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Chapter 9

Transaction Processing, FunctionalApplications and Integration

Information Technology for ManagementImproving Performance in the Digital Economy

7th editionJohn Wiley & Sons, Inc.

Slides contributed by Dr. Sandra ReidChair, Graduate School of Business & Professor, Technology

Dallas Baptist University

9-1Copyright 2010 John Wiley & Sons, Inc.

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Chapter Outline

• Functional Information Systems and Transaction Processing Systems

• Managing Production/Operations and Logistics

• Managing Marketing and Sales Systems• Managing Accounting and Finance Systems• Managing Human Resources Systems

9-2Copyright 2010 John Wiley & Sons, Inc.

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Chapter Outline (cont’d)

• Integrating Functional Information Systems• Managerial Issues

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Learning Objectives

1. Relate functional areas and business processes to the value chain model.

2. Define a functional management information system, and list its characteristics.

3. Understand the transaction processing system and demonstrate how it is supported by IT.

4. Analyze the support provided by IT and the Web to production/operations management, including logistics.

5. Describe the support provided by IT and the Web to marketing and sales.

9-4Copyright 2010 John Wiley & Sons, Inc.

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Learning Objectives – cont’d

6. Understand the support provided by IT and the Web to accounting and finance.

7. Analyze the support provided by IT and the Web to human resources management.

8. Describe the benefits and issues of integrating functional information systems.

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• Problem – Medical supplies inventory shortages, overstock of unneeded items, costly rush ordering, & nurses not appropriate personnel to manage process.

• Solution – Connect wireless handheld devices with purchasing & inventory management information systems.

• Results – Inventory levels reduced 50%; IT solution cost repaid in months. Consistent materials available for improved patient care.

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The functional areas, TPS, and integration connection. Note the flow of information from the TPS to the functional systems. Flow of information between and among functional systems is done via the integration component.

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Functional Information Systems

• Composed of smaller systems• Integrated or independent• Interfaces• Support all levels (operational, managerial,

strategic)

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Transaction Processing Information Systems

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TPS monitors, collects, stores, processes, & disseminates information for all routine core business transactions.

Rapid Processing Processes transactions virtually instantly

Reliability Ensures transactions never slip past the net, & systems themselves are operational permanently

Standardization Acquires identical data for each transaction.

Controlled Access Access is restricted to only those employees who require their use.

Characteristics of Transaction Processing Systems:

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Online Transaction Processing

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TPS – Online Transaction Processing Systems

• With OLTP and Web technologies such as an extranet, suppliers can look at the firm’s inventory level or production schedule in real time. The suppliers themselves, in partnership with their customers, can then assume responsibility for inventory management and ordering.

• Interactive Internet TPS expands OLTP to provide enhanced real time transaction processing over the Internet or intranets. Multi-store chains can access a centralized computer system no longer requiring in-store processors.

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TPS – Examples

• Traffic Control at Airports• In-flight Card Payments in American Airlines • Tax filing• Organizational payroll• Cruise ships operators• Order processing

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Example: Taxis in Singapore

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Modernizing TPS Saved Time & Money

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Behind Microsoft's Tellme Acquisition: Pizza To Go

Blaze Advisor drives modernization of legacy systems at the California DMV

Copy Services no longer need employees to complete your purchase…

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Transaction Processing on the Web

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Web analytics is the measurement, collection, analysis and reporting of internet data for purposes of understanding and optimizing web site usage.There are two categories of web analytics; off-site and on-site web analytics.

5 Great (Free) Analytics Tools You Might Not Know About Yet

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9.2 Managing Production/Operations & Logistics

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Managing Production/Operations & Logistics

• A few of the IT supported POM areas are:

– In-house logistics and materials management

– Planning production/operations

– Computer-integrated manufacturing (CIM)

– Product lifecycle management (PLM)

– Automating design work and manufacturing

The production and operations management (POM) function in an organization is responsible for the processes that transform inputs into useful outputs. In comparison to the other functional areas, POM is very diversified as are the supporting TPS. It also differs considerably among organizations.

