Chapter 8: Enterprise Systems: From Supply Chain to · Web viewReview Questions Section 10.1 - Before You Go On Define TPS. TPS stands for transaction processing system. Transaction

CHAPTER 10: Information Systems that Support Organizations

Chapter Outline

10.1 Transaction Processing Systems10.2 Functional Area Information Systems10.3 Enterprise Resource Planning Systems

Learning Objectives

1. Explain the purposes of transaction processing systems, and provide at least one example of how businesses use these systems.

2. Define functional area information systems, and provide an example of the support they provide for each functional area of the organization.

3. Explain the purpose of enterprise resource planning systems, and identify four advantages and four drawbacks to implementing an ERP system.

Discuss the three major types of reports generated by the functional area information systems and enterprise resource planning systems, and provide an example of each type.

Teaching Tips and Strategies

The focus of this chapter is organizational information systems. You might start this chapter by discussing why ISs can become quite complicated from both a technical and a managerial perspective. Significant performance and uptime requirements impose technical challenges, while coordination and usability for a large, diverse group of users pose managerial challenges.

Now, with the advent of e-commerce, online e-tailers are in the costly business of sending one or two items to millions of households. To illustrate how this changes the supply chain, you can use the following example. Let’s pretend for a moment that we work for eToys, and we get a thousand orders for Barbie in one day. Break the class up into groups, and ask them what will be involved in delivering those Barbies. The students will usually answer that someone will have to pick the dolls in the warehouse, create an address label for each customer, and then box and ship the order.

With the advancement of technology, companies now have more tools than ever before to successfully deploy information systems that can integrate their operations and reduce processing time. How do companies better manage their processes?

By integrating their systems so that all departments can communicate with one another (including outside vendors).

By being able to track relevant data in real-time from business processes dispersed across the organization. This will help management to make crucial decisions regarding resources.

Review Questions

Chapter 10: Information Systems that Support Organizations (4th edition) Page 2

Section 10.1 - Before You Go On… 1. Define TPS.

TPS stands for transaction processing system. Transaction processing involves the capture, storage, and monitoring of data generated from all business transactions. These data are input to the organization’s database. TPSs must handle high volumes of data, avoid errors, and provide a highly secure and stable environment.

2. List the key objectives of a TPS.

Objectives of a TPS are: Handle large volumes of data Avoid errors Handle large variations in volume (peak times) Avoid downtime Never lose results Maintain privacy and security

Section 10.2 - Before You Go On…

1. What is a functional area information system? List its major characteristics.

A functional area information system is one in which the functionality supports one particular area or department such as HR systems, accounting systems, marketing systems, and production systems. These systems were designed to increase internal effectiveness and efficiency. They typically developed independently of one another, resulting in “information silos.”.

2. How do information systems benefit the finance and accounting functional area?

Accounting and finance involves managing how money flows into, within, and out of organizations. This mission is very broad because money is involved in all functions of an organization. Planning activities involve analyzing operational data to help forecast and project business activities as well as the budgeting to support these activities. These data identify the amount of money that is needed to finance the firm’s operations. They also specify how that money can be raised from the financial markets and at what cost. These calculations involve many transactions and data points. Information systems are essential to achieve a level of automation in these activities.

3. Explain how POM personnel use information systems to perform their jobs more effectively and efficiently.

The production and operations management (POM) function in an organization is responsible for the processes that transform inputs into useful outputs and for the operation of the


business. Because of the breadth and variety of POM functions, the chapter discusses only four: in-house logistics and materials management, planning production and operation, computer-integrated manufacturing (CIM), and product life cycle management (PLM). The POM function is also responsible for managing the organization’s supply chain..

4. What are the most important HRIS applications?

The most important HRIS functions are personnel administration (including workforce planning, employee recruitment, assignment tracking, personnel planning and development, and performance management and reviews), time accounting, payroll, compensation, benefits accounting, and regulatory requirements.

5. How does an FAIS support management by exception? How does it support on-demand reports?

Exception reports include only information that falls outside certain threshold standards. To implement management by exception, management first creates performance standards. The company then configures the FAIS to monitor performance (via the incoming data about business transactions such as expenditures), compare actual performance to the standards, and identify exceptions to the standards. The FAIS alerts managers to the exceptions via exception reports.

An FAIS system can generate on-demand reports by using its flexible interactive reporting capabilities, which enable managers to query by timeframes, departments, product lines, and other appropriate criteria.

