12.

1 Supporting Business Functions in an Enterprise with Information

The principal business functions in a business firm are:

1. Marketing and sales

2. Production

3. Accounting and finance

4. Human resources

igure 12.1: !utlines a general "ie# of information s$stems supporting a compan$%s operations and management. &mphasi'e that management support s$stems (M)*+, decision support s$stems (-**+, and e.ecuti"e information s$stems (&/*+, rest on the foundation of transaction processing s$stems (TP*+ that support business operations. TP*s are the ma0or source of data used b$ the higher1le"el s$stems to deri"e information. Professional support s$stems (P**+ and office information s$stems (!/*+, #hich support indi"idual and group kno#ledge #ork, are also a part of this foundation.

12.2 Marketing /nformation *$stems 2 igure 12.2 3 igure 12.34

Marketing acti"ities are directed to#ard planning, promoting, and selling goods and ser"ices to satisf$ the needs of customers and the ob0ecti"es of the organi'ation.

Marketing information s$stems support decision making regarding the marketing mi.. These include:

1. Product

2. Price

3. Place

4. Promotion

igure 12.3 illustrates the structure of the entire marketing information s$stem. /n order to support decision making on the marketing mi., a marketing information s$stem dra#s on se"eral sources of data and information.

*ources of -ata and /nformation for Marketing: 5oundar$1*panning and Transaction Processing *ubs$stems

A marketing information s$stem relies on e.ternal information to a far greater degree than other organi'ational information s$stems. /t includes t#o subs$stems designed for boundar$ spanning 1 bringing into the firm data and information about the marketplace.

The ob0ecti"e of marketing research is to collect data on the actual customers and the potential customers, kno#n as prospects. The identification of the needs of the customer is a fundamental starting point for total 6ualit$ management (T7M+. &lectronic commerce on the 8&5 makes it eas$ to compile statistics on actual bu$er beha"iour.

Marketing research soft#are supports statistical anal$sis of data. /t enables the firm to correlate bu$er beha"iour #ith "er$ detailed geographic "ariables, demographic "ariables, and ps$chographic "ariables.

Marketing (competiti"e+ intelligence is responsible for the gathering and interpretation of

data regarding the firm%s competitors, and for the dissemination of the competiti"e information to the appropriate users. Most of the competitor information comes from corporate annual reports, media1tracking ser"ices, and from reports purchased from e.ternal pro"iders, including on1line database ser"ices. The /nternet has become a ma0or source of competiti"e intelligence.

Marketing Mi. *ubs$stems

The marketing mi. subs$stems support decision making regarding product introduction, pricing, promotion (ad"ertising and personal selling+, and distribution. These decisions are integrated into the sales forecast and marketing plans against #hich the ongoing sales results are compared.

Marketing mi. subs$stems include:

1. Product subs$stem

2. Place subs$stem

3. Promotion subs$stem

4. Price subs$stem

9. *ales forecasting

Product *ubs$stem

The product subs$stem helps to plan the introduction of ne# products. :ontinuall$ bringing ne# products to market is "ital in toda$%s competiti"e en"ironment of rapid change. The product subs$stem should support balancing the degree of risk in the

o"erall ne#1product portfolio, #ith more aggressi"e competitors assuming higher degrees of risk for a potentiall$ higher pa$off.

Although decisions regarding the introduction of ne# products are unstructured, information s$stems support this process in se"eral #a$s:

1. Professional support s$stems assist designers in their kno#ledge #ork

2. -**s are used to e"aluate proposed ne# products

3. 8ith a -**, a marketing manager can score the desirabilit$ of a ne# product.

4. &lectronic meeting s$stems help bring the e.pertise of people dispersed in space and time to bear on the problem

9. /nformation deri"ed from marketing intelligence and research is "ital in e"aluating ne# product ideas.

Place *ubs$stem

The place subs$stem assists the decision makers in making the product a"ailable to the customer at the right place at the right time. The place subs$stem helps plan the distribution channels for the product and track their performance.

The use of information technolog$ has dramaticall$ increased the a"ailabilit$ of information on product mo"ement in the distribution channel. &.amples include:

1. 5ar1coded ;ni"ersal Product :ode (;P:+

2. Point1of1sale (P!*+ scanning

3. &lectronic data interchange (&-/+

4. *upports 0ust1in1time product deli"er$ and customi'ed deli"er$

Promotion *ubs$stem

The promotion subs$stem is often the most elaborate in the marketing information s$stem, since it supports both personal selling and ad"ertising. Media selection packages assist in selecting a mi. of a"enues to persuade the potential purchaser, including direct mail, tele"ision, print media, and the electronic media such as the /nternet and the 8&5 in particular. The effecti"eness of the selected media mi. is monitored and its composition is continuall$ ad0usted.

