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Introduction to Information

Systems

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Learning Objectives
By the end of the lecture you should be able to:
 Explain Data and Information
 Describe Systems, Information Systems and
Information Technology
 List different types of IS and their concepts
 Describe what the major elements of a TPS,
MIS and DSS are

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Data and Information
 Data
 Streams of raw facts representing events
such as business transactions – meaningless
without context
 Information
 Clusters of facts meaningful and useful to
human beings in processes such as making
decisions
 Individuals - Entertainment and enlightenment
 Businesses - Decision making, problem solving

3 and control
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Information Quality – cont’d

Figure 1.2 Characteristics of useful information


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Using Information
 Information and control: Control allows
managers to regulate the efficiency and
effectiveness of the organization.
 Effective control requires good information.
 Information technology in the form of computers allows
managers quick access to information.
 Information and Coordination: Managers must
coordinate departmental actions to achieve goals.
 Information Systems provide information on
suppliers, production schedules, and orders to
allow coordination
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What Is a System?
 System: A set of components that work
together to achieve a common goal
 Subsystem: One part of a system where
the products of more than one system are
combined to reach an ultimate goal
 Closed system: Stand-alone system that
has no contact with other systems
 Open system: System that interfaces with
other systems

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What is an Information System (IS)
 Information System is becoming the
foundation of business models and
processes
 It allows for the distribution of knowledge like
 Integrated components processing, storing and
disseminating information in an organisation.
 Interdisciplinary study of systems that provide
information to users in organisations

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Data to Information via IS

Figure 1.1 Input-process-output

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Information Systems & Technology
 Information System (IS): Acquires, organizes,
stores, manipulates and transmits information.
 A Management Information System is the plan and
design of an Information System to provide managers
with information.
 Can be paper or computer-based.
 Information Technology (IT): Any form of technology
used by people to handle information e.g. acquiring,
organizing, storing, manipulating, and transmitting
information
 Information technology power has increased rapidly.
 Information and Decisions: managing has to do with
making decisions.
 Good Information allows effective decision making.
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Examples of IT and IS

Figure 1.3 Several subsystems make up this corporate accounting system.

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Examples of IT and IS
 Examples of IT
 Hardware (PC, UNIX server)
 Software (e-mail, Internet, Windows, Word)
 Consumer devices (mobiles)
 Examples of IS
 File systems, databases, e-mail servers /
clients
 e-commerce
 SAP, student records

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Why is IS Important?
 Worldwide changes:
 Global economy
 Knowledge- or information-based society
 Business enterprise
 Digital firm

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Global Economy
 Growing percentage of economy relies
upon import and export
 Need to operate globally
 IS can provide global trading infrastructure

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Information Economy
70%

60%
% SERVICE
50%
% WHITE COLLAR
40% % BLUE COLLAR
30% % FARMING

20%

10%

0%
10

60
00

20

30

40

50

70

80

97
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YEAR

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Changes to Society
 Change of employment profiles:
 Less farming
 Less ‘blue collar’ – manufacturing
 Increased service
 Increased ‘white collar’ – office-based
 USA: 55% of work force are in knowledge-
or information-based activities
 Shift of manufacture to low-wage countries

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Business Enterprise
 Change from hierarchical organisations
 Now flat, decentralised
 Relies on instant information
 Flexibility with customer focus, with
increasing importance

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IS - Impact on Organizational Hierarchy

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Digital Firm
 An organisation where:
 Nearly all relationships with customers,
suppliers and employees is digital
 Business processes accomplished through
digital networks
 Paperless Office
 Flexible
 Dependent upon on IT

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Impacts of IS
 Horizontal Information Flows: Information networks can
bridge functional departments.
 Allow information to flow horizontally between departments.
 Can lead to much higher productivity, quality, and innovation.
 Virtual products: firms can use their information system
to custom tailor goods and services to each customer.
 Virtual showroom, Online business Vs Brick and Mortar
 Systems can allow this at no increase in cost

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Impacts of IS
 For an organisation to survive and prosper
 More locations (networking, Internet)
 New products and services
 Improve jobs and work flows:
 Efficiency
 Cost

 Accountability

 Ethical and social issues

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Components of an information system

