Chapter 2: Types of Business Information Systems PDF

Chapter 2: Types of business information systems Trần Thị Tuyết - 2021 Contents E-commerce and Mcommerce 2. Enterprise systems 1. Transaction processing system (TPS) 2. Enterprise resource planning (ERP) 3. Supply Chain Management (SCM) 4. Customer Relationships Management (CRM) 3. Management and...

Chapter 2: Types of business information systems Trần Thị Tuyết - 2021 Contents E-commerce and Mcommerce 2. Enterprise systems 1. Transaction processing system (TPS) 2. Enterprise resource planning (ERP) 3. Supply Chain Management (SCM) 4. Customer Relationships Management (CRM) 3. Management and Decision Support system (DSS) 4. Knowledge Management System (KMS) and Specialized information system 1. 1.1 E-commerce • Electronic commerce is the conducting of business activities (e.g., • • • • distribution, buying, selling, marketing, and servicing of products or services) electronically over computer networks such as the Internet, extranets, and corporate networks Business-to-business (B2B) e-commerce is a subset of e-commerce where all the participants are organizations. B2B e-commerce is a useful tool for connecting business partners in a virtual supply chain to cut resupply times and reduce costs Business-to-consumer (B2C) e-commerce: A form of e-commerce in which customers deal directly with an organization and avoid intermediaries. Consumer-to-consumer (C2C) e-commerce is a subset of e-commerce that involves consumers selling directly to other consumers. E.g: eBay E-Government is the use of information and communications technology to simplify the sharing of information, speed formerly paper-based processes, and improve the relationship between citizens and government. • Online marketers must create specific trust-building strategies for their Web sites by analyzing their customers, products, and services. A perception of trustworthiness can be created by implementing one or more of the following strategies: • Demonstrate a strong desire to build an ongoing relationship with • • • • customers by giving first-time price incentives, offering loyalty programs, or eliciting and sharing customer feedback. Demonstrate that the company has been in business for a long time. Make it clear that considerable investment has been made in the Web site. Provide brand endorsements from well-known experts or wellrespected individuals. Demonstrate participation in appropriate regulatory programs or industry associations. 1.2. M-commerce • Because m-commerce devices usually have a single user, they are ideal for accessing personal information and receiving targeted messages for a particular consumer. Through m-commerce, companies can reach individual consumers to establish one-to-one marketing relationships and communicate whenever it is convenient—in short, anytime and anywhere. • Examples: • Mobile banking • Mobile Price comparison • Mobile advertising • Mobile coupons 1.3. Advantages of E-commerce & M-commerce • Reduce costs • Speed the flow of goods and information • Increase accuracy • Improve customer service 2. Enterprise systems • An enterprise system is central to an organization and ensures that information can be shared across all business functions and all levels of management to support the running and managing of a business. • Businesses rely on enterprise systems to perform many of their daily activities in areas such as product supply, distribution, sales, marketing, human resources, manufacturing, accounting, and taxation so that work is performed quickly, while avoiding waste and mistakes. • This collection of processed transactions also forms a storehouse of data invaluable to decision making. • The ultimate goal is to satisfy customers and provide a competitive advantage by reducing costs and improving service. 2.1. TPS • Every organization has many transaction processing systems (TPS), which capture and process the detailed data necessary to update records about the fundamental business operations of the organization. • These systems include order entry, inventory control, payroll, accounts payable, accounts receivable, and the general ledger,... • The input includes basic business transactions, such as customer orders, purchase orders, receipts, time cards, invoices, and customer payments. • The processing activities include data collection, data editing, data correction, data manipulation, data storage, and document production. • The result of processing business transactions is that the organization’s records are updated to reflect the status of the operation at the time of the last processed transaction. TPS methods Batch processing system A form of data processing where business transactions are accumulated over a period of time and prepared for processing as a single unit or batch. Online transaction processing (OLTP) A form of data processing where each transaction is processed immediately, without the delay of accumulating transactions into a batch. TPS’s objectives • Capture, process, and update databases of business data required to support routine business activities. • Ensure that the data is processed accurately and completely. • Avoid processing fraudulent transactions. • Produce timely user responses and reports. • Reduce clerical and other labor requirements. • Help improve customer service. • Achieve competitive advantage. Typical TPSs • Order processing systems: Running these systems efficiently and reliably is so critical that the order processing systems are sometimes referred to as the “lifeblood of the organization.” • Accounting systems: The accounting systems must track the flow of data related to all the cash flows that affect the organization. • Purchasing systems: The traditional transaction processing systems that support the purchasing business function include inventory control, purchase order processing, receiving, and accounts payable. • Payroll transaction systems: Integration of firm’s TPSs TPSs and competitive advantage TPSs for SMEs Transaction processing activities • TPSs capture and process data that describes fundamental business transactions. • This data is used to update databases and to produce a variety of reports used by people both within and outside the enterprise. • The business data goes through a transaction processing cycle (TPC)that includes data collection, data