CHAPTER 8 Transaction Processing, Innovative Functional Systems, and Integration 4-
Learning Objectives <ul><li>Relate functional areas and business processes to the value chain model </li></ul><ul><li>Iden...
Integrated Solutions Help Colonial Building Supply, Stay Competitive <ul><li>The Problem </li></ul><ul><ul><li>to remain c...
Crossing Functional Boundaries at Colonial <ul><li>IT support the routine processes of a retailer, enabling it to be effic...
Porter’s Value Chain Model and The Supply Chain Typical functional areas mapped on the value chain of a manufacturing comp...
Major Characteristics of Functional Information Systems <ul><li>A functional information systems comprises several smaller...
Computerization of Routine Transaction Processes <ul><li>Transaction Processing System (TPS) </li></ul><ul><ul><li>support...
Objectives of TPS <ul><li>To provide all the information needed by law and/or by organizational policies to keep the busin...
Major Characteristics of TPS <ul><li>Large amount of data are processed </li></ul><ul><li>The sources of data are mostly i...
Benefits of Internet Transaction Processing <ul><li>Flexibility to accommodate unpredictable growth in processing demands ...
Typical Tasks in Transaction Processing POS Terminal Terminal File Product Processing System Inventory Files Department Sa...
Innovative IT Applications in the Functional Areas <ul><li>Managing Production/Operations and Logistics </li></ul><ul><ul>...
Typical TPS of a Manufacturer Vendors Customers General Ledger Periodic Statements Manufac- turing Purchasing Order Receiv...
Innovative IT Applications in the Functional Areas <ul><li>Supply-Chain Management </li></ul><ul><ul><li>objective is to s...
Supply-Chain Management Suppliers Inbound Logistics Production Transaction Delivery Customer a) Supply Chain direct to cus...
In-House Logistics and Material Management <ul><li>Inventory Management </li></ul><ul><li>Quality Control </li></ul>
Planning Production/Operations <ul><li>Material Requirements Planning (MRP) </li></ul><ul><li>Manufacturing Resource Plann...
Automatic Design Work and Manufacturing <ul><li>Computer-aided Design (CAD) </li></ul><ul><li>Computer-aided Engineering (...
Computer-integrated Manufacturing (CIM) <ul><li>Three basic goals: </li></ul><ul><ul><li>simplification </li></ul></ul><ul...
Channel Systems <ul><li>The customer is king (queen) </li></ul><ul><ul><li>Customer profiles and preference analysis </li>...
Channel Systems <ul><li>Telemarketing </li></ul><ul><ul><li>Capabilities </li></ul></ul><ul><ul><ul><li>personalized conta...
Distribution Channels <ul><li>Distribution channels management </li></ul><ul><ul><li>DSS models are frequently used to sup...
Marketing Management <ul><li>Pricing of products or services </li></ul><ul><li>Salesperson productivity </li></ul><ul><li>...
Managing the Accounting and Finance Systems TACTIAL SYSTEMS a.   Budgeting Preparation and Control b.   Investment Managem...
Managing the Accounting and Finance Systems Strategic Systems Tactical Systems Operational and Transaction Processing Syst...
Financial Planning and Budgeting <ul><li>Financial and economic forecasting </li></ul><ul><li>Planning for incoming funds ...
Investment Management <ul><li>Access to financial and economical reports </li></ul><ul><ul><li>Internet meta-search engine...
Control and Auditing <ul><li>Budgetary control </li></ul><ul><li>Auditing </li></ul><ul><li>Financial health analysis </li...
Recruitment <ul><li>Position inventory </li></ul><ul><li>Employee selection </li></ul><ul><li>Using the Internet </li></ul>
Human Resources Maintenance and Development <ul><li>Performance evaluation </li></ul><ul><li>Training and human resources ...
Human Resources Planning and Management <ul><li>Personnel planning </li></ul><ul><li>Succession planning </li></ul><ul><li...
Internet Applications <ul><li>Eddify Corporation’s employee service systems allows users to access information via PCs, vo...
