2 Chapter INFORMATION SYSTEMS IN THE ENTERPRISE
Management Information Systems 8/e Chapter 2 Information Systems in the Enterprise OBJECTIVES • What are the major types of systems in a business? What role do they play? • How do information systems support the major business functions? • Why should managers pay attention to business processes?
Management Information Systems 8/e Chapter 2 Information Systems in the Enterprise OBJECTIVES • What are the benefits and challenges of using enterprise systems? • What are the benefits of using systems to support supply chain management and collaborative commerce? • What are the benefits of using information systems for customer relationship management and knowledge management?
FAST-TRACK FASHIONS AT ZARA • In the fast-paced world of fashion retailing, nothing is as important as time to market. • No company knows that better than Zara, a worldwide women's apparel chain headquartered in La Coruna, Spain. • Apparel companies have farmed out their production to low-wage countries, hoping to benefit from lower labor costs. • Zara decided against this because its management believed that the ability to respond quickly to shifts in customer tastes would prove much more efficient and profitable than outsourcing to low-cost contract manufacturers.
FAST-TRACK FASHIONS AT ZARA • By meticulously coordinating the entire production process, Zara can react much more quickly than its competitors to percolating fashion trends. • Zara has what many believe is the world's most responsive supply chain. • About half the items it sells are made in its own factories; the rest are outsourced. • Zara restocks its stores twice a week, delivering both reordered items and completely new styles
FAST-TRACK FASHIONS AT ZARA • Rival apparel chains, in contrast, only receive new designs once or twice a season. • Zara's design department likewise outstrips the competition by churning out more than 10,000 fresh new designs each year. • No competitor comes close. "It's like you walk into a new store every two weeks," observes Tracy Mullin, president and CEO of the National Retail Federation.
FAST-TRACK FASHIONS AT ZARA • Every working day, the manager of a Zara store reports exactly what has been sold to corporate headquarters via the Internet. • This information is quickly relayed to the Zara's design department, which can create or alter products in a matter of days. • Within days, the new garments are cut, dyed, stitched, and pressed. In just 3 weeks the clothes will be hanging in Zara stores all over the world. Zara's time to market is 12 times faster than rivals such as the Gap
FAST-TRACK FASHIONS AT ZARA • Zara maintains a gigantic 9 million square foot warehouse in La Coruna that is connected to 14 of its factories through a maze of tunnels, each with a rail hanging from its ceiling. Along these rails, cables transport bunches of clothes on hangers or in suspended racks into the warehouse. • Each bundle is supported by a metal bar with a series of tabs coded to indicate exactly where in the warehouse that bundle should be placed. There, the merchandise is sorted, rerouted, and resorted until it gets to the staging area of the distribution center.
FAST-TRACK FASHIONS AT ZARA • Zara's manufacturing costs run 15 to 20 percent higher than those of rivals, but they are more than offset by the advantages of split-second time to market. In 2001, when many clothing chains saw sales and profits slide, Zara's profits climbed 31 percent, and the company has historically maintained steady profit margins that are among the best in the industry.
Management Information Systems 8/e Chapter 2 Information Systems in the Enterprise MANAGEMENT CHALLENGES • Integration:Different systems serve variety of functions, connecting organizational levels difficult, costly • Enlarging scope of management thinking:Most managers are trained to manage a product line, a division, or an office. They are rarely trained to optimize the performance of the organization as a whole, and often are not given the means to do so. • ES are Huge system investments, long development time must be guided by common objectives
Management Information Systems 8/e Chapter 2 Information Systems in the Enterprise Figure 2-1 KEY SYSTEM APPLICATIONS IN THE ORGANIZATION Types of Information Systems
Different Kinds of Systems • Operational-level systems support operational managers by keeping track of the elementary activities and transactions of the organization, such as sales, receipts, cash deposits, payroll, credit decisions, and the flow of materials in a factory. The principal purpose of systems at this level is to answer routine questions and to track the flow of transactions through the organization. • How many parts are in inventory? • What happened to Mr. Williams's payment? • How many hours worked each day by employees on a factory floor.
