09.03.

2016

INSFORMATION SYSTEMS AND BUSINESS PROCESS

Agenda/Sylabus

Organizations and information systems (T1, Chapter 1)

Introduction to Enterprise systems for Management (T2, Chapter 1)
Enterprise Systems Architecture (T2, Chapter 3)
Entensions of ERP: SCM (T2, Chapter 11), CRM (T2, Chapter 12)
Organizational change and Business process reingineering (T2, Chapter
9)/Enhancing Business Processes Using Enterprise Information Systems
(Valacich, Ch7)
Business Processes : Procurement process (T1, Chapter 3), Production process
(T1, Chapter 5), Integration process (T1, Chapter 6)
Global, ethics and security management: BPO, SAAS,Ethics, Green computing
(T2, Chapter 10)

Chapter 1
Organizations
and Information
Systems

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Learning Objectives
Understand that work in organizations is
completed in processes that consist of many
steps.
Compare and contrast the functional and process
view of organization and identify the negative
consequences of the traditional functional
organizational structure.
Explain how enterprise systems enable
organizations to execute and manage processes.
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1.1 THE MODERN GLOBAL BUSINESS

ENVIRONMENT
To fully understand the modern business world, we need
to become familiar with the terms global competition,
information revolution and knowledge worker.
What exactly do these terms mean, and why do study it?

Globalization
= the global distribution of the production of goods and
services, through reduction of barriers to international
trade such as tariffs, export fees, and import quotas.
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Globalization
Changes:
Economic/Business
Cultural
Technological

Globalization
Globalization
created a new
world
characterized by:

+
Nanotechnologies

Worldwide
communication
Collaboration
without
barriers

https://www.youtube.com/watch?v=mEH6tDLKcVU

The World Is Flat (Thomas L. Friedman)

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1.1.1 Global Competition

We live in a global competitive environment.
Evidence is all around us.
Why? Many reasons:
International
politics&policies;
Manufacturing; R&D
Consequence of
globalization -> increased
competition among
companies.

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1.1.2 The Information Revolution

Co. must develop strategies to tightly
integrate their operations
globalization has significant implications for
how Co. operate -> information revolution ->
the increased use of ICT to create, deliver, and
use information
ICT includes -> the Internet (e-mail, Web) and
C.B.I.S. that support the work of organizations
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1.1.2 The Information Revolution

Information revolution -> important role in
the global competitive environment
Co. are expanding, their processes are
becoming widely dispersed
ICT has helped Co. to globalize their
operations.
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1.1.3 The Knowledge Worker

uses ICT to create, acquire, process, synthesize,
disseminate, analyze, and use information to be more
productive.
employed in all parts of an organization
perform work that uses structured & unstructured
information.
must develop the skills to find and use on their own
the needed information.
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1.1.3 The Knowledge Worker

Knowledge work -> nonroutine jobs
Task workers -> perform routine, structured
tasks, typically in a repeated manner.
Task workers include customer service
representatives, purchasing and accounting
clerks, and insurance claims processors.
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1.1.3 The Knowledge Worker

Key skills:
1. Strategic Thinking (see the big picture and
understand organization).
2. Information Literacy (determine information
needed, find it & use it).
3. Communication and Collaboration (an effective
part of a project team)
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1.1.4 Key Business Processes

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1.1.4 Key Business Processes

Examples of functional business processes
Manufacturing and production
Assembling the product

Sales and marketing

Identifying customers

Finance and accounting

Creating financial statements

Human resources
Hiring employees

Other?

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1.1.4 Key Business Processes:

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1.1.4 Key Business Processes

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1.1.4 Key Business Processes

Organizations today use a number of processes.
However, most of our discussions will focus on 3
fundamental processes, core BP: procurement,
production, and fulfillment.
Procurement process; acquires the basic materials
Production process manufacturing or generating
the goods and services
Fulfillment process delivers the goods or services
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1.1.4 Key Business Processes

Before the production process, Co must first
acquire the necessary components, or raw
materials -> the procurement process

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Key Business processes

The third key process- the fulfillment process -generally
occurs after the company has completed the
production process. The fulfillment process is
concerned with filling a customer order, and it might
include the five steps below:
first, the organization receives a customers order (1)
it then prepares(2) and ships(3) the order to the
customer,
along with an invoice(4).
finally, the customer sends(5) a payment to the
company.
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Key Business processes

Case study
Amazon -> purchases books (procurement) -> puts
those books in warehouses -> ships to customers
based on Web site orders (fulfillment).
Amazon.com does not manufacture books
(production); it simply resells books from other
companies -> a very efficient business model
because Amazon can sell an almost infinite
number of books from many publishers on its
Web site, and it does not have to worry about
dealing with: the authors, editors, bookbinders,
paper manufacturers, and ink suppliers involved
with producing the actual books.

