1


 When you finish this chapter, you will:
 Recognize different business functions and the role of
ISs in these functions.
 Understand how ISs in the basic business functions
relate to each other.
 Be able to show how ISs of different business functions
support each other.
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Learning Objectives


 Understand how IT is used in the most common
business functions to make business processes more
effective and more efficient.
 Understand the notion of Enterprise Resource
Planning systems.
 Recognize business areas where information
technology facilitates the work of managers and
knowledge workers.
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Learning Objectives


 ISs can help companies attain more effective and
efficient business processes.
 Effectiveness
 The degree to which a goal is accomplished
 Efficiency
 Determined by the relationship between resources
expended and benefits gained in achieving a goal
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Effectiveness and
Efficiency


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Effectiveness and
Efficiency
Figure 3.1 Information technology supports a variety of business functions


 AISs automatically post transactions in the books
and automate generation of reports for management
and legal requirements.
 Three types of AISs
 Transaction processing systems (TPS)
 Cost accounting systems
 Managerial accounting systems
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Accounting


 Electronic Data Processing (EDP) Audits
 Ensure electronic systems comply with standard
regulations and acceptable rules
 Ensure systems cannot be manipulated to circumvent
acceptable principles
 In recent years EDP auditors job title has changed to
information systems auditors.
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Accounting


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Accounting
Figure 3.3 Accounting information systems include features that reflect up-to-date performance
of the organization in financial terms.


The job of financial managers is to manage
money as efficiently as possible by:
 Collecting payables as soon as possible
 Making payments by the latest time allowed by
contract or law
 Ensuring that sufficient funds are available for
day-to-day operations
 Taking advantage of opportunities to accrue the
highest yield on funds not used for current
activities
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Finance


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Finance
Figure 3.4 Financial information systems help manage cash and investment portfolios.


 Cash Management
 Financial ISs help balance the need to accrue interest
against the need to have cash available.
 Cash management systems (CMS): Handle cash
transactions specifically.
 Electronic fund transfer (EFT): The electronic transfer
of cash from one bank account to another.
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Finance


 Investment Analysis and Service
 Analyze and project the prices of a specific stock or
bond.
 Transmit buy and sell orders electronically.
 Provide clients with a detailed statement.
 Monitor account information and news online.
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Finance


 ISs reduce engineering lead time or time-to-market.
 Key to maintaining a competitive edge
 Computer-Aided Design (CAD) Systems
 Help engineers and technicians design new products
and quickly modify and store drawings electronically.
 Rapid Prototyping: Creating one-of-a-kind products to
test design in three dimensions.
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Engineering


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Engineering
Figure 3.5 Engineering information systems aid engineers in designing new products and simulating
operations.


 IT helps in these manufacturing activities:
 Plant activity scheduling
 Material requirement assessment
 Material reallocation between orders
 Dynamic inventory management
 Grouping work orders by “characteristics”
 Resource qualification for task completion
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Manufacturing and
Inventory Control


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Manufacturing and
Inventory Control
Figure 3.6 Manufacturing and inventory control information systems help reduce cycle times and the
cost of maintaining inventory.


 Materials Requirement Planning (MRP)
 Take customer demand as initial input
 Number of product units needed and when they are
needed
 Use long-range forecasts to put long-lead material on
order
 Help reduce inventory cost while ensuring availability
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Manufacturing and
Inventory Control


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Manufacturing and
Inventory Control
Figure 3.7 Materials requirement planning and manufacturing resource planning


 Manufacturing Resource Planning (MRP II)
 Combines MRP with other manufacturing-related
activities to plan the manufacturing process such as
 Shop activity control and purchasing
 Source of demand
 Customer order entry and forecasting
 Support functions such as financial management, sales
analysis, and data collection
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Manufacturing and
Inventory Control


 Manufacturing Execution Systems (MES)
 Track, schedule, and control manufacturing processes
 Collect data such as
 Hours machine operates every day of the month
 Hours the machine is idle and why
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Manufacturing and
Inventory Control


 Market Research
 Statistical models help market researchers find the best
populations for new and existing products.
 Targeted Marketing
 Database management systems (DBMS) help define
potential customers as narrowly as possible.
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Marketing, Sales, and
Customer Service


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Marketing, Sales, and
Customer Service
Figure 3.8 Marketing and sales information systems help target potential buyers and serve clients.

