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Intro to Management Information Systems

by: Melody Posthuma

Intro to Management Information Systems MGT 268

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Melody Posthuma
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This is all the information for the ethics course at Grand Valley that you will need, including reading notes, class notes, and study guides.
Intro to MIS
Professor Knoll
MIS, Management, business
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This 53 page Bundle was uploaded by Melody Posthuma on Wednesday August 24, 2016. The Bundle belongs to MGT 268 at Grand Valley State University taught by Professor Knoll in Fall 2016. Since its upload, it has received 7 views. For similar materials see Intro to MIS in Business Management at Grand Valley State University.

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Date Created: 08/24/16
BALTZAN Chapter 1 MIS (Baltzan) 1. Fact: the confirmation or validation of an event or object 2. Information age: when infinite quantities of facts are widely available to anyone who can use a computer (data, info, business intelligence, and knowledge). 3. Data: raw facts that describe the characteristics of an event or object. ex: order date, customer name, sales rep., products, quantity 4. Information: Who are my best customers? Best selling product? These are answered by information. Info is data converted into meaningful and useful context. Value is only as good as the people that use it. 5. Variable : a data characteristic that stands for a value that changes or varies over time. Ex: $ & Q ordered, changing variables allows managers to study future possibilities. 6. Business Intelligence (BI): info collected from multiple sources to analyze patterns, trends, and relationships for strategic decision making. Manipulates multiple variables such as interest rates, weather conditions, and gas prices. Study internals & external data b/c those variables affect sales levels & forecasts (business performance & future, analyzes markets, industries, and economics to determine strategic direction). Ex: Meagan, Age 25, Female, Home Owner, Employed, SS# 325-86-3221. A co. can start to make good decisions, can I qualify for a loan, can I afford a new car. 7. Knowledge: skills, experience, and expertise, coupled w/ info & intelligence that creates a person’s intellectual resources. Ex: Knowledge is the company's experience after processing thousands and thousands of loans to know that young, female, homeowners are very responsible and are an excellent candidates for a loan.  8. Knowledge workers: valued for their ability to interpret & analyze info, use BI & personal experience to make decisions, key to business success: knowledge workers that use data, info, BI, & knowledge to make decisions and solve problems. 9. Companies departments: (1) Accounting: measures & reports monetary transactions, manages a co.’s resources and monetary data (2) Finance: strategic issues w/ money, banking, credit, investments, & assets, manages co.’s resources and monetary data (3) HR: policies & procedures for the effective management of employees, hires, and trains people (4) Marketing: supports sales by planning, pricing, and promoting G or S, focus on moving G & S into hands of customers, maintain transactional data (5) Op. Management: manages process of converting or transforming resources into G & S, focuses on manufacturing and maintains production data (6) Sales: performs function of selling G or S, focus on moving G or S into hands of consumer, maintains transactional data. A business decision made by one dep. affects all other depts., need to work together to make business decisions. Solution: Management Information Systems 10.Management Info Systems: operate cross-functionally, integrating operations of all deps. • System: a collection of parts that link to achieve a common purpose. • Systems Thinking: a way of monitoring the entire system by viewing multiple inputs being processed or transformed to produce outputs while continuously gathering feedback on each part. Input goes to process, process goes to output, & feedback goes to all 3. Systems thinkings implement solutions that consider entire process, not just one component. Feedback: info that returns to its original transmitter (input, process (transform), or output) & • modifies transmitter's actions, helps maintain stability. • MIS: a business func. which moves info about people, products, & processes across the company to facilitate decision-making and problem solving. MIS makes the sale to the customer continuous. If one part of the company is experiencing a problem, the entire system fails. It’s an ENABLER of business success & innovation. Most valuable when it leverages the talents of people who know how to use & manage it effectively. • MIS Roles & Responsibilities: (1)Chief Info Officer: oversees all uses of MIS, ensures MIS strategy aligns w/ business goals (2)Chief Knowledge Officer: collects, maintains, and distributes company knowledge. (3)Chief Privacy Officer: ensures ethical and legal use of info w/in a company. (4)Chief Security Officer: ensures security of business systems & developing strategies & safeguards against attacks by hackers and viruses. (5)Chief Tech. Officer: ensures speed, accuracy, availability, and reliability of the MIS. 11. Business Strategy: leadership plan that achieves a specific set of goals like developing new products or services, entering new markets, inc. customer loyalty, attracting new customers, inc. sales, dec. costs. Helps build buffers or slack, allowing the co. to defend against comp. & environmental threats. Needs to be updated often since internal & external environments rapidly change. Strategies that match core comp. competencies to opportunities result in comp. adv. = key to success. Bus. strategies should be based on a new comp. adv. 12. Comp. Adv.: customers place a high value on a specific good than they do for similar offerings from competitors. Offer G or S at low $ or w/ additional value that fetch premium $. It’s typically temporary b/c competitors duplicate them. Ex: intro of iPod & iTunes - merging technology, business, & entertainment. 13. 1st Mover Adv.: when a company inc. market share by being 1st with a new comp. adv. 14. Competitive Intelligence: gathering info about the comp. environment (competitor’s plans, activities, & products) to improve co.’s ability to succeed (learning what’s occurring outside co. to remain competitive). 15. 3 tools to analyze comp. intelligence & develop comp. adv. = (1) 5 forces model - evaluate industry attractiveness (2) 3 generic strategies - for choosing business focus (3) value chain analysis - for executing business strategy 16. Porter’s 5 forces model: analyzes the competitive forces w/in the environment in which a comp. operates to assess the potential profitability in an industry by identifying opportunities, comp. adv. & comp. intelligence. It helps managers set business strategy by identifying co. structure & economic environment of an industry. (1)Threat of sub. products or services: the power of customers to purchase alternatives, increase when many alt. to a product exist, a company wants few alternatives. Reduce threat by offering add. value through wider product distribution or add-on services (ex: iPhone has games, music, etc.) (2)Supplier power: power of suppliers to drive prices up, all parties involved in obtaining raw materials or a product are suppliers. It’s the suppliers ability to influence the prices they charge for supplies (materials, labor, service). Measures by # of suppliers, size of suppliers, service uniqueness, & sub. availability. Greater the power = charge higher prices, limit quantity or service, or shift costs to industry participants. With higher supplier power, buyers lose revenue b/c they can’t pass on raw materials price increase. They can use MIS to find alt. products, which can dec. supplier