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Benefits of Information Systems
 Information Systems have provided managers
with better information, enabling better decision
making.
 Effective Information Systems can be a source of
competitive advantage.
 Computer-based information systems are
associated with decentralization of managerial
decision making.
 Flattening the Organization: information systems
reduce the need for the hierarchy to control the firm.
 Managers control and coordinate using the
system, not workers
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Who should study IS?
 Information Systems Careers
 Systems analyst, Specialist in Enterprise Resource Planning
(ERP), Business Consultant, Database Administrator, etc.
 Knowledge Workers
 Managers and non-managers
 Employers seek computer-literate professionals who know how
to use information technology.
 Computer Literacy Replacing Traditional Literacy
 Key to full participation in western society

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Barriers of IS
 Technological factors: consistent standards for
systems do not exist.
 Makers of hardware use different standards.
 Makes it hard to share information between

systems.
 Resistance by Individuals: many managers do
not use the system fully.
 Some managers are afraid of technology or do not
understand it.
 Political Resistance: the information system
changes the way information flows in the firm
 Some managers feel threatened by it.
25  Managers may think they will be laid-off
Limitations of IS
 Loss of the human element: information systems
cannot present all kinds of information accurately.
 Thick information, which is rich in meaning and not
quantifiable, is best suited to human analysis.
Example: employee evaluations need face-to-face
communication to convey all information.
 Difficult installations: Information systems can be
hard to develop. To avoid problems:
 list major organization goals.
 build support for the system with workers.

 create formal training programs.

 emphasize that face-to-face contact is important

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Porter’s Value Chain and IS

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Value Chain.
It evaluates which value each particular activity adds to the
organizations products or services.

This idea was built upon the insight that an organization is more than a
random compilation of machinery, equipment, people and money.

Only if these things are arranged into systems and systematic


activates it will become possible to produce something for which
customers are willing to pay a price.

Porter argues that the ability to perform particular activities and to


manage the linkages between these activities is a source of
competitive advantage.

(Ref: M. Porter, "Competitive Advantage: Creating and Sustaining


Superior Performance" (1985)

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Porter’s Generic Value Chain

Infrastructure
Support
Activities Human Resource Management
Technology Development
Procurement
Inbound Operations Outbound Marketing Service
Primary Logistics Logistics & Sales
Activities

Elapsed Time - Value added time cost

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Primary Activities
Primary activities are directly concerned with the
creation or delivery of a product or service.

 inbound logistics,
 operations,
 outbound logistics,
 marketing and sales,
 and service.

Each of these primary activities is linked to support


activities which help to improve their
effectiveness or efficiency.
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Inbound Logistics
Here goods are received from a company's suppliers. They are stored until they are needed on
the production/assembly line. Goods are moved around the organization.

Operations
This is where goods are manufactured or assembled. Individual operations could include room
service in an hotel, packing of books/videos/games by an online retailer, or the final tune for a
new car's engine.

Outbound Logistics
The goods are now finished, and they need to be sent along the supply chain to wholesalers,
retailers or the final consumer.

Marketing and Sales


In true customer orientated fashion, at this stage the organization prepares the offering to meet
the needs of targeted customers. This area focuses strongly upon marketing communications
and the promotions mix.
Service
This includes all areas of service such as installation, after-sales service, complaints handling,
training and so on.

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Secondary Activities
There are four main areas of support
activities:
 procurement
 technology development (including R&D),
 human resource management, and
 infrastructure (systems for planning,
finance, quality, information management
etc.).
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Procurement
This function is responsible for all purchasing of goods, services and
materials. The aim is to secure the lowest possible price for purchases of
the highest possible quality.

Technology Development
Technology is an important source of competitive advantage. Companies
need to innovate to reduce costs and to protect and sustain competitive
advantage. This could include production technology, Internet marketing
activities, lean manufacturing, Customer Relationship Management (CRM),
and many other technological developments.

Human Resource Management (HRM)


Employees are an expensive and vital resource. An organization would
manage recruitment and selection, training and development, and rewards
and remuneration.

Firm Infrastructure
This activity includes and is driven by corporate or strategic planning. It
includes the Management Information System (MIS), and other mechanisms
for planning and control such as the accounting department. 33
Margin
Margin’ implies that organizations realize a
profit margin that depends on their ability
to manage the linkages between all
activities in the value chain.
organization is able to deliver a product /
service for which the customer is willing to
pay more than the sum of the costs of all
activities in the value chain.

