Chapter 7

Transaction Processing, Innovative Functional Systems, CRM, and Integration

Functional Information Systems Traditionally, IS were designed within

each functional area to increase their internal effectiveness & efficiency

This may not suit some organizations, because certain processes may involve activities that are performed in several functional areas

Solution 1: Reengineer the organization For example, the company can create cross-

functional teams, each responsible for performing a complete business process.

Solution 2: The integrated approach (e.g. Colonial on pg 276). Keeps the functional departments but creates

a supportive information system to help communication, coordination, and control.

Functional Departments and the Value Chain

Characteristics of Functional IS

A functional information system consists of several smaller information systems that support specific activities performed in the functional area.

The specific IS applications in any functional area can be integrated to form a coherent departmental functional system, or they can be completely independent

Functional information systems interface with each other to form the organization-wide information system.

Some organizational information systems interface with the environment.

Information systems applications support the three levels of an organization’s activities: operational, managerial, and strategic.

Transactions Transaction: something is given and something

is received, or there is an exchange Inside/outside transactions

Product is given, cash is received Internal-only transactions

Employee paycheck given, employee labor received Material is withdrawn from inventory, a material

requisition is given Every transaction involving cash or other real

assets is recorded in the TPS, and most lesser transactions (such as an internal transfer of finished products to inventory) also are recorded

It is the TPS that collects, records, stores, processes, and accesses the transactions

Transaction Processing Systems

Transaction Processing Systems (TPS) The information system that support business

processes, mainly accounting & finance transactions, with some sales, personnel, & production activities as well

TPS is the backbone of an organization’s information systems It monitors, collects, stores, processes &

disseminates information for all routine core business transactions.

These data are input data to functional information systems applications, DSS, and CRM

Primary Goal of TPS

To provide all the information needed by law and/or by organizational policies to keep the business running properly and efficiently

Specific Goals of TPS

To allow for efficient & effective operation of the organization

To provide timely documents and reports To increase the competitive advantage of

the corporation To provide the necessary data for tactical

& strategic systems, such as Web-based applications

To ensure accuracy & integrity of data & information.

To safeguard assets & security of information

Activities of TPS

First, data are collected & entered into the computer via any input device

The system then processes data in one of the following ways: Batch processing: the firm collects data from

transactions as they occur, placing them in groups or batches. The system then processes the batches periodically.

Online processing: data are processed as soon as a transaction occurs.

Hybrid system (a combination of batch & online processing) collects data as they occur but process them at specified intervals.

Benefits of Web-Based Transaction Processes

Flexibility to accommodate unpredictable growth in processing demand.

Cost effectiveness for small dollar amounts. Interactive, automatic billing, enabling companies

to offer services to anyone, not just subscribers. Timely search and analysis of large databases. Ability to handle multimedia data such as pictures

and sound effectively and efficiently. High data throughput to support inquiries

requiring massive file size. Fast response time. Effective storage of huge graphics and video

databases.

Logistics/Materials/Inventory Management Transaction Systems Very important Handled in OPIM 204

Channel Systems

Channel Systems: all the systems involved in the process of getting a product or service to customers & dealing with all customers’ needs.

FOUR MAIN CHANNEL SYSTEM ACTIVITIES: The Customer is King/Queen Telemarketing Distribution channels Marketing management

The Customer is Always Right

It is essential for companies today to be aware of their customers and treat them like royalty.

Innovative products & services and superb customer service are becoming a necessity for many organizations. For example: Customer Profiles and

Preference Analysis Prospective Customer

Lists & Marketing Databases

Mass Customization Personalization

Telemarketing

A telemarketing process can be divided into five major activities, all of which are supported by IT & can be done on the Web, even in a wireless environment. Advertisement and reaching customers Order processing Customer service Sales support Account management

Distribution Channels

Organizations can distribute their products & services through several available delivery channels A company may use its own outlets or

distributors. The company also needs to decide on the delivery mode (trains, planes, trucks).

Distribution Channels Management Once products are in the distribution channels,

firms need to monitor and track them to guarantee customer satisfaction.

Improving Sales at Retail Stores Using information technology, it is possible to

improve sales by reengineering the checkout process.

Marketing Management

Many marketing management activities are supported by computerized information systems. Some areas where this is being done include: Pricing of Products or Services Salesperson Productivity Productivity Software (Sales automation

software) Product-Customer Profitability Analysis Sales Analysis and Trends New Product, Service, and Market Planning Web-Based Systems in Marketing

Managing Accounting & Finance Systems

Managing Accounting & Finance Systems

An accounting/finance information system is responsible for: Gathering the raw data necessary for the

accounting/finance TPS Transforming the data into information Making the information available to users

Many packages exist to execute routine accounting transaction processing activities. Some software packages are integrated, e.g.

MAS 90 and MAS 200 The accounting/finance TPS also provides

a complete, reliable audit trail of all transactions transmitted through the network

Financial Planning and Budgeting

Appropriate management of financial assets is a major task in financial planning and budgeting

Financial and Economic Forecasting Knowledge about the availability and cost of

money is a key ingredient for successful financial planning

Planning for Incoming Funds  Funds for organizations come from several

sources Using the information generated by financial

and economic forecasts, the organization can build a decision support model for planning incoming funds

Control and Auditing

Specific forms of financial control are: Budgetary controls Internal and External audits Financial Ratio Analysis Profitability Analysis & Cost Control Product Pricing

Managing Human Resource Systems

Developments in Web-based systems increased the popularity of human resources information systems (HRISs) as of the late 1990s.

