Management Information Systems, 3rd EditionEffy Oz
Chapter 3Information Systemsin Business Functions
Management Information Systems, 3rd EditionEffy Oz
2
Learning Objectives
• When you finish this chapter, you will:– Recognize different business functions and the
role of ISs in these functions. – Understand how ISs in the basic business
functions relate to each other. – Be able to show how ISs of different business
functions support each other.
Management Information Systems, 3rd EditionEffy Oz
3
Learning Objectives
– Understand how IT is used in the most common business functions to make business processes more effective and more efficient.
– Understand the notion of Enterprise Resource Planning systems.
– Recognize business areas where information technology facilitates the work of managers and knowledge workers.
Management Information Systems, 3rd EditionEffy Oz
4
Effectiveness and Efficiency• ISs can help companies attain more effective
and efficient business processes.– Effectiveness
• The degree to which a goal is accomplished, or how much is the actual performance output (achievement) compared to the planned goal. Sometimes effectiveness is viewed as better performance.
– Efficiency• Determined by the relationship between resources
expended and benefits gained (in terms of saving money and/or time) in achieving a goal
Management Information Systems, 3rd EditionEffy Oz
5
Effectiveness and Efficiency
Figure 3.1 Information technology supports a variety of business functions
Management Information Systems, 3rd EditionEffy Oz
6
Effectiveness And Efficiency
Figure 3.2 Information systems in different business functions are interdependent.
Management Information Systems, 3rd EditionEffy Oz
7
Accounting
• AISs automatically post transactions in the books and automate generation of reports for management and legal requirements.
• Three types of AISs– Transaction processing systems (TPS)
– Cost accounting systems
– Managerial accounting systems
Management Information Systems, 3rd EditionEffy Oz
8
Accounting
• Electronic Data Processing (EDP) Audits– Ensure electronic systems comply with
standard regulations and acceptable rules– Ensure systems cannot be manipulated to
circumvent acceptable principles– In recent years EDP auditors job title has
changed to information systems auditors.
Management Information Systems, 3rd EditionEffy Oz
9
Accounting
Figure 3.3 Accounting information systems include features that reflect up-to-date performance of the organization in financial terms.
Management Information Systems, 3rd EditionEffy Oz
10
Finance
• The job of financial managers is to manage money as efficiently as possible by: – Collecting payables as soon as possible
– Making payments by the latest time allowed by contract or law
– Ensuring that sufficient funds are available for day-to-day operations
– Taking advantage of opportunities to accrue the highest yield on funds not used for current activities
Management Information Systems, 3rd EditionEffy Oz
11
Finance
Figure 3.4 Financial information systems help manage cash and investment portfolios.
Management Information Systems, 3rd EditionEffy Oz
12
Finance• Cash Management
– Financial ISs help balance the need to accrue interest against the need to have cash available.
– Cash management systems (CMS): Handle cash transactions specifically.
– Electronic fund transfer (EFT): The electronic transfer of cash from one bank account to another.
Management Information Systems, 3rd EditionEffy Oz
13
Finance
• Investment Analysis and Service – Analyze and project the prices of a specific
stock or bond.– Transmit buy and sell orders electronically.– Provide clients with a detailed statement.– Monitor account information and news
online.
Management Information Systems, 3rd EditionEffy Oz
14
Engineering• ISs reduce engineering lead time or time-to-
market.– Key to maintaining a competitive edge– Computer-Aided Design (CAD) Systems
• Help engineers and technicians design new products and quickly modify and store drawings electronically.
– Rapid Prototyping: Creating one-of-a-kind products to test design in three dimensions.
Management Information Systems, 3rd EditionEffy Oz
15
Engineering
Figure 3.5 Engineering information systems aid engineers in
designing new products and simulating operations.
Management Information Systems, 3rd EditionEffy Oz
16
Manufacturing and Inventory Control
• IT helps in these manufacturing activities:– Plant activity scheduling– Material requirement assessment– Material reallocation between orders– Dynamic inventory management– Grouping work orders by “characteristics” – Resource qualification for task completion
Management Information Systems, 3rd EditionEffy Oz
17
Manufacturing and Inventory Control
Figure 3.6 Manufacturing and inventory control information systems
help reduce cycle times and the cost of maintaining inventory.
Management Information Systems, 3rd EditionEffy Oz
18
Manufacturing and Inventory Control
• Materials Requirement Planning (MRP)– Take customer demand as initial input
• Number of product units needed and when they are needed
– Use long-range forecasts to put long-lead material on order
– Help reduce inventory cost while ensuring availability
Management Information Systems, 3rd EditionEffy Oz
19
Manufacturing andInventory Control
Figure 3.7 Materials requirement planning and manufacturing resource planning
Management Information Systems, 3rd EditionEffy Oz
20
Manufacturing and Inventory Control
• Manufacturing Resource Planning (MRP II)– Combines MRP with other manufacturing-related
activities to plan the manufacturing process such as• Shop activity control and purchasing
• Source of demand
• Customer order entry and forecasting
• Support functions such as financial management, sales analysis, and data collection
Management Information Systems, 3rd EditionEffy Oz
21
Manufacturing and Inventory Control
• Manufacturing Execution Systems (MES)– Track, schedule, and control manufacturing
processes– Collect data such as
• Hours machine operates every day of the month
• Hours the machine is idle and why
Management Information Systems, 3rd EditionEffy Oz
22
Marketing, Sales, and Customer Service
• Market Research– Statistical models help market researchers find the
best populations for new and existing products.