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Typical Value Chain Analysis
 Analysis of own value chain – which costs
are related to what activities
 Analysis of Customer value chain
 Identification of cost advantage
 Identification of potential “value” added for the
customer—lower cost/high performance-
where does customer see “value”
“….We have learned that it is NOT technology that creates
a competitive edge, but the management process that
exploits technology…” - Pater Keen an MIS Consultant

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Potential IS Contributions

Support Infrastructure - Planning Models


Activities Human Resource - Skills & Experience Databases
Technology - Computer-Aided Design
Procurement - On-line parts ordering
Automated Automated Point of Customer Care
Primary Warehouse Sale E-Commerce
Check
Activities Clearing Scanners

Service
Inbound Operations Outbound Marketing
Logistics Logistics & Sales

Elapsed Time - Value added time cost

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Business process
Business processes are simply a set of
activities that transform a set of inputs into
a set of outputs (goods or services) for
another person or process using people
and tools.

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BPR
BPR is the
 redesign of business processes,
 the associated systems and
 organizational structures to achieve a
dramatic improvement in business
performance

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Why BPR?
The business reasons:

 poor financial performance


 external competition
 erosion of market share or
 emerging market opportunities.

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BPR
It is the examination and change of five
components of the business:
 Strategy
 Processes
 Technology
 Organization
 Culture

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Check out process
Purpose of the process is to pay for and bag
your groceries.

The process begins with you stepping into


line, and ends with you receiving your
receipt and leaving the store. You are the
customer (you have the money and you
have come to buy food), and the store is
the supplier.

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Reengineering Business Processes
Business Business
Improvement Reengineering

Level of Change Incremental Radical


Process Improved New Brand New
Change Version of Process Process
Starting Point Existing Processes Clean Slate

Frequency of One-time or Periodic One-time


Change Continuous Change
Time Required Short Long

Narrow, Within Broad, Cross-


Typical Scope
Functions Functional
Horizon Past and Present Future
Participation Bottom-up Top-down

Path to
Cultural Cultural Structural
Execution
Primary Enabler Statistical Control Information Technology

Risk Moderate High 42


Enabling technology
Information technology allows operations, strategies and
competitive advantages not possible before.


Operational dependency occurs when time, volume or
other physical conditions makes IT unique to perform a
task. It is related to the organization's EFFICIENCY.


Strategic impact occurs when a policy, strategy or product
uniquely requires IT for its implementation. It is related to the
organization's EFFECTIVENESS.
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Corporate IS Strategy Objectives
 A corporate IS strategy is necessary to define:
          what IS services will be provided and to whom;
          who is responsible for providing specific IS services;
          how these services will be provided;
          priorities for provision of new facilities and improvement of existing
facilities;
          who has access to what information;
          how access to IS services will be distributed and supported;
          what common standards should be applied;
          what resources are required and how resources available should be
utilized;
          mechanisms for understanding and mapping current and future
business processes;
          a mechanism for maintaining and renewing the strategy.

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IS Planning Process

Assess the Create a set of Create a prioritized


current state of “blueprints” schedule of projects
affairs with regard that represent the
to IT assets desired state of
affairs

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Typical Corporate IS Plan
Section of Plan Section Contents

Organizational Mission Describes the objectives and goals


Statement of the organization including both
current and future perspectives.

Inventory of Information Describes the objectives and goals


Requirements of the IS organization with regard to
its role in the achievement of the
stated organizational goals and
objectives.

Itemizes and describes the


IS Development Constraints constraints imposed on current and
future development including
technological, financial, human
resource, and operational assets
and resources.
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Typical Corporate IS Plan (cont’d)
Section of Plan Section Contents

Presents the set of long-range (2 – 5


Long-Term IS Needs and year) needs and strategies of the IS
Strategies department prioritized in keeping with
the information requirements previously
described.

Provides a prioritized list of current


Short-Term IS Needs and projects and a schedule of all additional
Strategies projects intended to commence within
the current year.

Discusses the various expected


impacts on the organization of both the
Implications of IS short-term and long-term IS strategies.
Corporate Plan Additionally, this section can be used to
discuss any expected changes in the
current business environment.
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Project Selection Factors

Tim
i Support
Co ng o Degree of
mm f P From Top
Perceived Need
itm roje Management
en ct Within the
t Firm

Available Development Project Established


Organizational Selection Decision Evaluation
Resources Criteria

- Accept -
- Reject -
- Redefine -
- Postpone -
- Proof of Concept -

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Project Process Flow Model

Current New
System System
1 5
2
“How”
Physical Physical

“What”
Logical Logical
4
3

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Project Feasibility Assessment
Feasibility Assessment Description
Category

Determines the relationship between the present


Technical technology resources of the organization and the
expected technology needs of the proposed
project.