Section 10.3 - Before You Go On…

1. Define ERP and describe its functionalities.

Enterprise resource planning (ERP) was created to control all major business processes with a single software architecture in real time. ERP integrates all department and functional information flows across a company onto a single computer system that can serve all of the enterprise’s needs.

2. What are ERP II systems?

ERP II systems are interorganizational ERP systems that provide Web-enabled links between a company’s key business systems (such as inventory and production) and its customers, suppliers, distributors, and others. These links integrate internal-facing ERP applications with the external-focused applications of supply chain management and customer relationship management. Figure 10.3 illustrates the organization and functions of an ERP II system


3. Differentiate between core ERP modules and extended ERP modules.

ERP II systems include a variety of modules, which are divided into core ERP modules (financial management, operations management, and human resource management) and extended ERP modules (customer relationship management, supply chain management, business intelligence, and e-business). As the name suggests, the core models must be included in all ERP systems. In contrast, the extended modules are optional. Table 10.2 describes each of these modules.

4. List some drawbacks of ERP software.

ERP systems can be extremely complex, expensive, and time-consuming to implement. Also, companies may need to change existing business process to fit the predefined business process of the software. In addition, companies must purchase the entire software package even if they only want to use a few of the modules.

Section 10.4 Before You Go On…

1. Compare and contrast the three major types of reports.

Routine reports are produced at scheduled intervals. They range from hourly quality control reports to daily reports on absenteeism rates. Although routine reports are extremely valuable to an organization, managers frequently need special information that is not included in these reports.

Out-of-the routine reports are called ad-hoc (on-demand) reports. They are created based on what users need, when they need it.

Exception reports include only information that falls outside certain threshold standards. To implement management by exception, management first creates performance standards. The company then sets up systems to monitor performance (via the incoming data about business transactions such as expenditures), compare actual performance to the standards, and identify exceptions to the standards.

2. Compare and contrast the three types of on-demand reports.

Drill-down reports display a greater level of detail. For example, a manager might examine sales by region and decide to “drill down to more detail” to look at sales by store and then by salesperson.

Key-indicator reports summarize the performance of critical activities. For example, a chief financial officer might want to monitor cash flow and cash on hand.

Comparative reports compare, for example, the performances of different business units or of a single unit during different time periods.

IT’s About Business Questions

IT’s About Business 10.1USA Cycling


1. Why did USA Cycling need an inventory system?

As teams traveled around the world, they took supplies with them. When teams needed to restock tires, seats, chains, parts, and other items, they had to take time to gather inventory information from various locations to determine which items they need to reorder. This lack of information resulted in poor planning.

2. What advantages did the SmartTurn system provide for USA Cycling?

SmartTurn provided an on-demand inventory and warehouse management system that allowed USA Cycling teams in different locations manage inventory information in a single system.

The system is delivered as software-as-a-service (SaaS). SmartTurn allowed cycling teams around the world to update their inventory so that the

home office could instantly see which supplies their various teams have and which supplies they need.

IT’s About Business 10.2SAP at Airgas

1. What actions did Airgas take to help insure the successful implementation of SAP?

Airgas chose approximately 300 subject-matter “experts” from the various functional areas to identify which new functionalities were required in the SAP system.

The “experts” worked side-by-side with a 120-member, full-time project team composed of Deloitte consultants and Airgas executives.

2. What benefits does Airgas expect to receive from its deployment of SAP?

The SAP deployment is expected to generate between $75 and $125 million in additional operating income each year, thanks to increased sales, better price management, and leaner operating costs. Airgas expects to find additional benefits as the project moves forward.

Discussion Questions

1. Consider the-chapter opening case. What are the advantages that Fieldf/x provides for the owners of professional baseball teams? What are the advantages that Fieldf/x provides for professional baseball players? Are there disadvantages for the players? Support your answers.

Fieldf/x is a motion-capture, or optical tracking system, that is designed to rid sports of the biases of the human eye and quantify the formerly unquantifiable art of being in the right place at the right time. Sportvision claimed that Fieldf/x is accurate to within one foot.


The system collects player movement data and produces valuable information such as a fielder’s reaction time, his path to the ball, the baserunner’s speed, and the arc of a fly ball. The system generates more than 2.5 million records per game, or 2 terabytes of data. When Fiedlf/x is installed at all major league baseball parks, it will create a digital catalog of virtually every movement of every fielder at every Major League Baseball game.