-atabase marketing relies on the accumulation and use of e.tensi"e databases to segment potential customers and reach tem #ith personali'ed promotional information.

The role of telemarketing, marketing o"er the telephone, has increased. Telemarketing calls are #ell supported b$ information technolog$.

*ales management is thoroughl$ supported #ith information technolog$. :ustomer profitabilit$ anal$sis help identif$ high1profit and high1gro#th customers and target marketing efforts in order to retain and de"elop these accounts.

*ales force automation, in"ol"es e6uipping salespeople #ith portable computers tied into the corporate information s$stems. This gi"es the salespeople instantaneous access to information and frees them from the reporting paper#ork. This increases selling time and the le"el of performance. Access to corporate databases is sometimes accompanied b$ access to corporate e.pertise, either b$ being able to contact the e.perts or b$ using e.pert s$stems that help specif$ the product meeting customer re6uirements.

Price *ubs$stem

Pricing decisions find a degree of support from -**s and access to databases that contain industr$ prices. These highl$ unstructured decisions are made in pursuit of the compan$s pricing ob0ecti"es. <eneral strategies range from profit ma.imi'ation to forgoing a part of the profit in order to increase a market share.

/nformation s$stems pro"ide an opportunit$ to finel$ segment customer groups, and charge different prices depending on the combination of products and ser"ices pro"ided, as #ell as the circumstances of the sale transaction.

*ales orecasting

5ased on the planned marketing mi. and outstanding orders, sales are forecast and a full marketing plan is de"eloped. *ale forecasting is an area #here an$ 6uantitati"e methods emplo$ed must be tempered #ith human insight and e.perience. The actual sales #ill depend to a large degree on the d$namics of the en"ironment.

7ualitati"e techni6ues are generall$ used for en"ironmental forecasting 1 an attempt to predict the social, economic, legal, and technological en"ironment in #hich the compan$ #ill tr$ to reali'e its plans. *ales forecasting uses numerous techni6ues, #hich include:

1. <roup decision making techni6ues are used to elicit broad e.pert opinion

2. *cenario anal$sis in #hich each scenario in this process is a plausible future en"ironment

3. &.trapolation of trends and c$cles through a time1series anal$sis.

12.3 Manufacturing /nformation *$stems

<lobal competiti"e pressures of the information societ$ ha"e been highl$ pronounced in manufacturing and ha"e radicall$ changed it. The ne# marketplace calls for manufacturing that are:

1. =ean 1 highl$ efficient, using fe#er input resources in production through better engineering and through production processes that rel$ on lo# in"entories and result in less #aste.

2. Agile 1 fit for time1based competition. 5oth the ne# product design and order fulfilment are drasticall$ shortened.

3. le.ible 1 able to ad0ust the product to a customer%s preferences rapidl$ and cost effecti"el$.

4. Managed for 6ualit$ 1 b$ measuring 6ualit$ throughout the production process and follo#ing #orld standards, manufacturers treat 6ualit$ as a necessit$ and not a high1 price option.

*tructure of Manufacturing /nformation *$stems 2 igure 12.94

/nformation technolog$ must pla$ a "ital role in the design and manufacturing processes. Manufacturing information s$stems are among the most difficult both to de"elop and to implement.

TP*s are embedded in the production process or in other compan$ processes. The data pro"ided b$ the transaction processing s$stems are used b$ management support subs$stems, #hich are tightl$ integrated and interdependent.

Manufacturing information subs$stems include:

1. Product design and engineering

2. Product scheduling

3. 7ualit$ control

4. acilities planning, production costing, logistics and in"entor$ subs$stems

Product -esign and &ngineering

Product design and engineering are #idel$ supported toda$ b$ computer1aided design (:A-+ and computer1aided engineering (:A&+ s$stems. :A- s$stems assist the designer #ith automatic calculations and displa$ of surfaces #hile storing the design information in databases. The produced designs are sub0ect to processing #ith :A& s$stems to ensure their 6ualit$, safet$, manufacturabilit$, and cost1effecti"eness. :A->:A& s$stems increasingl$ eliminate paper#ork from the design process, #hile speeding up the process itself. As #ell, the combined techni6ues of :A->:A& and rapid protot$ping cut time to market.

Product *cheduling

Production scheduling is the heart of the manufacturing information s$stem. This comple. subs$stem has to ensure that an appropriate combination of human, machiner$, and material resources #ill be pro"ided at an appropriate time in order to manufacture the goods.