power. (3)Threat of new entrants: power of competitors to enter market, increase when easy for competitors to enter market. Entry barrier: a feature of a product or service that customers expect, entering company must have this to survive. Ex: banks need ATMs, online bill paying, online account monitoring (MIS enabled services) (4)Buyer power: power of customer to drive prices down, ability of buyers to affect price, assess buyer power: # of customers, price sensitivity, size of orders, availability of sub goods. Lower buyer power by manipulating switching costs (costs that make buyers reluctant to switch to another G or S) & through loyalty programs (rewards customers based on spending, ex: airlines). Tracking activities and accounts through MIS. (5) Rivalry among existing competitors: power of competitors (other 4 point to this), high when comp. is fierce & low when comp. are complacent. Grocery stores are highly competitive, have loyalty programs offering discounts while gathering info about purchasing habits. Product differentiation: co. develops unique difference in its G or S to influence demand & reduce rivalry. Ex: many co.’s sell books online, but Amazon tailors products to customer through customer profiling. * Weak force = decreases competition or few competitors * Strong force = increases competition or many competitors * Ex: Airline industry: (1) Buyer power = high b/c customers have many to choose from & make choices based on $ (2) Supplier power = high b/c limited # or plane and engine manufacturers to choose from (3) Threat of Sub. service = high b/c many subs. exist like cars, trains, etc. or videoconferencing can be a sub. to travel. (4) Threat of new entrants: high b/c many new entrants into industry (5) Rivalry b/w existing comp. = high b/c many rivals 17. Porter’s 3 Generic Strategies for Choosing a Business Focus: (1) broad cost leadership (2) broad differentiation (3) focused strategy - unique market w/ either cost leadership or differentiation. Suggested strategies: • Broad market & low cost (Walmart) = cost leadership • Broad market & high cost (specialty & upscale products for affluent customers) = differentiation • Narrow market & low cost (Payless - compete w/ Walmart by offering larger shoe selection) = focused strategy • Narrow market & high cost (Tiffany & Co.) = focused strategy 18. Value Chain Analysis for Executing Business Strategies: Firms make profit by taking raw inputs & applying business processes to make a G or S that’s valuable to customer. Business process: standardized set of activities that accomplish a specific task, once co. identifies industry it wants to enter & has a generic strategy, it chooses bus. processes required to make G or S that adds value & creates a comp. adv. • Value Chain AnalysisF :irms are a series of bus. processes that add value to G or S, determines how to create greatest value for customer. Goal: identify processes where firm can add value for customer & create comp. adv. w/ cost adv. or product differentiation. • Primary Value Activities: acquire raw materials, manufacture, deliver, market, sales, and service after sale • Inbound logistics: acquires raw materials & resources & distributes to manufacturing as required. • Operations: transforms raw materials or inputs into G or S. • Marketing and Sales: promotes, prices, & sells products to customers. • Service: provides customer support after sale of G or S. Support Value Activities: firm infrastructure (co. format, departmental structures, • environments, & systems), HR management, tech. development, procurement (purchases materials, resources, and equip. = inputs). • Firm as a value chain: allows managers to identify important bus. processes that add value for customer & find MIS solutions that support them. • Analysis: surveys customers to see what they value, then makes a comp. adv. decision (high value-adding activities, low value-adding activities, or both to inc. value). MIS adds value to both primary activities (ex: marketing campaign management = lower marketing costs, pinpoint target to increase sales) & support activities (HR system = efficiently reward employees, identify employees @ risk of quitting to help keep them & dec. turnover costs). 19. Combo of Porter’s 5 and Value Chain: dec. buyer power by value chain activity of service post-sale & inc. customer service to inc. switching costs and reduce power. Value chain could dec. threat of new entrants & through analyzing and constructing primary value activities, dec. threat of subs. BALTZAN CHAPTER 2 • Managerial decision-making challenges: (1) Managers need to analyze large amounts of information (2) Managers must make decisions quickly (3) Managers must apply sophisticated analysis techniques such as Porter’s strategies or forecasting, to make strategic decisions. • Decision-Making Process: Problem identification, data collection, solution generation, solution test, solution selection, solution implementation. Common Company Structure: (1) Operational: employees develop, control, and maintain • core business activities required to run the day-to-day operations. These decisions are structured decisions where established processes offer potential solutions. Often repetitive and affect short-term business strategies. Employee types: lower management, department managers, etc. The focus is internal and the key performance indicators focuses on efficiency (metrics). MIS requirement: information (2) Managerial: employees are continuously evaluating company operations to hone the firm’s abilities to identify, adapt to, and leverage change. Managerial decisions cover short & medium-range plans, schedules, and budgets + policies, procedures, & business objectives for the firm. Monitor the performance of organizational subunits. These decisions are semistructured, and few established processes help evaluate potential solutions. The focus is internal, cross-functional, & sometimes external. MIS requirement: business intelligence. Key performance indicators focusing on efficiency & critical success factors focusing on effectiveness (metrics) (3) Strategic: managers develop overall bus. strategies, goals, and objectives as part of the company’s strategic plan + monitor strategic performance. These decisions are highly unstructured where no procedures or rules exist to guide decision makers toward the correct choice. They are infrequent (one time decisions), extremely important, and long-term. Managers rely on many sources to find solutions. Focus is external, industry, cross company. MIS requirement: knowledge. Critical success factors focusing on effectiveness (metrics). • METRICS - MEASURING SUCCESS: - A project is a temporary activity a company undertakes to create a unique product, service, or result. Metrics are measurement that evaluate results to determine whether a project is meeting its goals. Two core metrics are critical success factors and key performance indicators. - Critical success factors (CSFs) are the crucial steps companies perform to achieve their goals and implement strategies (create high-quality products, retains competitive advantages, reduces product costs, increases cust. satisfaction, hires and retains the best bus. professionals). - Key performance indicators are the quantifiable metrics a company uses to evaluate progress toward critical success factors. They are more specific than CSFs. Ex: turnover rates of employees, % of help desk calls answered in 1st minute, # of product returns, # of new cust., average cust. spending. While CSFs are elements crucial for a bus. strategy’s success, KPIs measure the progress of CSFs & one CSF can have several KPIs. KPIs can focus on external and internal measurements. - A common EXTERNAL KPI is market share (the proportion of the market that a firm captures, found by dividing firm’s sales by the total market sales for the entire industry. It measures a firm’s external performance relative to that to its competitors. - A common INTERNAL KPI is return on investment (ROI) which indicates the earning power of a project. Found by dividing the profitability of a project by the costs. Difficult to measure when projects are intangible (ex: a fire extinguisher never used has low ROI, but if it puts out a fire then it’s high). Creating KPIs to measure success of an MIS project has challenges. Ex: how could managers track costs & profits in company emails. Non-revenue-generating deps. such as HR will not use email to generate profits, so many managers use higher-level metrics like efficiency & effectiveness to measure MIS projects. - Efficiency & Effectiveness Metrics: measure the performance of MIS. Effectiveness MIS metrics measure the impact MIS has on business processes and activities. Efficiency focuses on how well a firm uses its resources & effectiveness is how well a firm achieves its goals and objectives. KPIs that measure MIS projects include both efficiency & effectiveness metrics. Large increases in productivity typically result from increases in effectiveness, which focus on CSFs & efficiency MIS metrics. Most managers focus on efficiency MIS metrics to measure success since it’s easier to measure. - The Interrelationship b/w efficiency & effectiveness MIS Metrics: Just because something is efficient doesn’t mean it’s effective & vice versa. The goal is to have both high efficiency & effectiveness. - Common Types of Efficiency & Effectiveness Metrics: Efficiency Metrics = Throughput, transaction speed, system availability, information accuracy & response time. Effectiveness Metrics = Usability, customer satisfaction, conversion rates, financial. - Benchmarks: baseline values the system seeks to attain. Benchmarking is a process of continuously measuring system results, comparing those results to optimal system performance (benchmark values), & identifying steps and procedures to improve system performance. They help assess how an MIS project performs over time & provides feedback so managers can control the system. • SUPPORT - ENHANCING DECISION MAKING WITH MIS - A model is a simplified representation or abstraction of reality, help managers calculate risks, understand uncertainty, change variables, & manipulate time to make decisions. MIS support systems rely on models for computational and analytical routines that mathematically express relationships among variables. The primary types of MIS systems for decision making is transaction processing system, decision support systems, & executive information systems. - Operational Support Systems: Transactional information encompasses all the information contained within a single business process or unit of work to support the performance of daily operational decisions. Online transaction processing (OLTP) is the capture of transaction and event information using technology to process information according to defined business rules, store the information, & update existing information to reflect the new information. A transaction processing system (TPS) is the basic bus. system that serves the operational level (analysts) & assists in making structured decisions. Ex: accounting system like a payroll or order-entry system. Inputs for a TPS are source documents, the original transaction record, that include procedures like creating, reading, updating & deleting (CRUD) employee records + calculating & summarizing benefits. - Systems thinking example of a TPS: Feedback goes to all three (input, process, & output) while input (source documents) goes to process (CRUD, calculate, summarize) which goes to output (reports). - Managerial Support Systems: Analytical information encompasses all org. info to support the performance of managerial decisions. It includes transactional information + market & industry information. Online analytical processing (OLAP) is the manipulation of information to create BI in support of strategic decision making. Decision support systems (DSSs) model information using OLAP, which provides assistance in evaluating and choosing among different courses of action. High-level managers can examine and manipulate large amounts of detailed data from internal & external sources + analyze relationships b/w thousands or millions of data items to find patterns, trends, etc. * Common DSS Techniques: (1) What-if Analysis: checks the impact of a change in a variable or assumption on the model. (2) Sensitivity Analysis: the study of the impact on other variables when one variable is changed repeatedly, a special case of what-if analysis. Ex: repeatedly changing revenue in small increments to determine its effects. (3) Goal- Seeking Analysis: finds the inputs necessary to achieve a goal. Reverse of what-if analysis. It sets a target value for a variable and repeatedly changes other variables until the target value is achieved. (4) Optimization Analysis: an extension of goal-seeking analysis, finds optimum value for a target variable by repeatedly changing other variables, subject to specific constraints. - Systems thinking example of a DSS: The TPSs supply transactional data to a DSS which summarizes & aggregates the info form the different TPSs, which assist managers in making semistructured decisions. Feedback goes to all three (input, process, & output) while input (TPS) goes to Process (What-if, sensitivity, goal seeing, optimization) which goes to Output (forecasts, simulations, & ad hoc reports). - Interaction between TPS & DSS to support semistructured decisions: Managerial reports go to Decisions Support System which goes to sales data, manufacturing data, & transportation data. Sales data goes to order processing system which goes to order entry, manufacturing data goes to inventory tracking system which goes to inventory data, and transportation data goes to distribution system which goes to shipping data. All of these arrows go both ways. - Strategic Support Systems: decisions at this level need both BI & knowledge. An executive information system (EIS) is a specialized DSS that supports senior-level executives & unstructured, long-term, non-routine decisions. The decisions don’t have right or wrong answers, only efficient & effective answers. Managers deal with meaningful aggregations of information (coarse granularity). The greater granularity, the deeper level of detail or fineness. EIS requires data from external sources to support unstructured decisions while DSS semistructured decisions usually rely on internal data only. Visualization produces graphical displays of patterns and complex relationships in large amounts of data. EIS use visualization to deliver specific key information to top managers w/ little or no interaction with the system. Digital dashboard supports visualization. It tracks KPIs and CSFs buy compiling info from multiple sources & tailoring it to meet needs. The dashboard has a hot list of KPIs, a running line graph of planned vs. actual production for the past 24 hours, a table showing actual vs. forecasted product prices & inventories, a list of outstanding alerts and their resolution status, and a graph of stock market prices. They enable employees to move beyond reporting to use information to directly increase business performance. Employees can react to information as soon as it becomes available. They offer: (1) Consolidation: the aggregation of data from simple roll-ups to complex groupings of interrelated information. (2) Drill-down: users can drill down to find details in information, reverse of consolidation. (3) Slice & Dice: look at info from different perspectives. - Information levels throughout an organization: At strategic level, information is coarse, the processing is through OLAP (Online analytical processing), and the processes are analytical. At the operational level, information is fine, the processing is OLTP (online transactional processing), and the processes are transactional. The managerial level is in between the strategic & operational levels. - Interaction b/w a TPS & EIS: Executive reports go to the EIS which goes to sales, manufacturing, and transportation data + industry outlook and market outlook. The sales data goes to the order processing system which goes to order entry, the manufacturing data goes to inventory tracking system which goes to inventory data, and the transportation data goes to the distribution system which goes to the shipping data. The industry outlook, goes to industry information and the market outlook goes to the stock market information found in external sources of information. All these arrows are two-way. • THE FUTURE - ARTIFICIAL INTELLIGENCE: helps facilitate unstructured strategic decision making. Artificial Intelligence (AI) stimulates human thinking and behavior to build a system that mimics human intelligence. Intelligent systems are commercial applications of AI including sensors, software, & devices emulating & enhancing human capabilities. 