AACS 4794 Management Information Systems

Tutorial 3 – Student Suggested Answers

Question 1b1. Tangible benefits

Increase accuracy of reporting by 10% per year for three years Reduce pharmacy cost (cost of pain reducing drugs) by 15% in the first year of introduction Current expenses credited to inaccurate data gathering are RM100 000 per year

2. Intangible benefits

Improve medical decision making Provide better care to the patient

3. Operational costs Maintaining the system for the next five years, cost RM2 000 per year, with a total of RM10,000

4. Development cost Development system cost RM50 000 Printers cost RM2 000 per printer in 12 patient’s rooms and the central nurse’s station with a total

of RM 26,000.

Question 3The time value of money is the value of money figuring in a given amount of interest earned over a given amount of time. The time value of money is the central concept in finance theory.For example, RM100 of today's money invested for one year and earning 5% interest will be worth RM105 after one year.

Question 4

Limitations of financial models for establishing information system• Financial models assume all relevant alternatives have been examined, that all costs and

benefits are known, and that these costs and benefits can be expressed in terms of money. These assumptions are rarely met in the real world.

• Tangible benefits can be quantified and assigned a monetary value while the intangible benefits are not easily and immediately quantified but may lead to quantifiable gains in long run.

• These models can be selectively used to support political decisions made for organisational reasons having nothing to do with the cost and benefits of a system.

• Financial models do not express the risks and uncertainty of their own cost and benefits estimates. Costs and benefits do not occur in the same time frame which costs tend to be up front and tangible, whereas benefits tend to be back loaded and intangible. It tends to overlook

AACS 4794 Management Information Systems

or ignore the social and organisational dimensions of information systems that may affect the true costs and benefits of the investment. Inflation may affect the costs and benefits differently.

• Technology, especially information technology can change during the course of the project, causing estimates to vary greatly.

• In addition, firms can invest in capital projects for many non- economic reasons that are not captured by financial models. They may be undertaken to support strategic considerations or to meet government requirements of to satisfy some non-market public demand.

Question 7: Case Study 3: Ernst & Young Deploys Lotus Notes throughout Its Large, Global Enterprise (Sept 200 6)

YES.

Portfolio analysis is a measure of comparing and evaluating a certain profile of risk and benefit to the firm. It is use to support a firm’s decision making process to develop long term strategic Purchasing plans and to realign items to ensure that the correct resources are applied to the appropriate items. This is a portfolio system:

Project Risk High Low

Potential Benefits High

to organization Low

↑ benefit, ↑ risk system should be examined↓ benefit, ↑ risk system should be avoided↑ benefit, ↓ risk should be identify and develop↓ benefit, ↓ risk should be treated as routine projects.

• Portfolio analysis is useful to evaluate the investment of Lotus Notes as they cautiously examined the needs of Ernst & Young which is a solution to take care of its information sharing problem.

• By using portfolio analysis, the company is able to identify and develop software which can solve their problems by evaluating their potential benefits and risk. In the case if there is high risk and low benefit to the organization, Ernst & Young should avoid the project. However, this project is at low risk due to excellent support of Lotus Consulting in implementing it while having tons of benefits.

• Assuming they have critically accessed the project, after implementing the Lotus Notes project it has become so useful to the company. It can be proved by “all but one country had migrated to Lotus Mail at the end of second year after its implementation which is an outstanding achievement for a decentralized organization”.

Cautiously examine Identify and develop

Avoid Routine projects

AACS 4794 Management Information Systems

• Besides, Notes had turn Ernst & Young not only into a global enterprise system but had also increases the revenue by 17% after two years of implementation partly offered by Lotus notes to do work without barriers and have high level of communication and knowledge-sharing.

• As mentioned in the case study that the company is currently focusing on making significant extension to the existing system, they can use portfolio analysis to evaluate whether the extension of it would bring any risk and benefits to the company.

Question 8b: Case Study 4: Smart Systems and Smart Ways of Wo rking Help TOYOTA Become Number One (mid-term 2009)

Tangible Benefits

The production system software used by Toyota Motor Europe and other division is a part creates by Oracle E-business Suite Software; its makes the system management of production easier to integrate with the national marketing and other sales company to achieving quicker business processing and turnaround of documents or transaction in sales. The company can reduce the bad account or bad credits are cause by inefficiency system.

Besides that, the system also can help the company’s manager learn to eliminate wasted cost of production. For example, the business transaction process is based on actual customer orders rather than ‘best guesses’. the company can avoid the wastes of operating expenses, such as the cost of maintaining materials and the rental fees pay to keep the finish car in warehouse .

Other benefits can gain from the system is to help the company to optimizing the value to allocate business resources. The principle of this information system is delivering the value to guide the manager in daily operational to make organization reach the purpose of maximize company’s wealth by using the extra resource into other process are facing shortage problem to save the operational expenses, such as wages to employ workers.

From the case in above, we can know that if such company using the effective and efficiency system software to control and run the business can decrease the cost of production of the product. In this condition, company able to set lower and reasonable price level in the market to make customers accept and willing to pay without make heavy in discounting, so the company can reduce error rate done by human mistake in calculating the discount.

Intangible Benefits the oracle e-business suite software using by Toyota motor Europe are reduce the period of

time taken between placing a customer order and delivery the vehicle to the customer. With this system, it can increase the level of service to the buyer.

The existing system is provided the skillful at combining quality with efficiency in the order system. So the dealer can uses the system to configure a car with all of the selected option and showing the customer through implementation of smarter business process.

AACS 4794 Management Information Systems

Besides, the current system of the management is created trustiness and good image for customer by encompasses several business processes and through nation distributors to fulfill several types requirement from customer and make them scarified.

Toyota Europe can gain the benefit of intangible with the system, for example, inside the software had one program are design the schedules of production in the future. The objective is to attractive customer and makes them feel the company is keep improving on. the company can indirectly create the future sales from existing and also can pull suction for new customer in the market.

Question 9: Case Study 5: Dorfman Pacific Rolls Out a New Wireless Warehouse (Sept 2009), answer the following questions:

Tangible benefits of implementing the new wireless warehouse management system:

• Increase the number of product shipped and profit earned - Dorfman can handle twice the number of orders during peak seasons which across various functional areas because the paper based order fulfillment systems will be eliminated.

• Reducing labor costs -Wages of extra workers and hefty overtime wages will be reduced as there is no need to hire and pay them which has saved the company $250,000 per year.

• Operational cost reduced -The huge consultant and system maintenance costs will be saved as compared to the option of outsourcing because in-house development just involved employees and staff and use resources available in the company.

Two intangible benefits: • Improve job performance of workers -Workers are able to bring the right merchandise in right place

by using the most efficient route to right person or customer by using mobile devices connecting to wireless warehouse management system which increases their efficiency of work.

• Increase customer satisfaction -Error made when picking products by streamlined warehouse staff will be reduced compared to traditional order fulfillment process which is more confused as misunderstanding on the labeled boxes manually may occurred. Thus, customer will not receive the wrong product shipped.