Fieldf/x will generate new baseball metrics, such as degree-of-difficulty fielding ratings. Fieldf/x will also make coaching more precise. For example, coaches will be able to better position their fielders, depending on the hitter and the pitch being thrown (e.g., fast ball versus slow curve ball). Finally, the system will enhance the process by which clubs evaluate — and pay — their players.

Students will have their own opinions on advantages/disadvantages to players.

2. Why is it logical to organize IT applications by functional areas?

Data are collected and flow through an organization based on the functions of the various departments. IT systems that mirror those functions in departments support a smooth operation.

3. Describe the role of a TPS in a service organization.

Customer orders/requests are entered into the TPS and are then available for the department which will handle the order. Data is passed to other systems such as CRM, DSS, knowledge management and e-commerce as needed.

4. Describe the relationship between TPS and FAIS.

FAIS provides information primarily to lower- and middle-level managers in the various functional areas. Managers use this information to help plan, organize, and control operations. The information is provided in a variety of reports. Of course the reports need to be based on data, and that is the role of the TPS to generate the data from the business operations.

5. Discuss how IT facilitates the budgeting process.

The budget allows management to distribute resources in the way that best supports the organization’s mission and goals. Budgeting software supports budget preparation and control and facilitates communication, review and approval among participants in the budget process. These packages can reduce the time involved in the budget process. Further, they can automatically monitor exceptions for patterns and trends as well.

6. How can the Internet support investment decisions?


The internet is a massive repository of company and financial information. There are several web sites that provide financial information and these can be used by an investor to make investment decisions.

7. Describe the benefits of integrated accounting software packages.

Integrated accounting packages allow the automation of several business processes – expense management, investment management, control and auditing, managing multiple currencies, and virtual close. By integrating accounting with financial management, many vendors have allowed this automation to be supported.

8. Discuss the role that IT plays in support of auditing.

One major reason that organizations go out of business is their inability to forecast and/or secure a sufficient cash flow. Underestimating expenses, overspending, engaging in fraud, and mismanaging financial statements can lead to disaster. Consequently, it is essential that organizations effectively control their finances and financial statements. We discuss several forms of financial control next. Auditing has two basic purposes: (1) to monitor how the organization’s monies are being spent, and (2) to assess the organization’s financial health. Internal auditing is performed by the organization’s accounting/finance personnel. These employees also prepare for periodic external audits by outside CPA firms.

9. Investigate the role of the Web in human resources management.

Many HRIS applications are delivered via an HR portal. Key HR functions are: recruitment, HR maintenance and development, and HR planning and management.Recruitment involves finding potential employees, evaluating them, and deciding which ones to hire. Companies are trying to find appropriate candidates on the Web, usually with the help of specialized search engines. Companies also advertise hundreds of thousands of jobs on the Web. Online recruiting can reach more candidates, which may bring in better applicants. In addition, the costs of online recruitment are usually lower than traditional recruiting methods such as advertising in newspapers or in trade journals. After employees are recruited, they become part of the corporate human resources pool, which means they must be evaluated, maintained, and developed. IT provides support for these activities. IT also plays an important role in training and retraining. Some of the most innovative developments are taking place in the areas of intelligent, computer-aided instruction and the application of multimedia support for instructional activities. For example, much corporate training is delivered over the company’s intranet or via the Web. IT can also provide support for payroll and employees’ records, benefits administration as well. This is known as ERM – Employee resource management.

10. What is the relationship between information silos and enterprise resource planning?

ERP allows for integration of business operations and can break silos by sharing data from different parts of the business and integrating business processes.


Problem-Solving Activities

1. Finding a job on the Internet is challenging as there are almost too many places to look. Visit the following sites: www.careerbuilder.com, www.craigslist.org, www.linkedin.com, www.careermag.com, http://hotjobs.yahoo.com, www.jobcentral.com, and www.monster.com. What does each of these sites provide you as a job seeker?

Students prepare a list of capabilities for each of the sites. Building profiles, searching for jobs, responding to job ads, evaluate the job market, etc.

2. Enter www.sas.com and access revenue optimization there. Explain how the software helps in optimizing prices.

SAS is a statistical data analysis package and allows for advance mining of data to help in business planning.

3. Enter www.eleapsoftware.com and review the product that helps with online training (training systems). What are the most attractive features of this product?

While different features may appeal to different students, tracking progress and completion and multi format delivery of the content are very attractive capabilities.

