CH 09

9th Edition
Information Part III Enterprise Systems and Analytics

Technology
for Management
Advancing Sustainable,
Profitable Business Growth Chapter 9
Functional Area and
Compliance Systems
Copyright 2013 John Wiley & Sons, Inc.

9-1
Chapter 9 Outline
9.1 Management Levels and Functional Systems
9.2 Manufacturing, Production, and Transportation

Systems
9.3 Sales and Marketing Systems
9.4 Accounting, Finance and Compliance Systems
9.5 Human Resource Systems, Compliance and Ethics

9-2
Chapter 9 Learning Outcomes
1. Describe various types of functional systems and how they support
managers and workers at the operational level.
2. Define how manufacturing, production, and transportation
information systems enable organizational processes and support
supply chain operations and logistics.
3. Explain how sales and marketing information systems support
advertising, market research, intelligence gathering, getting
products and services to customers, and responding quickly and
efficiently to customers’ needs.
4. Describe how accounting, auditing, and finance application
systems meet compliance mandates, help deter fraud, and
facilitate capital budgeting and forecasting.
5. Explain how human resources information systems (HRIS) improve
business-to-employee (B2E) communications, workforce
productivity, and compliance with federal employment laws; and
discuss ethical issues related to the use of HRIS data.

9-3
Figure 9.1. Data from functional area ISs support enterprise apps

9-4
For Class Discussion & Debate
Case 1: International Speedway Gets Lean
Scenario for Brainstorming & Discussion (see book for full text, page 270-
271)
Discuss
1. Explain ISC’s strategic problem that was making it difficult to achieve their
mission.
2. Explain ISC’s data challenges.
3. Explain the benefits of being lean.
4. How did its data challenges relate to its strategic problem?
5. Visit Aprimo.com, click on “Products,” and then click “Aprimo Marketing
Studio.” Review the features and benefits listed by the vendor. What are
three of the benefits offered by the software?
6. Why is it important to use customer touchpoints effectively or correctly?

9-5
For Class Discussion & Debate
Case 1: International Speedway Gets Lean
Decide
7. Does the efficiency of marketing depend on the extent to which it is data-
driven and fact-based? Does the effectiveness of marketing depend on the
extent to which it is data-driven and fact-based? Would marketing apps have
a great impact on efficiency or effectiveness—or not? Explain your analysis
and answers.
Debate
8. Most marketers know this very old quote from John Wanamaker,
considered the father of modern advertising, “I know that half of my
advertising dollars are wasted ... I just don’t know which half.” This quote can
be interpreted to mean:
a. Marketing programs or campaigns are not easily justified on ROI because
they are expensive and direct benefits (increased sales) are difficult to
quantify.
b. Half of the cost of marketing campaigns is wasted.
Based on ISC’s results after implementing campaign management software,
debate whether or not either interpretation is still valid. Justify your position.

9-6
Levels of Support
 Strategic level. Decisions are visionary, future-oriented, and
define the mission, objectives, and strategy. External data
needed for SWOT (strengths, weaknesses, opportunities,
threats) analysis.
 Managerial or administrative level. Control is important at
this level. Middle level managers set goals for their
departments or business units. External and internal data are
important.
 Operational level. Lower-level managers, supervisors, and
workers need detailed data, in real-time or near real-time,
and the ability to respond to what they learn from functional
ISs.

9-7
Figure 9.3. Three organizational levels, their concerns, and strategic and
tactical questions, planning and control.

