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Learning Objectives

  1. 1. Chapter 7 Transaction Processing, Innovative Functional Systems, CRM & Integration
  2. 2. Learning Objectives <ul><li>Relate functional areas and business processes to the value chain model. </li></ul><ul><li>Identify functional management information systems. </li></ul><ul><li>Describe the transaction processing system and demonstrate how it is supported by IT. </li></ul><ul><li>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. </li></ul><ul><li>Describe the role of IT in facilitating CRM. </li></ul><ul><li>Describe the benefits & issues of integrating functional information systems. </li></ul>
  3. 3. Case: Integrated Solutions for Building Supply <ul><li>Problem : </li></ul><ul><li>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. </li></ul><ul><li>Solution : </li></ul><ul><li>Colonial purchased an integrated system, point-of-sale (POS) terminals, hand-held automatic product identification & data collection . </li></ul><ul><ul><li>Sold items are deducted from the inventory instantly. </li></ul></ul><ul><ul><li>Purchase orders are sent electronically via the Internet. </li></ul></ul><ul><li>Results : </li></ul><ul><li>Lower costs for data entry labor, reductions in inventory / storage space, fast access to information, better customer service, & higher employee satisfaction </li></ul>
  4. 4. Lessons from the Case <ul><li>IT supports the routine processes of a retailer, enabling it to be efficient and effective and to satisfy its customers. </li></ul><ul><li>The software helped to modernize & redesign the company’s major business processes. </li></ul><ul><li>The software supports several business processes, not just one. </li></ul><ul><li>The system’s major applications are in logistics. However, the same software vendor provides ready-made accounting, marketing, & operations modules. </li></ul><ul><li>IT can be beneficial to a relatively small company. </li></ul><ul><li>The integration includes connection to business partners using the Internet. </li></ul>
  5. 5. Functional Information Systems <ul><li>Traditionally, information systems were designed within each functional area to increase their internal effectiveness & efficiency. </li></ul><ul><ul><li>This may not suit some organizations, because certain processes may involve activities that are performed in several functional areas . </li></ul></ul><ul><li>Solution 1: Reengineer the organization. </li></ul><ul><ul><li>For example, the company can create cross-functional teams, each responsible for performing a complete business process. </li></ul></ul><ul><li>Solution 2: The integrated approach (e.g. Colonial). </li></ul><ul><ul><li>Keeps the functional departments but creates a supportive information system to help communication, coordination, and control. </li></ul></ul>
  6. 6. Functional Departments & the Value Chain
  7. 7. Characteristics of Functional Information Systems <ul><li>1. A functional information system consists of several smaller information systems that support specific activities performed in the functional area. </li></ul><ul><li>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. </li></ul><ul><li>3. Functional information systems interface with each other to form the organization-wide information system. </li></ul><ul><li>4. Some organizational information systems interface with the environment. </li></ul><ul><li>5. Information systems applications support the three levels of an organization’s activities: operational, managerial, and strategic . </li></ul>
  8. 8. Transaction Processing Systems <ul><li>Transaction Processing Systems (TPS) = </li></ul><ul><li>“ the information system that support business processes, mainly accounting & finance transactions, with some sales, personnel, & production activities as well.” </li></ul><ul><li>TPS is the backbone of an organization’s information systems. </li></ul><ul><ul><li>It monitors, collects, stores, processes & disseminates information for all routine core business transactions. </li></ul></ul><ul><ul><li>These data are input data to functional information systems applications, DSS, and CRM. </li></ul></ul>
  9. 9. Objectives of TPS <ul><li>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. </li></ul><ul><li>Specific objectives of a TPS = </li></ul><ul><ul><li>to allow for efficient & effective operation of the organization. </li></ul></ul><ul><ul><li>to provide timely documents and reports. </li></ul></ul><ul><ul><li>to increase the competitive advantage of the corporation. </li></ul></ul><ul><ul><li>to provide the necessary data for tactical & strategic systems, such as Web-based applications. </li></ul></ul><ul><ul><li>to ensure accuracy & integrity of data & information. </li></ul></ul><ul><ul><li>to safeguard assets & security of information. </li></ul></ul>
