MIS - Management Information Systems

HandOut #007

FUNCTIONAL BUSINESS SYSTEMS
IT IN BUSINESS There are as many ways to use information technology in business as there are business activities to be performed, business problems to be solved, and business opportunities to be pursued. As a business professional, you should have a basic understanding and appreciation of the major ways information systems are used to support each of the functions of business. Thus, in this section, we will discuss functional business systems, that is, a variety of types of information systems (transaction processing, management information, decision support, etc.) that support the business functions of accounting, finance, marketing, operations management, and human resource management. This functional or departmental view of how information technology has traditionally been used in business sets the stage for the discussion of crossfunctional enterprise information systems. As a business professional, it is also important that you have a specific understanding of how information systems affect a particular business function—marketing, for example-or a particular industry (e.g., banking) that is directly related to your career objectives. For example, someone whose career objective is a marketing position in banking should have a basic understanding of how information systems are used in banking and how they support the marketing activities of banks and other firms. Figure 5.2 illustrates how information systems can be grouped into business function categories. Thus, information systems in this section will be analyzed according to the business function they support to give you an appreciation of the variety of functional business systems that both small and large business firms may use.

MARKETING SYSTEMS The business function of marketing is concerned with the planning, promotion, and sale of existing products in existing markets, and the development of new products and new markets to better attract and serve present and potential customers. Thus, marketing performs a vital function in the operation of a business enterprise. Business firms have increasingly turned to information technology to help them perform vital marketing functions in the face of the rapid changes of today's environment. Figure 5.3 illustrates how marketing information systems provide information technologies that support major components of the marketing function. For example, Internet/intranet websites and services make an interactive marketing process possible where customers can become partners in creating, marketing, purchasing, and improving products and services. Salesforce automation systems use mobile computing and Internet technologies to automate many information processing activities for sales support and management. Other marketing information systems assist marketing managers in customer relationship management, product planning, pricing, and other product management decisions, advertising, sales promotion, and targeted marketing strategies, and market research and forecasting. Let's take a closer look at some of the newer marketing applications.

This enables a company to track a person's online behavior at a website so marketing efforts can be instantly developed -and targeted to that individual at each visit to their website. or geographic communities formed by the websites of a city or local newspaper. Therefore. computers and the Internet are providing the basis for sales force automation. and e-mail correspondence. male college graduates. such as virtual communities of online sporting enthusiasts or arts and crafts hobbyists. Interactive marketing encourages customers to become involved in product development. This not only increases the personal productivity of salespeople. Web forms and questionnaires.4. • Content. new product ideas. Advertising such as electronic billboards or banners can be placed on various website pages. they can upload information on sales orders. Web browsers. and strong customer relationships. The goal of interactive marketing is to enable a company to profitably use those networks to attract and keep customers who will become partners with the business in creating. Marketing efforts can be aimed only at specific types or classes of people: unmarried. delivery~ and service issues. In interactive marketing. Finally. purchasing. These can be communities of interest. and other sales . for example. as well as its traditional business venues. many companies are viewing sales force automation as a way to gain a strategic advantage in sales productivity and marketing responsiveness. These messages reach the targeted audience. • Demographic/Psychographic. Companies can customize their Web advertising messages and promotion methods to appeal to people in specific communities. sales reps in the field can connect their computers by modem and telephone links to the Internet and extranets. in addition to a company's home page. but dramatically speeds up the capture and analysis of sales data from the field to marketing managers at company headquarters. for example). such as Web "cookie" files recorded on the visitor's disk drive from previous visits. An ad for a movie on the opening page of an Internet search engine is a typical example.Interactive Marketing The term interactive marketing has been coined to describe a customer focused marketing process that is based on using the Internet. volume sales. and improving products and services. twenty-something. middle income. and their company intranets. the expected outcomes of interactive marketing are a rich mixture of vital marketing data. salespeople use their PCs to record sales data as they make their calls on customers and prospects during the day. including chat and discussion groups. which can access intranet or other network servers at their company. In return. customers are not just passive participants who receive media advertising prior to purchase. Advertising appears only in Web pages that are relevant to the content of a product or service. it allows marketing and sales management to improve the delivery of information and the support they provide to their salespeople. sales calls. the sales force is being outfitted with notebook computers. Targeted Marketing Targeted marketing has become an important tool in developing advertising and promotion strategies for a company's e-commerce websites. Advertising and promotion efforts can be tailored to each visit to a site by an individual. • Community. and sales contact management software that connect them to marketing websites on the Internet. intranets. • Context. • Online Behavior. Then. So advertising is targeted only at people who are already looking for information about a subject matter (vacation travel. but are actively engaged in a network-enabled proactive and interactive processes. targeted marketing is an advertising and promotion management concept that includes five targeting components. This is enabled by various Internet technologies. In many companies. extranets. and extranets to establish two-way transactions between a business and its customers or potential customers. Then each night. This strategy is based on a variety of tracking techniques. for example) that is related to a company's products (car rental services. Sales Force Automation Increasingly. As illustrated in Figure 5. For example.