9-8
Figure 9.4. Preparing factory orders for shipping after sales, finance,
and production functions have completed their processing tasks

9-9
Basic Functional Area Systems
 Manufacturing and production:
purchasing, quality control, scheduling,
shipping, receiving
 Accounting: accounts receivable, accounts
payable, general ledger, budgeting
 Finance: cash management, asset
management, credit management,
reporting
Figure 9.5. A billboard in New York
City’s Times Square advertises the  Sales and marketing: order tracking,
services of SquareUp, a credit card pricing, sales commissions, market
reader system for Apple and
research
Android mobile devices.
 HR: payroll, employee benefits, training,
compensation, employee relations,
staffing, performance appraisal
9-10
IT at Work 9.1: Standard Operating Procedures
for Securing Transaction Data, an Outline
 Data security: Data must be protected from
malicious or unintentional corruption,
unauthorized modification, theft, or natural
causes such as floods.
 Data accuracy: Data validation is used to
detect and correct data entry errors, such as
address data and customer names.
 Data integrity: Data integrity with real-time
systems involves the ACID test, which is short
for atomicity, consistency, isolation, and
durability:
9-11
IT at Work 9.1: Standard Operating Procedures
for Securing Transaction Data, an Outline
 Atomicity: If all steps in a transaction are not completed, then the
entire transaction is cancelled.
 Consistency: Only operations that meet data validity standards are
allowed. For instance, systems that record checking accounts only
allow unique check numbers for each transaction. Any operation that
repeated a check number would fail to insure that the data in the
database is correct and accurate. Network failures can also cause data
consistency problems.
 Isolation: Transactions must be isolated from each other. For example,
bank deposits must be isolated from a concurrent transaction
involving a withdrawal from the same account. Only when the
withdrawal transaction is successfully completed will the new account
balance be reported.
 Durability: Backups by themselves do not provide durability. A system
crash or other failure must not cause any loss of data in the database.
Durability is achieved through separate transaction logs that can be
used to re-create all transactions from a known checkpoint. Other
ways include database mirrors that replicate the database on another
server.
9-12
Figure 9.6. Flow of information in transaction processing
9-13
IT at Work 9.2: Real-time Reporting Improves
Sales at First Choice Ski
Read the full case on page 276 of the text.
Questions
1. How does the ski travel site’s quick response
to visitors’ clickstream behavior relate to its
profit margin?
2. Consider this measurement principle: You
can’t manage what you can’t measure. Explain
how the case illustrates this principle.
3. Does web analytics impact barriers to entry
and rivalry among incumbents in this industry?
9-14
MANUFACTURING AND PRODUCTION SYSTEMS
Figure 9.8.
Productions
operation
management
(POM) systems
process and
transform inputs
into outputs.

9-15
Processing
 Batch: data is collected from transactions and
stored. The system then prepares and processes
the collected data periodically, such as at the end
of the workday, e.g., payroll, billing.
 Online [online transaction processing (OLTP)]:
data are processed as soon as the transaction
occurs, in real time. Data can be accessed directly
from the operational database.

9-16
9.2 Manufacturing and Production Systems
 Logistics management deals with ordering,

purchasing, inbound logistics (receiving), and
outbound logistics (shipping) activities. In-
house logistics activities are processes that
cross several functional departments.
 Scanners, RFID, and voice technologies support
inspection, and robots can perform distribution
and materials handling.

9-17
Transportation Management Systems
1.Outdated transportation systems need to be

upgraded or replaced.
2. Growth of intermodal transport.
3. TMS vendors add capabilities.
4. TMS handle big data.

9-18
Logistics Management Systems
 Optimize transportation operations

 Coordinate with all suppliers
 Integrate supply chain technologies
 Synchronize inbound and outbound flows of
materials or goods
 Manage distribution or transport networks

