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Principles of Information
Systems, Tenth Edition
Chapter 9
Enterprise Systems
1
Principles and Learning Objectives
• An organization must have information systems that
support routine, day-to-day activities and that help a
company add value to its products and services
– Identify the basic activities and business objectives
common to all transaction processing systems
– Describe the transaction processing systems
associated with the order processing, purchasing,
and accounting business functions

Principles of Information Systems, Tenth Edition

2
Principles and Learning Objectives
(continued)
• A company that implements an enterprise resource
planning system is creating a highly integrated set
of systems, which can lead to many business
benefits
– Discuss the advantages and disadvantages
associated with the implementation of an enterprise
resource planning system
– Identify the challenges that multinational
corporations face in planning, building, and operating
their enterprise systems
Principles of Information Systems, Tenth Edition

3
Why Learn About Enterprise Systems?
• In our service-oriented economy:
– Outstanding customer service has become a goal of
virtually all companies

• Effective use of enterprise systems:
– Will be essential to raise the productivity of your firm,
improve customer service, and enable better
decision making

Principles of Information Systems, Tenth Edition

4
An Overview of Transaction
Processing Systems
• Transaction processing systems (TPSs):
– Capture and process detailed data necessary to
update records about fundamental business
operations
– Include order entry, inventory control, payroll,
accounts payable, accounts receivable, general
ledger, etc.
– Provide valuable input to:
• Management information systems, decision support
systems, and knowledge management systems
Principles of Information Systems, Tenth Edition

