Introduction to Information

Technology
2nd Edition
Turban, Rainer & Potter
© 2003 John Wiley & Sons, Inc.

Chapter 8:
Functional, Enterprise, and
Interorganizational Systems

Prepared by:
Roberta M. Roth, Ph.D.
University of Northern Iowa

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 Chapter Preview
 In this chapter, we will study:
 The role and function of Management
Information Systems (MIS) and Transaction
Processing Systems (TPS) in organizations
 How functional information systems support
Accounting & Finance; Sales and Marketing;
Production and Operations; and Human
Resource Management
 How and why information systems should
be integrated
 The role of interorganizational systems
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 Functional Information Systems
 Characteristics:
 Comprised of several small information
system focused on specific activities
 Specific IS applications can be
• completely independent, or
• integrated to form a coherent departmental
functional system
• also, can be integrated across departmental lines
to support a broad business process (cross-
departmental)
 Interface with each other to form the
organization wide information system
 Interface with the environment
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 Functional Information Systems
(continued)
Management Information Systems
Provide routine information to
managers in the functional areas
Business Reports
Transactions
Management Scheduled
Information Demand
TPS System Exception

Databases
Internal Data Warehouse
External
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 Transaction Processing Systems
What is a transaction?
Every business event that occurs
during business operations
Business events (transactions) can
trigger other business events
Each event (transaction) can be
described by a number of data items
Transaction processing systems (TPS)
are designed to record and store the
data that describes every business
event that occurs
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Transaction Processing Systems (continued)
 TPSs were the first to be automated –
repetitive, consistent, high-volume tasks are
ideal candidates for computerization
 TPSs provide foundation for all other
information systems
 Many TPSs are outward-reaching and convey
impressions to the customers about the quality
of the business
Customer POS
makes a system
purchase
Inventory file
Update
Transaction file
files Sales file

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 Transaction Processing System
(continued)
 Some characteristics of TPSs
 Process large volume of data
 Data sources mostly internal, and output intended
mainly for internal audience
 TPS operate regularly (on demand, daily, weekly,
etc.)
 Require large storage (database) capacity
 Require high processing speed (due to the high
volume)
 Input and output data known and well-understood
(highly structured)
 Involves high level of detail but low computation
complexity
 Requires high level of accuracy, data integrity, and
security
 Requires
Introduction high
to Information Technology, processing reliability; organizations
2nd Edition
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 Methods of Processing
Transactions
Batch Processing: simple,
inexpensive
Employee Data entry
timecards of timecardPayroll transactions
data

Employee data:
Pay rate Process Employee
Withholdings payroll paychecks
Etc.

Cash on hand Payroll summary

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 Methods of Processing
Transactions
Online Processing: complex,
expensive

Transaction history file

Customer
POS
makes a Inventory file
system
purchase
Sales file

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 Methods of Processing
Transactions
Hybrid Processing: simple, inexpensive, more
accurate
Badge reader Whenever employees
collects employee arrive / leave work
Payroll transactions
work data

Employee data: Process Employee

Pay rate payroll paychecks
Withholdings
Etc.
Normal payroll
Cash on hand Payroll summary
schedule:
weekly, monthly,
etc.
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 TPS Today
 Traditionally, TPS were implemented on
mainframe systems using batch
processing
 Online Transaction Processing (OLTP)
 can be built on a client/server architecture
 can save money
 Internet (Intranet) Transaction
Processing
 allows multimedia data transfer
 fast response time
 storage of large databases of graphics and
videos
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 Typical TPS Tasks
 Order processing
 General ledger
 Accounts payable and receivable
 Inventory management, shipping, and
receiving
 Payroll
 Periodic reports and statements

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Accounting and Finance Systems
Financial Planning and Budgeting
Financial and economic forecasting
Budgeting
Investment Management
Access to financial and economic
reports
Financial analysis

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Accounting and Finance Systems
Financial Controls
Budgetary Controls
Auditing
Financial Health Analysis
Profitability Analysis and Cost Control

