CHAPTER9-FunctionalBusinessSystems.pptx

IT for Management: On-Demand Strategies for Performance, Growth, and Sustainability

Twelfth Edition

Turban, Pollard, Wood

Chapter 9

Functional Business Systems

Learning Objectives (1 of 5)

Functional and Cross-Functional Business Processes

Sales and Marketing Management Systems

Accounting, Finance, and Regulatory Compliance Systems

Human Resource Information Systems (HRIS)

Production and Operations Management Systems

Functional and Cross-Functional Business Processes

An organization is divided into several functional business units—sometimes known as functional silos—that it depends on to meet its goals.

Reason: To allow each to operate within its area of expertise to build efficiencies and effectiveness across the business as a whole.

Traditionally, this includes production and operations, sales and marketing, accounting and finance, and human resources.

Information Systems to Support Functional Business Units

Functional Business System (FBS) is an IS designed to improve the efficiency and performance of a specific functional area within an organization.

Breaking Down Functional Business Silos

Originally, information systems were designed to only support the accounting function.

Systems for other functions were rolled out later.

This fragmented roll-out approach created data silos and could not support cross-functional business processes.

Cross-Functional Coordination and Integration

A cross-functional business system integrates the end-to-end activities of an entire business process and cross departmental boundaries.

Cross-functional business processes occur when different departments within the same organization work together to achieve a common goal.

When FBSs allow for cross-functional coordination, it becomes possible for the company to monitor and evaluate progress toward goals and objectives established during the strategic planning process.

Data Requirements

Standard operating procedures (SOPs) is a set of written instructions on how to perform a function or activity. SOPs provide the framework for complex processes to be managed more effectively.

It is critical that businesses have SOPs to maintain three related data properties in its IS:

Data security

Data validity

Data integrity

Standard Operating Procedures: Data Properties

The SOP documents three related data properties in company information systems:

Data security

the protection of data from malicious or unintentional corruption, unauthorized modification, theft, or natural causes such as floods.

Data validity

tests and evaluations used to detect and correct errors, for instance mistakes that might occur during data entry in fields, such as customer name and address.

Data integrity

the maintenance of data accuracy and validity over its life-cycle including the prevention of unintended modification or corruption.

Functional and Cross-Functional Business Processes: Questions

Define the five traditional functional business units.

Describe the processes that each traditional functional business unit performs.

Define what an SOP is and give an example.

Explain the relationship between TPSs and FBSs.

Name the three data properties that an IS must have.

Learning Objectives (2 of 5)

Functional and Cross-Functional Business Processes

Sales and Marketing Management Systems

Accounting, Finance, and Regulatory Compliance Systems

Human Resource Information Systems (HRIS)

Production and Operations Management Systems

The productions and operations management (POM) function is responsible for processes that transform inputs into value-added outputs.

These inputs include capital investments, human resources (workers, staff, and managers); facilities, supplies, equipment, materials, IT, and information along with the time and energy needed to manage them.

These are transformed through inspection and alteration and subsequent transportation and/or storage.

The outputs are the goods and services that an organization produces

Production and operations management (POM) system

A production and operations management system assists in the operation, planning, execution, and ongoing management of an organization.

The main objective of POM software is to optimize workflow in the production of goods and/or the delivery of services.

A wide variety of POM systems focus on various aspects of operations management that are heavily used across virtually all business functions from project management, to distributing and managing workloads to fully integrated enterprise-level solution such as a supply chain (SCM) system or enterprise resource planning (ERP) system.

Inventory Control Systems

Important because they minimize the total cost of inventory while maintaining optimal inventory levels. Inventory control systems minimize the following three cost categories:

Inventory holding costs

Ordering and shipping costs

Cost of shortages

Safety Stock

Extra inventory used as a buffer to reduce the risk of stockouts. Also called buffer stock.

Stockouts

Inventory shortage arising from unexpected demand, delays in scheduled delivery, production delays or poor inventory management.

Just-in-Time Inventory Management Systems

JIT inventory management attempts to minimize holding costs by not taking possession of inventory until it is needed in the production process.