  10. 10. Activities of TPS <ul><li>First, data are collected & entered into the computer via any input device. </li></ul><ul><li>The system then processes data in one of the following ways: </li></ul><ul><ul><li>Batch processing = the firm collects data from transactions as they occur, placing them in groups or batches. The system then processes the batches periodically </li></ul></ul><ul><ul><li>Online processing = data are processed as soon as a transaction occurs. </li></ul></ul><ul><ul><li>Hybrid system (a combination of batch & online processing) collects data as they occur but process them at specified intervals. </li></ul></ul>
  11. 11. Benefits of Internet Transaction Processes <ul><li>Flexibility to accommodate unpredictable growth in processing demand. </li></ul><ul><li>Cost effectiveness for small dollar amounts. </li></ul><ul><li>Interactive, automatic billing, enabling companies to offer services to anyone, not just subscribers. </li></ul><ul><li>Timely search and analysis of large databases. </li></ul><ul><li>Ability to handle multimedia data such as pictures and sound effectively and efficiently. </li></ul><ul><li>High data throughput to support inquiries requiring massive file size. </li></ul><ul><li>Fast response time. </li></ul><ul><li>Effective storage of huge graphics and video databases. </li></ul>
  12. 12. Case: Taxis in Singapore <ul><li>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. </li></ul><ul><li>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. </li></ul><ul><li>The system completely reengineered the taxi order processing. </li></ul><ul><li>The transaction time for processing an order is much shorter. </li></ul><ul><li>The system increased the capacity for taking incoming calls by 1,000%. </li></ul>
  13. 13. Production & Operations Management (POM) <ul><li>The Production and Operations Management (POM) function in an organization is responsible for the processes that transform inputs into useful outputs. </li></ul><ul><li>Four IT-supported POM topics be discussed: </li></ul><ul><ul><li>In-house logistics and material management. </li></ul></ul><ul><ul><li>Planning production/operations. </li></ul></ul><ul><ul><li> Automating design work and manufacturing. </li></ul></ul><ul><ul><li>Computer-integrated manufacturing (CIM). </li></ul></ul>
  14. 14. In-House Logistics & Material Management <ul><li>Logistics Management deals with ordering, purchasing, inbound logistics (receiving), and outbound logistics (shipping) activities. </li></ul><ul><ul><li>All of these activities can be supported by information systems. For example, many companies today are moving to some type of e-procurement </li></ul></ul><ul><li>Inventory management determines how much inventory to keep. </li></ul><ul><ul><li>Three costs play important roles in inventory decisions: </li></ul></ul><ul><ul><ul><li>cost of maintaining inventories </li></ul></ul></ul><ul><ul><ul><li>cost of ordering (a fixed cost per order) </li></ul></ul></ul><ul><ul><ul><li>cost of not having inventory when needed. </li></ul></ul></ul>
  15. 15. Planning Procedures/ Operations <ul><li>Material Requirements Planning (MRP) = The software that facilitates the plan for acquiring (or producing) parts, subassemblies, or materials. </li></ul><ul><li>Manufacturing Resource Planning (MRP II) = connects the regular MRP to other functional areas. </li></ul><ul><ul><li>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. </li></ul></ul><ul><li>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. </li></ul>
  16. 16. Planning Procedures/ Operations (cont.) <ul><li>The management of a project is complicated by the following characteristics: </li></ul><ul><ul><li>Most projects are unique undertakings, and participants have little prior experience in the area. </li></ul></ul><ul><ul><li>Uncertainty exists due to the long completion times. </li></ul></ul><ul><ul><li>There can be significant participation of outsiders, which is difficult to control. </li></ul></ul><ul><ul><li>Extensive interaction may occur among participants. </li></ul></ul><ul><ul><li>Projects often carry high risk but also high profit potential. </li></ul></ul>
  17. 17. Automated Design Work & Manufacturing <ul><li>Computer-aided design (CAD) is a system that enables industrial drawings to be constructed on a computer screen & stored, manipulated & updated electronically. </li></ul><ul><li>Computer-aided engineering (CAE) software enables designers to analyze the design and determine whether it will work the way the designer thought it would. </li></ul><ul><li>Computer-Aided Manufacturing (CAM) encompasses computer-aided techniques that facilitate planning, operation & control of a production facility. </li></ul><ul><li>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. </li></ul>
