BPFI Session 16

Information Systems and Common Business Processes
Objectives
In this session, you will learn to:

Identify the approaches for strategizing Logistics plans
Define the procedure to implement a Logistics System
Identify the use of Information Systems in managing Logistics
Identify the Human Resource processes
Identify the components of payroll process
Determine how to manage the Human Resource processes
using Information Systems
Ver. 1.0 Slide 1 of 43

Visioning the Organizational Operation
Logistics is a business-planning framework that comprises

everything from the movement and storage of materials,
funds, and information from any point in the process or
operations up to the final order fulfillment stage.
The examples of large-scale industries where logistics
planning is a high-priority are:
Railways
Steamships
Airlines
Ports
Transportation brokers
Warehouses
Motors

Visioning the Organizational Operation (Contd.)
The following figure illustrates the flow of goods in a typical

manufacturing unit.

Logistics Planning
The following figure illustrates the Logistics processes for a

typical manufacturing-based business organization.

Logistics Planning (Contd.)
The important considerations need to be made for logistics

planning are:
Analyzing the core business processes
Making decisions for physical distribution
Deciding for facility location
Analyzing the Core Business Processes:
An organization either manufactures a product using its own
resources or buys them from other suppliers.
The processes followed for the logistics activities depend on
the nature of the business undertaken by an organization.

Making Decisions for Physical Distribution:

The physical distribution of products is an important activity for
an organization and its customers.
Decisions for physical distribution can range from the long-term
strategic decisions to short-term strategic decisions.
The main factors to be considered while making decisions are:
The size, number, and location of warehouses
The mode of transport depending on the type of goods, distances,
and weights
The work force to be employed or hired

Making efficient decisions for physical distribution has the

following advantages:
If the warehouses are near the production facilities, they need
not keep large stocks of finished goods.
Wholesalers, who keep stocks from many suppliers, allow
retailers a choice of goods to buy from.
Wholesalers, who are near retailers, have shorter lead-times
and the retailers can carry fewer stocks at a time.
Distribution costs are reduced when there is a hierarchy of
suppliers.

Deciding the Facility Location:

An organization evaluates the location based on the following
factors:
The area is convenient for their target customers
The area has reliable suppliers located nearby
The location supports a good infrastructure
The location enables the company to employ a skilled workforce
Secondary factors that influence the final decision upon
location include:
Costs pertaining to operations, wages, transport, and taxes
The current economy situation
Infrastructure in terms of, transport and services availability
Locations of the competitors, suppliers, and customers
Plans regarding future expansion, or globalization

Problem Statement 6.1:

Trendshop Inc. is a retail store chain with 50 outlets all over
Malaysia. The organization has launched two new retail outlets
in Kuala Lumpur.
Each of these retail outlets has the following sections:
Apparel – clothing for men, women, and children
Entertainment – music and film cassettes, DVDs, VCDs
Gift Gallery – cards and gift items for all occasions
Footwear – for men, women, and children
Home – kitchen appliances and utensils
Wooden Furniture – sofas and dining sets

For the wooden furniture segment, the organization has its own
manufacturing unit in the outskirts of the city. Once the raw
materials and products are procured from the local suppliers
situated in different parts of the country, the finished goods are
manufactured and supplied to these outlets. Urban customers
are the targeted segment.
Task:
With respect to the make-or-buy decisions that Trendshop Inc.
makes, state at least five key logistics factors to be planned for
the organization’s furniture segment.

