Information Systems Today

Eighth Edition, Global Edition

Chapter # 6
Enhancing Business
Processes Using Enterprise
Information Systems

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 Learning Objectives
• 6.1 Explain core business processes that are common in organizations.

• 6.2 Describe what enterprise systems are and how they have evolved.

• 6.3 Describe enterprise resource planning systems and how they help to
improve internal business processes.

• 6.4 Understand and utilize the keys to successfully implementing enterprise

systems.

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Electronic Business: E-Commerce and
E-Government
• Learning Objective:
Explain core business
processes that are common
in organizations.

• Core Business Processes

• Organizational Activities Along the Value Chain
• Value Systems: Connecting Multiple Organizational Value
Chains
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Organizations and Functions

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Core Business Processes
• Order-to-Cash
– The process of selling goods or services and collecting
revenue for them
• Procure-to-Pay
– The process of ordering goods or services and paying
for them
• Make-to-Stock/Make-to-Order
– The process of manufacturing goods, either based on
forecasts or based on orders

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The Order-to-Cash Process

• Functional Areas in Order-to-Cash

– Sales and Marketing
– Accounting and Finance
– Manufacturing and Operations
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The Procure-to-Pay Process

• Functional Areas in Procure-to-Pay

– Supply Chain Management
– Accounting and Finance
– Manufacturing and Operations

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The Make-to-Stock and Make-to-Order
Processes

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An Example Supply Chain

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Organizational Activities Along the Value
Chain

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Value Systems: Connecting Multiple
Organizational Value Chains

Source: Based on Porter and Millar (1985), Christensen (1997)

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Enterprise Systems
• Learning Objective:
Describe what enterprise
systems are and how they
have evolved

• The Rise of Enterprise Systems

• Supporting Business Processes

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The Rise of Enterprise Systems
• Standalone Applications (Legacy Systems)
– Each department had their own proprietary
systems that were not designed to
communicate with other systems
– Information reentered from one system to the
next manually
• Enterprise System (Integrated Suite)
– All departments are integrated into one system
– No duplication of data and more efficient
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Standalone Systems

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Integrated Enterprise Systems

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Supporting Business Processes:
Internally Focused Systems

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Supporting Business Processes:
Externally Focused Systems

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Improving Business Processes Through
Enterprise Systems
• Packaged software (off-the-shelf software) is
written by third-party vendors for the needs of
many users
• Custom software (developed by contractors) is
designed for a specific organization.
• Enterprise systems are designed in modules with
components that can be selected as needed
• Modules are designed around functional areas (e.
g., accounting, human resources, etc.)
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Business Process Management
• Business Process
Management
– Actively managing
business processes
– Using a structured
approach
– May be ongoing
– Many include radical
process
reengineering

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Enterprise Resource Planning
• Learning Objective:
Describe enterprise
resource planning systems
and how they help to
improve internal business
processes.
• Responding to Compliance and Regulatory Demands
• Choosing an ERP System
• Enabling Business Processes Using ERP Core Components
• ERP Installation
• ERP Limitations
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Responding to Compliance and
Regulatory Demands
• ERP systems have built-in control systems
– Mirror organizational processes
– Support segregation of duties
– Monitor business activities
• ERP systems don’t solve all compliance
problems, but they help a lot

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Choosing an ERP System
• ERP Control
– Centralized or decentralized across business units
– Policies and procedures
▪ Do they need to be flexible?
▪ Do they need to be standardized?

• ERP Business Requirements

– What modules are available?
– How well do they meet specific business needs?

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Enabling Business Processes Using ERP
Core Components
• ERP systems support core business processes
• Assist with:
– Order-to-cash
– Procure-to-pay
– Make-to-stock/Make-to-order
– Other business processes

• Often packaged industry-specific ERP versions

– Support industry-specific core processes
▪ Health care
▪ Automotive
▪ Construction
▪ Retail
▪ Specialized manufacturing industries
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ERP Installation
• Configuration is critical
– Specifying the data to be in the underlying
database
– Thousands of decisions related to business
processes
– Companies need to understand how they do
business to implement and configure their
ERP systems

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ERP Limitations
• ERP systems often require organizations to
change their business processes
• Once implemented, a company is locked in
• Difficult and costly to make future changes
• Modifications require extra costly
programming

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Achieving Enterprise System Success
• Learning Objective:
Understand and utilize the
keys to successfully
implementing enterprise
systems
• Secure Executive Sponsorship
• Get Help from Outside Experts
• Thoroughly Train Users
• Take a Multidisciplinary Approach to Implementations
• Evolve the Implementation

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ERP Recommendations
• Recommendations
– Secure executive sponsorship
– Get help from outside experts
– Thoroughly train users
– Take a multidisciplinary approach to
implementations
– Evolve the implementation

