Essay on Ch07 InformationSystemsInOrgranizations

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Pages: 13

Information Systems Within
Chapter 7

© 2007 Prentice Hall, Inc.


Learning Objectives
 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

Calculation Systems
 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
 Functional systems facilitated the work of a single department

or function.
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

Operations Systems

Manufacturing Activities Supported by Information

Inventory Systems
 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