9-19
IT at Work 9.3: Total Visibility, a SaaS
Transportation Management System
In 2012, Agistix (agistix.com) introduced Total Visibility, a new cloud-
based, SaaS TMS. By providing the TMS in the cloud, shippers have access from
any location at any time. SaaS (a leased arrangement) makes it affordable to
more shippers.
Total Visibility provides shippers with real-time visibility to eliminate
blind spots. Visibility is achieved by capturing shipment estimates so that clients
can better forecast costs and meet compliance reporting requirements. Real-
time data allows customers to know what is happening and to analyze big data
to ensure that their supply chain is functioning as designed.
Total Visibility aggregates and standardizes a company’s shipping
activities and provides shippers with a comprehensive view into every shipment
they have paid for anywhere in the world. Key benefits of Total Visibility for
shippers are real-time visibility to all shipments in transit across all carriers, all
service levels, all modes, international and domestic, inbound and outbound.
9-20
Inventory Control Systems
 Inventory control minimizes the total cost of inventory
 The objective is to maintain optimal inventory levels by re-ordering
the correct quantity at the right time
Inventory control systems minimize three categories of cost:
1. Cost of holding inventory: warehousing costs, security costs,
insurance, losses due to theft or obsolescence, inventory
financing costs based on the interest rate
2. Cost of ordering and shipping: employees’ time ordering and
receiving, shipping fees
3. Cost of inventory shortage: production delays and forgone
revenues because of stock outs

9-21
Inventory Control Systems
 Just-in-time (JIT) and lean manufacturing are two

widely used methods or models to minimize waste and
deal with the complexity of inventory management.
Minimizing inventory costs remains a major objective
of supply chain management.
 Lean manufacturing system: suppliers deliver small
lots on a daily or frequent basis, and production
machines are not necessarily run at full capacity.
 Quality Control Systems. Manufacturing quality
control (QC) systems can be standalone systems or can
be part of an enterprise wide total quality
management (TQM) effort.

9-22
Computer Integrated Manufacturing (CIM) and
Manufacturing Execution Systems (MES)
 Computer integrated manufacturing (CIM) systems control the day-to-
day shop floor activities. In the early 1980s, companies invested greatly
in CIM solutions even though they were complex, difficult to
implement, and costly to maintain. They had required the integration
of many products and vendors.
 A manufacturing execution system (MES) is an online integrated
computerized system that consists of methods and tools used to
accomplish production.
 Goals of CIM. CIM has three basic goals:
1. The simplification of all manufacturing technologies and techniques
2. Automation of as many of the manufacturing processes as possible
3. Integration and coordination of all aspects of design, manufacturing,
and related functions.

9-23
 Data-driven marketing
 Distribution channels
 Marketing management
• Pricing of products and services
• Salesperson productivity
 Profitability analysis
 New product analysis, market planning, and
forecasting

9-24
Figure 9.11. Sales

and marketing
systems and related
subsystems

9-25
IT at Work 9.4: Google’s Microsurvey Market Research
Offers New Revenue Model for Online Publishers
In 2012, Adweek.com reported on a new service called Google Customer Surveys,
which publishers can use to generate revenues from their online content. The service
is an alternative to having a paywall for online news content. For example, when users
visit Web sites of partners like the New York Daily News and Texas Tribune, they’ll find
several articles partially blocked. To continue reading the full article, they have to
answer a question or microsurvey provided by Google.
Adweek, a Google Partner

Adweek’s editors, reporters and designers spend a lot of our time thinking about the
transformational impact digital technology is having on the businesses and people
they cover. They needed to monetize their digital assets to ensure that the brand
continues to be a profitable going concern. To that end, Adweek partnered with
Google on a new web-based revenue play. By answering a single marketing question
per day, readers can continue to get full access to Adweek.com and all their reporting,
analysis, and video. This method offers a solution to business concerns without
blocking or limiting your access via a traditional paywall.
9-26
IT at Work 9.4: Google’s Microsurvey Market Research
Offers New Revenue Model for Online Publishers
Microsurvey, Market Research