Purchase and Procurement
Purchase and Procurement:

An organizations categorize the materials for purchase,
depending on the current requirements and forecasted future
needs.
The procured materials are inventory that an organization
carries on hand.
A manufacturing unit consists of four categories of inventory:
Raw materials
Components
Work-in-process goods
Finished goods

Purchase and Procurement (Contd.)
The following inventory costs are involved during procurement:

Ordering costs
Inventory carrying costs
Out-of-stock costs
Capacity-associated costs

Inventory Management
Inventory Management is significant because wastage

leads to wastage of finance, materials, machine, and
manpower.
Inventory Control:
To control the inventory levels, various standards have been
established known as inventory control models.
Following are various inventory control models:
Economic Order Quantity (EOQ) model
Fixed Order Quantity (FOQ) model
Periodic Review System

Inventory Management (Contd.)
Economic Order Quantity (EOQ):

This model specifies the size of the order for which the costs of
procuring the inventory and the costs of holding it are the
minimum.
Fixed Order Quantity (FOQ) model:
In this system, the order quantity is fixed, but the frequency of
ordering the materials varies with the demand.
The following quantities serve as critical decision rules in this
system:
Maximum Level (MaxL)
Minimum Level (MinL)
Average inventory level (AL)
Reorder level (ROL)
Reorder quantity

Inventory Management (Contd.)
Periodic Review System:

In this system, the ordering level is fixed.
The size of the order varies with the fluctuations in demand and
the inventory position is reviewed weekly or monthly.
If the inventory is nearing the minimum level, an order is placed
immediately.
Inventory Analysis:
The relative importance of items to be stocked is based on the
following analysis methods:
ABC item analysis
Vital Essential Desirable (VED) Analysis
Fast Slow Non-moving (FSN) Analysis

Stock Maintenance
Maintaining stocks involves preserving the current stocks in

stores or warehouses and maintaining accounts through
regular status checks.
Stock Storage:
Must be conveniently located, most preferably near the
consuming departments.
Must be provided for the easy movement of materials,
maintenance, and sufficient space for ease and convenience of
man and material movement.
Must be provided with adequate lighting.
Must be safe to avoid accidents, such as fires, which may ruin
the stocks.

Stock Maintenance (Contd.)
Checking Stock Status:

Keeping a check on the stock status is necessary in order to
avoid discrepancies between the physical stocks in the store
and those indicated in the stock records.
The frequently-used techniques of inventory checking are:
Annual stock checking
Perpetual inventory method
Daily stock checking
Periodic checking

Inventory Accounting:
The important Valuation methods are:
First-in-First Out (FIFO)
Last-in-First-Out (LIFO)
Periodic Simple Average Method
Periodic Weighted average Method

The following data flow diagram depicts the process of

logistic management.
Microsoft Word
Document

The following diagram illustrates the flow of inventory

materials and documents.


Assuming that the safety stock (extra inventory held as a
protection against the possibility of stock-out due to higher
demand) is 30 units, the quantity ordered per batch is 100
units, the demand is a constant and the lead-time is 0,
calculate:
Minimum inventory level
Reorder level
Maximum inventory level
Average inventory level

Recruitment Process
HR division of the organization manages its workforce and

defines processes for recruitment, training, and
performance management.
Recruitment Process:
Effective recruitment and selection procedures are critical to
the functioning of organizations.
The various stages in the recruitment process include:
1. Identifying the recruitment need
2. Identifying the job requirements
3. Determining recruitment sources

Recruitment Process (Contd.)
4. Determining selection methods

5. Short listing candidates
6. Selecting the successful candidate
7. Notifying the result to the candidate
8. Notifying the successful candidate
The following figure depicts the data flow diagram for the
recruitment process.
Microsoft Word
Document

Identifying the Recruitment Need: Filling of position can be

done internally or by new recruitment.
While filling the vacancy in-house, the HR department
should take into account the following alternatives:
Reorganizing the jobs
Flexible working arrangements
Outsourcing
Transferring or promoting staff
Sharing of jobs

Identifying the Job Requirements: It involves clarity

regarding nature of job and description.
The job description must typically contain:
Qualification
Skills
Knowledge
Experience
Personal attributes

Determining Recruitment Sources:

The sources of recruitment are:
References
Newspaper and magazine advertisements
Recruitment consultants
Internet
Determining Selection Methods:
The various selection methods that can be deployed to short
list a candidate are:
CV or Application forms
Written tests
Interviews
Psychometric tests

Short listing candidates:

The process of short listing candidates involves selecting the
suitable candidates from a large number of initial applicants.
At this stage, reference checking is also done for the
candidate.
Selecting the successful candidate:
After the candidates are short listed, the candidate best suited
to the position offered is selected.
Notifying the result to the candidate:
At this stage, the results are communicated to the applicants.
Appointing successful candidate:
At this stage, the written offer of employment is provided to the
candidate.