4. Enter www.microsoft.com/dynamics/sl/product/demos.mspx. View three of the demos in different functional areas of your choice. Prepare a report on each product’s capabilities.

Student answers will vary based on the demo they view.

Web Activities

Students will follow the directions for these activities and submit a thoughtful report on each

1. Examine the capabilities of the following (and similar financial software packages: Financial Analyzer (from Oracle) and CFO Vision (from SAS Institute). Prepare a report comparing the capabilities of the software packages.

Students will develop a report on their findings

2. Surf the Net and find free accounting software (try www.shareware.com, www.rkom.com, www.tucows.com, www.passtheshareware.com, and www.freeware-guide.com). Download the software and try it. Compare the ease of use and usefulness of each software package.

Encourage students to download software, but remind them of the security issues.

3. Examine the capabilities of the following financial software packages: TekPortal (from www.teknowledge.com), Financial Analyzer (from www.oracle.com), and Financial


Management (from www.sas.com). Prepare a report comparing the capabilities of the software packages.


4. Find Simply Accounting Basic from Sage Software (www.simplyaccounting.com/products/basic). Why is this product recommended for small businesses?


5. Enter www.halogensoftware.com and www.successfactors.com. Examine their software products and compare them.


6. Enter www.iemployee.com and find the support it provides to human resources management activities. View the demos and prepare a report on the capabilities of the products.


Team Assignments

Groups will follow directions on these activities and submit a thoughtful report on each

1. The class is divided into groups. Each group member represents a major functional area: accounting/finance, sales/marketing, production/operations management, and human resources. Find and describe several examples of processes that require the integration of functional information systems in a company of your choice. Each group will also show the interfaces to the other functional areas.

Students will follow the directions for the group project. Note that students might have to search the Internet to locate information systems used in their functional area in order to better describe the interfaces to other related areas.

2. Each group is to investigate an HRM software vendor (Oracle, Peoplesoft (now owned by Oracle), SAP, Lawson Software, and others). The group should prepare a list of all HRM functionalities supported by the software. Then each of the groups makes a presentation to convince the class that its vendor is the best.

To help students prepare for the presentation, set up a scenario involving a company looking to adopt HRM software. Suggest that each project team is working for a consulting/software company. Stage the presentation as if they were presenting their software to the company’s executives as a part of the bidding process for the project.


3. Each group in the class will be assigned to a major ERP/SCM vendor such as SAP, Oracle, Lawson Software, and others. Members of the groups will investigate topics such as: (a) Web connections, (b) use of business intelligence tools, (c) relationship to CRM and to EC, and (d) major capabilities by the specific vendor. Each group will prepare a presentation for the class, trying to convince the class why the group’s software is best for a local company known to the students (for example, a supermarket chain).

To help students prepare for the presentation, set up a scenario where the city has funding to promote local business development. Each project team is working for a local company. Stage the presentation as if they were presenting the selected technology (i.e., topic) to the city’s Board of Commerce as a part of the city grant/funding application process.

Closing Case

The No-Fly Zone

The ProblemAmericans looked to their government to respond quickly and forcefully. Accordingly, the White House and Congress sought ways to increase the amount of intelligence data accessible to all agents and key agencies in the form of meaningful reports. For example, in a now-famous memo from an FBI field office in Phoenix, Arizona, an agent reported suspicions about Middle Eastern men training in Arizona flight schools prior to September 2001. Unfortunately, the agent’s superiors never acted on this information. These men turned out to be among the 9/11 hijackers. The government’s objectives were to prevent such lapses in the future and to foresee future attacks by consolidating and sharing data among intelligence and law-enforcement agencies, including the CIA, the FBI, the State Department, the Defense Department, the National Security Agency (NSA), the Transportation Security Agency (TSA), the Department of Homeland Security (DHS), U.S. Customs and Border Protection, the Secret Service, the U.S. Marshals Service, and the White House.

The IT SolutionThe Bush administration established the National Counterterrorism Center (NCTC) to organize and standardize information about suspected terrorists from multiple government agencies into a single database. As a result, the NCTC faced one of the most complex database challenges ever encountered.

The NCTC feeds data to the FBI’s Terrorist Screening Center (TSC), which is responsible for maintaining a database of suspected terrorists. The NCTC data contain information on individuals suspected of having ties to international terrorism. Such individuals appear on a report called the watch list. In turn, the FBI provides the watch list to the TSC concerning individuals with ties to domestic terrorism. As of mid-2009, the watch list contained more than 1 million names, and it was growing at the rate of 20,000 names per month.


