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Learning Objectives Learning Objectives Presentation Transcript

  • Chapter 7 Transaction Processing, Innovative Functional Systems, CRM & Integration
  • Learning Objectives
    • Relate functional areas and business processes to the value chain model.
    • Identify functional management information systems.
    • Describe the transaction processing system and demonstrate how it is supported by IT.
    • Describe the support provided by IT and the Web to each of these functional areas: production/operations, marketing and sales, accounting and finance, and human resources management.
    • Describe the role of IT in facilitating CRM.
    • Describe the benefits & issues of integrating functional information systems.
  • Case: Integrated Solutions for Building Supply
    • Problem :
    • Colonial is a small building supply company in Utah. To remain competitive, they needed a technology to provide information about inventory levels & customer buying trends.
    • Solution :
    • Colonial purchased an integrated system, point-of-sale (POS) terminals, hand-held automatic product identification & data collection .
      • Sold items are deducted from the inventory instantly.
      • Purchase orders are sent electronically via the Internet.
    • Results :
    • Lower costs for data entry labor, reductions in inventory / storage space, fast access to information, better customer service, & higher employee satisfaction
    View slide
  • Lessons from the Case
    • IT supports the routine processes of a retailer, enabling it to be efficient and effective and to satisfy its customers.
    • The software helped to modernize & redesign the company’s major business processes.
    • The software supports several business processes, not just one.
    • The system’s major applications are in logistics. However, the same software vendor provides ready-made accounting, marketing, & operations modules.
    • IT can be beneficial to a relatively small company.
    • The integration includes connection to business partners using the Internet.
    View slide
  • Functional Information Systems
    • Traditionally, information systems were designed within each functional area to increase their internal effectiveness & efficiency.
      • This may not suit some organizations, because certain processes may involve activities that are performed in several functional areas .
    • Solution 1: Reengineer the organization.
      • For example, the company can create cross-functional teams, each responsible for performing a complete business process.
    • Solution 2: The integrated approach (e.g. Colonial).
      • Keeps the functional departments but creates a supportive information system to help communication, coordination, and control.
  • Functional Departments & the Value Chain
  • Characteristics of Functional Information Systems
    • 1. A functional information system consists of several smaller information systems that support specific activities performed in the functional area.
    • 2. The specific IS applications in any functional area can be integrated to form a coherent departmental functional system, or they can be completely independent.
    • 3. Functional information systems interface with each other to form the organization-wide information system.
    • 4. Some organizational information systems interface with the environment.
    • 5. Information systems applications support the three levels of an organization’s activities: operational, managerial, and strategic .
  • Transaction Processing Systems
    • Transaction Processing Systems (TPS) =
    • “ the information system that support business processes, mainly accounting & finance transactions, with some sales, personnel, & production activities as well.”
    • TPS is the backbone of an organization’s information systems.
      • It monitors, collects, stores, processes & disseminates information for all routine core business transactions.
      • These data are input data to functional information systems applications, DSS, and CRM.
  • Objectives of TPS
    • Primary goal of TPS = to provide all the information needed by law and/or by organizational policies to keep the business running properly and efficiently.
    • Specific objectives of a TPS =
      • to allow for efficient & effective operation of the organization.
      • to provide timely documents and reports.
      • to increase the competitive advantage of the corporation.
      • to provide the necessary data for tactical & strategic systems, such as Web-based applications.
      • to ensure accuracy & integrity of data & information.
      • to safeguard assets & security of information.
  • Activities of TPS
    • First, data are collected & entered into the computer via any input device.
    • The system then processes data in one of the following ways:
      • Batch processing = the firm collects data from transactions as they occur, placing them in groups or batches. The system then processes the batches periodically
      • Online processing = data are processed as soon as a transaction occurs.
      • Hybrid system (a combination of batch & online processing) collects data as they occur but process them at specified intervals.
  • Benefits of Internet Transaction Processes
    • Flexibility to accommodate unpredictable growth in processing demand.
    • Cost effectiveness for small dollar amounts.
    • Interactive, automatic billing, enabling companies to offer services to anyone, not just subscribers.
    • Timely search and analysis of large databases.
    • Ability to handle multimedia data such as pictures and sound effectively and efficiently.
    • High data throughput to support inquiries requiring massive file size.
    • Fast response time.
    • Effective storage of huge graphics and video databases.
