1 Chapter 3 Information Systems in Business Functions.

11

Chapter 3Chapter 3Information SystemsInformation Systemsin Business Functionsin Business Functions

22

Learning ObjectivesLearning Objectives

When you finish this chapter, you When you finish this chapter, you will:will:– Recognize different business functions Recognize different business functions

and the role of ISs in these functions. and the role of ISs in these functions. – Understand how ISs in the basic Understand how ISs in the basic

business functions relate to each other. business functions relate to each other. – Be able to show how ISs of different Be able to show how ISs of different

business functions support each other.business functions support each other.

33

Learning ObjectivesLearning Objectives

– Understand how IT is used in the most Understand how IT is used in the most common business functions to make common business functions to make business processes more effective and business processes more effective and more efficient. more efficient.

– Understand the notion of Enterprise Understand the notion of Enterprise Resource Planning systems.Resource Planning systems.

– Recognize business areas where Recognize business areas where information technology facilitates the information technology facilitates the work of managers and knowledge work of managers and knowledge workers.workers.

44

Effectiveness and EfficiencyEffectiveness and Efficiency

ISs can help companies attain more ISs can help companies attain more effective and efficient business effective and efficient business processes.processes.– EffectivenessEffectiveness

The degree to which a goal is accomplishedThe degree to which a goal is accomplished

– EfficiencyEfficiency Determined by the relationship between Determined by the relationship between

resources expended and benefits gained in resources expended and benefits gained in achieving a goalachieving a goal

55

Effectiveness and EfficiencyEffectiveness and Efficiency

Figure 3.1 Information technology supports a variety of business functions

66

AccountingAccounting

AISs automatically post transactions AISs automatically post transactions in the books and automate in the books and automate generation of reports for generation of reports for management and legal management and legal requirements.requirements.

Three types of AISsThree types of AISs– Transaction processing systems (TPS)Transaction processing systems (TPS)– Cost accounting systemsCost accounting systems– Managerial accounting systemsManagerial accounting systems

77


Electronic Data Processing (EDP) Electronic Data Processing (EDP) AuditsAudits– Ensure electronic systems comply with Ensure electronic systems comply with

standard regulations and acceptable rulesstandard regulations and acceptable rules– Ensure systems cannot be manipulated to Ensure systems cannot be manipulated to

circumvent acceptable principlescircumvent acceptable principles– In recent years EDP auditors job title has In recent years EDP auditors job title has

changed to information systems auditors.changed to information systems auditors.

88


Figure 3.3 Accounting information systems include features that reflect up-to-date performance of the organization in financial terms.

99

FinanceFinance

The job of financial managers is to The job of financial managers is to manage money as efficiently as possible manage money as efficiently as possible by: by: – Collecting payables as soon as possibleCollecting payables as soon as possible– Making payments by the latest time allowed by Making payments by the latest time allowed by

contract or lawcontract or law– Ensuring that sufficient funds are available for Ensuring that sufficient funds are available for

day-to-day operationsday-to-day operations– Taking advantage of opportunities to accrue Taking advantage of opportunities to accrue

the highest yield on funds not used for current the highest yield on funds not used for current activitiesactivities

1010

FinanceFinance

Figure 3.4 Financial information systems help manage cash and investment portfolios.

1111

FinanceFinance

Cash ManagementCash Management– Financial ISs help balance the need to Financial ISs help balance the need to

accrue interest against the need to have accrue interest against the need to have cash available.cash available.

– Cash management systems (CMS): Cash management systems (CMS): Handle cash transactions specifically.Handle cash transactions specifically.

– Electronic fund transfer (EFT): The Electronic fund transfer (EFT): The electronic transfer of cash from one electronic transfer of cash from one bank account to another.bank account to another.

1212

FinanceFinance

Investment Analysis and Service Investment Analysis and Service – Analyze and project the prices of a Analyze and project the prices of a

specific stock or bond.specific stock or bond.– Transmit buy and sell orders Transmit buy and sell orders

electronically.electronically.– Provide clients with a detailed Provide clients with a detailed

statement.statement.– Monitor account information and news Monitor account information and news

online.online.

1313

EngineeringEngineering

ISs reduce engineering lead time or ISs reduce engineering lead time or time-to-market.time-to-market.– Key to maintaining a competitive edgeKey to maintaining a competitive edge– Computer-Aided Design (CAD) Systems Computer-Aided Design (CAD) Systems

Help engineers and technicians design new Help engineers and technicians design new products and quickly modify and store products and quickly modify and store drawings electronically.drawings electronically.

– Rapid Prototyping: Creating one-of-a-Rapid Prototyping: Creating one-of-a-kind products to test design in three kind products to test design in three dimensions.dimensions.

1414

EngineeringEngineering

Figure 3.5 Engineering information systems aid engineers in designing new products and simulating

operations.

