Turban Site: Chapter_8.ppt

CHAPTER 8Transaction Processing,

Innovative Functional Systems, and Integration

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IT for ManagementProf. Efraim Turban

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Learning Objectives

• Relate functional areas and business processes to the value chain model

• Identify functional management information systems• Describe the transaction processing system and

demonstrate how it is supported by IT• Describe the support provided by IT to each of these:

production/operations, marketing and sales, accounting, finance, and human resources management

• Describe the benefits and issues of integrating functional information systems

• Describe the role of IT in facilitating customer relationship management (CRM)


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Integrated Solutions Help Colonial Building Supply, Stay Competitive

• The Problem– to remain competitive, Colonial Building Supply needed a

technology to provide it with information about inventory levels and customer buying trends

• The Solution– 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

• The Results– Lower cost for data entry, reduction in inventory and storage

space, fast access to information, better customer service, and higher employee satisfaction


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Crossing Functional Boundaries at Colonial

• IT support the routine processes of a retailer, enabling it to be efficient and effective and to satisfy its customers

• IT software helped the modernization and reengineering of the company’s major business processes

• The software supports several business processes, not just one

• The system’s major applications were in logistics. However, a vendor provides integrated software

• IT can be beneficial to a relatively small company• The integration includes connection to business

partners using the Internet


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Porter’s Value Chain Model and The Supply Chain

Typical functional areas mapped onthe value chain of a manufacturing company

Profit

Margin

ProfitM

argin

Firm Infrastructure(Accounting, Finance, General Management)

Human Resource Management(Human Resources)

Technology Development(Engineering)Procurement

(Material Management-Operations)

Supp

ort A

ctiv

itie

s

Service

(Service orMarketing)

InboundLogistics

(MaterialManagaement-Operations)

Operations

(Operations)

OutboundLogistics

(MaterialManagemnet-Operations)

Marketingand Sales

(Marketing)

Prim

ary

Act

ivit

ies


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Major Characteristics of Functional Information Systems• A functional information systems comprises several smaller

information systems that support specific activities performed by each functional area

• The specific IS applications in any functional area can be integrated to form a coherent departmental functional, or they can be completely independent

• Functional information systems interface with each other to form the organization-wide information system

• Some organizational information systems interface with the business environment

• Information systems applications support the three levels of an organization’s activities: operational, managerial, and strategic


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Computerization ofRoutine Transaction Processes

• Transaction Processing System (TPS)– supports transaction processes– monitors, collects, stores, processes, and

disseminates information for all routine core business transactions

– includes accounting and finance transactions and some sales, personnel, and production activities


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Objectives of TPS• To provide all the information needed by law and/or by

organizational policies to keep the business running properly and efficiently

• To allow for efficient and effective operation of the organization

• To provide timely documents and reports• To increase the competitive advantage of the corporation• To provide the necessary data for tactical and strategic

systems such as DSS applications• To assure accuracy and integrity of data and information• To safeguard assets and security of information


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Major Characteristics of TPS• Large amount of data are processed• The sources of data are mostly internal, and the output is intended mainly

for an internal audience• The TPS processes information on a regular basis• Large storage (database) capacity is required• High processing speed is needed due to the high volume• TPS basically monitors and collects past data• Input and output data are structured• High level of detail is usually observed• Low computation complexity• High level of accuracy, data integrity, and security is needed• High reliability is required• Inquiry processing is a must


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Benefits ofInternet Transaction Processing

• Flexibility to accommodate unpredictable growth in processing demands

• Cost effectiveness even for small dollar amounts• Interactive, automatic billing, enabling companies to offer

services to anyone, not just subscribers• Timely search and analysis of large databases• Multimedia data such as pictures and sound are handled

effectively and efficiently• High data throughput to support inquiries requiring massive file

size• Fast response time• Effective storage of huge graphics and video databases


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Typical Tasks inTransaction Processing

POSTerminal

POSTerminal

TerminalFile

TerminalFile

ProductProcessing

System

ProductProcessing

System

InventoryFiles

InventoryFiles

DepartmentSales Files

DepartmentSales Files

CustomerMakes aPurchase

CustomerMakes aPurchase

MasterFiles

MasterFiles


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Innovative IT Applicationsin the Functional Areas

• Managing Production/Operations and Logistics– transform inputs into useful outputs– very diversified, and so its supporting

information systems– related to finance and sales, engineering and

design, and purchasing and logistics


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Typical TPS of a Manufacturer

VendorsVendors

CustomersCustomers

GeneralLedger

GeneralLedger

PeriodicStatementsPeriodic

Statements

Manufac-turing

Manufac-turing

PurchasingOrder

PurchasingOrder

ReceivingGoods

ReceivingGoods

AccountsPayable

AccountsPayable ShippingShipping

AccountsReceivable

AccountsReceivable

InventoryInventory

CustomerOrder

CustomerOrder

TaxesTaxes

PayrollPayroll

FixedAssets

FixedAssets


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Innovative IT Applicationsin the Functional Areas

• Supply-Chain Management– objective is to support the flow of goods

and materials from the original supplier through multiple production and logistic operations to the ultimate consumer

– extensive integrated software is available for managing portions of the supply chain as well as the entire process