  • Case: Taxis in Singapore
    • Taxis in Singapore are tracked by a global positioning system (GPS). This provides users with an instant fix on the geographical position of each taxi.
    • Customer orders are usually received via telephone, fax & e-mail. Frequent users enter orders from their offices or homes by keying in a PIN number.
    • The system completely reengineered the taxi order processing.
    • The transaction time for processing an order is much shorter.
    • The system increased the capacity for taking incoming calls by 1,000%.
  • Production & Operations Management (POM)
    • The Production and Operations Management (POM) function in an organization is responsible for the processes that transform inputs into useful outputs.
    • Four IT-supported POM topics be discussed:
      • In-house logistics and material management.
      • Planning production/operations.
      • Automating design work and manufacturing.
      • Computer-integrated manufacturing (CIM).
  • In-House Logistics & Material Management
    • Logistics Management deals with ordering, purchasing, inbound logistics (receiving), and outbound logistics (shipping) activities.
      • All of these activities can be supported by information systems. For example, many companies today are moving to some type of e-procurement
    • Inventory management determines how much inventory to keep.
      • Three costs play important roles in inventory decisions:
        • cost of maintaining inventories
        • cost of ordering (a fixed cost per order)
        • cost of not having inventory when needed.
  • Planning Procedures/ Operations
    • Material Requirements Planning (MRP) = The software that facilitates the plan for acquiring (or producing) parts, subassemblies, or materials.
    • Manufacturing Resource Planning (MRP II) = connects the regular MRP to other functional areas.
      • In addition to the output similar to that of MRP, MRP II determines the costs of parts and the cash flow needed to pay for parts.
    • Just-in-time (JIT) = an approach that attempts to minimize waste of all kinds (space, labor, materials, energy, and so on) and continuously improve processes and systems.
  • Planning Procedures/ Operations (cont.)
    • The management of a project is complicated by the following characteristics:
      • Most projects are unique undertakings, and participants have little prior experience in the area.
      • Uncertainty exists due to the long completion times.
      • There can be significant participation of outsiders, which is difficult to control.
      • Extensive interaction may occur among participants.
      • Projects often carry high risk but also high profit potential.
  • Automated Design Work & Manufacturing
    • Computer-aided design (CAD) is a system that enables industrial drawings to be constructed on a computer screen & stored, manipulated & updated electronically.
    • Computer-aided engineering (CAE) software enables designers to analyze the design and determine whether it will work the way the designer thought it would.
    • Computer-Aided Manufacturing (CAM) encompasses computer-aided techniques that facilitate planning, operation & control of a production facility.
    • Enhanced product realization (EPR) is a Web-based, distributed system that allows manufacturers to make product modifications anywhere in the world in as few as five days.
  • Computer-Integrated Manufacturing (CIM]
    • Computer-integrated manufacturing (CIM)
    • is a philosophy about the implementation of various integrated computer systems in factory automation.
  • Computer-Integrated Manufacturing (CIM]
    • Computer-integrated manufacturing (CIM) has three basic goals;
      • Simplification of all manufacturing technologies & techniques.
      • Automation of as many of the manufacturing processes as possible by the integration of many information technologies.
      •  Integration and coordination of all aspects of design, manufacturing & related functions via computer hardware and software.
  • The CIM Model
  • Channel Systems
    • CHANNEL SYSTEMS are all the systems involved in the process of getting a product or service to customers & dealing with all customers’ needs.
      • The Customer is King/ Queen.
      • Telemarketing.
      • Distribution channels.
      • Marketing management.
  • The Customer is King/ Queen
    • Innovative products & services and superb customer service are becoming a necessity for many organizations. For example;
      • Customer Profiles and Preference Analysis. 
      • Prospective Customer Lists & Marketing Databases. 
      • Mass Customization. 
      • Personalization.
    • It is essential for companies today to be aware of their customers and treat them like royalty .
  • Telemarketing & Online Shopping
    • Lately, telemarketing has been moving to cell phones, using Short message service (SMS) , which consists of messages you can receive on your cell phone.
    • A telemarketing process can be divided into five major activities, all of which are supported by IT & can be done on the Web, even in a wireless environment.
      • Advertisement and reaching customers
      • Order processing
      • Customer service
      • Sales support
      • Account management
  • Distribution Channels
    • Organizations can distribute their products & services through several available delivery channels.
