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GLOBAL E-BUSINESS: HOW BUSINESS USE INFORMATION SYSTEMSChapter 2
Doç.Dr. Aykut Hamit TURAN
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INFORMATİON SYSTEMS AT TUPPERWARE
Fast growing food storage containers producer Increasing complexity of organizational structure Implementing web based order management
system Streamlined communication among corporate
managers, support staff, sales consultants Illustrates how much companies rely on IS today Outdated old business models Need to change corporate technology,
management and organizational processes
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BUSİNESS PROCESSES AND İNFORMATİON SYSTEMS
In order to operate businesses must deal with many pieces of information about suppliers, customers, employees, invoices, payments, products and services
Businesses must organize work activities that use information to operate efficiently and enhance overall performance of the firm
IS make it possible for firms to manage all their information, make better decisions and improve the execution of their business processes
IS are all about improving business processes
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BUSİNESS PROCESSES Business processes is the manner in which work is
organized, coordinated and focused to produce a valuable product or service
Workflows of material, information and knowledge – set of activities
Unique ways in which management chooses to coordinate the work, information and knoweldge and the ways in which management chooses to coordinate the work
One of the major purpose of IS is to enable highly efficient business processes
The performance of a business firm depends on how well its business processes are designed and coordinated
A company’s business processes can be a source of competitive strenght if they enable the company to innovate or execute better than its rivals
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BUSİNESS PROCESSES Business process can also be liabilities if they are based
on outdated ways of working that impede organizational responsiveness and efficiency
Many business processes are tied to a specific functional area. Human resources function would be responsible for hiring employees
Other business processes cross many different functional areas and require corrdination across departments. For example fulfilling customer orders
While at first appearing to be a simple process, filling an order turns out to be a very complicated series of business processes that require close coordination of major funtional groups in a firm
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ORDER FULFİLLMENT PROCESS
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HOW İT ENHANCES BUSİNESS PROCESSES In two ways:
Increasing efficiency of existing processes Enabling entirely new processes that are capable of
transforming the business IS can automate many steps in business processes IS can also change the flow of information, making it
possible for many people to access and share information
Task can be performed simultaneously in parallel, eliminating delays in decision making
IS can transform the way businesses work and drive entirely new business models
By analyzing business processes, we can achieve a very clear understanding of how our business actually works
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TYPES OF BUSİNESS İNFORMATİON SYSTEMS
There are many types of IS to support business processes of the firm
There could be hundreds of different processes, because there are different people, specialties and levels in an organization
No single system can provide all the information organization needs. Large and medium size organizations have thousands of computer programs and hundreds of diffferent systems
At the begging it can be very difficult to comprehend all different systems at the business and how they relate to each other. We look at systems from two different perspectives as functional and constituency perspective
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SYSTEMS FROM FUNCTİONAL PERSPECTİVE Sales and Marketing Systems
Responsible for selling the organizations products or services
Marketing is concerned with identifying the customers for firm’s products and services, determining what customers want or need and advertising those products and services
Sales is concerned with contracting customers, selling the products and services, taking orders and following up on sales
Sales and marketing IS can support all of these activities
Help senior manager monitor trends affecting new products and sales opportunities, support new product and services development and monitor competitors
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SYSTEMS FROM FUNCTİONAL PERSPECTİVE Sales and Marketing Systems
Aid middle management by supporting market research and by analyzing advertisiement and promotional campaigns, pricing decisions and sales performance
Assist operational management and employees in locating and contacting prospective customers, tracking sales, processing orders and providing customer service support
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SYSTEMS FROM FUNCTİONAL PERSPECTİVE Manufacturing and Production Systems
Responsible for actually producing the goods and services
Deal with planning, development and maintainence of production facilities, establishment of product goals, acquisition, storage and availability of production materials, scheduling of equipment, materials and labor for production