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Fulfillment process
(1)

(2)

(3)

(4)

(5)

Amazon-> does not have production->only 2

processes: procurement&fulfillment.

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1.2 THE FUNCTIONAL

ORGANIZATIONAL STRUCTURE
The most common organizational structure is the
functional structure.
Organizations that utilize a functional structure are
divided into functions, or departments, each of
which is responsible for a set of closely related
activities.
Typical functions or departments found in a modern
organization include:
purchasing, operations, warehouse (inventory
management),
sales and marketing, research and development,
finance and accounting, human resources, and IT

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1.2 THE FUNCTIONAL

ORGANIZATIONAL STRUCTURE
The procurement and fulfillment processes: think about
where in the Co the various activities are performed or
who in the Co is responsible for performing them.
The procurement:
The warehouse determines what it needs, and it creates
the purchase requisition.
The purchasing department then selects the supplier and
creates and sends the purchase order to the supplier.
The warehouse receives the goods from the supplier and
places them into inventory.
Finally, the accounting department receives the invoice
from the supplier and makes the payment.
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1.2 THE FUNCTIONAL

ORGANIZATIONAL STRUCTURE
Fulfillment process:
the sales department takes the order
the warehouse packs and ships the order
and the accounting department sends the
invoice and receives payment.

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1.2 THE FUNCTIONAL

ORGANIZATIONAL STRUCTURE

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1.2 THE FUNCTIONAL

ORGANIZATIONAL STRUCTURE
The procurement and fulfillment processes
consist of activities that occur in different,
seemingly unrelated functions or departments.
In other words, these processes are crossfunctional; no single group or function is
responsible for their execution.
For the process to be successfully completed,
then, the company must rely on each functional
group to execute its individual steps in the
process.
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1.2.1 Silo effect

Employee focus too narrowly on their specific
tasks -> lose sight of the big picture of the
larger process.
This tendency is commonly referred to as the
silo effect -> workers complete their tasks in
their functional silos without regard to the
consequences for the other components of
the process.
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1.2.2 Delays in Executing the Process

increased lead times - how far in advance a
company must plan to obtain raw materials
from its suppliers -> insufficient inventory of
material when it is needed
increased cycle times - the amount of time
needed to produce a product or process a
customer order -> prevent the company from
producing goods and filling customer orders in
a timely manner
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1.2.2 Excess Inventory

Due to poor coordination among functions ->
excess inventory. The result -> an excessive
and costlyamount of extra just in case
inventory for the organization.

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1.2.3 Lack of Visibility across

Processes
lack of visibility across the process -> people
involved in the process do not have
information about (1) the status of the
process in other parts of the organization
and/or (2) how well the process is performing
over time.

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Root cause of the 3 problems: the tendency to view work in

terms of functional silos rather than in terms of crossfunctional processes.
As people in each functional area are focused on their own
world, they do not easily see how significant the negative
consequences of the little delays, small mistakes, and excess
inventory can be to the process or to the organization as a
whole.
At the process level, small delays can accumulate to significantly
extend the time required to fill a customer order or acquire
raw materials.
Similarly, at the organizational level, small quantities of extra
inventory can add up to cost the organization significant
amounts of money in terms of storage and opportunity costs.
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1.3 Processes and Process orientation

The process-oriented approach - management theory in the 1990s.
A change from a mainly functional view (main paradigm for many
decades).
A functional touch can largely still be found when you look at the
orgchart: Purchasing, marketing, HR, etc.
Instead of focusing on those functions -> cooperation across the
board is necessary to deliver something useful for the customer.
A process is:
a collection of activities that takes one or more kinds of input and
creates an output that is of value to the customer.
is a content-wise conclusive and time-wise ordered set of functions
that are required to perform work on an object that is relevant to
the business.
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1.3 Processes and Process orientation

First steps towards a more process-oriented way of doing
things came from these areas:
Activity-based costing
Computer science and organizational modelling
Business process re-engineering
There were a few points that triggered this re-thinking
(process vs. functional) namely:
A functional approach severely limits the organizations
capabilities to be customer-driven
A process-oriented organization increases flexibility
Processes, or more precisely the thoughts required to
define them, greatly improve the understanding of complex
commercial activities
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Process vs. functional view

The functional view => orgchart + who needs to do something
The process view => what needs to be done
Processes classification:
Core processes
Create product/service
Market communication
Optimize value for
customer

Support processes

Order processing
Logistics and customer
service
Ensure profitability and
liquidity
Capacity planning
Staff training,
motivation and
retention

Management processes

Plan and implement

strategy
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1.4 THE IMPORTANCE OF

INFORMATION SYSTEMS
IS are CBS -> capture, store, and retrieve data
associated with process activities.
In addition, they organize these data into
meaningful information that organizations use
to support and assess its activities.

