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

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

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

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

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

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

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

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

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

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

provisioning services. analyze and manage a telephone or computer network. People have relied on information systems to communicate with each other using a variety of physical devices (Hardware). and managing faults. configuring network components. • 15 . control. Information Systems are broadly classified into two categories: • Operations Support System • Management Support System INFORMATION SYSTEMS Support of Business Operations Support of Managerial Decision Making OPERATIONS SUPPORT SYSTEMS MANAGEMENT SUPPORT SYSTEMS TRANSACTION PROCESSING SYSTEMS Processing Business PROCESS Transactions CONTROL SYSTEMS Control of Industrial Processes ENTERPRISE COLLABORATION SYSTEMS Team and Workgroup Collaboration MANAGEMENT EXECUTIVE INFORMATION INFORMATION SYSTEMS SYSTEMS Prespecified Information Reporting for DECISION Tailored for Managers SUPPORT Executives SYSTEMS Interactive Decision Support OPERATION SUPPORT SYSTEM: • An operational support system (OSS) is a set of programs that help a communications service provider monitor. Communication Channels (Networks) & Store Data (Data Resources). software. • An OSS supports processes such as maintaining network inventory. Information Processing Instructions & Procedures (Software). transforms & disseminates information in an organization. communication networks & data resources that collects. hardware.Lecture 6 An Information System is an organized combination of people. Produce a variety of information products for internal & external use.

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

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

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

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

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

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 .

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

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

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

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. The value chain is a systematic approach to examining the development of competitive advantage. 25 . two broad categories of value activities: Primary Activities and Support Activities. There are. The chain consists of a series of activities that create and build value. They culminate in the total value delivered by an organization.Lecture 12 Value Chain Analysis Michael Porter suggested an approach of analysis of internal and external resources across distinct functional areas which consisted of identifying the series of steps/activities which are undertaken by the firm and are strategically relevant for meeting customer demand and in respect of which the firm may potentially have an edge over its competitors. for most business enterprises.

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

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

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 .

For example.LECTURE 17 Critical Success Factor                Critical Success Factor (CSF) is a business term for an element which is necessary for an organization or project to achieve its mission. KPIs are measures that quantify objectives and enable the measurement of strategic performance.what's new that will increase business with existing customers and attract new ones? Intellectual capital -. Employee attraction and retention -. Sustainability -. Acquiring new customers and/or distributors -. products and outside revenue. 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. revenue growth. Strategic relationships -. Critical success factors are elements that are vital for a strategy to be successful.new sources of business.how good is your product and service? Product or service development -. Johnson and Michael Friesen applied it to many sector settings. Rockart in 1986. [1] The concept of "success factors" was developed by D.increasing what you know that's profitable. and profit margins. Ronald Daniel of McKinsey & Company in 1961.your future.[3] In 1995 James A. a CSF for a successful Information Technology (IT) project is user involvement. including health care. Customer satisfaction -. For example: KPI = number of new customers CSF = installation of a call centre for providing quotations 33 .how happy are they? Quality -.your personal ability to keep it all going A critical success factor is not a key performance indicator (KPI).your ability to do extend your reach.The process was refined by Jack F.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

medium and large companies in a range of industries—the average TCO was $15 million (the highest was $300 million and lowest was $400. Among the 63 companies surveyed—including small. What are the hidden costs of ERP? Although different companies will find different land mines in the budgeting process. and so can failure to consider data warehouse integration requirements and the cost of extra software to duplicate the old report formats. What does ERP really cost? Meta Group recently did a study looking at the total cost of ownership (TCO) of ERP. including hardware. It is a navel-gazing exercise that focuses on optimizing the way things are done internally rather than with customers. software. The most common reason that companies walk away from multimillion-dollar ERP projects is that they discover the software does not support one of their important business processes. The TCO numbers include getting the software installed and the two years afterward. 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. professional services and internal staff costs. In addition to budgeting for software costs. Yet the navel gazing has a pretty good payback if you're willing to wait for it—a Meta Group study of 63 companies found that it took eight months after the new system was in (31 months total) to see any benefits. financial executives should plan to write checks to cover consulting. integration testing and a long laundry list of other expenses before the benefits of ERP start to manifest themselves.6 million. When will I get payback from ERP—and how much will it be? Don't expect to revolutionize your business with ERP.320. upgrading and optimizing the system for your business are felt. process rework. 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. While it's hard to draw a solid number from that kind of range of companies and ERP efforts. Meta came up with one statistic that proves that ERP is expensive no matter what kind of company is using it. which will slow down the project.000). Needless to say. But the median annual savings from the new ERP system were $1. which will mean deep changes in long established ways of doing business (that often provide competitive advantage) and shake up important people's roles and responsibilities (something that few companies have the stomach for).LECTURE 28 ERP and Business It's critical for companies to figure out if their ways of doing business will fit within a standard ERP package before the checks are signed and the implementation begins. suppliers or partners. Or they can modify the software to fit the process. the move to ERP is a project of breathtaking scope. which is when the real costs of maintaining. Underestimating the price of teaching users their new job processes can lead to a rude shock down the line. The TCO for a "heads-down" user over that period was a staggering $53. At that point there are two things they can do: They can change the business process to accommodate the software. those who have implemented ERP packages agree that certain costs are more 51 .