  18. 18. Computer-Integrated Manufacturing (CIM] <ul><li>Computer-integrated manufacturing (CIM) </li></ul><ul><li>is a philosophy about the implementation of various integrated computer systems in factory automation. </li></ul>
  19. 19. Computer-Integrated Manufacturing (CIM] <ul><li>Computer-integrated manufacturing (CIM) has three basic goals; </li></ul><ul><ul><li>Simplification of all manufacturing technologies & techniques. </li></ul></ul><ul><ul><li>Automation of as many of the manufacturing processes as possible by the integration of many information technologies. </li></ul></ul><ul><ul><li> Integration and coordination of all aspects of design, manufacturing & related functions via computer hardware and software. </li></ul></ul>
  20. 20. The CIM Model
  21. 21. Channel Systems <ul><li>CHANNEL SYSTEMS are all the systems involved in the process of getting a product or service to customers & dealing with all customers’ needs. </li></ul><ul><li>FOUR MAIN CHANNEL SYSTEM ACTIVITIES: </li></ul><ul><ul><li>The Customer is King/ Queen. </li></ul></ul><ul><ul><li>Telemarketing. </li></ul></ul><ul><ul><li>Distribution channels. </li></ul></ul><ul><ul><li>Marketing management. </li></ul></ul>
  22. 22. The Customer is King/ Queen <ul><li>Innovative products & services and superb customer service are becoming a necessity for many organizations. For example; </li></ul><ul><ul><li>Customer Profiles and Preference Analysis.  </li></ul></ul><ul><ul><li>Prospective Customer Lists & Marketing Databases.  </li></ul></ul><ul><ul><li>Mass Customization.  </li></ul></ul><ul><ul><li>Personalization. </li></ul></ul><ul><li>It is essential for companies today to be aware of their customers and treat them like royalty . </li></ul>
  23. 23. Telemarketing & Online Shopping <ul><li>Lately, telemarketing has been moving to cell phones, using Short message service (SMS) , which consists of messages you can receive on your cell phone. </li></ul><ul><li>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. </li></ul><ul><ul><li>Advertisement and reaching customers </li></ul></ul><ul><ul><li>Order processing </li></ul></ul><ul><ul><li>Customer service </li></ul></ul><ul><ul><li>Sales support </li></ul></ul><ul><ul><li>Account management </li></ul></ul>
  24. 24. Distribution Channels <ul><li>Organizations can distribute their products & services through several available delivery channels. </li></ul><ul><ul><li>A company may use its own outlets or distributors. The company also needs to decide on the delivery mode (trains, planes, trucks). </li></ul></ul><ul><li>Distribution Channels Management .   Once products are in the distribution channels, firms need to monitor and track them to guarantee customer satisfaction. </li></ul><ul><li>Improving Sales at Retail Stores. Using information technology, it is possible to improve sales by reengineering the checkout process. </li></ul>
  25. 25. Marketing Management <ul><li>Many marketing management activities are supported by computerized information systems . Some areas where this is being done include; </li></ul><ul><ul><li>Pricing of Products or Services.  </li></ul></ul><ul><ul><li>Salesperson Productivity.  </li></ul></ul><ul><ul><li>Productivity Software (Sales automation software) </li></ul></ul><ul><ul><li>Product-Customer Profitability Analysis. </li></ul></ul><ul><ul><li>Sales Analysis and Trends.   </li></ul></ul><ul><ul><li>New Product, Service, and Market Planning.  </li></ul></ul><ul><ul><li>Web-Based Systems in Marketing. </li></ul></ul>
  26. 26. Managing Accounting & Finance Systems
  27. 27. Managing Accounting & Finance Systems <ul><li>An accounting/finance information system is responsible for: </li></ul><ul><ul><li>Gathering the raw data necessary for the accounting/finance TPS </li></ul></ul><ul><ul><li>Ttransforming the data into information </li></ul></ul><ul><ul><li>Making the information available to users </li></ul></ul><ul><li>Many packages exist to execute routine accounting transaction processing activities. </li></ul><ul><ul><li>Some software packages are integrated, e.g. MAS 90 and MAS 200 </li></ul></ul><ul><li>The accounting/finance TPS also provides a complete, reliable audit trail of all transactions transmitted through the network. </li></ul>
