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Chapter 8-1

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Administrative Studies
ADMS 2511
Donna Rex

Chapter 8: Define and explain the role of Transaction Processing Systems (TPS)  Transaction Processing System (TPS) monitor, collect, store, and process data generated from all business transactions. o These pieces of data are inputs to the organization's database. In the modern business world, they also are inputs to the functional information systems, decision support systems, customer relationship management, knowledge management, and e-commerce. o TPSs have to handle high volume and large variations in volume (for example, during peak times) efficiently, avoid errors and downtime, record results accurately and securely, and maintain privacy and security. o Avoiding errors is particularly critical, because data from the TPSs is input into the organization's database and must be correct o Regardless of the specific data processed by a TPS, a fairly standard process occurs, whether in a manufacturing firm, a service firm, or a government organization.  First, data is collected by people or sensors, and entered into the computer via an input device. Generally speaking, organizations try to automate the TPS data entry as much as possible because of the large volume involved, a process called source data automation.  Next, the system processes data in one of two basic ways: batch processing or online processing. (see next ?) Understand the two basic ways that systems process data  In batch processing, the firm collects data from transactions as they occur, placing it in groups or batches. The system then prepares and processes the batches periodically (say, every night).  Traditional TPSs are centralized. In Real Time Transaction Processing, business transactions are processed online as soon as they occur. o For example, when you pay for an item at a store, the system records the sale by reducing the inventory on hand by a unit, increasing the store's cash position by the amount you paid, and increasing sales figures for the item by one unit—by means of online technologies and in real time. Describe and explain the role and use of functional area information systems (FAIS)  functional area information systems (FAIS) provide information mainly to lower- and middle-level managers in the functional areas. o The managers use this information to help them plan, organize, and control operations. o The information is provided in a variety of reports. o the FAISs access data from the corporate databases. However, to create management reports the FAISs also use data from external databases. Be able to discuss the different functional activities that are supported by an FAIS  Typical function-specific systems are accounting, finance, marketing, production/operations (POM), and human resources management. (LOOK AT TABLE 8.1!!!) Describe the three types of reports that are generated by an FAIS and be able to provide examples and applications of these reports  Routine Reports are produced at scheduled intervals. o They range from hourly quality control reports to daily reports on absenteeism rates. o Although routine reports are extremely valuable to an organization, managers frequently need special information that is not included in these reports.  Other times they need the information but at different times (“I need the report today, for the last three days, not for one week”). Such out-of-the routine reports are called Ad Hoc Reports. o Ad-hoc reports also can include requests for the following types of information:  Drill down reports – show greater detail (sales by stor)e and sales by salesperson  Key indicator reports – summarize the reports of critical activities (cash flow and cash on hand haha bubbles)  Comparative reports – comparing reports of different business units  Exception reports include only information that falls outside of certain threshold standards. o To implement management by exception, management first creates performance standards. The company then sets up systems to monitor performance (via the incoming data about business transactions such as expenditures), compare actual performance to the standards, and identify predefined exceptions. o Managers are alerted to the exceptions via exception reports. Be able to discuss the level within the organization that provides the primary users of each type of information system Define and describe an Enterprise Resource planning (ERP) system  Enterprise Resource planning (ERP) system integrate the planning, management, and use all of an organization's resources. o The major objectives of ERP systems are to tightly integrate the functional areas of the organization and to enable information to flow seamlessly across the functional areas. o Tight integration means that changes in one functional area are immediately reflected in all other pertinent functional areas. o ERP systems provide the information necessary to control the business processes of the organization.  A business process is a set of related steps or procedures designed to produce a specific outcome.  Business processes can be located entirely within one functional area, such as approving a credit card application or hiring a new employee.  They can also span multiple functional areas, such as fulfilling a large order from a new customer.  Customer relationship management and supply chain management, discussed in the next two sections, are examples of business processes (and thus of information systems) that span multiple functional areas. Be able to discuss the advantages and disadvantages of an ERP system  Advantages: o Read Case 8.1 for advantages  Disadvantages: o To begin with, they can be extremely complex, expensive, and time consuming to implement. o Also, as we saw in the IGT case, companies may need to change existing business processes to fit the predefined business processes of the software. For companies with well-established procedures, this requirement can be a huge problem. o Finally, companies must purchase the entire software package even if they require only a few of the modules. For these reasons, ERP software is not attractive to everyone. Understand how an ERP facilitates the operation and control of an entire business process and which ERP modules support different business processes  ERP software includes a set of interdependent software modules, linked to a common database that provides support for the internal business processes in the following functional areas: finance and accounting, sales and marketing, manufacturing and production, and human resources.  The modules are built around predefined business processes, and users access them through a single interface.  The business processes in ERP software are often predefined by the best practices that the ERP vendor has developed.  Best Practices are the most successful solutions or problem-solving methods for achieving a business objective.  