Learning Objectives 10 1 Transaction Processing Systems 10

Learning Objectives 10. 1 Transaction Processing Systems 10. 2 Functional Area Information Systems 10. 3 Enterprise Resource Planning (ERP) Systems 10. 4 ERP Support for Business Processes

10. 1 Transaction Processing Systems • A transaction is any business event that generates data worthy of being captured and stored in a database. • Examples of transactions are a product manufactured, a service sold, a person hired, and a payroll check generated. In another example, when you are checking out of Walmart, each time the cashier swipes an item across the bar code reader is one transaction.

TPS • A transaction processing system (TPS) supports the monitoring, collection, storage, and processing of data from the organization's basic business transactions, each of which generates data. • TPSs have to efficiently handle both high volumes of data and large variations in those volumes (e. g. , during periods of peak processing)

How transaction processing systems manage data.

Two basic ways of TPS • Batch processing: Transaction processing system (TPS) that processes data in batches at fixed periodic intervals. • Online Transaction Processing (OLTP): Transaction processing system (TPS) that processes data after transactions occur, frequently in real time.

10. 2 Functional Area Information Systems (FAIS) • FAIS: Systems that provide information to managers (usually mid-level) in the functional areas to better support managerial tasks of planning, organizing, and controlling operations. • Examples of FAISs are accounting IS, finance IS, production/operations management (POM) IS, marketing IS, and human resources IS.

Information Systems for Accounting and Finance • • Financial Planning and Budgeting. Managing Financial Transactions. Investment Management. Control and Auditing.

Information Systems for Marketing • Therefore, any successful organization must understand its customers' needs and wants and then develop its marketing and advertising strategies around them. Information systems provide numerous types of support to the marketing function.

Information Systems for Production/Operations Management The POM function is responsible for managing the organization's supply chain. Because supply chain management is vital to the success of modern organizations • in-house logistics and materials management, • inventory management, • quality control, • planning production and operation, • computer-integrated manufacturing (CIM), and • product lifecycle management (PLM)

In-house logistics and materials management • Logistics management deals with ordering, purchasing, inbound logistics (receiving), and outbound logistics (shipping) activities. Related activities include inventory management and quality control.

Inventory Management. • Inventory management determines how much inventory an organization should maintain. • Operations personnel make two basic decisions: when to order and how much to order. Inventory models, such as the economic order quantity (EOQ) model, support these decisions. A large number of commercial inventory software packages are available that automate the application of these models. • Many large companies allow their suppliers to monitor their inventory levels and ship products as they are needed. This strategy, called vendor-managed inventory (VMI), eliminates the need for the company to submit purchasing orders.

Quality Control. • Quality control systems used by manufacturing units provide information about the quality of incoming material and parts, as well as the quality of in-process semifinished and finished products. • They also generate periodic reports that contain information about quality—for example, the percentage of products that contain defects or that need to be reworked. • Quality control data, collected by web-based sensors, can be interpreted in real time. Alternatively, they can be stored in a database for future analysis.

Planning Production and Operations. • More complex planning also involves allocating related resources, such as money and labor. For these cases, more complex, integrated software, called manufacturing resource planning (MRP II), is available. • MRP II integrates a firm's production, inventory management, purchasing, financing, and labor activities. Thus, MRP II adds functions to a regular MRP system. In fact, MRP II has evolved into enterprise resource planning (ERP).

Computer-Integrated Manufacturing. • also called digital manufacturing) is an approach that integrates various automated factory systems. • CIM has three basic goals: (1) to simplify all manufacturing technologies and techniques, (2) to automate as many of the manufacturing processes as possible, and (3) to integrate and coordinate all aspects of design, manufacturing, and related functions through computer systems.

Product Life Cycle Management. • Product life cycle management (PLM) is a business strategy that enables manufacturers to share productrelated data that support product design and development and supply chain operations. • PLM applies web-based collaborative technologies to product development. By integrating formerly disparate functions, such as a manufacturing process and the logistics that support it, PLM enables these functions to collaborate, essentially forming a single team that manages the product from its inception through its completion

PLM

Information Systems for Human Resource Management • Recruitment—finding employees, testing them, and deciding which ones to hire • Performance evaluation—periodic evaluation by superiors • Training • Employee records • Benefits administration—retirement, disability, unemployment, and so on

Examples of information systems supporting the functional areas

Reports • routine, ad hoc (on-demand), and exception. • Ad hoc reports can also include requests for the following types of information: – Drill-down reports display a greater level of detail. For example, a manager might examine sales by region and decide to “drill down” by focusing specifically on sales by store and then by salesperson. – Key indicator reports summarize the performance of critical activities. For example, a chief financial officer might want to monitor cash flow and cash on hand. – Comparative reports compare, for example, the performances of different business units or of a single unit during different times.