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Supply-Chain Management

SuppliersSuppliers Inbound LogisticsInbound Logistics ProductionProduction

TransactionTransaction DeliveryDelivery CustomerCustomer

a) Supply Chain direct to customer

Suppliers Manufacturing Distribution Retail Outlet CustomerTransfer Transfer Transfer Transfer

Supply Chain Organization

Information Flow

CashFlow

b) Supply Chain including wholesalers and retailers


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In-House Logistics and Material Management

• Inventory Management

• Quality Control


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Planning Production/Operations

• Material Requirements Planning (MRP)

• Manufacturing Resource Planning (MRP II)

• Just-in-Time Systems

• Project Management

• Short-Term Schedules


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Automatic Design Workand Manufacturing

• Computer-aided Design (CAD)

• Computer-aided Engineering (CAE)

• Computer-aided Manufacturing (CAM)


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Computer-integrated Manufacturing (CIM)

• Three basic goals:– simplification– automation – integration and coordination

• The CIM model– made up by general business management, product

and process definition, manufacturing planning and control, factory automation, and information resource management


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Channel Systems

• The customer is king (queen)– Customer profiles and preference analysis– Prospective customer lists and marketing

databases– Mass customization– Targeted Advertisement on the Web– customer inquiry systems and Automated

Help Desk (EC application)


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Channel Systems• Telemarketing

– Capabilities• personalized contact with the customers• allows customers to buy at their convenience• effective in informing customers about a company’s

products and services

– Limitations• cost can be high• difficult to find good telemarketers• may be seen by many as a nuisance• challenges in reaching people


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Distribution Channels

• Distribution channels management– DSS models are frequently used to support

the decision of accomplishing by a company, or by a subcontractor

• Improving sales at retail stores– using IT, it is possible to improve the

situation by reengineering the checkout process


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Marketing Management

• Pricing of products or services

• Salesperson productivity

• Productivity software

• Products and customers profitability analysis

• Sales analysis and trends

• New products, services, and market planning


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Managing the Accounting and Finance Systems

TACTIAL SYSTEMSa. Budgeting Preparation and Controlb. Investment Managementc. Capital Budgeting d. Cost Analysis and Controle. Tax Management f. Auditingg. Financial Planning

INTERNAL ENVIRONMENT

Top ManagementOperation/ProductionMarketingHRMEngineering

EXTERNAL ENVIRONMENTIRSSECVendorsClientsCPA CompaniesSuppliersCustomersBusiness Partners

STRATEGIC SYSTEMSa. Strategic Planning b. Ratios and Financial Healthc. Merger and Acquisition Analysis

OPERATIONAL ANDTRANSACTION PROCESSING

SYSTEMSa. The General Ledger b. Sales Order Processingc. Accounts Payable and Receivabled. Receiving and Shipping e. Payroll f. Inventory Management g. Periodical Reports & Statements


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Managing the Accounting and Finance Systems

Strategic SystemsStrategic Systems

Tactical SystemsTactical Systems

Operational and Transaction

Processing System

Operational and Transaction

Processing System

Internal Environment

Internal Environment

ExternalEnvironment

ExternalEnvironment


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Financial Planning and Budgeting

• Financial and economic forecasting

• Planning for incoming funds

• Budgeting preparation and operation

• Capital budgeting decision


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Investment Management

• Access to financial and economical reports– Internet meta-search engines for finding financial

data– Internet directories and yellow pages– Software for monitoring, interpreting, analyzing

financial data, and alerting management

• Financial analysis– Treasury risk management systems (TRMS)


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Control and Auditing

• Budgetary control

• Auditing

• Financial health analysis

• Profitability analysis and cost control

• Product pricing


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Recruitment

• Position inventory

• Employee selection

• Using the Internet


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Human ResourcesMaintenance and Development

• Performance evaluation

• Training and human resources development

• Turnover, tardiness, and absenteeism analyses


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Human ResourcesPlanning and Management

• Personnel planning

• Succession planning

• Labor-management negotiations

• Benefits administration


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Internet Applications

• Eddify Corporation’s employee service systems allows users to access information via PCs, voice-recognition phone, kiosks, or faxes.

• Oracle corporation conducts its flexible benefits enrollment program on the intranet

• Apple Computers Inc. conducts extensive education and development activities on the intranet, including a remote management-training program


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Reasons for Integration

• Helps to reduce cost

• Helps to increase employees’ productivity

• Helps to facilitate information sharing and collaboration which are necessary for improving customer service

• IT helps CRM


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Customer Relationship Management (CRM)

• The company’s success depends on effectively managing relationship with customers

• Relationship marketing– 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

– include the concepts of loyalty and trust


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How is CRM Practiced?

• Know who the company’s current and potential customers are

• Know who is a good customer, and who are the most profitable customers for the business

• 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


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The Enabling Role of IT• Using intelligent agent technology, American Airlines generates

personalized Web pages for each of about 800,000 registered travel-planning customers

• 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

• Charles schwab’s call center handles effectively over 1 million customer calls every day

• State Farm Insurance Co. manages several initiatives for retaining customers by a computerized incentives system


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CRM Activities and IT Support

CRM Activity (Sample) IT SupportInformation 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


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CRM Activity (Sample) IT SupportMonitoring 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.


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CRM Activity (Sample) IT SupportCustomizing 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.

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Turban Site: Chapter_8.ppt