CS507 Organizational Information Systems

Organizational Information  Systems
CHAPTER  OUTLINE 
8.1 Transaction Processing  Systems
8.2 Functional Area Information  Systems
8.3 Enterprise Resource  Planning Systems
8.4 Customer Relationship  Management  Systems
8.5 Supply Chain Management  Systems
8.6 Electronic Data Interchange  and  Extranets
LEARNING  OBJECTIVES 
 Describe transaction  processing systems.
 Describe functional area information systems and the support they provide for each
functional area of the organization.
 Describe enterprise resource planning systems.
LEARNING  OBJECTIVES (continued) 
 Describe customer  relationship management systems.
 Describe supply chain management systems.
 Discuss electronic data interchange and extranets.
Chapter  Opening Case 
Toyota Production System
Toyota  Production System (continued) 
Electronic dashboard showing  status of assembly line
Toyota  Production System (continued)
Toyota  Production System (continued) 
How light curtains work
8.1 Transaction  Processing Systems  (TPS) 
 
Batch Processing
Online Transaction Processing  (OLTP) 
Rudy Giuliani checking  out of a Wal-Mart using a bar code 
scanner that produces data captured by  a transaction processing system 
Note: the barcode scanner  is an example of source data automation
 Transaction  processing system (TPS)  monitors, collects, stores and processes data
generated from all business transactions.
 Batch Processing is when the firm collects data from transactions as they occur, placing
them in groups or batches, then prepares and processes the batches periodically (say, every
night).
 Online Transaction Processing (OLTP) is when business transactions are processed
online as soon as they occur.
 Source data automation involves collecting data from sensors (e.g., barcode scanners)
and entering the data directly into a computer without human intervention.
How Transaction  Processing Systems Manage Data
8.2 Functional  Area Information Systems 
 Functional  area information Systems provide information mainly to lower- and
middle-level managers in the functional areas via a variety of reports.
 Functional area information Systems are designed to support a functional area by
increasing its internal effectiveness and efficiency in the following areas:
 Accounting
 Finance
 Marketing
 Operations (POM)
 Human Resources Management
Examples  of Information Systems Supporting the Functional  Areas
Functional  Area Information Systems Reports 
 Routine reports
 Ad hoc (on demand) reports
 Drill-down reports
 Key-indicator reports
 Comparative reports
 Exception reports
 Summary  reports provide summarized information, with less detail.
 Detailed reports provide high levels of detailed data, often in support of summary
reports.
 Note that this detailed report provides the underlying data for “Remove Catch Basin”,
which is
 the second item on the preceding summary report.
 A drill-down report allows users to click on an item in a report and be able to access
 underlying details about that item.
 RSSbus is a mashup tool that gives you the tools to quickly create structured feeds out of
 anything;  not just news and blog postings, but business data or application data that
 you own or have access to. (Note: RSSBus is not special, it just had an interesting
 video on drill-down.)
          Summary Report 
A summary report is one type of routine report
         Detailed Report 
A detailed report is another type of routine report
      Drill-Down Report 
Drill-down  report is a type of ad-hoc report
 A key indicator report summarizes the performance of critical activities.
 The key indicator in this report is the number of prison inmates per 100,000 of population
in 1996-1997.
       Key-Indicator Report 
Key-indicator  report is a type of ad-hoc report
      Comparative Report 
Comparative  report is one type of ad-hoc report.
 This comparative  report compares managed health care to  traditional fee-for-service
  healthcare. Let’s use one example: Advice to smokers to quit.
 * Fee-for-service has a 37% compliance rate on seven Healthcare Effectiveness Data and
Information Set (HEDIS) preventive measures. See purple arrow.
 * The minimum managed care plans have a 30% compliance rate. (left end of bar)
 * The maximum managed care plans have a 85% compliance rate. (right end of bar)
 * The average of all managed care plans (National Health Plan average) is 61%
compliance.
 (see red arrow).
 We can see that there is quite a bit of information in this graphical comparative report.
        Exception Report
 Exception  reports include only information that falls outside certain threshold
standards.
 
 This image shows  a financial transaction exception report using 
SAP from the University of
 Toronto in 2003.
8.3 Enterprise  Resource Planning  Systems (ERP) 
   The major objective of ERP systems is to tightly integrate the functional areas of the
organization and to enable seamless information flows across the functional areas.
 Enterprise  Resource Planning (ERP) systems integrate the planning, management and
use of all resources of the organization. That is, ERP systems are designed to break down the
information silos of an organization.
 Many information systems were developed for specific functional areas and did not
communicate with systems in other functional areas. Therefore, these systems are referred to
as information silos.
Problems  with information silos
         ERP Systems (continued)
SAP Modules
ERP Systems (continued) 
    A business process is a set of related steps or procedures designed to produce a specific
outcome.
8.4 Customer  Relationship  Management 

