Types of Information Systems

MBA 655 Management of Information Systems:

Theory and Applications

Dr. Ndeh Ntomambang Ningo

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 Types of Information Systems
Outline
▪ Information Systems
• Information system (IS) and Information Technology (IT)
• Definition of information system
• Four components of information systems
1) Information technology (IT)
2) People
3) Processes
4) Structure

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 Types of Information Systems
Outline
▪ Why do organizations build information systems?
• Every organization is unique
1) Strategy
2) Culture
3) Infrastructure
4) External environment
▪ Information systems and organizational change
▪ First order perspective: Automate
▪ Second order perspective: Informate
▪ Third order perspective: Transform

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 Types of Information Systems
Outline
▪ Categorizing Information Systems
• Hierarchical Perspective
1) Operational level
2) Managerial level
3) Executive level
• Functional Perspective
Functional area information systems
• Process perspective
Business process re-engineering
▪ Enterprise Wide Systems
• Rise of enterprise wide systems
• Supporting business processes
• Enterprise Resource Planning (ERP) Systems
• Supply Chain Management (SCM) Systems
• Customer Relationship Management (CRM) Systems

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Types of Information Systems

Information Systems

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 Types of Information Systems
Information System Not Information Technology
Among all the potentially confusing terms, information system,
usually abbreviated IS, is one of the most misused, often being
used as a synonym for information technology. But there is a critical
difference between IT and IS!

Consider an illustrative example.

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 Types of Information Systems
Information System Not Information Technology
The famous Ricasoli Winery is the oldest family-owned winery in
Italy, producing wine in the heart of the Chianti region since
1141. Bettino Ricasoli perfected the “sublime wine” blend in 1872
after years of studies and experiments at a time when his estate
was exporting wine all over Italy and beyond.
Did the Ricasoli estate have an information system when the
baron perfected the Chianti recipe?

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 Types of Information Systems
IS Not IT
The answer is yes, of course.
▪ The Ricasoli Winery’s information system allowed the firm to take
orders, track payments, organize activities around the farm, manage
its inventory of aging wines, and help the baron collect information
about the blends and treatments that enabled the wine to maintain
its organoleptic characteristics when shipped far from the Brolio
Castle. Using books and ledgers, the technology of the time, the
estate was able to keep track of all data and information necessary to
its proper operations and longevity.
▪ Yet the first-known implementation of digital computing did not
occur until World War II, and digital computers did not begin to
enter business organizations until after the war.
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 Types of Information Systems
IS Not IT
Clearly, while IT is a Information Technology (IT)
(Computers, Other) Information
fundamental
• Data (organized,
System (IS)
component of any Use
meaningful) Procedures
modern information • Representations of
system, we can see Knowledge
from this example that
IT and IS are separate
concepts.

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 Types of Information Systems
Definition of management information system
Information systems are formal, sociotechnical,
organizational systems designed to collect, process, store, and
distribute information.
One key aspect of this definition is the concept of a sociotechnical system.
Sociotechnical theory
• questioned overly optimistic predictions about the potential benefits of new
technology and
• suggested that the impact of new technologies on work systems was not a
direct one but depended on the interplay of technology with other aspects, or
components, of the work system.

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 Types of Information Systems

Four Components of an Information System

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 Types of Information Systems
The Four Components of an
Information System

Any formal organizational IS can be

represented as having four
fundamental components that must
work together to deliver the
information processing functionalities
that the firm requires to fulfill its
information needs.
▪ The four components of an IT-based
information system are
• IT,
• people,
• processes, and
• Structure.
Information system components 12
 Types of Information Systems
The Four Components of an
Information System
▪ The four components can be
grouped into two subsystems:
• the technical subsystem
comprising IT and processes, is
that portion of the information
system that does not include
human elements. and
• the social subsystem, comprising
people and people in relation to
one another (i.e., structure),
represents the human element of
the IS.

Information system components 13

 Types of Information Systems
The Four Components of an Information System

▪ Information Technology: IT is defined here as

hardware, software, and telecommunication equipment.
▪ The IT component is a cornerstone of any modern IS,
enabling and constraining action through rules of
operation that stem from its design.

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 Types of Information Systems
The Four Components of an Information System

Process: The process component of an information

system is the series of steps necessary to complete a
business activity.

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 Types of Information Systems
The Four Components of an Information System
▪ As an example of a process, consider the job of a small,
family-owned grocery store manager and the process
involved when restocking inventory. The store manager
must
1) check the inventory and identify the needed items;
2) call individual suppliers for quotes and delivery dates;
3) compare the various quotes;
4) select one or more suppliers for each of the needed items
based on the terms of the agreement (e.g., availability,
quality, delivery);

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 Types of Information Systems
The Four Components of an Information System

5) call these suppliers and place the orders;

6) receive the goods upon delivery, checking the
accuracy and quality of the shipped items; and
7) pay the suppliers.

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 Types of Information Systems
The Four Components of an Information System

▪ Business processes can become very complex, spanning

multiple individuals or organizational entities.

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 Types of Information Systems
The Four Components of an Information System

▪ To illustrate the complexity of business processes,

discuss the processes involved in receiving and filling a
customer’s order. Consider all the individuals,
functional areas of the organization, and external
influences involved.

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 Types of Information Systems
The Four Components of an Information System
Fulfilling a customer
order involves a complex
set of steps that requires
the close coordination of
the sales, accounting, and
manufacturing functions.

Are there any other

possible actors, missing
in this illustration, that
could participate in the
processes of fulfilling an
order?

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Types of Information Systems
EXAMPLES OF
FUNCTIONAL
BUSINESS
PROCESSES
 Types of Information Systems
The Four Components of an Information System

▪ Process:
▪ Note that the same activity may be performed using a variety of different
business processes. Note also that gaps can exist between the official
business process and customer service protocols and the informal ways in
which these processes are actually performed.
▪ This potential discrepancy between the business processes as designed by
the organization and the manner in which it is actually enacted is often the
root cause of IS failure.

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 Types of Information Systems
The Four Components of an Information System

▪ People: The people component refers to those individuals or

groups directly involved in the information system. These
individuals or groups are end users, managers, or IT
professionals; each may have their own set of skills, attitudes,
preconceptions, and personal agendas that determine what they
are able to do and what they will elect to do as part of the IS.

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 Types of Information Systems
The Four Components of an Information System

Structure:
▪ The organizational structure component (or “structure” for short)
refers to the organizational design (hierarchy, decentralized);
reporting (functional, divisional, matrix); and relationships
(communication and reward mechanisms) within the information
system.
▪ Structure is difficult to identify sometimes, but you can think of it as
the implicit or explicit rules that govern relationships between the
people involved in the information system.

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 Types of Information Systems
The Four Components of
an Information System
Systemic Effects
▪ All four components are
necessary to ensure that the
information system is successful
and delivers the functionality it
was intended to provide. If any
one of the four components is
broken, the system as a whole
would stop working.

Information system components

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 Types of Information Systems
The Four Components of an
Information System
Systemic Effects
▪ More subtly, the four components of an
information system don’t work in
isolation but instead interact with one
another—as shown by the arrows in the
figure. This notion of the
interdependence of the components goes
by the name systemic effects, indicating
that changes in one component (e.g., the
introduction of a new software
application, a process redesign, a new
organization chart, or turnover among
employees) affect all other components of
the system and, if not properly managed,
its outputs.
Information system components
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 Types of Information Systems

Why Do Organizations Build Information Systems?

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 Types of Information Systems
Why Do Organizations Build Information Systems?
▪ Simply put, a firm’s objective when introducing IT-enabled
information systems is to fulfill its information processing
needs.
▪ In business, people and organizations seek and use information
mainly to make sound decisions and to solve problems - two
closely related practices that form the foundation of every
successful company.
▪ More typically, an organization introduces information systems
in an effort to improve its efficiency and effectiveness.

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 Types of Information Systems
Why Do Organizations Build
Information Systems?
▪ In order to fulfill its information
processing needs, an organization must
capture relevant data that are then
manipulated, or processed, to produce an
output that will be useful to the
appropriate users, either internal or
external to the firm (e.g., customers). Information processing in an IS
These data and information are typically
accumulated, or stored, for future retrieval
and use (see figure). Thus while not a
component of the information system per
se, information plays a critical role in
modern organizations.

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 Types of Information Systems
Why Do Organizations Build Information Systems?
To Improves Business Processes
Exactly how do information systems improve business processes? Information
systems
▪ automate many steps in business processes that were formerly performed
manually, such as checking a client’s credit or generating an invoice and shipping
order.
▪ can actually change the flow of information, making it possible for many more
people to access and share information,
▪ replace sequential steps with tasks that can be performed simultaneously,
▪ eliminate delays in decision making. and
▪ frequently change the way a business works and supports entirely new business
models.

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 Types of Information Systems
Why Do Organizations Build Information Systems?
▪ Beyond efficiency and effectiveness improvements and the associated
financial considerations, information systems have other direct and
indirect effects on people within and outside the firm (e.g., employees,
customers, suppliers). These effects can be positive, including
empowering employees’ and widening the scope of their responsibility,
or negative, resulting in deskilling (i.e., reducing the scope of an
individual’s work to one, or a few, specialized tasks), loss of
responsibility, and the creation of a monotonous working environment.

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 Types of Information Systems
Why Do Organizations Build Information Systems?
▪ Another important outcome of information systems use
pertains to their effect on future opportunities available to
the firm. The introduction of a new information system
may enable or constrain future information systems and
strategic initiatives available to the organization. This is due
to the fact that future systems typically rely on, or connect
with, preexisting ones.

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 Types of Information Systems

Every Organization Is Unique

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 Types of Information Systems
Every Organization Is Unique

A firm is characterized by its

1) strategy,
2) its culture, and
3) its current infrastructure,
stemming from the organization’s history, size, product line,
location, values, and other factors.

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 Types of Information Systems
Every Organization Is Unique

1) Firm Strategy: A firm’s strategy represents the manner in

which the organization intends to achieve its objectives. In
other words, understanding a firm’s strategy indicates what
the firm is trying to do and what course of action it intends to
follow to achieve its intentions.

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 Types of Information Systems
Every Organization Is Unique
2) Culture is a set of major understandings and assumptions
shared by a group, such as within an ethnic group or a country.
Organizational culture consists of the major understandings
and assumptions for an organization. The understandings,
which can include common beliefs, values, and approaches to
decision making, are often not stated or documented as goals
or formal policies.