5
An Overview of Transaction
Processing Systems (continued)

Principles of Information Systems, Tenth Edition

6
Ad

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IS740 Chapter 09

  • 1. Principles of Information Systems, Tenth Edition Chapter 9 Enterprise Systems 1
  • 2. Principles and Learning Objectives • An organization must have information systems that support routine, day-to-day activities and that help a company add value to its products and services – Identify the basic activities and business objectives common to all transaction processing systems – Describe the transaction processing systems associated with the order processing, purchasing, and accounting business functions Principles of Information Systems, Tenth Edition 2
  • 3. Principles and Learning Objectives (continued) • A company that implements an enterprise resource planning system is creating a highly integrated set of systems, which can lead to many business benefits – Discuss the advantages and disadvantages associated with the implementation of an enterprise resource planning system – Identify the challenges that multinational corporations face in planning, building, and operating their enterprise systems Principles of Information Systems, Tenth Edition 3
  • 4. Why Learn About Enterprise Systems? • In our service-oriented economy: – Outstanding customer service has become a goal of virtually all companies • Effective use of enterprise systems: – Will be essential to raise the productivity of your firm, improve customer service, and enable better decision making Principles of Information Systems, Tenth Edition 4
  • 5. An Overview of Transaction Processing Systems • Transaction processing systems (TPSs): – Capture and process detailed data necessary to update records about fundamental business operations – Include order entry, inventory control, payroll, accounts payable, accounts receivable, general ledger, etc. – Provide valuable input to: • Management information systems, decision support systems, and knowledge management systems Principles of Information Systems, Tenth Edition 5
  • 6. An Overview of Transaction Processing Systems (continued) Principles of Information Systems, Tenth Edition 6
  • 7. Traditional Transaction Processing Methods and Objectives • Batch processing system: – Data processing in which business transactions are: • Accumulated over a period of time • Prepared for processing as a single unit or batch • Online transaction processing (OLTP): – Data processing in which each transaction is processed immediately Principles of Information Systems, Tenth Edition 7
  • 8. Principles of Information Systems, Tenth Edition 8
  • 9. Principles of Information Systems, Tenth Edition 9
  • 10. Traditional Transaction Processing Methods and Objectives (continued) • Organizations expect their TPSs to: – Capture, process, and update databases of business data – Ensure that the data is processed accurately and completely – Avoid processing fraudulent transactions – Produce timely user responses and reports – Reduce clerical and other labor requirements – Help improve customer service – Achieve competitive advantage Principles of Information Systems, Tenth Edition 10
  • 11. Traditional Transaction Processing Methods and Objectives (continued) • A TPS typically includes the following types of systems: – Order processing systems – Accounting systems – Purchasing systems Principles of Information Systems, Tenth Edition 11
  • 12. Traditional Transaction Processing Methods and Objectives (continued) Principles of Information Systems, Tenth Edition 12
  • 13. Transaction Processing Systems for Small and Medium-Size Enterprises (SMEs) • Many software packages: – Provide integrated transaction processing system solutions for small and medium-size enterprises (SMEs) • Camp Logan Cement: – Was able to get up and running in a month with Intuit Enterprise Solutions
  • 14. Transaction Processing Systems for SMEs (continued) Principles of Information Systems, Tenth Edition 14
  • 15. Transaction Processing Activities • TPSs: – Capture and process data that describes fundamental business transactions – Update databases – Produce a variety of reports • Transaction processing cycle: – The process of data collection, data editing, data correction, data manipulation, data storage, and document production Principles of Information Systems, Tenth Edition 15
  • 16. Transaction Processing Activities (continued) Principles of Information Systems, Tenth Edition 16
  • 17. Data Collection • Capturing and gathering all data necessary to complete the processing of transactions • Data collection can be: – Manual – Automated via special input devices • Data should be: – Collected at source – Recorded accurately, in a timely fashion Principles of Information Systems, Tenth Edition 17
  • 18. Data Collection (continued) Principles of Information Systems, Tenth Edition 18
  • 19. Data Editing • Checking data for validity and completeness to detect any problems • Examples: – Quantity and cost data must be numeric – Names must be alphabetic Principles of Information Systems, Tenth Edition 19
  • 20. Data Correction • Reentering data that was not typed or scanned properly • Error messages must specify the problem so proper corrections can be made Principles of Information Systems, Tenth Edition 20
  • 21. Data Manipulation • Performing calculations and other data transformations related to business transactions • Can include: – – – – – Classifying data Sorting data into categories Performing calculations Summarizing results Storing data in the organization’s database for further processing Principles of Information Systems, Tenth Edition 21
  • 22. Data Storage • Updating one or more databases with new transactions • After being updated, this data can be further processed and manipulated by other systems Principles of Information Systems, Tenth Edition 22
  • 23. Document Production and Reports • Generating output records, documents, and reports: – Hard-copy paper reports – Displays on computer screens • Results from one TPS can be inputs to another system Principles of Information Systems, Tenth Edition 23
  • 24. Enterprise Resource Planning and Customer Relationship Management • Enterprise resource planning (ERP): – Set of integrated programs that manage a company’s vital business operations for an entire organization • Business process: – Set of coordinated and related activities that takes one or more kinds of input and creates an output of value to the customer of that process Principles of Information Systems, Tenth Edition 24
  • 25. Enterprise Resource Planning and Customer Relationship Management (continued) Principles of Information Systems, Tenth Edition 25
  • 26. An Overview of Enterprise Resource Planning • ERP systems: – Evolved from materials requirement planning systems (MRP) developed in the 1970s • Large organizations: – The first to take on the challenge of implementing ERP Principles of Information Systems, Tenth Edition 26
  • 27. Advantages of ERP • Improved access to data for operational decision making • Elimination of costly, inflexible legacy systems • Improvement of work processes • Upgrade of technology infrastructure Principles of Information Systems, Tenth Edition 27