One or two market research multiple-choice questions are
asked, for instance, “Which types of candy do you usually buy for
your household?” Choices include “None, Chocolate, Hard
candies, Gummies, Toffees.“ Advertisers pay Google to host the
surveys, and the sites receive 5 cents per response from Google.
To minimize the possibility that people select untruthful answers
leading to poor quality data, Google makes the questions as
engaging as possible. And if users start to just answer the first
question on each page, or answer too quickly, the program
notices that behavior and forces readers to answer new
questions.
9-27
Sales and Distribution Channels
 In Macy’s and many other retailers, customers
check the current sales price on digital screens with
barcode readers.
 Customers use Exxon Mobil Speedpass to fill their tanks by
waving a token, embedded with an RFID device, at a gas-
pump sensor. Then the RFID starts an authorization process,
and the purchase is charged to the debit or credit card on
account.
 Home Depot and many supermarkets installed self-checkout
machines. Selfservice kiosks cut labor costs for retailers, and
can reduce customers’ checkout times, as shown in the Figure
(9.12) above.
9-28
Marketing Management
 Pricing of Products or Services. Sales volumes as well as
profits are determined by the prices of products or services.
 Tag Management. Tags, such as QR codes or Microsoft tags,
need to be managed.
 Salesperson Productivity. The performance of salespeople is
collected in the sales and marketing TPS and used to compare
performance along several dimensions, such as time, product,
region, and even the time of day.
 Profitability Analysis. In deciding on advertising and other
marketing efforts, managers need to know the profit
contribution or profit margin (profit margin sale price minus
cost of goods) of certain products and services.
9-29
9.4 Accounting, Finance and Compliance Systems
 Accounting and finance: control and manage cash flows, assets,
liabilities, net income or profit; and issue financial statements to
regulatory agencies
 Critical responsibility: fraud prevention, detection, and investigation
 Corporations whose stock is publicly traded must also comply with
the reporting requirements of the Securities and Exchange
Commission (SEC), a regulatory agency of the U.S. government.
 Inaccurate cash flow projection: #1 reason why many small
businesses go bankrupt
 Inability to access credit led to the demise of the investment bank
Lehman Brothers in September 2008.
 Software support for budgeting and forecasting is available from
Prophix
9-30
XBRL: eXtensible Business Reporting Language
XBRL is a programming language and an international standard for
electronic transmission of business and
financial information.
 Generates cleaner data, including

written explanations and supporting
notes.
 Produces more accurate data with
fewer errors that require follow-up by
regulators.
 Transmits data faster to regulators in
order to meet deadlines.
 Increases the number of cases and
amount of information that staffers
can handle.
Figure 9.14. Overview of the
creation of XBLR documents
9-31
Fraud Prevention and Detection
 Fraud is a crime with severe financial consequences.

Fighting fraud is an ethical duty—and essential to
public trust and the integrity of a company’s brand.
 Fraud occurs because internal controls to prevent
insider fraud—no matter how strong—will fail on
occasion.
 Fraud risk management is a system of policies and
procedures to prevent and detect illegal acts
committed by managers, employees, customers, or
business partners against the company’s interests.

9-32
Fraud Risk Factors
1. A high level of trust in

employees without sufficient
oversight to verify that they
are not stealing from the company Figure 9.15
2. Relying on informal processes of control

3. A mindset (belief) that internal controls and fraud
prevention systems are too expensive to implement
4. Assigning a wide range of duties for each
employee, giving them opportunities to commit
fraud
9-33
IT at Work 9.6: Employee Is a Serial Fraudster
A dental practice with $4 million in annual revenues had fired its
bookkeeper after a tax audit revealed to the owners that she’d been
stealing over a $100,000 per year for at least four years. The
bookkeeper was responsible for all accounting duties and financial
reporting for tax purposes. Her work was not inspected closely by
external auditors or the owners. No internal control systems, such as
controls that would prevent checks being written to bogus vendors or
employees, were implemented.
The classic red flags (fraud indicators)—lavish vacations, jewelry, and