1515

Manufacturing and Manufacturing and Inventory ControlInventory Control

IT helps in these manufacturing IT helps in these manufacturing activities:activities:– Plant activity schedulingPlant activity scheduling– Material requirement assessmentMaterial requirement assessment– Material reallocation between ordersMaterial reallocation between orders– Dynamic inventory managementDynamic inventory management– Grouping work orders by “characteristics” Grouping work orders by “characteristics” – Resource qualification for task completionResource qualification for task completion

1616


Figure 3.6 Manufacturing and inventory control information systems help reduce cycle times and the

cost of maintaining inventory.

1717


Materials Requirement Planning Materials Requirement Planning (MRP)(MRP)– Take customer demand as initial inputTake customer demand as initial input

Number of product units needed and when Number of product units needed and when they are neededthey are needed

– Use long-range forecasts to put long-Use long-range forecasts to put long-lead material on orderlead material on order

– Help reduce inventory cost while Help reduce inventory cost while ensuring availabilityensuring availability

1818


Figure 3.7 Materials requirement planning and manufacturing resource planning

1919


Manufacturing Resource Planning (MRP Manufacturing Resource Planning (MRP II)II)– Combines MRP with other manufacturing-Combines MRP with other manufacturing-

related activities to plan the manufacturing related activities to plan the manufacturing process such asprocess such as Shop activity control and purchasingShop activity control and purchasing Source of demandSource of demand Customer order entry and forecastingCustomer order entry and forecasting Support functions such as financial Support functions such as financial

management, sales analysis, and data collectionmanagement, sales analysis, and data collection

2020


Manufacturing Execution Systems Manufacturing Execution Systems (MES)(MES)– Track, schedule, and control Track, schedule, and control

manufacturing processesmanufacturing processes– Collect data such asCollect data such as

Hours machine operates every day of the Hours machine operates every day of the monthmonth

Hours the machine is idle and whyHours the machine is idle and why

2121

Marketing, Sales, and Marketing, Sales, and Customer ServiceCustomer Service

Market ResearchMarket Research– Statistical models help market Statistical models help market

researchers find the best populations for researchers find the best populations for new and existing products.new and existing products.

Targeted MarketingTargeted Marketing– Database management systems (DBMS) Database management systems (DBMS)

help define potential customers as help define potential customers as narrowly as possible.narrowly as possible.

2222


Figure 3.8 Marketing and sales information systems help target potential buyers and serve clients.

2323


The Computer as a Marketing and The Computer as a Marketing and Selling MediumSelling Medium– Companies send customers promotional Companies send customers promotional

disks with information on their products disks with information on their products and services.and services.

– Commercial announcements are posted Commercial announcements are posted on public bulletin board systems.on public bulletin board systems.

– The Web lets companies reach more The Web lets companies reach more shoppers and serve them better.shoppers and serve them better.

2424


Sales Force AutomationSales Force Automation– Equipping salespeople with information Equipping salespeople with information

technology to facilitate productivity.technology to facilitate productivity. IT allows salespeople to present different options IT allows salespeople to present different options

for products and services on the spot.for products and services on the spot.

Customer Relationship Management Customer Relationship Management (CRM)(CRM)– Customer service via the Web is available 24 Customer service via the Web is available 24

hours/day, 7 days/week.hours/day, 7 days/week. Saves companies labor hours and telephone Saves companies labor hours and telephone

expensesexpenses

2525

Human ResourcesHuman Resources

Figure 3.9 Human resource management information systems help managers optimize the

assignment of employees and provide payroll, benefits, and other employee-related services.

2626


Employee Record ManagementEmployee Record Management– Reduce space needed to store records, Reduce space needed to store records,

time to retrieve them, and costs of bothtime to retrieve them, and costs of both Promotion and RecruitmentPromotion and Recruitment

– Search databases for qualified personnelSearch databases for qualified personnel– Use intranet to post job vacanciesUse intranet to post job vacancies– Use the Web to recruit Use the Web to recruit

2727


TrainingTraining– Multimedia software training is replacing Multimedia software training is replacing

classrooms and teachers.classrooms and teachers.– Training software simulates an actual task Training software simulates an actual task

or situation and includes evaluation tools.or situation and includes evaluation tools. EvaluationEvaluation

– Evaluation software helps standardize the Evaluation software helps standardize the evaluation process and adds a certain evaluation process and adds a certain measure of objectivity and consistency.measure of objectivity and consistency.

2828


Compensation and Benefits Compensation and Benefits ManagementManagement– ISs can help manage compensation ISs can help manage compensation

efficiently and effectively.efficiently and effectively. Calculate salaries, hourly pay, commissions, and Calculate salaries, hourly pay, commissions, and

taxestaxes Automatically generate paychecks or direct Automatically generate paychecks or direct

depositsdeposits

– Special software helps manage benefits, Special software helps manage benefits, such as health insurance, life insurance, such as health insurance, life insurance, retirement plans, and sick and leave days.retirement plans, and sick and leave days.

