Bis Chapter6

Chapter 6

Business applications of information systems

Topics

1. Operational information systems

2. Management information systems

3. Functional and departmental applications

Operations information systems

• Operations information systems are used for the tasks involved in the daily running of a business.

• Their performance is vital to an organization and they are sometimes described as mission-critical or strategic information systems.

• There are three types of operational systems– Transaction processing systems (TPS)– Office automation systems (OAS)– Process control systems

Types of operational systems

1 Transaction processing systems (TPS). These are used to manage the exchange of information and funds between a company and third parties such as customers, suppliers and distributors.

2 Office automation systems (OAS). OAS are used to manage the administrative functions in an office environment and are often critical to service-based industries.

3. Process control systems. These are important in manufacturing industries for controlling the manufacture of goods.

Transaction processing systems (TPS)

• Transaction processing systems (TPS) perform the frequent routine external and internal transactions (such as orders for goods) that serve the operational level of the organization.

• Figure 6.1 shows the typical components of a transaction processing system.

• Transactions will typically occur across a local-area network within a retail branch or bank environment, with real-time processing and data transfer occurring across a wide area network with a central mainframe computer.

Figure 6.1 Key elements of a transaction processing system

Figure 6.2 Network architecture for a retail transaction processing system

Transaction processing systems (TPS) (Continued)

• Data are usually stored locally in the supermarket on a local server in real time and then uploaded by a batch system (when the store is closed) to head office. This arrangement is shown in Figure 6.2.

• Other information such as supply requests may be transmitted on demand in real time. Links with suppliers occur through EDI (described in Chapter 5).

Transaction processing systems (TPS) (Continued)

• Because the TPS give direct contact with customers and suppliers beyond the boundary of an organization, if they fail it becomes immediately apparent to the organization’s customers.

• Therefore those are often mission-critical systems which much be reliable and secure.

• Another reason for such applications being mission-critical is that data captured by the TPS are used to monitor the performance of the organization.

Transaction processing systems (TPS) (Continued)

• There are two main types of transaction systems in operation.

• Batch systems collect information on transactions in batches before it is processed at times of lower transaction rates (such as overnight).

• Real-time systems process information immediately.

Office Automation Systems (OAS)

• Office automation systems (OAS) are information systems intended to increase the productivity of office workers.

• Examples include groupware, workflow and general-purpose applications such as word processor and spreadsheets.

• Mission-critical applications such as groupware and workflow provide important support for the internal processes of the e-business.

Office Automation Systems (OAS) (Continued)

• Groupware is software that enables information to be shared by people collaboration on solving problems.

• This could include activities such as the scheduling and running of meetings, sharing documents and communicating over a distance.

• Groupware assists teams of people in working together because it provides the “three Cs’ of communication, collaboration and co-ordination.

Office Automation Systems (OAS) (Continued)

• Communication is the core groupware feature which allows information to be shared or sent to others using electronic mail.

• Collaboration is the act of joint cooperation in solving a business problem or undertaking a task. Groupware may reduce some of the problems of traditional meetings.

• Coordination is the act of making sure that a team is working effectively and meeting its goals, This includes distributing tasks to team members, reviewing their performance and perhaps steering an electronic meeting.

Different applications of collaborative systems

Synchronous Asynchronous

Same location Same time, same place Different time, same place

Example: meeting support software Example: workflow systems

Different location Same time, different place Different time, different place

Example: video conferencing Example: e-mail and discussion groups

Main groupware functions

Groupware function Application

E-mail and messaging E-mail, electronic forms processing

Document management and Improved information dissemination

information sharing

Collaborative authoring Team development of documents

Conferencing Text conferencing, video conferencing, whiteboarding

Time management Calendar and group scheduling

Groupware management and Remote and distributed access facilities including

decision support replication and access control

Ad hoc workflow Loosely coupled collaboration

Structured workflow Structured management of tasks

Figure 6.3 Universal inbox of Novell Groupwise groupware product

Figure 6.4 E-mail notification of requisition approval Source: Chaffey (2004); with permission of Tranmit.

Document imaging processing (DIP)

• DIP systems attempt to alleviate the problems caused by paper-based systems, including the cost of handling large amounts of paperwork and the time wasted searching for paper documents.

• DIP systems are used to convert documents (and images) into an electronic format so that they can be stored, organized and retrieved more easily.

