CHAPTER FOUR

COMMON BUSINESS APPLICATIONS OF

Prepared by Werkneh E
INFORMATION
Outline

4.1 Financial Information Systems

4.2 Marketing Information Systems
4.3 Manufacturing and Production Information Systems
4.4 Human Resource Information Systems
4.5 Managerial Decision Support Systems
4.6. Transaction Processing System (TPS)
Introduction

 apply what you have learned about

 Information Technology
 information systems,
 decision making, and
 computer system resources
 to problems in
 finance,
 marketing,
 manufacturing and
 production and human resources.
Financial Information Systems Overview

Importance: Essential for financial decision-making at all levels of management.

 Applications: Decisions on purchasing equipment, allocating funds, cash flow management,
investments, budgeting, and credit management.
 Financial Management Function
 Responsibilities:

 Monitoring financial condition

 Preparing financial statements and reports
 Managing budgets, credit, taxes, and insurance
 Ensuring accurate financial records through auditing
 Managing assets, pension funds, and investments
 Handling cash flow and borrowing needs
 Importance: Provides accurate, timely, and appropriate
information for decision-making.
Operational Financial Information Systems

 Focus: Routine, repetitive financial tasks.

 Outputs: Paychecks, vendor checks, invoices, purchase orders, and stock
reports.
 Components: General ledger, fixed assets, sales order processing,
accounts receivable, accounts payable, inventory control, purchase order
processing, and payroll systems.
Accounting Systems - Core Components

1. General Ledger:
o Integrates other subsystems.
o Provides periodic reports and support for budgeting.

2. Fixed Assets:
o Records and manages long-term assets.
o Tracks costs, depreciation, and asset value.

3. Sales Order Processing:

o Records sales orders, maintains inventory, and bills customers.
 Tracks sales performance and manages backorders.
Additional Accounting Subsystems

4. Accounts Receivable:
o Manages customer information, credit terms, and payments.
o Produces customer statements and aged accounts receivable reports.

5. Accounts Payable:
o Manages creditor information and processes payments.
o Schedules payments to optimize cash flow and take advantage of discounts.

6. Inventory Control:
o Tracks inventory levels and costs.
o Triggers stock purchases and maintains stock data.

7. Purchase Order Processing:

o Processes purchase orders and tracks order status.
o Provides data to accounts payable and inventory systems.

8. Payroll:
o Manages employee payments and deductions.
 Produces tax forms and payroll checks.
Tactical Financial Information Systems

 Shift in Perspective: Managers use accounting data for tactical planning,

not just operational tasks.
 Capabilities: Generate summaries, comparisons, and ad hoc reports for
better resource allocation.
 Key Systems: Budgeting, cash management, capital budgeting, and
investment management.
Budgeting Systems

 Function: Compare budgeted amounts to actual spending.

 Reports:

 Current budget allocations and variances.

 Comparisons with previous periods and other divisions.
 Purpose: Allow managers to monitor and adjust financial plans.
Cash Management Systems

 Purpose: Ensure sufficient cash for operations and investments.

 Components: Cash flow reports showing expected receipts and
expenditures.
 Decision-making: Helps managers with investment, purchasing, and
borrowing decisions.
Capital Budgeting Systems

 Focus: Evaluation of major plant asset acquisitions or disposals.

 Evaluation Tools:

 Net Present Value (NPV)

 Internal Rate of Return (IRR)
 Payback Period
 Usage: Utilize "What if?" scenarios for informed decision-making.
Strategic Financial Information Systems

 Goal-Oriented: Focus on setting and achieving organizational

goals.
 Information Flows:

 Internal financial condition analysis.

 External economic, demographic, and social data.
 Future forecasts for organizational planning.
 Outcomes: Setting financial goals, investment opportunities, and
capital source decisions.
Financial Conditions Analysis Systems

 Purpose: Provide comprehensive reports on organizational

financial health.
 Examples:

 Working Capital: Current assets - current liabilities.

