Chapter Eight: Organisational Information Systems

Section 8.1 - Before You Go On

1. What is a Transactional Processing and the role of TP systems. State the key objective of TP/TPSs.

Transactional processing systems are information systems that support routine, core business actions. These systems monitor, collect, store, and process data generated from all business transactions; the data is then stored into the organisations database. In the modern business environment, TPSs are also inputs to the functional information systems, decision support systems, customer relationship management, knowledge management and e-commerce.

Section 8.2 - Before You Go On

1. What is a functional area information system? List its major characteristics.

Functional area information systems (FAISs) provide information mainly to the lower and middle level management in the functional areas. This helps organise and control operations with information presented in a number of reports.

2. How does an FAIS support management by exception? How does it support on-demand reports?

Exception reports are those reports that include information that falls outside certain threshold standards. To implement management by exception using a functional area information system, management first creates performance standards. The company then sets up the FAIS to monitor performance, through the incoming data about business transactions such as expenditures. The company then compares actual performance to its standards and identifies predefined exceptions. Managers are alerted to the exceptions via exception reports.

On-demand (ad-hoc) reports are non-routine; they can be drill-down reports, key-indicator reports or comparative reports. Drill-down reports show a greater level of detail, whereas key-indicator reports summarise the performance of critical activities and comparative reports compare. The FAIS sends information to the corporate data warehouse and this data can be used for decision support and in the case of on-demand reports, FAIS is essential as it shows all the information needed for a unstructured management problem.

Section 8.3 - Before You Go On

1. Define ERP and describe its functionalities.

Enterprise resource planning (ERP) systems integrate the planning, management, and use of all the organisation’s resources. The major objective of ERP systems is to tightly integrate the organisation’s functional areas. ERP software includes a set of interdependent software modules, linked to a common database, that provide supports for internal business processes.

Enterprise resource planning (ERP) was created to control all major business processes with single software architecture in real time. ERP integrates all department and functional information flows across a company onto a single computer system that can serve all of the enterprise’s needs.

Business processes that are supported by ERP modules include financial and accounting processes (e.g. general ledger, accounts payable, financial reporting); sales and marketing processes (e.g. order processing, quotations, sales planning); manufacturing and production processes (e.g. procurement, transportation, plant and equipment maintenance); human resources processes (e.g. personnel administration; payroll, workforce planning).

2. List some drawbacks of ERP software.

ERP softwares do have some drawbacks, to begin with that can be extremely complex, expensive, and time consuming to implement. In addition, companies may need to change existing business processes to fit the predetermined business processes of the software. For companies with well-established procedures, this requirement can be a huge problem. Finally, companies must purchase the entire software package even if they require only a few of the modules. For these reasons, ERP software is not attractive to everyone.

Section 8.5 - Before You Go On…

1. Define a supply chain and supply chain management (SCM).

A supply chain refers to the flow of materials, information, capital, and services form raw material suppliers, through factories and warehouses, to the end customers. A supply chain also includes the organisations and processes that create and deliver products, information, and services to the end customers. The function for the supply chain management is to plan, organise, and optimise the supply and its distributors and customers.

2. List the major components of supply chains.

The supply chain consists of three parts: (1) Upstream supply chain, where sourcing or procurement from external suppliers occurs; (2) Internal supply chain, where packaging, assembly or manufacturing takes place; and (3) Downstream supply chains, where distribution or dispersal takes place, frequently be external distributors.

3. What is the bullwhip effect?

The bullwhip effect refers to erratic shifts in orders up and down the supply chain. Basically, customer demand variables can become magnified when they are viewed through the eyes of managers at each link in the supply chain.

Section 8.6 - Before You Go On

1. Define EDI and list its major benefits and limitations

Electronic data interchange (EDI) is a communication standard that enables the electronic transfer of routine documents, such as purchasing orders, between business partners. It formats these documents according to agreed-upon standards, and it reduces costs, delays, and errors inherent in a manual document delivery system.

EDI provides many benefits compared with manual delivery systems. To begin with, it minimises data entry errors because each entry is checked by the computer. In addition, the length of the message can be shorter, and the messages are secured. EDI also reduces cycle time, increases productivity, enhances customer service, and minimises paper usage and storage. Another issue is that some companies find the EDI traditional system inflexible, as they often require long startup periods. Business process may have to be restructured to fit EDI requirements and multiple standards exist.

Comparing Purchase Order Fulfillment Without EDI

Comparing Purchase Order Fulfillment With EDI