NYU Stern BTEP.UB.

3
Fundamentals of Information Technology
Lesson 3: Business Functions & Supply Chains

Professor Navin Manglani

[email protected]
Many slides in this deck use the exact same language, image and follow the same structure as the adopted textbook for this course Management Information Systems by Kenneth
Sousa & Effy Oz.
Re-Cap
Last Class we
• Understood the components of Prof Manglani’s IT Strategy Framework
• Applied the Prof Manglani’s IT Strategy Framework to Examples
• Discussed Objectives of Individual Presentations
 Content Roadmap

IS Procurement
IS Strategy IS Security
Strategic & Development
(LSN 1-2) (LSN 20-22)
(LSN 19)

Applications ERP & IS Info Tech in AI & Business

Systems Business & Intelligence
(LSN 3) Society Roadmap (LSN 15-18)

IT /
Infrastructure Hardware & Networks /
Databases
Software Internet (LSN
(LSN 7-11)
(LSN 4-6) 12-14)
Agenda
• Define Effectiveness vs Efficiency
• Understand in detail different types of IS, and why a company might use
one vs. another, specifically focusing on:
I. Enterprise Resource Planning Systems (ERPs)
II. Customer Relationship Management (CRM) Systems
III. Supply Chain Management (SCM) Systems
IV. Support Activities Systems

• Apply what we learned to Kimball’s Restaurant

I. Enterprise Resource Planning Systems
(ERPs)
Effectiveness & Efficiency
• Information technology makes work more effective, more efficient, or both
• Effectiveness: the degree to which a goal is achieved
• Efficiency: the relationship between resources expended and benefits gained in achieving a goal
• Efficiency = Benefit / Costs
• One system is more efficient if its operating costs are lower for the same or better quality product

• Productivity: efficiency of human resources

• Productivity improves when fewer workers are required to achieve the same goal

• Productivity tools: software applications that improve productivity

• ISs contribute to both effectiveness and efficiency of businesses

 Systems in a Business / ERP
• Enterprise resource planning (ERP) system: manages daily operations and facilitates planning and drives
efficiency
 Overview Types of ISs (Discussed in Detail this Lesson)
Different types of information systems serve different functions:
• Transaction Processing Systems (TPSs): most widely used of ISs; records data collected at point where
organization transacts business with other parties
- Includes Point-of-sale (POS) machines: record sales; Includes cash registers, ATMs, and PO systems

• Customer Relationship Management (CRM) systems help manage relations with customers;
- used with telephones for servicing, or link to web applications for online sales

• Supply Chain Management (SCM) Systems support supply chain activities, also known as enterprise
resource planning systems
- Supply chain: sequence of activities involved in producing and selling products or services and includes
marketing, purchasing raw materials, manufacturing and assembly, packing and shipping, billing,
collection, document management, and monitoring customer portfolios
- SCM systems eliminate the need to reenter data captured elsewhere in the organization
- SCMs is an Enterprise application, separate business process subsystems connected to form one large IS
 Overview of ISs (Continued)
Functional business area: services within a company that support main business:
• Accounting information systems help record transactions, produce periodic statements, create required
reports for law, create supplemental reports for managers and contain controls to guarantee adherence to
standards

• Finance systems facilitate financial planning and business transactions- - --

- Tasks include organizing budgets, managing cash flow, analyzing investments, and making decisions

• Marketing information systems help analyze demand for products in regions and demographic groups,
identify trends in demand for products/services and determine how advertising campaigns affect profit
- Web provides opportunity to collect marketing data as well as promote products and services

• Human resource (HR) management systems assist in employee record-keeping, employee evaluation,
employee benefits
 Types of ISs (cont’d)
Websites

Advanced IS (discussed in Ch 3 but will be discussed in 2nd half of semester):

• Decision Support Systems (DSSs)
• Expert Systems (ESs)
• Geographical Information Systems (GISs)

We’ll learn about these the second half of the semester!

