IST309 Power Point for a Term Project

Angeles Green

CRMPPT2.pptx

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Learning Objectives

Explain the purpose of transaction processing systems.

Explain the types of support information systems can provide for each functional area of the organization.

Identify advantages and drawbacks to businesses implementing an enterprise resource planning system.

Describe the three main business processes supported by ERP systems.

Chapter Outline

Transaction Processing Systems

Functional Area Information Systems

Enterprise Resource Planning (ERP) Systems

ERP Support for Business Processes

Opening Case

Backyard Adventures Shares Inventory to Control Inventory

Questions

Why is maintaining effective control over inventory so important to any enterprise?

What factors drove Backyard Adventures’ decision to select Fishbowl as their inventory management system? Why do you think these factors are significant?

How did Backyard Adventures benefit from implementing the Fishbowl solution?

10.1 Transaction Processing Systems (TPS)

Transaction

Transaction Processing System (TPS)

Online Transaction Processing (OLTP)

Transaction: any business event that generates data worthy of being captured and stored in a database (e.g., product manufactured, a service sold, a person hired, and a payroll check generated)

Transaction Processing System (TPS): supports the monitoring, collection, storage, and processing of data from the organization’s basic business transactions, each of which generates and collects data continuously, in real time.

Source Data Automation: a process in which organizations try to automate the TPS data entry as much as possible because of the large volume involved.

Batch Processing: the firm collects data from transactions as they occur, placing them in groups or batches then prepares and processes the batches periodically.

Online Transaction Processing (OLTP): business transactions are processed online as soon as they occur and system performs these tasks in real time by means of online technologies.

Transaction Processing Systems (TPS)

Transaction Processing System (TPS)

Continuous ‘real-time’ data collection

Efficiently handle high volumes of data and large variations in those volumes

Avoid errors and downtime

Record results accurately and securely

Maintain privacy and security

Source data automation

Batch processing

Figure 10.1 How transaction processing systems manage data.

FIGURE 10.1 How transaction processing systems manage data.

10.2 Functional Area Information Systems

Information Systems for Accounting and Finance

Information Systems for Marketing

Information Systems for Production/Operations Management

Information Systems for Human Resource Management

Information Systems for Accounting and Finance

Financial Planning and Budgeting

Managing Financial Transactions

Investment Management

Control and Auditing

Financial Planning and Budgeting: Appropriate management of financial assets and is an important part of managerial planning for both acquiring and utilizing resources.

Managing Financial Transactions: accounting/finance software packages that are integrated with other functional areas (e.g., Peachtree offers a sales ledger, a purchase ledger, a cash book, sales order processing, invoicing, stock control, a fixed assets register, etc.). Organizations, business processes, and business activities operate with, and manage, financial transactions.

Investment Management: Systems for managing organization investments in in stocks, bonds, real estate, and other assets that are subject to complex regulations and tax laws, which vary from one location to another.

Control and Auditing: effectively control their finances and financial statements. Let us examine some of the most common forms of financial control.

Financial Planning and Budgeting

Financial and economic forecasting

Budgeting

Financial Planning and Budgeting: Appropriate management of financial assets and is an important part of managerial planning for both acquiring and utilizing resources.

Financial and Economic Forecasting: Knowledge about the availability and cost of money a key ingredient for successful financial planning including flow projections which inform organizations what funds they need, when they need them, and how they will acquire them.

Budgeting: allocates the organization’s financial resources among participants and activities allowing management to distribute resources in the way that best supports the organization’s mission and goals.

Managing Financial Transactions

Global stock exchanges

Managing multiple currencies

Virtual close

Expense management automation (EMA)

Global stock exchanges: Financial markets operate in global, 24/7/365, distributed electronic stock exchanges that use the Internet both to buy and sell stocks and to broadcast real-time stock prices

Managing multiple currencies: Financial and accounting systems utilize financial data from different countries to convert currencies (with conversion ratios that constantly flux) in seconds.

Virtual close: the ability the books quickly at any time, on very short notice (rather than quarterly) which provides almost real-time information on the organization’s financial health.

Expense management automation (EMA): systems that automate the data entry and processing of travel and entertainment expenses through Web-based applications that enable companies to quickly and consistently collect expense information, enforce company policies and contracts, and reduce unplanned purchases as well as airline and hotel expenses.

Control and Auditing

Budgetary control

Auditing

Two basic purposes of Audits

Monitor how the organization’s monies are being spent

Access the organization’s financial health

Financial ratio analysis

Control and Auditing: effectively control their finances and financial statements. Let us examine some of the most common forms of financial control.

Budgetary control: managers at various levels monitor departmental expenditures and compare them against the budget and the operational progress of corporate plans.

Auditing: monitoring how the organization’s monies are being spent and assessing the organization’s financial health.