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 Types of Information Systems
Every Organization Is Unique
2) Firm Culture: A firm’s culture is defined as the collection of
beliefs, expectations, and values shared by the organization’s
members. The firm’s culture is a broad representation of how
the firm does business, is an important characteristic of the
organization because it captures the often unspoken and
informal way in which the organization operates. Practices
that are deemed appropriate in one organization may not be
in another one.

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 Types of Information Systems
Every Organization Is Unique
3) Infrastructure: When it comes to making information systems
decisions, it is also important to consider the current IT
infrastructure of the firm. The existing IT infrastructure,
defined as the set of shared IT resources and services of the
firm, constrains and enables opportunities for future
information systems implementations.

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 Types of Information Systems
Every Organization Is Unique
4) The External Environment: Organizations themselves don’t
exist in a vacuum but instead are embedded in the external
environment that encompasses regulation, the competitive
landscape, and general business and social trends (e.g.,
outsourcing, customer self-service).

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 Types of Information Systems
Every Organization Is Unique
The discussions on information systems
use and the context of information
systems are summarized in the following
figure, which indicates that the
immediate effect of information systems
is whether or not they are used. If they
are used, then intended and unintended
outcomes ensue, including financial
results, effects on people, and effects on
the future opportunities and constraints
available to the firm.

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 Types of Information Systems
Every Organization Is Unique
▪ The model also shows that information
systems do not exist in a vacuum but
are embedded in a specific
organizational context, defined by the
firm’s strategy, culture, and IT
infrastructure.
▪ Moreover, the organization itself does
not exist in isolation but is embedded in
the external environment, including
social and competitive forces.

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 Types of Information Systems
Every Organization Is Unique
▪ The feedback loops represented by the
solid, bold line remind us that the
outcomes produced by the information
system, whether positive or negative,
will affect organizational characteristics
and future information systems
decision making.

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 Types of Information Systems
Every Organization Is Unique
▪ This model is important for you
as a manager because it draws to
your attention all the external
influences that will aid or
undermine information
system success.

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 Types of Information Systems

Information Systems and Organizational Change

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 Types of Information Systems
Information Systems and Organizational Change

Organization: A group of people that is structured and

managed to meet its mission or set of group goals.
“Structured” means that there are defined relationships
between members of the organization and their various
activities, and that processes are defined that assign roles,
responsibilities, and authority to complete the various
activities.

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 Types of Information Systems
Information Systems and Organizational Change
Organizational change deals with how organizations successfully plan for,
implement, and handle change. Change can be caused by internal factors,
such as those initiated by employees at all levels, or by external factors, such
as those brought about by competitors, stockholders, national laws,
community regulations, natural disasters, and general economic conditions.
Implementing change, such as a new information system, introduces
conflict, confusion, and disruption. People must stop doing things the way
they are accustomed to and begin doing them differently.

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 Types of Information Systems
Information Systems and Organizational Change

With the widespread adoption of IT by modern organizations,

increasingly this organizational change is brought on by the
introduction of new IT. Specifically, we can identify three levels of
organizational change brought about by the introduction of new IT:
1) First Order: Automate
2) Second Order: Informate
3) Third Order: Transform

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 Types of Information Systems
Information Systems and
Organizational Change
1) First Order: Automate
The simplest order of change
ensuing from the deployment of
technology is automation. This
level of change involves
technology and processes but does
not affect the sphere of the social
subsystem. First-order change
occurs when an IT innovation is
introduced that modifies how an
existing process is performed.
First-order change
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 Types of Information Systems
Information Systems and
Organizational Change
Second-Order Change: Informate
Second-order change has major
implications for the “people”
component of the information systems
as well as IT and processes. With
second-order change, not only the
manner in which the process is
performed changes but also those
individuals who perform it are affected
by the change - either their role is
modified or a different set of people is Second-order change
now involved.
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 Types of Information Systems
Information Systems and
Organizational Change
Second-Order Change: Informate
Moreover, the manner in which people
interact with the technology also
undergoes modification. This level of
change typically occurs when the
information intensity of the process
being performed changes substantially
due to the introduction of new IT. For
this reason, this level of change is called
informate. Second-order change
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 Types of Information Systems
Information Systems and
Organizational Change
Third-Order Change:
Transform
Third-order change represents the most
pervasive and radical level of change —as
such, it is often referred to as transform.
Third-order change incorporates first- and
second-order change while also causing
organizational structure disruptions.
▪ The interaction between structure and
technology is substantiated by a change
in the way the organization selects, uses,
and manages technology.

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 Types of Information Systems
Information Systems and
Organizational Change
Third-Order Change:
Transform
▪ The interaction between the
organizational structure and the people
generally results in a change in the
reporting and authority structure of the
organization. A flatter or more permeable
organizational structure usually emerges
after the technology implementation.
▪ The interaction between the
organizational structure and tasks
manifests itself in a novel way of task
accomplishment or a new set of tasks.
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 Types of Information Systems

Categorizing Systems

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 Types of Information Systems
Categorizing Systems
Information systems can be categorized in three ways:
1) Hierarchical Perspective
2) Functional Perspective
3) Process Perspective

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 Types of Information Systems
Categorizing Systems
Information systems can be categorized in two ways:

1)Hierarchical Perspective
2) Functional Perspective
3) Process Perspective

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 Types of Information Systems
Categorizing Systems : Hierarchical Perspective

▪ The hierarchical perspective recognizes that decision making

and activities in organizations occur at different levels.
▪ At each level of the hierarchy, the individuals involved have
different responsibilities, make different types of decisions, and
carry out different kinds of activities.
▪ As a consequence, the type of information systems introduced
to support each level must take these differences into account.

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 Types of Information Systems
Categorizing Systems : Hierarchical Perspective

There are three levels in the hierarchical perspective:

i. Operational level
ii. Managerial level
iii. Executive level

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 Types of Information Systems
Categorizing Systems : Hierarchical Perspective

There are three levels in the hierarchical perspective:

i. Operational level
ii. Managerial level
iii. Executive level

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 Types of Information Systems
Categorizing Systems : Hierarchical Perspective

Hierarchical
perspective
with
associated
information
systems
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 Types of Information Systems
Categorizing
Systems :
Hierarchical
Perspective

There are three levels for

decision making in the
hierarchical perspective:
i. Executive level
ii. Managerial level
iii. Operational level
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 Types of Information Systems
Categorizing Systems : Hierarchical Perspective

i) Operational Level
▪ The operational level of the organization is mostly concerned with short-term
activities, typically those that occur in the immediate term. Operational
personnel are focused on performing the day-today activities that deliver the
firm’s value proposition.
▪ Decision making at the operational level is typically highly structured by
means of detailed procedures, and traditionally, front-line employees enjoy
little discretion. The objective here is efficient transaction processing under a
limited degree of uncertainty.

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 Types of Information Systems
Categorizing Systems : Hierarchical Perspective

i) Operational Level
▪ We refer to the information systems that support this
organizational level as transaction processing systems
(TPSs), which are typically used to automate recurring
activities and to structure day-to-day operations, ensuring
that they are performed with speed and accuracy.

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 Types of Information Systems

Categorizing Systems : Hierarchical Perspective

i) Operational Level

Transaction Processing Systems

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 Types of Information Systems
Categorizing Systems : Hierarchical Perspective
i) Operational Level
Transaction Processing Systems
▪ Millions (sometimes billions) of transactions occur in large organizations every
day. A transaction is any business event that generates data worthy of being
captured and stored in a database. Examples of transactions are a product
manufactured, a service sold, a person hired, and a payroll check generated. In
another example, when you are checking out of Njeiforbi, each time the cashier
swipes an item across the bar code reader is one transaction.
▪ A transaction processing system (TPS) supports the monitoring, collection,
storage, and processing of data from the organization’s basic business
transactions, each of which generates data. The TPS collects data continuously,
typically in real time—that is, as soon as the data are generated—and it provides
the input data for the corporate databases.

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 Types of Information Systems
Categorizing Systems : Hierarchical Perspective
i) Operational Level
Transaction Processing Systems
▪ The TPSs are critical to the success of any enterprise because they support
core operations. In the modern business world, TPSs are inputs for the
functional area information systems and business intelligence systems, as
well as business operations such as customer relationship management,
knowledge management, and e-commerce.
▪ TPSs have to efficiently handle both high volumes of data and large
variations in those volumes (e.g., during periods of peak processing). In
addition, they must avoid errors and downtime, record results accurately
and securely, and maintain privacy and security.

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 Types of Information Systems
Categorizing Systems : Hierarchical Perspective
i) Operational Level : Transaction Processing Systems

The figure illustrates how TPSs manage data.

Packet
of
Sugar

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 Types of Information Systems
Categorizing Systems : Hierarchical Perspective
i) Operational Level
Transaction Processing Systems
Consider these examples of how TPSs handle the complexities of
transactional data:
▪ When more than one person or application program can access the database at the same
time, the database has to be protected from errors resulting from overlapping updates.
The most common error is losing the results of one of the updates.
▪ When processing a transaction involves more than one computer, the database and all
users must be protected against inconsistencies arising from a failure of any component
at any time. For example, an error that occurs at some point in an ATM withdrawal can
enable a customer to receive cash, although the bank’s computer indicates that he or she
did not. (Conversely, a customer might not receive cash, although the bank’s computer
indicates that he or she did.)

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 Types of Information Systems
Categorizing Systems : Hierarchical Perspective
i) Operational Level
Transaction Processing Systems
Consider these examples of how TPSs handle the complexities of
transactional data:
▪ It must be possible to reverse a transaction in its entirety if it turns out to have
been entered in error. It is also necessary to reverse a transaction when a
customer returns a purchased item. For example, if you return a sweater that you
have purchased, then the store must refund your cash, or offer you an in-store
credit to purchase another item. In addition, the store must update its inventory.

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 Types of Information Systems
Categorizing Systems : Hierarchical Perspective
i) Operational Level
Transaction Processing Systems
Regardless of the specific data processed by a TPS, the actual process
tends to be standard, whether it occurs in a manufacturing firm, a
service firm, or a government organization.

▪ As the first step in this procedure, people or sensors collect data, which are
entered into the computer via any input device. Generally speaking,
organizations try to automate the TPS data entry as much as possible because of
the large volume involved, a process called source data automation.

