1. Management Information Systems,Sixth EditionChapter 3:Business Functions and Supply Chains

2. Objectives Identify various business functions and the roleof ISs in these functions Explain how ISs in the basic business functionsrelate to each other Articulate what supply chains are and howinformation technology supports management ofsupply chainsManagement Information Systems, Sixth Edition2 3. Objectives (continued) Enumerate the purposes of customerrelationship management systems Explain enterprise resource planning systemsManagement Information Systems, Sixth Edition3 4. Effectiveness and Efficiency Information technology makes work moreeffective, more efficient, or both Effectiveness: the degree to which a goal isachieved Efficiency: the relationship between resourcesexpended and benefits gained in achieving agoal Efficiency = Benefit / Costs One system is more efficient if its operating costs are lower for the same or better quality productManagement Information Systems, Sixth Edition4 5. Effectiveness and Efficiency(continued) Productivity: efficiency of human resources Productivity improves when fewer workers are required to achieve the same goal Productivity tools: software applications thatimprove productivity ISs contribute to both effectiveness andefficiency of businessesManagement Information Systems, Sixth Edition 5 6. Effectiveness and Efficiency(continued) Customer relationship management (CRM)system: system that serves customers betterand faster Service continues after delivery of goods as customer service and more marketing Often combined with supply chain management (SCM) systems to create an enterprise resource planning (ERP) systemManagement Information Systems, Sixth Edition 6 7. Effectiveness and Efficiency(continued)Management Information Systems, Sixth Edition 7 8. Effectiveness and Efficiency(continued)Management Information Systems, Sixth Edition 8 9. Accounting Accountings purpose is to track every financialtransaction Accounting systems are required by law and forproper management Needed to ensure company is making a profit Accounts payable and accounts receivable trackwho owes who what Balance sheet: picture of financial situation Includes profit-and-loss reportManagement Information Systems, Sixth Edition9 10. Accounting (continued) Accounting information system: receivesinformation from transaction processing systems(TPSs) Automatically routes purchases to accounts payable Automatically routes sales to accounts receivable Generates reports on demand or on schedule Work order: an authorization to perform workfor a specific purposeManagement Information Systems, Sixth Edition 10 11. Accounting (continued) Cost-accounting systems: accumulate dataabout costs involved in producing specificproducts Accounting ISs are used for managerialpurposes for budgeting and cost controlManagement Information Systems, Sixth Edition 11 12. Accounting (continued)Management Information Systems, Sixth Edition 12 13. Finance Firms health is measured by its finances Information systems can improve financialmanagement Financial managers goal is to manage moneyas efficiently as possible by: Collecting payables as soon as possible Making payments at the latest time allowed Ensuring funds are available for daily operations Investing funds not used for current activitiesManagement Information Systems, Sixth Edition13 14. Finance (continued)Management Information Systems, Sixth Edition 14 15. Cash Management Financial information systems help managerstrack company finances Cash management systems: systems that dealspecifically with cash Electronic funds transfer: electronic transfer ofcash from one bank account to anotherManagement Information Systems, Sixth Edition15 16. Investment Analysis and Service Investors goal is to buy an asset and sell it for ahigher value When investing in securities, you must knowcurrent prices in real time Nearly instantaneous information systems canprovide investors and clients with financial news,stock prices, commodity prices, and currencyexchange ratesManagement Information Systems, Sixth Edition 16 17. Investment Analysis and Service(continued) Some important factors to consider in investing: Variability of the securitys past yield Expected return Liquidity (how fast an investment can be turned into cash)Management Information Systems, Sixth Edition17 18. Engineering Time to market: time between generating anidea for a product and completing a prototype Brainstorming: process of a group ofcolleagues meeting and collaborating togenerate creative solutions and new ideas Minimizing time to market is key to maintainingcompetitive edge Information systems can contribute significantlyto minimizing time to marketManagement Information Systems, Sixth Edition18 19. Engineering (continued) Computer-aided design (CAD): tools to create,modify, and store designs and drawingselectronically Rapid prototyping: creating one-of-a-kindproducts to test design in three dimensions Allows a model to be produced in hours rather than days or weeks Computer-aided manufacturing (CAM):systems that instruct machines how tomanufacture parts and assemble productsManagement Information Systems, Sixth Edition19 20. Engineering (continued)Management Information Systems, Sixth Edition 20 21. Supply Chain Management Supply chain: consists of procurement of rawmaterials, processing materials into goods, anddelivering goods Processing raw materials into goods is alsoknown as manufacturing Supply chain management: monitoring,controlling, and facilitating supply chains CAD systems often transfer data automaticallyto CAM systemsManagement Information Systems, Sixth Edition 21 22. Supply Chain Management (continued) IT helps in manufacturing activities: Scheduling plant activities to optimize the use of resources Planning material requirements based on current and forecasted demand Reallocating materials and resources from one order to another