Management Information

System
by
Jamil Ahmad
 Manufacturer In the factory, CEO can
HEAD QUARTERS compare manufacturing

FACTORY
Customer Data equipment side-by-side with
 Web Site Content CEO
images of replacement parts
 New Designs

on the iPad to make sure he’s
Calendar, e-mail, Contact
Management, Documents getting the correct pieces.

Dealers
Back at the shop,
IPAD Wifi
Jackson Kayak’s
Customers managers and
Eric Jackson
employees find iPad
President
and iPhone equally
• Participate in competitions
3G invaluable.
• Monitor Industry trends
• Meets directly with dealers
and customers
SHOP
• With the iPhone and iPad,
Jackson claims he can run
the entire 120-person All the tools this executive needs to
company from afar. Executives
communicate with the home office,
dealers, and customers.
 General Electric (GE) is one of the Has developed dozens of
world’s largest companies, producing Center of iPhone and iPad applications,
aircraft engines, locomotives and other Excellence including industry-specific
transportation equipment, kitchen and diagnostic and monitoring
laundry appliances, lighting, electric
tools and business intelligence
distribution and control equipment,
generators and turbines, and medical
tools that help decision
imaging equipment. GE is also a makers find patterns and
leading provider of financial services, trends in large volumes of
aviation, clean energy, media, and data
health care technology. IPAD
Wifi

Employees
Transformer
Use their iPads to access e-mail, Monitoring App
contacts, documents, and electronic
Helps manage gas turbine
presentations.
inventory and electronic
Service transformers throughout the
PDS Movement Personnel world, with the ability to zoom
Planner App in from a global map to a
A PDS Movement Planner lets service personnel specific transformer and read
all of the key performance
monitor railway tracks and obtain diagnostic
indicators.
information on locomotives.
 With operations in 60 countries, Roambi Executives use their iPhones to
Dow Corning offers more than Visualizer app quickly view and analyze real-
7,000 products and services for time data from their core
consumer and industrial corporate system, including
applications, from adhesives to sales figures, trends, and
lubricants, delivered as fluids, projections.
solids, gels, and powders. It presents managers with
simple, intuitive dashboards of
complex data.
Executives According to Executive Vice
President and Chief Financial
IPAD Wifi Officer Don Sheets, in 15
seconds he can get a sense of
Analytics App whether there’s a financial
performance issue he needs to
App for the iPhone monitors Web site traffic and online sales for get involved with.
the company’s XIAMETER brand of standard silicone products.
Analytics App interfaces with Google Analytics.

When Dow Corning rolls out XIAMETER Web sites across the
globe, executives can monitor what content is and isn’t being used
whether they are home, traveling, or at the office.
Sunbelt Rentals, is one of the
largest equipment rental inventory enterprise
point-of sale
companies in the United States, control system
with a $2 billion inventory of rental
equipment. More than 1,200
company employees, including
Mobile
sales staff, field personnel, and
executives. SalesPro app
Ties multiple systems and databases
into a single package for the sales
team.

Employees Wifi Users are able to share sales quotes

based on the most up-to-date
IPAD information on rental rates and
equipment availability. With this
Equipped with iPhones to interact with application,
contacts and stay abreast of calendar
events, e-mail, scheduling, and contact
management,
Can respond immediately to
Sales Team
customer requests while they
are at a job site.
 QUESTIONS
1. What kinds of applications are described here? What business functions do they support? How do they
improve operational efficiency and decision making?
– Mobile Digital Platform, Office Automation (e-mail, document handling), Sales Management, Performance Management
– Business Processes, Manufacturing, Dealer network, Shop dealing, Customer Handling, Support Handling
– By making Informed and just in time decisions

2. Identify the problems that businesses in this case study solved by using mobile digital devices.
– Improved coordination thus eleminating redundant work
– Globalization challenges
– Reduced support cost
3. What kinds of businesses are most likely to benefit from equipping their employees with mobile digital devices
such as iPhones and iPads?
– Global based companies
– Support dependent companies with large installation of equipment globally
4. One company deploying iPhones has said: The iPhone is not a game changer, it’s an industry changer. It
changes the way that you can interact with your customers and with your suppliers. Discuss the implications of
this statement.
 UPS COMPETES GLOBALLY WITH INFORMATION TECHNOLOGY
• United Parcel Service (UPS) started out in 1907 in a closet-sized basement office. Jim Casey and
Claude Ryan—two teenagers from Seattle with two bicycles and one phone—promised the “best
service and lowest rates.” UPS has used this formula successfully for more than a century to
become the world’s largest ground and air package-delivery company. It’s a global enterprise with
over 400,000 employees, 93,000 vehicles, and the world’s ninth largest airline.