Reasons for Integration <ul><li>Helps to reduce cost </li></ul><ul><li>Helps to increase employees’ productivity </li></ul...
Customer Relationship Management (CRM) <ul><li>The company’s success depends on effectively managing relationship with cus...
How is CRM Practiced? <ul><li>Know who the company’s current and potential customers are </li></ul><ul><li>Know who is a g...
The Enabling Role of IT <ul><li>Using intelligent agent technology, American Airlines generates personalized Web pages for...
CRM Activities and IT Support CRM Activity (Sample) IT Support Information about choice of doctors, hospitals, and alterna...
CRM Activities and IT Support CRM Activity (Sample) IT Support Monitoring of customers’ orders inside the company. Workflo...
CRM Activities and IT Support CRM Activity (Sample) IT Support Customizing products to suit customers’ specific needs. Int...
Copyright    2001 John Wiley & Sons, Incorporated.  All rights reserved.  Reproduction or translation of this work beyond...
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Turban Site: Chapter_8.ppt

  1. 1. CHAPTER 8 Transaction Processing, Innovative Functional Systems, and Integration 4-
  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 to each of these: production/operations, marketing and sales, accounting, finance, and human resources management </li></ul><ul><li>Describe the benefits and issues of integrating functional information systems </li></ul><ul><li>Describe the role of IT in facilitating customer relationship management (CRM) </li></ul>
  3. 3. Integrated Solutions Help Colonial Building Supply, Stay Competitive <ul><li>The Problem </li></ul><ul><ul><li>to remain competitive, Colonial Building Supply needed a technology to provide it with information about inventory levels and customer buying trends </li></ul></ul><ul><li>The Solution </li></ul><ul><ul><li>purchased a integrated system that includes: accounting, POS terminal, inventory control, purchasing/receiving, employee time control and attendance, hand-held automatic identification and data collection, and several others </li></ul></ul><ul><li>The Results </li></ul><ul><ul><li>Lower cost for data entry, reduction in inventory and storage space, fast access to information, better customer service, and higher employee satisfaction </li></ul></ul>
  4. 4. Crossing Functional Boundaries at Colonial <ul><li>IT support the routine processes of a retailer, enabling it to be efficient and effective and to satisfy its customers </li></ul><ul><li>IT software helped the modernization and reengineering of 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 were in logistics. However, a vendor provides integrated software </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. Porter’s Value Chain Model and The Supply Chain Typical functional areas mapped on the value chain of a manufacturing company Profit Margin Profit Margin Firm Infrastructure (Accounting, Finance, General Management) Human Resource Management (Human Resources) Technology Development (Engineering) Procurement (Material Management-Operations) Support Activities Service (Service or Marketing) Inbound Logistics (Material Managaement- Operations) Operations (Operations) Outbound Logistics (Material Managemnet- Operations) Marketing and Sales (Marketing) Primary Activities
  6. 6. Major Characteristics of Functional Information Systems <ul><li>A functional information systems comprises several smaller information systems that support specific activities performed by each functional area </li></ul><ul><li>The specific IS applications in any functional area can be integrated to form a coherent departmental functional, or they can be completely independent </li></ul><ul><li>Functional information systems interface with each other to form the organization-wide information system </li></ul><ul><li>Some organizational information systems interface with the business environment </li></ul><ul><li>Information systems applications support the three levels of an organization’s activities: operational, managerial, and strategic </li></ul>
  7. 7. Computerization of Routine Transaction Processes <ul><li>Transaction Processing System (TPS) </li></ul><ul><ul><li>supports transaction processes </li></ul></ul><ul><ul><li>monitors, collects, stores, processes, and disseminates information for all routine core business transactions </li></ul></ul><ul><ul><li>includes accounting and finance transactions and some sales, personnel, and production activities </li></ul></ul>
