Analysis and Management

of Production System
Lesson 15: Information systems

Prof. Giulia Bruno

Department of Management and

Production Engineering

giulia.bruno@polito.it
Definitions

● Information system: set of elements collecting, processing,

memorising, and distributing information, to support the activities
of decision-making and control of an enterprise
● In addition to supporting decision-making, coordinating and
controlling, information systems can help managers and
employees to analyse problems, visualise complex situations
and design new products.
● Information systems contain information about people, places
and objects in the company
 Data are simple facts representing events occurring inside or
outside the company, they are encoded in numbers, images,
sounds; however, such facts need to be structured and interpreted
 Information is data transformed into a meaningful and useful form.
Characteristics of information

• Information is used to decide how to achieve business goals

• It is necessary to define the processes for collecting information to
plan, organize and control company activities
• Each activity produces information
• Information is intangible assets
• Information is not destroyed when it is used, on the contrary it can
produce new information
Wrong assumptions

• The information system is by no means the domain of the

IT manager alone.
 Any role contributes to the improvement of information
management.
• Despite this:
 The concept of information system is often associated
exclusively with hardware and software tools (the IT system)
 In many companies, the person responsible for the
information system is the one managing the data processing
centre
Benefits

• Enterprises invest in information systems because they represent real

economic value for the company.
• The decision to implement and maintain an information system implies a
higher return on investment (increased productivity, increased profits...)
compared to other possible investments (real estate, machinery, etc.).

• Strategic benefits: reactivity and responsiveness to market variables

(flow control, cost control, technological adaptation, ...)
Information -> Knowledge -> Expertise -> EFFECTIVENESS
• Operational benefits: shared, pervasive, updated, organized
information flow (rationalisation of information and business processes,
reduction of intra- and inter-company coordination costs, ...)
Information -> Knowledge -> Expertise -> EFFICIENCY
Development and deployment

• To develop its information system, an organization must:

 Understand: interpret the organizational context and its

information management requirements and IT requirements (AS
IS)
 Describe: clarify the role of information in the organization and in
support of its strategy (TO BE)
 Deploy: choose the most suitable ICT (Information and
Communication Technologies) contribution to the specific needs
of the organization and establish the related information system
Costs

ADOPTION COSTS
• Initial survey to choose the information system (Benchmarking)
• Technological infrastructure (Hardware, software, cloud)
• System migration (production stops, data consolidation)
• Integration with other dedicated information systems
• Internal resources (management committees, key users)
• External resources (Parameterisation, customisation, reorganization)
• User training (Frontal, manuals)

OPERATING COSTS
• Initial loss of efficiency (Learning curve)
• Licences (Expiry)
• Evolutionary maintenance (Evolutive)
• Technological infrastructure (Hardware, software, cloud)
Successful deployment factors

Success Failure

Management support Incorrect choice

Project organization chart Internal resistance
Project methodology …
Adjustment of processes
Consolidation of data
Change management (organizational
alignment, involvement and
communication, training)
…
Components of the enterprise system

Enterprise
systemsystem
Enterprise
An enterprise is an economic
Management
organization resulting from the
system combination of many elements
that are combined and
Information coordinated to perform a given
system activity and achieve a given
goal.
IT system
Enterprise system

• Characterised by
 One or more institutional goals or purposes (making a
profit, satisfying a need, ...)
 A structure: a set of parts, subsets, resources
People: organize and activate processes
Tangible or intangible assets: functional to the production
 The processes: a set of interconnected activities, carried
out within the company as part of the operations
management of its business functions; they create value by
transforming resources (process input) into a final product
(process output) with added value, addressed to a party
inside or outside the company.
Components of the enterprise system

Enterprise
system

Management
Organizational
system system

Information
system

IT system
Organizational system

• The organizational system results from the choices related to the

distribution, organization and coordination of activities within a
company system.

• Characterised by
 Resources (people, money, materials, information)
 Rules allowing the rationalisation of the company's activities
through the coordinated use of resources
Organizational system

• The main configurations of the organizational system are:

 Functional structure
 Divisional structure (by product or geographical area )
 Matrix structure
Organizational system

• Functional structure
Organizational solution where
activities are divided by
“speciality”, i.e.: operations of the
same nature are grouped
together.

