INFORMATION SYSTEMS FOR BUSINESS

INFORMATION SYSTEMS (IS)

IS are combination of hardware & software which people develop & use to collect, store, process & distribute useful data to organizational personnel Computers are the core component of IS Globalization has changed the nature of competition This has forced companies to do things better, faster & cheaper Each level of an organization has different responsibilities

DECISION MAKING LEVELS OF AN ORGANIZATION

strategic

TOP / EXECUTIVE LEVEL tactical MIDDLE / MANAGERIAL LEVEL operational

LOWER / OPERATIONAL LEVEL

DECISION MAKING LEVELS OF AN ORGANIZATION

1.OPERATIONAL LEVEL The routine, day to day business processes occur Personnel at the operational level, such as supervisors, make mostly day to day decisions These decisions are highly structured & recurring Structured decisions are those in which the procedures to follow can be specified in advance As structured decisions are relatively straightforward, they can be programmed

DECISION MAKING LEVELS OF AN ORGANIZATION

2.MANAGERIAL LEVEL At the managerial level of the organization the functional managers operate Focus is on monitoring & controlling operational level activities & providing information to higher levels of the organization Focus on effectively utilizing & deploying organizational resources to achieve the objectives set by the top level The decision making is not nearly as structured or routine as operational decision making

DECISION MAKING LEVELS OF AN ORGANIZATION

3. EXECUTIVE LEVEL Personnel at this level include the president, CEO, VP

Focus is on long term strategic issues facing the organization

The decisions deal with complex problems with long term ramifications for the organization
Decisions made at this level are unstructured & cannot be programmed

TRANSACTION PROCESSING SYSTEM (TPS)

Transactions Basic business operations such as customer orders, purchase orders, receipts, invoices, and payroll checks in an organization Transaction processing systems (TPS) Perform routine operations and serve as a foundation for other systems TPS automates repetitive information processing activities within organizations TPS records & process the routine transactions necessary to conduct business, such as sales order entry, payroll, hotel reservation The principal purpose of TPS is to answer routine questions & to track the flow of transactions through the organization Eg: How many parts in the inventory? What happened to the suppliers payment? Outputs from a TPS include reports, inputs to other system

MANAGEMENT INFORMATION SYSTEM (MIS)

MIS is a term with two meanings

field of study

MIS
specific type of IS

MIS helps middle level managers to make more effective decisions Eg: A marketing manager may have a MIS that contrast sales revenue and advertising expenses by geographic region A sales manager may review the monthly performance of all sales staff Examples of types of activities supported by MIS :
Sales forecasting, advertising

MANAGEMENT INFORMATION SYSTEM (MIS)

Outputs of MIS: Scheduled reports

Exception reports Ad hoc reports

EXECUTIVE INFORMATION SYSTEM (EIS)

Also known as Executive Support System (ESS) To support the highest organizational personnel Senior managers are concerned with questions like: What products should we be making in five years? What will employment levels be in five years? ESS address non routine decisions requiring judgment, evaluation, & insight Information is presented in a summarized manner to the senior managers Although data are provided in a summarized manner, the executive also has the capability to drill down & see the details if necessary An EIS can deliver both soft & hard data to the executive decision maker Providing timely soft information to executive decision makers has been much more of a challenge

IS THAT SPAN ORGANIZATIONAL BOUNDARIES

DECISION SUPPORT SYSTEM (DSS)

To support organizational decision making at all levels of the organization (but mostly middle level) A DSS is designed to be an interactive decision aid A DSS enable users to examine alternative solutions to a problem via what if analyses Eg: What would be the impact on production schedules if we were to double sales in the month of December? What would happen to our ROI if a factory schedule were delayed for four months? What if analysis allows users to make hypothetical changes to the data associated with a problem & observe how these changes influence the result

IS THAT SPAN ORGANIZATIONAL BOUNDARIES

EXPERT SYSTEMS

It is a special type of IS that uses reasoning methods based on a knowledge base in order to provide advice, much like a human expert A knowledge base is created by acquiring knowledge from experts, & compiling it Expert systems model human knowledge as a set of rules that collectively are called the knowledge base Rules are typically expressed using an IF-THEN format When one uses an expert system, the system asks the user a series of questions, much as a human expert would do The expert system matches the responses with the defined rules until the responses point to a solution Expert systems are used when expertise for a particular problem is rare or expensive

IS THAT SPAN ORGANIZATIONAL BOUNDARIES

Inference Rules:
1. Forward chaining starts with the available data and uses inference rules to extract more data until a goal is reached. An inference engine using forward chaining searches the inference rules until it finds one where the antecedent (If clause) is known to be true. For example, suppose that the goal is to conclude the color of a pet named Fritz, given that he croaks and eats flies, and that the rule base contains the following four rules: If X croaks and eats flies - Then X is a frog If X chirps and sings - Then X is a canary If X is a frog - Then X is green If X is a canary - Then X is yellow