5 most common categories of AI systems are expert systems, neural networks, genetic algorithms, intelligent agents, and virtual reality. - Expert systems are computerized advisory programs that imitate the reasoning processes of experts in solving difficult problems, most common form of AI because they fill the gap when human experts are difficult to find or are to expensive. - Neural network: AKA artificial neural network, emulate the way the human brain works. It analyzes information to establish patterns and characteristics in situations where logic or rules are unknown. Fuzzy logic is a mathematical method of handling imprecise or subjective information. Scale of 0-1 where 0 represents not included information and 1 is inclusion. Fuzzy logic & neural networks are combined to express complicated and subjective concepts to simplify the problem and apply rules that are executed with a level of certainty. - Genetic algorithm: mimics the evolutionary, survival-of-the-fittest process to generate better solutions to a problem. It’s an optimizing system (finds the combos of inputs that give the best outputs). Best in making decisions where thousands or millions of decisions are possible. - Intelligent Agents: a special-purpose knowledge-based info system that accomplishes specific tasks for its users. They usually have a graphical representation like “Sherlock Holmes” for an information search agent. A shopping bot is a graphical rep. It is software that searches several retailer websites and provide a comparison of each retailer’s offerings including price and availability + can handle all supply chain buying and selling and perform environmental scanning & competitive intelligence to alert users when a significant event occurs with their competitors. Artificial intelligence scientists learn from ecosystems and adapt their characteristics to human and organizational situations (biomimicry). Agent-based modeling simulates human organizations using multiple intelligent agents that follow a set of simple rules and can adapt to changing conditions. - Virtual Reality: a computer simulated environment that can be a simulation of the real world or an imaginary world. It enables users to be anywhere and work together. It began to build more natural, realistic, multi-sensory, human-computer interfaces. • EVALUATING BUSINESS PROCESSES - A business process is a standardized set of activities that accomplish a specific task. - 5 Steps in the order-to-delivery business process: (1) Marketing: create campaign, check inventory (2) Sales: place order, notify production, check credit (3) Operations Management: manufacture goods (4) Accounting and Finance: deliver goods, bill customer (5) Customer Service: support sale. Marketing goes to sales which goes to Operations management + accounting and finance. Operations management goes to sales and accounting and finance. Accounting an finance goes to operations management. - Customer-facing processes, AKA front-office process result in a product or service received by an organization’s external customer. Business-facing processes, AKA back-office processes are invisible to the external customer but essential to the effective management of businesses. A company’s strategic vision should determine which bus. processes are core. Mapping them to the value chain reveals where the processes touch the customers and affect their perceptions of value. • MODELS - MEASURING PERFORMANCE: - Business process modeling or mapping is the activity of creating a detailed flowchart or process map of a work process that shows its inputs, tasks, ad activities in a structured sequence. A business process model is a graphic description of a process, showing the sequence of process tasks, which is developed for a specific purpose and from a selected viewpoint. Purpose: expose process detail gradually in a controlled manner, conciseness & accuracy in describing process model, focus attention on the process model interfaces, & provide a powerful process analysis and consistent design vocabulary. - Business process modeling begins with an As-Is Process Model: represents the current state of the operation that has been mapped w/o any specific improvements or changes to existing processes. Next, a To-Be process model shows the results of applying change improvement opportunities to the As-Is process model to ensure process is fully & clearly understood before details of a process solution are decided on. The swim lane layout arranges the steps of a bus. process into a set of rows depicting the various elements. Refining the To-Be processes help define the most efficient & effective process identifying all of the illogical, missing, or irrelevant processes. Investigating business processes can help an org. find bottlenecks, remove redundant tasks, and recognize smooth-running processes. - As-Is & To-Be Process Model for Ordering a Hamburger: * As-Is: Customer approaches cashier - order burger - want fries? (yes = order fries, if no...) - want drink (yes = order drink, if no...) - customer pays cashier. * To-Be: Customer approaches cashier - order combo meal - customer pays cashier - Business processes should drive MIS choices & be based on business strategies & goals. • SUPPORT - CHANGING BUSINESS PROCESSES WITH MIS: - Workflow: tasks, activities, & responsibilities required to execute each step in a bus. process. Companies need to understand workflow, cust. expectations, & competitive environment to design and evaluate alt. bus. processes in order to maintain comp. advantages when internal or external circumstances change. - Alternative business processes should be efficient, effective, flexible, and support change as customers, market forces, & technology shift. It is right to initiate a bus. process change if (1) There is a shift in the market the process was designed to serve (2) The company is markedly below industry benchmarks on its core processes (3) To regain comp. advantage - For best results, business processes should drive MIS choices: order to delivery, product realization, & customer acquisition all go to MIS. - Primary types of business process change = automation (operations), streamlining (managerial), & reengineering (strategic). - Automation: Business process improvement attempt to understand and measure the current process and make performance improvements accordingly. Automation is the process of computerizing manual tasks to increase efficiency & effectiveness + lower operational costs. Transaction processing systems (TPSs) are primarily used to automate business processes. To improve a bus. process: (1) Doc. As-Is Process (2) Establish measures (3) Follow Process (3) Measure performance (4) Identify and implement improvements. This is good for gradual, incremental improvement. Technology has put pressure on businesses to improve their business processes as more capabilities are available. - Streamlining: improves bus. process efficiencies by simplifying or eliminating unnecessary steps. Bottlenecks occur when resources reach full capacity and cannot handle any additional demands. Streamlining removes bottlenecks & eliminates