The following business processes are supported by ERP modules: o Financial and accounting processes: general ledger, accounts payable, accounts receivable, fixed assets, cash management and forecasting, product-cost accounting, cost-centre accounting, asset accounting, tax accounting, credit management, financial reporting o Sales and marketing processes: order processing, quotations, contracts, product configuration, pricing, billing, credit checking, incentive and commission management, sales planning o Manufacturing and production processes: procurement, inventory management, purchasing, shipping, production planning, production scheduling, material requirements planning, quality control, distribution, transportation, plant and equipment maintenance o Human resources processes: personnel administration, time accounting, payroll, personnel planning and development, benefits accounting, applicant tracking, compensation, workforce planning, performance management Describe the basic characteristics of CRM (customer relationship management) and SCM (supply chain management) systems  CRM (customer relationship management is an enterprisewide effort to acquire and retain customers. o CRM recognizes that customers are the core of a business and that a company's success depends on effectively managing its relationships with them. o CRM focuses on building long-term and sustainable customer relationships that add value both for the customer and the company. o CRM includes a one-to-one relationship between a customer and a seller.  To be a genuine one-to-one marketer, a company must be willing and able to change its behaviour toward a specific customer, based on what it knows about that customer. o In essence, CRM is based on a simple idea: Treat different customers differently. For example, “good” customers account for about 80 percent of a company's profits, but they account for only 20 percent of its customers.  SCM (supply chain management) is to plan, organize, and optimize the supply chain's activities. o Like other functional areas, SCM utilizes information systems. o The goal of SCM systems is to reduce friction along the supply chain. o Friction can involve increased time, costs, and inventories as well as decreased customer satisfaction. o SCM systems, then, reduce uncertainty and risks by decreasing inventory levels and cycle time and improving business processes and customer service. o All of these benefits contribute to increased profitability and competitiveness. Describe an Inter-organisational Information System (IOS) and the issues associated with global IOS design  Inter-organisational Information System (IOS) involves information flows among two or more organizations. o By connecting the information systems of business partners, IOSs enable the partners to perform a # of tasks:  reduce the costs of routine business transactions  improve the quality of the information flow by reducing or eliminating errors  compress the cycle time involved in fulfilling business transactions  eliminate paper processing and its associated inefficiencies and costs  make the transfer and processing of information easier for users ISSUES IN GLOBAL IOS DESIGN  Interorganizational systems that connect companies located in two or more countries are referred to as Global Info Systems. Regardless of its structure, a company with global operations relies heavily on IT. The major benefits of global information systems for such organizations are effective communication at a reasonable cost and effective collaboration that overcomes differences in distance, time, language, and culture.  The task of designing any effective IOS is complicated. It is even more complex when the IOS is a global system, because of differences in cultures, economies, and politics among parties in different countries. Some countries are erecting artificial borders through local language preference, local regulation, and access limitations. Some issues to consider in designing global IOSs are cultural differences, localization, economic and political differences, and legal issues. o CULTURAL DIFFERENCES  Culture consists of the objects, values, and other characteristics of a particular society.  It includes many different elements ranging from tradition to legal and ethical issues to what types of information are considered offensive.  When companies plan to do business in countries other than their own, they must consider the cultural environment. o LOCALIZATION  Many companies use different names, colours, sizes, and packaging for their overseas products and services. This practice is referred to as localization, which means that products and services are modified for each locality.  In order to maximize the benefits of global information systems, the localization approach also should be used in the design and operation of such systems.  For example, many websites offer different language and/or currency options, as well as special content. o ECONOMIC AND POLITICAL DIFFERENCES  Countries also differ considerably in their economic and political environments. One result of such variations is that IT infrastructures often differ from country to country.  For example, many countries own the telephone services or control communications systems very tightly. o For example, France insisted for years that French should be the sole language on French websites. The country now permits websites to use other languages, but French still must appear in every site. China goes even further. The Chinese government controls the content of the Internet and blocks many websites from being viewed in the country. o LEGAL ISSUES  Legal systems differ considerably among countries.  As a result, laws and rules concerning copyrights, patents, computer crimes, file sharing, privacy, and data transfer vary from country to country.  All of these issues can affect what information is transmitted via global systems. For this reason, companies must consider these issues when they establish a global IS.  The impact of legal, economic, and political differences on the design and use of global information systems can be clearly seen in the issue of cross-border data transfer. The term trans border data flow refers to the flow of corporate data across national borders. o Several countries, such as Canada and Brazil, impose strict laws to control this transfer. o These countries usually justify their laws as protecting the privacy of their citizens, because corporate data frequently contains personal information. Other justifications are protecting intellectual property and keeping jobs within the country by requiring that data processing be done there. Be able to explain how CRM systems benefit both the customer and organizations Understand customer touch points and how a CRM provides applications that facilitate customer interaction within three major touch point areas  customer touch point is a method of interaction with a customer, such as telephone, e-mail, a customer service or help desk, conventional mail, a website, or a store.  Properly designed CRM systems provide a single, enterprisewide view of each customer.  These systems also provide customers with a single point of contact within the enterprise as well as a unified view of the enterprise.  CRM systems provide applications in three major areas: sales, marketing, and customer service. Let's take a look at each one. o SALES  Sales force automation (SFA) functions in CRM systems make salespeople more productive by helping them focus on the most profitable customers.  SFA functions provide data such as sales prospect and contact information, product information, product configurations, and sales quotes.  SFA software can integrate all the information about a particular customer so the salesperson can put together a personalized presentation for that customer. o MARKETING  CRM systems support marketing campaigns by providing prospect and customer data, product and service information, qualified sales leads, and tools for analyzing marketing and customer data. In addition, they enhance opportunities for cross-selling, up-selling, and bundling.  Cross selling refers to the marketing of complementary products to customers. o For example, a bank customer with a large balance in his or her chequing account
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