Enterprise Function Information

Essentials of Management Information Systems, 6e
Chapter 2 Information Systems in the Enterprise
Systems from a Functional Perspective
Major Business Functions
1. Sales and Marketing Systems

2. Manufacturing and Production Systems
3. Finance and Accounting Systems
4. Human Resource Systems
2.1
Sales and Marketing Systems
• Help identify customers

• Develop products and services
• Promote products and services
• Sell products and services
• Provide ongoing customer support
2.2
Table 2-2: Examples of Sales and Marketing Information Systems
System Description Organizational

Level
Order processing Enter, process, and Operational
track orders
Pricing analysis Determine prices for Management

products and
services
Sales trend Prepare 5-year sales Strategic
forecasting forecasts
2.3
Manufacturing and Production Systems
• Planning, development, production of products

and services
• Planning, development, maintenance of
production facilities
• Acquisition, storage, availability of materials
• Scheduling materials, facilities, labor
• Controlling the flow of production
2.4
Table 2-3: Examples of Manufacturing and Production Information Systems

Level
Machine control Control the actions Operational
of machines and
equipment
Production Decide when and Management
planning how many products
should be produced
Facilities Decide where to Strategic
location locate new facilities
2.5
Overview of an inventory system
Figure 2-10
2.6
Finance and Accounting Systems
• Manage firm’s financial assets: cash, stocks,

bonds, etc.
• Manage capitalization of firm and finding new
financial assets
• Maintain and manage financial records
2.7
Table 2-4: Examples of Finance and Accounting Information Systems

Level
Accounts Track money owed Operational
receivable the firm
Budgeting Prepare short-term Management

budgets
Profit planning Plan long-term Strategic

profits
2.8
Human Resources Systems
• Identify potential employees

• Maintain employee records
• Track employee skills, job performance, and
training
• Support planning for employee compensation
and career development
2.9
Table 2-5: Examples of Human Resources Information Systems

Level
Training and Track employee Operational
development training, skills, and
performance
Compensation Monitor wages, Management
analysis salaries, benefits
Human Plan long-term labor Strategic

resources force needs
planning
2.10
Window on Management
Employees Serve Themselves Online

• What are the management benefits of employee
self-service systems for human resources and
benefits administration?
• How do these systems provide value for businesses?
• What management, organization, and technology
issues should be addressed when installing self-
service human resources and benefits systems?
2.11
An employee record-keeping system
Figure 2-11
2.12
Enterprise Applications
Business Processes and Information Systems
Business Processes
• Manner in which work is organized,

coordinated, and focused
• Concrete workflows of material, information,
and knowledge
• Unique ways to coordinate work, information,
and knowledge
2.13
Examples of Functional Business Processes
• Manufacturing and production: Assembling

product, checking quality, producing bills of
materials
• Sales and marketing: Identifying customers,
creating customer awareness, selling
2.14
Examples of Functional Business Processes
• Finance and accounting: Paying creditors,

creating financial statements, managing cash
accounts
• Human Resources: Hiring employees, evaluating
performance, enrolling employees in benefits
plans
2.15
Cross-Functional Business Processes

• Transcend boundary between sales, marketing,
manufacturing, and research and development
• Group employees from different functional

specialties to a complete piece of work
Example: Order Fulfillment Process
2.16
The order fulfillment process
Figure 2-12
2.17
Enterprise application architecture
Figure 2-13
2.18
• Enterprise systems
• Supply chain management systems
• Customer relationship management systems
• Knowledge management systems
2.19
Traditional view of systems
Figure 2-14
2.20
Enterprise Systems
• Enterprise resource planning (ERP)

• Provides single information system for
organization-wide coordination and integration
of key business processes
• Models and automates many business processes
2.21
Enterprise systems
Figure 2-15
2.22
Supply Chain Management and Collaborative Commerce
• Supply Chain Management Systems (SCM): Automate

flow of information between firm and suppliers to
optimize production and delivery
• Supply Chain Management: Close linkage of activities

involved in buying, making, moving a product
• Supply Chain: Network of organizations and business

processes for production and distribution of products
2.23
A supply chain
Figure 2-16
2.24
Information Systems Can Help Supply Chain Participants:

• Decide when and what to produce, store, and move
• Rapidly communicate orders
• Track status of orders
• Check and monitor inventory
• Reduce inventory, transportation, warehousing costs
• Track shipments
• Plan production based on actual customer demand
• Rapidly communicate changes in product design
2.25
Collaborative Commerce
• Uses digital technologies to enable multiple
organizations to collaboratively design, develop,
build, move, and manage products
• Increases efficiencies in reducing product design life

cycles, minimizing excess inventory, forecasting
demand, and keeping partners and customers
informed
2.26
Collaborative commerce
Figure 2-17
2.27
• Collaborative planning, forecasting,

and replenishment (CPFR)
Collaboration between partners to formulate
demand forecasts, develop production plans,
coordinate shipping, warehousing, stocking
• Private industrial networks
Web-enabled networks for coordinating
transorganizational business processes
2.28
Window on Technology
Diageo plc Collaborates in Real-Time