Managing inventories Grouping similar work orders for efficiencyManagement Information Systems, Sixth Edition 22 23. Supply Chain Management (continued)Management Information Systems, Sixth Edition 23 24. Material Requirements Planning and Purchasing Material requirements planning (MRP):inventory control Determines when inventory needs to be restocked Can predict future need based on demand forecasts Takes customer demand as input, then works back to calculate resources needed to produce goodsManagement Information Systems, Sixth Edition24 25. Material Requirements Planningand Purchasing (continued) Bill of materials (BOM): list of all raw materialsand subcomponent demands to produce aproduct Economic order quantity (EOQ): optimalquantity of a raw material that minimizesoverstocking and saves cost, without missingproduction deadlines Considers cost, discounts for large quantities, cost of warehousing material, cost of alternative uses of money, etc.Management Information Systems, Sixth Edition25 26. Manufacturing Resource Planning Manufacturing resource planning (MRP II):combines MRP with other related activities toplan the entire manufacturing process Uses master production schedule Master production schedule: specifies howproduction capacity is to be used to meetcustomer demands Just-in-time manufacturing: suppliers shipparts directly to assembly lines as needed Avoids warehousing costsManagement Information Systems, Sixth Edition 26 27. Monitoring and Control Information systems are designed to controlmanufacturing processes as well as monitorthem Controlling processes helps ensure qualityManagement Information Systems, Sixth Edition 27 28. Shipping Performed by manufacturer or shippingcompany Many variables affect cost and speed ofshipping, including: Length of routes Sequence of loading and unloading Type of shipped materials (e.g., perishable, hazardous, fragile) Fuel prices Road tollsManagement Information Systems, Sixth Edition 28 29. Shipping (continued) Sophisticated software that optimizes shippingefficiency helps a company stay competitive Need to optimize: Shipping time Cost of labor Use of equipment Maintenance Vehicles equipped with computers, globalpositioning systems (GPS), and satellitecommunication have increased efficiencyManagement Information Systems, Sixth Edition29 30. Shipping (continued)Management Information Systems, Sixth Edition 30 31. RFID in SCM Radio frequency identification (RFID): atechnology containing circuitry that allowsrecording of information about a product Electronic product code (EPC): a code onan RIFD tag that provides more informationthan the universal product code (UPC) Information may include date of manufacturing, plant location, expiration date, destination Ensures genuineness of productsManagement Information Systems, Sixth Edition 31 32. RFID in SCM (continued)Management Information Systems, Sixth Edition 32 33. RFID in SCM (continued)Management Information Systems, Sixth Edition 33 34. Customer Relationship Management Customer relationship management (CRM)systems: designed to support any and allrelationships with customers Supports three areas Marketing Sales Customer service CRM systems capture the entire customerexperience with an organization All company employees who deal with the customer have access to this informationManagement Information Systems, Sixth Edition 34 35. Customer Relationship Management(continued)Management Information Systems, Sixth Edition 35 36. Market Research To promote products successfully, organizationsmust perform market research Market research: helps discover populationsand regions that are most likely to purchaseproduct Activities may include: Conducting interviews with consumers and retailers Building statistical models to predict sales volumes of different productsManagement Information Systems, Sixth Edition 36 37. Targeted Marketing Targeted marketing: promotes to people mostlikely to purchase products Database technology allows all companies touse targeted marketing, even small companies Can direct promotional dollars to customersmost likely to buy Spam: cheap method of advertising involvingsending mass e-mail communicationsManagement Information Systems, Sixth Edition37 38. Targeted Marketing (continued)Management Information Systems, Sixth Edition 38 39. Targeted Marketing (continued) Database management systems sort consumersbased on demographic information Telemarketing: marketing over the telephone Caller has large database of consumer data Computer telephony integration: allowscomputer to use telephone line as input Caller ID can be used to locate customer data Data mining: uses large data warehouses tofind trends and shopping habits of variousdemographic groupsManagement Information Systems, Sixth Edition39 40. Targeted Marketing (continued) Targeted marketing and Web technologiesenable retailers to personalize online shopping Software can track Web page click streams todetermine customer preferencesManagement Information Systems, Sixth Edition 40 41. Customer Service Web-based customer service providesautomated customer service 24/7 Saves labor costs Saves paper costs Includes FAQs, tracking systems, maintenanceof customer profiles Artificial intelligence may be used to emulate areal-life customer service representativeManagement Information Systems, Sixth Edition41 42. Salesforce Automation Equips traveling salespeople with informationtechnology to improve productivity Laptops and personal digital assistants (PDAs) Makes sales presentations more efficient Allows salespeople to present different optionsfor products and services at the customerlocationManagement Information Systems, Sixth Edition 42 43. Human Resource Management Human resource management (HRM) can beclassified into five main activities: Employee record management Promotion and recruitment Training Evaluation Compensation and benefits managementManagement Information