Eliminates costs associated with carrying large inventories at any given point in time.

Higher ordering costs because of more frequent orders.

Higher risk of stockouts.

Must have cooperative production and/or supply partners to succeed.

Lean Manufacturing Systems

The main objective of lean manufacturing is to eliminate waste of any kind by eliminating any step in the manufacturing process that does not add value to the final product.

Empowers workers so that production decisions can be made by those who are closest to the production processes.

A lean manufacturing system streamlines efficiency and processes by connecting production line machinery and warehouse management systems to maximize productivity.

As shown in Figure 9.6, the five core “Principles of Lean Management” are:

• Value. Specify value from the standpoint of the customer

• Map Value Stream. Identify steps in the value stream and eliminate steps that do not create value.

• Create Flow. Ensure smooth flow of product to customer by completing value-creating steps in a tight sequence.

• Establish Pull. Use flow to let customers pull value from the next upstream activity.

• Seek Perfection. Repeat above cycle until perfect results are achieved.

Quality Management Systems (QMS)

Stand-alone or part of an enterprise-wide total quality management (TQM) effort providing data about the quality of incoming materials or parts, as well as the quality of in-process semi-finished and finished products.

The main objectives of a QMS include improved internal processes, lower costs, optimization of resource utilization, continuously improved customer satisfaction, and data management.

Data collection by sensors or RFID and interpreted in real-time or stored in a database for future analysis.

Components of a QMS

Compliance control

Analytics tools

Customer satisfaction management

Document management

Real-time data

Risk management tools

Computer-integrated Manufacturing (CIM) Systems

A management approach that uses computers and automation systems to control the entire manufacturing and production process

CIM is comprehensive and flexible

CIM helps production managers better use information to execute manufacturing plans.

The goal of CIM is to remove all barriers between functions within an operation and encourage departments to work closely together throughout the process.

CIM

Technology associated with CIM: CAD/CAM (computer-aided design and computer-aided manufacturing)

Advantages gained from using CIM systems include:

Reduction in costs

Improved quality and customer satisfaction

Greater production control

Reduced inventory requirements

Improved product development cycles to enable faster response to market pressures

Support for manufacturing of small lots

Manufacturing Execution Systems (MESs) Systems

Manage, monitor, and synchronize the execution of realtime, physical processes involved in transforming raw materials into intermediate and/or finished goods and execute work orders with production scheduling and enterprise-level systems.

Unlike CIM, an MES is based much more on standard reusable application software, instead of custom-designed software programs on a contract-by-contract basis.

MES is a subset of enterprise resource planning (ERP) systems.

Transportation Management Systems

Within POM, transportation management systems (TMSs) are relied on to handle:

transportation planning which includes shipping consolidation

load and trip planning

route planning

fleet and driver planning, and

carrier selection to gain significant cost savings and provide better customer service

Logistics management

A subset of TMS that deals with the coordination of several complex inbound logistics, and outbound logistics processes.

The main functions of logistics management systems are:

Optimize transportation operations.

Coordinate with all suppliers.

Integrate supply chain technologies.

Synchronize inbound and outbound flows of materials or goods.

Manage distribution or transport networks

Field Service Management (FSM) System

FSM systems optimize routing and effective fleet use through automatic territory management, map visualization, calendar management, and appointment scheduling.

They also supply customer forms or notifications such as traffic and weather updates provided through client dashboards.

Trends in TMS Growth

Factors currently contributing to the growth of TMS are:

Need to upgrade or replace outdated transportation systems

Growth of intermodal transport

TMS vendors add capabilities

TMSs handle big data

Production and Operations Management Systems: Questions

What is the function of SCM in an organization?

What trends are contributing to the growing use of TMS?

Define logistics management.

What are the three categories of inventory costs?

What are the objectives of JIT?

Explain the difference between EOQ and JIT inventory models.

What is the goal of lean manufacturing?

What is CIM?