IS THAT SPAN ORGANIZATIONAL BOUNDARIES

2. Backward chaining is an inference method that can be described as working backward from the goal(s). Backward chaining starts with a list of goals (or a hypothesis) and works backwards from the consequent to the antecedent to see if there is data available that will support any of these consequents. An inference engine using backward chaining would search the inference rules until it finds one which has a consequent (Then clause) that matches a desired goal. Eg: If X croaks and eats flies - Then X is a frog If X chirps and sings - Then X is a canary If X is a frog - Then X is green If X is a canary - Then X is yellow

ENTERPRISE SYSTEMS

Companies use IS to support their various business processes & activities Oftentimes, these systems were built on different computing platforms Running different applications on separate computing platforms can create tremendous inefficiencies within organizations Enterprise systems are IS that allow companies to integrate information across operations on a company wide basis Enterprise systems can be extended to streamline communications with customers & suppliers

ENTERPRISE SYSTEMS

IS can be used to support internally or externally focused business processes Internally focused systems support functional areas, processes or activities within an organization These activities can be viewed as a series of links in a chain along which information flows within an organization At each stage (or link) in the process, value is added

Information flow for an order:

ORDER ENTRY

PRODUCTION

SHIPPING

ORDER

PACKING LIST

INVOICE

ENTERPRISE SYSTEMS

Externally focused systems coordinate business activities with customers, suppliers, business partners, & others who operate outside the organizations boundaries Sharing information between organizations helps companies to adapt more quickly to changing market conditions COMAPANY A COMPANY B

Information flow for a shipment:

SHIPPING

RECEIVING

INVOICE

INVENTORY

ENTERPRISE SYSTEMS
Internally Focused Applications
The flow of information through a set of business activities is referred to as a value chain Functional areas can be broken down into primary & support activities Value Chain framework:

SUPPORT

FIRM INFRASTRUCTURE HR TECHNOLOGY DEVELOPMENT PROCUREMENT INBOUND LOGISTICS OPERATIONS & MANUFACTURING OUTBOUND LOGISTICS MARKETING & SALES CUSTOMER SERVICE

PRIMARY

ENTERPRISE SYSTEMS
Externally Focused Applications
The flow of information can be streamlined not only within a company but outside organizational boundaries as well Companies accomplish this by connecting their internal value chains as a value system Value system:

COMPANY A VALUE CHAIN COMPANY B VALUE CHAIN

COMPANY C VALUE CHAIN

FI

HR TD PROCUREMENT

FI HR TD PROCUREMENT

FI HR TD PROCUREMENT

IL

O&M OL M&S

CS

IL

O&M OL M&S

CS

IL

O&M OL M&S

CS

ENTERPRISE SYSTEMS
Enterprise systems come in two forms packaged & custom Evolution of Enterprise Systems~

LEGACY SYSTEMS

ERP

SUPPLY CHAIN MANAGEMENT

CUSTOMER RELATIONSHIP MANAGEMENT

ENTERPRISE SYSTEMS
ENTERPRISE RESOURCE PLANNING (ERP) Applications that integrate business activities across departmental boundaries are referred to as ERP ERP make accessing information easier by providing a central information repository Eg: a customer calls in wondering about the status of an order ERP vendors include Oracle, PeopleSoft, SAP

ENTERPRISE SYSTEMS
CUSTOMER RELATIONSHIP MANAGEMENT (CRM) SYSTEMS

In todays highly competitive markets, customers hold the balance of power The focus is shifting from conducting business transactions to managing relationships Two main objectives: to attract potential customers & create customer loyalty CRM applications are modularized along two lines sales & service CRM applications are commonly integrated with ERP CRM vendors E.piphany, Siebel Systems Eg: NBA uses E.piphanys CRM application to gather information about basketball fans from around the world Marriott International uses Siebel Systems CRM to create a superior experience for its customers

ENTERPRISE SYSTEMS
SUPPLY CHAIN MANAGEMENT (SCM) SYSTEMS When deliveries from suppliers are accurate & timely, companies can convert them to finished products more efficiently The term supply chain is commonly used to refer to the producers of supplies that a company uses Two main objectives: to accelerate product development & to reduce costs associated with procuring raw materials SCM applications are commonly integrated with ERP SCM vendors Agile Software, Ariba, i2 Technologies Southwest Airlines uses SCM from i2 Technologies

SYSTEMS DEVELOPMENT LIFE CYCLE (SDLC)

SDLC is a set of steps that start with a set of users requirements & produces a system that satisfies these requirements SDLC consists of the following activities: Preliminary investigation Determination of system requirements Design of system Development of system Systems testing Implementation, evaluation, & maintenance

SDLC
Reasons for undertaking projects: 1. Capability

IS add capability in three ways: Greater processing speed Increased volume Faster information retrieval The two categories of concern include: Improve accuracy & consistency Enhancing security

2. Control

SDLC
3.Communication

Enhanced communication Integration of business areas

IS play important role in both monitoring & reducing costs Lock in customers Lock out competitors Improve arrangements with suppliers New product development

4. Cost

5. Competitive advantage

SDLC
Sources of project requests:

Departmental managers Senior executives Systems analysts Outside groups

Managing project review & selection Steering committee IS committee User group committee

SDLC

The Project Request

What is the problem? Inventory records are frequently inaccurate, causing shortages at manufacturing time. Details of problem. Quantity on hand & actual physical count records do not always agree. Sometimes quantity on record is high & other times it is low. The quantity should always agree if material requisitions are posted properly. How significant is the problem? Sometimes production has to shut down until emergency reorders are filled. Controller objects when costs become excessive at the end of month. Inventory manager complains when books are out of agreement with on hand actuals.

