Introduction to Information Systems Chapter 10 PDF

Introduction to Information Systems Rainer, Prince, Sanchez-Rodriguez, Splettstoesser Hogeterp, Ebrahimi Fifth Canadian Edition Chapter 10 Information Systems within the Organization Copyright ©2021 John Wiley & Sons Canada, Ltd. L...

Introduction to Information Systems Rainer, Prince, Sanchez-Rodriguez, Splettstoesser Hogeterp, Ebrahimi Fifth Canadian Edition Chapter 10 Information Systems within the Organization Copyright ©2021 John Wiley & Sons Canada, Ltd. Learning Objectives 1. Explain the purpose of transaction processing systems 2. Explain the types of support information systems can provide for each functional area of the organization 3. Identify advantages and drawbacks to businesses implementing an enterprise resource planning (ERP) system 4. Describe the three main business processes supported by ERP systems Copyright ©2021 John Wiley & Sons Canada, Ltd. 2 Chapter Outline 1. Transaction Processing Systems 2. Functional Area Information Systems 3. Enterprise Resource Planning (ERP) Systems 4. ERP Support for Business Processes Copyright ©2021 John Wiley & Sons Canada, Ltd. 3 10.1 Transaction Processing Systems (TPS) A transaction is any business event that generates data worth being captured and stored in a database. Examples: a product manufactured, a service sold, and a payroll cheque generated. Transactions are inputs for functional area information systems and business intelligence systems, as well as for business operations such as customer relationship management, knowledge management, and e-commerce. Transaction processing systems (TPS) support the monitoring, collection, storage, and processing of data generated by each of the organization’s basic business transactions and are critical to their functioning. Copyright ©2021 John Wiley & Sons Canada, Ltd. 4 10.1 Transaction Processing Systems (TPS) The TPS collects data continuously, in real time, as soon as the data are generated, and it provides the input data for the corporate databases. Copyright ©2021 John Wiley & Sons Canada, Ltd. 5 Transaction Processing Systems (TPS) Characteristics of a TPS include: Continuous “real-time” data collection Efficiently handles high volumes of data and large variations in those volumes Avoids errors and downtime Records results accurately and securely Maintains privacy and security Copyright ©2021 John Wiley & Sons Canada, Ltd. 6 FIGURE 10.1 How transaction processing systems manage data Copyright ©2021 John Wiley & Sons Canada, Ltd. 7 10.2 Functional Area Information Systems (FAIS) Functional Area Information Systems (FAIS) support the various functional areas in an organization by increasing each area’s internal efficiency and effectiveness. They often provide information in a variety of reports. Copyright ©2021 John Wiley & Sons Canada, Ltd. 8 10.2 Functional Area Information Systems (FAIS) Information Systems for Accounting and Finance Information Systems for Marketing Information Systems for Production/Operations Management Information Systems for Human Resource Management Reports Copyright ©2021 John Wiley & Sons Canada, Ltd. 9 Information Systems for Accounting and Finance Financial planning and budgeting Managing financial transactions Investment management Control and auditing Copyright ©2021 John Wiley & Sons Canada, Ltd. 10 Financial Planning and Budgeting Financial and economic forecasting Budgeting Copyright ©2021 John Wiley & Sons Canada, Ltd. 11 Managing Financial Transactions Global stock exchanges Managing multiple currencies Virtual close Expense management automation (EMA) Copyright ©2021 John Wiley & Sons Canada, Ltd. 12 Control and Auditing Control and auditing o Budgetary control o Internal auditing Financial ratio analysis Copyright ©2021 John Wiley & Sons Canada, Ltd. 13 Information Systems for Production/ Operations Management In-house logistics and materials management o Inventory management (includes vendor-managed inventory, VMI) o Quality control Planning production and operations (and MRP, MRPII) Computer-integrated manufacturing (CIM) Copyright ©2021 John Wiley & Sons Canada, Ltd. 14 Information Systems for Human Resource Management Recruitment Human resources development Human resources planning and management o Payroll and employees’ records o Benefits administration o Employee relationship management Copyright ©2021 John Wiley & Sons Canada, Ltd. 15 FIGURE 10.3 Examples of information systems supporting the functional areas Copyright ©2021 John Wiley & Sons Canada, Ltd. 16 Reports Routine reports are produced at scheduled intervals (hourly quality control report, daily reports on absenteeism rates) Non-routine or Ad hoc (on demand) reports: o Drill-down reports display a greater level of detail o Key-indicator reports summarize the performance of critical activities o Comparative reports may compare, for example, performances of different business units or of a single unit during different time periods Exception reports include only information that falls outside certain threshold standards or criteria Copyright ©2021 John Wiley & Sons Canada, Ltd. 17 10.3 Enterprise Resource Planning (ERP) Systems What are ERP systems? ERP II Systems Core ERP and Extended ERP Benefits