redundancy Ex: Reducing cycle time (time required to process an order) is a common KPI for operations management. Rush and custom orders tend to create bottlenecks. Removing bottlenecks can create master streamlined bus. processes that deliver standard & custom orders reliably and profitably. Streamlining automates + improves by monitoring, controlling, & changing bus. process. - Reengineering: BPR = the analysis and redesign of workflow within and between enterprises. When selecting a bus. process to reengineer, managers should focus on core processes (not marginal processes) as they are critical to performance. In the extreme, BPR assumes that the current process is irrelevant, doesn’t work, and must be overhauled from scratch. Steps: (1) Set project scope (2) Study competition (3) Create new processes (4) Implement solution. While automation & streamlining operate departmentally, BPR occurs at the systems level or companywide level and the end-to-end view of a process. It helps create value for the customer. BPR improves processes by performing them better, faster, & cheaper + redefines the best practices for an entire industry. Redesigning any process w/in an integrated system requires recognition of the impact the redesign has on other processes. With a systems view, managers can understand how reengineering effects all processes, so they can all be improved. Leveraging business processes has enormous implications for the business system as a whole. • THE FUTURE - BUSINESS PROCESS MANAGEMENT: - BeforeBusiness process improvement focused on improving workflow or document-based processes that were completed by hand. Creating a company that can quickly adapt to market industry & economic changes to create comp. advantage requires a new set of operating rules based on achieving speed, performance, & improved delivery. So... - Business process management (BPM) systems focus on evaluating and improving processes that include both person-to-person workflow and system-to-system communications. Include enhanced process modeling, simulation, execution, & monitoring + flexibility & reduced costs. The result is efficiency & effectiveness and gives a company competitive advantage. It also provides the tools to measure performance & identifies areas needing improvement. It brings processes & info together, breaks down barriers b/w bus. areas, & manages front & back-office bus. processes. BPM offers customer-facing & business- facing systems that function as one simultaneously & in real time. Chapter 6 of Baltzan: • Info Granularity: extent of detail w/in info - fine & detailed (line items, each individual trans.) vs. coarse & abstract. Can be detailed (fine) - reports fore each salesperson product & part, summary (reports for a salesperson, products, & parts), or aggregate (coarse) - reports across dep., orgs., & companies. • Info Value: (1) Info type (transaction & analytical - all go into database) (2) Info timeliness (3) Info quality (4) Info governance • Info Levels: individual, department, & enterprise • Info Formats: document, presentation, spreadsheet, & database • Real-Time Info: immediate up-to-date info that comes to you (didn’t request, ex: 911 emergency), pitfall = continual change, info must be current w/ respect to bus. needs. Real- time systems provide real-time info in response to requests, used to uncover key corporate transactional info. • Data inconsistency: same data w/ diff. values, decisions are only as good as qual. of info used to make them. • Data Integrity Issues: System produces incorrect, inconsistent, or duplicate data • Characteristics of Qual. Info: (1) Accuracy (2) Completeness (3) Consistency (4) Timeliness (5) Uniqueness Reasons for low-quality info: (1) Online cut. intentionally enter inaccurate info to protect • privacy (2) Diff. standards & formats (3) Abbreviated info or erroneous info by accident during data-entry (4) 3rd party & external info contains errors. Problems = can’t track cust, or find most valuable cust., missed selling ops., marketing to nonexistent cust., difficulty tracking revenue, bad relations w/ cust. • Data Governance: management of the availability, usability, integrity, & security of data, policies about who’s accountable for what data & the quality of it. • Database: maintains info about various types of objects (inventory), events (transactions), people, and places (warehouses). They need to be scalable to handle massive amounts of info & many users & also need to perform quickly for info-processing & info-searching tasks. It is a collection of related data that’s organized. Key elements = data & structure. Database design is organized for retrieval & analysis. Database management system (DBMS): creates, reads, updates, & deletes data in a database while controlling access & security. (create, store, organize, & retrieve data vs. file cabinets, the multiple databases in a DBMS can work separately or together) 2 primary tools to retrieve data from a DBMS: Query-by- example (QBE) tool: users graphically design the answer to a question against a database, & Structured query language (SQL): asks users to write lines of code to answer questions against a database. • Data Element: AKA data field, smallest or basic unit of info. Data model: logical data structures that detail the relationships among data elements using graphics or picture (ex: Entity Relationship Diagram). Metadata: provides details about the data. Data dictionary: compiles all metadata about data elements into the data created. It’s a doc. that specifies what data needs to be entered (attribute name, key or not, data type, valid values), can be used to enforce bus. rules. • Relational database management system: allows users to create, read, update, & delete data in a relational database. Include entities, attributes, keys, & relationships. An entity is a table that stores info about a person, place, thing, transaction, or event, stored in a 2- dimensional table with rows & columns. Attributes are the columns or fields, data elements associated w/ an entity. A record is a collection of related data elements about a single entity, the rows in an entity. The primary key is a filed that uniquely identifies a given entity while a foreign key is a primary key of one table that appears as an attribute in another table. PKs & FKs provide relationships b/w tables, so managers can search data & turn it into useful info. Every table has a PK, not every table has a FK. Associations are used to relate info b/w tables (the line). Can be one-to-one, one-to-many (each order has 1 cust. & each cust. has many orders), or many-to-many. An ERD shows associations b/w entities. • Database Administrator (DBA): responsible for development & management of databases (works with system analysts & programmers, users & managers, implements security features & grands access rights). • The physical view of info deals w/ the physical storage of info on a storage device while the logical view of info focuses on how individual users logically access info to meet particular bus. needs. Databases have one physical view, but many logical views (flexibility). • Data Redundancy: duplication of data or storage of same data in multiple places. Storage issues & integrity issues = can’t determine which value is most current or accurate, problematic if an attribute has to be changed. Databases can record each piece of info in ONE place to save space, make updating easier, & improve info quality. Normalization: grouping data into tables. • Info Integrity: measure the quality of information. Integrity constraints are rules that insure the quality of info database design. Two types = relational integrity constraints (enforce basic & fundamental info-based constraints) & business critical integrity constraints (enforce bus. rules vital to an org.’s success & often require more insight & knowledge). Help produce higher-qual. info to support bus. decisions. • Increased info security: passwords, access levels (who can access