• UPS delivers 15.6 million packages and documents each day in the United States and more than
220 other countries and territories. The firm has been able to maintain leadership in small-package
delivery services despite stiff competition from FedEx and Airborne Express by investing heavily in
advanced information technology. UPS spends more than $1 billion each year to maintain a high
level of customer service while keeping costs low and streamlining its overall operations.

• It all starts with the scannable bar-coded label attached to a package, which contains detailed
information about the sender, the destination, and when the package should arrive.
 UPS COMPETES GLOBALLY WITH INFORMATION TECHNOLOGY
• Customers can download and print their own labels using special software provided by UPS or by
accessing the UPS Web site.

• Before the package is even picked up, information from the “smart” label is transmitted to one of
UPS’s computer centers in Mahwah, New Jersey, or Alpharetta, Georgia, and sent to the
distribution center nearest its final destination.

• Dispatchers at this center download the label data and use special software to create the most
efficient delivery route for each driver that considers traffic, weather conditions, and the location of
each stop.

• UPS estimates its delivery trucks save 28 million miles and burn 3 million fewer gallons of fuel each
year as a result of using this technology.
 UPS COMPETES GLOBALLY WITH INFORMATION TECHNOLOGY
• To further increase cost savings and safety, drivers are trained to use “340 Methods” developed by
industrial engineers to optimize the performance of every task from lifting and loading boxes to
selecting a package from a shelf in the truck.

• The first thing a UPS driver picks up each day is a handheld computer called a Delivery Information
Acquisition Device (DIAD), which can access a wireless cell phone network. As soon as the driver
logs on, his or her day’s route is downloaded onto the handheld.

• The DIAD also automatically captures customers’ signatures along with pickup and delivery
information. Package tracking information is then transmitted to UPS’s computer network for
storage and processing.

• From there, the information can be accessed worldwide to provide proof of delivery to customers or
to respond to customer queries. It usually takes less than 60 seconds from the time a driver
presses “complete” on the DIAD for the new information to be available on the Web.
 UPS COMPETES GLOBALLY WITH INFORMATION TECHNOLOGY
• Through its automated package tracking system, UPS can monitor and even re-route packages
throughout the delivery process.

• At various points along the route from sender to receiver, barcode devices scan shipping
information on the package label and feed data about the progress of the package into the central
computer.

• Customer service representatives are able to check the status of any package from desktop
computers linked to the central computers and respond immediately to inquiries from customers.

• UPS customers can also access this information from the company’s Web site using their own
computers or mobile phones.
 UPS COMPETES GLOBALLY WITH INFORMATION TECHNOLOGY
• UPS now has mobile apps and a mobile Web site for iPhone, BlackBerry, and Android smartphone
users. Anyone with a package to ship can access the UPS Web site to track packages, check
delivery routes, calculate shipping rates, determine time in transit, print labels, and schedule a
pickup.

• The data collected at the UPS Web site are transmitted to the UPS central computer and then back
to the customer after processing. UPS also provides tools that enable customers, such Cisco
Systems, to embed UPS functions, such as tracking and cost calculations, into their own Web sites
so that they can track shipments without visiting the UPS site.

• A Web-based Post Sales Order Management System (OMS) manages global service orders and
inventory for critical parts fulfillment. The system enables hightech electronics, aerospace, medical
equipment, and other companies anywhere in the world that ship critical parts to quickly assess
their critical parts inventory, determine the most optimal routing strategy to meet customer needs,
place orders online, and track parts from the warehouse to the end user.
 UPS COMPETES GLOBALLY WITH INFORMATION TECHNOLOGY
• An automated e-mail or fax feature keeps customers informed of each shipping milestone and can
provide notification of any changes to flight schedules for commercial airlines carrying their parts.