Generally adopted by enterprises: Advantages:

 with limited experience on
international markets
 producers of goods with little
differentiation targeting non-
heterogeneous markets
 operating in contexts where
efficiency is an important
competitive factor
 specialisation and efficiency
 coordination within the function
 fast decision-making
Disadvantages:
 poor coordination towards common goals
 multiplication of hierarchy levels and difficult
coordination between functions
 risk of the manager focusing on their own
function
Organizational system

• Divisional structure
Organizational solution
where activities related to
a product or geographical
area are grouped
together in a division.

Generally adopted by Advantages:

enterprises:  facilitates the strategy of production diversification
 operational flexibility thanks to the concentration of activities
 multi-product or multi-site by product or geographical area
 where each division  coordination of division activities and measurement of
corresponds to one results and efficiencies by division
organizational unit
 with production/supply Disadvantages:
centres and end markets  low economies of scale and synergies
spread over vast territories  the manager focuses on the division
 conflicts between general administration and division
Organizational system
• Matrix structure
Organizational solution with
separate managers for functions
and projects: a function manager
responsible for allocating resources
to projects (funding, facilities, etc.)
and a project manager responsible
for the management and results of
single projects.

Generally adopted by enterprises: Advantages:

 highly diversified and  reduces the disadvantages of the
operating in different previous ones (specialisation and
geographical areas coordination)
 involved in projects and
commissions Disadvantages:
 difficult balance among interests
Components of the enterprise system

Enterprise
system

Organizational
system

Information
Information
systemsystem

IT system
Information system

• The information system is the combination of resources, both human and

material, and procedures for collecting, storing, processing and transmitting
the information needed to carry out the company's activities.

• The elements characterising an information system are:

• Data: describing the reality represented
• Organizational principles: defining which users can access data
and information and how
• Processes: defining the processes used to manage data
• Technological infrastructure: the equipment used for the physical
implementation of the information system.
• People: resources that manage and use the information
Information system and organization

Given the close relationship between the information system and the
organization, on what basis is it possible to develop the information
system best suited to the company's needs?

 Representation by function: each business function has its own

Information System (e.g.: IS for marketing, IS for administration, IS for
production).

 Representation by activity: each type of activity (classified according

to the Anthony pyramid) has its own information system.

 Representation by process: each business process has its own

information system (e.g.: IS for the launch of a new product, IS for the
acquisition of a new resource)
Representation by function

• Corporate organization chart

 Horizontal development: highlights functions
 Vertical development: highlights hierarchy

Direction

Administra Information Human

Production Sales
tion systems Resources

Internet Database
Clients Suppliers Italy Abroad
Service Management
Representation by function

• Advantages:
 Immediate correlation with the company's organizational structure
 Different business functions have different needs and procedures (autonomy in
content, performance and decision-making).
• Disadvantages:
 Focuses on local optimisation as a means of pursuing effectiveness on a global
scale
 Poor dialogue among different functions

The functional information system is characterised by the fact that it is

designed to meet the needs of each function
Representation by activity

• Corporate activities are divided into three levels

 Activities at the strategy level (corporate mission): involve long-term planning
(organizational and investment decisions).
 Activities at the tactic level: these involve planning the available resources and
monitoring the achievement of results in terms of effectiveness and efficiency
(direction of resources in a business department or changes in strategy to take
advantage of trends as they arise)
 Activities at the operation level: they concern the day-to-day life of the business.

The activity-based information system is characterised by the fact that it

is designed for the needs of the level where the activities are located
Anthony's pyramid and processes

Unplanned decision-making processes: long-term

decisions, designing processes and organization, etc.
Examples: opening a new plant, new marketing
Strategic strategy on social media
activities

Tactical Planned decision-making processes: short-term

activities decisions, control of routine activities, etc.
Examples: production launch, machine load control

Physical and operational processes: production,

Operational distribution, etc.
activities Examples: running a production line, paying a supplier
Anthony's pyramid and needs

Prevalence of:
• External information
• Estimated and approximate projected data
• Information, even if not homogeneous
Information needs on internal data that cannot
High be foreseen or repetitive
manage
ment
Prevalence of:
• Internal information
• Homogeneous and congruent data
• Synthetic or rounded data
Functional or • Consecutive data
divisional • Repetitive and consistent processing over time
directions Need to:
• Timely report exceptions
• Access unanticipated information on request
Prevalence of:
• Exact data
Executive staff • Analytical data
Real-time information needs
Representation by process

PROCESS

Input Activity Activity Activity Output

From an information point of view, process representation has the

advantage of showing which information "flows" through the organization
(so-called information flows).