editing, data correction, data manipulation, data storage, and document production. TPC - Data collection • Data collection: Capturing and gathering all data necessary to complete the processing of transactions. • Data collection begins with a transaction (e.g., taking a customer order) and results in data that serves as input to the TPS. • Data should be captured at its source and recorded accurately in a timely fashion, with minimal manual effort, and in an electronic or digital form that can be directly entered into the computer. TPC (continue) • Data editing: The process of checking data for validity and completeness. • • • • The codes associated with an individual transaction are edited against a database containing valid codes. If any code entered (or scanned) is not present in the database, the transaction is rejected Data correction: The process of reentering data that was not typed or scanned properly. If the code is misread or does not exist in the table, the checkout clerk is given an instruction to rescan the item or type the information manually. Data manipulation: The process of performing calculations and other data transformations related to business transactions. Data manipulation can include classifying data, sorting data into categories, performing calculations, summarizing results, and storing data in the organization’s database for further processing Data storage: The process of updating one or more databases with new transactions. After being updated, this data can be further processed and manipulated by other systems so that it is available for management reporting and decision making. Document production: The process of generating output records and reports. Point-of-Sale Transaction Processing System: The purchase of items at the checkout stand updates a store’s inventory database and its database of purchases Control and management issues • Disaster Recovery Plan: A formal plan describing the actions that must be taken to restore computer operations and services in the event of a disaster. • Transaction processing system audit: A check of a firm’s TPS systems to prevent accounting irregularities and/or loss of data privacy. • Does the system meet the business need for which it was implemented? • What procedures and controls have been established? • Are these procedures and controls being used properly? • Are the information systems and procedures producing accurate and honest reports? 2.2. Enterprise resource planning (ERP) • ERP is a set of integrated programs that manage a company’s vital business operations for an entire multisite, global organization • Recall that a business process is a set of coordinated and related activities that takes one or more types of input and creates an output of value to the customer of that process. • The core of the ERP system is a database that is shared by all users so that all business functions have access to current and consistent data for operational decision making and planning Example of business process Advantages of ERP • Improved Access to Data for Operational Decision Making • Elimination of Costly, Inflexible Legacy Systems • Improvement of Work Processes • Upgrade of Technology Infrastructure Disadvantages of ERP • Expense and Time in Implementation • Difficulty Implementing Change • Difficulty Integrating with Other Systems • Risks in Using One Vendor • Risk of Implementation Failure Tips for avoiding many common causes for failed ERP implementations: • Assign a full-time executive to manage the project. • Appoint an experienced, independent resource to provide project oversight and to verify and validate system performance. • Allow sufficient time for transition from the old way of doing things to the new system and new processes. • Plan to spend considerable time and money training people; many project managers recommend that $10,000–$20,000 per employee be budgeted for training of personnel. • Define metrics to assess project progress and to identify project- related risks. • Keep the scope of the project well defined and contained to essential business processes. • Be wary of modifying the ERP software to conform to your firm’s business practices. ERP for SMEs Open source ERP system 2.3. Production and supply chain management 2.4. Customer relationship management (CRM) • CRM system helps a company manage all aspects of customer encounters, including marketing and advertising, sales, customer service after the sale, and programs to keep and retain loyal customers. • The goal of CRM is to understand and anticipate the needs of current and potential customers to increase customer retention and loyalty while optimizing the way that products and services are sold. • CRM is used primarily by people in the sales, marketing, and service organizations to capture and view data about customers and improve communications. • CRM software automates and integrates the functions of sales, marketing, and service in an organization to capture data about every contact a company has with a customer through every channel and store it in the CRM system so the company can truly understand customer actions. • CRM software helps an organization build a database about its customers that describes relationships in sufficient detail so that management, salespeople, customer service providers—and even customers—can access information to match customer needs with product plans and offerings, remind them of service requirements, and know what other products they have purchased Key features of CRM • Contact management: The ability to track data on individual customers and sales leads and access that data from any part of the organization • Sales management: The ability to organize data about customers and sales leads and then to prioritize the potential sales opportunities and identify appropriate next steps • Customer support: The ability to support customer service reps so that they can quickly, thoroughly, and appropriately address customer requests and resolve customers’ issues while at the same time collecting and storing data about those interactions • Marketing automation: The ability to capture and analyze all customer interactions, generate appropriate responses, and gather data to create and build effective and efficient marketing campaigns • Analysis: The ability to analyze customer data to identify ways to increase