Chapter 4: Enterprise Systems

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Ryerson University
Information Technology Management
ITM 102
David Atkinson

CHAPTER 4 ENTERPRISE SYSTEMS VALUE CHAIN • Value chain: connected series of activities, each of which adds value or supports the addition of value to firm’s goods or services • Five core components: 1. INBOUND LOGISTICS receiving, warehousing, and inventory control of raw materials required to create product or service 2. OPERATIONS value-creating and often proprietary activity that transforms raw inputs into final product 3. OUTBOUND LOGISTICS activities required to get finished product to customer, including packaging, warehousing, and order fulfillment 4. MARKETING AND SALES activities associated with getting buyers to purchase product, including working with distributors, retailers or online channels, marketing, advertising, and pricing 5. SERVICE ACTIVITIES maintain and enhance product’s value, including customer support, repair services, and warranty and recall • Classified into two activities: 1. PRIMARY ACTIVITIES directly related to production and distribution of organization’s products and services • Creates business value for organization and customers 2. SUPPORT ACTIVITIES activities conducted to support creation of business value by primary activities • Four critical support activities: i. Firm infrastructure (administration) ii. Technology development iii. Human resource (HR) management iv. Procurement • Useful tool for defining organization’s processes, activities, and competencies that it can use to gain competitive advantage INFORMATION SYSTEMS THAT SUPPORT BUSINESS ACTIVITIES • FUNCTIONAL INFORMATION SYSTEMS (FIS) focus on activities of functional department to improve efficiency and effectiveness • Includes accounting, marketing, human resources, financial, and manufacturing information system • WORKFLOW MANAGEMENT SYSTEMS (WMS) supports activities that several departments of organization may carry out; also referred to as business process management (BPM) • Workflow: represents steps, organizational resources, input and output data, and tools needed to complete business process • Includes tools and features that allow users to work with and manage processes and the system itself • Will not have all the capabilities needed to support business rules of organization • Business rule is a statement that defines or constrains some aspect of business – intended to assert business structure or to control or influence behaviour of business • Benefits of WMS: i. Less misplaced or stalled work, which improves efficiency and quality ii. Managers can focus more time on business decisions rather than on tracking work iii. Requires formal documents of all procedures, more analysis and tighter control of processes, which leads to better work assignments and produces more efficient scheduling • TRANSACTION PROCESSING SYSTEMS (TPS) enable transaction activities and capture key data created by transaction • Transaction: exchange of goods or services (value) between two or more parties that creates relationship • Has four characteristics (ACID) allow organizations to create systems that can handle large numbers of simultaneous transactions: i. Atomicity – transaction must be unequivocally completed; if error occurs, transaction should be reset to previous state ii. Consistency – unchanging properties of data must be preserved; data captured by transaction must fit within rules of data storage iii. Isolation – transactions occurring at the same time should be executed independently iv. Durability – completed transactions should be permanent • MANAGEMENT INFORMATION SYSTEM (MIS) storing processed transaction data as reports for managers; produced large volumes of information because of limited ability to sort and process data to specific user needs • Three types of reports: i. Periodic reports – updated and generated after specific time period has passed ii. Exception reports – monitor when exceptions occur of key values, defined as critical to operation iii. Demand reports – generated based on user request • Executive information systems (EIS): designed to provide summary information about business performance to those making higher-level strategic decisions DOCUMENT MANAGEMENT SYSTEM (DMS) enters, tracks, routes, and processes many documents used in organization; can create documents electronically or convert them to electrons form using imaging technology • KNOWLEDGE MANAGEMENT SYSTEMS (KM) how entity recognizes, generates, manages, and shares knowledge • Two types of knowledge: i. Explicit knowledge – anything that can be written down, stored, and codified ii. Tactic knowledge – the know-how that people have to learn through experience, which is difficult to write down and share • Groupware: providing shared workspaces to store common files and tools for conferencing and meeting support; can be divided into three levels of support: communication, conferencing, and collaborative management • Benefits of KMS i. Allow business professionals to streamline value chain which improves customer service and boost revenues as organization gets products and services out to market faster ii. Increase employee morale • DECISION SUPPORT SYSTEMS (DSS) helps businesses use communications technology, knowledge, and models to organize and access data to perform decision-making activities • Five types of DSS: communication-drive, data-drive, document-driven, knowledge- driven, model-driven • Model-driven DSS provides tools to create and work with models; makes the most significant contribution to decision making • EX. Financial models, statistical models, optimization models, simulation modelling SUPPLY CHANGE MANAGEMENT • Supply chain: system of organizations, people, technology, activities, information, and resources involved in moving a product or service from supplier to customer • Supply chain management (SCM): manages materials, information, and finances as they move from supplier to manufacturer to wholesaler to retailer to customer • Modules in SCM: i. Materials management – procurement, storage, and use of raw materials to be used in end product ii. Inventory management – finished goods inventory iii. Order management – orders by customers, distribution, retail outlets iv. Logistics management – plans for shipping product and tracking it from origin to destination and related shipping documentation ENTERPRISE RESOURCE PLANNING • Enterprise resource planning (ERP): runs all applications from a single database; links applications and ensures compatibility via common data storage • Can support all areas of value chain, both primary and supporting processes, helping to achieve efficiencies not possible with independent systems • Primary disadvantage s that ERP system can become complex and difficult to manage as it grows – entity is reliant on ERP vendors and service providers, such as IBM ENTERPRISE SYSTEMS THAT SUPPORT THE VALUE CHAIN • Enterprise system: large-scale applications that support business units or functions; another way entity applies IT to value chain • Each component of value chain and the enterprise systems that support activities SOFTWARE AS A SERVICE • Software as a service (SaaS): one way companies acquire enterprise systems; rent software
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