Production scheduling and the ancillar$ processes are toda$ fre6uentl$ controlled #ith a manufacturing resource planning s$stem as the main informational tool. This elaborate soft#are con"erts the sales forecast for the plants products into a detailed production plan and further into a master schedule of production.

:omputer integrated manufacturing (:/M+ is a strateg$ through #hich a manufacturer takes control of the entire manufacturing process. The process starts #ith :A- and :A& and continues on the factor$ floor #here robots and numericall$ controlled machiner$ are installed 1 and thus computer1aided manufacturing (:AM+ is implemented. A manufacturing s$stem based on this concept can turn out "er$ small batches of a particular product as cost1effecti"el$ as a traditional production line can turn out millions of identical products. A full1fledged :/M is e.tremel$ difficult to implement? indeed, man$ firms ha"e failed in their attempts to do so.

7ualit$ :ontrol

The 6ualit$ control subs$stem of a manufacturing information s$stem relies on the data collected on the shop floor b$ the sensors embedded in the process control s$stems.

Total 6ualit$ management (T7M+ is a management techni6ue for continuousl$ impro"ing the performance of all members and units of a firm to ensure customer satisfaction. /n particular, the principles of T7M state that 6ualit$ comes from impro"ing the design and manufacturing process, rather than Ainspecting out@ defecti"e products. The foundation of 6ualit$ is also understanding and reducing "ariation in the o"erall manufacturing process.

acilities Planning, Production :osting, =ogistics and /n"entor$ *ubs$stems

Among the higher1le"el decision making supported b$ manufacturing information s$stems are facilities planning 1 locating the sites for manufacturing plants, deciding on their production capacities, and la$ing out the plant floors.

Manufacturing management re6uires a cost control program, rel$ing on the information s$stems. Among the informational outputs of the production costing subs$stem are labor and e6uipment producti"it$ reports, performance of plants as cost centers, and schedules for e6uipment maintenance and replacement.

Managing the ra#1materials, packaging, and the #ork in progress in"entor$ is a responsibilit$ of the manufacturing function. /n some cases, in"entor$ management is

combined #ith the general logistics s$stems, #hich plan and control the arri"al of purchased goods into the firm as #ell as shipments to the customers.

12.4 Accounting and inancial /nformation *$stems 2 igure 12.A4

The financial function of the enterprise consists in taking stock of the flo#s of mone$ and other assets into and out of an organi'ation, ensuring that its a"ailable resources are properl$ used and that the organi'ation is financiall$ fit. The components of the accounting s$stem include:

1. Accounts recei"able records

2. Accounts pa$able records

3. Pa$roll records

4. /n"entor$ control records

9. <eneral ledgers

inancial information s$stems rel$ on e.ternal sources, such as on1line databases and custom produced reports, particularl$ in the areas of financial forecasting and funds management. The essential functions that financial information s$stems perform include:

1. inancial forecasting and planning

2. inancial control

3. unds management

4. /nternal auditing

inancial orecasting

inancial forecasting is the process of predicting the inflo#s of funds into the compan$ and the outflo#s of funds from it for a long term into the future. !utflo#s of funds must be balanced o"er the long term #ith the inflo#s. 8ith the globali'ation of business, the function of financial forecasting has become more comple., since the acti"ities in multiple national markets ha"e to be consolidated, taking into consideration the "agaries of multiple national currencies. *cenario anal$sis is fre6uentl$ emplo$ed in order to prepare the firm for "arious contingencies.

inancial forecasts are based on computeri'ed models kno#n as cash1flo# models. The$ range from rather simple spreadsheet templates to sophisticated models de"eloped for the gi"en industr$ and customi'ed for the firm or, in the case of large corporations to specif$ modeling of their financial operations. inancial forecasting ser"es to identif$ the need for funds and their sources.

inancial :ontrol

The primar$ tools of financial control are budgets. A budget specifies the resources committed to a plan for a gi"en pro0ect or time period. i.ed budgets are independent of the le"el of acti"it$ of the unit for #hich the budget is dra#n up. le.ible budgets commit resources depending on the le"el of acti"it$.

*preadsheet programs are the main budgeting tools. *preadsheets are the personal producti"it$ tools in use toda$ in budget preparation.

/n the s$stems1theoretic "ie#, budgets ser"e as the standard against #hich managers can compare the actual results b$ using information s$stems. Performance reports are used to monitor budgets of "arious managerial le"els. A performance report states the

actual financial results achie"ed b$ the unit and compares them #ith the planned results.