and service companies must use production/operations information systems to plan and control their operations. and better production processes with computer-aided process planning. Information systems used for operations management and transaction processing support all firms that must plan. prospect lists of information on good sales prospects. CIM is an overall concept that stresses that the objectives of computer-based systems in manufacturing must be to: • Simplify (reengineer) production processes. MANUFACTURING SYSTEMS Manufacturing information systems support the production/operations function that includes all activities concerned with the planning and control of the processes producing goods or services. They are also used to help plan the types of material needed in the production process.statistics.6. The overall goal of CIM and such manufacturing information systems is to create flexible. In this section.7. and e-mail messages. Manufacturing information systems help companies simplify. many of them Web-enabled. which is called material requirements planning (MRP). and the flow of goods and services. machines. telecommunications networks. financial institutions. Thus. retailers. CIM supports the concepts of flexible manufacturing systems. • Automate production processes and the business functions that support them with computers. and factory organization as a vital foundation to automation and integration. and other information technologies. See Figure 5. Implementing such manufacturing concepts enables a company to quickly respond to -and fulfill customer requirements with high-quality products and services. product designs. the production/operations function is concerned with the management of the operational processes and systems of all business firms. and robots. Many of the processes within manufacturing resource planning systems are included in the manufacturing module of enterprise resource planning (ERP) software discussed earlier. and total quality management. as well as send electronic mail messages and access website sales support information. . and control inventories. monitor. See Figure 5. For example. • Integrate all production and support processes using computers. Therefore. we will concentrate on computer-based manufacturing applications to illustrate information systems that support the production/operations function. and to integrate MRP with production scheduling and shop floor operations. agile. the network servers may download product availability data. and integrate many of the activities needed to produce products of all kinds. computers are used to help engineers design better products using both computer aided engineering (CAE) and computer-aided design (CAD) systems. automate. are used to support computer-integrated manufacturing (CIM). wholesalers. agile manufacturing. Thus. manufacturing processes that efficiently produce products of the highest quality. purchases. which is known as manufacturing resource planning. In return. firms such as transportation companies. Computer Integrated Manufacturing A variety of manufacturing information systems.

(3) performance appraisals. a machine tool (machine control). and (3) control of all personnel policies and programs. high-quality manufacturing process. These devices operate one or more machines according to the directions of a numerical control program. (2) job placement. Numerical control computer programs for machine tools convert geometric data from engineering drawings and machining instructions from process planning into a numerical code of commands that control the actions of a machine tool. or machines with some humanlike work capabilities (robots). Process control software uses mathematical models to analyze the data generated by the ongoing process and compare them to standards or forecasts of required results. These manufacturing systems monitor.Computer-aided manufacturing (CAM) systems are those that automate the production process. Machine Control Machine control is the use of a computer to control the actions of a machine. placement. and (6) health. Thus. Many firms have gone beyond these traditional personnel management functions and have developed human resource information systems (HMS) that also support (1) recruitment. selection. and security. human resource information systems are designed to support (1) planning to meet the personnel needs of the business. and (3) analyze the use of personnel in business operations. machine control. The goal of human resource management is the effective and efficient use of the human resources of a company. and fine-tune machine tool performance. The process control system also provides messages and displays about the status of the process so a human operator can take appropriate measures to control the process. Manufacturing engineers use computers to develop numerical control programs. and process control systems. safety. Manufacturing execution systems (MES) are performance monitoring information systems for factory floor operations. and control the five essential components involved in a production process: materials. This is also popularly called numerical control. equipment. These continuous physical measurements are converted to digital form by analog-to-digital converters and relayed to computers for processing. report.9. instructions and specifications. (2) development of employees to their full potential. and so on. cement plants. Originally. compensation. MES includes shop floor scheduling and control. Then the computer directs the control of the process by adjusting control devices such as thermostats. The control of machine tools in factories to manufacture products of all kinds is a typical numerical control application. steel mills. and hiring. (2) maintain personnel records. this could be accomplished by monitoring and controlling the production process in a factory (manufacturing execution systems) or by directly controlling a physical process (process control). and so on. food product manufacturing plants. Process control computers control physical processes in petroleum refineries. Many process control computers are special-purpose minicomputer systems. personnel. HRM and the Internet . and adjust the status and performance of production components to help a company achieve a flexible. Process Control Process control is the use of computers to control an ongoing physical process. (4) employee benefits analysis. Machine control may involve the use of special-purpose microcomputers called programmable logic controllers (PLCs). valves. For example. HUMAN RESOURCE SYSTEMS The human resource management (HRM) function involves the recruitment. businesses used computer-based information systems to (1) produce paychecks and payroll reports. switches. See Figure 5. and development of the employees of an organization. and production facilities. analyze production data furnished bv PLCs. pulp and paper mills. A process control computer system requires the use of special sensing devices that measure physical phenomena such as temperature or pressure changes. chemical plants. (5) training and development. They monitor. electric power plants. robotics control. evaluation. track.

