Itm 2b

Kinds of Information Systems

Different types of Information Systems

1)Categorisation on the basis of Levels

• Operational level systems

• Management-level systems

• Strategic-level systems

2)Categorisation on the basis of Users

• Knowledge Workers

• Data Workers

3) Categorisation on the basis of the characteristics

• Structured Decisions

• Semi-structured Decisions

• Unstructured Decisions

The information systems support of people in organizations.

Three main categories of information systems serve different organizational levels:

1. Operational-level systems: support operational managers, keeping track of the elementary activities and transactions e.g., sales, receipts and cash deposits

- purpose of this system is to answer the routine questions and to track the flow of transactions

- track the no.of hours worked each day by employees on a factory floor

2. Management-level systems: serve the monitoring, controlling, decision-making and administrative activities of middle managers

e.g- are things working well ?

what –if questions

3. Strategic-level systems: help senior management tackle and address strategic issues and long term trends, e.g: what will be employment level in five years, what products should we be making

Major Types of Systems

• Transaction Processing Systems (TPS)

• Management Information Systems (MIS)

• Decision-Support Systems (DSS)

• Executive Support Systems (ESS)

Transaction Processing Systems (TPS)

• Basic business systems that serve the operational level

• A computerized system that performs and records the daily routine transactions necessary to conduct the business

• Transactions are events that occur as part of doing business, such as sales, purchases, deposits, withdrawals, refunds and payments

i,e they record the routine transactions that take place in everyday operations

e.g – check the status of sales order, employee record keeping ,amount of stock in inventory

The Transaction Processing System records the data from everyday operations throughout every division or department

Major modules-

Order processing-System receives, summarizes and stores the orders

Accounts payable and receivables – records the debit, credit and balance of each customer or vendor generated from sales journals or purchase orders

Receiving and shipping of goods-

Payroll-

Candy bar manufacturing company

TPS will record quantity of sugar required in making the candy bar

records the time it takes from beginning to end to make the candy bar

record the number of people working on the assembly line when candy bar is made and what functions they perform.

record the sales and marketing actions surrounding the sale of the product

records how many stores are actually stocking the candy bar and where the product is located inside the stores.

records how much did the company pay to package the product, store the product, and ship the candy bar to the stores

how many truck drivers were required to deliver the product to the local store.

The best Transaction Processing System will be integrated throughout the organization to supply useful information to those who need it when they need it.

Office Automation System -worker must complete the necessary paperwork to be filed with the Patent Office.

makes easy work of developing press releases that Sales and Marketing will use to announce the new and improved Cybernuts candy bar.

The clerical workers in Human Resources will use their OAS to process the job changes

An Office Information System is used by data workers to fulfill the coordination and communication functions vital to a company

Management Information Systems (MIS)

Management level

• Inputs: High volume transaction level data

• Processing: Simple models

• Outputs: Summary reports

• Users: Middle managers

Example: Annual budgeting

serve the management level of the organization

provides reports, historical records etc

serve the functions of planning, controlling & decision making at the management level

The MIS draws data from the Transaction Processing System to help managers answer structured questions - such as "How much more sugar must we purchase if we increase production from 5000 candy bars to 7000 candy bars?"

Accounting managers will know the quantity of increase in purchase of sugar and milk to support the new recipe.

The Shipping manager will know in time to plan for the new size wrapper for the Cybernuts candy bar.

The Sales and Marketing manager can know almost instantaneously that the shipment is going to be delayed ( change in recipe)

MIS report may consists of

Average daily sales with details for each product and each region

Daily production of data

Seasonal sales

Personal and project assignment and the number of hours logged in by each person for the month and for the week

Printing and paper charges for the year

Routine reports- periodic reports; Monthly absenteeism

Adhoc(demand) reports – need special information which is not included in routine reports(drill down report, key indicator report, comparative report)

Exception report-

Help management sense the organisation by seeing and reviewing all the activities as well as take decisions regarding future activities

computer based IS that provide interactive information support to managers and business professionals during the decision making process.

use internal information from TPS & MIS, as well as external information

have more analytical power, condense large amount of data ,designed so that users can work directly

The Sales and Marketing management of WorldWide Candy would use a DSS to answer a semi structured question such as "What price should we charge for the candy bar so that we can maximize our profits and minimize our costs?"