  • 28. Disadvantages of ERP Systems • • • • • • Expense and time in implementation Difficulty implementing change Difficulty integrating with other systems Difficulty in loading data into new ERP system Risks in using one vendor Risk of implementation failure Principles of Information Systems, Tenth Edition 28
  • 29. Leading ERP Systems • No one ERP software solution from a single vendor is “best” for all organizations • SAP: – Largest and most-recognized ERP solution provider among Fortune 1000 and Global 5000 organizations • Microsoft and SAP: – Partnered in the development of Duet Principles of Information Systems, Tenth Edition 29
  • 30. ERP for Small and Medium-Size Enterprises (SMEs) • Many SMEs elect to implement open-source ERP systems • Reasons for customization: – Customization is needed for your other business systems to work with the ERP package – You need additional data fields and/or different field sizes than what comes with the standard system – Customization is needed to meet regulatory requirements
  • 31. Supply Chain Management (SCM) • A system that includes: – Planning, executing, and controlling all activities involved in raw material sourcing and procurement – Converting raw materials to finished products, and warehousing and delivering finished product to customers Principles of Information Systems, Tenth Edition 31
  • 32. Supply Chain Management (SCM) (continued) • Process for developing a production plan: – – – – – – – – Sales forecasting Sales and operations plan (S&OP) Demand management Detailed scheduling Materials requirement planning (MRP) Purchasing Production Sales ordering Principles of Information Systems, Tenth Edition 32
  • 33. Financial and Managerial Accounting and ERP • ERP systems: – Do not work directly with production machines, so they need a way to capture information about what was produced • Retailers as well as manufacturers: – Use demand forecasting to match production to consumer demand and to allocate products to stores Principles of Information Systems, Tenth Edition 33
  • 34. Financial and Managerial Accounting and ERP (continued) • General ledger: – Main accounting record of a business • ERP system: – Captures transactions entered by workers in all functional areas of the business – Creates associated general ledger record to track the financial impact of the transaction Principles of Information Systems, Tenth Edition 34
  • 35. Financial and Managerial Accounting and ERP (continued) • Financial accounting: – Captures and records all transactions that affect a company’s financial state – Uses these documented transactions to prepare financial statements to external decision makers • Managerial accounting: – Provides data to enable the firm’s managers to make decisions about current and future operations Principles of Information Systems, Tenth Edition 35
  • 36. Business Intelligence and ERP • Business intelligence (BI): – Gathering enough of the right information to shine a spotlight on the organization’s performance – Essential component of an organization’s ERP system • BI tools are used to: – Access all the operational data captured in the ERP database, analyze performance on a daily basis – Highlight areas for improvement, and monitor the results of business strategies Principles of Information Systems, Tenth Edition 36
  • 37. Customer Relationship Management • Goal is to understand and anticipate the needs of current and potential customers • Used primarily by people in: – The sales, marketing, and service organizations to capture and view data about customers and to improve communications • CRM software: – Automates and integrates the functions of sales, marketing, and service in an organization Principles of Information Systems, Tenth Edition 37
  • 38. Customer Relationship Management (continued) Principles of Information Systems, Tenth Edition 38
  • 39. Customer Relationship Management (continued) • Key features of a CRM system: – – – – – – – – Contact management Sales management Customer support Marketing automation Analysis Social networking Access by smartphones Import contact data Principles of Information Systems, Tenth Edition 39
  • 40. Customer Relationship Management (continued) Principles of Information Systems, Tenth Edition 40
  • 41. Hosted Software Model for Enterprise Software • Many business application software vendors: – Are pushing the use of the hosted software model for SMEs • Using the hosted software model: – Means the small business firm does not need to employ a full-time IT person to maintain key business applications Principles of Information Systems, Tenth Edition 41
  • 42. Hosted Software Model for Enterprise Software (continued) Principles of Information Systems, Tenth Edition 42
  • 43. International Issues Associated with Enterprise Systems • Challenges that must be met by an enterprise system of a multinational company include: – – – – Different languages and cultures Disparities in IS infrastructure Varying laws and customs rules Multiple currencies Principles of Information Systems, Tenth Edition 43
  • 44. Different Languages and Cultures • In some cultures, people do not routinely work in teams in a networked environment • Multinational companies: – Can establish close connections with their business partners – Roll out standard IS applications for all to use Principles of Information Systems, Tenth Edition 44
  • 45. Disparities in Information System Infrastructure • Lack of a robust or a common information infrastructure can create problems • Many countries’ telecommunications services are controlled by a central government or operated as a monopoly – No incentives to provide fast and inexpensive customer service Principles of Information Systems, Tenth Edition 45
  • 46. Varying Laws and Customs Rules • Numerous laws can affect collection and dissemination of data • Examples: – Labor laws in some countries prohibit recording of worker performance data – Some countries have laws limiting the trans-border flow of data linked to individuals • Trade custom rules between nations: – North American Free Trade Agreement (NAFTA) Principles of Information Systems, Tenth Edition 46
  • 47. Multiple Currencies • Enterprise system of multinational companies must conduct transactions in multiple currencies • Systems must: – – – – – Be current with foreign currency exchange rates Handle reporting and other transactions Issue vendor payments and customer statements Record retail store payments Generate financial reports in the currency of choice Principles of Information Systems, Tenth Edition 47
  • 48. Summary • Transaction processing systems (TPSs): – Are at the heart of most information systems in businesses today • Batch and online processing: – The collection of transactions into batches • TPSs perform the following basic activities: – Data collection, data editing, data correction – Data manipulation, data storage, document production Principles of Information Systems, Tenth Edition 48
  • 49. Summary (continued) • Enterprise resource planning (ERP): – Software that supports the efficient operation of business processes • Most firms use ERP systems to: – Support financial and managerial accounting and business intelligence • Organizations are implementing CRM systems to manage all aspects of customer encounters Principles of Information Systems, Tenth Edition 49