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Chapter 7, 8. Information Technology For Management 4 th Edition Turban, McLean, Wetherbe John Wiley & Sons, Inc. Basic Information Systems. Functional Areas in a Business. Compensation Vacation Skills/Training. A/R A/P Payroll General Ledger. Receiving Fulfillment Process control

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Chapter 7 8 l.jpg
Chapter 7, 8

Information Technology For Management 4th Edition

Turban, McLean, Wetherbe

John Wiley & Sons, Inc.

Basic Information Systems

Chapter 7

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Functional Areas in a Business

  • Compensation

  • Vacation

  • Skills/Training

  • A/R

  • A/P

  • Payroll

  • General Ledger

  • Receiving

  • Fulfillment

  • Process control

  • Purchasing

  • Cash Management

  • Asset Management

  • Budgeting

  • Retail Pricing

  • Sales Promotions

  • Sales Force Management.

  • Customer Loyalty

  • Interactive Marketing

  • Order Taking

  • CRM

  • Self-service

Chapter 7

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Functional Areas– Value Chain Perspective

The value chain model, views activities in organizations as either primary (reflecting the flow of goods and services) or secondary (supporting the primary activities). The organizational structure of firms is intended to support both of these types of activities.

Chapter 7

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Functional Areas – Supply Chain Perspective

The supply chain is a business process that links all the procurement from suppliers, the transformation activities inside a firm (the value chain) and the distribution of goods or services to customers via wholesalers and retailers.

Chapter 7

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Functional Information Systems

Functional information systems support the organization, processes and business model.

  • Composed of smaller systems:A functional information system consists of several smaller information systems that support specific activities performed in the functional area.

  • Integrated or independent:The specific IS applications in any functional area can be integrated to form a coherent departmental functional system, they can be integrated across departmental lines to match a business process or be completely independent.

  • Interfacing:Functional information systems may interface internally with each other to form the organization-wide information system or externally systems outside the organization.

  • Supportive of different levels:Information systems applications support the three levels of an organization’s activities: operational, managerial, and strategic

Enterprise Wide Environment– All business units.

Chapter 7

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Functional Information Systems

Data Analysis and statistical forecasting.

Datamining ops that support management

Dynamic and what-if features.


Clerical documents, schedules, mail, manuals, etc.

Back office administrative tasks and ops.

Business transactions, events and processes. Support of the business and customers.

Operation Level of the company is normally highly structured and predefined.

Run The Company

Chapter 7

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Supply and Value Chains

Supply chain refers to the flow of materials, information, payments, and services from raw material suppliers, through factories and warehouses (Value Chain), to the final consumer (Demand Chain). It includes tasks such as purchasing, payment flow, materials handling, production planning & control, logistics & warehousing, inventory control, and distribution. When it is managed electronically it is referred to as an e-supply chain.

  • Supply Chain Flows

    • Materials flows are all physical products, new materials, and supplies that flow along the chain.

    • Information flows relates to all data associated with demand, shipments, orders, returns and schedules.

    • Financial flows include all transfers of money, payments, credit card information, payment schedules, e-payments and credit-related data.

Supply Chains contribute to increased profitability and competitiveness

Chapter 7

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Supply Chains Components

  • The supply chain involves three segments:

    • Upstream, where sourcing or procurement from external suppliers occur

    • Internal, where packaging, assembly, or manufacturing take place

    • Downstream, where distribution or dispersal take place, frequently by external distributors.

  • It also includes the movement of information and money and the procedures that support the movement of a product or a service.

  • Organizations and individuals are also part of the chain.

Chapter 7

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Supply Chains Classifications

  • There are several major types of supply chain

    • Integrated make-to-stock

    • Continuous replenishment

    • Build-to-order

    • Channel assembly.

“Supply” Chain

Value Chain

Demand Chain

Chapter 7

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Supply Chain Problems

Adding value along the chain is essential for competitiveness, however problems exist especially in complex or long chains and in cases where many business partners are involved. These problems are due to uncertainties and the need to coordinate several activities, internal units, and business partners.

