Learning Outcomes

LO1 Analyse the information requirements of organisations.

 
LO2 Discuss the types of information systems that are used within all levels of an organisation.
 
LO3 Demonstrate the use of an information system to produce management
information.
 
LO4 Evaluate the effectiveness of strategic information systems.
 What is Information System?
• IS – a set of interrelated components
working together to collect, retrieve,
process, store, and distribute information
for the purpose of facilitating planning,
control, coordination, analysis, and
decision making in business organizations

• Input-process-output perspective

• People-organization-technology
perspective
IS in Business
• Business functions
• Business processes
• A series of interrelated activities through which work is organized and focused to produce a
product or service

• Business levels
• Strategic (long range planning)
• Tactical (co-ordinate & supervise)
• Operational (produce product & service)
The Order Generation And Fulfillment Process
The Need for SIS
Role of IS in Business
• Competitive advantage
• Low-cost (value chain)
• Market niche
• Product differentiation
• Customer loyalty

• Globalization
• People (language)
• Organization (culture)
• Technology (telecommunication)
 Basic Activities And Information System Needs

•The value chain views the firm as a series of basic activities

that add value to a firm's products or services

•Primary activities
Inbound logistics,
Operations,
Outbound logistics,
Sales and marketing service

•Support activities
Administration and management
Human resources
Technology and procurement.
 The Business Value Chain Model

Highlights specific activities in a business

where competitive strategies can best be
applied and where information systems
are likely to have a strategic impact
- Primary activities
- Support activities
- Benchmarking
- Best practices

This figure provides examples of systems for both primary and support activities of a firm and of its
value partners that would add a margin of value to a firm’s products or services.
• Quality
• Process simplification
• Benchmarking
• Customer focus
• Cycle time reduction
• Improve design & production
• Error reduction

• Reengineering
• Business processes redesign

• Ethical & social responsibility

• Information rights & privacy
• Intellectual property
• Accountability & liability
• Quality of life
IS Approach to Problem Solving

Systems Analysis

Systems Design
Systems Analysis & Design

• Systems Analysis
• Problem analysis (what)
• Information gathering (where & why)
• Decision making (how)
• Establish objectives
• Determine feasibility
• Choose best solution

• Systems Design (Input, Process, Output, Procedures, Control)

• Logical design
Systems Analysis & Design
• Systems Design
• Logical design (what will the system do?)
• Input: content, format, source, volume, frequency, timing
• Process: rule, model, formula, timing
• Output: content, format, organization, volume, freq., timing
• Storage: data, format, organization, relationship, volume
• Procedure: manual activities, rule, sequence, timing, location
• Control: security, accuracy, validity, supervision

• Physical design (how the system will work?)

• Input: keyboard, voice, scanner
• Process: PC, operating system, software
• Output: print-outs, files, audio
• Storage: tape, CD
• Procedure: batching, backup, auditing, data entry
• Control: batch control, password, audit logs

• Implementation (coding, testing, training)

Choice Hotels Reservation System example:
Key Components of Management Information System
• Potential inputs and outputs for each
• Technology – the means by which data is functional area
transformed and organized for business use:
• Note the kinds of data needed by each
• Hardware area and how people use the data
• Software • Information systems maintain
• Database relationships between all functional
areas and processes
• Telecommunication

• People – the users of IS

• Organization -- a collection of functional units

working together to achieve a common goal
Functional Areas of Operation (cont’d.)

• Functional areas are interdependent

Each requires data from the others

• Better integration of functional areas

leads to improvements in
communication, workflow, and success
of company

• Information system (IS): Computers,

people, procedures, and software that
store, organize, and deliver information

15
Business Processes
• Collection of activities that takes one or more kinds
of input and creates an output that is of value to
customer
• Customer can be traditional external customer or internal
customer
• Thinking in terms of business processes helps
managers to look at their organization from the
customer’s perspective
Business Processes (cont’d.)
• Businesses must always consider customer’s
viewpoint in any transaction
• Successful customer interaction
• Customer (either internal or external) is not required to
interact with each business function involved in the
process
• Successful business managers view business
operations from the perspective of a satisfied
customer
• Sharing data effectively and efficiently between and
within functional areas leads to more efficient
business processes
• Integrated information systems: Systems in which
functional areas share data
Business Processes (cont’d.)

• Businesses take inputs (resources)

and transform these inputs into
goods and services for customers
• Inputs: Material, people, equipment

• Managing inputs and business

processes effectively requires
accurate and up-to-date information
Functional Areas and Business Processes
of a Very Small Business – Exercise 1

• Example: A fictitious coffee shop

• Examine business processes of the coffee shop
• See why coordination of functional areas helps
achieve efficient and effective business processes
• Look at how integration of the information system
improves the business
Marketing and Sales
• Needs information from all other functional
areas

• Customers communicate orders to M/S in

person or by telephone, e-mail, fax, the
Web, etc.