• UPS is now leveraging its decades of expertise managing its own global delivery network to
manage logistics and supply chain activities for other companies. It created a UPS Supply Chain
Solutions division that provides a complete bundle of standardized services to subscribing
companies at a fraction of what it would cost to build their own systems and infrastructure. These
services include supply chain design and management, freight forwarding, customs brokerage, mail
services, multimodal transportation, and financial services, in addition to logistics services.
 UPS COMPETES GLOBALLY WITH INFORMATION TECHNOLOGY
• In 2006, UPS started running the supply chains of medical device and pharmaceutical companies.
For example, at UPS headquarters in Louisville, Kentucky, company pharmacists fill 4,000 orders a
day for insulin pumps and other supplies from customers of Medtronic Inc., the Minneapolis-based
medicaldevice company.

• UPS pharmacists in Louisville log into Medtronic's system, fill the orders with devices stocked on
site, and arrange for UPS to ship them to patients. UPS's service has allowed Medtronic to close its
own distribution warehouse and significantly reduce the costs of processing each order. UPS and
other parcel delivery companies are investing in giant warehouses that service multiple
pharmaceutical companies at once, with freezers for medicines and high-security vaults for
controlled substances.
 UPS COMPETES GLOBALLY WITH INFORMATION TECHNOLOGY
• UPS has partnered with Pratt & Whitney, a world leader in the design, manufacture, and service of
aircraft engines, space propulsion systems, and industrial gas turbines, to run its Georgia
Distribution Center, which processes 98 percent of the parts used to overhaul Pratt & Whitney jet
engines for shipment around the world.

• UPS and Pratt & Whitney employees together keep track of about 25,000 different kinds of parts
and fulfill up to 1,400 complex orders each day—ranging from a few nuts and bolts to kits
comprising all the parts needed to build an entire engine.

• On the receiving side of the 250,000-square-foot building, UPS quality inspectors check newly
arrived parts against blueprints.
 UPS COMPETES GLOBALLY WITH INFORMATION TECHNOLOGY
1. What are the inputs, processing, and outputs of UPS’s package tracking system?

2. What technologies are used by UPS? How are these technologies related to UPS’s business
strategy?

3. What strategic business objectives do UPS’s information systems address?

4. What would happen if UPS’s information systems were not available?

 Review Questions
1. How are information systems transforming business, and what is their relationship
to globalization?
– Describe how information systems have changed the way businesses operate and
their products and services.
– Identify three major new information system trends.
– Describe the characteristics of a digital firm.
– Describe the challenges and opportunities of globalization.
 Review Questions
2. Why are information systems so essential for running and managing a business
today?
– List and describe six reasons why information systems are so important for business today.

3. What exactly is an information system? How does it work? What are its management,
organization, and technology components?
– Define an information system and describe the activities it performs.
– List and describe the organizational, management, and technology dimensions of information
systems.
– Distinguish between data and information and between information systems literacy and
computer literacy.
– Explain how the Internet and the World Wide Web are related to the other technology
components of information systems.
 BUSINESS PROCESSES AND INFORMATION SYSTEMS

• In order to operate, businesses must deal with many different pieces of information about suppliers,
customers, employees, invoices, and payments, and of course their products and services.

• They must organize work activities that use this information to operate efficiently and enhance the
overall performance of the firm.

• Information systems make it possible for firms to manage all their information, make better
decisions, and improve the execution of their business processes.
 BUSINESS PROCESSES AND INFORMATION SYSTEMS
• Business processes, refer to the manner in which work is organized, coordinated, and focused to
produce a valuable product or service. Business processes are the collection of activities required
to produce a product or service.

• These activities are supported by flows of material, information, and knowledge among the
participants in business processes.

• To a large extent, the performance of a business firm depends on how well its business processes
are designed and coordinated.

– A company’s business processes can be a source of competitive strength if they enable the company to
innovate or to execute better than its rivals.