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

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

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

55 .

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

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

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

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

Supply chain business process integration involves collaborative work between buyers and suppliers. and attempts to satisfy this demand. joint product development. 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. An example scenario: the purchasing department places orders as requirements become appropriate.LECTURE 31 Supply chain business process integration Successful SCM requires a change from managing individual functions to integrating activities into key supply chain processes. in many companies.Customer service provides the source of customer information. However. communicates with several distributors and retailers. f. e. common systems and shared information. which in turn assist to achieve the best product flows. responding to customer demand. c. According to Lambert and Cooper (2000) operating an integrated supply chain requires continuous information flows. management has reached the conclusion that optimizing the product flows cannot be accomplished without implementing a process approach to the business. 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. Successful organizations use following steps to build customer relationships: • • determine mutually satisfying goals between organization and customers establish and maintain customer rapport 60 . d. g. Shared information between supply chain partners can only be fully leveraged through process integration. The key supply chain processes stated by Lambert (2004) are: • • • • • • • • Customer relationship management Customer service management Demand management Order fulfillment Manufacturing flow management Supplier relationship management Product development and commercialization Returns management One could suggest other key critical supply business processes combining these processes stated by Lambert such as: a. b. Marketing.

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

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

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

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

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

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

and sales management by optimizing information shared by multiple employees. and effectively build relationships between the company. and generate quality leads for the sales team. Each interaction with a customer is generally added to a 67 . According to one industry view.analysis of customer data for a broad range of purposes META Group (acquired by Gartner in April 2005) developed this conceptual architecture in the late 1990s. manage marketing campaigns with clear goals and objectives. Aspects of CRM There are three aspects of CRM which can each be implemented in isolation from each other: • • • Operational CRM. taking orders using mobile devices) Allowing the formation of individualized relationships with customers.LECTURE 34 Customer Relationship Management What is CRM (customer relationship management)? CRM (customer relationship management) is an information industry term for methodologies. and usually Internet capabilities that help an enterprise manage customer relationships in an organized way. account. and perhaps the customer directly could access information. Assisting the organization to improve telesales. and streamlining existing processes (for example. understand their needs. and so forth. Providing employees with the information and processes necessary to know their customers. marketing and service. its customer base.direct communication with customers that does not include a company’s sales or service representative (“self service”) Analytical CRM. people providing service. remind customers of service requirements. with the aim of improving customer satisfaction and maximizing profits. and distribution partners. software. and dubbed it the “CRM Ecosystem” Operational CRM Operational CRM provides support to "front office" business processes. an enterprise might build a database about its customers that described relationships in sufficient detail so that management. CRM consists of: • • • • Helping an enterprise to enable its marketing departments to identify and target their best customers. know what other products a customer had purchased. including sales. For example. salespeople.automation or support of customer processes that include a company’s sales or service representative Collaborative CRM. match customer needs with product plans and offerings. identifying the most profitable customers and providing them the highest level of service.

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

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

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

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

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. 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. Customers also want their data used by companies to provide a benefit for them. 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. Sales and Service) can be executed across these Communication channels.10. 72 . these are often the result of unrealistic high expectations and exaggerated claims by CRM vendors. In contrast there are a growing number of successes. These channels can be: 1. Call Center (via Phone/FAX/Email etc) All the three CRM Sub Modules (Marketing. [1] [2] Privacy and Data Security The data gathered as part of CRM must consider customer privacy and data security. Based on these criteria. Online (Internet) 3. One example is the National Australia Bank (NAB) which has pursued a CRM strategy for over ten years and has won numerous awards for its efforts. an increase in unsolicited telemarketing calls is generally resented by customers while a small number of relevant offers is generally appreciated by customers. For instance.

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

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

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

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

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

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

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

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

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

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

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

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