Chapter 2: Information Systems in

the Enterprise

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 KINDS OF INFORMATION SYSTEMS

 Organizational Hierarchy

 Organizational Levels

 Information Systems

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 KINDS OF INFORMATION SYSTEMS

KIND OF SYSTEM GROUPS SERVED

STRATEGIC LEVEL SENIOR MANAGERS

MANAGEMENT LEVEL MIDDLE MANAGERS

KNOWLEDGE LEVEL KNOWLEDGE &

DATA WORKERS

OPERATIONAL OPERATIONAL
LEVEL MANAGERS

SALES & MANUFACTURING FINANCE ACCOUNTING HUMAN

MARKETING & ENGINEERING RESOURCES
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 Four General Kinds of IS
 Operational-level systems
 support operational managers by monitoring

the day-to-day’s elementary activities and

transactions of the organization. e.g. TPS.
 Knowledge-level systems
 support knowledge and data workers in

designing products, distributing information, and

coping with paperwork in an organization. e.g.
KWS
 Management-level systems
 support the monitoring, controlling, decision-

making, and administrative activities of middle

managers. e.g. MIS, DSS
 Strategic-level systems
 support long-range planning activities of senior

management. e.g. ESS 4

 A Framework for IS
(with respect to support provided)

• Executive Support Systems (ESS)

• Management Information Systems (MIS)
• Decision Support Systems (DSS)
• Knowledge Work Systems (KWS)
• Office Automation Systems (OAS)
• Transaction Processing Systems (TPS)

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 Transaction Processing Systems (TPS)
Computerized system that performs and records
the daily routine transactions necessary to
conduct the business; these systems serve the
operational level of the organization

• TYPE: Operational-level
• INPUTS: transactions, events
• PROCESSING: updating
• OUTPUTS: detailed reports
• USERS: operations personnel, supervisors
• DECISION-MAKING: highly structured

EXAMPLE: payroll, accounts payable 6

 A Symbolic Representation for a payroll
TPS
E m p lo y e e d a ta (v a r io u s d e p a r t m e n t s ) T o g e n e r a l le d g e r : w a g e s a n d s a la r ie s

M anagem ent
P ayr o ll S yste m R e po rts

G o v e rn m e n t do cu m e n ts
P ayro ll
m aster E m p lo y e e c h e c k s
fi l e O n - lin e
q u e r ie s

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 Typical Applications of TPS
TYPE OF TPS SYSTEM
Sales/ Manufacturing! Finance/ Human Other types
marketing production accounting resources (e.g., university)
systems systems systems systems
Major functions Sales management Scheduling Budgeting Personnel recard Admissions
of system Market research Purchasing General ledger Benefits Grade records
Promotion Shipping/receiving Billing Cornpensation Course records
Pricing Engineering Cost accounting Labor relations Alumni
New products Operations Training
Major Sales order Materials resource General ledger Payroll Registration system
application information system planning systems
systems Market research Purchase order Accounts Employee records Student transcript
system control systems receivable/payable system
Pricing system Engineering Budgeting Benefit systems Curriculum class
systems control systems
Quality control Funds managementCareer path Alumni benefactor
systems systems systems system

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 Office Automation Systems (OAS)
Computer system, such as word processing,
electronic mail system, and scheduling system,
that is designed to increase the productivity of
data workers in the office.

• TYPE: Knowledge-level
• INPUTS: documents, schedules
• PROCESSING: document management,
scheduling, communication
• OUTPUTS: documents; schedules
• USERS: clerical workers

EXAMPLE: document imaging system 9

 Knowledge Work Systems (KWS)

Information system that aids knowledge workers in

the creation and integration of new knowledge in
the organization.

•TYPE: Knowledge-level
• INPUTS: design specifications
• PROCESSING: modelling
• OUTPUTS: designs, graphics
• USERS: technical staff; professionals

EXAMPLE: Engineering workstations

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 Decision Support Systems (DSS)

Information system at the management level of an

organization that combines data and sophisticated
analytical models or data analysis tools to support
semi-structured and unstructured decision making.