Along #ith budgets and performance reports, financial control emplo$s a number of financial ratios indicating the performance of the business unit. A #idel$ emplo$ed financial ratio is return on in"estment ()!/+. )!* sho#s ho# #ell a business unit uses its resources. /ts "alue is obtained b$ di"iding the earnings of the business unit b$ its total assets.

unds Management

inancial information s$stems help to manage the organi'ation%s li6uid assets, such as cash or securities, for high $ields #ith the lo#est degree of loss risk. *ome firms deplo$ computeri'ed s$stems to manage their securities portfolios and automaticall$ generate bu$ or sell orders.

/nternal Auditing

The audit function pro"ides an independent appraisal of an organi'ation%s accounting, financial, and operational procedures and information. All large firms ha"e internal auditors, ans#erable onl$ to the audit committee of the board of directors. The staff of the chief financial officer of the compan$ performs financial and operational audits. -uring a financial audit, an appraisal is made of the reliabilit$ and integrit$ of the compan$%s financial information and of the means used to process it. An operational audit is an appraisal of ho# #ell management utili'es compan$ resources and ho# #ell corporate plans are being carried out.

12.9 Human )esource /nformation *$stems

A human resource information s$stem (H)/*+ supports the human resources function of an organi'ation #ith information. The name of this function reflects the recognition that people #ho #ork in a firm are fre6uentl$ its most "aluable resources. The comple.it$ of human resource management has gro#n immensel$ o"er recent $ears, primar$ due to the need to conform #ith ne# la#s and regulations.

A H)/* has to ensure the appropriate degree of access to a great "ariet$ of internal stakeholders, including:

1. The emplo$ees of the Human )esources department in performance of their duties

2. All the emplo$ees of the firm #ishing ti inspect their o#n records

3. All the emplo$ees of the firm seeking information regarding open positions or a"ailable benefit plans

4. &mplo$ees a"ailing themsel"es of the computer1assisted training and e"aluation opportunities

9. Managers throughout the firm in the process of e"aluating their subordinates and making personnel decisions

B. :orporate e.ecuti"es in"ol"ed in tactical and strategic planning and control

Transaction Processing *ubs$stems and -atabases of Human )esource /nformation *$stems

At the heart of H)/* are its databases, #hich are in some cases integrated into a single human resource database. The record of each emplo$ee in a sophisticated emplo$ee database ma$ contain 19C to 2CC data items, including the personal data, educational histor$ and skills, occupational background, and the histor$ of occupied positions, salar$, and performance in the firm. )icher multimedia databases are not assembled b$ some firms in order to facilitate fast formation of compatible teams of people #ith complementar$ skills.

!ther H)/* databases include:

1. Applicant databases

2. Position in"entor$

3. *kills in"entor$

4. 5enefit databases

9. &.ternal databases

/nformation *ubs$stems for Human )esource Management

The information subs$stems of H)/* reflect the flo# of human resources through the firm, from planning and recruitment to termination. A sophisticated H)/* includes the follo#ing subs$stems:

1. Human resource planning

2. )ecruiting and #orkforce management

3. :ompensation and benefits

4. <o"ernment reporting and labour relations support

Human )esource Planning

To identif$ the human resources necessar$ to accomplish the long1term ob0ecti"es of a firm, #e need to pro0ect the skills, kno#ledge, and e.perience of the future emplo$ees.

)ecruiting and 8orkforce Management

5ased on the long1term resource plan, a recruitment plan is de"eloped. The plan lists the currentl$ unfilled positions and those e.pected to become "acant due to turno"er.

The life1c$cle transitions of the firm%s #orkforce 1 hiring, promotion and transfer, and termination 1 ha"e to be supported #ith the appropriate information s$stem components.

:ompensation and 5enefits

T#o principal e.ternal stakeholders ha"e an abiding interest in the human resource policies of organi'ations. These are:

1. Darious le"els of go"ernment

2. =abor unions

12.B /ntegrating unctional *$stems for *uperior !rgani'ational Performance

unctional information s$stems rarel$ stand alone. This reflects the fact that the functions the$ support should, as much as possible, connect #ith each other seamlessl$ in order to ser"e the firms customers. :ustomers e.pect timel$ order deli"er$, often on a 0ust1in1time schedule? 6ualit$ inspection to their o#n standards? fle.ible credit terms? post1deli"er$ ser"ice? and often, participation in the product design process.

/nformation technolog$ pro"ides "ital support for integrating internal business processes, cutting across functional lines, and for integrating operations #ith the firm%s business partners, its customers and suppliers.