• M/S has a role in determining product

prices
• Pricing might be determined based on a
product’s unit cost, plus some percentage
markup
• Requires information from Accounting and
Finance, and Supply Chain Management
data
Marketing and Sales (cont’d.)
• M/S needs to interact with Human Resources to
exchange information on hiring needs, legal
requirements, etc.
• Inputs for M/S
• Customer data
• Order data
• Sales trend data
• Per-unit cost • Outputs for M/S

• Company travel expense policy • Sales strategies

• Product pricing
• Employment needs
• Needs information from various functional areas
Supply Chain Management
• Production plans based on information about
product sales (actual and projected) that comes
from Marketing and Sales
• With accurate data about required production
levels: • Supply Chain Management data and
records can:
• Raw material and packaging can be ordered as • Provide data needed by Accounting
needed and Finance to determine how much
of each resource was used
• Inventory levels can be kept low, saving money
• Support the M/S function by providing
information about what has been
produced and shipped
• Supply Chain Management interacts in
some ways with Human Resources
Supply Chain Management (cont’d.)
 Accounting and Finance
• Needs information from all other
functional areas
• A/F personnel:
• Record company’s transactions in
the books of account

• Record accounts payable when raw

materials are purchased and cash • People in other functional areas provide data to A/F
outflows when they pay for
materials • M/S provides sales data
• Summarize transaction data to • SCM provides production and inventory data
prepare reports about company’s • HR provides payroll and benefit expense data
financial position and profitability

• M/S personnel require data from A/F to evaluate

customer credit
Accounting and Finance (cont’d.)
• Inputs for A/F
• Payments from customers
• Accounts receivable data
• Accounts payable data
• Sales data
• Production and inventory data
• Outputs for A/F
• Payroll and expense data
• Payments to
suppliers
• Financial reports
• Customer credit data
• Functions of Human
Human Resources
Resources
• Recruit, train, evaluate,
and compensate employees

• HR uses sales forecasts

developed by the
individual departments to
plan personnel needs

• Systems integrated using

ERP software provide the
data sharing necessary
between functional areas
 Human Resources (cont’d.)
• Observing governmental
regulations in recruiting,
training, compensating,
promoting, and terminating •Outputs for HR
employees • Regulation compliance
• Employee training and certification
• Inputs for HR • Skills database
• Employee evaluation and compensation
• Personnel forecasts
• Skills data
Other Functional Areas of Business
• The manufacturing and production function is
responsible for producing the firm's goods and
services. There are three stages of the
manufacturing/ production process:
• inbound logistics
• production
• outbound logistics
Computer vs IS literacy
Technology perspective to problem solving
Organizational perspective to problem solving
People perspective to problem solving
 Introduction – ERP System
• Enterprise Resource Planning (ERP)
programs: Core software used by
companies to coordinate information in
every area of business
• Help manage companywide business processes
• Use common database and shared
management reporting tools

• Business process: Collection of activities

that takes some input and creates an
output that is of value to the customer
 Functional Areas and Business Processes of ERP
• Marketing and Sales (M/S)
• To understand ERP,
• Supply Chain Management (SCM)
you must understand
• Accounting and Finance (A/F)
how a business works
• Human Resources (HR)
• Functional areas of • Business functions: Activities specific to a
operation functional area of operation
• Business processes
ERP (cont’d.)
• Significant amount of data is maintained by and
shared among the functional areas
• Timeliness and accuracy of these data critical to
each area’s success and to company’s ability to
make a profit and generate future growth
• ERP software allows all functional areas to share
a common database
• Allows accurate, real-time information to be available
Summary
• Basic functional areas: Marketing and Sales, Supply Chain Management, Accounting
and Finance, and Human Resources
• Marketing and Sales: Sets product prices, promotes products through advertising and
marketing, takes customer orders, supports customers, and creates sales forecasts
• Supply Chain Management: Develops production plans, orders raw materials from
suppliers, receives raw material, manufactures products, maintains facilities, and ships
products to customers

• Employees working in one functional area need data from employees in

other functional areas
• Functional area information systems should be integrated, so shared data
are accurate and timely
• Managers think in terms of business processes that integrate the
functional areas
• Need to share information between functions and functional areas
• ERP software provides this capability by means of a single common
database
• Accounting and Finance: Financial accounting to provide
Summary (cont’d.)
summaries of operational data in managerial reports, controlling
accounts, planning and budgeting, and cash-flow management
• Human Resources: Recruits, hires, trains, and compensates
employees, ensures compliance with government regulations,
and oversees the evaluation of employees
• Information systems capture, process, and store data to provide
information needed for decision making