• What are the business benefits of using CPFR?
• How does Diageo’s system for CPFR provide

value for the company and for its suppliers and
distributors?
2.29
How Businesses Engage in

Collaborative Commerce
• Product design and development
• Service and support
• Supply chain coordination
• Logistics
• Sales support and training
• Channel management
2.30
Customer Relationship Management (CRM)
• Manages ways used to deal with existing and

potential customers
• Both a business and technology discipline
• Uses information systems to coordinate all

customer interaction processes in sales,
marketing, and service.
2.31
Customer Relationship Management Systems
• Track all customer interactions

• Analyze data to optimize revenue,
profitability, customer satisfaction,
customer retention
2.32
Figure 2-18
2.33
Knowledge Management Systems in the Enterprise
Knowledge Management Systems (KMS)

• Collect relevant knowledge and
experience in firm to support business
processes and management decisions
• Manage and distribute documents and
other digital knowledge objects
2.34
Knowledge Management Systems in the Enterprise
Role of Knowledge Management Systems

• Acquire knowledge
• Store knowledge
• Distribute knowledge
• Apply knowledge
2.35
Effectiveness and Efficiency
(continued)
Management Information Systems, Sixth Edition 36

Effectiveness and Efficiency
(continued)

Accounting
• Accounting’s purpose is to track every financial

transaction
• Accounting systems are required by law and for
proper management
• Needed to ensure company is making a profit
• Accounts payable and accounts receivable track
who owes who what
• Balance sheet: picture of financial situation
– Includes profit-and-loss report

Accounting (continued)
• Accounting information system: receives

information from transaction processing systems
(TPSs)
– Automatically routes purchases to accounts
payable
– Automatically routes sales to accounts receivable
• Generates reports on demand or on schedule
• Work order: an authorization to perform work
for a specific purpose

• Cost-accounting systems: accumulate data

about costs involved in producing specific
products
• Accounting ISs are used for managerial
purposes for budgeting and cost control


Finance
• Firm’s health is measured by its finances

• Information systems can improve financial
management
• Financial managers’ goal is to manage money
as efficiently as possible by:
– Collecting payables as soon as possible
– Making payments at the latest time allowed
– Ensuring funds are available for daily operations
– Investing funds not used for current activities

Finance (continued)

Cash Management
• Financial information systems help managers

track company finances
• Cash management systems: systems that deal
specifically with cash
• Electronic funds transfer: electronic transfer of
cash from one bank account to another

Investment Analysis and Service
• Investor’s goal is to buy an asset and sell it for a

higher value
• When investing in securities, you must know
current prices in real time
• Nearly instantaneous information systems can
provide investors and clients with financial news,
stock prices, commodity prices, and currency
exchange rates

Investment Analysis and Service
(continued)
• Some important factors to consider in investing:
– Variability of the security’s past yield
– Expected return
– Liquidity (how fast an investment can be turned
into cash)

Engineering
• Time to market: time between generating an
idea for a product and completing a prototype
• Brainstorming: process of a group of
colleagues meeting and collaborating to
generate creative solutions and new ideas
• Minimizing time to market is key to maintaining
competitive edge
• Information systems can contribute significantly
to minimizing time to market

Engineering (continued)
• Computer-aided design (CAD): tools to create,
modify, and store designs and drawings
electronically
• Rapid prototyping: creating one-of-a-kind
products to test design in three dimensions
– Allows a model to be produced in hours rather than
days or weeks
• Computer-aided manufacturing (CAM): systems
that instruct machines how to manufacture parts
and assemble products

Engineering (continued)

Supply Chain Management
• Supply chain: consists of procurement of raw materials,
processing materials into goods, and delivering goods
• Processing raw materials into goods is also known as
manufacturing
• Supply chain management: monitoring, controlling, and
facilitating supply chains
– Instrumental in reducing manufacturing cost
– In retail the manufacturing phase does not exist and in service industries the
term “manufacturing” is not applicable or meaningless.
• CAD systems often transfer data automatically to CAM
systems

Supply Chain Management (continued)
• IT helps in manufacturing activities:

– Scheduling plant activities to optimize the use of
resources
– Planning material requirements based on current
and forecasted demand
– Reallocating materials and resources from one
order to another
– Managing inventories
– Grouping similar work orders for efficiency