Learning Objectives (3 of 5)

Functional and Cross-Functional Business Processes

Sales and Marketing Management Systems

Accounting, Finance, and Regulatory Compliance Systems

Human Resource Information Systems (HRIS)

Production and Operations Management Systems

Sales and Marketing Systems

Customer relationships (sales and support)

Digital advertising

Social media monitoring and promotions

Automated ad placement and media buying

Market research

Intelligence gathering

Distributing products and services to customers

Order tracking

Online and mobile order processing

Online and mobile payment methods

Sales Management Systems

Sales management involves sales procedures and tasks from the generation of leads and quotes and moving to customer conversion, purchases, returns, and support.

Sales management systems combine different sales procedures and tasks to provide a detailed overview of a sales team’s work on different products, services, location, and customers to accelerate the tracking of sales flow and help an organization achieve its sales targets faster.

Sales Management Systems

Benefits of sales management systems include:

Provides feedback on sales team members performance

Boosts repeat selling

Increases social media marketing

Sales management systems can be deployed in three ways:

On-premise

Software-as-a-Service (SaaS)

Cloud-hosted

Marketing Management

Pricing of Products or Services

Sales volumes as well as profits are determined by the prices of products or services.

Profitability Analysis

Profit contribution or profit margin of certain products and services derived from the cost accounting system.

Benefits of marketing management systems:

Easier access to customer information

Improved account planning

Visual schedules to prioritize work

Easier communication with other members of the marketing team

Anytime, anywhere access to customer information, schedules, and reports

Social Media as a Marketing Management Strategy

Social media provides easy access to a huge diverse population that is searching for good online content.

Marketing managers are increasingly using social media marketing to generate awareness about their brand and promote their goods and services.

One of the main features that attracts them to use social media as a marketing tool is its faster, spontaneous, and systematic form of communication.

A chatbot is a service powered by rules and sometimes artificial intelligence that simulates a conversation (or chat) with a customer using a chat interface.

Sales and Marketing Management Systems: Questions

Explain push-through marketing and pull-through marketing.

List two sales and distribution channels.

Describe challenges associated with pricing products and services.

Describe profitability analysis.

What are the differences between sales management and marketing management?

How do some online businesses determine the prices they will charge to individual customers?

Learning Objectives (4 of 5)

Functional and Cross-Functional Business Processes

Sales and Marketing Management Systems

Accounting, Finance, and Regulatory Compliance Systems

Human Resource Information Systems (HRIS)

Production and Operations Management Systems

Accounting, Finance, and Regulatory Compliance Systems

Income Statement

Summarizes a company’s revenue and expenses for one quarter of a fiscal year or the entire fiscal year.

Also known as a P&L (profit and loss) or earnings statement.

Compliance

Accounting and finance departments must comply with generally accepted accounting principles (GAAP) and the Financial Accounting Standards Board (FASB).

Corporations whose stock is publicly traded must also comply with the reporting requirements of the Securities and Exchange Commission (SEC)

Accounting Systems

Most accounting software packages offer the same basic features necessary for managing finances:

Accounts receivable (A/R)

Accounts payable (A/P)

General ledger

Billing and invoicing

Purchase and sales orders, and

Reporting

Many vendors offer cloud-based accounting solutions

SaaS accounting software solutions

Financial Planning and Budgeting Systems

Help companies:

Create and manage budgets

Improve the organization’s ability to monitor performance

Quickly identify departures from planned financial activity when they occur

Five activities that are central to financial planning and budgeting:

Budgeting

Forecasting

Financial ratio analysis

Profitability analysis

Cost control

Budgeting

The best-known part of financial planning is the annual budget, which allocates the financial resources of an organization among participants, activities, and projects.

The budget is the financial expression of the enterprise’s plans.

Management allocates resources in the way that best supports the mission.

Capital budgeting is the process of analyzing and selecting investments with the highest return on investment (ROI) for the company.

Forecasting

A major reason why organizations fail is their inability to forecast and/or secure sufficient cash flow.

Underestimated expenses, overspending, financial mismanagement, and fraud can lead to disaster.