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 Types of Information Systems
Categorizing Systems : Hierarchical Perspective
i) Operational Level
Transaction Processing Systems
▪ Next, the system processes data in one of two basic ways: batch processing and online
processing.
▪ In batch processing, the firm collects data from transactions as they occur, placing
them in groups or batches. The system then prepares and processes the batches periodically
(say, every night).
▪ In online transaction processing (OLTP), business transactions are processed online as soon as
they occur. For example, when you pay for an item at a store, the system records the sale by
reducing the inventory on hand by one unit, increasing sales figures for the item by one unit,
and increasing the store’s cash position by the amount you paid. The system performs
these tasks in real time by means of online technologies.

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 Types of Information Systems
Categorizing Systems : Hierarchical Perspective
i) Operational Level
Transaction Processing Systems
Objectives:
Because of the importance of transaction processing, organizations
expect their TPSs to accomplish a number of specific objectives,
including the following:
▪ Capture, process, and update databases of business data required
to support routine business activities
▪ Ensure that the data is processed accurately and completely
▪ Avoid processing fraudulent transactions

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 Types of Information Systems
Categorizing Systems : Hierarchical Perspective
i) Operational Level
Transaction Processing Systems
Objectives:
Because of the importance of transaction processing, organizations expect
their TPSs to accomplish a number of specific objectives, including the
following:
▪ Produce timely user responses and reports
▪ Reduce clerical and other labor requirements
▪ Help improve customer service
▪ Achieve competitive advantage

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 Types of Information Systems
Categorizing Systems : Hierarchical Perspective
i) Operational Level: Transaction Processing Systems

data collection: Capturing and gathering all data

necessary to complete the processing of transactions

Activities: data editing: Checking data for validity and

completeness to detect any problems.
data correction:
Reentering data that was data processing: Performing calculations and other
not typed or scanned data transformations related to business transactions.
properly.
data storage: Updating one or more databases with
new transactions.

document production: Generating output records,

documents, and reports.
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 Types of Information Systems
ii) Operational Level
Transaction Processing Systems
▪ Operational managers need systems that keep 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.
▪ Transaction processing systems (TPS) provide this kind
of information.
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 Types of Information Systems
ii) Operational Level
Transaction Processing Systems
Definition of TPS
▪ A transaction processing system is a computerized system
that performs and records the daily routine transactions
necessary to conduct business, such as sales order entry,
hotel reservations, payroll, employee record keeping, and
shipping.
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 Types of Information Systems
ii) Operational Level
Transaction Processing Systems
Breaking the definition into its major components:
• record & process data business (daily) transactions;
• 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.
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 Types of Information Systems
ii) Operational Level
Transaction Processing Systems
▪ The predominant function of TPSs is to record data collected at the
boundaries of organizations, in other words, at the point where the
organization transacts business with other parties.
▪ They also record many of the transactions that take place inside an
organization.

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 Types of Information Systems
ii) Operational Level
Transaction Processing Systems
▪ 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. Ayuk’s payment?
▪ To answer these kinds of questions, information generally
must be easily available, current, and accurate.
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 Management Information Systems

Types of Information Systems

ii) Operational Level
Transaction processing systems
• Allow managers to monitor status of operations and relations with
external environment
• Serve operational levels
• Serve predefined, structured goals and decision making
Examples: sales processing, inventory systems, accounting
systems, payroll

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 Types of Information Systems
ii) Operational Level
Transaction Processing Systems
Transaction processing systems (TPSs) are the
most widely used information systems.

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 Types of Information Systems
Operations support systems
Example
CDC Banana
• CAN THIS BE USED TO ILLUSTRATE THE TYPES OF INFORMATION
SYSTEMS?
• IF YES, HOW?

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 Types of Information Systems
Operations support systems
Transaction Processing Systems
Example: CDC Banana
In a banana plantation made of 9 farms (Farm 1 – 9)
divided into 3 zones (zone 1 – 3), Farm Clerks
communicate daily by radio (Walkie –Talkie) to the
Management Clerk production data at 12:00 noon; 4:00
pm and at the end of the day.

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 Types of Information Systems
Operations support systems
Transaction Processing Systems
Example of one day’s data
BOXES OF BANANA PRODUCED AND REPORTED
Zone A Zone B Zone C
Reporting periodFarm 1 Farm 2 Farm 3 Farm 4 Farm 5 Farm 6 Farm 7 Farm 8 Farm 9
12:00 Noon 480 384 576 576 288 720 960 336 480
Monday 4:00 PM 384 384 480 528 480 720 960 384 480
End of day 1,296 1200 1584 1632 1248 2016 2928 1056 1440

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 Types of Information Systems
Operations support systems
Transaction Processing Systems
Example of Information
transmitted to the
management

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 Types of Information Systems
Operations support systems
Transaction Processing Systems

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 Types of Information Systems
Operations support systems
Transaction Processing Systems

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 Types of Information Systems
Operations support systems
Transaction Processing Systems

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 Types of Information Systems
Operations support systems

End of CDC Example

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 Types of Information Systems
Categorizing Systems : Hierarchical Perspective
i) Operational Level
Transaction Processing Systems
Before continuing,
1. Define TPS.
2. List the key functions of a TPS.
3. Identify and briefly describe six basic transaction processing
activities performed by all transaction processing systems.

89
 Types of Information Systems
Categorizing Systems : Hierarchical Perspective
i) Operational Level
Transaction Processing Systems
Minicase study : TPS Needed to Support Small Business
Cal is setting up a small business to prep, cook, and deliver healthy and
nutritionally balanced meals to customers in his local area. Cal meets with
prospective customers to acquaint them with the program, discuss their
eating habits and nutritional needs, and help them select from one of several
menus (vegetarian, gluten free, low carb but high protein) that meets their
needs. Twice a week Cal and his workers buy food ingredients based on
what has been ordered. They then cook three or four days of meals for each
customer and seal them in airtight bags for reheating. Deliveries are made
twice a week. All the customer has to do is take the bag from the refrigerator
and pop it into the microwave for 60 seconds.

90
 Types of Information Systems
Categorizing Systems : Hierarchical Perspective
i) Operational Level
Transaction Processing Systems
Minicase study : TPS Needed to Support Small Business
Business has really taken off and Cal has had to hire two part-time cooks
and two part-time delivery people. Cal has been so busy lining up new
customers, shopping, and cooking that he has not had time to carefully
track all his expenses. He pays his workers in cash, but realizes he will need
to set up a formal payroll system and start deducting for taxes, social
security, and health insurance. Cal also wishes he had some sort of system
that could help him better plan the kinds and amounts of ingredients
needed based on customer orders. As it is, he usually purchases too much of
the various ingredients and ends up giving leftovers away at the free store.

91
 Types of Information Systems
Categorizing Systems : Hierarchical Perspective

i) Operational Level
Transaction Processing Systems

Minicase study : TPS Needed to Support Small Business

Review Questions
1. What kind of transaction processing systems does Cal need to manage
and support the basic functions of his business?
2. Identify six specific tasks that the TPS must perform to meet his needs.

92
 Types of Information Systems
Categorizing Systems : Hierarchical Perspective

i) Operational Level
Transaction Processing Systems

Minicase study : TPS Needed to Support Small Business

Critical Thinking Questions
1. Should Cal consider developing his own programs using spreadsheet and database
software or should he purchase an integrated package to meet his needs?
2. Business is going so well that Cal is thinking of expanding the scope of his business to
include catering for weddings, parties, and various business functions. As the scope of
his business expands, how might this impact the choice of transaction processing
systems?

93
 Types of Information Systems
Categorizing Systems : Managerial Perspective

There are three levels in the hierarchical perspective:

i. Operational level

ii.Managerial level
iii. Executive level

94
 Types of Information Systems
Categorizing Systems : Hierarchical
Perspective
ii) Managerial Level
▪ At the managerial level (or tactical level) of the organization, functional
managers (e.g., marketing managers, finance managers, manufacturing
managers, human resource managers) focus on monitoring and
controlling operational-level activities and providing information to
higher levels of the organization.
▪ Managers at this level, referred to as midlevel managers, focus on
effectively utilizing and deploying organizational resources to increase
effectiveness (i.e., the extent to which goals or tasks are accomplished
well) to achieve the strategic objectives of the organization.

95
 Types of Information Systems
Categorizing Systems : Hierarchical Perspective
ii) Managerial Level
▪ Midlevel managers typically focus on problems within a specific
business function, such as marketing or finance. Here, the scope of the
decision usually is contained within the business function, is
moderately complex, and has a time horizon of a few days to a few
months (also referred to as tactical planning).
▪ Managerial-level decision making is not nearly as structured or routine
as operational-level decision making. Managerial-level decision
making is referred to as semi-structured decision making because
solutions and problems are not clear-cut and often require judgment
and expertise. For semi-structured decisions, some procedures to
follow for a given situation can be specified in advance, but not to the
extent where a specific recommendation can be made.
96
 Types of Information Systems
Categorizing Systems : Hierarchical Perspective
ii) Managerial Level
▪ The managerial level of the organization is mostly concerned
with midterm decision making and a functional focus. The
activities performed tend to be semi-structured, having both
well-known components and some degree of uncertainty.
▪ Decision making at this level is typically semi-structured but
characterized by repeatable patterns and established methods.
The focus is on tactical decision making characterized by some
discretion. The objective is to improve the effectiveness of the
organization, or one of its functions, within the broad strategic
guidelines set by the executive team.
97
 Types of Information Systems
Categorizing Systems : Hierarchical Perspective
ii) Managerial Level
▪ The information systems that support this organizational level are
typically management information systems (MIS) or decision
support systems (DSSs), which provide the information needed
by managers at this level to engage in tactical decision making.
The objective is to produce recurring reports (e.g., daily sales
reports, monthly customer service reports) and exception reports
(e.g., reports of items that are running low and may cause a
stockout). While MIS typically focus on internal operations, DSS
include external influences; both use the data from the firm’s TPS.

98
 Types of Information Systems
Categorizing Systems : Hierarchical Perspective

ii) Managerial Level

The TPS and MIS

work together to
process business
transaction and
create standard
management
reports.

99
 Types of Information Systems
ii) Managerial Level
Management Information Systems (MIS)

What are they?