data), & access controls (what type of access they have to info). • Driving Websites w/ Data: website is constantly updated & relevant to cust. needs. Helps limit amount of info displayed to cust. based on unique search requirements. It costs less to add a web interface in front of a DBMS than to redesign & rebuild system. Result = content managed more easily, easy to store large amounts of data, & eliminate human errors + gain valuable bus. knowledge by view data accessed & analyzed on website. Plus web browsers are much easier to use than accessing database using a custom-query tool. A data-driven website: search query goes to co.’s web server goes to database goest to results which provide cust. what they are looking for. BI in a data-driven website: (1) Web page (2) Database (cust., categories, orders, items, & products) (3) PivotTable (sum of price, purchase date, worst & best selling products for the day) • Operation Databases are bad because (1) Inconsistent date def. (2) Lack of data standards w/in all departments (3) Poor data quality (4) Inadequate data usefulness (users can’t get desired data & data collected wasn’t always useful) (5) Ineffective direct data access (users don’t get info in timely fashion) • Data Warehouse: relevant info for strategic queries & reports, multiple databases to make analytical bus. decisions. Purpose is to combine standardized info throughout org. into a single repository. Info is stored in aggregated form (totals, counts, averages, etc). info is compiled through internal databases (transactional & operational) & external databases both through Extraction, Transformation (using common set of definitions), & Loading (ETL). • Data Mart: subset of data warehouse info w/in data warehouse • Multidimensional analysis: Arelational database contains info in 2-dimensional tables while a multidimensional database like data warehouse, contains layers of columns & rows. A dimension is a particular attribute of info & each layer in a data warehouse or mart is info according to an additional dimension. - Cube: can slice to drill down into info & become more specific through multidimensional analysis & used to perform multiple queries against a database. Data gets pulled from databases through ETL by data marts then by data cubes. Rows are the vertical info, columns are the horizontal info, and layers are the info that goes backward (3-d area). • Info Cleansing & Scrubbing: weeds out & fixes or discards inconsistent, incorrect, or incomplete info. Important b/c databases often contain info from several diff. databases. Begins during ETL & then again, once it’s in data warehouse. Result = accuracy & consistency. The more accurate & consistent, the more expensive the info. - Data quality audits: help determine accuracy & completeness of data and if % is high enough to make good decisions @ reasonable cost. • Data Mining: analyze data to extract info not offered by raw data alone. Can begin @ summary level (coarse granularity) & get more detailed or less detailed. Gives complete picture of a company’s operations in a single view. You pull out info you’re looking for from data warehouse, data mart, or data info cube to empower bus. decisions. - Data mining tools: vary w/ use of technique to find patterns or relationships to predict future behavior or make decisions. Uncovers BI & helps build models for info analysis functions. - Helps determine relationships among internal factors ($, product positioning, staff skills, etc.) & external factors (econ. indicators, comp., cust. demographics) & determine impact on sales, cust. satisfaction, profits, etc. - Uses query tools, reporting tools, multi-dimen., statistical tools, & intelligent agents. - Decision making with mining: Patterns + (1) Classification - assigns records to classes (2) Estimation = determines value for an unknown cont. variable behavior or estimated future value (3) Affinity grouping (hot dogs & buns) (4) Clustering: segments a heterogeneous pop. of records into a number of more homogeneous subgroups - Occurs on structured data (already in a database) & unstructured data (not in fixed location) - Text mining: analyzes unstructured data to find trends & patterns in words & sentences - Web mining:analyzes unstructured data in websites to identify cust. behavior & website navigation. - 3 ways of mining structured & unstructured data: (1) Cluster Analysis: divides info sets into mutually exclusive groups to identify cust. w/ similar character traits & uncover occurring patterns (ex: zip code, demographics). Result = lower costs & higher success of market campaign. (2) Association Detection: reveals relationship b/w variables along w/ frequency & nature of relationships. Creates rules to determine likelihood of events occurring @ same time or following in logical progression. Market Basket Analysis: analyzes items like websites & checkouts scanner info to detect cust. behavior & predict future behavior by identifying affinities among cust. choices of G & S. Used to develop marketing campaigns for cross- selling G & S, inventory control, & shelf product placement. Ex: in Hurricane Katrine, beer & TP went together, or Amazon who offers similar products you’re buying. (3) Statistical Analysis: performs functions as info correlations, distributions, calculations, & variance analysis. Ex: forecasting (predictions based on time series info, which is time stamped info collected @ a particular frequency). Helps discover trends & seasonal variations in transaction info, plus co.’s can consider all sorts of variables when making decisions, can build statistical models & examine/compare them to chose the best one for the particular issue. • Business Intelligence: Many businesses are data rich & info poor. BI can find cause to many issues by asking Why? Starts with analyzing a report, managers drill down & find out why there’s a problem. They share info to improve a business or take effective action to resolve issue. The details help support questions asked. - Answers questions like where has the business been (historical perspective to determine trends and patterns), where is the business now (current situation to solve issues before they grow out of control), & where is the business going (strategic direction). - Databases, data warehouses, & data marts provide a single source of trusted data that can answer questions, alert managers to inconsistencies, or help determine cause & effects of bus. decisions. Quiz Questions: • Example of analytical info: future growth analysis, sales projections, & product statistics • Transactional info encompasses all info contained w/in a single business process or unit of work where its primary purpose is to support the performing of daily operational tasks. • 3 Types of Info: levels, formats, granularities • Traits of Info: timeliness, transactional, & analytical, NOT quantity • Analytical info encompasses all organizational info where its primary purpose is to support the performing of managerial analysis tasks. • Example of transaction info: airline ticket, sales receipts, and packing slips. Baltzan Chapter 8 Pg. 196-203 Employee Relationship Management (ERM): web-based self-service tools that streamline • and automate the HR department, helps retain employees. • Enterprise Resource Planning (ERP): integrates all departments and functions throughout an org. into a single IT system (or integrated set of IT systems) so employees can make decisions by viewing enterprise wide information about all business operations. Consistency, effective planning and controlling of resources. At the core of the system is a central database that gathers transactional data from operational systems across the company. ERPs can facilitate order processes, support employee benefits, financial reporting, supplier and customer business processes, and help with operational efficiency. - ERP System Overview: Corporate Data (includes employees, orders, sales, inventory, and customers) which goes into the ERP to make