Introduction to Management Information

Systems

Chapter 7 IS within Organization

HTM 304

Fall 07

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Learning Objectives

Understand the history of Information Systems

and three types of Information Systems

Functional Information Systems:

-- Features and Problems

Integrated Applications

Why Integrate? (Value Chain Model)

Three major integrated systems: CRM, ERP, & EAI

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Three Types of Information Systems

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Calculation Systems

First Kind of IS (1950-1980)

Perform tedious, repetitive CalculationBalanced accounting records

Computed payroll

Applied debits & credits to general ledger

Track inventory, etc…

Provide specifically

designed, small

volume, numeric

information

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Functional Systems

As the technology evolve, every department develops their own Information Systems

“Single Function” -- independent

Payroll system

Student registration systems

Computer inventory management systems

Automate the process for each functional area

(Maintaining the same process, streamlining it…)

Sales and marketing

Manufacturing

Human Resources

Finance,

Etc.

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Example: Human Resources Systems

Support recruitment, compensation, evaluation, and development

of organization’s employees

Recruiting methods may be simple or complex

Compensation includes payroll, processing and

tracking vacation, sick leave, health care, other benefits

Employee evaluation includes publication of job and

skill descriptions and performance evaluations

Development and training activities vary

HR system concerns every employee in the organization. You

should check the website before you accept the job offer…

CSUSM HR Webpage: http://www.csusm.edu/HR/

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Accounting and Finance Systems

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Sales and Marketing Systems

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Operations Systems

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IS supported Manufacturing Activities

Will talk more later in ERP system

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Problem of Functional Systems

(inconsistent coding)

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Integrated Systems

Combining functional areas to better support business

goals and objectives

Porter’s Value Chain Model:

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Simplified Value Chain

• Linkages – interactions across value activities

• Linkages important source of efficiencies and readily supported by IS

• Emphasis on the linkages triggered the movement of Business Process Redesign

-- Dell, Toyota, etc…

Customer placesorder

Product is manufactured

Product is delivered to customer

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Value chain – network of value-creating activities

is foundation business process design, or

business process redesign (BPR)

Organizations should not automate or

improve existing functional systems

Organizations should instead PLUNGE

Create new, more efficient, business processes

Integrate activities of all departments involved

in value chain

Business Process Redesign

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Projects expensive and difficult1. Highly trained systems analysts interview key personnel from

many departments and document existing system and alternatives

2. Managers review results and try to develop new, improved processes

3. New information systems developed to implement new business processes

Employee resistance to change

Cannot know ahead of time how effective the new processes are

Few successes, and many others failed…

The Challenges of Business Process Redesign

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Built-in processes provided by software application (Oracle and SAP)

Inherent Processes

Benefits

“Bests Practices”

Save substantial amount

of money and time in

developing new process

and system

Proved benefits from other

organization.

Disadvantage

May require substantial

organizational change

Change can be disruptive

to ongoing operations

Disturbing to employees

Homogenous processes

may not be good for

differentiation

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Business Process Application Vendors

Page 210, MIS in Use 7-1

Largest market share: Oracle/SAP.

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Three Examples of Integrated IS

CRM – Customer Relationship Management

ERP – Enterprise Resource Planning

EAI – Enterprise Application Integration

Note: Different vendors define their own version of the

above terms to better support their own products.

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Customer Relationship Management Systems

Set of business processes for attracting, selling,

managing & supporting customers

Provides single data repository about all

customer interactions

Stores all customer data in one place and

enables access to people with permissions

CRM components

Solicitation

Lead Tracking (presale)

Relationship management (post-sale)

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3 New Processes Creates Customer Life Cycle

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Enterprise Resource Planning

Enterprise resource planning (ERP) integrates

all of organization’s principal processes

Outgrowth of MRP II manufacturing systems

Primary ERP users are manufacturing companies

SAP first & most successful

ERP software vendor

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MRP MRPII ERP

MRP (material requirements planning)

An Information System that plans the need for materials and inventories

of materials used in the manufacturing process

Does not include the planning of personnel, equipment, or facilities

requirements.

BOM (Bill-of-Material) List of product materials and subassemblies.

(see figure 7-8, page 203)

MRP II (manufacturing resource planning)

Follow-on to MRP that includes the planning of materials, personnel, and

machinery.

limited cross-functional..Push

ERP:

All the resources in the entire company

Defined processes to link the resources. (see page 212)

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Characteristics of ERP

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Potential Benefits of ERP

Note: However, you need to trade off between the cost and benefit.

Not all the business are suitable for change.

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Implementing ERP System

CEO needs to be cautious in deciding whether to implement.

Once decided, it may take years to complete.

3rd party consultant may need to come in to facilitate the process

Task 1: Model current business processes

Task 2: Managers and analysts compare these processes to

ERP blueprint processes and note differences

Task 3: Eliminate differences by either

Changing existing business process to match

ERP process

Altering ERP system to match business process

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Enterprise Application Integration (EAI)

ERP systems are not for every organization

Too manufacture-oriented

Too daunting

Alternative: EAI

Connects system “islands” via a new layer

of software/system

Enables existing applications to

communicate and share data

(“virtual” database)

Provides integrated information

Leverages existing systems

Enables a gradual move

towards ERP.

EAI

IT infrastructure

Hum

an Resource

Man

ufactu

ring

Marketin

g Inven

tor

y othe

r

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Key Terms and Concepts

Bill of materials (BOM)

Business process design

Calculation systems

Cross-departmental systems / Cross-functional systems

Customer relationship management (CRM)

Customer Life Cycle

Enterprise application integration (EAI)

Enterprise resource planning (ERP)

Functional systems (examples)

Inherent processes

Integrated systems

Linkages

MRP/MRP II

Value chain