CHAPTER 2.

THE STRATEGIC ROLE OF INFORMATION SYSTEMS

LEARNING OBJECTIVES
ANALYZE ROLES OF 6 TYPES OF INFORMATION SYSTEMS
DESCRIBE TYPES OF INFORMATION

SYSTEMS EXAMINE COMPETITIVE FORCES, VALUE CHAIN MODELS *

LEARNING OBJECTIVES
EXPLAIN DIFFICULTIES OF BUILDING, SUSTAINING STRATEGIC INFORMATION SYSTEMS DESCRIBE HOW INFORMATION SYSTEMS SUPPORT LEVELS OF BUSINESS STRATEGY

Enterprise Systems

MANAGEMENT CHALLENGES
INTEGRATION:
ENTERPRISE RESOURCE MANAGEMENT
CONNECTING ORGANIZATIONAL LEVELS

DIFFICULT, COSTLY

SUSTAIN COMPETITIVE ADVANTAGE:

INFO SYSTEMS MUST BE FLEXIBLE TO ENSURE

LONG-TERM PROFITS

TYPES OF INFORMATION SYSTEMS

KIND OF SYSTEM
STRATEGIC LEVEL

GROUPS SERVED
SENIOR MANAGERS

MANAGEMENT LEVEL

MIDDLE MANAGERS

KNOWLEDGE LEVEL

KNOWLEDGE & DATA WORKERS

OPERATIONAL LEVEL
SALES & MARKETING MANUFACTURING FINANCE ACCOUNTING

OPERATIONAL MANAGERS
HUMAN RESOURCES

MAJOR TYPES OF SYSTEMS

EXECUTIVE SUPPORT SYSTEMS (ESS)
DECISION SUPPORT SYSTEMS (DSS) MANAGEMENT INFORMATION SYSTEMS (MIS)

KNOWLEDGE WORK SYSTEMS (KWS)

OFFICE AUTOMATION SYSTEMS (OAS) TRANSACTION PROCESSING SYSTEMS (TPS)

TYPICAL TPS APPLICATIONS Sales & Marketing Systems

MAJOR FUNCTIONS OF SYSTEMS: Sales Management; Market Research; Promotion; Pricing; New Products MAJOR APPLICATION SYSTEMS: Sales Order Info System; Market Research System; Pricing System *

TPS

Overview of Inventory Systems

TYPICAL TPS APPLICATIONS

Manufacturing & Production Systems

MAJOR FUNCTIONS OF SYSTEMS: Scheduling; Purchasing; Shipping / Receiving; Engineering; Operations MAJOR APPLICATION SYSTEMS: Materials Resource Planning Systems; Purchase Order Control Systems; Engineering Systems; Quality Control Systems *

TPS

TYPICAL TPS APPLICATIONS

Finance & Accounting Systems
MAJOR FUNCTIONS OF SYSTEMS: Budgeting; General Ledger; Billing: Cost Accounting MAJOR APPLICATION SYSTEMS: General Ledger; Accounts Receivable / Payable; Budgeting; Funds Management Systems *

TPS

TYPICAL TPS APPLICATIONS Human Resources Systems

MAJOR FUNCTIONS OF SYSTEMS: Personnel Records; Benefits; Compensation; Labor Relations; Training MAJOR APPLICATION SYSTEMS: Payroll; Employee Records; Benefit Systems; Career Path Systems; Personnel Training Systems *

TPS

A Payroll TPS

A TPS for payroll processing captures employee payment transaction data (such as a time card). System outputs include online and hardcopy reports for management and employee paychecks.

TYPICAL TPS APPLICATIONS Other Types (e.g., University)

MAJOR FUNCTIONS OF SYSTEMS: Admissions; Grade Records; Course Records; Alumni MAJOR APPLICATION SYSTEMS: Registration System; Student Transcript System; Curriculum Class Control System; Alumni Benefactor System *

TPS

KNOWLEDGE WORK SYSTEMS (KWS)

KNOWLEDGE LEVEL INPUTS: DESIGN SPECS PROCESSING: MODELLING OUTPUTS: DESIGNS, GRAPHICS USERS: TECHNICAL STAFF
EXAMPLE: ENGINEERING WORK STATION

OFFICE AUTOMATION SYSTEMS (OAS)

TOWARD A PAPERLESS OFFICE REDESIGN OF WORK FLOW INTEGRATED SOFTWARE ERGONOMIC DESIGN BRIGHT, CHEERFUL

WORK

SPACE EXAMPLE: PRESENTATION GRAPHICS

MANAGEMENT INFORMATION SYSTEMS (MIS)

MANAGEMENT LEVEL INPUTS: HIGH VOLUME DATA PROCESSING: SIMPLE MODELS OUTPUTS: SUMMARY REPORTS USERS: MIDDLE MANAGERS
EXAMPLE: ANNUAL BUDGETING

MANAGEMENT INFORMATION SYSTEMS (MIS)

STRUCTURED & SEMI-STRUCTURED DECISIONS
REPORT CONTROL ORIENTED

PAST & PRESENT DATA

INTERNAL ORIENTATION LENGTHY DESIGN PROCESS

TPS DATA FOR MIS APPLICATIONS

TPS
Order Processing System ORDER FILE Materials Resource Planning System PRODUCTION MASTER FILE General Ledger System ACCOUNTING FILES UNIT PRODUCT COST PRODUCT CHANGE DATA EXPENSE DATA MIS FILES SALES DATA

MIS

MIS

REPORTS

MANAGERS

MIS ex:

MIS Management Information System

Creates reports managers can use to make routine business decisions
Scheduled reports Key-indicator reports Exception reports Ad hoc (demand) reports Drill-down reports

Scheduled Reports

Produced periodically, or on a schedule (daily, weekly, monthly).