Financial ratio analysis: monitoring the company’s financial health by assessing a set of financial ratios including liquidity ratios (the availability of cash to pay debt), activity ratios (how quickly a firm converts noncash assets to cash assets), debt ratios (measure the firm’s ability to repay long-term debt), and profitability ratios (measure the firm’s use of its assets and control of its expenses to generate an acceptable rate of return).

Information Systems for Production/ Operations Management

In-House Logistics and Materials Management

Inventory Management

Quality Control

Planning Production and Operations

Computer-Integrated Manufacturing

Product Life Cycle Management

Figure 10.2 Product life cycle.

FIGURE 10.2 Product life cycle.

Information Systems for Human Resource Management

Recruitment

Human Resources Development

Human Resources Planning and Management

Payroll and employees’ records

Benefits administration

Employee relationship management

Recruitment: systems that assist human resource personnel in finding potential employees, evaluating them, and deciding which ones to hire.

Human Resources Development: IS that assist human resource personnel in helping new hires become part of the corporate human resources pool through evaluation and development.

Human Resources Planning and Management: Managing human resources in large organizations requires extensive planning and detailed strategy.

IT’s About Business 10.1

Three Square Markets Puts IS insides Their Employees

Questions

Do you think microchipping is an effective method of controlling access to information assets within an organization?

What ethical, privacy, and security concerns would you have about the use of this technology if it were mandated as opposed to being voluntary?

Who do you think should “own” the microchip information? A private company? A government entity? The individual employees? Why do you feel this way?

Figure 10.3 Examples of information systems supporting the functional areas.

FIGURE 10.3 Examples of information systems supporting the functional areas.

10.3 Enterprise Resource Planning (ERP) Systems

ERP II Systems

Benefits and Limitation of ERP Systems

Implementing ERP Systems

Enterprise Application Integration

Enterprise Application Integration (EAI)

Enterprise Resource Planning (ERP) Systems: systems designed to correct a lack of communication among the functional area IS and they adopt a business process view of the overall organization to integrate the planning, management, and use of all of an organization’s resources, employing a common software platform and database.

ERP II Systems: interorganizational ERP systems that provide Web-enabled links among a company’s key business systems—such as inventory and production—and its customers, suppliers, distributors, and other relevant parties.

Enterprise Application Integration (EAI) System: integrates existing systems by providing software, called middleware, that connects multiple applications allowing existing applications to communicate and share data.

IT’s About Business 10.2

Under Armour Finds a Chip in Their Armor

The Business Problem

The IT Solution

The Results

Questions

What strategic moves has Under Armour made to become more of a digital company?

What problems has the company faced as a result of implementing an integrated ERP solution (SAP HANA)?

Based on the information in the case, how do you think technology will drive fashion in the future? Explain your answer.

ERP II Systems

ERP II systems are interorganizational ERP systems that provide Web-enabled links among a company’s key business system and its customers, suppliers, distributors, and other relevant parties

Core ERP Modules

Financial Management

Operations Management

Human Resource Management

Core ERP Modules

Financial Management: These modules support accounting, financial reporting, performance management, and corporate governance. They manage accounting data and financial processes such as general ledger, accounts payable, accounts receivable, fixed assets, cash management and forecasting, product-cost accounting, cost-center accounting, asset accounting, tax accounting, credit management, budgeting, and asset management.

Operations Management: These modules manage the various aspects of production planning and execution such as demand forecasting, procurement, inventory management, materials purchasing, shipping, production planning, production scheduling, materials requirements planning, quality control, distribution, transportation, and plant and equipment maintenance.

Human Resource Management: These modules support personnel administration (including workforce planning, employee recruitment, assignment tracking, personnel planning and development, and performance management and reviews), time accounting, payroll, compensation, benefits accounting, and regulatory requirements.

Extended ERP Modules

Customer Relationship Management (CRM)

Supply Chain Management (SCM)

Business Intelligence (BI)

E-Business

Extended ERP Modules

Customer Relationship Management: (Discussed in detail in Chapter 11.) These modules support all aspects of a customer’s relationship with the organization. They help the organization to increase customer loyalty and retention, and thus improve its profitability. They also provide an integrated view of customer data and interactions, helping organizations to be more responsive to customer needs.

Supply Chain Management: (Discussed in detail in Chapter 11.) These modules manage the information flows between and among stages in a supply chain to maximize supply chain efficiency and effectiveness. They help organizations plan, schedule, control, and optimize the supply chain from the acquisition of raw materials to the receipt of finished goods by customers.

Business Intelligence: (Discussed in detail in Chapter 12.) These modules collect information used throughout the organization, organize it, and apply analytical tools to assist managers with decision making.

E-Business: (Discussed in detail in Chapter 7.) Customers and suppliers demand access to ERP information including order status, inventory levels, and invoice reconciliation. Furthermore, they want this information in a simplified format that can be accessed via the Web. As a result, these modules provide two channels of access into ERP system information—one channel for customers (B2C) and one for suppliers and partners (B2B).

