Management Information Systems, Global Edition

Chapter 2: Global E-business and Collaboration

The Company Organization and Functions

All companies can be

viewed as having four
basic functions
1.Sales and Marketing
2.Manufacturing and
Production
3.Finance and Accounting
4.Human Resources

Plus execs, senior &

middle management,
operatives
In a start up you have to
do all these things
yourself!

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Business Processes and Information Systems

• A Business processes:
– Flows of material, information, knowledge
– Sets of activities, steps. The sequence of activities and
steps is called a business process
– May be tied to functional area or be cross-functional
– Each company will be unique
• Businesses: Can be seen as collection of business processes
• Business processes – in ‘the old days’ were done without
computers being involved – e.g. general ledger in a bank
• Even today sometimes best not to use technology – e.g. ? Lost
on a mountain – GPS or map ?
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Business Processes and Information Systems

• Examples of business processes (any examples from EMU?)
– Manufacturing and production
• How to assembling the product
• How to replace a part
• Can we think of any more?
– Sales and marketing
• Identifying customers
• Shipment of product
• Any more?
– Finance and accounting
• Creating financial statements
• Accounts payable run
– Human resources
• Hiring employees
• Evaluation of performance / Promotion
• education
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e.g.The Order Fulfillment Process (cross-function)

FIGURE 2-1 Fulfilling a customer order involves a complex set of steps that requires the close coordination of the sales,
accounting, and manufacturing functions.

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Business Processes and Information Systems

• Information technology enhances business

processes by:
– Increasing efficiency of existing processes
• Automating steps that were manual
• Making things happen a lot quicker
• Reducing inaccuracies
– Enabling entirely new processes
• Change flow of information e.g. individualize product
• More people can access information
• Eliminate delays in decision making
• Support new business models e.g. buying over the internet!
• Analytics to help get deeper understanding of customers

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 Levels in a Firm

Business Processes have

to be coordinated and
controlled by a hierarchy
of managers
Business organizations
are hierarchies consisting
of three principal levels:
senior management,
middle management, and
operational
management.
Information systems
serve each of these
levels. Scientists and
knowledge workers often
work with middle
management.
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Business Processes and Information Systems

• Types of Information Systems
– Performing business processes requires different skills and actions
from different levels within the organization
• Each of the above reasons involves business processes
• There are different types of systems which specialize in
supporting different functions within the organization and the
business processes associated with the functions
• Senior managers need summary information which can quickly inform them about
the overall performance of the company
• Middle managers need more detailed information about specific functional areas
such as sales contacts by the sales force or production statistics
• Operational managers may need transaction level information such as number of
parts in inventory each day
• Production or maintenance workers may need very specific information about a
customer or a particular machine
• We will now take a quick look at some of these different types of systems which
focus on helping these different types of people make decisions

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Decision Making Systems: Type1: TPS

• Transaction processing systems (simple decision making systems)
– Serve operational managers and staff
– TPS perform and record daily routine transactions necessary to
conduct business
• Examples: sales order entry, payroll, shipping
• Ensures accurate and reliable information for operatives
– Allow managers to monitor status of operations and relations with
external environment
– Track flow of information; Predefined reports, structured goals and
simple decision making
• E.g. how many parts in the store, how many tins of beans on the
shelf
• Simple transactional based queries
• Summary reports – how many tins of beans sold today
• How many bags gone through this check-in desk
• Room reservations in a hotel
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e.g. A Payroll TPS

A TPS for payroll processing

captures employee payment
transaction data (such as a time
card). System outputs include
online and hard-copy reports
for management and employee
paychecks.

TPS systems have large

numbers of records
Failure can be critical to
operations e.g. Parcel
Tracking or Bank

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e.g. A Baggage Handling TPS

– What might baggage handling reports look like ?

• Throughput per hour
• % near to capacity
• Average time for a bag to reach gate
• % of delayed bags
• % of lost bags
• Summary of bags by check-in
• Summary of bags by gate
• All provides accurate and reliable information for operative/supervisor
– US Airways: 2.5m bags lost or delayed per year
• Were losing 9 bags per 1000 passengers
• Each delayed/lost bag cost airline on average $1000 i.e. $2.5B/year
• Implemented new system with sensors, actuators, mechanical devices, RFID
• New figure of 3 bags/1000 passengers

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Decision Making Systems: BIS Systems

• Three more types of DMS known collectively as :

• Business intelligence systems (BIS)

– Management Information Systems (MIS)
– Decision support systems (DSS)
– Executive support systems (ESS)