Help senior managers decide where to locate new plants or whether to invest in new manufacturing technology
Help middle manager analyze and monitor manufacturing and production costs and resources
Help operational manager deal with the status of production tasks
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SYSTEMS FROM FUNCTİONAL PERSPECTİVE Manufacturing and Production Systems
Most manufacturing and production systems use some sort of inventory systems
Data about each item in inventory are either scanned or keyed into the system
Companies can estimate the number of items to reorder or they can use a formula for calculating the least expensive quantity to reorder called the economic order quantity
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SYSTEMS FROM FUNCTİONAL PERSPECTİVE
Finance and Accounting systems Finance Function is responsible for managing
firm’s financial assets, such as cash, stocks, bonds and other investments to maximize return on these financial assets
In change of finding new financial assets Determine whether firm is getting the best return
on its investments by obtaining large of external information
Accounting function is responsible for maintaining and managing the firm’s financial records, receipts, disbursements, depreciation, payroll etc
Finance and accounting try to keep track of firm’s financial assets and fund flows
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SYSTEMS FROM FUNCTİONAL PERSPECTİVE
Finance and Accounting systems Helps senior mangers to establish long term
investment goals and provide long term forecasting for firm performance
Helps middle managers to oversee and control firm’s financial resources
Helps operational management to track the flow of funds in the firm through transactions
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SYSTEMS FROM FUNCTİONAL PERSPECTİVE Human Resources Systems
Responsible for attracting, developing and maintaining the firm’s workforce
Support activities such as identifying potential employees, maintaining complete records on existing employees and creating programs to develop employees'’ talents and skills
Help senior managers to identify the human resources requirement for meeting long term firm objectives
Help middle managers to monitor and analyze the recruitment, allocation and compensation of employees
Help operational managers to track the recruitment and placement of firm’s employees
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SYSTEMS FROM CONSTİTUENCY PERSPECTİVE
We need a perspective that examines systems in terms of the various levels of management and types of decisions the systems support
Senior managers need summary information that can quickly inform them about the overall performance of the firm like gross sales revenues, sales by product group and region
Middle managers need more specific information on the results of specific functional areas and departments of the firm like sales contacts by sales force, production statistics for different factories or product lines by monthly or even daily
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SYSTEMS FROM CONSTİTUENCY PERSPECTİVE
Operation managers need transaction level information such as daily inventory for each part
Knowledge workers need access to external scientific databases or internal databases
Production and service workers need access to information from production machines and service workers need access to customer information
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SYSTEMS FROM CONSTİTUENCY PERSPECTİVE
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Transaction Processing Systems Transaction Processing Systems (TPS) provide
information to keep track of elementary activities and transactions of the organization such as sales, receipts, cash deposits, payroll
TPS is a computerized system that performance and records the daily routine transactions necessary to conduct business
TPS tries to answer routine questions and to track flow of transactions throughout the organization
At operational level tasks, resources and goals are highly structured
TPS is the major producer of information for the other types of systems
SYSTEMS FROM CONSTİTUENCY PERSPECTİVE
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Transaction Processing Systems TPS is often so central to business that TPS failure
for a few hours can lead toa firm’s demise and perhaps that of other firms linked to it
Imagine what would happen if a bank’s customer account system would not function or UPS’s package tracking systm malfunction
SYSTEMS FROM CONSTİTUENCY PERSPECTİVE
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Management Information Systems and Decision Support Systems MIS serves the middle managers to help,
monitor, control, make decisions and carry out administrative activities
Summarize and provides reports to organization’s current performance and basic operations using data supplied by TPS
MIS generally provide answers to routine questions that have been specified in advance and have predefined procedure for answering them
These systems are usually not flexible and have little analytical capabilities
SYSTEMS FROM CONSTİTUENCY PERSPECTİVE
Decision Support Systems Support non-routine decision making for middle
management Focus on problems that are unique and rapidly
changing and solutions may not be defined in advance