Manufacturing Division could determine the best answer to the semi structured question, "How does the change in the size and packaging of the candy bar affect the other products we produce, not just in shipping, but also on the display shelf at the convenience store?"

Decision Support Systems are used for complex "what-if" questions that require internal and external data. Decisions at this management level are mostly semi structured, so the Information System must respond to the unique requirements of the executives.

DSS involves 4 basic types of analytical modeling activities

What –if analysis: end user can change the value of variables and observe the resulting change

Eg: tax rate

Sensitivity analysis: value of only one variable is changed repeatedly and the resulting changes on the other variable is observed

What if analysis with repeated change to only one variable at a time

Used when uncertain about the assumptions made in estimating the value of certain key variable.

Goal seeking analysis: reverse of what if.

Sets a target value for a variable and repeatedly change other variable until the target is reached.

Optimization analysis: complex extension of

Goal seeking analysis.

The goal is to find the optimum value for one or more target values, given certain constraints

Then the values of the other variables are changed until the best value for the target variables are achieved

EXECUTIVE SUPPORT SYSTEMS (ESS):

• Inputs: Aggregate data

• Processing: Interactive

• Outputs: Projections

• Users: Senior managers

Example: 5 year operating plan

goal of EIS is to provide top executives with immediate and easy access to information about firm’s CSFs, that are critical to accomplish the strategic objectives.

Eg: E-com vs traditional sales

Presented in the forms tailored to the preferences of the executives using the system.

ESS provides minute to minute view of the firm’s financial performance as measured by working capital ,accounts receivables, accounts payables and inventory

serve the strategic level

-address the non routine decisions requiring judgment & evaluation because there is no agreed on procedure for arriving at a solution

-incorporate data about external events (competitors), but also draws data from MIS & DSS

-filters the data to save time & effort of the executives

-e.g-what are the competitors doing

An Executive Support System helps managers make strategic decisions affecting the entire company. The systems use internal and external data to give executives the information they need to determine the proper course of action in unstructured situations.

• Top Level Management

• Designed to the individual senior manager

• Ties CEO to all levels

• Very expensive to keep up

Relationship of Systems to One Another

In contemporary digital firms, the different types of systems are closely linked to one another. This is the ideal. In traditional firms these systems tend to be isolated from one another, and information does not flow seamlessly from one end of the organization to the other. Efficiency and business value tend to suffer greatly in these traditional firms

Functional Business Systems

Definition:

Information systems that support the business functions of accounting, finance, marketing, operations management, and human resource management

Interactive Marketing

Definition:

Customer-focused marketing process that is based on using the Internet, intranets, and extranets to establish two-way transactions between a business and its customers or potential customers

Goal:

Use networks to attract and keep customers who will become partners with the business in creating, purchasing, and improving products and services

Sales Force Automation

Definition:

Information systems that improve the delivery of information and support to salespeople with the goal of improving sales productivity and marketing responsiveness

Sales and Marketing Systems

Major functions of systems:

• Sales management, market research, promotion, pricing, new products

Major application systems:

• Sales order info system, market research system, pricing system

Manufacturing Systems

Definition:

Information systems that support the production/operations function that includes all activities concerned with the planning and control of the processes producing goods and services

Major functions of systems:

• Scheduling, purchasing, shipping, receiving, engineering, operations

Major application systems:

• Materials resource planning systems, purchase order control systems, engineering systems, quality control systems

Financing and Accounting Systems

Major functions of systems:

• Budgeting, general ledger, billing, cost accounting

Major application systems:

• General ledger, accounts receivable, accounts payable, budgeting, funds management systems

Designed to support

Planning to meet the personnel needs of the business

Development of employees

Control of all personnel policies and programs.