Changes in job assignments and compensation. Typically. They emphasize cost accounting reports. Companies are also using commercial recruiting services and databases on the World Wide Web. and communicating with job applicants via e-mail. Accounting information systems are based on the double-entry bookkeeping concept. Intranets can collect information online from employees for input to their FIRM files. are examples of information that would be used to update the personnel database. access and update their personal information. Figure 5. Computer-based multimedia training programs and appraisals of employee job performance are available to help support this area of human resource management. They record and report business transactions and other economic events. more recent accounting concepts such as responsibility accounting and activity-based costing. . Staffing the Organization The staffing function must be supported by information systems that record and track human resources within a company to maximize their use. accounting information systems. They can also disseminate valuable information faster than through previous company channels. which is hundreds of years old. Of course. and development programs by analyzing the success history of present programs. but important. They also analyze the career development status of each employee to determine whether development methods such as training programs and periodic performance appraisals should be recommended. and other changes to the records in a personnel database. or hirings and terminations. For example.com. accounts payable. FreeAgent. ACCOUNTING SYSTEMS Accounting information systems are the oldest and most widely used information systems in business. the development of financial budgets and projected financial statements.The Internet has become a major force for change in human resource management. you may also want to access the job listings and resource databases of commercial recruiting companies on the Web. a personnel record-keeping system keeps track of additions. Another benefit of the intranet is that it can serve as a superior training tool. Computer-based accounting systems record and report the flow of funds through an organization on a historical basis and produce important financial statements such as balance sheets and income statements. Let's briefly review how several of these systems support the operations and management of a business firm. In addition.org. enter travel and expense reports. accounts receivable. and analytical reports comparing actual to forecasted performance. Such systems also produce forecasts of future conditions such as projected financial statements and financial budgets. Another example is an employee skills inventory system that uses the employee skills data from a personnel database to locate employees within a company who have the skills required for specific assignments and projects. and Jobweb. Operational accounting systems emphasize legal and historical record-keeping and the production of accurate financial statements. inventory control. Employees can also use their corporate intranets to produce automated paysheets. employee self-service (ESS) intranet applications allow employees to view benefits. HRM and Corporate Intranets Intranet technologies allow companies to process most common HRM applications over their corporate intranets. right from their desktop PCs. Thus. the intranet eliminates the need to loan out and track training videos. statistics. and other useful HRM information. the online alternative to time cards. Through this completely electronic process. For example. and other. For example.com. Management accounting. The Internet has a wealth of information and contacts for both employers and job hunters. these systems include transaction processing systems such as order processing. verify employment and salary information. mobile computers. or listings of the top recruiting markets by industry and profession. employees can use their Web browsers to look up individual payroll and benefits information online. and they can enable employees to perform HRM tasks with little intervention by the HRM department. and adjusting payroll information easy for both employees and HRM professionals. posting messages in selected Internet newsgroups. such as job reports by industry. and general ledger systems. Employees can easily download instructions and processes to get the information or education they need. These websites are fall of reports. or intranet kiosks located around a work site. payroll. Training and Development HRM systems can help human resource managers plan and monitor employee recruitment. deletions. These electronic forms have made viewing. Intranets allow the HRM department to provide around-the-clock services to their customers: the employees.12 summarizes the purpose of six common. and enter data that has a time constraint to it. systems focus on the planning and control of business operations. A firm's financial performance is measured against such forecasts by other analytical accounting reports. Top websites for job hunters and employers on the World Wide Web include Monster. training. Figure 5. entering.11 illustrates the interrelationships of several important accounting information systems commonly computerized by both large and small businesses. employees using new technology can view training videos over the intranet on demand. Many accounting software packages are available for these applications. online HRM systems may involve recruiting for employees through recruitment sections of corporate websites.