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The production/operations management functions transform inputs into useful outputs. (Source: J.R. Meredith and S. M. Shafer, Operations Management. New York: Wiley, 2002. Reprinted by permission of John Wiley & Sons, Inc.)

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In-House Logistics & Materials Management

• Deals with ordering, purchasing, inbound logistics (receiving), & outbound logistics (shipping) activities.

• Purchasing results in incoming materials & parts.• Parts inspected for quality then stored.• Inventory management– Goal is to minimize costs of keeping inventory,

ordering and shortage.

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e-Procurement

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E-procurement (electronic procurement, sometimes also known as supplier exchange) is the business-to-business or business-to-consumer or Business-to-government purchase and sale of supplies.

Information systems that support logistics & materials management:

Radio-frequency identification (RFID) is the use of an object (typically referred to as an RFID tag) applied to or incorporated into a product, animal, or person for the purpose of identification and tracking using radio waves. Some tags can be read from several meters away and beyond the line of sight of the reader.

Robots perform distribution & materials handling.

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Quality Control Systems

• Can be standalone systems.• May be part of enterprise-wide total quality

management (TQM) effort.• Provide information about quality of incoming

materials & parts; quality of in-process semi-finished & finished products.

• May compare results to metrics such as Six Sigma.

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• Material Requirements Planning (MRP) is software that facilitates the plan for purchasing or producing parts, subassemblies, or materials in the case of interdependent items. It integrates Master Production Schedules, BOM’s, and Inventory levels.

• Manufacturing Resource Planning (MRP II) adds functionalities to a regular MRP system by determining the costs of parts and the associated cash flow. It also estimates costs of labor, tools, equipment repair, and energy while generating a requirements report.

• Just-in-Time Systems is an approach that attempts to minimize waste of all kinds (space, labor, materials, energy, etc.) and to continuously improve processes and systems. The JIT concept is used in mass customization and build-to-order environments.

• Project Management. A project is usually a one-time effort composed of many interrelated activities, costing a substantial amount of money, and lasting for weeks or years. Software tools such as: program evaluation and review technique (PERT) and the critical path method (CPM) are used to manage milestones, resources, costs, etc.

• Work Management Systems (WMS) automatically manages the prioritization and distribution of work. These systems deal with resource allocation and reallocation.

POM planning is a major component of operational systems

Managing Production/Operations & LogisticsManaging Production/Operations & Logistics

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Computer-Integrated Manufacturing

• Typical integrated technologies are:

– FMS - Flexible-manufacturing systems

– JIT – Just-in-Time

– MRP – Materials Requirements Planning

– CAD – Computer Aided Design

– CAE – Computer Aided Engineering

– GT - Group technology

CIM is a concept that promotes the integration of various computerized factory systems. It has three basic goals: (1) the simplification of all

manufacturing technologies and techniques, (2) automation of as many of the manufacturing processes as possible, and (3) integration and

coordination of all aspects of design, manufacturing, and related functions via computer hardware and software.

Managing Production/Operations & LogisticsManaging Production/Operations & Logistics

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9.3 Managing Marketing & Sales Systems

27Copyright 2010 John Wiley & Sons, Inc. 9-27Marketing channel systems.

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Customer Relations It is essential for companies to know who their customers are and to

treat them properly. Innovative products and services, successful promotions, customization, and customer service are a necessity for

most organization.

• Customer Profiles and Preference Analysis. Sophisticated information systems are being developed to collect data on existing and potential customers, their demographics (age, gender, income level), and preferences.

• Prospective Customer Lists and Marketing Databases. All firms need to know and track who their existing and potential customers are. These prospective-customer lists can be analyzed and sorted by classification for direct mailing, e-mailing, or telemarketing.

• Mass Customization. Today’s customers prefer customized products. Through mass customization, the practice of maintaining WIP inventory, manufacturers can offer different product configurations at reasonable prices.

• Personalization. Special product offers are made, based on where the customer spent their time and on what they may have purchased.

• Advertising and Promotions. Special promotions or coupons are presented to the customer via mails, email, wireless and pervasive computing applications.