Good planning is necessary, but not sufficient, and must be supplemented by skillful control.

Ratio Analysis, Profitability Analysis, and Cost Control

Financial Ratio Analysis: used by external parties when they decide whether to invest in an organization, extend credit, or buy it.

Profitability Analysis: understanding the profitability of individual products or services, product lines, or the financial health of the entire organization.

Cost Control: financial management of assets, through proper estimation, to assure financial health and cash flow.

Financial Misrepresentations

Occurs when a company has intentionally deceived one or more other parties.

XBRL Tagging

eXtensible Business Reporting Language (XBRL)

Reporting (disclosure) system designed by the SEC to eliminate document “search and find” difficulties and improve how investors find and use information.

Designed to:

Generate cleaner data, including written explanations and supporting notes.

Produce more accurate data with fewer errors that require follow-up by regulators.

Transmit data more quickly to regulators and meet deadlines.

Increase the number of cases and amount of information that staffers can handle.

XBRL Reporting Compliance

The SEC requires mutual funds to submit risk return summaries in XBRL format

Banks in the United States must submit certain types of XBRL reports to the Federal Deposit Insurance Corporation (FDIC).

Globally, regulators in many other countries require companies to file reports using XBRL.

When international firms file XBRL reports, they will oftentimes use the International Financial Reporting Standards (IFRS) Taxonomy created by the International Accounting Standards Board (IASB).

Mishandling Data

Common elements found in regulatory compliance software includes:

Support for widely adopted standards such as ISO 9000 (quality management); ISO 14000 (environmental management); IS) 31000 (risk management) and OHSAS 18000 (Occupational health and safety management).

Identify and management regulatory requirements including permits and reports by country or world region.

Provide access to regulatory content and compliance requirements of regulatory agencies.

Ability to measure compliance and product reports for delivery to agencies, customers, suppliers, shareholders, etc.

Management and planning of compliance audits, including scheduling, task assignments, tracking, and report.

Measure and assess risk associated with noncompliance.

Document change to provide a history of regulatory compliance.

Measure costs of fulfilling regulatory compliance requirements.

Accounting, Finance, and Regulatory Compliance Systems: Questions

Identify five activities that are central to financial planning and budgeting.

Name three features that assist organizations in gaining an insight into the health of the company and speed up cycle times.

What types of regulatory compliance are organizations responsible for?

What is eXtensible Business Reporting Language (XBRL)?

Why does the SEC mandate data disclosure, whereby data items are tagged to make them easily searchable?

Identify three common elements found in regulatory compliance software.

Learning Objectives (5 of 5)

Functional and Cross-Functional Business Processes

Sales and Marketing Management Systems

Accounting, Finance, and Regulatory Compliance Systems

Human Resource Information Systems (HRIS)

Production and Operations Management Systems

Human Resource Information Systems (HRIS)

The main goals of human resource management are to support various facets of the employment process including recruitment; employee development; HR planning, control, and management; and HR compliance.

To reduce the workload and improve the effectiveness of the HR function, organizations need reliable human resource information systems (HRIS).

A human resource information systems (HRIS) provides a centralized repository of employee master data that the HR management group needs for completing HR processes.

Employee Development

Performance Evaluation

Corporate managers can analyze employees’ performances with the help of intelligent systems, which provide systematic interpretation of performance over time.

Training and Human Resources Development

Provide career development plan for each employee. IT can support the planning, monitoring, and control of these activities by using workflow applications.

HR Planning, Control, and Management

Personnel Planning and HR Strategies

Forecasts requirements for people and skills, planning how to locate sufficient human resources or develop them from within.

Benefits Administration

Salary/wage, bonuses, and other rewards for service.

Employee Relationship Management

Self-service personal information tracking, online training, and other employee-focused tasks.

HR Compliance

Human Resource Information Systems (HRIS): Questions

What are the key HR functions?

What are the benefits of moving HRISs to intranets or the cloud?

What concerns have deterred companies from implementing SaaS HR?

How can companies reduce the cost of recruiting qualified employees?

Describe IT support for HR planning and control.

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