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Decision Making Systems: Type2: Management Information Systems

• Management Information Systems

– Serve middle management
– Typically provide reports on dept or
firm’s current performance, based on
data from TPS (often more than one TPS
input)
– Provide answers to routine questions
with predefined procedure for
answering them e.g. Burgers sold this
quarter; number of rooms free
tomorrow night
– Typically have little analytic capability
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How MIS Obtain Their Data from the Organization’s TPS

FIGURE 2-3 In the system illustrated by this diagram, three TPS supply summarized transaction data to the MIS reporting
system at the end of the time period. In the above scenario we might ask if we need to apply for additional
bank funding to buy more materials if orders are exceeding expectation and payment is on 3 month terms

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Decision Making Systems: Type3: Decision Support Systems

• Decision support systems
– Serve middle management
– Support non-routine decision making
• Example: What is the impact on production schedule if December
sales doubled?
– May use external information as well TPS / MIS data
– E.g. model driven DSS (Optimization)
• Voyage-estimating systems; many ships; many contracts to bid for
– which ships to use? Must calculate financial and technical
voyage details such as speed, capacity, fuel efficiency, labor, port
expenses, loading pattern; optimization.
• What other examples can we think of regarding the need for
optimization? (Internet traffic, parcel delivery, furniture maker
with 3 different types of wood – oak, pine and cherry – could
make chest of drawers, dressers or table and chairs. Each has
different profit – what is optimum combination?)
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Decision Support Systems: E.g. Voyage Estimating

FIGURE 2-5 This DSS operates on a powerful PC. It is used daily by managers who must develop bids on shipping
contracts.

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DMS Type 3: Decision Support Systems: E.g.2 supermarket

• Supermarket promotion or not ?

– Marketing department want to increase sales over
festive season by 20%
• Price reductions, special offers, extra loyalty card points, advertising
campaign for awareness of offers, introductory loyalty card points
– Operations Manager must consider:
• Can supply chain handle additional re-stock orders
• Are there enough staff to handle check-out, customer service, shelf
stocking
• Will there be a need for overtime payments – how much
• Additional cash collection to meet insurance requirements
– DSS support these type of more complex decisions

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DMS Type 4: Executive Support Systems (ESS)

• Executive support systems

– Support senior management
– Address non-routine decisions
• Requiring judgment, evaluation, and insight
– Incorporate data about external events (e.g. new tax laws or competitors) as
well as summarized information from internal MIS and DSS
– Example: Digital dashboard (a portal!) with real-time view of firm’s financial
performance: working capital, accounts receivable, accounts payable, cash
flow, and inventory –
– Often incorporate data about external events - investment decision for new
manufacturing plant – interest rate now and long term, tax incentives,
projected product demand, expected lifetime of machinery, political stability
– This is an example of the term “Information Driven Management”

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Enterprise Applications

• Enterprise applications
– Where we need different systems to talk and
share data
– Systems for linking the enterprise
– Span functional areas
– Execute business processes across firm
– Include all levels of management
– Four major types:
• Enterprise systems – a.k.a. ERP systems (do what
we have been looking at but single applications)
• Supply chain management systems (go external to
help manage/support supply chain)
• Customer relationship management systems
(extend externally to manage customer)
• Knowledge management systems – focused on
company collaboration
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Enterprise Application Architecture

Enterprise applications
automate processes that span
multiple business functions and
organizational levels and may
extend outside the
organization.

FIGURE 2-6

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Types of Information Systems

• Enterprise systems (ERP Systems)

– Collects data from different firm functions and stores data in single central
data repository
– Resolves problem of fragmented data
– Enable:
• Coordination of daily activities
• Efficient response to customer orders (production, inventory)
• Help managers make decisions about daily operations and longer-term
planning
• Examples – Oracle e-Business Suite, SAP, Microsoft Dynamics. These can
be expensive to implement (license costs, re-training, data conversion)
• Useful way to bring together companies after acquisition (multiple
business processes need consolidating to realize economies of scale)
• Encapsulate business best practices (many years of investment in the
product)
• Order->warehouse->shipment->accounting->customer service

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Types of Information Systems

• Supply chain management (SCM) systems (inter-

organizational system – automate flow of information
between organizations)
– Manage firm’s relationships with suppliers
• Link suppliers, purchasing dept, distribution, logistics
– Share information about:
• Orders, production, inventory levels, delivery of products and
services
– Goal:
• Right amount of products to destination with least amount of time
and lowest cost
– Example – Nike: contract manufacturers, component suppliers, raw
materials suppliers (more later in the course)
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Types of Information Systems

• Customer relationship management systems:

– Provide information to coordinate all of the business processes that
deal with customers
• Sales
• Marketing
• Customer service
– Helps firms identify, attract, and retain most profitable customers
• Optimize customer revenue, service and retention
• Identify most profitable customers
• Supermarket loyalty card forms part of a CRM system – it helps to
gather the data
• Identify which customers you don’t want ! E.g. call centre !