and Limitations of ERP Systems Implementing ERP Systems Enterprise Application Integration (EAI) Copyright ©2021 John Wiley & Sons Canada, Ltd. 18 10.3 Enterprise Resource Planning (ERP) Systems Enterprise Resource Planning (ERP) systems adopt a business process view of the overall organization by integrating the planning, management, and use of all of an organization’s resources. It employs a common software platform and database. It uses software modules at its core. Other modules can be added as the need arises. Examples of ERP systems Copyright ©2021 John Wiley & Sons Canada, Ltd. 19 10.3 Enterprise Resource Planning (ERP) Systems The major objective of ERP system is to tightly integrate the functional areas of the organization, enabling information to flow seamlessly across them. ERP systems function much the same as FAISs and produce the same reports. ERP systems “simply” integrate the functions of the various FAISs. ERP systems provide the information necessary to control the business processes of the organization. Copyright ©2021 John Wiley & Sons Canada, Ltd. 20 ERP II Systems ERP II systems are interorganizational ERP systems that integrate internal-facing ERP applications with external- focused supply chain management and customer relationship management applications. ERP II systems provide web-enabled links between a company’s key business systems—such as inventory and production—and its customers, suppliers, distributors, and others. Copyright ©2021 John Wiley & Sons Canada, Ltd. 21 FIGURE 10.4 ERP II system Copyright ©2021 John Wiley & Sons Canada, Ltd. 22 ERP II system Enterprise application integration (EAI) system integrates existing systems by providing software, called middleware, that connects applications together. Copyright ©2021 John Wiley & Sons Canada, Ltd. 23 TABLE 10.2 ERP Modules: Core ERP Modules Financial management Operations management Human resource management Copyright ©2021 John Wiley & Sons Canada, Ltd. 24 TABLE 10.2: ERP Modules: Extended ERP Modules Customer relationship management (CRM) Supply chain management (SCM) Business analytics E-business Copyright ©2021 John Wiley & Sons Canada, Ltd. 25 Major Benefits of ERP Systems Organizational flexibility and agility. ERP systems break down many former departmental and functional silos of business processes, information systems, and information resources. The organizations therefore can react quickly to changing business conditions as well as capitalize on new business opportunities. Provide decision support. ERP systems provide essential information on business performance across functional areas. This information significantly improves managers’ ability to make better, more timely decisions. Improved business processes for increased quality and efficiency. ERP systems integrate and improve an organization’s business processes, resulting in significant improvements in the quality of customer service, production, and distribution. Copyright ©2021 John Wiley & Sons Canada, Ltd. 26 Major Limitations of ERP Implementations Since ERP’s systems modules are based on “best practices”, companies may need to change their methods of achieving business objectives by changing their business processes Such practices are not the “best” for every company and may result in loss of competitive advantage Some ERP systems can be complex, expensive, and time- consuming to implement Underestimating the complexity of the planning, development, and training required to prepare for a new ERP system is another major problem Copyright ©2021 John Wiley & Sons Canada, Ltd. 27 Implementing ERP Systems On-premise ERP implementation o Vanilla approach o Custom approach o Best of breed approach Software-as-a-Service (SaaS). cloud-based software delivery model that allows users to access applications over the internet Ex. Salesforce Copyright ©2021 John Wiley & Sons Canada, Ltd. 28  IMPLEMENTING ERP SYSTEMS On-premise ERP implementation Vanilla approach: use the standard ERP package Custom approach: analyze needs and have the software customized in response to the documented design document Best of Breed: use the ERP Vanilla software and integrate with other software SaaS ERP: Lease ERP software that is cloud-based, normally using the vanilla approach Copyright ©2021 John Wiley & Sons Canada, Ltd. 29 Three major advantages of using a cloud-based ERP system (SaaS) are: The system can be used from any location anytime as long as there is Internet access Companies using cloud-based ERP avoid the initial hardware and software expenses that are typical of on- premise implementations Cloud-based ERP solutions are scalable, meaning you pay for only what you use Copyright ©2021 John Wiley & Sons Canada, Ltd. 30 Three major disadvantages of using cloud-based ERP systems (SaaS) are: Companies that adopt cloud-based ERP systems sacrifice their control over a strategic IT resource Using the vanilla approach potentially reduces competitive advantage Usage problems if the Internet is not available or capacity problems arise with the service provider Copyright ©2021 John Wiley & Sons Canada, Ltd. 31 Copyright Copyright © 2021 John Wiley & Sons Canada, Ltd. or the author. 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