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Understand the differences between functional applications and
integrated cross-departmental process-based systems.
Know the features and purposes of functional information systems for human resources, accounting, sales and marketing, operations, and manufacturing. Understand the problems caused by the isolation of functional systems.
Understand how value chains and business process redesign led to the development of integrated applications.
Know the features and functions of three types of integrated systems: customer relationship management (CRM), enterprise resource planning
(ERP), and enterprise application integration (EAI).
History of IS Within Organizations
The first information system was the calculation system.
Its purpose was to relieve workers of tedious, repetitive calculations.
The first systems computed payroll; applied debits and credits to
general ledger, balanced accounting records, and kept track of inventory quantities.
These systems produced very little information.
Functional systems facilitated the work of a single department
These systems grew as a natural expansion of the capabilities of systems of the first era.
– Payroll expanded to become human resources.
– General ledger became financial reporting.
– Inventory was merged into operations or manufacturing.
These new functional areas added features and functions to encompass more activities and to provide more value and assistance. The problem with functional applications is their isolation.
Functional applications are sometimes called islands of automation. Integrated, Cross-Functional Systems
In this era, systems are designed not to facilitate the work of a single
department or function.
The objective is to integrate the activities in an entire business process. Since these business activities cross department boundaries, they are referred to as cross-departmental or cross-functional systems.
The transition from functional systems to integrated systems is difficult. Integrated processing requires many departments to coordinate their activities. Most organizations today are a mixture of functional and integrated systems. To successfully compete internationally, organizations must achieve the efficiencies of integrated cross-department process-based systems
Typical Functional Systems
Human Resources Systems
Accounting and Finance Systems
Sales and Marketing System
Manufacturing Activities Supported by Information
Information systems facilitate inventory control, management, and policy.
Inventory applications track goods and materials into, out of, and between
Today most systems use UPC bar codes to scan product numbers as items move in and out of inventories.
In the future, radio frequency identification tags (RFID) will be in widespread use.
An RFID is a computer chip that transmits data about the container or product to which it is attached.
Inventory management applications use past data to compute stocking levels, reorder levels, and reorder quantities in accordance with inventory policy.
Just-in-time (JIT) inventory policy seeks to have production inputs (both raw materials and work in process) delivered to the manufacturing site just as they are needed.
By using JIT policy, companies are able to reduce inventories to a minimum.
The Problems of Functional Systems
Functional systems provide tremendous benefits to the departments
that use them; however, they are limited due to operating in isolation.
With isolated systems:
Data are duplicated because each application has its own database
Business processes are disjointed
Lack of integrated enterprise data
Competitive Strategy and Value Chains
When Michael Porter wrote