•TYPE: Management-level
• INPUTS: low volume data
• PROCESSING: simulations, analysis
• OUTPUTS: decision analysis
• USERS: professionals, staff managers
• DECISION-MAKING: semi-structured

EXAMPLE: sales region analysis 11

 Characteristics of Decision-Support
Systems
1. DSS offer users flexibility, adaptability, and a
quick response.
2. DSS operate with little or no assistance from
professional programmers.
3. DSS provide support for decisions and problems
whose solutions cannot be specified in advance.
4. DSS use sophisticated data analysis and
modelling tools.
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 Management Information Systems
(MIS)

Information system at the management level of an

organization that serves the functions of planning,
controlling, and decision making by providing routine
summary and exception reports.

•TYPE: Management-level
•INPUTS: high volume data
•PROCESSING: simple models
•OUTPUTS: summary reports
•USERS: middle managers
•DECISION-MAKING: structured to semi-structured
EXAMPLE: annual budgeting
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Characteristics of Management information
Systems
1. MIS support structured decisions at the operational and
management control levels. However, they are also
useful for planning purposes of senior management
staff.
2. MIS are generally reporting and control oriented. They
are designed to report on existing operations and
therefore to help provide day-to-day control of
operations.
3. MIS rely an existing corporate data-and data flows.
4. MIS have little analytical capability.
5. MIS generally aid in decision making using past and
present data.
6. MIS are relatively inflexible.
7. MIS have an internal rather than an external orientation.

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 Executive Support Systems (ESS)

Information system at the strategic level of an

organization that address unstructured decision making
through advanced graphics and communications.
TYPE: Strategic level
• INPUTS: aggregate data; internal and external
• PROCESSING: interactive
• OUTPUTS: projections
• USERS: senior managers
• DECISION-MAKING: highly unstructured

EXAMPLE: 5 year operating plan

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 Model of a Typical Executive Support
System
ESS
w o r k statio n

M enus
G r a p h ic s
C o m m u n ic a tio n s
L o c a l p r o c e s s in g

ESS In te r n a l D a ta E xte r n al D ata

ESS
w o r k statio n
T P S /M IS D a ta D ow Jones w o r k statio n
F in an c ial D ata G allup P o ll
O ffi c e S y s t e m s S tan d ar d &
M o deling / P o o r 's
M enus analysis M enus
G r a p h ic s G r a p h ic s
C o m m u n ic a tio n s C o m m u n ic a tio n s
L o c a l p r o c e s s in g L o c a l p r o c e s s in g
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 Major Types of Information Systems
T Y P E S O F SY ST E M S

S tr a te g ic L e v e l S y s te m s
E SS 5 -y e a r 5 -y e a r 5 -ye ar P r o fit M anpo w e r
o p e r a tin g bu dg e t s a le s t r e n d p la n n in g p la n n in g
p la n fo r e c a s t in g fo r e c a s t in g

M a n a g e m e n t-L e v e l S y s te m s
S a le s In v e n to ry A nn ual C a p ita l R e lo c a tio n
M IS
m anag e m e nt C o n tro l b u d g e t in g I n v e s t m e n t a n a ly s is a n a ly s is
P r ic in g /p r o fit a b ilit y C o n trac t c o s t
D S S S a le s r e g io n P r o d u c t io n C o st
a n a ly s is a n a ly s is
a n a ly s is S c h e d u lin g a n a ly s is

K n o w le d g e - L e v e l S y s t e m s
K W S E n g in e e r in g G r a p h ic s M a n a g e r ia l
w o r k s t a t io n s w o r k s ta tio n s w o r k s ta tio n s
O A S W o rd D o cum e n t E le c t r o n ic
p r o c e s s in g I m a g in g C a le n d a r s

