Chapter 10
Information Systems for Business Operations
V. LECTURE NOTES
SECTION I: Business Information Systems
10-1 Information Systems in Business:
As a prospective managerial end user you should have a general understanding of the major ways information systems are used to support each of the functions of business. The term business information systems is used to describe a variety of types of information systems (transaction processing, information reporting, decision support, etc.) that support the functions of business such as accounting, finance, marketing, or human resource management.
Analyzing Gulf States Paper
We can learn a lot about how information technology provides major business benefits in manufacturing and other functional areas of business from the Real World Case of Gulf States Paper Corporation.
Take a few minutes to read it, and we will discuss it (See Gulf States Paper Corporation in section XI).
10-2 Cross Functional Information Systems: [Figure 10.2]
Information systems can be grouped into business function categories, however, in the real world information systems are typically integrated combinations of functional information systems. Such systems support business processes, such as product development, production, distribution, order management, customer support, and so on. There is a strong emphasis in many organizations to develop such composite or cross-functional information systems that cross the boundaries of traditional business functions in order to reengineer and improve vital business processes. These organizations view cross-functional information systems as a strategic way to share information resources and improve the efficiency and effectiveness of a business, thus helping it attain its strategic objectives.
Applications of information systems in the functional areas of business include:
1. Production/Operations IS
2. Marketing IS
3. Financial IS
4. Accounting IS
5. Human Resource Management IS
Business firms are turning to Internet technologies to integrate the flow of information among
their internal business functions and their customers and suppliers. Companies are using the World Wide Web and their intranets and extranets as the technology platform for their cross-functional and interorganizational information systems.
In addition, many companies have moved from functional mainframe legacy systems to cross-functional client/server network applications. This typically has involved installing enterprise resource planning (ERP) or supply chain management (SCM) software. Instead of focusing on the information processing requirements of business functions, ERP software focuses on supporting the supply chain processes involved in the operations of a business.
10-3 Marketing Information Systems: [Figure 10.5]
The business function of marketing is concerned with the planning, promotion, and sale of existing products in existing markets, and the development of new products and new markets to better serve present and potential customers. Marketing information systems integrate the information flow required by many marketing activities.
Marketing information systems provide information for:
1. Internet/intranet web sites and services make an interactive marketing process possible where customers can become partners in creating, marketing, purchasing, and improving products and services.
2. Sales force automation systems use mobile computing and Internet technologies to automate many information processing activities for sales support and management.
3. Other marketing systems assist marketing managers in product planning, pricing, and other product management decision, advertising and sales promotion strategies, and market research and forecasting.
4. Planning, control, and transaction processing in the marketing function.
5. Strategic, tactical and operational information systems assist marketing managers in product planning, pricing decisions, advertising and sales promotion strategies and expenditures, forecasting market potential for new and present products, and determining channels of distribution.
6. Control Reporting Systems support the efforts of marketing managers to control the efficiency and effectiveness of the selling and distribution of products and services.
7. Analytical reports provide information on a firm's actual performance versus planned marketing objectives.
Interactive Marketing: [Figure 10.5]
The explosive growth of Internet technologies has had a major impact on the marketing function. The term interactive marketing has been coined to describe a type of marketing that is based on using the Internet, intranets, and extranets to establish two-way interaction between a business and its customers or potential customers. The goal of interactive marketing is to enable a company to profitably use those networks to attract and keep customers who will become partners with the business in creating, purchasing, and improving products and services.
Figure 10.5 summarizes several important ways that computer-based information systems support the marketing function. These include:
1. Interactive Marketing
2. Sales Force Automation
3. Sales Management
5. Product Management
5. Advertising and Promotion
6. Sales Forecasting
7. Market Research
8. Marketing Management
Note: The Internet has become the primary distribution channel of the new online marketing environment. Customers are not just passive participants who receive media advertising prior to purchase, but are actively engaged in a network-enabled proactive and interactive process.
Note that interactive marketing views prospective customers as belonging to many distinct market segments that must be approached differently online through targeted marketing techniques. Interactive marketing also encourages customers to become involved in product development, delivery, and service issues. This is enabled by various Internet technologies, including:
1. Usenet discussion groups
2. Web forms and questionnaires
3. E-mail correspondence
The expected outcomes of interactive marketing are a rich mixture of:
1. Vital marketing data
2. New product ideas
3. Volume sales
4. Strong customer relationships
Sales Force Automation
Increasingly, computers and networks are providing the basis for sales force automation. In many companies, the sales force is being outfitted with notebook computers that connect them to Web browsers, and sales contact management software marketing Web sites on the Internet, extranets, their company intranets. Characteristics of sales force automation include:
1. Increase in the personal productivity of salespeople
2. Dramatically speeds up the capture and analysis of sales data from the field to marketing managers at company headquarters.
3. Allows marketing and sales management to improve the support they provide their salespeople.
4. Many companies view sales force automation as a way to gain a strategic advantage in sales productivity and marketing responsiveness.
10-4 Sales and Product Management:
Sales managers must plan, monitor, and support the performance of the salespeople in their organizations. Computer-based systems produce sales analysis reports that analyze sales by product, product line, customer, type of customer, salesperson, and sales territory. Such reports help marketing managers monitor the sales performance of products and salespeople and help them to develop sales support programs to improve sales results.
Some of the benefits of Web-based sales force automation include:
1. Shorten the sales cycle through prequalification of prospects.
2. Increase revenue through targeted marketing
3. Automate the management and qualification of web leads.
4. Capture all customer information directly into sales databases.
5. Enhance order management with access to data on pricing, promotions, availability, production schedules, export regulations, carriers, and transportation schedules.
Product managers need information to:
Plan and control the performance of specific products, product lines, and brands.