  28. 28. Financial Planning & Budgeting <ul><li>Appropriate management of financial assets is a major task in financial planning and budgeting. </li></ul><ul><li>Financial and Economic Forecasting. </li></ul><ul><ul><li>Knowledge about the availability and cost of money is a key ingredient for successful financial planning. </li></ul></ul><ul><li>Planning for Incoming Funds.  </li></ul><ul><ul><li>Funds for organizations come from several sources. </li></ul></ul><ul><ul><li>Using the information generated by financial and economic forecasts, the organization can build a decision support model for planning incoming funds. </li></ul></ul>
  29. 29. Investment Management <ul><li>Investment management is a difficult task for the following reasons: </li></ul><ul><li>1. There are thousands of investment alternatives. </li></ul><ul><li>2. Investment decisions are based on economic and financial forecasts, which are frequently unreliable. </li></ul><ul><li>3. The investment environment includes opportunities in other countries, providing both high potential rewards and high risks. </li></ul><ul><li>4. Investments made by many organizations are subject to complex regulations and tax laws. </li></ul><ul><li>5. Investment decisions need to be made quickly & frequently. </li></ul><ul><li>6. Several multiple and conflicting objectives exist in making investments, including high yield, safety, and liquidity. </li></ul>
  30. 30. CASE: Equity Portfolios at Daiwa Securities <ul><li>Daiwa Securities of Japan is one of the world’s largest and most profitable multinational securities firms. </li></ul><ul><li>They believe that identifying mispricings in the stock markets holds great profit potential. </li></ul><ul><li>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. </li></ul><ul><li>The recommendations are generated by a system called MATLAB. </li></ul><ul><ul><li>MATLAB attempts to minimize the risk of the portfolio yet maximize its profit. </li></ul></ul>
  31. 31. 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.
  32. 32. Control & Auditing <ul><li>Specific forms of financial control are; </li></ul><ul><ul><ul><li>Budgetary controls </li></ul></ul></ul><ul><ul><ul><li>Internal and External audits </li></ul></ul></ul><ul><ul><ul><li>Financial Ratio Analysis </li></ul></ul></ul><ul><ul><ul><li>Profitability Analysis &Cost Control </li></ul></ul></ul><ul><ul><ul><li>Product Pricing </li></ul></ul></ul>
  33. 33. Managing Human Resource Systems <ul><li>Developments in Web-based systems increased the popularity of human resources information systems (HRISs) as of the late 1990s. </li></ul><ul><li>Initial HRIS applications were mainly related to transaction processing systems. </li></ul><ul><li>However, in the last decade we have seen considerable computerization activities in the managerial and even strategic areas. </li></ul>
  34. 34. HRISs & Recruitment <ul><li>Using the Web for Recruitment . With millions of resumes available online, companies are trying to find appropriate candidates on the Web . </li></ul><ul><li>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. </li></ul><ul><li>Employee Selection.  To expedite the testing and evaluation process and ensure consistency in selection, companies use information technologies such as expert systems. </li></ul>
  35. 35. Human Resources Maintenance & Development <ul><li>Performance Evaluation.   Once digitized, evaluations can be used to support many decisions, ranging from rewards to transfers to layoffs. </li></ul><ul><li>Training and Human Resources Development.   IT can support the planning, monitoring, and control of training and retraining activities by using workflow applications. </li></ul><ul><ul><li>Intelligent computer-aided instruction (ICAI) and application of multimedia support for instructional activities. </li></ul></ul><ul><ul><li>Training can be improved using Web-based video clips & virtual reality. </li></ul></ul>
  36. 36. Human Resources Planning & Management <ul><li>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. </li></ul><ul><li>Labor–Management Negotiations.   Some companies have developed computerized DSS models that support negotiations. </li></ul><ul><ul><li>These models can simulate financial & other impacts of fulfilling any demand made by employees and provide answers to queries in seconds. </li></ul></ul><ul><li>Benefits Administration.   Using computers for benefits selection can save a tremendous amount of labor and time. </li></ul><ul><ul><li>Some companies have automated benefits enrollments. </li></ul></ul>
  37. 37. Customer Relationship Management <ul><li>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. </li></ul><ul><li>Customer service is a series of activities designed to enhance the level of customer satisfaction. </li></ul><ul><li>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). </li></ul><ul><li>E-Service is customer service that is performed on the Web, sometimes automatically. </li></ul>