10. 3 Enterprise Resource Planning Systems • Historically, the functional area information systems were developed independent of one another, resulting in information silos. These silos did not communicate well with one another, and this lack of communication and integration made organizations less efficient.

ERP • It is important to understand that ERP systems are an evolution of FAIS. That is, ERP systems have much the same functionality as FAIS, and they produce the same reports. As you see in IT's About Business 10. 1, ERP systems simply integrate the functions of the individual FAIS.

ERP • The leading ERP software vendor is SAP (www. sap. com). Other major vendors include Oracle (www. oracle. com) and People. Soft (www. peoplesoft. com), now an Oracle company. (With more than 700 customers, People. Soft is the market leader in higher education). For up-to-date information on ERP software, visit http: //erp. ittoolbox. com.

ERP II Systems • ERP II systems include a variety of modules that are divided into core ERP modules—financial management, operations management, and human resource management—and extended ERP modules—customer relationship management, supply chain management, business intelligence, and e-business. If a system does not have the core ERP modules, then it is not a legitimate ERP system.

Benefits of ERP Systems • Organizational flexibility and agility: In this way, they make organizations more flexible, agile, and adaptive. The organizations can therefore respond quickly to changing business conditions and capitalize on new business opportunities. • Decision support: This information significantly improves managers' ability to make better, more timely decisions. • Quality and efficiency: ERP systems integrate and improve an organization's business processes, generating significant improvements in the quality of production, distribution, and customer service

The major limitations of ERP • companies may need to change their existing business processes to fit the predefined business processes incorporated into the ERP software • different companies organize their value chains in different configurations to transform inputs into valuable outputs and achieve competitive advantages. • ERP systems can be extremely complex, expensive, and time consuming to implement.

The following are the major causes of ERP implementation failure: • Failure to involve affected employees in the planning and development phases and in change management processes • Trying to accomplish too much too fast in the conversion process • Insufficient training in the new work tasks required by the ERP system • Failure to perform proper data conversion and testing for the new system

Implementing ERP Systems • On-Premise ERP Implementation: – The vanilla approach – The custom approach – The best-of-breed approach: • Software-as-a-Service ERP Implementation.

The three major advantages of using a cloud-based ERP system • The system can be used from any location that has Internet access. • Companies using cloud-based ERP avoid the initial hardware and software expenses that are typical of on-premise implementations • Cloud-based ERP solutions are scalable, meaning it is possible to extend ERP support to new business processes and new business partners (e. g. , suppliers) by purchasing new ERP modules.

Three major disadvantages of using a cloud-based ERP system • It is not clear whether cloud-based ERP systems are more secure than on-premise systems. • Companies that adopt cloud-based ERP systems sacrifice their control over a strategic IT resource. • A direct consequence of the lack of control over IT resources occurs when the ERP system experiences problems, for example, some ERP functions are temporarily slow or are not available.

Enterprise Application Integration • An enterprise application integration (EAI) system integrates existing systems by providing software, called middleware, that connects multiple applications. • In essence, the EAI system allows existing applications to communicate and share data, • EAI systems also support implementation of best -of-breed ERP solutions by connecting software modules from different vendors.

10. 4 ERP Support for Business Processes • ERP systems effectively support a number of standard business processes. • In particular, ERP systems manage end-to -end, cross-departmental processes. A cross-departmental process is one that (1) originates in one department and ends in a different department or (2) originates and ends in the same department but involves other departments.

three prominent examples of cross-departmental processes • The procurement process, which originates in the warehouse department (need to buy) and ends in the accounting department (send payment) • The fulfillment process, which originates in the sales department (customer request to buy) and ends in the accounting department (receive payment) • The production process, which originates and ends in the warehouse department (need to produce and reception of finished goods) but involves the production department as well

The Procurement,

Fulfillment,

Production Processes

Integrated processes with ERP systems

Interorganizational Processes: ERP with SCM and CRM • Intraorganizational processes: they originate and conclude within the company • ERP systems can also manage processes that originate in one company and conclude in another company. • These processes are called interorganizational processes, and they typically involve supply chain management (SCM) and customer relationship management (CRM) systems.

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