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1.4 THE IMPORTANCE OF

INFORMATION SYSTEMS
Information system:
Set of interrelated components
Collect, process, store, and distribute information
Support decision making, coordination, and
control

Information vs. data

Data are streams of raw facts
Information is data shaped into meaningful form
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ASCII table

Components of Information System

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Information systems
An IS uses computer technology and networks to perform some or all of its tasks. As
you read in the opening section, IS can be as small as a Smartphone with a
software app that can snap tags to load a Web site.
Or it may include several thousand computers of various types, scanners, printers,
and other devices connected to databases via wired and wireless
telecommunication networks. Basic components of ISs are listed next:
Hardware is a set of devices such as processor, monitor, keyboard, and printer.
Graphical user interfaces, which are called GUI, accept data and information that
are then processed by central processing units (CPUs), stored in databases, and
displayed on screens.
Software is a set of applications (apps) or programs that instruct the hardware to
process data or other inputs such as voice commands.
Data is an essential part processed by the system and, if needed, stored in a
database or other storage system.
A network is a telecommunication system connecting hardware that is wired,
wireless, or a combination.
Procedures are the set of instructions about how to combine the above components
in order to process information and generate the desired output.
People are those individuals who work with the system, interface with it, or use its
output.
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1.4.1 Data and Information

Every activity in an organization generates data,
which are raw facts that, by themselves, have
limited value or meaning.
Examples of data: customer names, product
numbers, and quantities of products sold.
Data that are organized in a way that is useful to
an organization are referred to as information. In
this case, the organization can utilize the sales
information to determine which products are
doing well and which are not.
Knowledge -> support decision making process
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1.4.1 Data and Information

Data is the Root and Purpose of Information Systems

Data is analyzed and processed into information
When there is an ability to understand the information
and make decisions using it, it becomes knowledge

Data and Information

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1.4.2 Functional Information Systems

Three activities of information systems
produce information organizations need
1. Input: Captures raw data from organization or
external environment- age
2. Processing: Converts raw data into meaningful
form-stat fc
3. Output: Transfers processed information to
people or activities that use it-write it
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1.4.2 Functional Information Systems

Although organizations utilize a variety of information
systems, most systemslike most organizationstend
to focus on functions rather than processes and are not
well integrated (not easily share data between them).
Each functional area or department developed a
system that suites its purposes.
-> sales developed order management systems,
-> warehouses developed systems to track inventory of
materials,
-> accounting developed systems to track invoices and
payments, and so on.
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1.4.2 Functional Information Systems

The above 3 functional information systems
evolved independently of one another. Because
the work was performed in functional silos,
organizations gave little thought to sharing the
data among functions or departments.
Result -> organizations have implemented
systems to support the work of individual
functional areas, exchanging information among
them is often difficult.
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1.4.3 Enterprise Systems

In addition to moving from silos to processes,
Co must also move from functionally focused
information systems to integrated enterprise
systems (ES).
ES support the entire process rather than
parts of the process -> ES not only support the
execution of individual activities in a process,
they also help the Co coordinate work across
functions.
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1.5 THE ROLES OF ENTERPRISE

SYSTEMS IN ORGANIZATIONS
ES are a critical component of the process view of
organizations.
ES facilitate communication and coordination
among different functions, and they allow easy
exchange of, and access to, data across the
process.
ES play a vital role in the following three areas:
1. Execute the process
2. Capture and store process data
3. Monitor process performance
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1.5.1 Execute the Process

ES help execute processes by informing people when it
is time to complete a task, by providing the data
necessary to complete the task, and in some cases by
providing the means to complete the task.
E.g. Procurement process: the system generates the
purchase requisitions and then informs the purchasing
department that they need to act on these
requisitions. The accountant will be able to view all
shipments received to match an invoice that has been
received from a supplier and verify that the invoice is
accurate.
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1.5.2 Capture and Store Process Data

ES capture and store data (processes create data
such as dates, times, product numbers,
quantities, prices, and addresses, as well as who
did what, when, and where.), commonly referred
to as process data or transaction data.
Some of these data are generated and
automatically captured by the system. These are
data related to who, when, and where an activity
is completed.
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1.5.3 Monitor Process Performance

Help to monitor the state of the processes,
that is, to indicate how well the process is
executing.
An ES performs this role by evaluating
information about the process. This
information can be created either at the
instance level (i.e., a specific task or activity)
or the process or aggregate level (i.e., the
process as a whole).
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