revenue and decrease costs, identify the source of the firm’s “best customers,” and determine how to retain them and find even more of them Top-rated CRM systems Hosted Software Model for Enterprise Software • Many business application software vendors are pushing the use of the hosted software model for SMEs. The goal is to help customers acquire, use, and benefit from the new technology while avoiding much of the associated complexity and high start-up costs. • SAP, Microsoft, NetSuite, Intacct, Oracle, BizAutomation.com, Salesforce.com, NetBooks, and Workday are among the software vendors who offer hosted versions of their ERP or CRM software at a cost of $50–$200 per month per user. Leading ERP software vendors 3. Management and Decision Support Systems • The ultimate goal of management information and decision support systems is to help managers and executives at all levels make better decisions and solve important problems. Decision making and problem solving • intelligence stage: potential problems or opportunities are identified and defined. • design stage: alternative solutions to the problem are developed. • choice stage: selecting a course of action. problem solving: A process that goes beyond decision making to include the implementation stage. • implementation stage: a solution is put into effect. • monitoring stage: decision makers evaluate the implementation. Programmed versus Non-programmed Decisions Programmed Decisions Non-programmed Decisions • Being made using a rule, procedure, or quantitative method • Being easy to computerize using traditional information systems • The relationships between system elements are fixed by rules, procedures, or numerical relationships. • Being suitable for structured problems that are routine and in which the relationships are well defined. • Dealing with unusual or exceptional situations. • Being difficult to quantify • Containing unique characteristics, and standard rules or procedures might not apply to them • Being suitable for unstructured or ill-structured problems which are not routine and rules and relationships are not well defined. MIS DSS The benefits of MIS and DSS 3.1. MIS • A management information system (MIS) is an integrated collection of people, procedures, databases, and devices that provides managers and decision makers with information to help achieve organizational goals. • MISs can often give companies and other organizations a competitive advantage by providing the right information to the right people in the right format and at the right time. • scheduled report: A report produced periodically, or on a schedule, such as daily, weekly, or monthly • key-indicator report: A summary of the previous day’s critical activities; typically available at the beginning of each workday • demand report: A report developed to give certain information at someone’s request • exception report: A report automatically produced when a situation is unusual or requires management action • drill-down report: A report providing increasingly detailed data about a situation. data data data reports Source of management information Functional MISs 3.2. DSS • A DSS is an organized collection of people, procedures, software, databases, and devices used to help make decisions that solve problems. • The focus of a DSS is on decision-making effectiveness when faced with unstructured or semi-structured business problems. • DSS should be designed, developed, and used to help an organization achieve its goals and objectives. • Decision support systems offer the potential to generate higher profits, lower costs, and better products and services. Characteristics of a Decision Support System • Provide rapid access to information. • Handle large amounts of data from different sources. • Provide report and presentation flexibility. • Offer both textual and graphical orientation. • Support drill-down analysis. • Perform complex, sophisticated analysis and comparisons using advanced software packages. • Support optimization, satisficing, and heuristic approaches • Perform simulation analysis—the ability of the DSS to duplicate the features of a real system, where probability or uncertainty is involved. Capabilities of a Decision Support System • Support for Problem-Solving Phases • Support for Different Decision Frequencies • Support for Different Problem Structures • Support for Various Decision-Making Levels Components of DSS • DBMS = database management system • MMS: model management system The Model Base • The model base allows managers and decision makers to perform quantitative analysis on both internal and external data. A model-driven DSS primarily performs mathematical or quantitative analysis. The model base gives decision makers access to a variety of models so that they can explore different scenarios and see their effects • Model management software (MMS) can coordinate the use of models in a DSS, including financial, statistical analysis, graphical, and projectmanagement models. Depending on the needs of the decision maker, one or more of these models can be used Comparison MIS and DSS 4.1. KMS and specialized systems • Knowledge is the awareness and understanding of a set of information and the ways that information can be made useful to support a specific task or reach a decision • The overall goal of knowledge management and the specialized systems discussed is to help people and organizations achieve their goals. • In some cases, knowledge management and these specialized systems can help an organization achieve a long-term, strategic advantage knowle dge information data KMS • Explicit knowledge is objective and can be measured and documented in reports, papers, and rules • Tacit knowledge, on the other hand, is hard to measure and document and typically is not objective or formalized => Convert tacit knowledge to explicit knowledge to make the knowledge easier to measure, document, and share with others. Technology to Support KM • Organizational learning • Data mining • Business intelligence. • ERP tools • Groupware KM organizations and resources Artificial Intelligence • Artificial intelligence systems: People, procedures, hardware, software, data, and knowledge needed to develop computer systems and machines that demonstrate the characteristics of intelligence. Strategy and Information Systems (see appendix 2.1)