O p e r a tio n a l L e v e l S y s te m s
M a c h in e c o n tr o l S e c u r itie s P a y r o ll C o m p e n s a tio n
T P S t r a d in g
O r d e r T r a c k in g P la n t s c h e d u lin g A c c o u n ts p a y a b le T r a in in g & d e v e lo p m e n t
O r d e r p r o c e s s in g M a te r ia l m o v e m e n t C a s h A c c o u n t s r e c e iv a b le E m p lo y e e r e c o r d k e e p in g
c o n tro l m anag e m e n t

S a le s a n d M a n u fa c t u r in g F in a n c e A c c o u n t in g H um an
m a r k e tin g R e s o u rce s
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Relationship between different IS

ESS

MIS DSS

KWS/
TPS
OAS
TPS is a major producer of information for other systems 18
 Classification of IS
by Organizational Structure
 Departmental Information Systems
 Enterprise Information System
 Inter-organizational Systems
 NYCE
 SABRE or APOLLO

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 Classification of IS
by Functional Area
 The accounting information system
 The finance information system
 The manufacturing (operations, production)
information system
 The marketing information system
 The human resources information system

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 Sales & Marketing Systems
 Systems that help the firm identify customers
for the firm’s products or services, develop
products and services to meet customer’s
needs, promote products and services, sell
the products and services, and provide
ongoing customer support.
EXAMPLES
System Description Organizational Level
Order processing Enter, process, and track orders Operational
Market analysis Identify customers and markets using Knowledge
data on demographics, markets,
consumer behavior, and trends
Pricing analysis Determine prices for products Management
and services

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 Manufacturing and Production Systems
 Systems that deal with the planning,
development, and production of
products and services and with
controlling the flow of production.
Examples
System Description Organizational Level
Machine control Control the actions of machines Operational
and equipment
Computer-aided design (CAD) Design new products using Knowledge
the computer
Production planning Decide when and how many Management
products should be produced
Facilities location Decide where to locate new Strategic
production facilities

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 Finance and Accounting Systems
 Systems that keep track of the firm’s
financial assets and fund flows.
Examples
System Description Organizational Level
Accounts receivable Track money owed the firm Operational
Portfolio analysis Design the firm's portfolio of investments Knowledge
Budgeting Prepare short-term budgets Management
Profit planning Plan long-term profits Strategic

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 Human Resources Systems
 Systems that maintain employee
records; Track employee skills, job
performance, and training; And support
planning for employee compensation
and career development.
Examples
System Description Organizational Level
Training and development Track employae training, skills, Operational
and performance appraisals
Career pathing Design career paths for employees Knowledge
Compensation analysis Monitor the range and distribution Management
ofemployee wages, salaries, and bene6cs
Human resources planning Plan the long-term labor force needs Strategic
of the organization

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 Examples of Business Processes

Functional Area Business Process

Manufacturing and production Assembling the product
Checking for quality
Producing bills of materials
Sales and marketing Identifying customers
Making customers aware of the product
Selling the product
Finance and accounting paying creditors
Creating financial statements
Managing cash accounts
Human resources Hiring employees
Evaluating employees' job performance
Enrolling employees in benefits plans

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The Order Fulfillment Process (F 2.12)

G e n e ra te S u b m it
S a le s
O rd er O rd er

A c c o u n t in g C hec k A p p ro v e G e n e ra te
C r e d it C r e d it I n v o ic e

M a n u f a c t u r in g A s s e m b le S h ip
& P r o d u c t io n P ro d u c t P ro d u c t

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 Customer Relationship Management

 Customer relationship management

Business and technology discipline to
coordinate alt of the business processes
S a le s
T e le p h o n e s a le s for dealing with customers.
W e b sa le s
F ie ld s a le s
R e t a il s a le s
U n if ie d v ie w o f c u s t o m e r s
M a r k e t in g
C a m p a ig n d a t a
C o n s is t e n t m e s s a g e t o c u s t o m e r s
C o n ten t E n d -to -e n d c u s to m e r c a re
D a t a a n a ly sis L o n g - t e r m c u s t o m e r r e la t i o n s h ip s
C u s t o m e r S e r v ic e I d e n t if ic a t io n o f b e s t c u s t o m e r s
C a ll c e n t e r d a t a
W e b se lf se r v ic e d a t a
F ie ld s e r v ic e d a t a
W ir e le s s d a t a

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 Customer Relationship Management
 Supply chain management Integration of
supplier, distributor, and customer logistics
requirements into one cohesive process.
 Supply chain Network of facilities for
procuring materials, transforming raw
materials into finished products,' and
distributing finished produce to customers.