Information from the watch list is distributed to many government agencies, among them the TSA. Airlines use data supplied by the TSA system in their NoFly and Selectee lists for prescreening passengers. NoFly passengers are not allowed on the plane. Selectee passengers can fl y, but they are subject to extra searches and possible additional questioning.

The ResultJames Robinson is a retired Air National Guard brigadier general and a commercial pilot for a major airline. He has even been certified by the TSA to carry a weapon into the cockpit as part of the government’s defense program should a terrorist try to commandeer a plane. However, he has trouble even getting to his plane because his name is on the government’s terrorist watch list. This means that he cannot use an airport kiosk to check in, he cannot check in online, and he cannot check in curbside. Instead, like thousands of Americans whose names match a name or an alias used by a suspected terrorist on the list, he must go to the ticket counter and have an agent verify that he is James Robinson, the pilot, and not James Robinson, the terrorist. Prominent lawmakers, including Massachusetts Senator Edward Kennedy and Georgia Representative John Lewis, have also encountered difficulties with the watch list.

Congress has demanded that the TSC and the TSA fix the problems with the list that are making travel so difficult for so many Americans. People are considered “misidentified” if they are matched in the TSC database and then, upon further examination, are found not to match. They are usually misidentified because they have the same name as someone in the database. Misidentifications typically lead to delays, intensive questioning and searches, and missed flights.

More than 30,000 airline passengers who have been misidentified have asked the TSA to have their names cleared from the watch list. The problem has become so severe that the DHS developed the Traveler Redress Inquiry Program, or TRIP. The purpose of this program is to clear people who are routinely subjected to extra airport security screening and even detention simply because their names are confused with those on the watch list.

Unfortunately, the number of requests to TRIP is more than 2,000 names per month. That number is so high that the DHS has been unable to meet its goal of resolving cases in 30 days.

Questions1. Is the watch list program a success or a failure? Support your answer.

Something needed to be done after the attacks. This is a solution and can prevent attacks. However as with any system, it can have problems and they need to be worked out.

2. Are the problems with the watch list the result of technology? If so, how? If not, what is the cause of the problems with the watch list? Support your answer.

Partially, as names are not the way to uniquely identify a person. People are considered “misidentified” if they are matched in the TSC database and then, upon further examination, are found not to match. They are usually misidentified because they have the same name as someone in the database. Misidentifications typically lead to delays, intensive questioning


and searches, and missed flights. More than 30,000 airline passengers who have been misidentified have asked the TSA to have their names cleared from the watch list. The problem has become so severe that the DHS developed the Traveler Redress Inquiry Program, or TRIP to clear people.

Glossary

ad-hoc (on-demand) reports Nonroutine reports that often contain special information that is not included in routine reports.

batch processing TPS that processes data in batches at fixed periodic intervals.

comparative reports Reports that compare performances of different business units or time periods.

computer-integrated manufacturing (CIM) An information system that integrates various automated factory systems.

drill-down reports Reports that show a greater level of detail than is included in routine reports.

enterprise application integration (EAI) system A system that integrates existing systems by providing layers of software that connect applications together.

enterprise resource planning (ERP) system Information system that takes a business process view of the overall organization to integrate the planning, management, and use of all of an organization’s resources, employing a common software platform and database.

ERP II systems Interorganizational ERP systems that provide that provide Web-enabled links between key business systems (such as inventory and production) of a company and its customers, suppliers, distributors, and others.

exception reports Reports that include only information that exceeds certain threshold standards.

functional area information systems (FAISs) A system that provides information to managers (usually mid-level) in the functional areas, in order to support managerial tasks of planning, organizing, and controlling operations.

key-indicator reports Reports that summarize the performance of critical activities.

online transaction processing (OLTP) TPS that processes data after transactions occur, frequently in real time.

routine reports Reports produced at scheduled intervals.


trans-border data flow The flow of corporate data across nations’ borders.

transaction Any business event that generates data worth capturing and storing in a database.

transaction processing systems (TPSs) Information system that supports routine, core business transactions.

Documents

Chapter 8: Enterprise Systems: From Supply Chain to · Web viewReview Questions Section 10.1 - Before You Go On Define TPS. TPS stands for transaction processing system. Transaction