– Business processes can also be liabilities if they are based on outdated ways of working that impede
organizational responsiveness and efficiency.
 BUSINESS PROCESSES AND INFORMATION SYSTEMS
Many business processes are tied to a specific functional area. For example, the sales and marketing
function is responsible for identifying customers, and the human resources function is responsible for
hiring employees.
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
 BUSINESS PROCESSES AND INFORMATION SYSTEMS
Other business processes cross many different functional areas and require coordination across
departments. For instance, consider the seemingly simple business process of fulfilling a customer
order.
 BUSINESS PROCESSES AND INFORMATION SYSTEMS
• What at first appears to be a simple process, fulfilling an order, turns out to be a very complicated
series of business processes that require the close coordination of major functional groups in a firm.

• Moreover, to efficiently perform all these steps in the order fulfillment process requires a great deal
of information.

• The required information must flow rapidly both within the firm from one decision maker to another;
with business partners, such as delivery firms; and with the customer. Computer-based information
systems make this possible.
 HOW INFORMATION TECHNOLOGY 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. But today,
information technology can do much more.

• New technology can actually change the flow of information, making it possible for many more
people to access and share information, replacing sequential steps with tasks that can be
performed simultaneously, and eliminating delays in decision making.

• New information technology frequently changes the way a business works and supports entirely
new business models. Downloading a Kindle e-book from Amazon, buying a computer online at
Best Buy, and downloading a music track from iTunes are entirely new business processes based
on new business models that would be inconceivable without today’s information technology.
 HOW INFORMATION TECHNOLOGY IMPROVES BUSINESS PROCESSES
• That’s why it’s so important to pay close attention to business processes.

• By analyzing business processes, you can achieve a very clear understanding of how a business
actually works.

• Moreover, by conducting a business process analysis, you will also begin to understand how to
change the business by improving its processes to make it more efficient or effective.

• We examine business processes with a view to understanding how they might be improved by
using information technology to achieve greater efficiency, innovation, and customer service.
 TYPES OF INFORMATION SYSTEMS
• Now that you understand business processes, it is time to look more closely at how information
systems support the business processes of a firm.

• Because there are different interests, specialties, and levels in an organization, there are different
kinds of systems. No single system can provide all the information an organization needs.

• A typical business organization has systems supporting processes for each of the major business
functions—sales and marketing, manufacturing and production, finance and accounting, and
human resources.

• Functional systems that operate independently of each other are becoming a thing of the past
because they cannot easily share information to support cross-functional business processes.
Many have been replaced with large-scale cross-functional systems that integrate the activities of
related business processes and organizational units.
 TYPES OF INFORMATION SYSTEMS
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. 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.

• 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. Smith’s payment? To answer these kinds
of questions, information generally must be easily available, current, and accurate.
 TYPES OF INFORMATION SYSTEMS
Transaction Processing Systems
• At the operational level, tasks, resources, and goals are predefined and highly structured. The
decision to grant credit to a customer, for instance, is made by a lower-level supervisor according to
predefined criteria. All that must be determined is whether the customer meets the criteria.

• A payroll system keeps track of money paid to employees. An employee time sheet with the
employee’s name, ID number, and number of hours worked per week represents a single
transaction for this system. Once this transaction is input into the system, it updates the system’s
master file that permanently maintains employee information for the organization.

• The data in the system are combined in different ways to create reports of interest to management
and government agencies and to send paychecks to employees.

• Managers need TPS to monitor the status of internal operations and the firm’s relations with the
external environment. TPS are also major producers of information for the other systems and
business functions.
 TYPES OF INFORMATION SYSTEMS
Transaction Processing Systems
• Transaction processing systems are often so central to a business that TPS failure for a few hours
can lead to a firm’s demise and perhaps that of other firms linked to it. Imagine what would happen
to UPS if its package tracking system were not working! What would the airlines do without their
computerized reservation systems?
 TYPES OF INFORMATION SYSTEMS
Systems for Business Intelligence
• Firms also have business intelligence systems that focus on delivering information to support
management decision making.

• Business intelligence is a contemporary term for data and software tools for organizing, analyzing,
and providing access to data to help managers and other enterprise users make more informed
decisions.

• Business intelligence addresses the decision-making needs of all levels of management.

• Previously we defined management information systems as the study of information systems in

business and management. The term management information systems (MIS) also designates a
specific category of information systems serving middle management.
 TYPES OF INFORMATION SYSTEMS
Systems for Business Intelligence
• 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. Today, many of these
reports are delivered online.
 TYPES OF INFORMATION SYSTEMS
Systems for Business Intelligence
• MIS typically provide answers to routine
questions that have been specified in advance
and have a predefined procedure for answering
them. For instance, MIS reports might list the total
pounds of lettuce used this quarter by a fast-food
chain or compare total annual sales figures for
specific products to planned targets.