Initial HRIS applications were mainly related to transaction processing systems.

However, in the last decade we have seen considerable computerization activities in the managerial and even strategic areas.

HRISs and Recruitment

Using the Web for Recruitment With millions of resumes available online,

companies are trying to find appropriate candidates on the Web.

Position Inventory Large organizations need to fill vacant

positions frequently. An advanced intranet-based position inventory system keeps the position inventory list current & matches openings.

Employee Selection To expedite the testing and evaluation process

and ensure consistency in selection, companies use information technologies such as expert systems

HR Maintenance and Development

Performance Evaluation Once digitized, evaluations can be used to

support many decisions, ranging from rewards to transfers to layoffs.

Training and Human Resources Development IT can support the planning, monitoring, and

control of training and retraining activities by using workflow applications.

Intelligent computer-aided instruction (ICAI) and application of multimedia support for instructional activities.

Training can be improved using Web-based video clips & virtual reality.

HR Planning and Management

Personnel Planning Large companies develop qualitative and

quantitative workforce planning models, which can be enhanced if IT is used to collect, update, and process the information

Labor–Management Negotiations Some companies have developed computerized DSS

models that support negotiations These models can simulate financial & other

impacts of fulfilling any demand made by employees and provide answers to queries in seconds

Benefits Administration Using computers for benefits selection can save a

tremendous amount of labor and time Some companies have automated benefits

enrollments

So What is CRM?

CRM stands for Customer Relationship Management

It is a strategy used to learn more about customers' needs and behaviors in order to develop stronger relationships with them

There are many technological components to CRM, but thinking about CRM in primarily technological terms is a mistake

The more useful way to think about CRM is as a process that will help bring together lots of pieces of information about customers (Market research, historical data), sales (Historical data), marketing effectiveness (Sales/Advertising, Sales/Sales Rep), responsiveness (Response to price, promotion, distribution), and market trends (Market research….)

Customer Relationship Management

CRM is an approach that recognizes that customers are the core of the business and that the company’s success depends on effectively managing relationships with them

Customer service is a series of activities designed to enhance the level of customer satisfaction

CRM, cont’d. Relationship marketing: the “overt

attempt of exchange partners to build a long-term association, characterized by purposeful cooperation and mutual dependence on the development of social, as well as structural, bonds” (Mowen & Minor, 1998).

E-Service: customer service that is performed on the Web, sometimes automatically.

Introduction to CRM

Contact Points: Advertisements, Retail counters, Website

visits, Purchase, Direct sales, Catalogs, direct mail, Telemarketing, Call centers, Internet email, Sales promotions, Banner advertisements, Market research……

What do we get: Data, Data, Data What do we want? Information and

knowledge of customers Why do we want this? Retain customers,

Target customers, Change strategies, Make it easy for customers to access information, product, services. Identify profitable customers

Goal of CRM

To use technology and human resources to gain insight into the behavior of customers and the value of those customers

Provide better customer service Make call centers more efficient Cross sell products more effectively Help sales staff close deals faster Simplify marketing and sales processes Discover new customers Increase customer revenues

CRM in Action

According to Seybold and Marshak (1998) there are five steps in building IT-supported CRM. These are: Make it easy for customers to do business with

you. Focus on the end customer for your products

and services. Redesign your customer-facing business

processes from the end customer’s point of view.

Wire your company for profit: design a comprehensive, evolving electronic business architecture.

Foster customer loyalty. In e-Commerce, especially, this is the key to profitability.

IT in CRM

Customer Service

Providing Search and Comparison Capabilities

Providing Free Products and Services

Providing Technical and Other Information and Service

Allowing Customers to Order Customized Products and Services Online

Letting Customers Track Accounts or Order Status

Tools for Customer Service

Personalized Web Pages FAQs Tracking Tools Chat Rooms E-mail and Automated Response Help Desks and Call Centers Troubleshooting Tools

CRM is Cool But How Does It Happen?

Buy software, install it, and you are all set (Wrong!)

Identify what information you need and what to do with it!

What are the sources of information, where, when, how data come? Where to store this data? How data is used currently?

CRM systems link these points. Data flow between operational system (Sales,

Inventories, etc.) to Analytical systems (Logical system/software to identify trends, patterns, behavior…by sorting through this records)

Analysts can analyze these patterns to make conclusion about customer needs, profile, profitability to make crucial business decisions

Examples of Data That CRM Needs to Collect

Responses to campaigns Shipping and fulfillment dates Sales and purchase data Account information Web registration data Service and support records Demographic data Web sales data

Managerial Issues

Integration of functional information systems. Integration of existing stand-alone functional information systems is a major problem for many organizations.

Priority of transaction processing. Transaction processing may not be an exotic application, but it deals with the core processes of organizations.

The customer is king/queen. In implementing IT applications, management must remember the importance of the customer, whether external or internal.

Managerial Issues, cont’d.

Finding innovative applications Tools such as Lotus Notes, intranets, and the

Internet enable the construction of many applications that can increase productivity and quality.

System integration Although functional systems are necessary, they

may not be sufficient if they work independently. Using the Web

Web-based systems should be considered in all functional areas. They are effective, inexpensive & user friendly.

Ethical Issues Many ethical issues are related to the code of ethics

followed in CRM and privacy policies.