22

Key-Indicator Report

Summarizes the previous days critical activities and typically available at the beginning of each day.

Demand Report

Gives certain information at a managers request.

Exception Report
Automatically produced when a situation is unusual or requires management action.
24

Drill Down Reports

Provide detailed data about a situation.

25

DECISION SUPPORT SYSTEMS (DSS)

MANAGEMENT LEVEL INPUTS: LOW VOLUME DATA PROCESSING: INTERACTIVE OUTPUTS: DECISION ANALYSIS USERS: PROFESSIONALS, STAFF EXAMPLE: CONTRACT COST ANALYSIS, SELECTION

DECISION SUPPORT SYSTEMS (DSS)

FLEXIBLE, ADAPTABLE, QUICK
USER CONTROLS INPUTS/OUTPUTS NO PROFESSIONAL PROGRAMMING SUPPORTS DECISION PROCESS SOPHISTICATED MODELING TOOLS

EXECUTIVE SUPPORT SYSTEMS (ESS)

STRATEGIC LEVEL INPUTS: AGGREGATE DATA PROCESSING: INTERACTIVE OUTPUTS: PROJECTIONS USERS: SENIOR MANAGERS
EXAMPLE: 5 YEAR OPERATING PLAN

EXECUTIVE SUPPORT SYSTEMS (ESS)

TOP LEVEL MANAGEMENT
DESIGNED TO THE INDIVIDUAL TIES CEO TO ALL LEVELS VERY EXPENSIVE TO KEEP UP EXTENSIVE SUPPORT STAFF

Executive support systems

Support senior management
Address nonroutine decisions requiring

judgment, evaluation, and insight Incorporate data about external events (e.g. new tax laws or competitors) as well as summarized information from internal MIS and DSS Example: ESS that provides minute-to-minute view of firms financial performance as measured by working capital, accounts receivable, accounts payable, cash flow, and inventory

Model of an Executive Support System

This system pools data from diverse internal and external sources and makes them available to executives in easy-to-use form.

INTERRELATIONSHIPS AMONG SYSTEMS

ESS

MIS

DSS

KWS OAS

TPS

SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

SALES & MARKETING SYSTEMS
MANUFACTURING & PRODUCTION

SYSTEMS FINANCE & ACCOUNTING SYSTEMS HUMAN RESOURCES SYSTEMS *

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES

The Order Fulfillment Process

TYPES OF INFORMATION SYSTEMS

Functional Examples
Examples of Information System by functions
Sales & Marketing Manufacturing and production

Finance and accounting

Human Resource

Sales & Marketing

System Order Processing Description Enter, process and track orders Organizational Level Operational

Market analysis
Pricing analysis Sales trends

Identify customers and market

Determine prices Prepares 5 year forecast

Knowledge
Management Strategic

Manufacturing and production

System Description Organizational Level

Machine control
Computer aided design Production planning Facilities location

Control actions of equipment

Design new products Decide number and schedule of products Decide where to locate facilities

Operational
Knowledge Management Strategic

Finance & Accounting

System
Accounting Receivable Portfolio analysis Budgeting Profit planning

Description
Track Money owed to firm Design firms investments Prepare short term budgets Plan long term profits

Organisational Level
Operational Knowledge Management Strategic

Human resource
System Training and development Description Track training, skills and appraisals Organizational Level Operational

Portfolio analysis
Budgeting Profit planning

Design firms investments

Prepare short term budgets Plan long term profits

Knowledge
Management Strategic

STRATEGIC ROLE OF INFORMATION SYSTEMS

STRATEGIC INFO SYSTEM: CAN CHANGE GOALS, OPERATIONS PRODUCTS, SERVICES ENVIRONMENT TO GAIN COMPETITIVE ADVANTAGE

COMPETITIVE FORCES MODEL

NEW MARKET ENTRANTS SUBSTITUTE PRODUCTS & SERVICES

THE FIRM

TRADITIONAL COMPETITION

SUPPLIERS

CUSTOMERS

COUNTERING COMPETITIVE FORCES

PRODUCT DIFFERENTIATION
FOCUSED DIFFERENTIATION DATAMINING LINKING CUSTOMERS & SUPPLIERS BECOMING LOW COST PRODUCER

VALUE CHAIN MODEL

HIGHLIGHTS PRIMARY & SUPPORT ACTIVITIES THAT ADD VALUE TO PRODUCTS, SERVICES PRIMARY: DIRECTLY RELATED TO PRODUCTION, DISTRIBUTION SUPPORT: INFRASTRUCTURE, HUMAN RESOURCES, TECHNOLOGY, PROCUREMENT *