The Training Process
Training Process:
Training is the process by which the necessary knowledge and
skills are imparted to employees to effectively and efficiently
carry out their responsibilities.
The main objective of any training is to enhance the
knowledge, skills, experience, and behavior of the employee.
The phases of the training process are:
Analyzing training needs
Planning for training
Implementing the training plan
Evaluating the training program

The Training Process (Contd.)
The following figure depicts the training process.

Managing and Rewarding Performance
Defining Performance management:

Performance management is the process designed to link the
organization’s objectives with individual objectives so that both
objectives are met.
The main stages of the Performance management
process are:
Planning performance
Managing performance
Reviewing performance
Rewarding performance

Managing and Rewarding Performance (Contd.)
The Appraisal Process:

Is a formal interaction between the senior and junior
employees.
Is aimed at the areas of improvement.
The commonly-used appraisal strategies are:
Performance Rating Scale method
Ranking method
360 Degree feedback method
The important appraisal structures are:
Graded salary structure
Individual jobs range
Progressions or pay curves
Job family system
Rate for age

Defining the Payroll Process
The Payroll Process:

The Payroll Process includes all forms of compensation paid to
the employees as a reward for their efforts to achieve
organizational goals.
The main objectives of the Payroll Process are:
To prepare a detailed salary record of all the employees in an
organization
To generate Pay Slips through the calculation of salary
The various stages of the Payroll Process are:
1. Retrieving salary records
2. Calculating payroll
3. Distributing salary

Defining the Payroll Process (Contd.)
The following figure depicts the data flow diagram of the

Payroll Process.
Microsoft Word
Document

Inputs to Payroll Process:

The inputs to Payroll Process are:
Organizational details
Types of employees
Designation
Basic salary
Allowance
Retirement benefits
Other benefits
Deductions
Tax deduction
Leave deduction
Loan deduction
Provident Fund deduction
Attendance

Outputs of Payroll Process:

The outputs of Payroll Process are:
Payroll Register
Pay Slip
Methods of Disbursing Pay: Following are the methods
disbursing payments:
Pay cheques
Direct deposit
Cash in hand

HRMIS and its Components
HRMIS is a specialized software used for implementing and

monitoring HR processes in any organization.
The modules included in the HRMIS are:
Recruitment module
Training module
Performance and appraisal module

HRMIS and its Components (Contd.)

ChilliPeppers, a restaurant chain, is in the process of rapid
expansion of its branches throughout the country. There is
demand for computerization of the existing manual Payroll
System to keep a record of all pay slips of employees working
in different departments, across locations, and in different time
slots.
The use of payroll software solved their problem to a large
extent. It relieved them of huge paperwork and saved them a
lot of time from reproducing and mailing multiple copies of
payroll reports at their offices around the country. Thereby, it
helped to maximize workforce productivity.

HRMIS and its Components (Contd.)
Task:
Create a pay slip for ChilliPeppers restaurant, which is
customized to handle all the needs indicated.

Summary
In this session, you learned that:

There are two necessary approaches for Logistics planning:
Visioning the organizational operation
Strategic analysis for organizations
Analyzing the core processes
Making decisions for physical distribution
Deciding the facility location
For implementing the Logistics system, the following steps are
taken:
Purchase and procurement, which includes the:
Categorization of inventory by condition during processing as raw
materials, components, work-in-process, and finished goods
Categorization of inventory by functions as fluctuation, anticipation,
lot-size, and transportation inventory
Identifying the different inventory costs as ordering, inventory
carrying, out-of-stock, and capacity-associated costs

Summary (Contd.)
Inventory control includes:

Models that affect the inventory control process- ROQ, ROL, EOQ,
FOQ, and Periodic Review System
Selective Inventory Control- ABC, VED, FSN analysis methods
Stock maintenance includes:
Maintaining stock storage
Checking stock status — Annual, Perpetual, Daily, Periodical
checking methods
Inventory accounting — FIFO, LIFO, Periodic Simple Average, and
Periodic Weighted Average methods
The HR process comprises the recruitment process, training
process, performance appraisal process, and the Payroll
Process.