A management information system (MIS) is an organized
collection of people, procedures, software, databases, and
devices that provides routine information to managers and
decision makers.
An MIS focuses on operational efficiency.

100
 Types of Information Systems
ii) Managerial Level
Management Information Systems (MIS)

What are they?

MISs typically provide standard reports generated with data
and information from the TPS.

Manufacturing, marketing, production, finance, and other

functional areas are supported by MISs and are linked through
a common database.

101
 Types of Information Systems
ii) Managerial Level
Management Information Systems (MIS)

What they do?

• Serve middle management
• Provide information and support for effective decision
making by managers
• Provide reports on firm’s current performance, based on
data from TPS

102
 Types of Information Systems
ii) Managerial Level
Management Information Systems (MIS)
What they do?
• Provide answers to routine questions with predefined
procedure for answering them
• Typically have little analytic capability

103
 Types of Information Systems
ii) Managerial Level
Management Information Systems (MIS)
How they serve management
Reports and displays for managers to help them make better business
decisions

Example: daily sales analysis reports

104
 Types of Information Systems
ii) Managerial Level
Management Information Systems (MIS)
Management level

• Inputs: High volume transaction level data

• Processing: Simple models
• Outputs: Summary reports
• Users: Middle managers

Example: Annual budgeting, sales analysis, production

performance, and cost trend reporting systems.
105
 Types of Information Systems
ii) Managerial Level
Management Information Systems (MIS)
• MIS provide middle managers with reports on the organization’s
current performance.
• This information is used to monitor and control the business and
predict future performance.
• MIS summarize and report on the company’s basic operations using
data
supplied by transaction processing systems.
• The basic transaction data from TPS are compressed and usually
presented in reports that are produced on a regular schedule.

106
 Types of Information Systems
ii) Managerial Level

Example
CDC Banana
• CAN THIS BE USED TO ILLUSTRATE THE TYPES OF
INFORMATION SYSTEMS?
• IF YES, HOW?

107
 Types of Information Systems
ii) Managerial Level
Transaction Processing Systems
Example: CDC Banana
In a banana plantation made of 9 farms (Farm 1 – 9)
divided into 3 zones (zone 1 – 3), Farm Clerks
communicate daily by radio (Walkie –Talkie) to the
Management Clerk production data at 12:00 noon;
4:00 pm and at the end of the day.

108
 Types of Information Systems
ii) Managerial Level

Transaction Processing Systems

Example of one day’s data
BOXES OF BANANA PRODUCED AND REPORTED
Zone A Zone B Zone C
Reporting periodFarm 1 Farm 2 Farm 3 Farm 4 Farm 5 Farm 6 Farm 7 Farm 8 Farm 9
12:00 Noon 480 384 576 576 288 720 960 336 480
Monday 4:00 PM 384 384 480 528 480 720 960 384 480
End of day 1,296 1200 1584 1632 1248 2016 2928 1056 1440

109
 Types of Information Systems
ii) Managerial Level

Transaction Processing Systems

Example of Information
transmitted to the
management

110
 Types of Information Systems
ii) Managerial Level

Transaction Processing Systems

111
 Types of Information Systems
ii) Managerial Level

Transaction Processing Systems

112
 Types of Information Systems
ii) Managerial Level

Transaction Processing Systems

113
 Types of Information Systems
ii) Managerial Level

End of CDC Example

114
 Types of Information Systems
Categorizing Systems : Hierarchical Perspective

ii) Managerial Level

▪ DSS: analytical, interactive

115
 Types of Information Systems
ii) Managerial Level
Decision Support Systems (DSS)
What are they?
Decision Support System (DSS)
▪ Computer based information system designed
to help managers (knowledge workers) select
one of many alternative solutions to a problem.

116
 Types of Information Systems
ii) Managerial Level
Decision Support Systems (DSS)
What are they?
Decision Support System (DSS)
▪ A decision support system (DSS) is an organized collection of people,
procedures, software, databases, and devices that support problem-specific
decision making.
▪ The focus of a DSS is on making effective decisions.
Whereas an MIS helps an organization “do things right,” a DSS helps a manager
“do the right thing”.

117
 Types of Information Systems
ii) Managerial Level
Decision Support Systems (DSS)
What they do?
▪ DSSs can help corporations increase market share,
reduce costs, increase profitability, and enhance
product quality.
▪ By automating some of the decision-making process,
the systems give knowledge workers access to
previously unavailable analyses.
118
 Types of Information Systems
ii) Managerial Level
Decision Support Systems (DSS)
What they do?
▪ DSS rely more heavily on modeling than MIS, using
mathematical or analytical models to perform what-if or
other kinds of analysis
▪ Designed to help knowledge workers select one of many
alternative solutions to a problem
▪ DSSs provide sophisticated and fast analysis of vast
amounts of data and information

119
 Types of Information Systems
ii) Managerial Level
Decision Support Systems (DSS)
What they do?
▪ Technically, certain analyses could be performed by
managers, but it would be prohibitively time-
consuming and would render late, and therefore
bad, decisions.
▪ Although the use of DSSs typically increases with
the level of management, the systems are used at all
levels, and often by non-managerial staff.
120
 Types of Information Systems
ii) Managerial Level
Decision Support Systems (DSS)
What they do?
• Serve middle management
• Direct computer support for decision-making;
• Provide interactive ad hoc support for decision
making
• Support non-routine decision making
• Often use external information as well from TPS
and MIS
121
 Types of Information Systems
ii) Managerial Level
Decision Support Systems (DSS)
What they do?
▪ Focus on problems that are unique and rapidly
changing, for which the procedure for arriving
at a solution may not be fully predefined in
advance.

122
 Types of Information Systems
ii) Managerial Level
Decision Support Systems (DSS)
What they do?
▪ Try to answer questions such as these:
o What would be the impact on production
schedules if we were to double sales in the
month of December?
o What would happen to our return on
investment if a factory schedule were delayed
for six months?
123
 Types of Information Systems
ii) Managerial Level
Decision Support Systems (DSS)
What they do?
▪ Although DSS use internal information from
TPS and MIS, they often bring in information
from external sources.

124
 Types of Information Systems
ii) Managerial Level
Decision Support Systems (DSS)
• Inputs: Transaction level data

• Processing: Interactive

• Outputs: Decision analysis

• Users: Professionals, staff

Example: Contract cost analysis, product pricing, profitability forecasting,

and risk analysis systems.

125
 Types of Information Systems
Categorizing Systems : Hierarchical Perspective
ii) Managerial Level
Information systems at
the managerial level of
an organization help to
improve effectiveness
by automating the
monitoring and
controlling of
operational activities.

126
 Types of Information Systems
Categorizing Systems : Hierarchical Perspective

There are three levels in the hierarchical perspective:

i. Operational level
ii. Managerial level

iii. Executive level

127
 Types of Information Systems
Categorizing Systems : Hierarchical Perspective

iii) Executive Level

▪ The executive echelon of the organization is concerned with high-level, long-
range decisions. Executives are focused on strategic decision making and on
interpreting how the firm should react to trends in the marketplace and the
competitive environment.
▪ Decision making at this level is highly unstructured, often ad hoc, and
reliant on internal as well as external data sources. The objective is, as much
as possible, to predict future developments by evaluating trends, using
highly aggregated data and scenario analyses. Little structure and few
formal methodologies exist for activities at this level.

128
 Types of Information Systems
Categorizing Systems : Hierarchical Perspective
iii) Executive Level
▪ At the executive level (or strategic level) of the organization, managers focus on long-
term strategic questions facing the organization, such as which products to produce,
which countries to compete in, and what organizational strategy to follow.
▪ Executive-level decisions deal with complex problems with broad and long-term
ramifications for the organization. Executive-level decisions are referred to as
unstructured decisions because the problems are relatively complex and nonroutine.
In addition, executives must consider the ramifications of their decisions in terms of
the overall organization. For unstructured decisions, few or no procedures to follow
for a given situation can be specified in advance. Such a decision may have vast, long-
term effects on the organization’s levels of employment and profitability. To assist
executive-level decision making, information systems are used to obtain aggregate
summaries of trends and projections of the future.

129
 Types of Information Systems
Categorizing Systems : Hierarchical Perspective

iii) Executive Level

▪ At the executive level, information systems provide KPIs that are
focused on balancing performance across the organization, such that,
for example, product launches are staggered to smooth out the effects of
spikes in demand on the supply chain. Other KPIs are used to
benchmark the organization’s performance against its competitors.
▪ Information systems used for executive-level decisions need to take into
account various types of unstructured data, such as data related to
global economic factors, demographic changes, or changing customer
tastes and preferences.

130
 Types of Information Systems
Categorizing Systems : Hierarchical Perspective

iii) Executive Level

▪ The information systems that support this organizational
level are executive information systems (EISs). These tools
enable rapid evaluation of highly aggregated organizational
and trend data while still providing drill-down features that
enable executives to view detailed information.

131
 Types of Information Systems
iii) Executive Level
- Executive Information Systems (EIS)
What they do?
• Support senior management
• provide critical information specifically for executives
and managers to make better decisions; not just a
better MIS

132
 Types of Information Systems
iii) Executive Level
- Executive Information Systems (EIS)
▪ Senior managers need systems that address strategic issues and
long-term trends, both in the firm and in the external environment.
▪ They are concerned with questions such as these:
▪ What will employment levels be in five years?
▪ What are the long-term industry cost trends, and where does our
firm fit in?
▪ What products should we be making in five years?
▪ What new acquisitions would protect us from cyclical business
swings?
133
 Types of Information Systems
iii) Executive Level
- Executive Information Systems (EIS)
Executive support systems (ESS) help senior management answer these
questions and make appropriate decisions.

They address non-routine decisions requiring

• judgment,
• experience,
• evaluation, and
• insight
because there is no agreed-on procedure for arriving at a solution.

134
 Types of Information Systems
iii) Executive Level
- Executive Information Systems (EIS)
How they serve executives
• Incorporate data about external events (e.g. new tax
laws or competitors) as well as summarized
information from internal MIS and DSS
Example: easy access to actions of competitors

135
 Management Information Systems

Types of Information Systems

iii) Executive Level
- Executive Information Systems (EIS)
Business intelligence
• Class of software applications
• Analyze current and historical data to find patterns and trends
and aid decision-making
• Used in systems that support middle and senior management
• Data-driven DSS
• Executive support systems (ESS)
136
 Management Information Systems

Types of Information Systems

iii) Executive Level
- Executive Information Systems (EIS)
Characteristics of EIS
1. An easy to use and maintainable graphical user interface.
2. Integrated capabilities for data access, analysis, and control.
3. Analysis and report generation across multiple data sources.
4. On-request “drill down” capability to lower levels of detail.
5. Depiction of organizational critical success factors.