Supply Chain Management (continued)

Material Requirements Planning
and Purchasing
• Material requirements planning (MRP):
inventory control
– Inventory based on future need not on past use
– Determines when inventory needs to be restocked
– Can predict future need based on demand
forecasts
– Takes customer demand as input, then works
back to calculate resources needed to produce
goods

Material Requirements Planning
and Purchasing (continued)
• Bill of materials (BOM): list of all raw materials
and subcomponent demands to produce a
product
• Economic order quantity (EOQ): optimal
quantity of a raw material that minimizes
overstocking and saves cost, without missing
production deadlines
– Considers cost, discounts for large quantities,
cost of warehousing material, cost of alternative
uses of money, etc.

Manufacturing Resource Planning
• Manufacturing resource planning (MRP II): combines MRP
with other related activities to plan the entire manufacturing
process
– Can quickly modify schedules to accommodate orders, track production in real time & fix
quality slippage
– Uses master production schedule
• Master production schedule: specifies how production

capacity is to be used to meet customer demands and
maintain inventory
– It helps balance production economies, customer demands, manufacturing capacity,
inventory levels over a planning horizon of several months.
• Just-in-time manufacturing: suppliers ship parts directly to

assembly lines as needed
– Avoids warehousing costs (e.g. Cisco)

Monitoring and Control
• Information systems are designed to control

manufacturing processes as well as monitor
them
• Controlling processes helps ensure quality
– Example: Ford Motor Company’s Project
Execution.

RFID in SCM
• Radio frequency identification (RFID): a

technology containing circuitry that allows
recording of information about a product
• Electronic product code (EPC): a code on
an RIFD tag that provides more information
than the universal product code (UPC)
– Information may include date of manufacturing,
plant location, expiration date, destination
• Ensures genuineness of products

RFID in SCM (continued)

RFID in SCM (continued)

Customer Relationship Management
• Customer relationship management (CRM)
systems: designed to support any and all
relationships with customers
– Supports three areas
• Marketing
• Sales
• Customer service
• CRM systems capture the entire customer
experience with an organization
– All company employees who deal with the customer
have access to this information

Customer Relationship Management
(continued)

Targeted Marketing
• Targeted marketing: promotes to people most

likely to purchase products
• Database technology allows all companies to
use targeted marketing, even small companies
• Can direct promotional dollars to customers
most likely to buy
• Spam: cheap method of advertising involving
sending mass e-mail communications

Targeted Marketing (continued)

• Database management systems sort consumers
based on demographic information
• Telemarketing: marketing over the telephone
– Caller has large database of consumer data
• Computer telephony integration: allows
computer to use telephone line as input
– Caller ID can be used to locate customer data
• Data mining: uses large data warehouses to find
trends and shopping habits of various demographic
groups

• Targeted marketing and Web technologies

enable retailers to personalize online shopping
• Software can track Web page click streams to
determine customer preferences

Human Resource Management
• Human resource management (HRM) can be

classified into five main activities:
– Employee record management
– Promotion and recruitment
– Training
– Evaluation
– Compensation and benefits management

Human Resource Management
(continued)

Employee Record Management
• HR departments must keep personnel records

– To satisfy laws
– For payroll and tax calculation and deposit
– For promotion consideration
– For periodic reporting
• Human resource ISs are now digitized
– Saves space to store records, time to retrieve
them, and costs of both

Employee Record Management
(continued)

Promotion and Recruitment
• HR can select best-qualified person for position
by searching database of applicants and existing
employees for specific criteria
• Automating the selection process significantly
minimizes time and money for recruitment
• Intranet: inter-organizational network that
supports Web applications
– Allows HR manager to post position vacancy
announcements that get wide exposure

Training
• One important HR function is improving

employee skills
• Multimedia software training is replacing
classrooms and teachers
– May include 3D virtual reality simulated
environments in which the employee must act
• Information technology reduces training costs
dramatically

Evaluation
• Employee ability must be periodically evaluated by
supervisors
– May include evaluation of technical ability,
communication skills, professional conduct, and
general behavior
• Often a subjective process, which is a problem
• Evaluation software tries to solve this problem by
standardizing evaluation process
– Provides tools to aid in evaluating every employee
fairly and objectively

Compensation and Benefits
Management
• Compensation includes salary, hourly pay,

commissions, and bonuses
• Programs calculate pay and taxes
– Automatically generate paychecks and perform
direct deposits
• Software can help manage benefits
– Benefits database accessible through intranet or
Internet

Supply Chain Management Systems
• Overall inventory in the U.S. is decreasing while