“What would be the impact on production schedules if we were to double sales in December
DSS use information from both TPS and MIS also from external sources such as stock prices or product prices of competitors
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SYSTEMS FROM CONSTİTUENCY PERSPECTİVE
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Executive Support Systems Senior managers need systems that address strategic issues
and long term trends in the firm and external environments ESS help senior managers to make strategic and non-routine
decisions requiring judgment, evaluation and insights since there is no agreed on procedure for arriving a solution
ESS are designed to incorporate external data, display the data in appealing format and presents data in graphs through an interface that is easy for senior managers to use
Often the information is delivered to senior executives through a portal, which uses a web interface to present integrated personalized business content
ESS consists of workstations with menus, interative graphics and communication capabilities that can be used to access historical and competitive data from internal corproate systems and external databases such as IMKB, Dow/Jones
INTERRELATİONSHİPS AMONG İNFORMATİON SYSTEMS
All mentioned systems are interrelated TPS are typically a major source of data for other
systems, whereas ESS are primary a recipient of data from lower level systems
Other types of systems may exchange data with each other as well
Data may be exchanged among systems serving different functional areas
In reality, in most business firms, these systems are loosely integrated. Businesses cannot usually move data from one systems to another to respond rapidly changing environments. But this is changing because of new networking technologies and enteprise wide software systems
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INTERRELATİONSHİPS AMONG İNFORMATİON SYSTEMS
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SYSTEMS THAT SPAN THE ENTERPRİSE
How a business can manage all information in these different systems
How costly it is to maintain so different systems
How these systems can share information
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ENTERPRİSE APPLİCATİONS Getting all the different kinds of systems in a
company to work together is a major challenge After acquisitions, corporations end up with
collection different systems, mostly older and not be able to talk each other
One solution is to implement enterprise applications, which span functional areas, focus on business processes across the business firm and include all levels of management
Enterprise applications can make firms more flexible and productive by coordinating their business processes more closely and integrating groups of processes
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ENTERPRİSE APPLİCATİONS
Four major enterprise applications Enterprise systems Supply chain management systems Customer relationships management systems Knowledge management systems
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ENTERPRİSE APPLİCATİON ARCHİTECTURE
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ENTERPRİSE SYSTEMS
A large organizations typically has many different kinds of IS around different functions, organizational levels and business processes
These systems cannot automatically exchange information
Managers have problems to assemble data for a comprehensive, overall picture of the organizations’ operations
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
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ENTERPRİSE SYSTEMS
Enterprise systems are also known as Enterprise Resource Planning Systems (ERP)
They collect data from various key business processes in manufacturing and production, finance and accounting, sales and marketing and human resources management and store the data in a central repository
Make possible previously fragmented data from different systems to be shared across the firm
Speed communication of information through the company, making easier for businesses to coordinate their activities
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ENTERPRİSE SYSTEMS
Gives companies flexibility to respond rapidly to customer requests while producing and stocking inventory only what is needed
Increase accurate shipments, minimize costs and increase customer satisfaction
Provide valuable information for improving management decision making
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SUPPLY CHAİN MANAGEMENT SYSTEMS
Help businesses manage their relationships with their customers
Provide information to help suppliers, purchasing firms, distributors and logistic companies share information about orders, production levels and delivery of products and services efficiently
If company and its supply network do not have accurate information, they will most likely be dealing with excessive inventories and problems in deliveries of inventories and products
SCMS are inter-organizational systems because they automate the flow of information across organizational boundaries
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SUPPLY CHAİN MANAGEMENT SYSTEMS
When you buy a book from amazon.com the information is being supplied to amazon.com, its suppliers, logistics firms and yourself.
Interorganizational systems are increasingly common as firms combine their capabilities to offer customers an integrated online shopping experience.