• These systems generally are not flexible and have little analytical capability. Most MIS use simple routines,
such as summaries and comparisons, as opposed to sophisticated mathematical models or statistical
techniques.
 TYPES OF INFORMATION SYSTEMS
Decision-support systems
• (DSS) 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.

• They try to answer questions such as these:

– What would be the impact on production schedules if we were todouble sales in the month of December?
– What would happen to our return on investment if a factory schedule were delayed for six months?

• Although DSS use internal information from TPS and MIS, they often bring in information from
external sources, such as current stock prices or product prices of competitors.

• These systems are employed by “super-user” managers and business analysts who want to use
sophisticated analytics and models to analyze data.
 TYPES OF INFORMATION SYSTEMS
Decision-support systems
• An interesting, small, but powerful DSS is the voyage-estimating system of a large global shipping
company that transports bulk cargoes of coal, oil, ores, and finished products.

• The firm owns some vessels, charters others, and bids for shipping contracts in the open market to
carry general cargo.

• A voyage estimating system calculates financial and technical voyage details. Financial calculations
include ship/time costs (fuel, labor, capital), freight rates for various types of cargo, and port
expenses.

• Technical details include a myriad of factors, such as ship cargo capacity, speed, port distances,
fuel and water consumption, and loading patterns (location of cargo for different ports).
 TYPES OF INFORMATION SYSTEMS
Decision-support systems
• The system can answer questions such as
the following:
– Given a customer delivery schedule and an
offered freight rate, which vessel should be
assigned at what rate to maximize profits?

– What is the optimal speed at which a

particular vessel can optimize its profit and
still meet its delivery schedule?

– What is the optimal loading pattern for a ship

bound for the U.S. West Coast from
Malaysia?

• The voyage-estimating DSS we have just described draws heavily on models.

 TYPES OF INFORMATION SYSTEMS
Executive support systems (ESS)
• (ESS) help senior management make these
decisions.

• They address non-routine decisions

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

• ESS present graphs and data from many

sources through an interface that is easy for
senior managers to use.

• Dashboard is an example.
 TYPES OF INFORMATION SYSTEMS
Enterprise Applications
• Getting all the different kinds of systems in a company to work together has proven a major
challenge.

• Typically, corporations are put together both through normal “organic” growth and through
acquisition of smaller firms. Over a period of time, corporations end up with a collection of systems,
most of them older, and face the challenge of getting them all to “talk” with one another and work
together as one corporate system.

• There are several solutions to this problem.

• One solution is to implement enterprise applications, which are systems that span functional areas,
focus on executing business processes across the business firm, and include all levels of
management.
 TYPES OF INFORMATION SYSTEMS
Enterprise Applications
• Enterprise applications help businesses become more flexible and productive by coordinating their
business processes more closely and integrating groups of processes so they focus on efficient
management of resources and customer service.

• There are four major enterprise applications:

– enterprise systems,
– supply chain management systems,
– customer relationship management systems,
– and knowledge management systems.

• Each of these enterprise applications integrates a related set of functions and business processes
to enhance the performance of the organization as a whole.
 SCHIPHOL INTERNATIONAL HUB
• Theoretically, baggage-handling is quite simple. Baggage input is connected to merely two events:
an airplane lands or a person checks in.

• However, it’s risky business. Baggage handling is the second most important factor in having a
pleasant trip, according to a 2009 IATA CATS survey. Moreover, mishandled baggage is a $2.5
billion problem for industry every year.

• Just think that this problem may annually affect about 51 million passengers travelling through
Schiphol airport alone.

