Information systems and management in business

Chapter 4Using Information Systems in Business Operations

4.1 Business Fundamental Concepts Overview

What is a business Basically an organization which is

engaged in commercial, industrial or professional activities

For-profit Non- profit

Generally, a business orientated organization is engaged in either making physical products or delivering services

4.1 Business Fundamental Concepts Overview

Business Revenue, Expenses and Profit Revenue : money generated through

the selling of products or services Expenses: The cost incurred as a result

of making products or delivering services

Profit : The variance between revenue and expenses

4.1 Business Fundamental Concepts Overview

Business Types manufacturing business

Wholesale Retail Distribution

Service business or service industry

4.1 Business Fundamental Concepts Overview

Business Organization The process of organizing the various activities

surrounding producing and selling products and delivering services into individual functional business areas

Individual functions have sets of goals and responsibilities associated with it

The sales and marketing function handles promotional and sales activities of the

finished manufactured products Collectively these functions results in what is

known as an organizational chart

4.2 Increasing business operation’s efficiencies

Business efficiency In one sense, when talking about

business efficiency, we are primarily comparing the speed in which the activities are carried out relative to the resources available to it

In another sense the comparison involves the cost of the transaction

4.2 Increasing business operation’s efficiencies

A typical business transaction An order entry process

At least four business functions are involved in the completion of the process

Marketing, Finance, Warehouse and manufacturing

The process is likely to be automated through functional specific information systems

Fragmenting process completion in this way creates an efficiency, cost effectiveness and accuracy challenges

Effective deployment of information systems can help to manage such challenges in a very beneficial way

Automating the entire order entry business process

4.3 Information Systems Approaches to Supporting Business Operations

Three widely deployed approaches Automating individual functional business

areas Functional specific information systems Marketing or HR systems

Automating an entire business transaction Transaction processing systems (TPSs)

Automating an entire business processes Enterprise resources planning (ERP)

4.4 Transaction Processing Systems (TPSs)

Business Transaction Overview In a business setting, transactions are

repetitive events (activities) that take place as a result of doing business

Processing a customer order Paying employees

Business transaction tends to generate a wealth of business data

The manual processing of such information is time challenging

Accuracy, efficiency, cost, etc..

4.4 Transaction Processing Systems (TPSs)

Transaction Processing Systems Definition A special type of information systems which

are most suited to dealing with repetitive business activities - processes

The system is geared for the collection, storage, modification and retrieval of business data which is associated or required to complete a business transaction or process

4.4 Transaction Processing Systems (TPSs)

Transaction Processing System Architecture The architecture involves three basic

functions Input function, the processing function

and the output function

4.4 Transaction Processing Systems (TPSs)

Input function Facilitates data entry, capturing and validation Typically when a business transaction occurs, a

document describing the nature of the transaction is generated and it is usually called the source document

Source document forms the foundation for the data submitted to the input function

Source document submission approaches Manual Semi-automated Fully automated

4.4 Transaction Processing Systems (TPSs)

The Processing Function (PF) Generally, the end-of-data entry (source

document presentation) activates the processing function

The PF would typically involve a complicated piece of computer programming which is used in order to accomplish a number of programming tasks

Computation Decision making Database communication, data storage, and

data retrieval

4.4 Transaction Processing Systems (TPSs)

The Output Function Transaction processing systems

presents their output to the system’s user or operator in either a printed or screen display format

The output data is usually delivered in a style which user friendly and easily comprehendible

4.5 Transaction Processing Systems Examples

Examples of widely implemented transaction processing systems

Inventory Management Sales Order Entry systems Payroll Account Receivable and Account

Payable General Ledger Purchasing

4.5 Transaction Processing Systems (PIS) Examples

A Purchasing Information System Material requisition is a very common and frequent

activity in many organizations This kind of activity typically involves the participation and

co-operation of many business functions in order to complete the purchasing transaction

A purchasing system is typically used to keep track of suppliers, identify and select the appropriate supplier and prepare purchase orders

The purchasing information system key activities Facilitating and capturing the order data as entered by the

system operator Processing the order

Checking funds availability and committing it to the order Updating account payable Logging order details

4.5 Transaction Processing Systems Examples

PIS Advantages Significantly reduces the transaction

processing time and paper work Helps to enforce business rules

Permitting purchasing from only approved suppliers

Managing and controlling the purchasing budget

Ensures that the requesting department has enough funds to be committed to the transaction prior to issuing the order

4.6 Functional Information Systems (FISs)

FISs Overview Cross functional information systems are not

designed to serve the overall and specific functional requirement of a business

A cross functional information system such as an order entry would serve the accounting function requirement

Examples of business functional areas in which information systems are widely implemented

Finance Marketing Information services Manufacturing Human resources Accounting

4.6 Functional Information Systems (FISs)

Marketing Information Systems Marketing definition

Institute of Marketing (CIM) defines it as “Marketing is the management process that identifies, anticipates and satisfies customer requirements profitably”

Marketing Information Systems key activities Collection, analysis and making available relevant marketing

information that aids the marketing decision making process In general there are a number of individual information

systems that are specifically designed to assist companies to significantly increase the overall efficiency of the marketing function

The current trend is to develop a more integrated system approach to supporting the marketing needs that is centered on the customer

Customer relationship management (CRM) and SFA are cases in point

4.6 Functional Information Systems (FISs)

Accounting Information Systems (AIS) Basically accounting information

systems employ information technology in conjunction with traditional accounting controls and methods in order to deliver financial information necessary to help users manage their organization [7]

4.6 Functional Information Systems (FISs)

Manufacturing Information Systems The primary objectives of a manufacturing

function are the planning, designing and the production of new products

a manufacturing process involves a number of complicated steps

Product planning and designing, planning the parts required by the manufacturing process, scheduling the use of manufacturing machinery, managing production inventories, automating the use and operation of manufacturing machinery and so on

4.6 Functional Information Systems (FISs)

Manufacturing Information Systems examples Computer aided manufacturing - CAM Computer aided design - CAD Material requirements planning - MRP Just in time inventory management

4.6 Functional Information Systems (FISs)

Human Resources Information - HRI Systems Key objectives are

Help organizations manage their HR function’s activities in an effective and efficient manner

HRI typical usage examples Manage employee’s recruitment process and

keep track of applicant’s applications Analyze employee on the job performance Keep track of employee skills Manage employment termination Manage employee’s benefits and

compensation

4.6 Functional Information Systems (FISs)

Financial Information Systems Definition – defined by the Investor

dictionary.com as “An information system, comprised of one

or more applications, that is used for any of the following: collecting, processing, maintaining, transmitting, and reporting data about financial events; supporting financial planning or budgeting activities; accumulating and reporting cost information; or supporting the preparation of financial statements”

4.6 Functional Information Systems (FISs)

Financial Information Systems examples Capitol budgeting Cash management Credit management Investment management Financial planning and forecasting

Chapter 3 Knowledge Enhancement and Consolidation Tools and Exercises

Visit the book’s Web site www.halaeducation.com & select module 4

Perform Chapter 4 associated demo and case study through their respective demo and case Studies Links

Chapter 3 Problems Solving Skills Development

Visit the book’s Web site www.halaeducation.com & select module 4

Perform Chapter 4 associated skills development through their respective skills development exercises link

Chapter 3 Balancing Knowledge to Practice

Visit the book’s Web site www.halaeducation.com & select module 4

Perform Chapter 4 associated Balancing Knowledge to Practice project through its respective Hands on Project Link