137
 Management Information Systems

Types of Information Systems

iii) Executive Level
- Executive Information Systems (EIS)
Characteristics of EIS
6. Functionality for decision support, ad-hoc queries and what-if
analysis.
7. Sophisticated tools for system navigation.
8. Data analysis features.
9. Advanced report generation.
10. Access to a variety of external data sources.

138
 Types of Information Systems
iii) Executive Level
- Executive Information Systems (EIS)
• Top Level Management

• Designed to the individual senior manager

• Ties CEO to all levels

• Very expensive to keep up

• Extensive support staff

139
 Types of Information Systems
iii) Executive Level
- Executive Information Systems (EIS)
• Inputs: Aggregate data

• Processing: Interactive

• Outputs: Projections

• Users: Senior managers

Example: 5 year operating plan

140
 Types of Information Systems
Categorizing Systems : Hierarchical Perspective
iii) Executive Level
Information systems at
the executive level of an
organization help to
improve strategy and
planning by providing
summaries of past data
and projections of the
future.

141
 Types of Information Systems
Categorizing Systems : Hierarchical Perspective

Activities by
hierarchical level
142
 Types of Information Systems
Categorizing Systems : Hierarchical Perspective

Hierarchical
perspective
with
associated
information
systems
143
 Types of Information Systems
Categorizing Systems : Hierarchical Perspective

Expand to
include more
details, types
of decision,
DSS, etc

144
 Types of Information Systems
Categorizing Systems: Hierarchical Perspective

TPS, MIS/DSS, and special information systems in perspective

A TPS provides valuable input to MIS, DSS, and KM systems.
145
 Types of Information Systems
Categorizing Systems
Information systems can be categorized in two ways:
1) Hierarchical Perspective

2)Functional Perspective
3) Process Perspective

146
 Types of Information Systems
Categorizing Systems: Functional Perspective

The functional organization within business units is typically

represented in the form of the organizational chart. This
decentralized management structure solves the coordination
problems that happen when firms become large. Each business
function manages its own budget independently and has unique
information processing needs.

147
 Types of Information Systems
Categorizing Systems: Functional Perspective

Functional perspective
148
 Types of Information Systems
Categorizing Systems: Functional
Perspective

Functional Systems
▪ Functional systems are expressly designed to
support the specific needs of individuals in the
same functional area.
▪ Functional systems are based on the principle of
local optimization, which suggests that
information processing needs are unique and
homogeneous within a functional area. Thus
systems are tailored to those highly specific
needs and use a language that is familiar to the
professionals in the area. Functional perspective

149
 Types of Information Systems

Categorizing Systems: Functional Perspective

Functional Area Information Systems

150
 Types of Information Systems
Categorizing Systems: Functional Perspective
Functional Area Information Systems
▪ Organizations have historically designed and custom
developed software applications to support their unique work
activities and business processes. These custom-developed
applications were typically designed and implemented at the
departmental or functional level, giving rise to what we have
earlier termed the functional perspective.

151
 Types of Information Systems
Categorizing Systems: Functional Perspective
Functional Area Information Systems

▪ Each department or functional area within an organization has

its own information systems. Each of these functional area
information systems (FAIS) supports a particular
functional area in the organization by increasing each area’s
internal efficiency and effectiveness.

152
 Types of Information Systems
Categorizing Systems:
Functional Perspective
Functional Area Information
Systems

▪ For example, manufacturing,

marketing, production, finance, and
other functional areas of an
organization were often supported by
their own TPS and MIS. Functional perspective

153
 Types of Information Systems
Categorizing Systems:
Functional Perspective
Functional Area
Information Systems
▪ Examples of FAISs are
accounting IS, finance IS,
production/operations
management (POM) IS,
marketing IS, and human
resources IS. As illustrated
before, the FAIS access data
from the corporate databases.

154
This dashboard highlights
the current status of the
key performance
indicators (KPIs) for sales,
resources, customers, and
budget.
 Types of Information Systems
Categorizing Systems: Functional Perspective
Functional Area Information Systems
Examples of
information
systems
supporting
the functional
areas.

156
 Types of Information Systems
Categorizing Systems: Functional Perspective
Functional Area Information Systems

Before continuing,
1. Define a functional area information system and list its major
characteristics.
2. How do you think information systems benefit the different
functional areas of an organization?

157
 Types of Information Systems
Categorizing Systems
Information systems can be categorized in two ways:
1) Hierarchical Perspective
2) Functional Perspective

3)Process Perspective

158
 Types of Information Systems
Categorizing Systems: Functional
Perspective
The primary limitation of the
functional and hierarchical
perspectives is their lack of
integration among separate systems
and the introduction of considerable
redundancy. This redundancy often
created inefficiency, with
duplication of similar efforts in
separate business units, and
substandard service, with
customers often being referred to
different representatives of the Hierarchical perspective Functional perspective
same organization for support.

159
 Types of Information Systems
Categorizing Systems: Process
Perspective

▪ From a technology perspective, the

functional approach led to the development
of siloed applications. Like silos used in
farms to store and keep different grains
separate, these applications would serve a
vertical (i.e., functional) need very well but
made it difficult to enable communication
across different functional areas.
Silos used in farms to store and
keep different grains separate

160
 Types of Information Systems
Categorizing Systems: Process Perspective
▪ A business process is the series of steps that a firm performs in order to
complete an economic activity.

Process perspective

161
Processes span multiple
business functions and
organizational levels and
may extend outside the
organization.

162
 Types of Information Systems
Categorizing Systems: Process Perspective
Business Process Reengineering
▪ Business process reengineering (BPR) emerged in the early 1990s as a way
to break down organizational silos in recognition of the fact that business
processes are inherently cross-functional.
Since its inception, BPR has evolved under a number of labels (e.g.,
business process redesign, business transformation), and it has now
become a standard approach to efficiency improvement in organizations.

163
 Types of Information Systems
Categorizing Systems: Process Perspective

Business Process Reengineering

▪ To stay competitive, organizations must occasionally
make fundamental changes in the way they do business
by innovating and changing the activities, tasks, or
processes they use to achieve their goals.

164
 Types of Information Systems
Categorizing Systems: Process Perspective

Business Process Reengineering

▪ Business process reengineering (BPR), involves the radical
redesign of business processes, organizational structures,
information systems, and values of the organization to
achieve a breakthrough in business results.
▪ Successful reengineering can reduce delivery time, increase
product and service quality, enhance customer satisfaction,
and increase revenues and profitability.
165
 Types of Information Systems
Categorizing Systems:
Process Perspective
Business Process Reengineering
Business process reengineering
(BPR), involves the radical
redesign of business processes,
organizational structures,
information systems, and values of
the organization to achieve a
breakthrough in business results.

166
 Types of Information Systems
Categorizing Systems: Process Perspective
Business Process Reengineering: Difficulties

Many enterprise application and reengineering projects have been undermined by poor
implementation and change management practices that failed to address employees’
concerns about change.

▪ Dealing with fear and anxiety throughout the organization,

▪ overcoming resistance by key managers, and
▪ changing job functions, career paths, and recruitment practices
have posed greater threats to reengineering than the difficulties companies faced
visualizing and designing breakthrough changes to business processes.

170
 Types of Information Systems
Categorizing Systems: Process Perspective
Business Process Reengineering: Difficulties
As with any far-reaching transformation process, there are significant
risks associated with BPR efforts.
▪ First, radical third-order change, as required by BPR efforts,
engenders significant resistance by those involved. Changes in an
individuals’ scope of work, responsibility, and position within the
organizational structure require abundant retraining and careful
planning. People tend to be very comfortable with the way they
operate, and changes in their job role, job scope, or responsibility
require the development of new sets of skills and training. This often
engenders confusion

171
 Types of Information Systems
Categorizing Systems: Process Perspective
Business Process Reengineering: Difficulties
▪ Second, despite its obvious importance, operations (and
consequently business processes) are not “glamorous” or highly
valued.
▪ Third, BPR initiatives are very expensive because they often
require the firm to retire its legacy systems and develop a costly
integrated technology infrastructure. Applications that had
been developed to enable a functional perspective rarely can be
adapted to support a process perspective.

172
 Types of Information Systems
Categorizing Systems: Process Perspective
Business Process Reengineering: Difficulties
▪ Finally, the BPR methodology developed a bad reputation after
the initial excitement because of its complexity and the fact that
for many organizations, BPR led to significant downsizing and
layoffs.

173
 Types of Information Systems
Categorizing Systems: Process Perspective
Business Process Reengineering
The Role of IT in Business Process Reengineering Efforts
▪ The main catalyst for BPR efforts is modern information technology;
technological innovation typically enables the firm to question old
assumptions that constrain current operations.
▪ As organizations and technology evolve over time, traditional business
processes may become obsolete and need to be reevaluated.
▪ The interplay of new technologies, and the opportunities they afford, with
the redesign of business processes to take advantage of these technologies,
has the potential to yield substantial performance improvements.
174
 Types of Information Systems
Categorizing Systems: Process Perspective
Business Process Reengineering
The Role of IT in Business Process Reengineering Efforts
▪ Information technology plays a major role in reengineering most business
processes.

▪ The speed,
▪ information-processing capabilities, and
▪ connectivity of computers and Internet technologies

can substantially increase the efficiency of business processes, as well as

communications and collaboration among the people responsible for their
operation and management.

175
 Types of Information Systems
Categorizing Systems: Process Perspective
Business Process Reengineering

Consider the order management process.

Order management process 176

 Types of Information Systems
The Four Components of an Information System
Fulfilling a customer
order involves a complex
set of steps that requires
the close coordination of
the sales, accounting, and
manufacturing functions.

Are there any other

possible actors, missing
in this illustration, that
could participate in the
processes of fulfilling an
order?

177
 Types of Information Systems

Enterprise Wide Systems

178
 Types of Information Systems
Enterprise Wide Systems

▪ The primary limitation of the functional and hierarchical

perspectives is their lack of integration among separate systems
and the introduction of considerable redundancy. This
redundancy often created inefficiency, with duplication of
similar efforts in separate business units, and substandard
service, with customers often being referred to different
representatives of the same organization for support.

