Enterprise Systems

Enterprise Systems - Transcript

Principles of Information Systems Eighth Edition
Enterprise Systems

Principles and Learning Objectives
An organization must have information systems that support the routine day to day activities that occur in the normal course of business and help a company add value to its products and services
Identify the basic activities and business objectives common to all transaction processing systems Identify key control and management issues associated with transaction processing systems

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Principles and Learning Objectives continued
Traditional TPSs support the various business functions of organizations that have not yet implemented enterprise systems
Describe the inputs processing and outputs for the transaction processing systems associated with the order processing purchasing and accounting business functions

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Principles and Learning Objectives continued
A company that implements an enterprise resource planning system is creating a highly integrated set of systems which can lead to many business benefits
Discuss the advantages and disadvantages associated with the implementation of an enterprise resource planning system Identify the challenges multinational corporations must face in planning building and operating their TPSs
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Why Learn About Enterprise Systems
Many organizations use enterprise systems to perform business processes and to keep records Support a wide range of business activities
Supply chain management Customer relationship management

Used by large medium and small companies

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Introduction
Enterprise system ensures information can be shared across all business functions and all levels of management to support the running and managing of a business Enterprise systems employ a database of key operational and planning data that can be shared Examples of enterprise systems
Enterprise resource planning systems Customer relationship management systems

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An Overview of Enterprise Systems Transaction Processing Systems and Enterprise Resource Planning
Transaction processing systems TPSs
Process detailed data necessary to update records about fundamental business operations Include order entry inventory control payroll accounts payable accounts receivable general ledger etc Provide data for other business processes
Management information system decision support system MIS DSS Special purpose information systems
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An Overview of Enterprise Systems Transaction Processing Systems and Enterprise Resource Planning continued

Figure TPS MIS DSS and Special Information Systems in Perspective
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Traditional Transaction Processing Methods and Objectives
Batch processing system
Computerized processing in which business transactions are accumulated over a period of time and prepared for processing as a single unit or batch

Online transaction processing OLTP
Computerized processing in which each transaction is processed immediately

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Traditional Transaction Processing Methods and Objectives continued

Figure Batch Versus Online Transaction Processing
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Traditional Transaction Processing Methods and Objectives continued

Figure Integration of a Firm s TPSs
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Traditional Transaction Processing Methods and Objectives continued
Organizations expect their TPSs to
Process data generated by and about transactions Maintain a high degree of accuracy and integrity Avoid processing fraudulent transactions Produce timely user responses and reports

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Traditional Transaction Processing Methods and Objectives continued
Organizations expect their TPSs to continued
Increase labor efficiency Help improve customer service Help build and maintain customer loyalty Achieve competitive advantage

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Transaction Processing Activities
TPSs
Capture and process data that describes fundamental business transactions Update databases Produce a variety of reports

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Transaction Processing Activities continued

Figure A Simplified Overview of a Transaction Processing System
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Transaction Processing Activities continued
Transaction processing cycle
Data collection Data editing Data correction Data manipulation Data storage Document production

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Transaction Processing Activities continued

Figure Data Processing Activities Common to Transaction Processing Systems
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Data Collection
Capturing and gathering all data necessary to complete the processing of transactions Data collection can be
Manual Automated via special input devices such as scanners point of sale devices and terminals

Data should be
Collected at source Recorded accurately in a timely fashion

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Data Editing
Checking data for validity and completeness to detect any problems Examples
Quantity and cost data must be numeric Names must be alphabetic Verification that codes associated with an individual transaction are present in a database containing valid codes

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Data Correction
Reentering data that was not typed or scanned properly If invalid data is detected system should provide error messages
Error messages must specify the problem so proper corrections can be made

Software tools can be used to identify bad data

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Data Manipulation
Performing calculations and other data transformations related to business transactions Can include the following
Classifying data Sorting data into categories Performing calculations Summarizing results Storing data in the organization s database for further processing

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Data Storage
Updating one or more databases with new transactions After being updated this data can be further processed and manipulated by other systems

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Document Production and Reports
Generating output records documents and reports
Hard copy paper reports Displays on computer screens

Results from one TPS can be inputs to another system Typical uses
Checks and invoices management information decision support and compliance with local state and federal regulations

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Control and Management Issues
TPSs are critical to the operation of most firms Many business activities would come to a halt if supporting TPSs failed To ensure reliable operation of their TPSs firms must engage in disaster recovery planning and TPS audits

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Disaster Recovery Plan
A firm s plan to recover data technology and tools that support critical information systems and necessary information systems components
Necessary information systems components network databases hardware software operating systems etc Critical information systems TPSs that directly affect the cash flow of the firm

Some firms that provide disaster recovery services
SunGuard Hewlett Packard AppRiver
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Transaction Processing System Audit
Checks a firm s TPS systems to prevent accounting irregularities and or loss of data privacy
Does the system meet the business need for which it was implemented What procedures and controls have been established Are these procedures and controls being used properly Are the information systems and procedures producing accurate and honest reports
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Traditional Transaction Processing Applications

Table Systems That Support Order Processing Purchasing and Accounting Functions
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Order Processing Systems

Figure 9 7 Traditional TPS Systems That Support the Order Processing Business Function
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Order Processing Systems continued

Table IPO of the Traditional TPS Systems That Support Order Processing
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Purchasing Systems

Figure Traditional TPS Systems That Support the Purchasing Business Function
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Purchasing Systems continued

Table IPO of the Traditional TPS Systems That Support Purchasing
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Accounting Systems