C a p a c it y , i n v e n t o r y le v e l, d e liv e r y s c h e d u le , p a y m e n t t e r m s

R e t a il
S u p p lie r M a n u f a c tu re r D is t r ib u t o r C u s to m e r
O u t le t

O r d e r s , r e t u r n r e q u e s t s , r e p a ir a n d s e r v ic e r e q u e s t s , p a y m e n t s
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HOW INFORMATION SYSTEMS CAN
FACILITATE SUPPLY CHAIN
MANAGEMENT
Information systems can help participants in the
supply chain:
 Decide when and what to produce, store, and move
 Rapidly communicate orders Track the status of orders
 Check inventory availability and monitor inventory levels
 Track shipments
 Plan production based on actual customer demand
 Rapidly communicate changes in product design
 Provide product specifications
 Share information about defect rates and returns

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Enterprise Systems

 Firm wide information systems that

integrate key business processes so
that information can flow freely
between different parts of the firm.

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 Traditional View of Systems (F. 2.15)

B u s in e s s F u n c tio n s

M a r k e tin g a n d H um an
M a n u fa c tu r in g A c c o u n tin g F in a n c e
S a le s R e sou rce s
O r g a n iz a t io n a l

O r g a n iz a t io n a l
B o u n d a r ie s

B o u n d a r ie s
B u s in e s s B u s in e s s B u s in e s s B u s in e s s B u s in e s s
Processes P roce sse s P roce sse s Processes P roce sse s
H um an
M a n u fa c tu r in g A c c o u n tin g F in a n c e M a r k e tin g a n d
R esources
S y ste m s S y ste m s S y ste m s S a le s S y s te m s S y s te m s

V en dors I n fo r m a tio n S y s t e m s C u stom e rs

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 Enterprise Systems (F. 2.16)

M a n u fa c tu r in g A c c o u n tin g

E n te r p r is e S y s te m

B u s in e s s P r o c e s s

O r g a n iz a tio n a l
O r g a n iz a t io n a l
B o u n d a r ie s

B o u n d a r ie s
B u s in e s s P r o c e s s
V e n dors B u s in e s s P r o c e s s C u sto m e rs
E n t e r p r is e - w id e b u s in e s s
proce sse s

H um an
S a le s a n d F in a n c e
R e sou rce s
M a r k e t in g
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Benefits and Challenges of
Enterprise Systems
 Benefits
 Firm structure and organization: One Organization
 Management: Firm wide Knowledge-based
Management Processes
 Technology: Unified Platform
 Business: More Efficient Operations and Customer-
driven Business Processes
 Challenges
 Daunting Implementation
 High Up-front Costs and Future Benefits
 Inflexibility

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Extended Enterprises

 Extended Enterprises: Networks linking systems of

multiple firms in an industry. Also called extended
enterprises.
 Vertical industrial networks Networks for integrating the
operations of a firm with its suppliers.
 Horizontal industrial networks Networks for linking firms
across an entire industry.

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 Industrial Networks (F. 2.17)

H o r iz o n t a l in d u s t r ia l n e t w o r k
F ir m s F ir m F ir m F ir m F ir m
in a s in g le 1 2 3 4
in d u s t r y
F ir m v a lu e c h a in s a n d e n t e r p r is e s y s t e m s
In d u s try
v a lu e
I n d u s t r ia l N e t w o r k s c h a in

F ir m s i n F ir m S u p p lie S u p p lie S u p p lie

c o m p le m e n t a r y 1
r r r
1 2 3
b u s in e s s
V e r t ic a l in d u s tr ia l n e t w o r k

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