  38. 38. CRM in Action <ul><li>According to Seybold and Marshak (1998) there are five steps in building IT-supported CRM. These are: </li></ul><ul><li>1. Make it easy for customers to do business with you. </li></ul><ul><li>2. Focus on the end customer for your products and services. </li></ul><ul><li>3. Redesign your customer-facing business processes from the end customer’s point of view. </li></ul><ul><li>4. Wire your company for profit: design a comprehensive, evolving electronic business architecture. </li></ul><ul><li>5. Foster customer loyalty. In e-Commerce, especially, this is the key to profitability. </li></ul>
  39. 39. Information Technology in CRM
  40. 40. Customer Service on the Web <ul><li>Providing Search and Comparison Capabilities. </li></ul><ul><li>Providing Free Products and Services. </li></ul><ul><li>Providing Technical and Other Information and Service. </li></ul><ul><li>Allowing Customers to Order Customized Products and Services Online. </li></ul><ul><li>Letting Customers Track Accounts or Order Status </li></ul>
  41. 41. Tools for Customer Service <ul><li>Personalized Web Pages </li></ul><ul><li>FAQs </li></ul><ul><li>Tracking Tools </li></ul><ul><li>Chat Rooms </li></ul><ul><li>E-mail and Automated Response </li></ul><ul><li>Help Desks and Call Centers </li></ul><ul><li>Troubleshooting Tools </li></ul>
  42. 42. Justifying CRM programs <ul><li>Response time. </li></ul><ul><li>Site availability. </li></ul><ul><li>Download time. </li></ul><ul><li>Timeliness. </li></ul><ul><li>Security and privacy. </li></ul><ul><li>Fulfillment. </li></ul><ul><li>Return policy. </li></ul><ul><li>Navigability. </li></ul>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:
  43. 43. CRM Failures <ul><li>A large percentage of failures have been reported in CRM. </li></ul><ul><li>Some of the big issues are; </li></ul><ul><ul><li>Failure to identify and focus on specific business problems. </li></ul></ul><ul><ul><li>Lack of active senior management (non-IT) sponsorship. </li></ul></ul><ul><ul><li>Poor user acceptance, which can occur for a variety of reasons such as unclear benefits and usability issues. </li></ul></ul><ul><ul><li>Trying to automate a poorly defined process. </li></ul></ul>
  44. 44. Partner Relationship Management <ul><li>Partnership Relationship Management (PRM) refers to all of the efforts made to apply CRM to all types of business partners. </li></ul><ul><li>Specific functions of PRM applications: </li></ul><ul><ul><li>Partner profiles  Centralized forecasting </li></ul></ul><ul><ul><li>Partner communications  Group planning </li></ul></ul><ul><ul><li>Lead management  E-mail/ Web-based alerts </li></ul></ul><ul><ul><li>Targeted information distribution  Messaging </li></ul></ul><ul><ul><li>Connecting the extended enterprise  Price lists </li></ul></ul><ul><ul><li>Partner planning  Community bulletin boards </li></ul></ul>
  45. 45. Case: Integrated Server System at Europcar <ul><li>Problem: </li></ul><ul><li>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. </li></ul><ul><li>The 55 independent systems needed to be integrated. </li></ul><ul><li>Solution: </li></ul><ul><li>Key business processes were all integrated into Greenway. </li></ul><ul><li>Customer-related benefits include (1) faster service (2) reservation desks linked to airline reservation systems, and (3) corporate customers managed from one location. </li></ul><ul><li>Results: </li></ul><ul><li>By 2000, Europcar expanded to 100 countries worldwide. </li></ul>
  46. 46. Managerial Issues <ul><li>Integration of functional information systems. Integration of existing stand-alone functional information systems is a major problem for many organizations. </li></ul><ul><li>Priority of transaction processing. Transaction processing may not be an exotic application, but it deals with the core processes of organizations. </li></ul><ul><li>The customer is king/queen. In implementing IT applications, management must remember the importance of the customer, whether external or internal. </li></ul>
  47. 47. Managerial Issues (cont.) <ul><li>Finding innovative applications. Tools such as Lotus Notes, intranets, and the Internet enable the construction of many applications that can increase productivity and quality. </li></ul><ul><li>System integration. Although functional systems are necessary, they may not be sufficient if they work independently. </li></ul><ul><li>Using the Web . Web-based systems should be considered in all functional areas. They are effective, inexpensive & user friendly. </li></ul><ul><li>Ethical Issues . Many ethical issues are related to the code of ethics followed in CRM and privacy policies. </li></ul>