• Targeted Marketing– Database management systems (DBMS) help
define potential customers as narrowly as possible.
Management Information Systems, 3rd EditionEffy Oz
23
Marketing, Sales, and Customer Service
Figure 3.8 Marketing and sales information systems help target
potential buyers and serve clients.
Management Information Systems, 3rd EditionEffy Oz
24
Marketing, Sales, and Customer Service
• The Computer as a Marketing and Selling Medium– Companies send customers promotional disks
with information on their products and services.– Commercial announcements are posted on
public bulletin board systems.– The Web lets companies reach more shoppers
and serve them better.
Management Information Systems, 3rd EditionEffy Oz
25
Marketing, Sales, and Customer Service
• Sales Force Automation– Equipping salespeople with information
technology to facilitate productivity.• IT allows salespeople to present different options for
products and services on the spot.
• Customer Relationship Management (CRM)– Customer service via the Web is available 24
hours/day, 7 days/week.• Saves companies labor hours and telephone expenses
Management Information Systems, 3rd EditionEffy Oz
26
Human 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.
Management Information Systems, 3rd EditionEffy Oz
27
Human Resources
• Employee Record Management– Reduce space needed to store records, time to
retrieve them, and costs of both
• Promotion and Recruitment– Search databases for qualified personnel– Use intranet to post job vacancies– Use the Web to recruit
Management Information Systems, 3rd EditionEffy Oz
28
Human Resources
• Training– Multimedia software training is replacing
classrooms and teachers.– Training software simulates an actual task or
situation and includes evaluation tools.
• Evaluation– Evaluation software helps standardize the
evaluation process and adds a certain measure of objectivity and consistency.
Management Information Systems, 3rd EditionEffy Oz
29
Human Resources• Compensation and Benefits Management
– ISs can help manage compensation efficiently and effectively.
• Calculate salaries, hourly pay, commissions, and taxes
• Automatically generate paychecks or direct deposits
– Special software helps manage benefits, such as health insurance, life insurance, retirement plans, and sick and leave days.
Management Information Systems, 3rd EditionEffy Oz
30
Enterprise Resource Planning
• Enterprise Resource Planning (ERP)– All business functions served by one system that
supports different activities for different departments
– Support supply chain management, the series of main and supporting activities from order to delivery.
Management Information Systems, 3rd EditionEffy Oz
31
Groupware and Collaborative Work
• GroupWare lets workers in different locations communicate ideas, brainstorm, and work together as if they were in the same place.
• Document Control– Users can distribute and track electronic documents
without working with outdated information.
• Collaborative Projects– Users can coordinate work on a single document from
many different terminals.
Management Information Systems, 3rd EditionEffy Oz
32
Groupware and Collaborative Work
• Brainstorming– A group meeting and working collaboratively to
generate creative solutions and new ideas.– Groupware software can facilitate this process
• Eliminates the expense of bringing everyone to the same physical location.
Management Information Systems, 3rd EditionEffy Oz
33
Ethical and Societal IssuesPrivacy? What Privacy?
• What is Privacy?– One’s right to control information about oneself.– Not a constitutional right per se; secured by laws
or convention.– Increasing number of organizations may access
information via better IT hardware and software.– Business and civil rights advocates dispute degree
of privacy vs. utility of information access.
Management Information Systems, 3rd EditionEffy Oz
34
Ethical and Societal IssuesPrivacy? What Privacy?
• Business Arguments– Necessary to collect basic financial and personal
information as cheaply as possible– Consumers benefit eventually from competitive
environment augmented by readily available information
Management Information Systems, 3rd EditionEffy Oz
35
Ethical and Societal IssuesPrivacy? What Privacy?
• Consumer Arguments– Resent unsolicited mail and telephone calls – Resent being refused credit because of credit
bureau mistakes– Frightened by “dossier phenomenon”– Loss of control over information unfair—
information gathered for a particular purpose with permission should remain restricted
Management Information Systems, 3rd EditionEffy Oz
36
Ethical and Societal IssuesPrivacy? What Privacy?
• Seven Commandments of Personal Data Collection and Maintenance– Purpose. Companies should inform people who
provide information of specific, exclusive purpose.
– Relevance. Companies should record and use only data necessary to fulfill their own purposes.
– Accuracy. Companies should ensure that their data are accurate.
Management Information Systems, 3rd EditionEffy Oz
37
Ethical and Societal IssuesPrivacy? What Privacy?
– Currency. Companies should make sure that all data about an individual are current.
– Security. Companies should limit data access to only those who need to know.
– Time Limitation. Companies should retain data only for the time period necessary.
– Scrutiny. Companies should establish procedures to let individuals review their records and correct inaccuracies.