  8. 8. Objectives of TPS <ul><li>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>To allow for efficient and effective operation of the organization </li></ul><ul><li>To provide timely documents and reports </li></ul><ul><li>To increase the competitive advantage of the corporation </li></ul><ul><li>To provide the necessary data for tactical and strategic systems such as DSS applications </li></ul><ul><li>To assure accuracy and integrity of data and information </li></ul><ul><li>To safeguard assets and security of information </li></ul>
  9. 9. Major Characteristics of TPS <ul><li>Large amount of data are processed </li></ul><ul><li>The sources of data are mostly internal, and the output is intended mainly for an internal audience </li></ul><ul><li>The TPS processes information on a regular basis </li></ul><ul><li>Large storage (database) capacity is required </li></ul><ul><li>High processing speed is needed due to the high volume </li></ul><ul><li>TPS basically monitors and collects past data </li></ul><ul><li>Input and output data are structured </li></ul><ul><li>High level of detail is usually observed </li></ul><ul><li>Low computation complexity </li></ul><ul><li>High level of accuracy, data integrity, and security is needed </li></ul><ul><li>High reliability is required </li></ul><ul><li>Inquiry processing is a must </li></ul>
  10. 10. Benefits of Internet Transaction Processing <ul><li>Flexibility to accommodate unpredictable growth in processing demands </li></ul><ul><li>Cost effectiveness even 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>Multimedia data such as pictures and sound are handled 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>
  11. 11. Typical Tasks in Transaction Processing POS Terminal Terminal File Product Processing System Inventory Files Department Sales Files Customer Makes a Purchase Master Files
  12. 12. Innovative IT Applications in the Functional Areas <ul><li>Managing Production/Operations and Logistics </li></ul><ul><ul><li>transform inputs into useful outputs </li></ul></ul><ul><ul><li>very diversified, and so its supporting information systems </li></ul></ul><ul><ul><li>related to finance and sales, engineering and design, and purchasing and logistics </li></ul></ul>
  13. 13. Typical TPS of a Manufacturer Vendors Customers General Ledger Periodic Statements Manufac- turing Purchasing Order Receiving Goods Accounts Payable Shipping Accounts Receivable Inventory Customer Order Taxes Payroll Fixed Assets
  14. 14. Innovative IT Applications in the Functional Areas <ul><li>Supply-Chain Management </li></ul><ul><ul><li>objective is to support the flow of goods and materials from the original supplier through multiple production and logistic operations to the ultimate consumer </li></ul></ul><ul><ul><li>extensive integrated software is available for managing portions of the supply chain as well as the entire process </li></ul></ul>
  15. 15. Supply-Chain Management Suppliers Inbound Logistics Production Transaction Delivery Customer a) Supply Chain direct to customer Suppliers Manufacturing Distribution Retail Outlet Customer Transfer Transfer Transfer Transfer Supply Chain Organization Information Flow Cash Flow b) Supply Chain including wholesalers and retailers
  16. 16. In-House Logistics and Material Management <ul><li>Inventory Management </li></ul><ul><li>Quality Control </li></ul>
  17. 17. Planning Production/Operations <ul><li>Material Requirements Planning (MRP) </li></ul><ul><li>Manufacturing Resource Planning (MRP II) </li></ul><ul><li>Just-in-Time Systems </li></ul><ul><li>Project Management </li></ul><ul><li>Short-Term Schedules </li></ul>
  18. 18. Automatic Design Work and Manufacturing <ul><li>Computer-aided Design (CAD) </li></ul><ul><li>Computer-aided Engineering (CAE) </li></ul><ul><li>Computer-aided Manufacturing (CAM) </li></ul>
  19. 19. Computer-integrated Manufacturing (CIM) <ul><li>Three basic goals: </li></ul><ul><ul><li>simplification </li></ul></ul><ul><ul><li>automation </li></ul></ul><ul><ul><li>integration and coordination </li></ul></ul><ul><li>The CIM model </li></ul><ul><ul><li>made up by general business management, product and process definition, manufacturing planning and control, factory automation, and information resource management </li></ul></ul>