179
 Types of Information Systems
Categorizing Systems: Process Perspective
Business Process Reengineering

Consider the order management process again. How can it be re-engineered

to be more effective?

Order management process 180

 Types of Information Systems
The Four Components of an Information System
Fulfilling a customer
order involves a complex
set of steps that requires
the close coordination of
the sales, accounting, and
manufacturing functions.

Are there any other

possible actors, missing
in this illustration, that
could participate in the
processes of fulfilling an
order?

181
 Types of Information Systems
Categorizing Systems: Process Perspective
Business Process Reengineering

182
 Types of Information Systems
Enterprise Wide Systems

▪ Businesses have leveraged information systems to support

business processes for many years, beginning with the
installation of individual, separate applications to assist
companies with specific business tasks.
▪ However, in order to efficiently and effectively conduct the core
business processes (as well as other business processes), the
different functional areas within a company need to share data.

183
 Types of Information Systems

Enterprise Wide Systems:

The Rise of Enterprise Wide Systems

184
 Types of Information Systems
Enterprise Wide Systems
The Rise of Enterprise Wide Systems
▪ As companies began to actively use IS applications, they
typically started out by fulfilling the needs of particular
business activities in a particular department within the
organization by purchasing a variety of proprietary software
systems from different software vendors or developed
department-specific software (e.g., accounting) to support
specific business processes.

185
 Types of Information Systems
Enterprise Wide Systems
The Rise of Enterprise Wide Systems
▪ However, systems that focus on the specific needs of individual
departments are typically not designed to communicate with
other systems in the organization and are, therefore, referred to
as standalone applications. Although such systems enable
departments to conduct their daily business activities efficiently
and effectively, these systems often are not very helpful when
people from one part of the firm need information from another
part of the firm.
186
 Types of Information Systems
Enterprise Wide Systems
The Rise of Enterprise Wide Systems
▪ This creates a highly inefficient process for operations personnel,
who must have access to several systems in order to get information.
This can be challenging, as applications running on different
computing platforms are difficult to integrate, and IS managers are
faced with the problem of “knitting together” a hodgepodge
portfolio of discordant proprietary applications into a system that
communicates and shares data; such integration is typically very
costly.

187
 Types of Information Systems
Enterprise Wide Systems
The Rise of Enterprise Wide Systems
▪ In some cases, the same data may be stored on different systems,
creating redundancy. Should data be updated in one system but not
the other, the data become inconsistent. In addition, there are further
unnecessary costs associated with entering, storing, and updating
data redundantly. As a result, many standalone applications are
typically either fast approaching or beyond the end of their useful
life within the organization; such systems are referred to as legacy
systems.

188
 Types of Information Systems
Enterprise Wide Systems
The Rise of Enterprise Wide Systems
▪ To utilize data stored in separate standalone systems to facilitate
business processes and decision making, data must be reentered
from one system to the next (by either manual typing, copying and
pasting, etc.) or be consolidated by a third system.
▪ Further, the same data may also be stored in several (sometimes
conflicting) versions throughout the organization, making the data
harder to consolidate, often causing inefficiencies or missed business
opportunities. In addition, organizations need integrated data to
demonstrate compliance with standards, rules, or government
regulations.
189
 Types of Information Systems
Enterprise Wide Systems
The Rise of Enterprise Wide Systems

Summary of difficulties with functional systems

▪ No communication between standalone systems from different
functional areas
▪ No integration of standalone systems
▪ Redundancy; inconsistency in updates; legacy systems
▪ Re-entry of data; incompatible formats
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 Types of Information Systems
Enterprise Wide Systems
The Rise of Enterprise Wide Systems
▪ To address these challenges, organizations have turned to
enterprise wide information systems.
▪ Definition:
An enterprise wide information system (or enterprise
wide system or enterprise system) is an integrated suite of
business applications for virtually every business process,
allowing companies to integrate data across functional
areas on a company wide basis.

191
 Types of Information Systems
Enterprise Wide Systems
The Rise of Enterprise Wide Systems
▪ Rather than storing data in separate places throughout the
organization, enterprise systems use an integrated database to
provide a central repository common to all users.
▪ The central database alleviates the problems associated with
multiple computing platforms by providing a single place
where all data relevant to the company and particular
departments can be stored and accessed. This, along with a
common user interface, allows personnel to share information
seamlessly, no matter where the user is located or who is using
the application.

192
 Types of Information Systems
Enterprise Wide Systems
The Rise of Enterprise Wide Systems

Summary of difficulties with functional systems

▪ No communication between standalone systems from different
functional areas
▪ No integration of standalone systems
▪ Redundancy; inconsistency in updates; legacy systems
▪ Re-entry of data; incompatible formats
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 Types of Information Systems
Enterprise Wide Systems
The Rise of Enterprise Wide Systems

Enterprise systems
allow companies to
integrate information
on a company-wide
basis.
Enterprise Applications

Enterprise applications
automate processes that
span multiple business
functions and
organizational levels and
may extend outside the
organization.
195
Types of Information Systems

Enterprise Wide Systems

Supporting Business Processes

196
 Types of Information Systems
Enterprise Wide Systems
Supporting Business Processes

Information systems can be used to gain and sustain competitive

advantage by supporting and/or streamlining activities along the
value chain. Information systems can be used to support either
internally or externally focused business processes.

197
 Types of Information Systems
Enterprise Wide Systems
Supporting Business Processes
▪ Internally focused systems support functional areas, business processes,
and decision making within an organization. These activities can be
viewed as a series of links in a chain along which information flows within
the organization. At each stage (or link) in the process, value is added in
the form of the work performed by people associated with that process,
and new, useful information is generated. Information begins to
accumulate at the point of entry and flows through the various links, or
business processes, within the organization, progressing through the
organization with new, useful information being added every step of the
way

198
Information flow for a
typical order

Order management process

 Types of Information Systems
Enterprise Wide Systems
Supporting Business Processes
▪ Companies can gain several advantages by integrating and converting
legacy systems so that data stored on separate computing platforms can be
consolidated to provide a centralized point of access.
▪ However, although internally focused systems do an excellent job of
serving the needs of internal business operations on an organization-wide
basis, they are not necessarily designed to completely accommodate the
communication of information outside the organization’s boundaries. The
emergence of the Internet and the web has resulted in the globalization of
customer and supplier networks, opening up new opportunities and
methods to conduct business.

200
 Types of Information Systems
Enterprise Wide Systems
Supporting Business Processes
▪ Externally focused systems help to streamline communications and
coordinate business processes with customers, suppliers, business
partners, and others who operate outside an organization’s boundaries.
▪ A system that communicates across organizational boundaries is
sometimes referred to as an interorganizational system. The key purpose
of an interorganizational system is to streamline the flow of information
from one company’s operations to another’s operations (e.g., from a
company to its potential or existing customers).

201
 Types of Information Systems
Enterprise Wide Systems
Supporting Business Processes
▪ Competitive advantage can be achieved here by integrating multiple
business processes in ways that enable a firm to meet a wide range of
unique customer needs. Sharing information between organizations helps
companies to adapt more quickly to changing market conditions.
▪ Information systems allow the company and its suppliers to satisfy the
needs of customers efficiently because changes can be identified and
managed immediately, creating a competitive advantage for companies
that can respond quickly.

202
 Types of Information Systems
Enterprise Wide Systems
Supporting Business Processes
▪ In addition, streamlining the information flows can help
companies find innovative ways to increase accurate on-time
shipments, avoid (or at least anticipate) surprises (such as
shortages in raw materials), minimize costs, and ultimately
increase customer satisfaction and the overall profitability of the
company.

203
 Types of Information Systems
Enterprise Wide Systems
Supporting Business Processes
▪ We can view processes and information flows across
organizations just as we previously viewed the processes and
information flows within an organization. At each stage (or
link) in the process, value is added by the work performed, and
new, useful information is generated and exchanged between
organizations. Using an interorganizational system, one
company can create information and transmit it electronically to
another company.

204
 Types of Information Systems

Enterprise Resource Planning Systems

205
 Types of Information Systems
Enterprise Resource Planning Systems

Historically, the functional area information

systems were developed independent of one
another, resulting in information silos. These
silos did not communicate well with one
another, and this lack of communication and
integration made organizations less efficient.
This inefficiency was particularly evident in
business processes that involve more than one
functional area, such as procurement and
fulfillment. Silos used in farms to store and
keep different grains separate

206
Types of Information Systems
Traditional View of Systems

207
 Types of Information Systems
Enterprise Resource Planning Systems
▪ An isolated information system that is not easily capable of
exchanging information with other information systems is
called an information silo. The “silo mentality” is a way of
thinking that occurs when groups of people do not share
information, goals, tools, priorities, and processes with other
departments. Such thinking degrades operations, reduces
employee productivity, and can lead to the overall failure of a
company or its products and services.
▪ Unfortunately, this sort of silo mentality was the basis for the
design of many TPS and MIS systems.

208
 Types of Information Systems
Enterprise Resource Planning Systems
▪ Enterprise resource planning (ERP) systems are designed to
correct a lack of communication among the functional area IS.
ERP systems resolve this problem by tightly integrating the
functional area IS via a common database, thereby greatly
increasing organizational productivity.
▪ ERP systems adopt a business process view of the overall
organization to integrate the planning, management, and use of
all of an organization’s resources, employing a common
software platform and database.

209
 Types of Information Systems
Enterprise Resource Planning Systems
▪ The major objectives of ERP systems are to tightly integrate the
functional areas of the organization and to enable information
to flow seamlessly across them. Tight integration means that
changes in one functional area are immediately reflected in all
other pertinent functional areas. In essence, ERP systems
provide the information necessary to control the business
processes of the organization.
▪ It is important to understand that ERP systems are an evolution
of FAIS. That is, ERP systems have much the same functionality
as FAIS, and they produce the same reports. ERP systems
simply integrate the functions of the individual FAIS.

210
 Types of Information Systems
Enterprise Resource Planning Systems
•Enterprise resource planning (ERP) systems provide a single
information system for organization-wide coordination and
integration of key business processes.
•Information that was previously fragmented in different
systems can seamlessly flow throughout the firm so that it can
be shared by business processes in manufacturing, accounting,
human resources, and other areas.