 Includes a one-to-one  relationship between a customer and a  seller.
 One simple idea “Treat different customers differently.”
 Helps keep profitable customers and maximizes lifetime revenue from them.
 Customer  relationship management (CRM)  is an enterprisewide effort to acquir and
retain customers.
 The customer life cycle: engage, transact, fulfill, and support.
     The Need for CRM 
 It costs six  times more to sell to a new customer  than to sell to an existing one.
 A typical dissatisfied customer will tell 8-10 people.
 By increasing the customer retention rate by 5%, profits could increase by 85%.
 Odds of selling to new customers = 15%, compared to the odds of selling to existing
customers (50%)
 70% of complaining customers will remain loyal if problem is solved
    The Customer Life Cycle
          Customer Value
 The  value of a customer  to a company depends on three dimensions: the duration of
the
 relationship, the number of relationships (e.g., the number of products from a
 company that a customer purchases), and the profitability of the relationship.
Customer  Touch Points 
 Telephone 
Conventional mail 
Help desk 
Web site 
      E-mail 
         Store
        CRM Applications 
CRM systems provide applications  in 3 major areas:
Sales - sales force automation (SFA).
Marketing – support marketing campaigns & provide opportunities for cross-selling, up-selling
and bundling.
Customer  Service – can take many Web-based forms. 
 Sales  force automation (SFA) functions provide such data as sales prospect and
contact information, product information, productconfigurations and sales quotes.
 Cross-selling is the marketing of complementary products to customers.
 Up-selling is the marketing of higher-value products or services to customers.
 Bundling is a type of cross-selling in which a vendor sells a combination of products
together
 at a lower price than the combined costs of the individual products.
        Customer Service 
 Customer service  can take many forms and includes:
 Technical and other information and services
 Customized products and services
 Tracking account or order status
 Personalized Web pages
 FAQs
 E-mail and automated response
 Call centers
Software  as a Service for CRM (IT’s About Business 8.2)
        Putting it all together 
The relationships among  SCM, ERP, and CRM
8.5 Supply  Chain Management  Systems (SCM) 
Supply chain
Supply chain management  (SCM) 
Interorganizational information  system (IOS)
Global information system
 Supply  chain refers to the flow of materials, information, money, and services from raw
material suppliers, through factories and warehouses, to the end customers.
 Supply chain management (SCM) is the function of planning, organizing and
optimizing the supply chain’s activities.
 Interorganizational information system (IOS) involves information flows among two
or more organizations.
 Global information systems are interorganizational information systems that connect
companies located in two or more countries.
Supply  Chain (recall Figure 2.2)
Warner’s  Digital Supply Chain (IT’s About Business 8.3)
The Structure  & Components of Supply Chains 
A supply chain involves  three segments:
Upstream
Internal
Downstream
Tiers of suppliers

 Upstream, where sourcing or procurement from external suppliers occurs.
 Internal, where packaging, assembly or manufacturing takes place.
 Downstream, where distribution takes place, frequently by external distributors.
 Tiers of suppliers, a supplier may have one or more subsuppliers, and the subsupplier
may
 have its own subsupplier(s) and so on.
       Generic Supply Chain
The Flows  of the Supply Chain 
 Material flows
 Information flows
 Financial flows
 Material  flows are the physical products, raw materials, supplies and so forth that flow
along the chain.
 Information flows are all data related to demand, shipments, orders, returns and
schedules as well as changes in any of these data.
 Financial flows are all transfers of money, payments and credit-related data.
 A supply chain involves a product life cycle approach, from “dirt to dust”.
Problems  Along the Supply Chain 
 Poor customer service
 Poor quality product
 High inventory costs
 Loss of revenues
 New technologies
Problems  Along the Supply Chain (continued) 
 Problems stem mainly  from two sources:
 Uncertainties due to demand forecast, delivery times, quality problems in
materials and parts that can create production delays;
 The need to coordinate several activities, internal units and business partners.
 Bullwhip effect refers to erratic shifts in orders up and down the supply chain.
      The Bullwhip Effect
Issues  of Global IOS Design 
 Cultural differences
 Localization
 Economic and Political Differences
 Legal issues
 Cross-border data transfer which refers to the flow of corporate data across nations’
borders.
8.6 Electronic  Data Interchange (EDI)  and Extranets 
Electronic data interchange  (EDI)
Extranets
 Electronic  data interchange (EDI) is a communication standard that enables
 business partners to exchange routine documents, such as purchase orders,
 electronically.
 Extranets link business partners to one another over the Internet by providing
       EDI Benefits 
 Minimize data entry  errors
 Length of messages are shorter
 Messages are secured
 Reduces cycle time
 Increases productivity
 Enhances customer service
 Minimizes paper usage and storage
         EDI Limitations 
 Significant initial  investment to implement
 Ongoing operating costs are high due to the use of expensive, private VANs
 Traditional EDI system is inflexible
 Long startup period
 Multiple EDI standards exist
Comparing  Purchase Order Fulfillment Without EDI 
Comparing  Purchase Order Fulfillment With EDI
          Extranets 
 The main goal  of extranets is to foster collaboration  between business partners.
 An extranet is open to selected B2B suppliers, customers and other business partners.
The Structure  of an Extranet
      Types of Extranets 
A company and its  dealers, customers or suppliers 
 
An industry’s extranet 
Joint ventures and other  business partnerships
 A  company and its dealers,  customers or suppliers – centers around one company.
 An industry’s extranet – major players in an industry team up to create an extranet.
 Joint ventures and other business partnerships – partners in a joint venture use
extranet as a vehicle for communications and collaboration.
   Chapter Closing Case