Different Kinds of Systems • Knowledge-level systems support the organization's knowledge and data workers. The purpose of knowledge-level systems is to: • Help the business firm integrate new knowledge into the business. • Help the organization control the flow of paperwork. • Knowledge-level systems, especially in the form of workstations and office systems, are among the most widely used applications in business today.
Different Kinds of Systems • Management-level systems serve the monitoring, controlling, decision-making, and administrative activities of middle managers. • The principal question addressed by such systems is: Are things working well? Management-level systems typically provide periodic reports rather than instant information on operations. • Some management-level systems support nonroutine decision making. • They tend to focus on less-structured decisions for which information requirements are not always clear. These systems often answer "what if" questions:External & Internal Data.
Different Kinds of Systems • Strategic-level systems help senior management TACKLE and ADDRESSSTRATEGIC issues and LONG-TERM trends, both in the FIRM and in the EXTERNAL environment. • Their principal concern is matching changes in the external environment with existing organizational capability. • What will EMPLOYMENT LEVELS be in FIVE YEARS? • What are the LONG-TERM INDUSTRY COST trends? • What PRODUCTS should we be making in FIVE YEARS?
Management Information Systems 8/e Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS • Executive Support Systems (ESS) at the strategic level • Decision Support Systems (DSS) at the management level • Management Information Systems (MIS) at the management level • Knowledge Work Systems (KWS) at the knowledge level • Office Automation Systems at the (OAS)knowledge level • Transaction Processing Systems (TPS) at the operational level
Management Information Systems 8/e Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS
Management Information Systems 8/e Chapter 2 Information Systems in the Enterprise Transaction Processing Systems (TPS) • Basic business systems that serve the operational level • A computerized system that performs and records the daily routine transactions necessary to the conduct of the business. • Examples are sales order entry, hotel reservation systems, payroll, employee record keeping, and shipping. • At the operational level, tasks, resources, and goals are predefined and highly structured.
Transaction Processing Systems (TPS) • Transaction processing systems are often so central to a business that TPS failure for a few hours can spell a firm's end and perhaps other firms linked to it. • TPS are also major producers of information for the other types of systems. For example, the payroll system along with other accounting TPS, supplies data to the company's general ledger system, which is responsible for maintaining records of the firm's income and expenses and for producing reports such as income statements and balance sheets.
Management Information Systems 8/e Chapter 2 Information Systems in the Enterprise Figure 2-3 MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS Payroll TPS
Management Information Systems 8/e Chapter 2 Information Systems in the Enterprise Figure 2-4 MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS Types of TPS Systems
KNOWLEDGE WORK SYSTEMS (KWS) • Knowledge work systems (KWS) and office systems serve the information needs at the knowledge level of the organization. • Knowledge work systems aid knowledge workers, whereas Office Automation systems primarily aid data workers (although they are also used extensively by knowledge workers).
OFFICE AUTOMATION SYSTEMS TOWARD A “PAPERLESS” OFFICE Typical office systems handle and manage documents through • Word processing • Desktop publishing • Document imaging • Scheduling(electronic calendars) • Communication(through electronic mail, voice mail, or videoconferencing).
KNOWLEDGE WORK SYSTEMS (KWS) Knowledge Work Systems (KWS): Knowledge level • Inputs:Design specs • Processing:Modeling • Outputs:Designs, graphics • Users:Technical staff and professionals Example: Engineering work station
Management information systems • Management information systems (MIS) serve the management level of the organization, providing managers with reports or with on-line access to the organization's current performance and historical records. • They are oriented almost exclusively to internal, not environmental or external, events. • MIS primarily serve the functions of planning, controlling, and decision making at the management level. • They depend on underlying transaction processing systems for their data.
AL- ALAWI DEFINITION OF MANAGEMENTINFORMATION SYSTEMS (MIS): MIS is a system which provides historical, present and predictive information derived from both the internal operation of the organization and the external environment. MIS supplies accurate, selective and timely information and supports the information needs of management activity to assist in decision-making. The author’s working definition of MIS will apply to both profit making organization as well as non-profit organization as it provides and supplies all different types of all levels of management activity in order to help them in their decision-making.