cars that she could not afford—were evident, but ignored by the
owners/managers. The bookkeeper was a serial fraudster having
defrauded at least two prior employers—a religious organization and a
nonprofit where she’d worked as a volunteer. See text for full case.
9-34
IT at Work 9.6: Employee Is a Serial Fraudster
Questions
1. How was the fraud detected?
2. How long had it been going on?
3. What were the red flags that suggested the
bookkeeper was living beyond her means?
4. What mistakes were made in the handling of the
fraud?
5. In your opinion, did the dental practice have an
ethical responsibility to prosecute the fraudster?
9-35
9.5 Human Resource Information Systems,
Compliance and Ethics
 Human Resources (HR) deals with policies,
procedures, compliance requirements, and best
practices.
 HRISs have been moved to intranets and the
cloud—where HR apps are leased in software as
a service (SaaS) arrangements.
 See Table 9.1 on page 292 of the text.

9-36
Human Resources Information Systems
Benefits of using SaaS for HR.

1. A global medical device manufacturer needed to
create an independent HR system as it divested
from its parent company.
2. A national nonprofit foundation with a fast-
growing employee population wanted to
improve the effectiveness of HR operations.
3. A global entertainment company needed a
learning management system that could deliver
content varying from instructor-based training
to 30-second video how-to snippets.
9-37
Human Resources Information Systems
SaaS can be an efficient way to transform and improve HR and
at lower cost, as shown in Table 9.2.
1. Security. SaaS security may be as effective as security
associated with in-house data centers, but many companies
don’t understand the situation. Some early adopters are
keeping highly sensitive applications in house.
2. Quality of service. The lack of formal service-level
agreements (SLA) or performance and availability means
quality of service may be a risky issue for some organizations.
3. Integration. Many companies have questions about their
ability to integrate SaaS applications seamlessly with their in-
house applications.
9-38
Management and Employee Development
Figure 9.16. HR management activities

9-39
HR Planning, Control, and Management
 Personnel Planning and HR Strategies.

 Benefits Administration.
 Employee Relationship Management.
 Ethical Challenges and Considerations.

9-40

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9th Edition

Information Part III Enterprise Systems and Analytics

Copyright 2013 John Wiley & Sons, Inc.

9.2 Manufacturing, Production, and Transportation

9.3 Sales and Marketing Systems

9.4 Accounting, Finance and Compliance Systems

9.5 Human Resource Systems, Compliance and Ethics

Copyright 2013 John Wiley & Sons, Inc.

Copyright 2013 John Wiley & Sons, Inc.

Copyright 2013 John Wiley & Sons, Inc.

Copyright 2013 John Wiley & Sons, Inc.

Copyright 2013 John Wiley & Sons, Inc.

Copyright 2013 John Wiley & Sons, Inc.

Copyright 2013 John Wiley & Sons, Inc.

Copyright 2013 John Wiley & Sons, Inc.

Copyright 2013 John Wiley & Sons, Inc.

Copyright 2013 John Wiley & Sons, Inc.

 Logistics management deals with ordering,

Copyright 2013 John Wiley & Sons, Inc.

1.Outdated transportation systems need to be

Copyright 2013 John Wiley & Sons, Inc.

 Optimize transportation operations

Copyright 2013 John Wiley & Sons, Inc.

Copyright 2013 John Wiley & Sons, Inc.

 Just-in-time (JIT) and lean manufacturing are two

Copyright 2013 John Wiley & Sons, Inc.

Copyright 2013 John Wiley & Sons, Inc.

Copyright 2013 John Wiley & Sons, Inc.

Figure 9.11. Sales

Copyright 2013 John Wiley & Sons, Inc.

Adweek, a Google Partner

Microsurvey, Market Research

 Generates cleaner data, including

 Fraud is a crime with severe financial consequences.

Copyright 2013 John Wiley & Sons, Inc.

1. A high level of trust in

2. Relying on informal processes of control

The classic red flags (fraud indicators)—lavish vacations, jewelry, and

Copyright 2013 John Wiley & Sons, Inc.

Benefits of using SaaS for HR.

Figure 9.16. HR management activities

 Personnel Planning and HR Strategies.

Copyright 2013 John Wiley & Sons, Inc.

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