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 Marketing & Sales Systems
 Distribution Channel (definition)
 providing the goods or services to the customer; may
extend through various intermediaries such as
wholesalers and retailers
Manufacturing R&D/Design
Company
Distribution Accounting/Finance
 Other Channel Systems
 support all marketing linkages, such as after-sales
customer support
Market Intelligence Channel Dealer Systems
Systems Systems Delivery Systems
Target Marketing
Customer Support
Systems Sales Systems Systems

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 Marketing & Sales Systems
(continued)
 Customer Service
 customer profiles and preference analysis
 mass customization – high volume
production of specialized product
 targeted advertising
 customer inquiry systems and automated
Help Desk
 Telemarketing
 advertisement and reaching customers
 order processing
 customer service
 sales support
 account management
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 Marketing & Sales Systems
(continued)
 Distribution Channels
 Delivery and shipping management
 Improve retail stores
 Marketing Management
 Set and monitor prices of products or
services
 Monitor and evaluate salesperson
productivity
 Evaluate profitability of products / customers
 Assess sales trends
 Analyze new products, services, and markets

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 Marketing & Sales Systems
(continued)
 Ethical and Social Issues in IT-supported
Sales Activities
 Information collection and usage
 Privacy concerns
 Current trend – Customer Relationship
Management (CRM)
 Focus is on developing a one-to-one
relationship with customers

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 Production & Operations
Management Systems
Logistics and Material Management
Logistics Management
• Ordering, purchasing, and inbound and
outbound shipping
Inventory Management
• Determine how much inventory to carry
Quality Control
• Monitor and report quality of materials,
work in process, and finished goods

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 Production & Operations
Management Systems (continued)
Planning Production/Operations
 Material Requirements Planning; MRP II
 Just-In-Time
 Project Management (PERT & CPM)
 Short-term scheduling
Automatic Design Work and
Manufacturing
 Computer Aided Design (CAD)
 Computer Aided Manufacturing (CAM)
 Computer Integrated Manufacturing (CIM)
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 Human Resources Management
Systems
 Recruitment
 Keep track of all open positions
 Advertise positions via Internet
 Employee selection
 Human Resources Maintenance and
Development
 Training and retraining employees
 Performance assessment
 Turnover, tardiness, and absenteeism
analysis

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 Human Resources Management
Systems
Human Resources Management
and Planning
Maintain personnel files and skills
inventory
Administer benefits
Comply with government reporting
Personnel planning
Succession planning
Labor negotiations
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 Integrated Information Systems
Reasons for Integration
Existing, functionally oriented
information systems are deficient:
• cannot give employees all the information
they need
• do not let different departments
communicate effectively
• crucial sales, inventory, and production
data often entered manually into separate
computer systems

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 Integrated Information Systems
How to Integrate Information
Systems
Connect existing systems
• maximize the use of existing systems and
allows the addition of new applications
Using supply chain management
software
• Overcomes the isolation of traditional
departmental structure by integrating
processing across several functional areas
Use Enterprise Resource Planning
software
• control all major business processes with a
single software architecture in real time
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 Interorganizational Information
Systems (IOS)
 Electronic systems involving information
flow among two or more organizations in
an on-going relationship
 Objective – efficient transaction
processing
 Many large businesses require suppliers
to be linked to them though IOS
applications
 IOSs may be implemented with
 Private, third-party networks (value-added
networks)
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accessible networks (Internet) 8-25
 Interorganizational Systems
(continued)
 Types of Interorganizational
Systems
 Global systems
 Electronic data interchange (EDI)
 Electronic funds transfer (EFT)
 Extranets
 Shared databases
 Integrated messaging

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 Issues in IOS / Global IS Design
 Cultural differences
 Economic and political differences
 Cross-border data transfer
concerns

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 Chapter Summary
 Role and function of TPSs
 Role and function of MISs
 In-depth review of how Iss support
various business functional areas
 Need and methods for integrating
functional information systems
 Interorganizational and global
information systems provide great
opportunities but also great complexity

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