• The document is converted using a scanner which can be either handheld and passed over a document, or a flat-bet type where a document is placed on a glass sheet and a scanner reader passes under it. It is then indexed and stored on high-capacity magnetic or optical storage.

Document imaging processing (DIP) (Continued)

• The main components of a DIP system are shown in Figure 6.5

• Figure 6.6 shows document management software as an integrated part of an e-procurement system.

Figure 6.5 Components of a document image processing system

Figure 6.6 Document management software for reconciling supplier invoice with purchase order dataSource: Chaffey (2004).

Electronic document management system (EDMS)

• EDMS are used for the management of large procedural documents which are required in organizations for managing their products and services.

• EDMS are intended to help in the task of managing the document lifecycle of:– Write– Review and annotate– Modify– Publish– Distribute– Update and repeat the cycle

Workflow management system (WFMS)

• WFMS is a system which automates the movement and processing of information in a business according to a set of procedural rules.

• Workflow software provides functions to– assign tasks to people;– remind people about their tasks which are part of a

workflow queue;– allow collaboration between people sharing tasks;– retrieve information needed to complete the task,

such as a customer’s personal details;– provide an overview for supervisors of the status of

each task and the team’s performance.

Workflow management system (WFMS) (Continued)

• Figure 6.7 gives an example of an integrated DIP/workflow system used for a customer service application to action a letter of complaint.

Figure 6.7 Example of a workflow application from StaffwareSource: Stuffware.

Process control system (PCS)

• Process control systems are systems that report to employees and supervisors who are very close to a specific activity.

• They are particularly associated with the support and control of manufacturing processes.

• The receipt of a customer order will trigger a series of information flows through the operations function of a manufacturing company. These are shown as a simplified flow process chart in Figure 6.10.

Figure 6.10 Simplified flow process chart for a production management system

Topics

1. Operational information systems

2. Management information systems

3. Functional and departmental applications

Management information systems

There are three types of management information systems:

• Decision support systems (DSS). These provide information and models in a form to facilitate tactical and strategic decision making.

• Information reporting systems (IRS). These provide pre-specified reports for day-to-day decision making.

• Executive information systems (EIS). These provide senior managers with a system to analyze, compare and highlight trends to help govern the strategic direction of a company.

Decision types

• Figure 6.12 indicates that at the operational level, structured decisions predominate and these are commonly supported by TPS.

• Decision support systems are mainly used to support the tactical, semi-structured decisions that need to be made as part of the evaluation and planning of the business.

• Executive information systems are targeted at strategic decision making, which often involves unstructured decisions.

Figure 6.12 Classification of decisions by decision type and their relation to different types of system

Decision Support System (DSS)

• Decision support systems (DSS) provide information and models in a form to facilitate tactical and strategic decision making.

• They are information systems that support management decision making by integrating:– Company performance data– Business rules based on decision tables– Analytical tools and models for forecasting

and planning– An easy-to-use graphical user interface

Decision Support System (DSS) (Continued)

• DSS are often developed by end-users and are departmental rather than corporate systems. DSS tend to be used for ad hoc queries rather than regular reporting.

• When used by teams of people to make decisions, they are sometimes known as GDSS or group decision support systems.

• DSS are often implemented as specialized types of information systems such as data warehousing, expert systems, geographical information systems or even spreadsheet models.

Expert systems

• Expert systems are used to represent the knowledge and decision-making skills of specialists so that non-specialists can take decisions.

• They encapsulate the knowledge of experts by providing tools for the acquisition of knowledge and representation of rules and their enactment as decisions.

• They need to contain information relevant to taking the decision.

• This is often referred to as the knowledge base and includes the rules on which the decisions are based.

Expert systems (Continued)

• The different rules are applied using a separate module of the expert system known as the inference engine.

• The relationship between these different components of the expert system is shown in Figure 6.13.

• The user interface program is used to build rules and ask questions of the system.

• Applications of expert systems include medical diagnosis, credit decisions, etc.

Figure 6.13 Components of an expert system

Information reporting system (IRS)

• Information reporting systems produce reports that have been defined in advance for day-to-day decision-making needs.

• There are two main types of report that these systems produce:

• Periodic reports. These are predefined reports that are required by decision makers at regular intervals. Examples include a monthly financial statement and a weekly sales analysis.

• Exception reports. These are reports produced only when required. They can be generated automatically by the information system when a performance measure moves outside a predefined range.