  • Demand forecasts are a major source of uncertainties

    • Competition

    • Prices

    • Weather conditions

    • Technological development

    • Customer confidence

  • Uncertainties exist in delivery times

    • Machine failures

    • Road conditions

    • Shipments

  • Quality problems may also create production delays

Chapter 7

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Supply Chain Problems continued

The bullwhip effect refers to erratic shifts in orders up and down the supply chain because of poor demand forecasting,

price fluctuation, order batching, and rationing within the chain.

Even slight demand uncertainties and variability become magnified if each distinct entity, on the chain, makes ordering and inventory decisions with respect to its own interest above those of the chain. Distorted information can lead to tremendous inefficiencies, excessive inventories, poor customer service, lost revenues, ineffective shipments, and missed production schedules.

A common way to solve the bullwhip problem is by sharing information along the supply chain through EDI, extranets, and groupware technologies. For example employing a vendor-managed inventory(VMI) strategy, the vendor monitors inventory levels and when it falls below the threshold for each product this automatically triggers an immediate shipment.

Chapter 7

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Supply Chain Solutions

Information sharing among supply chain partners (c-commerce) sometimes referred to as the collaboration supply chain is one method to overcome problems in the flow. Others are:

  • Optimal Inventory Levels

  • Supply Chain Coordination and Collaboration

  • Supply Chain Teams

  • Performance Measurement and Metrics

  • Various IT-Assisted Solutions

    • wireless technology

    • optimal shipping plans

    • strategic partnerships with suppliers

    • just-in-time

Chapter 7

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ERP and Supply Chains

Enterprise Resource Planning

ERPor enterprise systemscontrol all major business processes with a single software architecture in real time.

  • It is comprised of a set of applications that automate routine back-end operations:

    • such as financial management

    • inventory management

    • Scheduling

    • order fulfillment

    • cost control

    • accounts payable and receivable,

  • It includes front-end operations such as:

    • POS

    • Field Sales

    • Service

  • It also increases efficiency, improves quality, productivity, and profitability.

Chapter 7

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ERP Reality

  • Complete systems can cost tens of millions of dollars

  • Implementation can take several years

  • Companies may lose flexibility

Chapter 7

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What is SAP?Systems Applications and Products in Data Processing

  • SAP is the leading global provider of client/server business application solutions

  • SAP is the number one vendor of standard business applications software

  • SAP is the fifth largest independent software supplier in the world

Chapter 7

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Electronic Commerce

Interorganizational Systems:


Electronic storefront

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Market ExchangeInterorganizational Structure

  • Vertical integration

    Multiple activities in the same firm

    • Risk: range of expertise required

  • Selective sourcing

    Some outsourced activities

    • Risk: control of outsourcer

  • Virtual corporation

    Coordination of separate activities

    • Risk: loss of core competency

  • Chapter 7

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    • Do we benefit from electronic commerce?

    • Do we use information to add value to customers?

    • Are we managing the product/service channel?

    • Have we redesigned business with our partners to take advantage of technology and provide security

    • Do we have partners with shared vision and common purpose?

    • Do we have the right infrastructure?

    Chapter 7

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    External / Internal Hosting

    • Outside (Cheaper)

      • minimize bandwidth and hardware problems

      • use external experts

      • installed infrastructure

      • little additional staffing required

    • Inside (More Control)

      • dependent on third party reliability

      • possible single vendor software solutions

      • possible single vendor payment scheme

    Chapter 7

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    External / Internal Hosting

    • External better at storefronts

      but requires close integration with core business

    • Internal better at business to business

      but often creates a self-contained replicated system that can be outsourced

    Chapter 7

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    • Credit Cards

      SET (Secure Electronic Transaction) with http

    • Electronic Checks

      Public/private key transactions with banks

    • Electronic Cash

      3rd party software to create virtual cash

    • EDI/EFT

      Value added network using 3rd party. Common in business to business.

    Chapter 7