Summary (Contd.)
The recruitment process includes:

Identifying the recruitment need
Identifying the job requirements
Identifying the sources of recruitment
Identifying the selection methods
Short listing the candidates
Selecting the successful candidate
Notifying result to the candidates
Appointing the successful candidate
The training process involves, determining the purpose of
training, determining the types of training to be used, and
implementing a training strategy.
Performance management is the process that is designed to
link the objectives of the employee with the objectives of the
organization.

Summary (Contd.)
The appraisal process is defined as a well organized and

structured formal interaction between the senior and junior
employees.
The Payroll Process consists of calculating and disbursing pay
to the employees.
Disbursing the pay involves dispatching the pay slip and the
paycheck to the employees.
The common forms of disbursing the salary to the employees
are:
Pay cheques
Direct deposit
Cash in hand

Summary (Contd.)
HRMIS is a specialized software used for implementing and

monitoring HR processes in any organization. It merges the
basic HR activities and processes within an organization with
the help of information technology.
For successful implementation of HRMIS in an organization, it
should include separate modules or software to perform each
of the HR processes.

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Information Systems and Common Business Processes

In this session, you will learn to:

Ver. 1.0 Slide 1 of 43

Logistics is a business-planning framework that comprises

Ver. 1.0 Slide 2 of 43

The following figure illustrates the flow of goods in a typical

Ver. 1.0 Slide 3 of 43

The following figure illustrates the Logistics processes for a

Ver. 1.0 Slide 4 of 43

The important considerations need to be made for logistics

Ver. 1.0 Slide 5 of 43

Making Decisions for Physical Distribution:

Ver. 1.0 Slide 6 of 43

Making efficient decisions for physical distribution has the

Ver. 1.0 Slide 7 of 43

Deciding the Facility Location:

Ver. 1.0 Slide 8 of 43

Problem Statement 6.1:

Ver. 1.0 Slide 9 of 43

Ver. 1.0 Slide 10 of 43

Purchase and Procurement:

Ver. 1.0 Slide 11 of 43

The following inventory costs are involved during procurement:

Ver. 1.0 Slide 12 of 43

Inventory Management is significant because wastage

Ver. 1.0 Slide 13 of 43

Economic Order Quantity (EOQ):

Ver. 1.0 Slide 14 of 43

Periodic Review System:

Ver. 1.0 Slide 15 of 43

Maintaining stocks involves preserving the current stocks in

Ver. 1.0 Slide 16 of 43

Checking Stock Status:

Ver. 1.0 Slide 17 of 43

Ver. 1.0 Slide 18 of 43

The following data flow diagram depicts the process of

Ver. 1.0 Slide 19 of 43

The following diagram illustrates the flow of inventory

Ver. 1.0 Slide 20 of 43

Problem Statement 6.2:

Ver. 1.0 Slide 21 of 43

HR division of the organization manages its workforce and

Ver. 1.0 Slide 22 of 43

4. Determining selection methods

Ver. 1.0 Slide 23 of 43

Identifying the Recruitment Need: Filling of position can be

Ver. 1.0 Slide 24 of 43

Identifying the Job Requirements: It involves clarity

Ver. 1.0 Slide 25 of 43

Determining Recruitment Sources:

Ver. 1.0 Slide 26 of 43

Short listing candidates:

Ver. 1.0 Slide 27 of 43

Ver. 1.0 Slide 28 of 43

The following figure depicts the training process.

Ver. 1.0 Slide 29 of 43

Defining Performance management:

Ver. 1.0 Slide 30 of 43

The Appraisal Process:

Ver. 1.0 Slide 31 of 43

The Payroll Process:

Ver. 1.0 Slide 32 of 43

The following figure depicts the data flow diagram of the