Marketing and Sales SystemsMarketing and Sales Systems

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Distribution Channels & In-Store Innovations Organizations can distribute their products and services through a variety of delivery channels. A company may use its own outlets, representatives,

or distributors.

• IT-Supported Distribution Channels– Internet– Location Based Mapping– Self-service convenience stores

• Improving Shopping and Checkout at Retail Stores– Hand-held wireless devices that scan the bar code– Smart card or credit card– Information kiosk enable customers to view catalogs in stores– Self-checkout machines– Check-writers attached to cash registers– Computerization of various activities in retail stores – Video-based systems count and track shoppers in a physical store

Marketing and Sales SystemsMarketing and Sales Systems

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Marketing Management Many marketing management decision applications are supported by

computerized information systems.

• Pricing of Products or Services. Sales volumes are largely determined by the prices of products or services as is profit.

• Salesperson Productivity. Salespeople differ from each other in selling skill. Sales-force automation increases salesperson productivity by providing them with mobile devices, access to information, etc.

• Profitability Analysis profit contribution of certain products and services can be derived from cost-accounting systems

• Sales Analysis And Trends. Marketing. TPS collect sales figures that can be searched for trends and relationships.

• New Products, Services, and Market Planning. New products and services can be an expensive risk. “Will it sell?” Requires careful analysis, planning, forecasting, and market research.

• Web-Based Systems support marketing and sales through data capture

Marketing and Sales SystemsMarketing and Sales Systems

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Internet Market Research & Proctor & Gamble

• Whitestrips introduced & offered for sale on the Internet.

• Spent months identifying target market.• Collected data via online questionnaires

rather than mail-outs.• Data mining revealed most enthusiastic

groups.• Buzz created a huge demand for product by

the time it hit the shelves.

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9.4 Managing Accounting & Finance Systems

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Major Benefits of Using Budgeting Software

• Reduces time & effort in the budget process.• Possible to easily explore & analyze implications

of organizational & environmental changes.• Can facilitate integration of corporate strategic

objectives with operational plans.• May make planning an ongoing, continuous

process.• Automatically monitor exceptions for patterns &

trends.

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Accounting and Finance Systems

Accounting and finance functional areas manage the inflow and outflow of organizational assets. This involves all functions of an

organization including payroll, billing, cash management, etc.

• Financial Planning and Budgeting– Financial and Economic Forecasting– Planning for Incoming Funds– Budgeting– Capital Budgeting• Buy vs. lease• Standard financial model used (e.g. IRR, NPV, payback period)

• Managing Financial Transactions

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Integrated accounting business software.

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Accounting and Finance Systems (Continued)

• E-Commerce Applications of Financial Transactions – Global stock exchanges and multiple currencies– E-Bonds– Factoring online– Electronic re-presentment of checks– Electronic bill presentment and payments

• Investment Management– Financial Analysis– Access to Financial and Economic Reports

• Control and Auditing– Risk analysis– Budgetary Control and Auditing– Financial Ratio Analysis– Profitability Analysis and Cost Control– Product Pricing

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9.5 Managing Human Resources Systems

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HRIS Applications

• Payroll• Work Time• Benefits Administration• Recruiting• Training• Performance Records

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HRM activities

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Human Resources Systems • Recruitment is finding employees, testing them, and deciding which ones to hire. The Web

has enhanced the recruitment process.– Position Inventory– HRM Portals and Salary Surveys– Employee Selection

• Human Resources Maintenance and Development– Performance Evaluation– Training and Human Resources Development• Web-based video clips.• Mobile devices.• Virtual reality.• Interactive simulations.

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Human Resources Systems (Continued)

• Human Resources Planning and Management–Personnel Planning–Labor –Management Negotiations–Payroll and Employees’ Records–Benefits Administration–Employee Relationship Management (ERM)

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Integrating Functional Information Systems

• Functional information systems are mainly independent, often custom- or in-house -made

• Information Systems that serve business processes need to be integrated– Using middleware – ERP software– Web 2.0 tools, web services, etc. – Front-office back-office integration

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Managerial Issues

• Integration of functional information systems• Priority of transaction processing• Finding innovative applications• Using the Web• Ethical issues– HRM– CRM

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