211
 Types of Information Systems
Enterprise Resource Planning Systems

ERP system: A system that supports an organization’s routine

business processes, maintains records about those processes, and
provides extensive reporting and data analysis capabilities

212
 Types of Information Systems
Enterprise Resource
Planning Systems
▪ We define an ERP as a
modular, integrated
software application that
spans (all) organizational
functions and relies on one
database at the core.

213
 Types of Information Systems
Enterprise Resource Planning Systems

Enterprise systems
feature a set of
integrated software
modules and a central
database by which
business processes
and functional areas
throughout the
enterprise can share
data.
214
 Types of Information Systems
Enterprise Resource Planning Systems
ERP II Systems

▪ ERP systems were originally deployed to facilitate business processes associated

with manufacturing, such as raw materials management, inventory control, order
entry, and distribution. However, these early ERP systems did not extend to other
functional areas, such as sales and marketing. They also did not include any
customer relationship management (CRM) capabilities that enable organizations
to capture customer-specific information. Finally, they did not provide Web-
enabled customer service or order fulfillment.
▪ Over time, ERP systems evolved to include administrative, sales, marketing, and
human resources processes. Companies now employ an enterprise wide
approach to ERP that utilizes the Web and connects all facets of the value chain.
These systems are called ERP II.

215
 Types of Information Systems
Enterprise Resource Planning Systems
ERP II systems are interorganizational ERP systems that provide Web-
enabled links among a company’s key business systems—such as inventory
and production—and its customers, suppliers, distributors, and other
relevant parties. These links integrate internal-facing ERP applications with
the external-focused applications of supply chain management and
customer relationship management. The figure illustrates the organization
and functions of an ERP II system.

216
 Types of Information Systems
Enterprise Resource Planning Systems

The figure
illustrates the
organization
and functions
of an ERP II
system.
217
 Types of Information Systems
Enterprise Resource Planning Systems

An ERP system consists

of core and extended
components.

218
 Types of Information Systems
Enterprise Resource Planning Systems
ERP Core Components
ERP core components support
the important internal activities
of the organization for
producing its products and
services. These components
support internal operations
such as the following:

1) Financial Management.
Components to support
accounting, financial
reporting, performance
management, and corporate
governance

219
 Types of Information Systems
Enterprise Resource Planning Systems
ERP Core Components
ERP core components support the
important internal activities of the
organization for producing its
products and services. These
components support internal
operations such as the following:

2) Operations Management.
Components to simplify,
standardize, and automate
business processes related to
inbound and outbound
logistics, product development,
manufacturing, and sales and
service

220
 Types of Information Systems
Enterprise Resource Planning Systems
ERP Core Components
ERP core components support
the important internal activities
of the organization for
producing its products and
services. These components
support internal operations
such as the following:

3) Human Resource
Management. Components to
support employee
recruitment, assignment
tracking, performance
reviews, payroll, and
regulatory requirements

221
 Types of Information Systems
Enterprise Resource Planning Systems
ERP Extended Components
▪ ERP extended components
support the primary external
activities of the organization for
dealing with suppliers and
customers.
▪ Specifically, ERP extended
components focus primarily on
supply chain management and
customer relationship
management

222
 Types of Information Systems
Enterprise Resource Planning Systems
ERP II systems include a variety of modules that are divided into
▪ core ERP modules
• financial management,
• operations management, and
• human resource management, and
▪ extended ERP modules
• customer relationship management,
• supply chain management,
• business intelligence, and
• e-business.
If a system does not have the core ERP modules, then it is not a legitimate ERP system. The
extended ERP modules, in contrast, are optional.

223
 Types of Information Systems
Enterprise Resource Planning Systems
Benefits of ERP
1) Operational Benefits

▪ Reduced processing cycle.

▪ Access to multi dimensional information.
▪ Empowerment of employees to become a decision maker.
▪ Effective cost control through use of cost data for business
decisions.
▪ Increase in resource productivity.

224
 Types of Information Systems
Enterprise Resource Planning Systems
Benefits of ERP
2) Business Benefits

▪ Higher profits and improved ROI due to cost savings.

▪ Improved working capital management due to reduced inventory
and receivables.
▪ Higher utilisation of resources reducing the cost of production per
unit.
▪ Higher customer satisfaction due to prompt deliveries.

225
 Types of Information Systems
Enterprise Resource Planning Systems
Benefits of ERP
3) Management Benefits

▪ Change management is easy due to configurable feature of the ERP

product.
▪ Strategic information about sales, production, resource usage
showed through pattern, and trends.
▪ Secured information access to authorised users.
▪ Cost of business reduced, business performance improved due to
other technologies’ integration with ERP processes.

226
 Types of Information Systems
Enterprise Resource Planning Systems
Before continuing……
What benefits should the suppliers and customers of a firm that has
successfully implemented an ERP system expect to see? How might an ERP
implementation affect an organization’s suppliers?

227
Types of Information Systems

Enterprise Resource Planning Systems

Supply Chain Management (SCM)

228
 Types of Information Systems
Enterprise Resource Planning Systems
The Supply Chain

▪ The term supply chain is commonly used to refer to a collection of companies

and processes involved in everything from extracting raw materials to moving a
product from the suppliers of raw materials to the suppliers of intermediate
components, then to final production, and, ultimately, to the customer.
▪ Companies often procure specific raw materials and components from many
different “upstream” suppliers. These suppliers, in turn, work with their own
suppliers to obtain raw materials and components; their suppliers work with
additional suppliers, and so forth.

229
 Types of Information Systems
Enterprise Resource Planning Systems
The Supply Chain

▪ The term supply chain is commonly used to

refer to a collection of companies and
processes involved in everything from
extracting raw materials to moving a product
from the suppliers of raw materials to the
suppliers of intermediate components, then to
final production, and, ultimately, to the
customer.
▪ Companies often procure specific raw
materials and components from many
different “upstream” suppliers. These
suppliers, in turn, work with their own
suppliers to obtain raw materials and
components; their suppliers work with
additional suppliers, and so forth.

230
 Types of Information Systems
Enterprise Resource Planning
Systems
The Supply Chain
▪ The upstream portion of the
supply chain includes the
company’s suppliers, the
suppliers’ suppliers, and the
processes for managing
relationships with them.
▪ The downstream portion consists
of the organizations and processes
for distributing and delivering
products to the final customers.

231
 Types of Information Systems
Enterprise Resource Planning
Systems
The Supply Chain
▪ Companies that manufacture also
manage their own internal supply
chain processes for transforming
materials, components, and
services their suppliers furnish
into finished products or
intermediate products
(components or parts) for their
customers and for managing
materials and inventory.

232
 Types of Information Systems
Enterprise Resource Planning Systems
The Supply Chain

▪ A firm’s supply chain is a network of organizations and business

processes for procuring raw materials, transforming these materials into
intermediate and finished products, and distributing the finished products
to customers.
▪ It links suppliers, manufacturing plants, distribution centers, retail outlets,
and customers to supply goods and services from source through
consumption. Materials, information, and payments flow through the
supply chain in both directions.

233
 Types of Information Systems
Enterprise Resource Planning Systems
Supply Chain Management (SCM)
▪ The goal of SCM is to decrease costs and improve customer service, while
at the same time reducing the overall investment in inventory in the
supply chain.

234
 Types of Information Systems
Enterprise Resource Planning Systems
Supply Chain Management (SCM)

▪ Supply chain management (SCM) encompasses all the activities required to get
the right product into the right consumer’s hands in the right quantity at the right
time and at the right cost—from the identification of suppliers and the acquisition
of raw materials through manufacture and customer delivery.
▪ The organizations that compose the supply chain are “linked” together through
both physical flows and information flows.
• Physical flows involve the transformation, movement, and storage of supplies and
raw materials.
• Information flows allow participants in the supply chain to communicate their plans,
coordinate their work, and manage the efficient flow of goods and material up and
down the supply chain.

235
 Types of Information Systems

Enterprise Resource Planning Systems

Customer Relationship Management (CRM) System

236
 Types of Information Systems
Enterprise Resource Planning Systems
Customer Relationship Management (CRM) System
▪ A customer relationship management (CRM) system helps a company
manage all aspects of customer encounters, including marketing, sales,
distribution, accounting, and customer service.
▪ Think of a CRM system as an address book with a historical record of all
the organization’s interactions with each customer. The goal of CRM is to
understand and anticipate the needs of current and potential customers to
increase customer retention and loyalty while optimizing the way that
products and services are sold.

237
 Types of Information Systems
Enterprise Resource Planning Systems
Customer Relationship Management (CRM) System
▪ CRM software automates and integrates the functions of sales, marketing,
and service in an organization. The objective is to capture data about every
contact a company has with a customer through every channel and to
store it in the CRM system so that the company can truly understand
customer actions.
▪ CRM software helps an organization build a database about its customers
that describes relationships in sufficient detail so that management,
salespeople, customer service providers, and even customers can access
information to match customer needs with product plans and offerings,
remind them of service requirements, and report on the other products the
customers have purchased.

238
 Types of Information Systems
Enterprise Resource Planning Systems
Customer Relationship Management (CRM) System
The defining characteristics of CRM are the following:
▪ CRM is a strategic initiative, not a technology. IT is an essential enabler of
all but the smallest CRM initiatives.
▪ CRM relies on customer personal and transactional data and is designed
to help the firm learn about customers.
▪ The ultimate objective of a CRM initiative is to help the firm use customer
data to make inferences about customer behaviors, needs, and value to the
firm so as to increase its profitability.

239
 Types of Information Systems
Enterprise Resource Planning Systems
Customer Relationship Management (CRM) System
▪ CRM is a comprehensive set of processes and technologies for managing the
relationships with potential and current customers across the business functions.
▪ The goal of CRM is to optimize customer satisfaction and revenue through
relationships built with potential and current customers, across the business
functions.
▪ The goal of CRM is to optimise customer satisfaction and revenue through
relationships built between customer and all those who deal with the customer.
The relationship is built through managing customer initiatives and behaviour in
such a way that customer experience is full of comfort, happiness and
satisfaction.

240
 Types of Information Systems
Enterprise Resource Planning Systems
Customer Relationship Management (CRM) System
▪ CRM is used primarily by people in the sales, marketing, distribution,
accounting, and service organizations to capture and view data about
customers and to improve communications. Businesses implementing
CRM systems often report benefits such as improved customer
satisfaction, increased customer retention, reduced operating costs, and
the ability to meet customer demand.