The information system by process is characterised by primarily

being designed to meet the concept of integration between business
functions
Example
Representation by process

• Advantages:
 Solves the problem of interdependency between functions
 Less rigid approach compared to the breakdown by functional areas
• Disadvantages:
 Complex to isolate and identify a process on which to design an IS
 Burdensome for companies very focused on functions
 Suitable for operational activities but not for management activities

• More recent approach, with an increasing number of users

• Can also be used in combination with functional division
(processes within each function are identified)
Components of the enterprise system

Enterprise
system

Set of IT tools used for

Organizational
system automatic processing of an
organization's information in
Information
order to facilitate its IT system
system functions.

IT system
IT system
Example

• The company Soldoni s.r.l. was set up with the aim of

drawing up applications for interest or capital loans to
the European Economic Community, which grants such
loans for energy savings.
• The companies that believe they have achieved energy
savings appoint the company Soldoni s.r.l. to submit the
funding application.
• The secretary, with the help of the administrator, takes
care of the bureaucracy, while the engineer draws up
and signs a technical report quantifying the savings
achieved and the financing requested.
• The loans are then sent directly to the companies,
which pay Soldoni s.r.l. a percentage.
Example - Enterprise system

• Goal: to provide technical and administrative support

to apply for and obtain European funding

• Components: engineer, secretary, administrator,

archive, machinery and premises

• Processes: contracting by companies, acquiring

technical data, drafting reports, submitting
applications, soliciting payments, etc.
Example – Organizational system

• Resources: people (engineer, secretary...),

money, materials (premises, machinery),
information (knowledge of bureaucracy,
technical knowledge...)

• Internal hierarchy, compilation procedures,

personnel administration.....
Example - Information system

• Contact details of companies and contacts

needed, technical data of interventions,
parameters for assessing the legitimacy of
applications, legislature, deadlines, application
forms, data for administering internal staff,
technical skills/knowledge needed to draft
reports, collection of previously accepted and
rejected applications.
Example - IT system

• Local archive and magnetic support to collect contact

and personnel data every month

• Dedicated software to manage internal salaries

• IT applications for letters and technical reports
• Software developed by the engineer to calculate the
energy savings and the financing request
Information systems for production
ERP – Enterprise Resource Planning

Enterprise Company
Resource People, Products, Means, ...
Planning Times, Quantity, Locations, ...
ERP System Definition

An Enterprise Resource Planning (ERP) is an IT system for the

integrated management of relevant business processes.

It guides and supports the company in its business operations.

With the rise in popularity of ERP and the reduction of ICT costs,
applications have been developed to help companies implement
this approach in day-to-day activities such as inventory control,
order tracking, customer services, finance and human
resources.
Video ERP

https://www.youtube.com/watch?v=NQT0tTJwn8I
Evolution of the ERP Information system
Evolution of the ERP Information system

• 1960 - Birth of MRP (Material Requirements Planning)

Need to manage the supply of raw materials and balance production with customer demand.
First calculation software to plan production, material procurement and product delivery.
By using such systems, companies were able to keep their inventory levels low, which in turn led
to a consequent reduction in money invested in inventory.
• 1970 - Consolidation of MRP and birth of the first software houses
In 1975, MRP software was operating in 700 companies and running on huge mainframe
computers that didn't even have the computing power of today's laptops. In 1972, the first data-
processing software development company was founded to create business software that ran in
real time.
• 1980 - Evolution of MRP: MRP II
In the 1980s, MRP technology underwent several developments that increased its capacity and
power, turning it into what many called "MRP II" or "Manufacturing Resource Planning". The
implementation of this technology made it possible to manage multiple production processes by
increasing the data storage capacity of the devices.
Evolution of the ERP Information system