  20. 20. Channel Systems <ul><li>The customer is king (queen) </li></ul><ul><ul><li>Customer profiles and preference analysis </li></ul></ul><ul><ul><li>Prospective customer lists and marketing databases </li></ul></ul><ul><ul><li>Mass customization </li></ul></ul><ul><ul><li>Targeted Advertisement on the Web </li></ul></ul><ul><ul><li>customer inquiry systems and Automated Help Desk (EC application) </li></ul></ul>
  21. 21. Channel Systems <ul><li>Telemarketing </li></ul><ul><ul><li>Capabilities </li></ul></ul><ul><ul><ul><li>personalized contact with the customers </li></ul></ul></ul><ul><ul><ul><li>allows customers to buy at their convenience </li></ul></ul></ul><ul><ul><ul><li>effective in informing customers about a company’s products and services </li></ul></ul></ul><ul><ul><li>Limitations </li></ul></ul><ul><ul><ul><li>cost can be high </li></ul></ul></ul><ul><ul><ul><li>difficult to find good telemarketers </li></ul></ul></ul><ul><ul><ul><li>may be seen by many as a nuisance </li></ul></ul></ul><ul><ul><ul><li>challenges in reaching people </li></ul></ul></ul>
  22. 22. Distribution Channels <ul><li>Distribution channels management </li></ul><ul><ul><li>DSS models are frequently used to support the decision of accomplishing by a company, or by a subcontractor </li></ul></ul><ul><li>Improving sales at retail stores </li></ul><ul><ul><li>using IT, it is possible to improve the situation by reengineering the checkout process </li></ul></ul>
  23. 23. Marketing Management <ul><li>Pricing of products or services </li></ul><ul><li>Salesperson productivity </li></ul><ul><li>Productivity software </li></ul><ul><li>Products and customers profitability analysis </li></ul><ul><li>Sales analysis and trends </li></ul><ul><li>New products, services, and market planning </li></ul>
  24. 24. Managing the Accounting and Finance Systems TACTIAL SYSTEMS a. Budgeting Preparation and Control b. Investment Management c. Capital Budgeting d. Cost Analysis and Control e. Tax Management f. Auditing g. Financial Planning INTERNAL ENVIRONMENT Top Management Operation/ Production Marketing HRM Engineering EXTERNAL ENVIRONMENT IRS SEC Vendors Clients CPA Companies Suppliers Customers Business Partners STRATEGIC SYSTEMS a. Strategic Planning b. Ratios and Financial Health c. Merger and Acquisition Analysis OPERATIONAL AND TRANSACTION PROCESSING SYSTEMS a. The General Ledger b. Sales Order Processing c. Accounts Payable and Receivable d. Receiving and Shipping e. Payroll f. Inventory Management g. Periodical Reports & Statements
  25. 25. Managing the Accounting and Finance Systems Strategic Systems Tactical Systems Operational and Transaction Processing System Internal Environment External Environment
  26. 26. Financial Planning and Budgeting <ul><li>Financial and economic forecasting </li></ul><ul><li>Planning for incoming funds </li></ul><ul><li>Budgeting preparation and operation </li></ul><ul><li>Capital budgeting decision </li></ul>
  27. 27. Investment Management <ul><li>Access to financial and economical reports </li></ul><ul><ul><li>Internet meta-search engines for finding financial data </li></ul></ul><ul><ul><li>Internet directories and yellow pages </li></ul></ul><ul><ul><li>Software for monitoring, interpreting, analyzing financial data, and alerting management </li></ul></ul><ul><li>Financial analysis </li></ul><ul><ul><li>Treasury risk management systems (TRMS) </li></ul></ul>
  28. 28. Control and Auditing <ul><li>Budgetary control </li></ul><ul><li>Auditing </li></ul><ul><li>Financial health analysis </li></ul><ul><li>Profitability analysis and cost control </li></ul><ul><li>Product pricing </li></ul>
  29. 29. Recruitment <ul><li>Position inventory </li></ul><ul><li>Employee selection </li></ul><ul><li>Using the Internet </li></ul>
  30. 30. Human Resources Maintenance and Development <ul><li>Performance evaluation </li></ul><ul><li>Training and human resources development </li></ul><ul><li>Turnover, tardiness, and absenteeism analyses </li></ul>
  31. 31. Human Resources Planning and Management <ul><li>Personnel planning </li></ul><ul><li>Succession planning </li></ul><ul><li>Labor-management negotiations </li></ul><ul><li>Benefits administration </li></ul>
  32. 32. Internet Applications <ul><li>Eddify Corporation’s employee service systems allows users to access information via PCs, voice-recognition phone, kiosks, or faxes. </li></ul><ul><li>Oracle corporation conducts its flexible benefits enrollment program on the intranet </li></ul><ul><li>Apple Computers Inc. conducts extensive education and development activities on the intranet, including a remote management-training program </li></ul>