global sales report, global manufacturing report, and global shipping report. - ERP Process Flow: Sales (sales quote, sales order) - Warehouse (pack and ship) - Accounting (billing and payment) - Receiving (returns). The ERP system automatically routes orders to the next department in the order process while sharing info between all of them. • The Benefits of ERP: First generation ERP was focused on improving the manufacturing process through automation (back-office processes). The 2nd generation also involved front office & cust. issues (marketing & sales). The 3rd generation (ERP-II) adopted an enterprise- wide approach using the Internet to connect all participants in the value chain. There are 2 parts of ERP II: Core ERP components (traditional components and focused on internal operations, Ex: accounting & finance, production & materials management, & HR) & Extended ERP components (meet org. needs not covered by the core components and focused on external operations, Ex: BI, CRM, supply chain management, E-business). When used together, these all go into the ERP software. - Core ERP Components: accounting & finance (manage accounting data and financial processes w/in the enterprise w/ functions such as general ledger, accounts payable, accounts receivable, budgeting, and asset management. W/ credit management, ERP financial systems correlate cust. orders w/ account balances to determine credit availability), production & materials management (handle production planning and execution tasks like demand forecasting to determine production schedule or material purchasing, job cost accounting, and quality control., HR (track employee info like payroll, benefits, compensation, and performance assessment and ensure compliance w/ all laws + employee analysis and identifies which employees are using which resources (online training, long-distance telephone services, etc.). - Extended ERP Components: BI (collects info used throughout the org., organize it, and apply analytical tools to assist managers with decisions. Data warehouses are one of the most popular extensions to ERP systems), Customer Relationship Management (include contact centers, sales force automation, and advanced marketing functions to provide an integrated view of cust. data. Can manage cust. relationships by responding to cust. needs & demands while identifying most & least valuable customers to allocate market resources), Supply Chain management (manages info flows b/w and among supply chain stages from acquisitions of raw materials to receipt of finished goods by customers, maximizing total supply chain effectiveness & profitability), & E-Business: fulfill online orders, primary features are E- logistics which manages transportation and storage of goods & E-procurement which is the B2B online purchase and ale of supplies and services. In order to have an online business, businesses must properly integrate the entire org. on the ERP system). - Evolution of ERP: (1) ERP: materials planning, order entry, distribution, general ledger, accounting, shop floor control (1990) (2) Extended ERP: scheduling, forecasting, capacity planning, E-commerce, warehousing, logistics (2000) (3) ERP-II: project management, knowledge management, work flow management, customer relationship management, HR management, portal capability, integrated financials. • Measuring ERP Success: The balanced scorecard is a management & measurement system that a firm uses to translate business strategies into executable tasks. It provides feedback for business processes allowing for improvement. It retains traditional financial measures and is inadequate for guiding and evaluating the journey that the information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation. The balanced scorecard uses the learning and growth perspective, the internal business process perspective, the customer perspective and financial perspective to monitor the organization. -The Four Primary Perspectives of the Balanced Scorecard: Financial, internal business processes, customer, and learning and growth all have their own objectives, measures, targets, initiatives which they share with each other with vision and strategy in the middle. -Primary Uses and Business Benefits of Strategic Initiatives: Enterprise application (CRM, SCM, ERP) - Primary users (sales, marketing & cust. service, customers, resellers, partners, suppliers & distributors, and accounting, finance, logistics & production) - Primary Business benefit (sales forecasts, sales strategies, & marketing campaigns, market demand, resource & capacity constraints, & real-time scheduling, forecasting, planning, purchasing, material management, warehousing, inventory, & distribution. Enterprise applications go to primary users and primary business benefits go to primary users, which goes to both enterprise application & primary business benefit. • The Challenges of ERP: COST to purchase and implement, fundamentally changes the way the org. operates causing employees to learn and adjust to new business processes. Many fail b/c the managers and MIS professionals underestimate the complexity of the planning, development, and training required with implementation. • The Future of ES: integrating SCM, CRM, & ERP: these are the backbone of E-business, with integration, organizations could function as a single unit meeting customer, partner, and supplier needs. If one application runs poorly, the entire cust. value delivery system is affected. The world-class enterprises of tomorrow must be built on the world-class applications implemented today. -Integrations b/w SCM, CRM, and ERP: Employees - accounting, finance, HR, purchasing, management, & auditing - which go to ERP (logistics, production, & distribution) & CRM (marketing, sales, & customer service). Then ERP goes to SCM which goes to business partners, suppliers, distributors, & resellers & CRM goes to SCM which goes to customers. All of these arrows are two-way arrows and there are also arrows b/w ERP & CRM. MAGAL READING Chapter 1 Essentials of Business Process & Information Systems (Magal) 1. Business Processes: tasks or activities that companies use to produce G or S supported by ICT (info & communication technology like computers, internet, Web, & info systems). 2. Global Comp. Environment: a product is designed in 1 country, parts came from several countries, assembled in another, and served to another country. SHIFT: companies moved manufacturing to places where manufacturing is cheaper & research/development to where educated scientists and engineers are located. Ex: Apple used to not know customer b/c goods were sold by resellers THEN it became a corporation with 4X rev. & 200 retail stores b/ c Jobs focused on designing computers but outsourced to high-tech manufacturing companies in Asia. Jobs implemented SAP R/3 (enterprise system that managed processes, making them visible to employers across operations) plus the online store helped reach customers. * Consequence of increased globalization: no longer limited to local markets, puts pressure on companies to be more efficient and productive w/ strategies to integrate operations that can be distributed across many locations. 3. Info. Revolution: increased use of info & communication tech. to create, deliver, and use information. SAP ERP for ex. supports work of organizations. W/ expansion, it’s vital that info is shared efficiently and accurately. Ex: Toyota must make sure quality of cars in US are same as in Japan. DANGER: If ICT doesn’t func. properly, the entire organization doesn’t func. properly. 