      • A company may use its own outlets or distributors. The company also needs to decide on the delivery mode (trains, planes, trucks).
    • Distribution Channels Management .   Once products are in the distribution channels, firms need to monitor and track them to guarantee customer satisfaction.
    • Improving Sales at Retail Stores. Using information technology, it is possible to improve sales by reengineering the checkout process.
  • Marketing Management
    • Many marketing management activities are supported by computerized information systems . Some areas where this is being done include;
      • Pricing of Products or Services. 
      • Salesperson Productivity. 
      • Productivity Software (Sales automation software)
      • Product-Customer Profitability Analysis.
      • Sales Analysis and Trends.  
      • New Product, Service, and Market Planning. 
      • Web-Based Systems in Marketing.
  • Managing Accounting & Finance Systems
  • Managing Accounting & Finance Systems
    • An accounting/finance information system is responsible for:
      • Gathering the raw data necessary for the accounting/finance TPS
      • Ttransforming the data into information
      • Making the information available to users
    • Many packages exist to execute routine accounting transaction processing activities.
      • Some software packages are integrated, e.g. MAS 90 and MAS 200
    • The accounting/finance TPS also provides a complete, reliable audit trail of all transactions transmitted through the network.
  • Financial Planning & Budgeting
    • Appropriate management of financial assets is a major task in financial planning and budgeting.
    • Financial and Economic Forecasting.
      • Knowledge about the availability and cost of money is a key ingredient for successful financial planning.
    • Planning for Incoming Funds. 
      • Funds for organizations come from several sources.
      • Using the information generated by financial and economic forecasts, the organization can build a decision support model for planning incoming funds.
  • Investment Management
    • Investment management is a difficult task for the following reasons:
    • 1. There are thousands of investment alternatives.
    • 2. Investment decisions are based on economic and financial forecasts, which are frequently unreliable.
    • 3. The investment environment includes opportunities in other countries, providing both high potential rewards and high risks.
    • 4. Investments made by many organizations are subject to complex regulations and tax laws.
    • 5. Investment decisions need to be made quickly & frequently.
    • 6. Several multiple and conflicting objectives exist in making investments, including high yield, safety, and liquidity.
  • CASE: Equity Portfolios at Daiwa Securities
    • Daiwa Securities of Japan is one of the world’s largest and most profitable multinational securities firms.
    • They believe that identifying mispricings in the stock markets holds great profit potential.
    • Daiwa uses leading-edge computerized quantitative analysis which compares stock price performance of individual companies to that of other companies in the same market sector.
    • The recommendations are generated by a system called MATLAB.
      • MATLAB attempts to minimize the risk of the portfolio yet maximize its profit.
  • Access to Financial & Economic Reports Internet search engines for finding financial data. To cope with the large amount of financial online data, investors use three supporting tools: Internet directories and yellow pages. Software for monitoring, interpreting, analyzing financial data, & alerting management.
  • Control & Auditing
    • Specific forms of financial control are;
        • Budgetary controls
        • Internal and External audits
        • Financial Ratio Analysis
        • Profitability Analysis &Cost Control
        • Product Pricing
  • Managing Human Resource Systems
    • Developments in Web-based systems increased the popularity of human resources information systems (HRISs) as of the late 1990s.
    • Initial HRIS applications were mainly related to transaction processing systems.
    • However, in the last decade we have seen considerable computerization activities in the managerial and even strategic areas.
  • HRISs & Recruitment
    • Using the Web for Recruitment . With millions of resumes available online, companies are trying to find appropriate candidates on the Web .
    • Position Inventory.   Large organizations need to fill vacant positions frequently. An advanced intranet-based position inventory system keeps the position inventory list current & matches openings.
    • Employee Selection.  To expedite the testing and evaluation process and ensure consistency in selection, companies use information technologies such as expert systems.
  • Human Resources Maintenance & Development
    • Performance Evaluation.   Once digitized, evaluations can be used to support many decisions, ranging from rewards to transfers to layoffs.
    • Training and Human Resources Development.   IT can support the planning, monitoring, and control of training and retraining activities by using workflow applications.
      • Intelligent computer-aided instruction (ICAI) and application of multimedia support for instructional activities.
      • Training can be improved using Web-based video clips & virtual reality.
  • Human Resources Planning & Management
    • Personnel Planning.    Large companies develop qualitative and quantitative workforce planning models, which can be enhanced if IT is used to collect, update, and process the information.