Determines the degree to which the proposed


development project fits with the existing
Operational business environment and objectives with regard
to development schedule, delivery date,
corporate culture, and existing business
processes.

Determines the relationship between the present


human resource base of the organization and the
Human Factors expected human resource needs of the proposed
project.
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Project Feasibility Assessment (cont’d)
Feasibility Assessment Description
Category

Identifies any potential legal ramifications


Legal and Political
resulting from the construction and
implementation of the new system including
copyright or patent infringements, violation of
existing antitrust laws, foreign trade restrictions,
or any existing contractual obligations of the
organization.

Assesses the cost/benefit relationship of the


Economic proposed project and its net value contribution to
the organization.

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Project Evaluation Criteria
Evaluation Criteria Description of Criteria

   The degree to which the proposed project will


  improve profits, customer service, organizational
Potential Organizational Benefits performance, etc. and the expected duration of
these benefits.
 
   The degree to which the proposed project will
  assist the organization in achieving its strategic
Strategic Fit objectives and other long-term goals.
 

   The various types of resources and their


  expected levels associated with the proposed
Level of Resource Allocation project, including time, labor, capital, and
identifiable opportunity costs.

   The degree to which the proposed project


Value Chain Analysis contributes value to the manufacture or delivery
of goods and services to the marketplace.
 

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Quantitative vs. Qualitative
Quantitative Benefits Qualitative Benefits

   
Market share will improve to a sustainable We will be one of the leading suppliers in
minimum of 35%. the market.
 
   
Line throughput will increase by 7% within Line throughput will be dramatically
the first quarter and by at least 3% each increased and will continue this trend over
quarter thereafter. time.
    
Product quality will increase such that Product quality will increase and rework
rework will be reduced more than 12% will decrease.
annually.
    
Production costs for the auxiliary power Production costs for the auxiliary power
unit will be reduced by at least $3.00 per unit will go down significantly.
unit.
 
Note: Not all parameters are ‘easily’ measurable e.g. “Goodwill”

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Different types of IS

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Types of IS
 Types of Information System in
Organisations:
 By organisational level
 By function within organisational level
 Examples in functional areas

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IS at the Organisational Level
KIND OF SYSTEM GROUPS SERVED
STRATEGIC LEVEL SENIOR MANAGERS

MANAGEMENT LEVEL MIDDLE MANAGERS

KNOWLEDGE LEVEL KNOWLEDGE &


DATA WORKERS

OPERATIONAL OPERATIONAL
LEVEL MANAGERS
SALES & MANUFACTURING FINANCE ACCOUNTING HUMAN
MARKETING RESOURCES
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IS at the Organisational Level
 Operational-level
 Elementary activities and routine transactions
 Data current and accurate
 Knowledge-level
 Support knowledge and data workers
 Integrate new knowledge into the business
 Office automation

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IS at the Organisational Level
 Management-level
 Periodic monitoring, control, decision-making
and administration
 Is the business working well?
 Strategic-level
 Long-term (e.g. 5 year) planning and strategy
 Internal and external information

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Examples
 What examples can you think of at the
different organisational levels?

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Types of IS
 Transaction Processing Systems (TPS)
 Knowledge Work Systems (KWS)
 Office Automation Systems (OAS)
 Management Information Systems (MIS)
 Decision-support Systems (DSS)
 Executive Support Systems (ESS)

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Transaction Processing Systems
Systems that perform and record daily routine
transactions necessary for business
Operational-level Systems
Order Machine control Securities trading Payroll Compensatio
tracking n

Order Plant scheduling Cash Accounts Training and


processing management payable development

Material Accounts Employee


movement and receivable records
control
Sales and Manufacturing Finance Accountin Human
Marketing g Resources
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Knowledge Work Systems
Systems that aid the creation and integration of new
knowledge into an organisation

Knowledge-level Systems
Engineering workstations Graphics workstations Managerial workstations

