Chapter 7 - Information Systems for Competitive Advantage.docx

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Computer Science
Computer Science 1032A/B
Diane Goldstein

CHAPTER SEVEN – INFORMATION SYSTEMS FOR COMPETITIVEADVANTAGE What are the Fundamental Types of IS within Organizations? ­ 2 basic ways to develop competitive advantage through systems ­ 1. Change product: introduce new products/services/enhance current products/services  allows orgs to differentiate themselves ­ 2. Compete through business processes  orgs look to tech to help lock in customers, reduce costs, and create entry barriers for competitors in the market o info systems can affect comp adv by making the primary and support activities in an org more productive than those of competitors o increased productivity is realized when business processes within the org become more efficient/effective ­ fig 7.1 Calculation Systems ­ purpose: relieve workers of tedious repetitive calculations ­ computed payroll, printed pay cheques, applied debit/credit to general ledger and balanced company’s accounting records ­ kept track of inventory quantities Functional Systems ­ facilitated the work of a single department/business function ­ grew as natural expansion of the capabilities of the calculation systems ­ ex. Payroll  human resources, general ledger  financial reporting, inventory  operations/manufacturing ­ changed more than just name  in each functional area, companies added features and capabilities to the IS to support more functional area activity ­ problem: isolation aka functional silos ­ designed to work independently of one another ­ reality is: functional systems are inter related ­ led to 3 era Integrated, Cross Functional Systems ­ designed to not only facilitate the work of a single department/function but also to integrate the activities across business processes ­ aka cross departmental or cross functional systems ­ transition from functional systems to integrated cross functional systems is difficult ­ integrated processing requires many departments to coordinate activities ­ no clear lines of authority across depts., competition is fierce interdepartmental rivalries can subvert the development of new cross functional system ­ interorganizational systems: systems that are used by 2 or more related companies o ex. E-commerce, supply chain management systems ­ most orgs today have mixture of functional and integrated systems ­ to successfully compete internationally  orgs must achieve efficiencies of integrated, cross departmental process based systems WHATARE FUNCTIONAL SYSTEMSAND WHYARE THEY CHANGING ­ Porters value chain model  explains the scope and purposes of different types of info systems within the org ­ Value chain starts with marking and sales activities, followed by in bound logistics, operations and manufacturing, out bound logistics and service and support ­ Fig 7-3  5 functional systems and their relationship to the value chain ­ Each functional system is closely allied with the activities it supports, little cross over amount activities ­ Fig 7-4 Marketing and Sales Systems ­ product management  primary functional system for marketing o product managers use these systems to help assess how well their product marketing efforts are working ­ sales data are summarized by product, product category, and business line ­ sales to date are compared to forecasts, sales in past periods and other expectations ­ fi data is current enough, adjustments can be made in advertising and promotion by moving dollars from over performing products to underperforming ones ­ other sales examples  o lead tracking: records prospects and keeps track of sales contacts with potential customers o sales forecasting: planning production/managing inventories also for financial reporting by publicly held companies o customer management: generate follow up business from existing customers  sales people use customer management system to determine what products customers have already purchased, to record all contact with customer and to follow up for additional revenue generation o customer service Operations Systems ­ both operations and manu systems support same primary activity in value chain ­ operations systems: used by non manufacturers such as distributors and retailers ­ important operations systems: o order entry: can take place in house (ee enters orders), web based, e commerce sites such as Amazon o order management: systems track orders through fulfillment process, handling back orders and order changes as well as providing order status o inventory management: systems analyze sales activity and generate product orders as required  balance between cost of carrying excessive inventory and cost of lost orders due to product outage  modern inventory management seeks to minimize the investment in inventory o customer service: provide information about status of orders  used to process complaints, to respond to product/service issue and to receive returned good Manufacturing Systems ­ manufacturing information systems: support the transformation of materials into products ­ process inventory data for raw materials, work in process and finished goods, also concern production planning ­ 2 manufacturing philosophies o push production planning: organization creates a production plan/schedule and pushes goods through manufacturing and sales  produce 500 widgets, make them and sell them o pull production planning: responds to customer demand  as company sells goods, finished goods inventories fall and reduction in inventory triggers production of more good ­ whichever of the 2 philosophies used, manufacturer will choose a planning system to match ­ organizations that produce custom “one off” expensive products fall outside of push/pull categories ­ manufacturing scheduling and operations are additional functional systems ­ scheduling systems  help organization determine optimal methods of production o ex. Methods requiring less set up, less worker/machine idle time ­ manufacturing operations systems  control manufacturing plants and machines Human Resource Systems ­ functional systems for HR include payroll and related compensation systems  ex. Sick leave, vacation time ­ other HR function systems include those used for recruiting personnel and assessing ee performance ­ functional systems are used to categorize the skill of ee, their training requirements and training they have had ­ such systems feed HR planning systems to ensure that sufficient numbers of workers with appropriate skills will be available to fill needed job requirements Accounting Systems ­ accounting functional systems: support all of the organization’s accounting activities ­ general ledger, financial reporting, accounts receivable, accounts payment systems ­ cost accounting, budgeting, cash management, treasury management ­ key improvements in account systems  reduction in time required to provide results ­ managers need to know relationship of expenses as clos to when they actually occur as possible ­ management needs to close the books as close to the end of an accounting period as possible ­ Sarbanes OxleyAct (US) and Bill 198 (Budget Measures Act; Canada)  enacted to prevent corporate frauds like those perpetrated by directors at Enron and WorldCom o Requires management to create internal controls to provide more reliable financial statements and protect the organization’s assets Why are Functional Systems Changing? ­ fig 7.5  functional system problems ­ 1. Data is duplicated because each application has its own database, data may be inconsistent  potential lack of data integrity  inconsistent data will cause inconsistent application results ­ 2. Disjointed  no easy way for sales/marketing system to integrate activity with account for example  process is disjointed across functional applications ­ 3. Lack of Integrated Enterprise information  obtaining consolidated statement about the customer’s order will require processing each of these systems, with possibly inconsistent data ­ 4. Inefficiency  department can make decisions based only on the isolated data that it has; overall efficiency occurs when all activities are considered together WHAT IS THE IMPORTANCE OF INDUSTRY STANDARD PROCESSES? ­ wanted to develop info system that would integrate several different areas in an entire value chain ­ business process design aka business process redesign  central idea: organizations should not simply automate/improve existing functional systems ­ another approach: to est more efficient business processes that integrate the activities of all departments involved in a value chain o orgs began to design new cross departmental business processes  goal to take advantage of as many activity linkages as possible Challenges of Business Process Design ­ process design projects are expensive and difficult ­ 2 reasons 1. Business processes are complex and require many people to agree on changes to be made  time and effort 2. Employees resist change  people don’t want to work for someone new, work in new ways, have departments reorganized ­ outcomes of business process design are uncertain Benefits of Industry Standard Processes ­ mid 1990s  successful software vendors began to market pre made integrated applications, with built in industry standard processes ­ when organization acquires the application from companies like Oracle or SAP process for using the software are built in or industry standard processes ­ organization must conform al its activities to these processes ­ if software is designed well  industry standard process will effectively integrate activities across departments ­ fig 7-7 ­ when an organization licenses cross departmental software, primary benefit may not be software but that it’s tried and tested and company can benefit immediately  saves org time, expense, process of design ­ disadvantages: o industry standard processes may be very different from existing processes and require organization to change substantially  disruptive o can also make it difficult for orgs to differentiate themselves so they can radically alter the basis for competition WHATARE CRM SYSTEMS? ­ a type of cross functional system Customer Relationship Management (CRM) ­ customer relationship management systems: support the b
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