II. Customer Relationship Management
 Customer Relationship Management
• Customer relationship management (CRM) systems are designed to support
• Marketing (Market Research + Targeted Marketing)
• Sales
• Customer service
• CRM systems capture the entire customer experience with an organization
 CRM: Market Research
• Market research: helps discover populations and regions that are most likely to purchase product

• Activities may include:

• Conducting interviews with consumers and retailers
• Building statistical models to predict sales volumes of different products

• Example: Retail survey at bottom of receipt giving you discount to share feedback
• Contests: Vote for an M&M color or pick a new donut
 CRM: Targeted Marketing
Targeted marketing: promotes to people most likely to purchase products
• Database technology allows all companies to use targeted marketing, even small companies
• Can direct promotional dollars to customers most likely to buy through new data available (e.g. search
histories, etc)
• Telemarketing: marketing over the telephone; caller has large database of consumer data
• Computer telephony integration (CTI): allows computer to use telephone line as input; Caller ID can be
used to locate customer data
 CRM: Targeted Marketing using Location-Based Services
• Offer the ability to accurately and efficiently gather various dimensions of consumer information in real-
time, such as:
• When and where they shop
• What they buy
• Smartphone implementation of location-based services “leads” prospective customers to their
businesses
• Increases sales and promotes their location

• Sample Cases: https://blog.beaconstac.com/2016/04/4-brands-that-are-winning-at-location-based-

marketing-and-how/
- Example from article above: Van Leuwen using geo-marketing to send special offers when a
customer is near their store
 CRM: Salesforce Automation
• Equips traveling salespeople with information technology to improve productivity
• Laptops, tablet computers, or smart phones
• Makes tracking and reporting sales and customer data more effifcient
• Salesforce is a market leader in Salesforce CRM https://youtu.be/KW5lO34uOsM

As you watch the video, think about:

1) How Salesforce can help businesses? What kind of a return can they see?

2) What makes Salesforce unique? Is there anything that it can do that surprised you?
 CRM: Customer Service
• Web-based customer service provides automated customer service at any time 365 days per year
• Saves labor costs
• Reduces paper and postage costs
• Includes FAQs, tracking systems, maintenance of customer profiles
• Artificial intelligence may be used to emulate a real-life customer service representative (AI will be
covered after Exam # 1)
III. Supply Chain Management
 Systems in a Business / ERP
• Enterprise resource planning (ERP) system: manages daily operations and facilitates planning and drives
efficiency
 What is Supply Chain Management
• Supply chain: consists of procurement of raw materials, processing materials into goods (manufacturing),
and delivering goods
• Supply chain management (SCM): monitoring, controlling, and facilitating supply chains

Materials Production Distribution

Monitoring /
QC

• SCM System Example: https://www.youtube.com/watch?v=FRbSFw4U0fw

- What benefits does SCM offer? Why Oracle?
 SCM Systems
• Overall inventory in the U.S. is decreasing while U.S. gross domestic product (GDP) is increasing

• Money saved from reduced inventory can be spent elsewhere

• Reduction in inventory attributed to the use of ISs, especially SCM systems

• Streamline operations throughout chain

• IT helps in SCM & manufacturing activities by:

• Scheduling plant activities to optimize the use of resources
• Planning material requirements based on current and forecasted demand
• Reallocating materials and resources from one order to another
• Managing inventories
• Grouping similar work orders for efficiency
• Considering the qualifications of each resource to accomplish its task
 SCM Cycle & Systems
Forecasts

MRP2
EOQ
Demand MRP
BOM Shipping
Systems
MPS
Demand Material Sourcing
Production Distribution

• Material requirements planning (MRP): inventory control

• Determines when inventory needs to be restocked
• Can predict future need based on long-term demand forecasts
• Takes customer demand as input, then works back to calculate resources needed to produce goods

• Bill of materials (BOM): list of all raw materials and subcomponent demands to produce a product
 SCM: Cycles & Systems (Continued)
• Economic order quantity (EOQ): optimal quantity of a raw material that minimizes overstocking and
saves cost, without missing production deadlines
• Considers cost, discounts for large quantities, cost of warehousing material, cost of alternative uses
of money, etc.