Human Resource Systems

Major functions of systems:

• Personnel records, benefits, compensation, labor relations, training

Major application systems:

• Payroll, employee records, benefit systems, career path systems, personnel training systems

Business Processes and Information Systems

Business processes:

• Is a set of logically related activities for accomplishing a specific business results.

• Manner in which work is organized, coordinated, and focused to produce a valuable product or service

• Unique ways to coordinate work, information, and knowledge

• Ways in which management chooses to coordinate work

• Concrete work flows of material, information, and knowledge—sets of activities

Examples of Business Processes

Manufacturing and production:

• Assembling product, checking quality, producing bills of materials

Sales and marketing:

• Identifying customers, creating customer awareness, selling

Finance & accounting:

• Paying creditors, creating financial statements, managing cash accounts

Human resources:

• Hiring employees, evaluating performance, enrolling employees in benefits plans

Cross-Functional Business Processes:

• cross boundary between sales, marketing, manufacturing, and research and development

• Group employees from different functional specialties to complete a piece of work

Example: Order Fulfillment Process

Cross-Functional Business Processes:

• cross boundary between sales, marketing, manufacturing, and research and development

• Group employees from different functional specialties to complete a piece of work

Example: Order Fulfillment Process

Business Processes and Information Systems

• Purpose of IS is to enable highly efficient business processes

• Information systems help organizations achieve great efficiencies by automating parts of processes

• IS also contributes to completely rethinking processes.

Analyzing the customer request for service process ,how many steps involved ,how many people involved, how much it costs.

Analyzing the customer request for service process ,how many steps involved ,how many people involved, how much it costs.

Traditional “Silo” View of Information Systems

Within the business:

• There are functions, each having its uses of information systems

Outside the organization’s boundaries:

• There are customers and vendors

Functions tend to work in isolation

Systems for Enterprise-Wide Process Integration

Enterprise applications:

• Designed to support organization-wide process coordination and integration

• Systems for Enterprise-Wide Process Integration (Continued)

Consist of :

• Enterprise systems

• Supply chain management systems

• Customer relationship management systems

• Knowledge management systems

All these enterprise applications integrates a related set of functions and business processes to enhance the performance of the organization as a whole.

Enterprise Systems

• Enterprise systems, also known as enterprise resource planning (ERP) systems, provide a single information system for organization-wide coordination and integration of key business processes.

• Information that was previously fragmented in different systems can seamlessly flow throughout the firm so that it can be shared by business processes in manufacturing, accounting, human resources, and other areas.

• Gives a company an integrated real-time view of its core business processes

• ERP software suites typically consist of integrated modules of…

Manufacturing

Distribution

Sales

Accounting

Human Resource Management

Business Value of Enterprise Systems

• A more uniform organization

• More efficient operations and customer-driven business processes

• Firmwide information for improved decision making

• Benefits of Enterprise Systems

• Help to unify the firm’s structure and organization: One organization

• Management: Firm wide knowledge-based management processes

• Technology: Unified platform

• Business: More efficient operations & customer-driven business processes

Benefits (conti)

• Quality and efficiency---Helps improve the quality and efficiency of customer service, production, & distribution by creating a framework for integrating and improving internal business processes

• Decreased Costs---Reductions in transaction processing costs and hardware, software, and IT support staff

• Decision support---Provides cross-functional information on business performance to assist managers in making better decisions

• Enterprise agility----Results in more flexible organizational structures, managerial responsibilities, and work roles

• Challenges of Enterprise Systems

• Difficult to build: Require fundamental changes in the way the business operates

• Technology: Require complex pieces of software and large investments of time, money, and expertise

Causes of ERP failures

• Underestimating the complexity of the planning, development, and training required

• Failure to involve affected employees in the planning & development phases and change management programs