4. Knowledge worker: one who uses ICT to create, acquire, process, synthesize, disseminate, analyze, and use info to be more productive. Ex: product manager, sales, executive, financial analyst. Work requires structured info (well-defined, source known, manager knows location of info) & unstructured info (not well-defined or readily available, manager may not know what info is needed or its location). Work is typically non-routine. Employed in all parts of organization and don’t rely on others to find information, have understanding of the big picture dealing w/ many operations in a co. Key skills: (1) Strategic Thinking: sees big picture, understands how organization works as a whole (2) Info Literacy: determines info needed, where it is & how to use it (3) Communication and Collaboration: effective part of a team where you understand our role and others’ roles. 5. Task Workersr:outine, structured tasks. Ex: cust. service rep., purchasing & accounting clerks, insurance claims processors. Typically confined to a set of tasks in a func. area & rarely deal / other areas, narrow view of business. 6. Business Process: series of activities that take a set of inputs and convert them into outputs through 3 fundamental processes: procurement, production and fulfillment. Input - Step 1 - Step 2 - Step 3 - Output 7. Procurement Process: acquires materials to make G or S. (1) Create purchase requisition (2) Create & send purchase order (3) receive goods (4) receive invoice from supplier (5) send payment. • In procurement, warehouse determines needs & creates a purchasing requisition. Purchasing dep. selects supplier & creates & sends PO. Warehouse receives goods from supplier and places them in inventory. Accounting receives invoice from supplier and makes payment. 8. Production Process: involves manufacturing desired G or S, Ex: manufacturing skateboards; takes input & assembles skateboard, inspects skateboard’s quality & packs it into a box (assembly, inspection, packing). The output is skateboards. Org. w/o production process: org. buys product from supplier, stores product in warehouse & fills cust. orders from inventory. Ex: purchases books, stores them, then sends them to customers when they place an order (fulfillment) - doesn’t worry about making actual book & in procurement instead of buying raw materials, it buys final products. 9. Fulfillment Process: co. delivers G or S to its customers or resellers, (1) Receive cust. order (2) Prepare shipment (3) send shipment (4) send invoice to customer (5) receive payment. • In fulfillment, sales dep. takes order, warehouse packs & ships order, accounting dep. sends invoices & receives payment. 10.Func. Org. Structure: org. that utilizes a func. structure are divided into functions or departments responsible for a set of closely related activities, Ex: accounting sends & receives payments, warehouse receives & ships goods. • Purchasing: identifies vendors, selects vendors, creates and sends PO, evaluates vendor performance Warehouse (inventory management): receives goods from vendors, inspection of goods • received, prepares goods to return to vendors, ships goods to cust. receives goods returned from cust. • Operations: plans capacity, designs workflow, schedules production, executes production, performs inspection of produced goods. • Marketing & Sales: identifies customers, manages relations w/k them, promotes G or S, receives customer orders, begins processing those orders, provides after-sale service. • Research Development: conducts research, develops/refines products & processes. • Finance & Accounting: processes payments from cust. & to vendors, manages cash flow & capital needs, prepares financial statements. • HR: identifies workforce needs, recruits, hires & trains employees & evaluates them & manages compensation, rights, and benefits. • Info-System: process transactions & captures transactional data, provides info to monitor processes & finds problems w/ them & gives info & tools to solve those problems. 11. Cross-Functional Process: no single group is responsible for the activity’s execution, but execute steps to complete the process. 12. Bureaucracy: functional processes are bureaucracies - include admin. rules & procedures intended to help manage large organizations. 13. Silo Effect: Division of labor & specialization help manage activities in a func. structure. It allows them to perform an activity extremely well by isolating each time from distractions of another. Workers complete their tasks in their functional “silos” w/o regard to the other components of the process. Unless an org. carefully coordinates activities, it can’t execute the process. Key: exchange info efficiently & effectively. Ex: Warehouse updates the sales order, keeps a copy & sends it to accounting - errors with lost paperwork or forgetting to send are likely (delays, excess inventory, lack of visibility across process). 14. Delays: 1st consequence of poor coordination. Requiring employes to complete, forward, & file paperwork wastes time & is costly + delays from maintaining sending paperwork. Delays in form of lead times: how far in adv. a co. must plan to obtain raw materials, insufficient inventory when needed, and cycle time: amount of time to produce a product or process a cust. order, prevent co. from being on time with orders. These lead to lost sales. Ex: Nintendo Wii had this problem and competitors sold products to cust. who would have purchased the Wii. * A paper-based process: (1) Sales: receive cust. order, creates/updates paperwork (DELAY), send paperwork (DELAY) (2) Warehouse: prepares shipment, sends shipment, creates/ updates paperwork (DELAY), send paperwork (DELAY) (3)Accounting: send invoice, receives payment, creates/updates paperwork (DELAY) 15. Excess Inventory: 2nd consequence of poor coordination. Delays & poor communication cause co.’s to create a buffer of inventory (extra raw materials & goods in case purchasing process is delayed). Ex: Cisco Systems had shortages in raw materials & placed double or triple orders for some parts, made a “safety stock” based on sales forecasts. When the internet boom died, demand dec. & Cisco couldn’t communicate it through their org. so they could dec. production & sell of “safe stock” & dec. purchases of raw materials. 16. Lack of Visibility across Processes: 3rd consequence of poor coordination. People get involved w/o info on (1) status of process in other deps. (2) how well the process is performing over time - paperwork about process steps aren’t available to other deps. Cause: view work as functional silos rather than cross-func. processes. Global comp. forces efficiency and effectiveness, so co.’s try eliminating delays, excess inventories, & lack of visibility - need a process view (allows standardization across countries - cost saving). Enterprise systems (ES) or enterprise resource planning (ERP) systems manages business processes (SAP first introduced this), bring shifts in productivity and profitability. *Nike made many wrong shoes due to a mismatch b/w demand planning process & customer demand b/c manufacturing, procurement, & sales don’t check to see if it matched cust. request. The planning system said they lost > $100 million that quarter. *Dell: used process view - built computers after receiving an order (make-to-order), then procure the components, build the computer to specifications, ship the computer, etc. Other co.’s forecast demand and sell from stock, but this process-based model helped Dell be a leader in personal computers & remain profitable. 17. Information Systems: computer-based systems that capture, store, & retrieve data associated with process activities, organize data into meaningful info to support & assess org. activities. Every org. activity generates data (raw facts w/ limited value or meaning). Data is organized in a useful way called information. 18. Functional Information Systems: not well-integrated, evolve independent of each other & info isn’t shared among functions or deps. Exchanging info is difficult in a manual environment - reduce delays w/in functions, but not b/w deps. Process by func. info systems: (1) Sales: receive cut. order, enter/update data into sales info system, send paperwork (DELAY) (2) Warehouse: prepare shipment, enter/update data, send shipment, enter/update data, data goes into warehouse info system, send


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