• Manufacturing resource planning (MRP II): combines MRP with other related activities to plan the entire
manufacturing process
• Uses master production schedule

• Master production schedule (MPS): specifies how production capacity is to be used to meet customer
demands
• helps enable just-in-time (JIT) manufacturing where suppliers ship parts directly to assembly lines,
saving the cost of warehousing raw materials and parts
 SCM: Monitoring & Control
• Information systems are designed to control manufacturing processes as well as monitor them;
Controlling processes helps ensure quality

• Example: tagging a specific part (e.g. car chassis) with a unique bar code to see where in the assembly
line each part is in, and make sure a step in assembly or QC is not missed

• Radio frequency identification (RFID): a technology containing circuitry that allows recording of
information about a product

• Electronic product code (EPC): a code on an RIFD tag that provides more information than the universal
product code (UPC) and doesn’t require line of sight (e.g. can find items for a store)
• Universal Product Code (UPC): code using optical imaging that can be scanned using an optical reader;
• Information may include date of manufacturing, plant location, expiration date, destination, etc.

• Ensures genuineness of products

 SCM: Shipping
• Performed by manufacturer or shipping company
• Many variables affect cost and speed of shipping, including:
- Length of routes - Sequence of loading and unloading
- Fuel prices - Road tolls
- Type of shipped materials (e.g., perishable, hazardous, or fragile)

• Sophisticated software that optimizes shipping efficiency helps a company stay competitive
• Need to optimize:
- Shipping time - Cost of labor
- Equipment use - Maintenance

• Vehicles equipped with computers, global positioning systems (GPS), and satellite communication have
increased efficiency
 Effective SCM Systems
• SCM systems work best when all businesses in the chain are sharing information

• Effective SCM requires:

• Technology
• Trust
• Culture change

• Article: Apple’s Supply Chain issues may have impacted its stock price:
https://investorplace.com/2018/01/bad-news-may-show-that-apple-inc-aapl-stock-has-lost-its-
way/#.WmpXN5Opm00
 Inventory in SCMs
• Small enterprises do not use SCM systems
• Affect more powerful organization to which small enterprise is linked

• When SCMs of companies are not linked, demand requirements are unknown
• Supply companies must overstock inventory

• One company “sits” with lean inventory while other stands with “overstock”; can be solved
with ”collaborative logistics” through SCM and create the perfect order
IV. Support Activities
 Systems in a Business / ERP
• Enterprise resource planning (ERP) system: manages daily operations and facilitates planning and drives
efficiency; integrated management of core business processes
Support Activities Systems
• Accounting Systems
• Finance Systems
• Design Systems
• HR Systems
 Accounting Systems
• Accounting’s purpose is to track every financial transaction to make sure company is making a profit
• Accounting systems are required by law and for proper management
• Accounts payable and accounts receivable track who owes who what
• Accounting information system: receives information from transaction processing systems (TPSs)
• Automatically routes purchases to accounts payable
• Automatically routes sales to accounts receivable
• Accounting ISs are used for managerial purposes for budgeting and cost control

• Leading Systems: Quickbooks, Intacct, Netsuite

https://www.youtube.com/watch?time_continue=154&v=8q892InmlAc What are some useful features?
 Accounting Systems
• The accounting information systems join information from several different sources and reports out in
different ways
 Finance
• Firm’s health is measured by its finances
• Information systems can improve financial management
• Financial managers’ goal is to manage money as efficiently as possible by:
• Collecting payables as soon as possible
• Making payments at the latest time allowed
• Ensuring funds are available for daily operations
• Investing funds not used for current activities

• Leading Software: Oracle, Netsuite, Workday,

Intacct / Bloomberg Terminals
Engineering & Design
 Engineering & Design
• Time to market: time between generating an idea for a product and completing a prototype; IS can help
minimize time to market and provide a competitive edge

• Brainstorming: process of a group of colleagues meeting and collaborating to generate creative solutions
and new ideas

• Computer-aided design (CAD): tools to create, modify, and store designs and drawings electronically