Computers help provide price, revenue, cost, and growth information for existing products and new product development. Provide information and analysis for pricing decision is a major function of this system.
Information is also needed on the manufacturing and distribution resources proposed products will require.
Computer-based models may be used to evaluate the performance of current products and the prospects for success of proposed products.
Advertising and Promotion
Marketing managers need information to help them maximize sales at the lowest possible costs for advertising and promotion. Computers use market research information and promotion models to help:
Select media and promotional methods
Allocate financial resources
Control and evaluate results of various advertising and promotion campaigns.
Targeted Marketing: [Figure 10.10]
Targeted marketing has become an important tool in developing advertising and promotion strategies for a company’s electronic commerce web sites. Target marketing is an advertising and promotion management concept that includes five targeting components:
Community. Companies can customize their web advertising messages and promotion methods to appeal to people in specific communities. These can be communities of interest, such as virtual communities.
Content. Advertising such as electronic billboards or banners can be placed on various web site pages in addition to a company’s home page. These messages reach the targeted audience.
Context. Advertising appears only in web pages that are relevant to the content of a product or service. So advertising is targeted only at people who are already looking for information about a subject matter that is related to a company’s products.
Demographic/Psychographic. Marketing efforts can be aimed only at specific types or classes of people.
Online behaviour. Advertising and promotion efforts can be tailored to each visit to a site by an individual. This strategy is based on “web cookie” files recorded on the visitor’s disk drive from previous visits. Cookie files enable a company to track a person’s online behaviour at a web site so marketing efforts can be instantly developed and targeted to that individual at each visit to their web site.
Marketing Research and Forecasting
Market research information systems provide marketing intelligence to help managers make better marketing forecasts and develop more effective marketing strategies. Marketing information systems help market researchers, collect, analyze, and maintain an enormous amount of information on a wide variety of market variables that are subject to continual change. This includes:
Information on customers, prospects, consumers, and competitors.
Market, economic, and demographic trends are continually analysed
Data can be gathered from many sources, including a company’s databases, data marts and data warehouses, World Wide Web sites, and telemarketing services companies.
Statistical software tools can help managers analyze market research data, and forecast sales and other important market trends.
10-5 Manufacturing Information Systems
Manufacturing information systems support the production/operations function, which includes all activities concerned with the planning and control of the processes that produce
goods or services. The production/operations function is concerned with the management of the operational systems of all business firms. The planning and control information systems used for operations management and transaction processing support all firms that must plan, monitor, and control inventories, purchases, and the flow of goods and services.
Computer Integrated Manufacturing (CIM):
Computer-based manufacturing information systems use several major techniques to support computer-integrated manufacturing (CIM). CIM is an overall concept that stresses that the goals of computer use in factory automation must be to:
· Simplify - (reengineer) production processes, product designs, and factory organization as a vital foundation to automaton and integration.
· Automate - Production processes and the business functions that support them with computers and robots.
·Integrate - All production and support processes using computers and telecommunications networks.
Overall goal of CIM: - Is to create flexible, agile, manufacturing processes that efficiently product products of the highest quality. Thus, CIM supports the concepts of:
1. Flexible manufacturing systems
2. Agile manufacturing
3. Total quality management
Results of CIM: - Implementing such manufacturing concepts enables a company to quickly respond to and fulfill customer requirements with high-quality products and services.
Uses of computers in manufacturing include:
1. Computer-aided engineering (CAE)
2. Computer-aided design (CAD)
3. Computer-aiding processing planning (CAPP)
4. Material requirements planning (MRP)
5. Manufacturing resource planning (MRP)
6. Computer-aided manufacturing (CAM)
Computer-aided manufacturing - (CAM) systems are those that automate the production process. For example, this could be accomplished by monitoring and controlling the production process in a factory through manufacturing execution systems, or by directly controlling a physical process (process control), a machine tool (machine control), or
machines with some humanlike work capabilities (robots).
Manufacturing execution systems - (MES) are performance monitoring information systems for factory floor operations. They monitor, track, and control the five essential components involved in a production process:
1. Materials
2. Equipment
3. Personnel
4. Instructions and specifications
5. Production facilities.
MES includes:
1. Shop floor scheduling and control systems
2. Machine control systems
3. Robotics control systems
4. Process control systems
Some of the benefits of CIM are:
1. Increased efficiency through:
-work simplification & automation,
- better production schedule planning
- better balancing of production workloads in production capacity
2. Improved utilization of facilities, higher productivity, better quality control through:
- continuous monitoring
- feedback and control of factory operations, equipment and robots.
3. Reduced investments in production inventories & facilities
- work simplification
- just-in-time inventory policies
- better planning and control of production
- better planning and control of finished goods requirements
4. Improved customer service
- reducing out-of-stock situations
- producing high-quality products that better meet customer requirements
Collaborative Manufacturing Networks:
Manufacturing processes like computer-aided engineering and design, production control, production scheduling, and procurement management typically involve a collaborative process. Increasingly, this involves using the Internet, intranets, extranets, and other networks to link the workstations of engineers and other specialists with their colleagues at other sites. These collaborative manufacturing networks may link employees within a company, or include representatives from a company’s suppliers or customers wherever they may be located.
Process Control:
Process control is the use of computers to control an ongoing physical process. Process control computers are used to control physical processes in such areas as:
1. Petroleum refineries 5. Food product manufacturing plants
2. Cement plants 6. Pulp and paper mills
3. Steel mills 7. Electrical power plants
4. Chemical plants
Machine Control:
Machine control is the use of a computer to control the actions of a machine. This is also popularly called numerical control. The control of machine tools in factories is a typical numerical control application, though it also refers to the control of typesetting machines, weaving machines, and other industrial machinery.