Chapter 2 Study Questions
1. “How did this stuff get here?”
Organizations make use of processes to deliver goods and services to customers.
Business processes are central to what every organization does.
2. What is a business process?
A business process is a network of activities, resources, facilities, and
information that interact to achieve some business objective. Also sometimes
referred to as a business system.
Ex: inventory-management processes, manufacturing processes, sales processes,
and customer-support processes.
- Inventory-management processes work to balance the demands from
customers with the inventory purchased from suppliers. Purchasing is
therefore an important activity in the inventory-management process.
o Inventory database keeps track of what customers have ordered and
what is currently in inventory.
o As customers make purchases, stock moves out of inventory.
o When stock hits a “reorder point,” the system lets the manager know
that it is time to order new supplies.
o Purchase Order is created – lists items ordered and quantity desired.
o Purchase Order is sent to supplier. Supplier then ships the goods.
3. What are the components of a business process?
Business process consists of activities, resources, facilities, and information.
Activities transform resources and information of one type into resources and
information of another type.
- Can consist, or be made up of, strictly manual activities, be automated or
controlled by computers, or be a combination of manual and automated
Resources are items of value. Ex: case of milk, person working, cheque,
- Not considered activities because they are external—not under the
business’s control. Facilities are structures used within the business process. Ex: inventories,
databases, factories, pieces of equipment.
Activities use information to determine how to transform the inputs they
receive into the outputs they produce.
4. What is information?
The most common definition is that information is knowledge derived from
data. It is data presented in a meaningful context. We do something with data to
Characteristics of Good Information
Accurate Information is based on correct and complete data, and has been
processed correctly as expected. It is crucial; managers must be able to rely on
the results of their information systems.
- Need to cross check information you are receiving; begin with skepticism.
- Keep in mind that over time, information may lose its level of accuracy.
Timely Information is produced in time for its intended use. (Monthly report
that arrives 6 weeks late is useless).
Relevant Information – information should be relevant to both the context and
to the subject at hand. (A report that buries the information you need in several
pages of results is irrelevant to your purposes).
Sufficient Information – information needs to be sufficient for the purpose for
which it is generated.
- You must come to figure out which information to ignore and which
information to take into consideration and use.
- Information should be sufficient, but just barely so.
Worth Its Cost – there are costs associated with developing an information
system. There must be an appropriate relationship between the cost of
information and its value.
5. What is the role of information in business processes?
Any time a good is moved or a service is provided, data and information are
always created. During the move, that good may change ownership or the good
itself may be modified, both creating more data. Anytime there is a physical flow, there is the potential to capture a flow of
information. We don’t always collect the information, but we have the potential
to do so if we need to.
A business process generates information by bringing together important items
of data in a context.
Business Process Management (BPM) is a field of management that promotes
the development of effective and efficient processes through continuous
improvement and innovation. Often, innovations in business processes are
developed by integrating information technology into the business process.
- Information about the process provides the ability to better manage the
- Information about the business process is always the starting point for
understanding what can and should be changed within an organization.
- The better you are able to understand business processes, the better you will
be able to successfully manage the process.
6. How do information systems support business processes?
Information systems are used by the activities in the business process, but the
particular relationship varies among the processes. In some processes, several
activities use one information system. In other processes, each activity has its
own information system. Etc.
When an activity in a business process if handled by an automated system, it
means that work formerly done by people following procedures has been moved
so that computers now do that work by following instructions in software.
- Ex: the system used between a cashier & customer is fully automated so that
the cashier’s job is a low-skill-level position with high turnover. The designers
wanted to reduce the amount of training time that cashiers required before
they could productively use the cash registers.
The information system that supports payment activity in an organization is a
mostly manual system. Accounts Payable receives the Quantity Received report
and the Shipping Invoice, and reads those