 The Computer as a Marketing and Selling Medium
 Companies send customers promotional disks with
information on their products and services.
 Commercial announcements are posted on public
bulletin board systems.
 The Web lets companies reach more shoppers and
serve them better.
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Marketing, Sales, and
Customer Service


 Sales Force Automation
 Equipping salespeople with information technology to
facilitate productivity.
 IT allows salespeople to present different options for
products and services on the spot.
 Customer Relationship Management (CRM)
 Customer service via the Web is available 24
hours/day, 7 days/week.
 Saves companies labor hours and telephone expenses
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Marketing, Sales, and
Customer Service


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Human Resources
Figure 3.9 Human resource management information systems help managers optimize the
assignment of employees and provide payroll, benefits, and other employee-related services.


 Employee Record Management
 Reduce space needed to store records, time to retrieve
them, and costs of both
 Promotion and Recruitment
 Search databases for qualified personnel
 Use intranet to post job vacancies
 Use the Web to recruit
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Human Resources


 Training
 Multimedia software training is replacing classrooms
and teachers.
 Training software simulates an actual task or situation
and includes evaluation tools.
 Evaluation
 Evaluation software helps standardize the evaluation
process and adds a certain measure of objectivity and
consistency.
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Human Resources


 Compensation and Benefits Management
 ISs can help manage compensation efficiently and
effectively.
 Calculate salaries, hourly pay, commissions, and taxes
 Automatically generate paychecks or direct deposits
 Special software helps manage benefits, such as health
insurance, life insurance, retirement plans, and sick
and leave days.
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Human Resources


 Enterprise Resource Planning (ERP)
 All business functions served by one system that
supports different activities for different departments
 Support supply chain management, the series of main
and supporting activities from order to delivery.
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Enterprise Resource
Planning


GroupWare lets workers in different locations
communicate ideas, brainstorm, and work
together as if they were in the same place.
Document Control
 Users can distribute and track electronic documents
without working with outdated information.
 Especially useful for legal revisions.
Collaborative Projects
 Users can coordinate work on a single document from
many different terminals.
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Groupware and
Collaborative Work


 Brainstorming
 A group meeting and working collaboratively to
generate creative solutions and new ideas.
 Groupware software can facilitate this process
 Eliminates the expense of bringing everyone to the same
physical location.
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Groupware and
Collaborative Work


Time permitting… Refer to pgs 90-91 in your
text
Class divided in two groups
 Business
 Civil Rights advocates
Refer to rules on pg. 91
 Business: Do these rules impede the free flow of
information? What are the impacts?
 Civil Rights: Are these rules critical for privacy? Are
the technical and financial arguments strong enough
to set aside privacy issues?
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Debate


What is Privacy?
 One’s right to control information about oneself.
 Not a constitutional right per se; secured by laws
or convention.
 Increasing number of organizations may access
information via better IT hardware and software.
 Business and civil rights advocates dispute degree
of privacy vs. utility of information access.
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Ethical and Societal Issues
Privacy? What Privacy?


 Business Arguments
 Necessary to collect basic financial and personal
information as cheaply as possible
 Consumers benefit eventually from competitive
environment augmented by readily available
information
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Ethical and Societal Issues
Privacy? What Privacy?


 Consumer Arguments
 Resent unsolicited mail and telephone calls
 Resent being refused credit because of credit bureau
mistakes
 Frightened by “dossier phenomenon”
 Loss of control over information unfair—information
gathered for a particular purpose with permission
should remain restricted
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Ethical and Societal Issues
Privacy? What Privacy?


 Seven Commandments of Personal Data Collection
and Maintenance
 Purpose. Companies should inform people who
provide information of specific, exclusive purpose.
 Relevance. Companies should record and use only
data necessary to fulfill their own purposes.
 Accuracy. Companies should ensure that their data
are accurate.
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Ethical and Societal Issues
Privacy? What Privacy?


 Currency. Companies should make sure that all data
about an individual are current.
 Security. Companies should limit data access to only
those who need to know.
 Time Limitation. Companies should retain data only
for the time period necessary.
 Scrutiny. Companies should establish procedures to
let individuals review their records and correct
inaccuracies.
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Ethical and Societal Issues
Privacy? What Privacy?