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Secure Executive Sponsorship
• Executive Sponsorship is Critical
– Primary reason for ERP failure
– Critical for buy-in
– Dictates resource availability
– Necessary to authorize business improvements
– Key to removing obstacles

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Get Help from Outside Experts
• ERP systems are very complex
• Typically, IS departments aren’t familiar
with new systems
• Experts can help
– Specify needs
– Select a suitable vendor
– Manage the implementation project
– Provide technical expertise
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Thoroughly Train Users
• ERP systems are complex from the user
perspective as well
– Training costs are often poorly judged
– When systems go live it takes employees time
to regain productivity
• Proper training can:
– Alleviate concerns
– Mitigate productivity loss
– Set expectations
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Take a Multidisciplinary Approach to
Implementation
• ERP systems often affect the entire
organization
– The entire organization is a stakeholder
– The entire organization needs involvement
– Failure to have representatives can result in
unmet critical needs
– The project team can’t be experts in every aspect
of user needs
– Departments may become hostile if left out of the
implementation and needs assessment
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Evolve the Implementation
• Recent trend is to move away from large-
scale ERP
– Using cloud-based ERP allows scalability and
agility
• Another trend: managing businesses in real
time
– Take advantage of in-memory computing and
mobile access

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END OF CHAPTER CONTENT

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Managing in the Digital World:
Amazon.com
• Amazon has grown from an online bookstore to a
complete marketplace
– Almost any product can be purchased through Amazon
– Amazon uses enterprise information systems to
optimize processes, and it now provides this to others
– Amazon Web Services (AWS) is an IS infrastructure
rented to companies for their enterprise system needs
– AWS provides cloud services and hosting for other
companies

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Green IT: Why Your Enterprise Systems
Should Be in the Cloud
• Green IT refers to using computers resources more
efficiently and environmentally responsible
• Big part of Green IT movement focuses on cloud
computing
• One benefit of moving IT to the cloud is that the
organization will become known as a sustainable
business
• Benefits include:
– Low capital outlays, lower operating costs, better IT
resource utilization, increased security, and better ability to
adjust to demand changes
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Ethical Dilemma:
Too Much Intelligence? RFID and Privacy
• RFID tags being used to tag pharmaceuticals
– RFID tags can be read by anyone with an RFID
reader, creating concerns that a person’s
medications could be revealed
• RFID chips can be embedded in people
– Mexico’s attorney general and senior staff
– Alzheimer’s and diabetes patients
– Implant in kids to prevent kidnapping
• Lots of public opposition, what are the
dangers?
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Coming Attractions: Internet of Things
Will Transform ERP and Organizations
• The IoT refers to a broad range of physical objects
that are interconnected and automatically share data
over the Internet
• The integration of “things” will significantly transform
the way organizations do business
• Complex machines can have dozens of sensors to
provide massive amounts of data
• When IoT technologies provide data for enterprise-
wide systems, the enterprise will have a better
understanding of virtually every aspect of the business
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Security Matters: To Update or Not to
Update, That Shouldn’t Be the Question
• Virtually all software has known or unknown flaws
• In May 2016 36 unmanned organizations were
running misconfigured or outdated SAP software
• Many organizations fail to upgrade their systems
because they feel new features are not needed
• Failing to upgrade an ERP system can be
problematic and risks the entire company
• Given the size, scope, and complexity, a system
failure can lead an organization to bankruptcy
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Who’s Going Mobile: Big ERP Systems
Embracing Small Mobile Devices
• ERP users originally used client PCs to access ERP
systems
• Mobile users can now access ERP systems on the road
• There are many benefits to mobile ERP
– Improved service quality
– Improved productivity
– Strengthened customer relationships
– Improved competitive advantages
– Improved data timeliness and accuracy
• Examples: SAP, Microsoft
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When Things Go Wrong: Software Error
Frees Prisoners Early and Is Linked to Killings
• U.S. has highest incarceration rate in the world
• In 2015 a software glitch was blamed for the early
release of 3,200 prisoners
• Software problem discovered when a crime victim
believed a convicted prisoner was released early
• Two of those prisoners were involved in a murder
• A few of them were apprehended that were living
positive lives and resulted in an unwelcomed
surprise
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Industry Analysis:
The Automobile Industry
• More than 800 million cars on the road, 83 million
sold worldwide since 2013
– Sales predicted to climb to 100 million by 2018
– China, Brazil, Russia, India, other developing countries

• Growing global demand for energy-efficient cars

• Auto industry efforts:
– Evolving global network of suppliers
– Broader supply chains bring new innovations to market
– USB ports, hard drives, mobile data connectivity
– Google working on a self-driving car
– Marketing enhancements vis virtual showrooms
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Copyright © 2018, 2016, 2014 Pearson Education, Ltd. All Rights Reserved