• 1990 - Merging of MRP and MRP II: ERP software

The acronym ERP was first used in the 1990s. It described software that combined the functions
of its MRP and MRP II predecessors and included additional 'back office' and business
management functions. Thus, elements of companies such as finance and accounting, human
resources, project management and warehouse management were managed solely with one
software.
• 2000 - Changes introduced by ERP II
ERP II was a software that could also coordinate with systems outside the company. This
involved the integration of supply chain management, customer relationship management (CRM)
and business intelligence.
• Today - ERP, a constantly evolving software
Nowadays, ERP systems are even more advanced and evolving. Many ERP suites are based
on cloud technology and have remote web access via advanced applications that can also be
used on mobile devices.
Operational activities managed by ERP

• Accounting: system for ongoing recording of any event of

economic significance
• Management control: process aimed at guiding management
towards the achievement of goals established during operations
planning
• Personnel management: corporate function concerned with
personnel management in its broadest sense
• Purchasing management: rationalisation of suppliers and related
costs
• Warehouse management: control of incoming and outgoing goods
• Production management: set of integrated activities that make it
possible to obtain, according to pre-established processing cycles,
suitable raw materials, finished products required by customers in
pre-established quantities, characteristics and times and at well-
defined costs and quality levels
Operations managed by ERP

• Project management: activities aimed at achieving the aims/goals

of a project
• Sales management: achieving a company's sales targets
effectively and efficiently through planning and control of
organizational resources
• Supply chain management: logistical activities of companies,
with the aim of controlling performance and improving efficiency
• Asset management: monitoring and maintenance of all material
resources of value to the company
• Management of activities common to several management
areas: industrial solutions, workflow management
Island architecture (not-ERP)

Budget
Report

Order
Report

Administration
Order Arrival

Warehouse
Report

Warehouse
Centralised architecture (ERP)

Order Arrival Warehouse

Unified
System

Invoicing Revenue Recording

PLM – Product Lifecycle Management

Process to manage the entire life cycle of a

product: conception, requirements, design,
prototyping, industrialisation, active life
management, recovery and recycling
management, end of life and disposal.

● Not just an information technology, but

rather an integrated approach, based on
a set of technologies and methodologies
for organising collaborative work and
defining processes.

● The goal of PLM is to optimise (less time,

lower costs, higher quality, lower risks)
the development, launch, modification and
withdrawal of products or services from
the market.
Video PLM

https://www.youtube.com/watch?v=t4Rf8pCN04c
Needs

● Companies produce many products at the same time but,

with staff located in different offices and countries, they need
a tool to enable them to collaborate
● Keeping track of all this product information and of who does
what can be an extremely difficult task
● Attempts are made to work with separate software (Excel, e-
mail, Dropbox, server, PowerPoint), resulting in duplication of
data, a higher probability of error creation, difficulty in
accessing information
● In addition to this, consumers demand more choice, and
companies need to launch more products on the market in
less time
Benefits

● Allows users to control various aspects of processes

● Manages all product revisions
PLM and ERP
Video PLM vs ERP

https://www.youtube.com/watch?v=adxxcmViyZs
MES - Manufacturing Execution System

● Production control system: dispatch of orders, quantity and

time progress, deposits in stock
● Data collected through direct connections to machines
(PLC/Scada) or manual declarations of the working operators
● Information provided in real time to offices providing a
complete view of the progress of orders, the physical status of
resources and the materials used
Video MES

https://www.youtube.com/watch?v=KPaCW687qyo
Equipment monitoring
Industrial IoT

● Application of the Internet of Things

in the industrial world
● Includes sensors and other data-
generating devices, interconnected
and linked in a network
● Evolution of a distributed control
system enabling a higher degree of
automation using cloud computing
to improve process control
Video Industrial IoT

https://www.youtube.com/watch?v=r9F-H9gu5_o
ERP - PLM - MES
ERP - PLM - MES

Khedher et al. 2009, Interaction between product life cycle management and production management: PLM-MES integration