework. upgrading and optimizing the system for your business are felt. and the price tags on the front end are enough to make the most placid CFO a little twitchy. A few oversights in the budgeting and planning stage can send ERP costs spiraling out of control faster than oversights in planning almost any other information system undertaking. It is a navel-gazing exercise that focuses on optimizing the way things are done internally rather than with customers. Needless to say. Among the 63 companies surveyed—including small. suppliers or partners. including hardware. software. Or they can modify the software to fit the process. What does ERP really cost? Meta Group recently did a study looking at the total cost of ownership (TCO) of ERP. which is when the real costs of maintaining. At that point there are two things they can do: They can change the business process to accommodate the software. In addition to budgeting for software costs. which will slow down the project. But the median annual savings from the new ERP system were $1. and so can failure to consider data warehouse integration requirements and the cost of extra software to duplicate the old report formats. 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. 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. professional services and internal staff costs. those who have implemented ERP packages agree that certain costs are more 51 . financial executives should plan to write checks to cover consulting. What are the hidden costs of ERP? Although different companies will find different land mines in the budgeting process. 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). 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. When will I get payback from ERP—and how much will it be? Don't expect to revolutionize your business with ERP.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. The most common reason that companies walk away from multimillion-dollar ERP projects is that they discover the software does not support one of their important business processes. The TCO for a "heads-down" user over that period was a staggering $53. The TCO numbers include getting the software installed and the two years afterward.320. 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. integration testing and a long laundry list of other expenses before the benefits of ERP start to manifest themselves.

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

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

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

55 .

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Opportunity has several phases. emails).g.Opportunity Management Opportunities help the Sales team by organizing all the relevant data regarding a prospective deal into one place. Of course these phases can be defined based on individual company needs. important dates and milestones etc. 2.000 USD.g. Service Order Management Service Contract Management Planned Services management Warranty Management Installed Base (Equipment) Management SLA Management Resource Planning and Scheduling Knowledge Management (FAQs. products interested in. if won gets converted to a Sales order. 7. This is often referred as "Guided Sales Methodology". 3. How to guides) Call Center Support 71 . It creates reminders and planned activities within the system. Standard features of creating a "linked" Quotation or Sales Order from opportunities are provided. RFP received. 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. e. final stage. total spending. 8. Opportunities can be directly converted into Quotations or Sales Orders. avoid "Penalties" arising due to Non conformity of SLA (Service Level Agreements). avoid "leakage" of Warranty based services. Several functionalities are mentioned below: 1. can be converted to a quotation. helping to build a 360 degree view of customer. qualification. discussions. Activity Management Activities represent various Sales or Service related interactions with the customer (meetings. 4. and the deal size is more than (say) 50. if they reach a Quotation phase. expected budget. telephone calls. identification. e. Activities can be synchronized to MS Outlook/Lotus Notes Calendar items (Meetings and Tasks) Service Service related functionalities are focused on effectively managing the customer service (Planned or Unplanned). won or lost. 9. It is characterized by the details such as Prospective customer. and provide first and Second Level support to Customers. if the Opportunity has reached "RFP received" stage. expected closing date. Key players in the deal and their key characteristics. quotation sent. initiation. These Sales orders then flow to the Back-End (ERP) system for further execution and Delivery. Activity Management provides a platform to consolidate all the interactions with customer into a single platform. the system can prompt the representative to hold a review discussion with a senior manager. Quotation and Sales Order Management Opportunities. and. 6. 5.

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

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

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

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

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

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

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

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

it enables them to "drill down" into summary information to view detail transactional data. a retailer could use point-of-sale records of customer purchases to send targeted promotions based on an individual's purchase history. It enables these companies to determine relationships among "internal" factors such as price. By using the NBA universal clock. John Williams attempted four jump shots and made each one! Advanced Scout not only finds this pattern. an analysis of the play-by-play sheet of the game played between the New York Knicks and the Cleveland Cavaliers on January 6. it enables them to determine the impact on sales. financial. WalMart computers processed over 1 million complex data queries. 1995 reveals that when Mark Price played the Guard position. and "external" factors such as economic indicators. WalMart captures point-of-sale transactions from over 2. and customer demographics. Finally. communication. and corporate profits. For example. These suppliers use this data to identify customer buying patterns at the store display level. Those clips show a very successful pick-and-roll play in which Price draws the Knick's defense and then finds Williams for an open jump shot.LECTURE 39 What can data mining do? Data mining is primarily used today by companies with a strong consumer focus retail.500 suppliers. customer satisfaction. without needing to comb through hours of video footage. American Express can suggest products to its cardholders based on analysis of their monthly expenditures. but explains that it is interesting because it differs considerably from the average shooting percentage of 49. or staff skills. 80 . By mining demographic data from comment or warranty cards. The Advanced Scout software analyzes the movements of players to help coaches orchestrate plays and strategies. For example. a coach can automatically bring up the video clips showing each of the jump shots attempted by Williams with Price on the floor. WalMart allows more than 3. In 1995. They use this information to manage local store inventory and identify new merchandising opportunities. WalMart is pioneering massive data mining to transform its supplier relationships. product positioning. The National Basketball Association (NBA) is exploring a data mining application that can be used in conjunction with image recordings of basketball games. With data mining. to access data on their products and perform data analyses. the retailer could develop products and promotions to appeal to specific customer segments.30% for the Cavaliers during that game. Blockbuster Entertainment mines its video rental history database to recommend rentals to individual customers. And.900 stores in 6 countries and continuously transmits this data to its massive 7. and marketing organizations. competition.5 terabyte Teradata data warehouse.

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

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

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

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