 Return on Assets: Profits after tax / Average assets.
 Use: Assess current financial status and support strategic planning.
Long-Range Forecasting Systems

 Importance: Support strategic planners with future performance

forecasts.
 Applications:

 Sales Revenue Forecasts: For new product development.

 Financial Health Forecasts: Long-range budget estimates considering
various scenarios (e.g., wage settlements, competitor actions, interest rates).
 Information Sources: Economic, demographic, social, and
technological data.
General Software Tools for Financial
Managers
 Types:
 Spreadsheet Software: Versatile tool for designing templates and calculating
statistics.
 Forecasting and Statistical Software: For predicting future events and
analyzing data.
 Query Language and Report Writer Software: For extracting and
formatting database information.
 Spreadsheet Software
 Function: Design templates with headings, item names, and calculation
formulas.
 Benefits: Facilitates easy data entry and automated calculations for financial
analysis.
 Forecasting and Statistical Software
 Usage: Predict future trends using historical data.
 Example: Extrapolating energy price trends over five years.

General Accounting and Financial
Analysis Software
 Purpose: Automate routine financial tasks and support tactical and
strategic decisions.
 Features:

 Financial analysis tools for ratio analyses.

 Menu-driven report generation.
 Specialized Software: Vertical accounting software for sectors
like healthcare.
 Computerized Accounting Systems
 Function: Produce invoices, checks, financial statements, and other routine
outputs.
 Integration: Link operational-level tasks with tactical and strategic planning
tools.
 Example: Automatically generate financial reports for managers.
Computerized Auditing Software

 Purpose: Assist auditors in evaluating and monitoring

computerized accounting systems.
 Features:

 Access to computer files.

 Creation of audit files.
 Data extraction and statistical analysis.
 Data sorting, summarizing, sampling, and report generation.
 Benefit: Enhances the accuracy and efficiency of financial audits
Marketing Information Systems
Introduction to Marketing Information
Systems
 Definition: A system that collects, processes, and analyzes marketing data to
aid decision-making.
 Goal: To support the major activities of a marketing organization.
Marketing Functions

 Planning: Strategy development.

 Buying: Acquiring products/services.
 Merchandising: Standardization, grading, pricing.
 Selling: Advertising, sales promotion, personal selling.
 Physical Distribution: Transporting, storing.
 Facilitating: Financing, risk bearing, obtaining information.
Strategic and Tactical Decisions

 Strategic Decisions: New product development, target selection, old

product management.
 Tactical Decisions: Product, distribution, advertising, and pricing
decisions.
Operational Marketing Information
Systems
 Focus: Routine, repetitive data on past marketing activities.
 Characteristics: Detailed, structured, accurate data from internal sources.
Sales Information Systems

 Activities: Identifying prospects, contacting customers, making sales.

 Tools: Prospect information systems, contact information systems, inquiry
systems.
Prospect Information Systems

 Function: Locate potential customers.

 Outputs: Lists of prospects by location, product category, revenue.
Contact Information Systems

 Function: Manage customer contact data.

 Outputs: Call reports, sales history, preferences.
Inquiry Information Systems

 Function: Process and store customer inquiries.

 Importance: Associate inquiries with actual/potential customers.
Document Information Systems

 Function: Provide standardized documents.

 Outputs: Sales letters, quotation documents.
Order Entry Systems

 Function: Capture marketing data from financial accounting.

 Importance: Analyze sales data for decision making.
Telemarketing Systems

 Function: Selling via telephone.

 Benefits: Reduces travel costs, increases customer reach.
Direct Mail Advertising Systems

 Function: Send brochures and catalogs to customers.

 Data: Uses customer mailing lists from various sources.
Inventory Information Systems

 Function: Track inventory levels and stock movements.

 Importance: Ensure stock availability for sales.
Distribution Information Systems

 Function: Monitor effectiveness of distribution.

 Data: Equipment allocation, repair, use.
Credit Information Systems

 Function: Manage customer credit information.

 Integration: Linked with order entry system.
Tactical Marketing Information Systems

 Function: Provide regular and ad hoc reports.