    • Labor–Management Negotiations.   Some companies have developed computerized DSS models that support negotiations.
      • These models can simulate financial & other impacts of fulfilling any demand made by employees and provide answers to queries in seconds.
    • Benefits Administration.   Using computers for benefits selection can save a tremendous amount of labor and time.
      • Some companies have automated benefits enrollments.
  • Customer Relationship Management
    • Customer relationship management (CRM) is an approach that recognizes that customers are the core of the business and that the company’s success depends on effectively managing relationships with them.
    • Customer service is a series of activities designed to enhance the level of customer satisfaction.
    • Relationship marketing is the “overt attempt of exchange partners to build a long-term association, characterized by purposeful cooperation and mutual dependence on the development of social, as well as structural, bonds” (Mowen & Minor, 1998).
    • E-Service is customer service that is performed on the Web, sometimes automatically.
  • CRM in Action
    • According to Seybold and Marshak (1998) there are five steps in building IT-supported CRM. These are:
    • 1. Make it easy for customers to do business with you.
    • 2. Focus on the end customer for your products and services.
    • 3. Redesign your customer-facing business processes from the end customer’s point of view.
    • 4. Wire your company for profit: design a comprehensive, evolving electronic business architecture.
    • 5. Foster customer loyalty. In e-Commerce, especially, this is the key to profitability.
  • Information Technology in CRM
  • Customer Service on the Web
    • Providing Search and Comparison Capabilities.
    • Providing Free Products and Services.
    • Providing Technical and Other Information and Service.
    • Allowing Customers to Order Customized Products and Services Online.
    • Letting Customers Track Accounts or Order Status
  • Tools for Customer Service
    • Personalized Web Pages
    • FAQs
    • Tracking Tools
    • Chat Rooms
    • E-mail and Automated Response
    • Help Desks and Call Centers
    • Troubleshooting Tools
  • Justifying CRM programs
    • Response time.
    • Site availability.
    • Download time.
    • Timeliness.
    • Security and privacy.
    • Fulfillment.
    • Return policy.
    • Navigability.
    One way to determine how much customer service to provide is to compare your company against a set of standards known as metrics . Metrics to evaluate Web-related customer service:
  • CRM Failures
    • A large percentage of failures have been reported in CRM.
    • Some of the big issues are;
      • Failure to identify and focus on specific business problems.
      • Lack of active senior management (non-IT) sponsorship.
      • Poor user acceptance, which can occur for a variety of reasons such as unclear benefits and usability issues.
      • Trying to automate a poorly defined process.
  • Partner Relationship Management
    • Partnership Relationship Management (PRM) refers to all of the efforts made to apply CRM to all types of business partners.
    • Specific functions of PRM applications:
      • Partner profiles  Centralized forecasting
      • Partner communications  Group planning
      • Lead management  E-mail/ Web-based alerts
      • Targeted information distribution  Messaging
      • Connecting the extended enterprise  Price lists
      • Partner planning  Community bulletin boards
  • Case: Integrated Server System at Europcar
    • Problem:
    • Europcar Internet, the largest European-based car rental agency, combined 55 different mainframe and minicomputer systems into a single client/server center known as Greenway.
    • The 55 independent systems needed to be integrated.
    • Solution:
    • Key business processes were all integrated into Greenway.
    • Customer-related benefits include (1) faster service (2) reservation desks linked to airline reservation systems, and (3) corporate customers managed from one location.
    • Results:
    • By 2000, Europcar expanded to 100 countries worldwide.
  • Managerial Issues
    • Integration of functional information systems. Integration of existing stand-alone functional information systems is a major problem for many organizations.
    • Priority of transaction processing. Transaction processing may not be an exotic application, but it deals with the core processes of organizations.
    • The customer is king/queen. In implementing IT applications, management must remember the importance of the customer, whether external or internal.
  • Managerial Issues (cont.)
    • Finding innovative applications. Tools such as Lotus Notes, intranets, and the Internet enable the construction of many applications that can increase productivity and quality.
    • System integration. Although functional systems are necessary, they may not be sufficient if they work independently.
    • Using the Web . Web-based systems should be considered in all functional areas. They are effective, inexpensive & user friendly.
    • Ethical Issues . Many ethical issues are related to the code of ethics followed in CRM and privacy policies.