U.S. gross domestic product (GDP) is increasing
• Money saved from reduced inventory can be
spent elsewhere
• Reduction in inventory attributed to the use of ISs,
especially supply chain management systems
– Streamline operations throughout chain
• ERP systems can also serve as SCM systems,
connecting multiple organizations

Supply Chain Management Systems
(continued)

The Importance of Trust
• Supply chain systems work best when all

businesses in the chain are sharing information
• Trust between allied companies facilitates
collaboration
• Risk of disclosing important information to
competitors is present
• Risk of taking advantage of demand figures by
charging higher prices is present

Collaborative Logistics
• Web allows organizations from different

industries to collaborate
• Businesses combine freight and share trucks
– Can optimize logistics by connecting SCM
systems
• SCM systems can allow collaborative
warehousing to share warehouse space

Enterprise Resource Planning
• Many companies replace old, disparate
information systems with enterprise applications
• Enterprise resource planning (ERP) system:
manages daily operations and facilitates planning
• Current ERP market includes four vendors:
– SAP
– Oracle
– Microsoft
– Sage Software

Challenges and Disadvantages
of ERP Systems
• ERP systems pose many challenges:
– They are complex
– They often require special tailoring for specific
organizations
– They may not support a company’s unique sets of
business processes
– They are expensive
– A process that becomes a weak link in one area
may negatively affect other integrated processes

Providing the Missing Reengineering
• Although most reengineering projects of the

1990s failed, ERP systems helped realize many
of those ideas
– ERP systems forced changes in processes
• ERP systems allow better planning and
managing of processes at the organizational
level instead of at the organizational unit level

Summary
• Effectiveness is the degree to which a task is

accomplished
• Efficiency is the ratio of output to input
• Productivity is the measure of people’s efficiency
• Information systems have been integrated into
accounting services
• Financial information systems help managers
track cash

Summary (continued)
• Computer-aided design (CAD) systems help
engineers design new projects
• Computer-aided manufacturing (CAM) systems
direct machines that assemble parts
• Supply chain management (SCM) systems
optimize workload, speed, and cost in supply
chains
• Customer relationship management (CRM)
includes the entire cycle of relationships with
customers

Summary (continued)
• Human resource management systems facilitate

staff selection and record keeping
• Multiple companies’ SCM systems can be linked,
facilitating cooperation, which requires trust
• An enterprise resource planning (ERP) system
can encompass all business processes, but is
expensive and challenging

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Essentials of Management Information Systems, 6e

Chapter 2 Information Systems in the Enterprise

Systems from a Functional Perspective

Major Business Functions

1. Sales and Marketing Systems

Systems from a Functional Perspective

Sales and Marketing Systems

• Help identify customers

Systems from a Functional Perspective

Table 2-2: Examples of Sales and Marketing Information Systems

System Description Organizational

Pricing analysis Determine prices for Management

Systems from a Functional Perspective

Manufacturing and Production Systems

• Planning, development, production of products

Systems from a Functional Perspective

Table 2-3: Examples of Manufacturing and Production Information Systems

System Description Organizational

Systems from a Functional Perspective

Overview of an inventory system

Systems from a Functional Perspective

Finance and Accounting Systems

• Manage firm’s financial assets: cash, stocks,

Systems from a Functional Perspective

Table 2-4: Examples of Finance and Accounting Information Systems

System Description Organizational

Budgeting Prepare short-term Management

Profit planning Plan long-term Strategic

Systems from a Functional Perspective

Human Resources Systems

• Identify potential employees

Systems from a Functional Perspective

Table 2-5: Examples of Human Resources Information Systems

System Description Organizational

Human Plan long-term labor Strategic

Systems from a Functional Perspective

Employees Serve Themselves Online

Systems from a Functional Perspective

An employee record-keeping system

Business Processes and Information Systems

• Manner in which work is organized,

Business Processes and Information Systems

Examples of Functional Business Processes

• Manufacturing and production: Assembling

Business Processes and Information Systems

Examples of Functional Business Processes

• Finance and accounting: Paying creditors,

Business Processes and Information Systems

Cross-Functional Business Processes

• Group employees from different functional

Example: Order Fulfillment Process

The order fulfillment process

Enterprise application architecture

Business Processes and Information Systems

Traditional view of systems

• Enterprise resource planning (ERP)

Supply Chain Management and Collaborative Commerce

• Supply Chain Management Systems (SCM): Automate

• Supply Chain Management: Close linkage of activities

• Supply Chain: Network of organizations and business

Supply Chain Management and Collaborative Commerce

Information Systems Can Help Supply Chain Participants:

Supply Chain Management and Collaborative Commerce