Figure Traditional TPS Systems That Support the Accounting and Finance Business Function
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Accounting Systems continued

Table IPO of the Traditional TPS Systems That Support Accounting
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Enterprise Resource Planning Supply Chain Management and Customer Relationship Management
Enterprise resource planning ERP set of integrated programs that manage a company s vital business operations for an entire multisite global organization Business process set of coordinated and related activities that takes one or more kinds of input and creates an output of value to the customer of that process At the core of the ERP system is a database that is shared by all users
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Enterprise Resource Planning Supply Chain Management and Customer Relationship Management continued

Figure Enterprise Resource Planning System
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An Overview of Enterprise Resource Planning
1970s ERP systems evolved from materials requirement planning systems MRP
MRPs tied together production planning inventory control and purchasing business functions for manufacturing organizations

Late 1980s early 1990s recognition that legacy transaction processing systems lacked necessary integration for information sharing
Y2K provided impetus to upgrade systems

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Advantages of ERP
Improved access to data for operational decision making Elimination of costly inflexible legacy systems Improvement of work processes based on best practices Upgrade of technology infrastructure

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Disadvantages of ERP Systems
Expense and time in implementation Difficulty implementing change Difficulty integrating with other systems Risks in using one vendor Risk of implementation failure

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Disadvantages of ERP Systems continued
Tips for avoiding failed ERP implementations
Assign a full time project manager Appoint an experienced independent resource to oversee project and validate system performance Allow sufficient time for transition Spend substantial time and money for training Define metrics to assess progress and identify risks Keep project scope well defined Be wary of modifying ERP software to conform to firm s business practices
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Production and Supply Chain Management
ERP production plan process draws on the information available in the ERP system database
Sales forecasting estimates future customer demand Sales and operations plan takes demand and current inventory levels to determine production for future demands Demand management develops master production schedule

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Production and Supply Chain Management continued
ERP production plan process continued
Detailed scheduling schedules production run for each product and from one product to the next Materials requirement planning determines amount and timing of raw material orders with suppliers Purchasing purchases raw materials and transmits to qualified suppliers Production plans details of running and staffing production operation

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Customer Relationship Management and Sales Ordering
Customer relationship management CRM system helps a company manage all aspects of customer encounters including
Marketing and advertising Sales Customer service after the sale Programs to retain loyal customers

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Customer Relationship Management and Sales Ordering continued

Figure Customer Relationship Management System
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Customer Relationship Management and Sales Ordering continued
Sales ordering set of activities that must be performed to capture a customer sales order including the following
Recording items to be purchased Setting sales price Recording order quantity Determining total cost of the order including delivery costs Confirming customer s available credit

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Financial and Managerial Accounting
General ledger main accounting record of a business
Assets liabilities revenue expenses and equity

ERP system
Captures transactions entered by workers in all functional areas of the business Creates associated general ledger record to track the financial impact of the transaction

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Financial and Managerial Accounting continued
Financial accounting
Captures and records all transactions that affect a company s financial state Uses these documented transactions to prepare financial statements to external decision makers

Managerial accounting
Provides data to enable the firm s managers to make decisions about current and future operations and develop overall business strategies

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Hosted Software Model for Enterprise Software
Hosted software model offers many benefits to small to medium businesses
No need to make a major financial investment No need to employ a full time IT person Reduced hardware costs and costs associated with maintaining an appropriate computer environment

Some large companies are also experimenting with hosted software
Provides common systems platform and business processes for transition to global centers
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International Issues Associated with Enterprise Systems
Challenges that must be met by an enterprise system of a multinational company include
Different languages and cultures Disparities in IS infrastructure Varying laws and customs rules Multiple currencies

ERP software vendors help meet these challenges

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Different Languages and Cultures
Multinational companies sometimes roll out standard IS applications for all to use To meet the needs of business partners and employees operating in other parts of the world standard applications sometimes require extensive and costly customization

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Disparities in Information System Infrastructure
Lack of a robust or a common information infrastructure can create problems Many countries telecommunications services are controlled by a central government or operated as a monopoly
No incentives to provide fast and inexpensive customer service

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Varying Laws and Customs Rules
Numerous laws can affect collection and dissemination of data Examples
Labor laws in some countries prohibit recording of worker performance data Some countries have laws limiting the trans border flow of data linked to individuals

Trade custom rules between nations
North American Free Trade Agreement NAFTA

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Multiple Currencies
Enterprise system of multinational companies must conduct transactions in multiple currencies Systems must
Be current with foreign currency exchange rates Handle reporting and other transactions Issue vendor payments and customer statements Record retail store payments Generate financial reports in the currency of choice

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Comparison of Several ERP Systems

Table Some ERP Software Vendors
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Summary
Enterprise system ensures information can be shared across all business functions and all levels of management to support the running and managing of a business Transaction processing systems TPSs process detailed data necessary to update records about fundamental business operations Batch processing system accumulate transactions over a period of time and then process them Online transaction processing OLTP process each transaction immediately
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Summary continued
Transaction processing cycle data collection data editing data correction data manipulation data storage and document production Disaster recovery plan plan to recover data technology and tools that support critical information systems and necessary information systems components Many types of transaction processing systems support order processing purchasing and accounting business functions
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Summary continued
Enterprise resource planning ERP set of integrated programs that manage a company s vital business operations for an entire multisite global organization Customer relationship management CRM system helps a company manage all aspects of customer encounters Enterprise system of a multinational company must meet many challenges

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