• Rapid prototyping: creating one-of-a-kind products to test design in three dimensions

• Allows a model to be produced in hours rather than days or weeks

• Computer-aided manufacturing (CAM): systems that instruct machines how to manufacture parts and
assemble products
 Human Resources (HR)
Human resource management (HRM) can be classified into five main activities:
• Employee record management
• Promotion and recruitment
• Training
• Evaluation
• Compensation and benefits management

• Leading HR software:
Sage, BambooHR, ADP
 HR: Employee Record Management
• HR departments must keep personnel records:
• To satisfy laws
• For payroll and tax calculation and deposit
• For promotion consideration
• For periodic reporting

• Human resource ISs are now digitized

• Saves space to store records, time to retrieve them, and costs of both
 HR: Promotion & Recruitment
• HR can select best-qualified person for position by searching database of applicants and existing
employees for specific criteria

• Automating the selection process significantly minimizes time and money for recruitment

• Intranet: intra-organizational network that supports Web applications

• Allows HR manager to post position vacancy announcements that get wide exposure
 HR: Training
• One important HR function is improving employee skills

• Multimedia software training is replacing classrooms and teachers

• May include virtual reality simulated environments

• Information technology reduces training costs dramatically

 HR: Evaluation
• Employee ability must be periodically evaluated by supervisors
• May include evaluation of technical ability, communication skills, professional conduct, and general
behavior

• Often a subjective process, which is a problem

• Evaluation software assists in standardizing the evaluation process

• Provides tools such as step-by-step guides, checklists, scales, weighted calculations, etc.
 HR: Compensation & Benefits
• Compensation includes salary, hourly pay, commissions, and bonuses

• Programs calculate pay and taxes

• Automatically generate paychecks and perform direct deposits

• Software can help manage benefits

• Benefits database accessible through intranet or Internet
 Implementing Overall ERP
• Many companies replace old, disparate information systems with enterprise applications

• Enterprise resource planning (ERP) system: integrated management of core processes, including
managing daily operations and facilitates planning

• Current ERP market includes many vendors, such as SAP Business One, Sage 100 ERP, Oracle Netsuite
among others. These include multiple modules such as HR, CRM, Accounting, etc.

• Most reengineering projects of the 1990s failed

• In the late 1990s and early 2000s
• ERP systems forced changes in processes; helped realize many of those reengineering ideas
• ERP systems allow better planning and managing of processes at the organizational level instead of at the
organizational unit level

• SAP Business One Demo: https://www.youtube.com/watch?v=CHe6LLvkDnY

 Challenges and Disadvantages of ERP Systems
• Challenges of ERP systems
• They are complex
• They often require special tailoring for specific organizations
• They may not support a company’s unique sets of business processes
• They are expensive
• A process that becomes a weak link in one area may negatively affect other integrated processes

• Solutions Today:
• Virtual ERPs, where companies have different systems communicate seamlessly with each other to
create a virtual ERP
• Information from different systems is stored in a central database that is reconcile
V. Kimball’s Restaurant
 Kimball’s Restaurant Discussion
Kimball’s Restaurant:
- CONTEXT: Who started Kimball’s restaurant? Who are the people involved? How is the restaurant
doing? Where are they today? What are they considering business-wise?
- What information is the restaurant not tracking with its Point-of-Sales system that could help
operations?
- What could the professional advisors recommend?
- What new information is needed?
 Kimball’s Restaurant
• Using the classifications in this chapter, identify the business functions within Kimball’s. What business
functions could assist Kimball’s to gain efficiencies in the backhouse operations? List those functions
and their benefit to the business.
Class Wrap-Up
 Today We…
• Defined Effectiveness & Efficiency
• Differentiated how businesses leverage the following systems:
- ERP
- Supply Chain Management Systems
- CRM Systems
- Support Activities Systems

• Applied This Lesson to Kimball’s Restaurant

 Reading for This Class / Next Class
• This Class: Chapter 3 in Textbook
• Next Class: Chapter 4 in Textbook