  33. 33. Reasons for Integration <ul><li>Helps to reduce cost </li></ul><ul><li>Helps to increase employees’ productivity </li></ul><ul><li>Helps to facilitate information sharing and collaboration which are necessary for improving customer service </li></ul><ul><li>IT helps CRM </li></ul>
  34. 34. Customer Relationship Management (CRM) <ul><li>The company’s success depends on effectively managing relationship with customers </li></ul><ul><li>Relationship marketing </li></ul><ul><ul><li>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, bongs </li></ul></ul><ul><ul><li>include the concepts of loyalty and trust </li></ul></ul>
  35. 35. How is CRM Practiced? <ul><li>Know who the company’s current and potential customers are </li></ul><ul><li>Know who is a good customer, and who are the most profitable customers for the business </li></ul><ul><li>Know why a certain customer is in the market, why he or she does business with the company, what the customers like and dislike about he business </li></ul>
  36. 36. The Enabling Role of IT <ul><li>Using intelligent agent technology, American Airlines generates personalized Web pages for each of about 800,000 registered travel-planning customers </li></ul><ul><li>Manchester Metropolitan University tracks a population of 30,000 students, manages modular courses, and keeps the student management systems updated by databases and parallel processing </li></ul><ul><li>Charles schwab’s call center handles effectively over 1 million customer calls every day </li></ul><ul><li>State Farm Insurance Co. manages several initiatives for retaining customers by a computerized incentives system </li></ul>
  37. 37. CRM Activities and IT Support CRM Activity (Sample) IT Support Information about choice of doctors, hospitals, and alternative medicine offered by HMO’s. Internet; online customer survey; groupware; expert systems for giving advice. Customized information and services in many languages; discounts based on healthy lifestyle; appointment reminders; information on doctors; and medical research. Help center to solve HMO member problem E-mail; data warehouse for customer information; data mining; intelligent translating systems; search engines on the Web help center. Web-based integrated call centers; quick reply to customers’ inquiries Facilitates help-desk activities; intelligent agents for answering FAQs
  38. 38. CRM Activities and IT Support CRM Activity (Sample) IT Support Monitoring of customers’ orders inside the company. Workflow software for planning and monitoring; intranets Appointment of account managers; creation of specialized teams (BPR) Expert systems for advice; groupware for collaboration. Seminars and educational activities for customers Online training; Internet. Self-tracking of shipments and orders. Web-based training software; workflow Segmenting of customers Data mining in data warehouses. Matching customers with products and services. Web-based intelligent agents.
  39. 39. CRM Activities and IT Support CRM Activity (Sample) IT Support Customizing products to suit customers’ specific needs. Intelligent agents to find what customer wants; CAD/CAM to reduce cost of customization Customer discussion forums. Chat room; sponsored newsgroups. Loyalty programs for repeat customers. Data warehouses and data mining of customers’ activities; smart cards that record purchasers’ activities. Customer participation in product (service) development. Online surveys; newsgroups; chat room; e-mail Proactive approach to customers based on their activity level. Data warehouse; data mining.
  40. 40. Copyright  2001 John Wiley & Sons, Incorporated. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner in unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Son, Inc. Adopters of the textbook are granted permission to make back-up copies for his/her own use only, to make copies for distribution to student of the course the textbook is used in, and to modify this material to best suit their instructional needs. Under no circumstances can copies be made for resale. The publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein. IT for Management Prof. Efraim Turban 6-

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