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Chapter 3

Information Systemsin Business Functions

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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.

Learning Objectives

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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.

Learning Objectives

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ISs can help companies attain more effective

and efficient business processes. Effectiveness

The degree to which a goal is accomplished Efficiency

Determined by the relationship between resources expended and benefits gained in achieving a goal

Effectiveness and Efficiency

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Effectiveness and Efficiency

Figure 3.1 Information technology supports a variety of business functions

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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

Accounting

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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.

Accounting

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Accounting

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

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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

Finance

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Finance

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

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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.

Finance

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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.

Finance

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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.

Engineering

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Engineering

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

operations.

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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

Manufacturing and Inventory Control

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Manufacturing and Inventory Control

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

cost of maintaining inventory.

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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

Manufacturing and Inventory Control

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Manufacturing and Inventory Control

Figure 3.7 Materials requirement planning and manufacturing resource planning

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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

Manufacturing and Inventory Control

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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

Manufacturing and Inventory Control

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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.

Marketing, Sales, and Customer Service

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Marketing, Sales, and Customer Service

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

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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.

Marketing, Sales, and Customer Service

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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

Marketing, Sales, and Customer Service

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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.

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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

Human Resources

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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.

Human Resources

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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.

Human Resources

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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.

Enterprise Resource Planning

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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. Especially useful for legal revisions.

Collaborative Projects Users can coordinate work on a single document

from many different terminals.

Groupware and Collaborative Work

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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.

Groupware and Collaborative Work

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Time permitting… Refer to pgs 90-91 in

your text Class divided in two groups

Business Civil Rights advocates

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

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

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

Debate

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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.

Ethical and Societal IssuesPrivacy? What Privacy?

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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

Ethical and Societal IssuesPrivacy? What Privacy?

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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

Ethical and Societal IssuesPrivacy? What Privacy?

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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.

Ethical and Societal IssuesPrivacy? What Privacy?

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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.

Ethical and Societal IssuesPrivacy? What Privacy?