241
 Types of Information Systems
Enterprise Resource Planning Systems
Customer Relationship Management (CRM) System

Summary

242
 Types of Information Systems
Enterprise Resource Planning Systems
Customer Relationship Management (CRM) System
The customer relationship
management process.
1) The process begins with marketing
efforts, where the organization
solicits prospects from a target
population of potential customers. A
certain number of these prospects
will make a purchase and thus
become customers. A certain number
of these customers will become
repeat customers.
243
 Types of Information Systems
Enterprise Resource Planning Systems
Customer Relationship Management (CRM) System
The customer relationship management process.
2) The organization then segments its repeat
customers into low- and high-value repeat
customers. An organization’s overall goal is to
maximize the lifetime value of a customer, which
is that customer’s potential revenue stream over
a number of years.
Over time all organizations inevitably lose a
certain percentage of customers, a process called
customer churn. The optimal result of the
organization’s CRM efforts is to maximize the
number of high-value repeat customers while
minimizing customer churn.

244
 Types of Information Systems
Enterprise Resource Planning Systems
Customer Relationship Management (CRM) System
The customer relationship management process.
3) CRM is a fundamentally simple concept:
Treat different customers differently because
their needs differ and their value to the
company may also differ.

245
 Types of Information Systems
Enterprise Resource Planning Systems
Customer Relationship Management (CRM) System

The customer relationship

management process.

1) Distinguish between a CRM

strategy and a CRM system.
2) How can a CRM system be
used to manage the activities
depicted in this diagram?
246
Types of Information Systems

Enterprise Resource Planning Systems

Knowledge Management System

247
 Types of Information Systems
Knowledge Management System
▪ The term knowledge management refers to the set of activities and
processes used to create, codify, gather, and disseminate
knowledge within the organization.
▪ Thus knowledge management is the set of activities and
processes that an organization enacts to manage the wealth of
knowledge it possesses and to ensure that it is properly
safeguarded and put to use to help the firm achieve its
objectives.

248
Types of Information Systems

Enterprise Wide Systems

Summary

249
 Types of Information Systems
Enterprise Resource Planning Systems
Providing the Missing Reengineering
▪ Some reengineering projects have failed. But ERP systems helped realize many of
reengineering ideas because the systems forced changes in processes. At the least,
ERP systems integrated information from various organizational units, resulting
in less labor, greater accuracy, and shorter cycles.
▪ ERP systems also help organizations move away from the traditional silos of
functional units to business processes, an approach that helps many of them
operate better. Suppliers and customers do not care whose responsibility it is to
take care of their orders and payments.
▪ Therefore, organizations are better off planning and managing processes rather
than organizational units. Despite the risks and the high costs involved, a
growing number of companies adopt ERP systems.

250
 Types of Information Systems
Enterprise Resource Planning Systems
Providing the Missing Reengineering

▪How could an ERP system reengineer a

company or its processes?

251
 Types of Information Systems
Enterprise Systems: Benefits
Benefits of enterprise systems that can be used to make the
business case include:
▪ Improved availability of information
▪ Increased interaction throughout the organization
▪ Improved (reduced) lead times for manufacturing
▪ Improved customer interaction
▪ Reduced operating expenses

252
 Types of Information Systems
Enterprise Systems: Benefits
Benefits of enterprise systems that can be used to make the
business case include:
▪ Reduced inventory
▪ Reduced IS costs
▪ Improved supplier integration
▪ Improved compliance with standards, rules, and regulations

253
 Types of Information Systems
Enterprise Systems: Benefits
The two mostly likely benefits realized from utilizing enterprise
systems are
1) improvements in information availability and
2) increased interaction across the organization as a result of
streamlining business processes.

254
 Types of Information Systems
Enterprise Systems

This enterprise application

architecture presents an
overview of the major
cross-functional enterprise
applications and their
interrelationships
255
 Types of Information Systems
Enterprise Systems
Notice that instead of
concentrating on traditional
business functions or supporting
only the internal business
processes of a company,
enterprise applications focus on
accomplishing fundamental
business processes in concert
with a company’s customer,
supplier, partner, and employee
stakeholders.

256
 Types of Information Systems
Enterprise Systems
Enterprise Resource Planning
(ERP) concentrates on the
efficiency and effectiveness of a
firm’s internal production,
distribution, and financial
processes

257
 Types of Information Systems
Enterprise Systems

Customer relationship
management (CRM) focuses
on acquiring and retaining
profitable customers via
marketing, sales, and service
processes.
258
 Types of Information Systems
Enterprise Systems Partner relationship
management (PRM)
aims to acquire and
retain partners who
can enhance the sale
and distribution of a
firm’s products and
services

259
 Types of Information Systems
Enterprise Systems
Supply chain management
(SCM) focuses on
developing the most
efficient and effective
sourcing and procurement
processes with suppliers for
the products and services
that a business needs

260
 Types of Information Systems
Enterprise Systems
Knowledge management (KM)
refers to the set of activities
and processes used to
create, codify, gather, and
disseminate knowledge
within the organization.

261
 Types of Information Systems
Enterprise Wide Systems

Case Study
Dunkin’ Donuts Prepares for Rapid Growth

262
 Types of Information Systems
Enterprise Wide Systems
Dunkin’ Donuts Prepares for Rapid Growth

Dunkin’ Donuts has a strong following of customers around the world who rely on the
restaurant chain’s coffee, donuts, and other baked goods to get their day started.
Established in 1950, Dunkin’ Donuts still uses the original proprietary coffee blend recipe
created by its founder William Rosenburg, but what started as a small donut shop in
Quincy, Massachusetts, has grown into a global business generating more than $800 million
in revenue in 2015. And as the restaurant chain has grown, its business operations have
become increasingly sophisticated.

Today, Dunkin’ Donuts franchises are backed up by a complex supply chain managed by
National DCP (NDCP)—the exclusive supply chain management cooperative for more
than 8,900 Dunkin’ Donuts stores in the United States and 51 other countries. Founded as a
membership cooperative in 2012 with the merger of five regional food and beverage
operating companies, NDCP’s mission is to support the daily operations of Dunkin’ Donuts
franchisees and facilitate their growth and expansion plans. The company employs 1,700
people and maintains seven regional distribution centers along with another 32 logistics
hubs.

263
 Types of Information Systems
Enterprise Wide Systems
Dunkin’ Donuts Prepares for Rapid Growth

Recently, NDCP began a massive multiyear project, dubbed “Project Freshstart,” to

consolidate and upgrade its systems and transform its business processes
throughout every area of the company—from accounting to customer service to
warehousing and distribution. The goals of the project are to improve customer
service, lower costs, and create supply chain efficiencies through inventory- and
order-management improvements. According to Darrell Riekena, CIO at NDCP, the
company began the process by asking “what capabilities and corresponding
systems were needed to drive business process changes using leading-edge
technologies, without a lot of customization.”
NDCP spent considerable time researching and evaluating implementation
consulting partners and technology providers before opting to implement SAP’s
Business Suite in partnership with Deloitte Consulting. NDCP selected the SAP
system as the underlying technology for its business transformation because of
SAP’s track record and experience with wholesale distribution. SAP’s software also
offered NDCP the analytics and reporting tools the company felt were critical to
supporting their plans for growth.
264
 Types of Information Systems
Enterprise Wide Systems
Dunkin’ Donuts Prepares for Rapid Growth

According to Riekena, it was essential for the company to choose a technology

platform that was flexible and could serve as the foundation for the company’s
future expansion. Deloitte was chosen as NDCP’s implementation partner
because it offered an extensive background in process redesign and a proven
project methodology developed through years of experience in the wholesale
distribution industry.
One of the first things Deloitte did during the implementation was to work with
NDCP executives to define a business case for the project, which was used to
establish a set of objectives and success criteria. Then, according to Deloitte
Consulting’s Jerry Hoberman, they defined the scope of the project to meet those
business objectives. Once the scope was set, the project team members worked
together to set an aggressive but realistic two-year project plan.
According to Riekena, an important contribution from Deloitte—outside of its
technical expertise—was its framework for change management and
communication, which helped ensure that NDCP was effectively reaching out to all
of its stakeholders265
throughout the project.
 Types of Information Systems
Enterprise Wide Systems
Dunkin’ Donuts Prepares for Rapid Growth

“We recognized right off the bat that effective change management was
critical for the success of the project,” Riekena says. “Leveraging multiple
channels to reach all of the stakeholders, we took advantage of Dunkin’
Brands training programs, launched a comprehensive communications
effort, and promoted face-to-face interactions with franchise store managers
and field operations teams whenever possible.”

Unlike many companies that undertake a major system upgrade, NDCP was
willing to change many of its business processes in order to truly transform
its business, but Deloitte and NDCP also placed a priority on working
within NDCP’s culture—a balanced approach the recently led to the
successful deployment of the new SAP system in the first of the company’s
four regions.

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Enterprise Wide Systems
Dunkin’ Donuts Prepares for Rapid Growth

As the system is rolled out across the remaining regions, more franchisees
will see the benefits of NDCP’s careful planning and implementation
efforts—from better demand forecasting and inventory management tools
to improvements in NDCP’s customer service delivered by a centralized
staff who will have immediate access to customer histories and will be able
to provide real-time updates on order status and issue resolution.

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Enterprise Wide Systems
Dunkin’ Donuts Prepares for Rapid Growth

Critical Thinking Questions

1) Because NDCP is a membership cooperative, Dunkin’ Donuts franchisees are both

owners and customers. What might be some advantages to such an ownership
structure in terms of getting the support of all stakeholders for a massive project
like the one NDCP undertook? What might be some disadvantages?
2) How important do you think the communication and change management aspects
of this project were? Why do you think so many companies underestimate the
importance of those facets of an enterprise-level project?
3) What are some of the risks for a company that chooses to make changes to so many
parts of its business and underlying technology at once? What are some of the
things a company could do to mitigate those risks?

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Enterprise Wide Systems
Dunkin’ Donuts Prepares for Rapid Growth

Critical Thinking Questions

4) Why do you think the company succeeded in making the changes it
undertook?
5) What enterprise wide information systems did the company install?
Justify your answer.

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 Types of Information Systems
Enterprise Resource Planning Systems

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