• Trying to do too much, too fast

• Insufficient training

• Believing everything the software vendors and/or consultants say

• Trends

• Flexible ERP

• Web-enabled ERP

• Interenterprise ERP

• E-Business Suites

• ACC Limited,

• 14 manufacturing plants,

• 30 ready mix concrete plants,

• 20 sales units,

• 54 zonal offices ,

• Distribution network comprises -160 warehouses,

• 9000 distributors,

• 50,000 retail outlets

• DELMIA's Digital Manufacturing Products and Solutions allow manufacturers in any industry to virtually define, plan, create, monitor and control all production processes. From early process planning and assembly simulation to a complete definition of the production facility and equipment, DELMIA assists companies to achieve maximum production efficiency, lower cost, improve quality and reduce time to market.

• The Supply Chain

• Network of organizations and business processes for procuring raw materials, transforming into products, and distributing them to customers

A cross-functional inter enterprise system that uses IT to help support & manage the links between some of company’s key business processes and those of its suppliers, customers, & business partners.

• Materials, information, and payments flow through the supply chain in both directions.

Goal is to create a fast, efficient, & low-cost network of business relationships.

Supply Chain Management (SCM)

Close linkage and coordination of activities involved in buying, making, and moving a product

Integrates supplier, manufacturer, distributor customer

Reduces time, redundant effort, and inventory costs

Network of organizations and business processes

Helps in procurement of materials, transformation of raw materials into intermediate and finished products

Helps in distribution of the finished products to customers

Includes reverse logistics - returned items flow in the reverse direction from the buyer back to the seller

Coordination of business processes to speed information, product, and fund flows up and down a supply chain to reduce time, redundant effort, and inventory costs

SCOR (Chain Operations Reference Model)-cross industry process reference model for SCM.

• Defines a common set of SC processes to help companies better understand SCM issues and set goals for SC improvement.

• identifies five major supply chain processes:

• Plan: Balancing demand and supply to meet sourcing, production, and delivery requirements

• Source: Procurement of goods and services needed to create a product or service

• Make: Processes that transform a product into a finished state

• Deliver: Processes to manage order transportation and distribution

• Return: Processes associated with product returns and post delivery customer support

• Logistics:

• Planning and control of all factors that have an impact on the supply chain

BUSINESS PROCESS IN SUPPLY CHAIN LIFE CYCLE

Business Value of Supply Chain Management Systems

• Improved customer service and responsiveness

• Cost reduction

• Cash utilization

• Benefits

• Can provide faster, more accurate order processing, reductions in inventory levels, quicker time to market, lower transaction and materials costs, & strategic relationships with suppliers

PROBLEMS

A lack of proper demand planning knowledge

Inaccurate or overoptimistic demand forecast

Lack of adequate collaboration among marketing, production & inventory management departments within a company & with suppliers, distributors & others

Even the software of SCM is immature, incomplete & hard to implement

Analytical CRM:

• Applications that analyze customer data generated by operational CRM applications to provide information for improving business performance

• Examples: Develop customer segmentation strategies and customer profiles; analyze customer or product profitability; identify trends in sales length cycle; analyze leads generated and conversion rates

Business Value of Customer Relationship Management Systems

• Increased customer satisfaction

• More effective marketing and reduced direct marketing costs

• Lower costs for customer acquisition and retention

• Increased revenue from identifying most profitable customers and segments for marketing, cross-selling, up-selling

• Reduce churn rate:

• Number of customers who stop using or purchasing products or services from a company

Knowledge Management Systems

• Collects relevant knowledge and make it available wherever and whenever it is needed

• Support business processes and management decisions

• Also link the firm to external sources of knowledge

• Support processes for acquiring, storing, distributing, and applying knowledge for creating new knowledge and integrating it into the organization

• Include enterprise wide systems for managing and distributing documents ,graphics and other digital graphics for creating corporate knowledge directories of employees with special areas of expertise, office systems for distributing knowledge and information.

• KM applications are expert systems that codify the knowledge of experts in information systems that can be used by other members of the organisation and tools for knowledge discovery that recognise patterns and important relationships in large pools of data.