Systems, Sixth Edition 43 44. Human Resource Management (continued)FManagement Information Systems, Sixth Edition 44 45. Employee Record Management HR departments must keep personnel records To satisfy laws For payroll and tax calculation and deposit For promotion consideration For periodic reporting Human resource ISs are now digitized Saves space to store records, time to retrieve them, and costs of bothManagement Information Systems, Sixth Edition 45 46. Employee Record Management(continued)Management Information Systems, Sixth Edition 46 47. Promotion and Recruitment HR can select best-qualified person for positionby searching database of applicants and existingemployees for specific criteria Automating the selection process significantlyminimizes time and money for recruitment Intranet: inter-organizational network thatsupports Web applications Allows HR manager to post position vacancy announcements that get wide exposureManagement Information Systems, Sixth Edition 47 48. Training One important HR function is improvingemployee skills Multimedia software training is replacingclassrooms and teachers May include 3D virtual reality simulated environments in which the employee must act Information technology reduces training costsdramaticallyManagement Information Systems, Sixth Edition48 49. Evaluation Employee ability must be periodically evaluatedby supervisors May include evaluation of technical ability, communication skills, professional conduct, and general behavior Often a subjective process, which is a problem Evaluation software tries to solve this problemby standardizing evaluation process Provides tools to aid in evaluating every employee fairly and objectivelyManagement Information Systems, Sixth Edition49 50. Compensation and BenefitsManagement Compensation includes salary, hourly pay,commissions, and bonuses Programs calculate pay and taxes Automatically generate paychecks and perform direct deposits Software can help manage benefits Benefits database accessible through intranet or InternetManagement Information Systems, Sixth Edition 50 51. Supply Chain Management Systems Overall inventory in the U.S. is decreasing whileU.S. gross domestic product (GDP) is increasing Money saved from reduced inventory can bespent elsewhere Reduction in inventory attributed to the use ofISs, especially supply chain managementsystems Streamline operations throughout chain ERP systems can also serve as SCM systems,connecting multiple organizationsManagement Information Systems, Sixth Edition51 52. Supply Chain Management Systems (continued)Management Information Systems, Sixth Edition 52 53. The Importance of Trust Supply chain systems work best when allbusinesses in the chain are sharing information Trust between allied companies facilitatescollaboration Risk of disclosing important information tocompetitors is present Risk of taking advantage of demand figures bycharging higher prices is presentManagement Information Systems, Sixth Edition 53 54. The Musical Chairs of Inventory Small enterprises do not use SCM systems Affect more powerful organization to which small enterprise is linked Inventory turns: the number of times thebusiness sells its inventory per year When SCMs of companies are not linked,demand requirements are unknown, so supplycompanies must overstock inventory One company sits with lean inventory whileother stands with overstock, hence musicalchairsManagement Information Systems, Sixth Edition 54 55. Collaborative Logistics Web allows organizations from differentindustries to collaborate Businesses combine freight and share trucks Can optimize logistics by connecting SCM systems SCM systems can allow collaborativewarehousing to share warehouse spaceManagement Information Systems, Sixth Edition 55 56. Enterprise Resource Planning Many companies replace old, disparateinformation systems with enterprise applications Enterprise resource planning (ERP) system:manages daily operations and facilitatesplanning Current ERP market includes four vendors: SAP Oracle Microsoft Sage SoftwareManagement Information Systems, Sixth Edition56 57. Challenges and Disadvantagesof ERP Systems ERP systems pose many challenges: They are complex They often require special tailoring for specific organizations They may not support a companys unique sets of business processes They are expensive A process that becomes a weak link in one area may negatively affect other integrated processesManagement Information Systems, Sixth Edition57 58. Providing the Missing Reengineering Although most reengineering projects of the1990s failed, ERP systems helped realize manyof those ideas ERP systems forced changes in processes ERP systems allow better planning andmanaging of processes at the organizationallevel instead of at the organizational unit levelManagement Information Systems, Sixth Edition 58 59. Summary Effectiveness is the degree to which a task isaccomplished Efficiency is the ratio of output to input Productivity is the measure of peoples efficiency Information systems have been integrated intoaccounting services Financial information systems help managerstrack cashManagement Information Systems, Sixth Edition 59 60. Summary (continued) Computer-aided design (CAD) systems helpengineers design new projects Computer-aided manufacturing (CAM) systemsdirect machines that assemble parts Supply chain management (SCM) systemsoptimize workload, speed, and cost in supplychains Customer relationship management (CRM)includes the entire cycle of relationships withcustomersManagement Information Systems, Sixth Edition 60 61. Summary (continued) Human resource management systems facilitatestaff selection and record keeping Multiple companies SCM systems can belinked, facilitating cooperation, which requirestrust An enterprise resource planning (ERP) systemcan encompass all business processes, but isexpensive and challengingManagement Information Systems, Sixth Edition 61