IMPLICATIONS FOR MANAGERS & ORGANIZATIONS

STRATEGIC ALLIANCES, INFORMATION PARTNERSHIPS
INDUSTRY LEVEL STRATEGIC SYSTEMS

MANAGING STRATEGIC TRANSITIONS

IMPACT OF THE INTERNET

INFORMATION SYSTEMS & QUALITY

QUALITY: Conformance to specifications, customer satisfaction
SIMPLIFY PRODUCT, PROCESS

BENCHMARKING
CUSTOMER DEMAND AS GUIDE REDUCE CYCLE TIME IMPROVE QUALITY & PRECISION

IS & Business processes

This refers to the procedure on how things are

carried out in the business using proper procedures and guidelines to get the task completed. Looks at the following
Can this be more efficient Can this reduce cost

When one decides to choose a proper business

process to automate the overall work, there must be proper analysis done before the decision is being made. This looks at Business Process Re- engineering. (BPR)

Business Process Re engineering

The analysis and design of workflows and processes within an organization. A business process is a set of logically related tasks

performed to achieve a defined business outcome. Re-engineering is the basis for many recent developments in management.

Business Process Reengineering

Types of system
Customer Relationship Management (CRM)
Supply Chain Management Enterprise System

(SCM) (ES)

Customer Relationship Management

Customer relationship management (CRM) is a broadly recognized, widely-implemented strategy for managing a companys interactions with customers, clients and sales prospects. It involves using technology to organize, automate,

and synchronize business processesprincipally sales activities, but also those for marketing, customer service, and technical support. The overall goals are to find, attract, and win new clients, nurture and retain those the company already has, entice former clients back into the fold, and reduce the costs of marketing and client service

Customer Relationship Management

Types of CRM
Sales force automation Marketing

Customer Service and Support

Analytics

Salesforce.com Executive Team Dashboard

Illustrated here are some of the capabilities of Salesforce.com, a market-leading provider of on-demand customer relationship management (CRM) software. CRM systems integrate information from sales, marketing, and customer service.

Supply Chain Management

Supply Chain Management is the systemic, strategic coordination of the traditional business functions and the tactics across

these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole

Supply Chain Management

This integrates the supplier and distributor into a single process and this performs the following
Reduces the time and effort and also the

inventory costs Products on demand where the suppliers can send products directly to the customers

Examples
SAP, CSC, People soft

Example of a Supply Chain Management System

Customer orders, shipping notifications, optimized shipping plans, and other supply chain information flow among Haworths Warehouse Management System (WMS), Transportation Management System (TMS), and its back-end corporate systems.

Enterprise systems
This is used in the process of facilitating the information flow in a business
Known as ERP ( Enterprise Resource

Planning) Improves availability of information and removes any duplication and associated errors. Improve on efficiency and reduce cost. Example : SAP

Examples of ES
CRM, SCM are some examples for the ES.
Shows how multiple business processes can

be served by a suite of integrated IS

Enterprise Systems

Enterprise systems integrate the key business processes of an entire firm into a single software system that enables information to flow seamlessly throughout the organization. These systems focus primarily on internal processes but may include transactions with customers and vendors.

What is SAP & ERP

SAP (Systems, Applications and Products) is a name of a company which offers ERP solution for various industries to integrate information from various functions of that industry under one system. ERP (Enterprise Resource Planning) is enterprise wide information system which consolidate information from various functions/departments of an organization.

Enterprise Application Architecture

Enterprise applications automate processes that span multiple business functions and organizational levels and may extend outside the organization.

Business Value of IS
Assessment of implementing an IS
Financial & non financial models Tangible & intangible benefits

Benefits may go direct to customer

Helps in reducing cost and this helps in reducing

pricing of competition with others

Benefits may not be realized if the approach is not planned well.

Cost examples
Hardware
What sort of device is being used

Software
What sort of programmes are being used

Services
What sort of services are being offered with

options to choose from.

Personnel.
Looks at the required amount of manpower to run

the operations.

What is tangible and non tangible

Tangible refers to that which can be seen, weighed, measured, or apprehended by the senses. A tangible object is something that is

real and substantial. Non Tangible, especially an asset that cannot be perceived by the senses

Example of Tangible Benefits

Increased productivity
Low operating cost Reduced work force Lower computer expenses Lower supplier cost Lower clerical / professional cost Reduced growth of expenses Reduced facility cost.

Example of Intangible benefits

Improve asset use in terms of resource, control, planning Increased flexibility More timely information Increased learning Attain legal requirements Enhanced employee goodwill, job satisfaction, decision making, operations Higher customer satisfaction Better corporate image.

Connect to the INTERNET

Internet Resources related to this chapter: http://tools.org/EI/ICEIMT http://www.brint.com http://www.datawarehousing.com http://www.erpassist.com http://www.sap.com http://www.mysap.com