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Office Automation Systems
Systems that are designed to increase the
productivity of data workers
Knowledge-level Systems
Word processing Document imaging E-mail / electronic
calendars

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Management Information Systems
Systems that serve planning, control and decision-
making through routine summary and reports
Management-level Systems
Sales Inventory control Annual budgeting Capital Relocation
management investment analysis

Sales and Manufacturing Finance Accountin Human


Marketing g Resources

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Decision-support Systems
Systems that combine data, models and analysis
tools for non-routine decision-making

Management-level Systems
Sales region Production Cost analysis Pricing / Contract
analysis scheduling profitability cost analysis
analysis
Sales and Manufacturing Finance Accountin Human
Marketing g Resources

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Executive Support Systems (1)
Systems that support non-routine decision-making
through advanced graphics and communications
using expert systems, artificial intelligence

Strategic-level Systems
5-year sales 5-year operating 5-year budget Profit Personnel
trend plan forecasting planning planning
forecasting
Sales and Manufacturing Finance Accountin Human
Marketing g Resources

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Executive Support Systems (2)
 High level with drill down
 Key business and industry data
 Structured and unstructured information
 Structured: MTD orders
 Unstructured: Industry newsfeed
 Graphical

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Interrelationships

 TPS major producer of


data ESS
 External data also
required for MIS, DSS MIS DSS
and ESS
 Typical loose coupling of
systems
KWS
 ‘Digital firms’ have tighter TPS
OAS
integration

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Functional Examples
 Examples of IS by function:
 Sales and marketing
 Manufacturing and production
 Finance and accounting
 Human resources

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Sales and Marketing
System Description Organisational
Level
Order processing Enter, process and Operational
track orders

Market analysis Identify customers and Knowledge


markets

Pricing analysis Determine prices Management

Sales trends Prepare 5 year Strategic


forecasts

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Manufacturing and Production

System Description Organisational


Level
Machine control Control actions of Operational
equipment

Computer-aided Design new products Knowledge


design (CAD)

Production planning Decide number and Management


schedule of products

Facilities location Decide where to Strategic


locate facilities

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Finance and Accounting

System Description Organisational


Level
Accounts receivable Track money owed Operational
to firm

Portfolio analysis Design firm’s Knowledge


investments

Budgeting Prepare short-term Management


budgets

Profit planning Plan long-term Strategic


profits

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Human Resources

System Description Organisational


Level
Training and Track training, skills Operational
development and appraisals

Career paths Design employee Knowledge


career paths

Compensation Monitor wages, Management


analysis salaries and benefits

Human resources Plan long-term Strategic


planning workforce needs

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Summary
 Looked at the role of IS within organisations
 At organisational levels
 Looked at the diversity of types of IS within a
business / organisation
 Six different types of IS
 Looked at relationships between IS and
business functions
 Examples by functional area

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Transaction Processing System

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Transaction Processing Systems
 Manual or automatic – all businesses
systematically process transactions
 Function: process routine, day-to-day
business activities
 Computerized TPS:
 Batch
 Online (real-time, OLTP)
 The foundation of business systems

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Batch TPS
 Originally, the only available option
 Transactions accumulated over period of time
 Time period – day, week, month
 Transaction records accumulated in files
 When batches are processed, what happens?
 Update databases
 Generate reports
 Generate transactions for other systems

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Batch Processing Pros and Cons
 Pros
 Relatively easy to program, install and
maintain
 Batches can be processed during low-activity
periods
 Cons
 Information is delayed

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Online TPS (OLTP)
 Transactions are processed in real time
 Required for any “modern” application
where time is critical
 Well supported by client/server computing
model

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Hybrid TPS
 OLTP applications can feed transactions
to batch systems
 Examine: GL only updated once per day
 Real time order capture with delayed
processing

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TPS Requirements
 Capture, process and store transactions
 Produce reports and information about
transactions
 Produce transactions for other TPS
 Be accurate and timely
 Be efficient – require less labor
 Increase customer service
 Increase competitive advantage

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TPS Activity Model
 Data capture
 From online entry or “external” system
 Data validation
 Should be done as close to source as possible
 Processing
 Data manipulation
 Database updating
 Generation of transactions for other systems
 Archive Transaction
 Create documents and reports

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Management Issues
 Uptime
 How long can the system be “down” before
significant costs are incurred?
 Processing Delays / Response Times
 How quickly must a transaction be
processed?
 What is the worst online response time that is
acceptable

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Management Issues (2)
 Disaster Recovery
 What plans are in place to recover lost
business data?
 What plans are in place to resume business
processing in case of disaster?
 Audit
 Can you verify the integrity of the system?
 How will you know if transactions are not
processed or are processed incorrectly?