 Characteristics: Comparative, summary data from internal/external
sources.
Sales Management Information Systems

 Function: Help sales managers reach sales goals.

 Data: Sales histories, territory analysis.
Advertising and Promotion Information
Systems
 Function: Assist in planning ad campaigns.
 Data: Market segment history, ad effectiveness.
Product Pricing Information Systems

 Function: Determine product prices.

 Data: Demand forecasts, production costs, competitor prices.
Distribution Channel Decision Support
Systems
 Function: Decide product/service delivery methods.
 Data: Costs, time lags, reliability, market saturation.
Strategic Marketing Information Systems

 Function: Support overall marketing planning.

 Activities: Market segmentation, product planning, sales
 Sales Forecasting Information Systems
 Function: Predict future sales.
 Data: Historical trends, competition, government actions.
 Product Planning and Development Information Systems
 Function: Develop new products.
 Data: Consumer preferences, product specifications.
 Marketing Research Systems
 Function: Provide data for marketing decisions.
 Sources: External data (customers, census, industry reports).
 Competitive Tracking Information Systems
 Function: Monitor competitor activities.
 Sources: Trade journals, field reports, keyword searches.
Computer Software for Marketing

 Types: General purpose software, specific marketing software.

 Examples: Query language, graphics, multimedia, statistical software.
 General Purpose Software Applications
 Uses: Data analysis, presentation, communication.
 Tools: Query language, report writers, statistical software.
 Specific Marketing Software Applications
 Categories: Sales support, sales management, telemarketing, customer
support, integrated marketing.
 Examples: Sales tracking, telemarketing automation.
Introduction to Manufacturing and
Production Information Systems
Manufacturing and Production Information
Systems
 Overview of activities in manufacturing systems
 Focus areas of production systems:
 Raw materials acquisition

 Scheduling resources

 Product design and testing

 Quality and cost management

 Purpose of Manufacturing Systems

 Ensure production meets sales forecasts
 Evaluate and develop production facilities
 Set production goals aligned with marketing forecasts
 Key Components of Production Systems
 Raw materials and supplies management
 Scheduling equipment and workforce
 Product design and testing
 Meeting quality and cost parameters
Operational Production Information
Systems
 Integration with financial accounting systems
 Subsystems supporting production activities:
 Purchasing
 Inventory
 Order entry
 Accounts payable/receivable
 Payroll
Purchasing Information Systems

 Purchasing Information Systems

 Maintain data on raw materials acquisition
 Optimize costs and delivery times
 Ensure timely procurement for production
 Receiving Information Systems
 Inspect and verify received goods
 Update inventory and accounts payable
 Track delivery times for efficiency
 Quality Control Information Systems
 Monitor production quality from raw materials to finished goods
 Ensure adherence to quality standards
 Shipping Information Systems
 Manage finished goods inventory
 Oversee shipping processes
 Coordinate with inventory and accounts receivable
 Cost Accounting Information Systems
 Track production costs
 Monitor personnel, materials, and equipment expenses
 Provide accurate cost reports for production
 Tactical Manufacturing Information Systems
 Inventory management and control
 Capacity planning
 Production scheduling
 Product design and development
 Inventory Management and Control
 Optimize raw materials and finished goods levels
 Use EOQ to balance carrying and procurement costs
 Integrate data from operational systems
 Capacity Planning Information Systems
 Ensure adequate production capacity
 Manage personnel, space, and machinery
 Align capacity with production goals
 Production Scheduling Information Systems
 Allocate production resources
 Use Gantt and PERT charts
 Employ project management software
 Product Design and Development Information Systems
 Use customer feedback and quality control data
 Implement CAD and other design software
 Develop new products efficiently
 Strategic Planning Manufacturing Information Systems
 Support top-management decisions
 Plan for plant construction and site selection
 Integrate quantitative and qualitative data
Software for Manufacturing Decision
Making
 General Software for Manufacturing Decision Making
 Database, spreadsheet, and statistical software
 Project management tools
 Software for tactical and strategic planning
 Specific Software for Manufacturing Decision Making
 Quality control and automated materials handling
 CAD/CAM and image management
 Materials selection and MRP/MRP-II systems
 Computer-Integrated Manufacturing (CIM)
 Integration of all manufacturing processes
 Benefits of CIM:
 Reduced design costs
 Improved product quality
 Increased productivity and flexibility
Introduction to Human Resource Information
Systems (HRIS)
Introduction to Human Resource
Information Systems (HRIS)

