Chapter 3 Information Systems in Business

Management Information Systems, 4th Edition 1

Chapter 3Information Systems in Business


Learning Objectives

• Identify various business functions and the role of ISs in these functions

• Explain how ISs in the basic business functions relate to each other

• Show how ISs of different business functions support each other


Learning Objectives (Cont.)• Explain how information technology is used in the

most common business functions to make business processes more effective and more efficient

• Explain the notion of enterprise resource planning (ERP) systems

• Identify business areas where information technology facilitates the work of managers and knowledge workers


Effectiveness and Efficiency• ISs can help companies attain more effective and efficient

business processes

– Effectiveness

• The degree to which a task is accomplished

• The degree to which the company achieves outcomes better than the competitors do

• “To get the right things done” by Peter F. Drucker

– Efficiency

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

• To do the things right


Effectiveness and Efficiency (Cont.)


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


Accounting (Cont.)

• Electronic Data Processing (EDP) Audits

– Ensure electronic systems comply with standard regulations and acceptable rules

– Ensure systems cannot be manipulated to circumvent acceptable principles

– To be an EDP auditor ($)


Accounting (Cont.)


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 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 (Cont.)


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):

– Electronic transfer of cash from one bank account to another


Investment Analysis and Service

• Analyze and project prices of a specific stock or bond in real time

• Transmit buy and sell orders electronically

• Provide clients with a detailed statement

• Monitor account information and news online


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

• Concurrent engineering and communication through Internet

• Product Data Management (PDM)


Engineering (Cont.)


• IT helps in these manufacturing activities:

– Plant activity scheduling

– Material Requirement Planning/assessment

– Material reallocation between orders

– Dynamic inventory management

– Grouping work orders by “characteristics”

– Resource qualification for task completion

Manufacturing & Inventory Control


Manufacturing & Inventory Control (Cont.)


• Take customer demand as initial input

– Deployment according to the bill of materials (BOM)

– Number of product units needed and when they are needed (Main Production Scheduling)

• Use long-range forecasts to put long-lead material on order

• Help reduce inventory cost while ensuring availability

– EOQ inventory under a specific lead time and a consumption rate

Materials Requirement Planning (MRP)


Materials Requirement Planning (MRP) (Cont.)


• 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

• MPS (master production scheduling)

– Support functions such as financial management, sales analysis, and data collection

Manufacturing Resource Planning (MRP II)


PastPart: A OH 20 AL 0 LT 1 ST 0 SS 25

Period Due 1 2 3 4 5 6 7 8 9 10 11 12

1.GR 0 80 50 100 60 100 70 100 60 100 50 100 50

2.SR 0 100 0 0 0 0 0 0 0 0 0 0 0

3.POH X 40 -10 -75 -35 -75 -45 -75 -35 -75 -25 -75 -25

4.PAB X 40 25 25 25 25 25 25 25 25 25 25 25

5.NR X 0 35 100 60 100 70 100 60 100 50 100 50

6.PORC 0 35 100 60 100 70 100 60 100 50 100 50

7.POR 0 35 100 60 100 70 100 60 100 50 100 50 0

7-row MRP table (example)


The algorithm of MRP

• Procedure MRP;• 單階 BOM 展開 MPS 之 PORt, 加入其子件成為其

GRt

• LLC1;• While MPS 有未被處理項 Do

– While BOM 中 LLC 有任一項未被處理 Do• PAB0 OH-AL+max(SR0,0);• For t=1 to T Do

– IF t=1 then POH1PAB0+SR1-GR1-max(GR0,0)» Else POHtPABt-1+SRt-GRt;

– Endif – IF POHt<SS then NRtSS-POHt, PORCt=max(NRt,LS);

» Else NRt0, PORCt0;– Endif


The algorithm of MRP (cont.)

– PABtPOHt+PORCt;– PORt-LTPORCt;– 單階 BOM 展開之 PORt, 加入其子件之 GRt;

• Endfor • Print the item MRP report

– Endwhile; – LLCLLC+1;

• Endwhile;• Endprocedure;


• 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

– Optimization, rationalization

Manufacturing Execution Systems (MES)


• Supply chain management (SCM)

– Managers know status of product during manufacturing

– Recent IS control/adjustment as well as monitor manufacturing process

– System at Ford Motor Company designed to ensure no assemble steps are missed

Monitoring and Control


• Market Research

– Statistical (data mining) 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, & Customer Service


Marketing, Sales, & Customer Service (Cont.)


• The Internet as a Marketing and Selling Medium

– Web lets companies reach more shoppers and serve them better

– Mobile Commerce (M-Commerce) is the newest form of marketing

• Location-based, timely, impulse-purchasing, killing-time info-tainment

– Commercial announcements/Internet advertisements pervade the Web

• Annoying but effective

Marketing, Sales, & Customer Service (Cont.)


• Equipping salespeople with information technology to facilitate productivity

– IT allows salespeople to present different options for products and services on the spot

– Instantly mobile dispatching

Sales Force Automation


• Customer Relationship Management (CRM) software for companies to better serve and know customer needs

– Track past purchase and payments

– Update online answers to frequently asked questions (FAQs)

– Analyze customer’s contact with company

• Web-based Customer Service available 24/7/365

Customer Relationship Management


Human Resources


Human Resources (Cont.)

• 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 (Cont.)• 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 (MBO)


Human Resources (Cont.)• 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


Enterprise Resource Planning (ERP)

• All business functions served by one system that supports different activities for internal different departments

• Support the external-oriented material/information flow of supply chain management upward and downward, the series of main and supporting activities from order to delivery


Enterprise Resource Planning (ERP) (Cont.)


Groupware andCollaborative Work

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

• Document Control– Users can distribute and track electronic documents

without working with outdated information– PDM

• Collaborative Projects– Users can coordinate work on a single document from

many different terminals– Collaborative Production Commerce (CPC)


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



• 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

– Customization possibility



• 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



• 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



– 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


Summary

• There are various business functions and ISs have a role in these functions

• ISs relate to each other in basic business functions

• IT is used in business functions to make business more effective and more efficient

• ERP systems help run different functions upon a common platform

Chapter 3 Information Systems in Business

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