Figure 10.4 ERP II system.

FIGURE 10.4 ERP II system.

Core ERP Modules

Extended ERP Modules

Table_10-2

Benefits and Limitations of ERP Systems

Major Benefits of ERP Systems

Major limitations of ERP implementations

Major causes of ERP implementation failure

Major Benefits of ERP Systems

Organizational flexibility and agility

Decision support

Quality and efficiency

Organizational Flexibility and Agility: ERP systems break down many former departmental and functional silos of business processes, information systems, and information resources making organizations more flexible, agile, and adaptive.

Decision Support: provide essential information on business performance across functional areas which significantly improves managers’ ability to make better, more timely decisions.

Quality and Efficiency: ERP systems integrate and improve an organization’s business processes, generating significant improvements in the quality of production, distribution, and customer service.

Major Limitations of ERP Implementations

Since ERP’s are based on best practices companies may need to change their methods of achieving business objectives

ERP systems can be complex, expensive, and time-consuming to implement.

Business Processes Predefined by Best Practices: may require companies need to change their existing business processes to fit the predefined business processes incorporated into the ERP software.

Difficult to Implement: ERP systems can be extremely complex, expensive, and time consuming to implement.

Potential for Failure

Major Causes of ERP Implementation Failure

Failure to involve affected employees in the planning and development phases and in change management processes

Trying to do too much too fast in the conversion process

Insufficient training in the new work tasks required by the ERP system

The failure to perform proper data conversion and testing for the new system

Implementing ERP Systems

On-Premise ERP Implementation

Vanilla approach

Custom approach

Best of breed approach

Vanilla Approach: a company implements a standard ERP package, using the package’s built-in configuration options.

Custom Approach: a company implements a more customized ERP system by developing new ERP functions designed specifically for that firm.

Best of Breed Approach: combines the benefits of the vanilla and customized systems while avoiding the extensive costs and risks associated with complete customization.

Software-as-a-Service ERP Implementation

Three major advantages of using a cloud-based ERP system

Three major disadvantages of using a cloud-based ERP system

Three major advantages of using a cloud-based ERP system are:

The system can be used from any location that provides 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 it is possible to extend ERP support to new business processes and new business partners (e.g., suppliers) by purchasing new ERP modules.

Three major disadvantages of using cloud-based ERP systems are:

It is not clear whether cloud-based ERP systems are more secure than on-premise systems

Companies that adopt cloud-based ERP systems sacrifice their control over a strategic IT resource

Lack of control over IT resources when the ERP system experiences problems

10.4 ERP Support for Business Processes

The Procurement, Fulfillment, and Production Processes

The Procurement Process

The Fulfillment Process

The Production Process

Interorganizational Processes: ERP with SCM and CRM

SCM and CRM

ERP SCM

ERP CRM

Procurement Process: originates when a company needs to acquire goods or services from external sources, and it concludes when the company receives and pays for them.

Order Fulfillment Process: (order-to-cash process) process in which the company sells goods to a customer originating when the company receives a customer order, and concluding when the company receives a payment from the customer.

Production Process: occurring only in companies that produce physical goods, this process follows one of two strategies: make-to-stock and make-to-order.

ERP Support for Business Processes

The Procurement, Fulfillment, and Production Processes

Interorganizational Processes: ERP with SCM and CRM

Procurement Process: originates when a company needs to acquire goods or services from external sources, and it concludes when the company receives and pays for them.

Production Process: occurring only in companies that produce physical goods, this process follows one of two strategies: make-to-stock and make-to-order.

Figure 10.5 Departments and documents flow in the procurement process.

FIGURE 10.5 Departments and documents flow in the procurement process.

Figure 10.6 Departments and documents flow in the fulfillment process.

FIGURE 10.6 Departments and documents flow in the fulfillment process.

Figure 10.7 Departments and documents flow in the production process.

FIGURE 10.7 Departments and documents flow in the production process.

Figure 10.8 Integrated processes with ERP systems.

FIGURE 10.8 Integrated processes with ERP systems.

Interorganizational Processes: ERP with SCM and CRM

SCM and CRM

ERP SCM

ERP CRM

Closing Case Olive Garden

The Business Problem

The IT Solution

The Results

Questions

In what ways did Olive Garden hope their new tabletop ordering system would improve the customer experience?

What do you see as the positive and negative impacts on the waitstaff of the new tabletop kiosk system?

What are the positive and negative impacts on collecting payment?

How do information systems benefit the finance and accounting functional area?

Define ERP and describe its functionalities. List some drawbacks of ERP software.

What are the three inter-organizational processes that are typically supported by ERP systems?

Highlight the differences between ERP configuration, customization, and best of breed implementation strategies.

In-Class Discussion