In many firms. intranets. and credit management reports. procedures. Once data about customer orders are received from an order processing system. Order Processing Order processing. is an important transaction processing system that captures and processes customer orders and produces data needed for sales analysis and inventory control. Then it may notify managers about items that need reordering and provide them with a variety of inventory status reports. They produce invoices to customers. inventory control. Using the Internet. and efficient method of recording and screening customer orders and sales transactions. Inventory Control Inventory control systems process data reflecting changes to items in inventory. and accounts payable. it also keeps track of the status of customer orders until goods are delivered. a computer-based inventory control system records changes to inventory levels and prepares appropriate shipping documents. and other networks changes how accounting information systems monitor and track business activity.12 are being affected by Internet technologies. Computer-based accounts payable systems help ensure prompt and accurate payment of . accurate.Online Accounting Systems It should come as no surprise that the accounting information systems illustrated in Figures 5. many companies are using Internet and other network links to these trading partners for such online transaction processing systems. extranets. Computer-based sales order processing systems provide a fast. monthly customer statements. Computer-based inventory control systems thus help a business provide high-quality service to customers while minimizing investment in inventory and inventory carrying costs. Accounts Payable Accounts payable systems keep track of data concerning purchases from and payments to suppliers. Computer-based accounts receivable systems stimulate prompt customer payments by preparing accurate and timely invoices and monthly statements to credit customers. accounts receivable. They provide managers with reports to help them control the amount of credit extended and the collection of money owed. This particularly applies to systems like order processing. The online. and controls. They prepare checks in payment of outstanding invoices and produce cash management reports. This activity helps to maximize profitable credit sales while minimizing losses from bad debts. These systems are directly involved in the processing of transactions between a business and its customers and suppliers. They also provide inventory control systems with information on accepted orders so they can be filled as quickly as possible.11 and 5. So naturally. Accounts Receivable Accounts receivable systems keep records of amounts owed by customers from data generated by customer purchases and payments. or sales order processing. interactive nature of such networks calls for new forms of transaction documents.

and other deductions. or holding decisions for each type of security so that an optimum mix of securities is developed that minimizes risk and maximizes investment income for the business. selling. Cash Management Cash management systems collect information on all cash receipts and disbursements within a company on a real-time or periodic basis. and labor analysis reports. employees. financial forecasting. At the end of each accounting period. They produce paychecks and other documents such as earning statements. These systems also produce daily. commercial paper. payroll. they close the books of a business and produce the general ledger trial balance. and financial planning. They typically provide better financial controls and management reports and involve fewer personnel and lower costs than manual accounting methods. taxes. weekly. payroll reports. Capital Budgeting The capital budgeting process involves evaluating the profitability and financial impact of proposed capital expenditures. Computer-based payroll systems help businesses make prompt and accurate payments to their employees. Online Investment Management Many businesses invest their excess cash in short-term low-risk marketable securities (such as U. Mathematical models frequently can determine optimal cash collection programs and determine alternative financing or investment strategies for dealing with forecasted cash deficits or surpluses. The portfolio of such securities can be managed with the help of portfolio management software packages. expenses. General Ledger General ledger systems consolidate data received from accounts receivable. Payroll Payroll systems receive and maintain data from employee time cards and other work records. the income statement and balance sheet of the firm. ensure a good credit standing.suppliers to maintain good relationships. and various income and expense reports for management. employee expense accounts. Computer-based general ledger systems help businesses accomplish these accounting tasks in an accurate and timely manner. accounts payable. See Figure 5. and thus increase the income generated by deposited or invested funds. and other accounting information systems. Such information allows businesses to deposit or invest excess funds more quickly. Online investment management services help a financial manager make buying. Long-term expenditure proposals for plants and equipment can be analyzed using a variety of techniques. Financial Forecasting and Planning . and cash requirements. and government agencies concerning earnings. Other reports are also prepared for management and government agencies. purchases. or certificates of deposit) or in higher-return/higher-risk alternatives. and secure any discounts offered for prompt payment. as well as reports to management. They may also provide management with reports analyzing labor costs and productivity. Investment information and securities trading are -available from hundreds of online sources on the Internet and other networks. FINANCIAL MANAGEMENT SYSTEMS Computer-based financial management systems support financial managers in decisions concerning (1) the financing of a business and (2) the allocation and control of financial resources within a business. They also provide management with information needed for the analysis of payments.S.14. They provide tight financial control over all cash disbursements of the business. or monthly forecasts of cash receipts or disbursements (cash flow forecasts) that are used to spot future cash deficits or surpluses. capital budgeting. Major financial management system categories include cash and investment management. so that investment income may be earned until the funds are required. This application makes heavy use of spreadsheet models that incorporate present value analysis of expected cash flows and probability analysis of risk to determine the optimum mix of capital projects for a business. Treasury bills.

They also help determine the financing needs of a business and analyze alternative methods of financing. business operations. Electronic spreadsheet packages.Financial analysts typically use electronic spreadsheets and other financial planning software to evaluate the present and projected financial performance of a business. Financial analysts use financial forecasts concerning the economic situation. interest rates. and stock and bond prices to develop an optimal financing plan for the business. types of financing available. and Web-based groupware can be used to build and manipulate financial models. . Answers to what-if and goal-seeking questions can be explored as financial analysts and managers evaluate their financing and investment alternatives. DSS software.

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