2929

Enterprise Resource Enterprise Resource PlanningPlanning

Enterprise Resource Planning (ERP)Enterprise Resource Planning (ERP)– All business functions served by one All business functions served by one

system that supports different activities system that supports different activities for different departmentsfor different departments

– Support supply chain management, the Support supply chain management, the series of main and supporting activities series of main and supporting activities from order to delivery.from order to delivery.

3030

Groupware and Groupware and Collaborative WorkCollaborative Work

GroupWare lets workers in different locations GroupWare lets workers in different locations communicate ideas, brainstorm, and work communicate ideas, brainstorm, and work together as if they were in the same place. together as if they were in the same place.

Document ControlDocument Control– Users can distribute and track electronic Users can distribute and track electronic

documents without working with outdated documents without working with outdated information.information.

– Especially useful for legal Especially useful for legal revisionsrevisions.. Collaborative ProjectsCollaborative Projects

– Users can Users can coordinate coordinate work on a single document work on a single document from many different terminals.from many different terminals.

3131

Groupware and Groupware and Collaborative WorkCollaborative Work

BrainstormingBrainstorming– A group meeting and working A group meeting and working

collaboratively to generate creative collaboratively to generate creative solutions and new ideas.solutions and new ideas.

– Groupware software can facilitate this Groupware software can facilitate this processprocess Eliminates the expense of bringing everyone Eliminates the expense of bringing everyone

to the same physical location.to the same physical location.

3232

DebateDebate

Time permitting… Refer to pgs 90-91 in Time permitting… Refer to pgs 90-91 in your textyour text

Class divided in two groupsClass divided in two groups– Business Business – Civil Rights advocatesCivil Rights advocates

Refer to rules on pg. 91 Refer to rules on pg. 91 – Business: Do these rules impede the free flow Business: Do these rules impede the free flow

of information? What are the impacts?of information? What are the impacts?– Civil Rights: Are these rules critical for privacy? Civil Rights: Are these rules critical for privacy?

Are the technical and financial arguments Are the technical and financial arguments strong enough to set aside privacy issues?strong enough to set aside privacy issues?

3333

What is Privacy?What is Privacy?– One’s right to control information about One’s right to control information about

oneself.oneself.– Not a constitutional right per se; secured by Not a constitutional right per se; secured by

laws or convention.laws or convention.– Increasing number of organizations may access Increasing number of organizations may access

information via better IT hardware and information via better IT hardware and software.software.

– Business and civil rights advocates dispute Business and civil rights advocates dispute degree of privacy vs. utility of information degree of privacy vs. utility of information access.access.

Ethical and Societal IssuesEthical and Societal IssuesPrivacy? What Privacy?Privacy? What Privacy?

3434

Business ArgumentsBusiness Arguments– Necessary to collect basic financial and Necessary to collect basic financial and

personal information as cheaply as personal information as cheaply as possiblepossible

– Consumers benefit eventually from Consumers benefit eventually from competitive environment augmented by competitive environment augmented by readily available informationreadily available information


3535

Consumer ArgumentsConsumer Arguments– Resent unsolicited mail and telephone Resent unsolicited mail and telephone

calls calls – Resent being refused credit because of Resent being refused credit because of

credit bureau mistakescredit bureau mistakes– Frightened by “dossier phenomenon”Frightened by “dossier phenomenon”– Loss of control over information unfair—Loss of control over information unfair—

information gathered for a particular information gathered for a particular purpose with permission should remain purpose with permission should remain restrictedrestricted


3636

Seven Commandments of Personal Seven Commandments of Personal Data Collection and MaintenanceData Collection and Maintenance– Purpose. Companies should inform Purpose. Companies should inform

people who provide information of people who provide information of specific, exclusive purpose.specific, exclusive purpose.

– Relevance. Companies should record Relevance. Companies should record and use only data necessary to fulfill and use only data necessary to fulfill their own purposes.their own purposes.

– Accuracy. Companies should ensure that Accuracy. Companies should ensure that their data are accurate.their data are accurate.


3737

– Currency. Companies should make sure Currency. Companies should make sure that all data about an individual are that all data about an individual are current.current.

– Security. Companies should limit data Security. Companies should limit data access to only those who need to know.access to only those who need to know.

– Time Limitation. Companies should retain Time Limitation. Companies should retain data only for the time period necessary.data only for the time period necessary.

– Scrutiny. Companies should establish Scrutiny. Companies should establish procedures to let individuals review their procedures to let individuals review their records and correct inaccuracies.records and correct inaccuracies.


1 Chapter 3 Information Systems in Business Functions.

Documents

common business functions

basic business functions

business areas

information systems

efficient business processes

cash management systems

acceptable rulesensure

electronic transfer