What does user feel is the solution? We need to automate inventory records to eliminate arithmetic error.
How IS will help? Cut down on arithmetic errors; also provide quicker information. Who else knows about this & could be contacted? Controller, Manager of inventory, Buyers.

SDLC PRELIMINARY INVESTIGATION

The purpose of the preliminary investigation is to evaluate project requests Preliminary investigation should accomplish the following objectives:

Clarify & understand the project request Determine the size of the project Assess costs Determine the technical & operational feasibility Report the findings to management, with recommendations outlining the acceptance or rejection of the proposal

SDLC PRELIMINARY INVESTIGATION

Conducting the investigation

Reviewing organizational documents Conducting interviews

Testing project feasibility

Operational feasibility Technical feasibility Economic feasibility

SDLC
DETERMINATION OF SYSTEMS REQUIREMENT (SYSTEMS ANALYSIS)

A requirement is a feature that must be included in a new system Requirements determination involves studying the current business system to find out how it works & where improvements should be made Systems Analysts, working closely with employees & managers, study the business process

Activities in requirement determination:

a) Requirements investigation analysts study the present system based on the fact finding techniques b) Requirements specification the data produced during the fact finding investigation are analyzed to determine requirements specifications

SDLC
DETERMINATION OF SYSTEMS REQUIREMENT (SYSTEMS ANALYSIS)
Systems Analysts structure their investigation by Understanding the business Identifying data used & information produced Determining process timing & volume Identifying control

Tools for organizing the details collected1. Decision Trees

CONDITIONS ACTIONS

Possible states of an entity

Lead to selection of

Alternatives steps, activities, or procedures that can be taken when confronted with a set of conditions

SDLC
DETERMINATION OF SYSTEMS REQUIREMENT (SYSTEMS ANALYSIS)

A decision tree is a diagram that presents conditions & actions

sequentially It shows the relationship of each condition & its permissible actions The diagram resembles branches on a tree Eg: discount authorization If invoice is paid within 10 days of receipt then a customer may get a discount, otherwise the customer has to pay full invoice amount. If the invoice amount is paid within 10 days and amount is over $10000 then 3% discount is given. If invoice amount is between $5000 to $10000 then 2% discount is given provided the payment is made within 10 days. If the invoice amount is below $ 5000 then a customer will not get any discount, even if he clears the invoice amount within 10 days of receiving it.

SDLC
DETERMINATION OF SYSTEMS REQUIREMENT (SYSTEMS ANALYSIS)
Condition

Action
give 3% discount give 2% discount no discount to be given pay full invoice amount

within 10 days over Rs. 10000 Rs.5000 to 10000 less than Rs.5000 longer than 10 days

within 10 days

over Rs.10000 Rs. 5000-10000 below Rs. 5000

give 3% discount give 2% discount no discount to be given

longer than 10 days

pay full invoice amount

SDLC
DETERMINATION OF SYSTEMS REQUIREMENT (SYSTEMS ANALYSIS)
Tools for organizing the details collected2. Decision Tables A decision table is a matrix of rows & columns that shows conditions & actions CONDITION DECISION RULES Condition statements Condition entries Action statements Action entries

Decision rules state what procedure to follow when certain conditions exist Condition statement identifies the relevant conditions Condition entries tell which value, if any, applies for a particular condition. Action statements list the set of all steps that can be taken when a certain condition occurs

SDLC
DETERMINATION OF SYSTEMS REQUIREMENT (SYSTEMS ANALYSIS)
CONDITIONS
Within 10 days Over $10000 $5000-$10000 Below $5000

DECISION RULES

Y Y N N

Y N Y N

Y N N Y

N Y N N

N N Y N

N N N Y

3% discount
2% discount Pay full invoice amount

X
X X X X X

SDLC
DETERMINATION OF SYSTEMS REQUIREMENT (SYSTEMS ANALYSIS)

Credit is allowed to a customer if the credit limit has not exceeded. If the credit limit has been exceeded, then a customers credit history is checked. Customers with a bad credit history are refused credit. Customers with a good credit history can be allowed credit if purchase is up to $200. In case of customers with a good credit history but with a purchase above $200, the salesman will have to refer the matter to the manager.

SDLC
DETERMINATION OF SYSTEMS REQUIREMENT (SYSTEMS ANALYSIS)
CONDITIONS
Credit limit exceeded Customer with good payment history Purchase upto $200 Allow credit

DECISION RULES

Y Y Y X

Y Y N

Y N Y

Y N N

N Y Y X

N N Y X

N Y N X

N N N X

Refuse credit

X X

Refer to the manager