Management information systems • MIS usually serve managers interested in weekly,monthly, and yearly results–not day-to-day activities. • MIS reports might compare total annual sales figures for specific products to planned targets. • These systems are generally not flexible and have little analytical capability. • Most MIS use simple routines such as summaries and comparisons, as opposed to sophisticated mathematical models or statistical techniques.
Management information systems Management level • Inputs: High volume data • Processing: Simple models • Outputs: Summary reports • Users: Middle managers Example: Annual budgeting
DECISION SUPPORT SYSTEMS • DSS help managers make decisions that are unique, rapidly changing, and not easily specified in advance. • They address non-routine problems DSS use internal information from TPS and MIS bring in information from external sources, such as product prices of competitors. • DSS have more analytical power than other systems. • They are built explicitly with a variety of models to analyze data • DSS include user-friendly software. • DSS are interactive; the user can change assumptions, ask new questions
DECISION SUPPORT SYSTEMS (DSS) MANAGEMENT LEVEL • INPUTS: LOW VOLUME DATA • PROCESSING: INTERACTIVE • OUTPUTS: DECISION ANALYSIS • USERS: PROFESSIONALS, STAFF EXAMPLE: CONTRACT COST ANALYSIS
DECISION SUPPORT SYSTEMS (DSS) • FLEXIBLE, ADAPTABLE, QUICK • USER CONTROLS INPUTS/OUTPUTS • NO PROFESSIONAL PROGRAMMING • SUPPORTS DECISION PROCESS • SOPHISTICATED MODELING TOOLS *
VOYAGE-ESTIMATING SYSTEM • The system can answer questions such as the following: Given a customer delivery schedule and an offered freight rate, which Truck should be assigned at what rate to maximize profits? • What is the optimum speed at which a particular Truck can optimize its profit and still meet its delivery schedule? • What is the optimal loading pattern for a ship bound for the U.S. West Coast from Malaysia?
EXECUTIVE SUPPORT SYSTEMS (ESS) • ESS serve the strategic level of the organization. • They address long term non-routine decisions requiring judgment, evaluation, and insight because there is no agreed-on procedure for arriving at a solution. • ESS are designed to incorporate data about external events such as new tax laws or competitors, but they also draw summarized information from internal MIS and DSS.
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 • VERY EXPENSIVE TO KEEP UP • EXTENSIVE SUPPORT STAFF • TIES CEO TO ALL LEVELS *
Management Information Systems 8/e Chapter 2 Information Systems in the Enterprise Figure 2-8 MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS Executive Support System (ESS)
Relationship of Systems to One Another • Systems serving different levels in the organization are related to one another. • TPS are typically a major source of data for other systems. • ESS are primarily a recipient of data from lower-level systems. • The other types of systems may exchange data with each other as well. • Data may also be exchanged among systems serving different functional areas. For example, an order captured by a sales system may be transmitted to a manufacturing system as a transaction for producing or delivering the product specified in the order.
SYSTEMS FROM A FUNCTIONAL PERSPECTIVE • SALES & MARKETING SYSTEMS • MANUFACTURING & PRODUCTION SYSTEMS • FINANCE & ACCOUNTING SYSTEMS • HUMAN RESOURCES SYSTEMS *
SALES AND MARKETING INFORMATION 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
SALES AND MARKETING INFORMATION SYSTEMS • Selling the organization's products or services. • Sales&Marketing is concerned with: • Identifying the customers for the firm's products or services • Determining what they need or want • Advertising and promoting these products and services. • Sales is concerned with: • Contacting customers • Selling the products and services • Taking orders, and following up on sales.
MANUFACTURING AND PRODUCTION INFORMATION 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
MANUFACTURING AND PRODUCTION INFORMATION SYSTEMS Producingthe firm's goods and services.Manufacturing and production activities deal with: • The planning, development, and maintenance of production facilities • The acquisition, storage, and availability of production materials • The scheduling of equipment, facilities, materials, and labor required to fashion finished products.
Management Information Systems 8/e Chapter 2 Information Systems in the Enterprise SYSTEMS FROM A FUNCTIONAL PERSPECTIVE Most manufacturing and production systems use some sort of inventory system Overview of Inventory Systems