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TPS By Function
 Order Processing
 Procurement & Inventory Control
 Accounting

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Order Processing TPS
 Order capture
 Variety of means
 Configuration
 Shipment planning and inventory
allocation
 Prioritize orders, select shipment locations,
allocate inventory to orders
 Shipping and warehousing
 Picking, packing, invoicing, reporting

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Procurement
 Inventory Control
 Raw materials, WIP, FGI, etc
 Purchase Order Processing
 Generating, transmitting, maintaining
purchase orders
 Receiving
 Accounts Payable
 Boundary between procurement and
accounting

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Accounting
 Accounts Payable
 Accounts Receivable
 Budget
 Payroll
 General Ledger
 Asset Management

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Disadvantages of Functionally
Organized TPS
 Data redundancy
 Causes integrity problems
 Inefficient
 Temporal integrity problems
 Caused by different times at which
processing occurs
 Lack of information coherence

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Management Information System

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Stages of Data Processing
 The Four Stages of Data Processing
 Input: Data is collected and entered into
computer.
 Data processing: Data is manipulated into
information using mathematical, statistical,
and other tools.
 Output: Information is displayed or presented.
 Storage: Data and information are maintained
for later use.

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Management Information Systems
 MIS
 The study of information systems focusing on
their use in business and management.
 Goals of an MIS
 Provide managers with information
 Regular, routine operations
 Control, organize and plan better

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Typical Inputs and Outputs
 Inputs: Information from the TPS
 Outputs: hard and softcopy reports
 Scheduled reports
 On-demand reports
 Key-indicator (business fundamentals)
 Exception reports

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Functional Perspectives of MIS
 Financial MIS
 Will integrate information from multiple
sources
 Functions
 Costing

 P&L reporting
 Auditing

 Funds management

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Functional Perspectives of MIS
 Manufacturing
 Design and Engineering
 Master Production Scheduling
 Inventory Control
 Materials Planning
 Manufacturing and Process Control
 Quality Control

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Functional Perspectives of MIS
 Marketing
 Market research
 Web-based market research
 Pricing

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Functional Perspectives of MIS
 Transportation and Logistics
 Route and schedule optimization
 Human Resources
 Accounting

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TPS Vs MIS
Transaction Processing Management Information
Systems (TPS) Systems (MIS)
 Support operation  Provide decision-
 Management and making support for
control routine, structured
 Routine, normal decisions
operations  Closely linked to and
fed by TPS

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Decision Support System

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100
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Decision Making Process
 Intelligence gathering
 Definition of problem
 Data gathered on scope
 Constraints identified
 Design phase
 Alternatives identified and assessed
 Choice
 Selection of an alternative
 Implementation
 Is the solution working?
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Structured vs. Unstructured Problems
 Structured problems lend themselves to
programmed decisions
 The implication is that a repeatable
process can be employed and these
can be automated
 Unstructured problems require
unprogrammed decisions - Can be
addressed (or partially addressed) with
Decision Support Systems
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Structured Problems
 Can be addressed by an MIS
 Three decision models or techniques
 Optimization
 Find the best solution
 Satisficing
 Find a solution which meets certain criteria
 Heuristics
 Rule-based solution generation

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Mintzberg’s Research

106
Mintzberg’s Research

107
Mintzberg’s Management roles

108
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Decision Support Systems
 Used for unstructured problems
 Characteristics
 Data from multiple sources internal and
external to organization
 Presentation flexibility
 Simulation and what-if capability
 Support for multiple decision approaches
 Statistical analysis

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 Dialogue Manager
112  Allows user interaction with DSS
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Group Decision Making Systems
 Very interesting field
 How can information technology improve how
decisions are made by groups?
 Applications
 Where time is critical
 Where participants are geographically dispersed
 Where authority obstructs communication
 Military
 Business
 Government

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Group Decision Making Systems
 Common characteristics
 Meeting moderation/facilitation
 Signed and anonymous comments
 Structured deliberations
 Presentation period
 Comment period

 Automated collation of comments

 “Voting”

 Face-to-face and remote


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