• In 2004, IBM Corporation,Vanderlande Industries and later Grenzebach Automation Systems, jointly
took up the challenge of renewing the Baggage Control System for one of the biggest airport hubs
in Europe, and one of the busiest in the world: Schiphol International Airport, in Amsterdam, the
Netherlands.
 SCHIPHOL INTERNATIONAL HUB
• With an investment of around $1 billion over a period of about 10 years, Schiphol’s goal was
threefold:
A. realize a monumental 1% maximum loss of transfer baggage (against the initial 22 million lost baggage);

B. increase capacity from 40 to 70 million bags;

C. reduce cost per bag without increasing wait-times.

 SCHIPHOL INTERNATIONAL HUB
• Most of the job involved Schiphol’s gigantic baggage conveyor network: 21 kilometers of transport
tracks, 6 robotic units, and 9,000 storage capacitors, all behaving as one system.

• Also, extending the system with more surfaces is not possible, given the land conditions
surrounding the airport.

• The baggage conveyor network has a simple goal: the right bag must be at the right place at the
right time.

• To pursue this goal the network must perform several key roles: move bags from the check-in area
to the departure gate, move bags from gate to gate, move bags from the arrival gate to the
baggage claim, and plan and control peripheral hardware and software.
 SCHIPHOL INTERNATIONAL HUB
• In addition, these roles involve a wide variety of sensors, actuators, mechanical devices, and
computers.

• The network uses over 3 million lines of source code.

• Some of the advanced technology used in baggage- handling systems includes destination-coded
vehicles (DCVs), automatic bar code scanners, radio-frequency identification (RFID) tags, and
high- tech conveyors equipped with sorting machines.

• Baggage should move from its current location to its destination before travellers do.

• To add further complications, all of this must be available and robust, i.e. operate 99.99% of times
while being able to minimize loss or damage in that 0.01% of time it doesn’t!
 SCHIPHOL INTERNATIONAL HUB
• The following simple scenario summarizes the operations of the Schiphol baggage conveyors
network.

• You arrive at check-in desk, and your bags are tagged. The tags contain your flight information and
a bar-code/RFID that all of the computers in the baggage-handling system can read.

• When computers in the system scan the bar code/detect the RFID, they process the information it
contains and determine where to send your bag.

• After being scanned (at least) once, the system always knows where your bag is at any point, and
is able to redirect it based on three parameters:
– (a) time of its flight;
– (b) priority;
– (c) size.
 SCHIPHOL INTERNATIONAL HUB
• Bags for immediate embarkation are considered “hot”. These are sent immediately to aircraft
stands while “cold” baggage (i.e. low priority, distant flight time) are quickly rerouted away from the
main “highway” tracks, directed towards various storage points in the network.

• DCVs are unmanned carts that can load and unload bags without stopping movement. These carts
move on tracks like miniature roller coasters along the main “highway” tracks that span the airport.

• Buffers and hot/cold storage areas are used to avoid overcrowding.

• Computers throughout the system keep track of the location of each bag, its destination, and the
time it is needed at that destination.

• The system can optimize the routes taken by the carts to get the bags needed most urgently to their
destinations fastest.
 SCHIPHOL INTERNATIONAL HUB
• Because DCVs move at high speed and do not come to a full stop to receive baggage, the
conveyors must be extremely precise, depositing bags where they are needed at just the right time
for maximum efficiency.

• Once bags reach the gate, they enter a sorting station where airline employees use computer
terminals to send bags to the correct plane.

• To make sure that baggage is not lost, the system “reconciles” baggage with its owner, i.e. it checks
if the baggage and the owner are actually on the same plane!

• However beautiful and harmonious this process may seem, there are still many things that can go
wrong. For example,
– what if baggage is mis-tagged?
– What if the tag is unreadable?
– What about schedule changes?
 SCHIPHOL INTERNATIONAL HUB
• Baggage handling systems can be extremely expensive, but if implemented successfully, they pay
for themselves — imagine saving around 0.1% of $2.5 billion. It’s a lot of money!

• The new baggage system at Schiphol is not flawless. In November 2012, a special warrant by local
Police was issued that required stopping the tracks at Schiphol as part of a drug-smuggling
investigation.

• Some of the 140,000 passengers that were being served by the international Hub at the time
suffered baggage loss.
 SCHIPHOL INTERNATIONAL HUB
1. How many levels of complexity can you identify in Schiphol’s baggage conveyor network?

2. What are the management, organization, and technology components of Schiphol’s baggage
conveyor network?

3. What is the problem that Schiphol is trying to solve? Discuss the business impact of this problem.

4. Think of the data that the network uses. What kinds of management reports can be generated
from that data?