• Examples include sales falling below a certain level and customers exceeding their credit limits.

Executive Information System (EIS)

• Executive information systems (EIS) provide senior managers with a system to assist them in taking strategic and tactical decisions.

• Their purpose is to analyze, compare and highlight trends to help govern the strategic direction of a company.

• They are commonly integrated with operational systems, giving managers the facility to “drill down” to find out further information on a problem.

Executive Information System (EIS)

• EIS involves two types of software or processing: business intelligence software and online analytical processing (OLAP).

• Business intelligence software is a general term to describe the market for a range of decision support systems, including EIS, DSS and data-warehouse software and including application of expert systems and data-mining techniques to interpret data.

• Online analytical processing refers to the ability to analyze in real time the type of multi-dimensional information stored in data warehouses.– “Online” indicates that users can formulate their own

queries compared to standard paper reports.

Executive Information System (EIS)

• EIS are intended as decision support tools for senior managers.

• Since these strategic decisions are based on a wide range of input information, they always need to be well integrated with operational systems in a business.

• Some important features of EIS are:1. They provide summary information to enable

monitoring of business performance.

2. They are used mainly for strategic decision making.

Executive Information System (EIS) (Continued)

3. They provide a drill-down feature which gives a manager the opportunity to find out more information necessary to take a decision or discover the source of a problem.

4. They provide analysis tools.

5. They must be integrated with other facilities to help manage the solving of problems and the daily running of the business.

Executive Information System (EIS) (Continued)

6. They integrate data from a wide variety of information sources, including company and external sources such as market and competitor information.

7. They have to be designed according to the needs of managers who do not us computers frequently. They should be intuitive and easy to learn.

• All the above facilities require integration with operational data. Since this information is commonly stored in ERP systems, these are often integrated with EIS or have EIS functions built in.

Data warehouses and data marts

• Data warehouses are large database systems (often measured in gigabytes or terabytes) containing detailed company data on sales transactions which are analyzed to assist in improving the marketing and financial performance of companies.

• Data warehouses form a category of business intelligence software that has been adopted by many companies for analysis of transactions to help improve their competitiveness.

Data warehouses and data marts

• Data marts defines a smaller, departmental version which may be easier to manage than a company-scale data warehouse.

• Data marts do not aim to hold information across an entire company, but rather focus on one department.

• A data warehouse can consist of many data marts supporting different (smaller) operations.

Figure 6.14 Data warehouse architecture

Figure 6.15 Example of multidimensional data cube for vehicle sales

Data mining

• Data mining of data warehouses is an attempt to identify a relationship between variables in order to assist decision making.

• It will involve statistical techniques such as multiple linear regression where a number of variables are compared to identify patterns.

• Data mining is used to identify patterns or trends in the data in data warehouses which can be used for improved profitability.

Functional and departmental applications

• Information systems can be used in four key functional parts of an organization:– Procurement– Human resources– Marketing– Finance

Topics

1. Operational information systems

2. Management information systems

3. Functional and departmental applications

Procurement

• Electronic procurement involves the electronic integration and management of all procurement activities including purchase request, authorization, ordering, delivery and payment between a purchaser and a supplier.

Figure 6.18 Key procurement activities within an organisationSource: Chaffey (2004).

Figure 6.19 Use of different information systems for different aspects of the fulfilment cycleSource: Chaffey (2004).

Human resource management

• HRM is about ensuring that the employees of the organization have the required skills and tools in order to meet its strategic goals.

• The main role of HRM software is to act as a storage and retrieval system maintaining large volumes of data on employee and job specifications.

Marketing

• Marketing information systems support decision making at the operational, tactical and strategic levels necessary to manage the marketing function.

• At the operational level, distribution information systems and telemarketing systems offer assistance in day-to-day activities and provide information to areas such as inventory and customer credit systems.

• Tactical marketing systems provide assistance in such areas as product pricing and sales management information systems.

• At the strategic level, information from sales forecasting, marketing research and competitive tracking systems helps management plan and develop new products.

Accounting information systems

• Accounting information systems are used for the financial activities that take place in any organization.

• These include the operation of sales order processing systems, payroll, budgeting and reporting of the financial condition of the organization.

• Other functions include the management of capital investment and general cash-flow management.

Figure 6.21 Modules of a standard accounting system, plus additional purchasing, sales order processing and payroll modules