Customer orders, shipping notifications, optimized plans and other supply chain infomation flow through mang different systems such as warehouse systems, transformation management systems and back end corproate systems
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SUPPLY CHAİN MANAGEMENT SYSTEMS
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CUSTOMER RELATİONSHİP MANAGEMENT SYSTEMS CRM helps firms manage their relationships with customers Provide information to coordinate all of the business
processes that deal with customers in sales, marketing and service to optimize revenue, customer satisfaction and customer retention
This information helps firms identify, attract and retain most profitable customers, provide better service to existing customers and hopefully increase sales
CRM systems try to solve fragmented customer data problem by integrating the firm’s customer related processes and consolidating customer information from multiple communication channels, telephone, email, wireless devices, retail outlets or web
Detailed and accurate knoweldge of customes and their preferences helps firms increase the effectiveness of their marketing champaigns and provide higher quality customer service and support
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KNOWLEDGE MANAGEMENT SYSTEMS The value of firm’s products and services based not only on
its physical resources but also on intangible knowledge assets
A large part of firm’s assets are from intangible assets, mostly knowledge
Some firms perform better than the others because they have better knowledge about how to create, produce and deliver products and services
Firm knowledge is difficult to imitate, unique and can be leveraged into long term strategic benefits
KMS enable organizations better to manage processes for capturing and applying knowledge and expertise
KMS support processes for acquiring, storing, distributing and applying knowledge as well as processes for creating new knowledge and integrating it into the organization
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KNOWLEDGE MANAGEMENT SYSTEMS
Enterprise wide systems manage and distribute documents, graphics and other digital knowledge objects
They facilitate new knowledge creation
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INTRANETS AND EXTRANETS Enterprise applications create deep seated changes in
the way a firm conduct its business and they are often costly to implement. But sometimes companies can get advantage of enterprise applications without installing them by using Intranet and extranets
Intranets and extranets are technology platforms rather than specific technology applications
Companies that do not have the resources to invest in enterprise applications can still achieve some measure of information integration by using intranets and extranets
Intranets and extranets are technology platforms more than specific applications. They are tools firms to increase integration and expedite the flow of information within the firm with customers and suppliers
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INTRANETS AND EXTRANETS
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Intranets are internal networks built with the same tools and communication standards as the Internet and are used for the internal distribution of information to employees
Extranets are intranets extended to authorized users outside the company. Extranets expediate the flow of information between firms and its suppliers and customers
Intranet typically presents information to users through private portal that provides a single point of access to information from several different systems and to documents using web interfaces
Extranets expedite the flow of information between the firm and its suppliers and customers
Extranets allow different firms to work collaboratively on product design, marketing and production
E-BUSİNESS, E-COMMERCE AND E-GOVERNMENT
The systems and technologies are transforming firms’ relationships with customers, employees, suppliers and logistic partners
Business is now enabled by or based upon digital networks – electronic business or electronic commerce
E-business is the use of digital technology and Internet to execute the major business processes in the firm
E-commerce is part of e-business that deals with the buying and selling goods and services over the Internet
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E-BUSİNESS, E-COMMERCE AND E-GOVERNMENT
E-commerce also encompasses activities supporting marketing transactions such as advertising, marketing, customer support, security, delivery and payment
Governments also are using Internet to deliver information and services to citizens, employees or businesses
E-government refers to the application of Internet and networking technologies to digitally enable government and public agencies’ relationships with citizens, businesses and other branches of government
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INFORMATİON SYSTEM FUNCTİON İN BUSİNESS
Information Systems Department is the formal organizational unit responsible for information technology services
IS department consists of programmers, systems analysts, project leaders and IS managers
Programmers are experts who write the software instructions for computers
Systems analysts constitute the principal liaisons between IS groups and the rest of the organization
IS managers are the leaders of programmers teams, project managers, facility managers, telecommunication and database managers
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INFORMATİON SYSTEM FUNCTİON İN BUSİNESS
IS department is headed by Chief Information Officer (CIO)
End users are representatives of departments outside of information systems group for whom applications are developed
In the early days of computing, IS department was mainly composed of programmers who perform highly specialized but limited technical functions. Today, a growing proportion of staff members are system analysts and network specialists with IS department acting as a powerful change agent in the organization
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INFORMATİON SYSTEM FUNCTİON İN BUSİNESS
IS department suggests new business strategies and new information based products and services and coordinates both the development of the technology and the planned changes in organization
A very small company with fewer than 100 employees will not have a formal IS department. It will have one or two employees who are responsible keeping its network and applications running or use consultants for these services
Lage organizations will have seperate IS department organized along several different lines
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INFORMATİON SYSTEM FUNCTİON İN BUSİNESS Sometimes we can see decentralized organization where
each functional areas have their own IS department and reports to senior manager or CIO
These approach can enable managers to address specific IS needs of different functional areas. However central quidence is low and chances are high to build incompatable systems and increasing costs of each groups to make their own purchases
In other arrangement a large IS department is formed with its own managers and staff. The central department makes technology decisions for the entire company, which is more likely to produce more compatible systems and more coherent long term system development plans
Very large Fortune 1000 firms with multiple divisions or lines might allow each division to have its own IS group. All of these divisional IS groups report to a high level central IS group and CIO
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ORGANİZİNG THE INFORMATİON SYSTEMS FUNCTİON
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ORGANİZİNG THE INFORMATİON SYSTEMS FUNCTİON
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