 Human Resource Management Function

 Concerned with individuals in the organization
 Responsible for acquisition, effective use, well-being, growth, and development
of each worker
 Major Activities of HR Function
 Recruiting employees

 Evaluating applicants and employees

 Selecting, placing, promoting, terminating, and transferring

employees
 Analyzing and designing jobs

 Training and development reports

 Producing required governmental reports

 Managing employee wage and benefit plans

Introduction to Human Resource
Information Systems (HRIS)

 Operational Information Systems

 Support routine, repetitive personnel decisions

 Types:

 Payroll Information Systems

 Position Information Systems
 Employee Information Systems
 Employee Evaluation Information Systems
 Applicant Selection and Placement Systems
Introduction to Human Resource
Information Systems (HRIS)

 Tactical HR Information Systems

 Support decisions emphasizing resource allocation

 Types:

 Job Analysis and Design Information Systems

 Recruiting Information Systems
 Compensation and Benefits Information Systems
 Employee Training and Development Systems
 Labor Negotiations Information Systems
 Strategic HR Information Systems
 Human resource planning: ensure right people, right places, right

time
 Types:

 Manpower Planning
HR Information Systems Software

 General-Use Software
 Database Management Software
 On-Line Databases
 Spreadsheet Software
 Statistical Software
 Specialized HR Information Systems Software
 Comprehensive HRIS Software
 Limited-Function Packages
 Managerial Decision Support Systems
 Executive Support Systems (ESS)

 Management Information Systems (MIS)

 Decision Support Systems (DSS)

Phases of Decision Making
 Intelligence
 Design
 Choice
 Types of Decision Problems
 Structured vs. Semi-structured vs. Unstructured
 Attributes of Decision Makers
 Perceptual Ability
 Information Capacity
 Risk-taking Propensity
 Aspiration Level
 Strategies for Decision Making
 Maximizing
 Satisficing

 Implications of Decision Making for Decision Support
Systems
 Decision Support Systems (DSS) designed for semi-structured and

unstructured decisions
 Support "satisficing" goals and situations with incomplete

information
 Enable application of right decision rules to specific problems

 Provide flexibility to explore alternatives using appropriate data and

models
 Important Features of Decision Support Systems

 Support of Unstructured Decisions

 Enable support for semi-structured and unstructured decisions

 Examples: Budget preparation, specific problem-solving situations
 Important Features of Decision Support Systems (contd.)
 Support for All Phases of Decision-Support Process

 Intelligence, design, and choice phases supported

 Operations: Data collection, manipulation, analysis, simulation
 Support for Communications Among Decision Makers
 Support group decision making and interaction
 Sequential or pooled knowledge decision-making processes
 Important Features of Decision Support Systems (contd.)
 Availability of Memory Aids

 Provide workspaces for data representations and intermediate results

 Assist in recalling information and previous operations
 Availability of Control Aids for Decision Making
 Include help screens, menus, prompts for training and system use
 Tools for Decision Support
 Database Languages

 Model-Based Decision Support

 Tools for Statistics and Data Manipulation

 Display-Based Decision Support Software

 Capabilities of DSS

 Support for semi-structured and unstructured problems

 Support for managers at all levels, individuals, and groups

 Support for interdependent or sequential decisions

 Support for intelligence, design, choice, and implementation phases

 Adaptability, flexibility, and ease of use

 Capabilities of DSS (contd.)
 Complete control by decision-makers

 Ease of development and modification by end users

 Support for modeling, analysis, and data access

 Standalone, integration, and Web-based capabilities

The End