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Types of Information Systems

• Knowledge management systems (KMS)

– Support processes for capturing and applying knowledge
and expertise about how the company operates
• How to create, produce, deliver products and services
(often this information is specific to the company)
– Collect internal knowledge and experience within firm
and make it available to employees
– Link to external sources of knowledge
– More in chapter 11

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Types of Information Systems

• Internet Standards based systems

– Intranets:
• A cheaper alternative for integration
• Internal company Web sites accessible only by
employees
– Extranets:
• Company Web sites accessible externally only
to vendors and suppliers
• Often used to coordinate supply chain
• EMU Student Portal ?

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Types of Information Systems

• E-business
– Use of digital technology and Internet to drive major
business processes (more in chapter 10)
• E-commerce
– Subset of e-business
– Buying and selling goods and services through
Internet (more in chapter 10)
• E-government:
– Using Internet technology to deliver information and
services to citizens, employees, and businesses
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Systems for Collaboration and Teamwork

• Collaboration:
– Short-lived or long-term
– Informal or formal (teams)
• Growing importance of collaboration:
– Changing nature of work
– Growth of professional work—“interaction jobs”
– Changing organization of the firm
– Changing scope of the firm
– Emphasis on innovation
– Changing culture of work

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Systems for Collaboration and Teamwork

• Social business (company social sites e.g Facebook, LinkedIn)

– Use of social networking platforms, internal and external
– Engage employees, customers, and suppliers
– Goal is to deepen interactions and expedite information sharing
• Product development
• Product feedback
• Customer support
– “Conversations”
– Requires information transparency
• Driving the exchange of information without intervention from
executives or others

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Systems for Collaboration and Teamwork

• Business benefits of collaboration and teamwork

– Investments in collaboration technology can bring organization
improvements, returning high ROI
– Benefits:
• Productivity
• Quality
• Innovation
• Customer service
• Financial performance
– Profitability, sales, sales growth
• E.g. software development (IBM and others)
– Development teams can be global
– ‘virtual teams’
– Draw upon global expertise to have ideas and solve problems

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Requirements for Collaboration

Successful collaboration
requires an appropriate
organizational structure
and culture, along with
appropriate collaboration
technology.

FIGURE 2-7

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Systems for Collaboration and Teamwork

• Building a collaborative culture and business processes has challenges:

– “Command and control” organizations
• No value placed on teamwork or lower-level participation in
decisions
– Collaborative business culture
• Senior managers rely on teams of employees.
• Policies, products, designs, processes, and systems rely on teams.
• The managers purpose is to build teams.
• Manager’s purpose is to serve and assist employees rather than
control
• Need a reward system which encourages team rather than
individualistic behavior

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Systems for Collaboration and Teamwork

• Tools for collaboration and teamwork

– E-mail and instant messaging
– Wikipeadia (c.f. old model of Encyclopedia Britannica
– central point of control of information)
– Virtual worlds
– Collaboration and social business platforms
• Virtual meeting systems (telepresence)
• Google Apps/Google sites (introductory)
• Cyberlockers
• Microsoft SharePoint (mid market)
• Lotus Notes (IBM) (Large companies)
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The Information Systems Function in Business

• Information systems department:

• Formal organizational unit responsible for information technology services
• Often headed by chief information officer (CIO) (none technical role –
information focused)
• Other senior positions include chief security officer (CSO), chief knowledge
officer (CKO), chief privacy officer (CPO), chief technology officer (CTO)
• Programmers
• Systems analysts
• Information systems managers
• Project Managers
• IS Dept provides (typically) Information Technology infrastructure (hardware
and software); Telco comms; data management and backup and retention
policies; application development and support; IT Planning and Education; IT
security; support for mobile platforms; IT helpdesk
• More and more IT is now outsourced to third party specialist companies
(Cloud, Software as a Service)

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The Information Systems Function in Business

• End users
– Representatives of other departments for whom
applications are developed
– Increasing role in system design, development
• IT Governance:
– Strategies and policies for using IT in the
organization
– Decision rights
– Accountability
– Organization of information systems function
• Centralized, decentralized, and so on
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