Business Applications:Functional Business Systems.

Business Applications

5.1 Functional Business Systems

There are many ways to use information technology in business as there are business activities to be performed, business problems to be solved, and business opportunities to be pursued. But a business professional, should have a basic understanding and appreciation of the major ways in which information systems are used in supporting each of the business functions.

Functional business systems are composed of a variety of types of information systems (transaction processing, management information, decision support, etc.) that support the business functions of:

• Accounting

• Finance

• Marketing

• Productions/operations management

• Human resource management

IT in Business

Business professionals should have a specific understanding of how information systems affect a particular business function (eg: Marketing) or a particular industry (eg: Banking). For example, someone whose career objective is a marketing position in banking should have a basic understanding of how information systems are used in banking and how they support the marketing activities of banks and other firms. The information systems discussed in this section are analysed according to the business function they support.

Figure 5.1 illustrates how information systems can be grouped into business function categories.

Figure 5.1

Marketing Systems

The business function of marketing is concerned with the planning, promotion, and sale of existing products in existing markets, and the development of new products and new markets to better serve present and potential customers. Figure 5.2 illustrates how marketing information system provides information technologies that support major components of the marketing function.

Figure 5.2

Marketing information systems integrate the information flow required by many marketing activities. Marketing information systems provide information for:

• Internet/intranet websites and services make an interactive marketing process possible where customers can become partners in creating, marketing, purchasing, and improving products and services.

• Sales force automation systems use mobile computing and Internet technologies to automate many information processing activities for sales support and management.

• Other marketing systems assist marketing managers in product planning, pricing, and other product management decisions, advertising and sales promotion strategies, and market research and forecasting.

Interactive Marketing

The term interactive marketing has been coined to describe a type of marketing that is based on using the Internet, intranets, and extranets to establish two-way interaction between a business and its customers or potential customers. The goal of interactive marketing is to enable a company to profitably use those networks to attract and keep customers who will become partners with the business in creating, purchasing, and improving products and services.

In Interactive marketing,

• Customers are not passive participants, but are actively engaged in a network-enabled proactive and interactive process.

• Encourages customers to become involved in product development, delivery, and service issues.

• Enabled by various Internet technologies, including chat and discussion groups, Web forms and questionnaires, and e-mail correspondence.

• Expected outcomes are a rich mixture of vital marketing data, new product ideas, volume sales and strong customer relationships.

Targeted Marketing

Targeted marketing has become an important tool in developing advertising and promotion strategies for a company’s electronic commerce websites.

Figure 5.3

As illustrated in figure 5.3, Target marketing is an advertising and promotion management concept that includes five targeting components:

• Community – companies can customize their web advertising messages and promotion methods to appeal to people in specific communities. These can be communities of interest, such as virtual communities of online sporting enthusiasts or arts and crafts hobbyists, or geographic communities formed by the websites of a city or other local organizations.

• Content – advertising such as electronic billboards or banners can be placed on various website pages, in addition to a company’s home page. These messages reach the targeted audience.

• Context – advertising appears only in Web pages that are relevant to the content of a product or service. So advertising is targeted only at people who are already looking for information about a subject matter that is related to a company’s products.

• Demographic/Psychographic – marketing efforts can be aimed only at specific types or classes of people: unmarried, middle income, male college graduates.

• Online Behavior – Advertising and promotion efforts can be tailored to each visit to a site by an individual. This strategy is based on “web cookie” files recorded on the visitor’s disk drive from previous visits. Cookie files enable a company to track a person’s online behavior at a website so marketing efforts can be instantly developed and targeted to that individual at each visit to their website.

Sales Force Automation

Increasingly, computers and networks are providing the basis for sales force automation. In many companies, the sales force is being outfitted with notebook computers that connect them to Web browsers, and sales contact management software that connect them to marketing websites on the Internet, extranets, and their company intranets. Characteristics of sales force automation include:

• Increases the personal productivity of salespeople.

• Dramatically speeds up the capture and analysis of sales data from the field to marketing managers at company headquarters.

• Allows marketing and sales

management to improve the delivery of information and the support they provide to their salespeople.

• Many companies view sales force automation as a way to gain a strategic advantage in sales productivity and marketing responsiveness.

Marketing information system at different levels of an Organisation

Manufacturing Systems

Manufacturing information systems support the production/operations function, which includes all activities concerned with the planning and control of the processes that produce goods or services. The production/operations function is concerned with the management of the operational systems of all business firms. Information systems used for operations management

and transaction processing support all firms that must plan, monitor, and control inventories, purchases, and the flow of goods and services.

Computer-Integrated Manufacturing (CIM)

Computer-based manufacturing information systems use several major techniques to support computer-integrated manufacturing (CIM). CIM is an overall concept that stresses that the goals of computer use in factory automation must be to:

• Simplify - (reengineer) production processes, product designs, and factory organization as a vital foundation to automation and integration.

• Automate - Production processes and the business functions that support them with computers, machines, and robots.

• Integrate - All production and support processes using computers, telecommunications networks, and other information technologies.

The Overall goal of CIM is to create flexible, agile, manufacturing processes that efficiently produce products of the highest quality. Thus, CIM supports the concepts of:

• Flexible manufacturing systems

• Agile manufacturing

• Total quality management

Implementing such manufacturing concepts enables a company to quickly respond to and fulfil customer requirements with high-quality products and services.

Uses of computers in manufacturing include

• Computer-aided engineering (CAE)

• Computer-aided design (CAD)

• Computer-aided process planning (CAPP)

• Material requirements planning (MRP)

• Manufacturing resource planning (MRP-II)

• Computer-aided manufacturing (CAM)

Computer-aided manufacturing - (CAM) systems are those that automate the production process. For example, this could be accomplished by monitoring and controlling the production process in a factory (manufacturing execution systems) or by directly controlling a physical process (process control), a machine tool (machine control), or machines with some humanlike work capabilities (robots).

Manufacturing execution systems - (MES) are performance monitoring information systems for factory floor operations. They monitor, track, and control the five essential components involved in a production process,

• Materials

• Equipment

• Personnel

• Instructions and specifications

• Production facilities.

MES includes:

• Shop floor scheduling control systems

• Machine control systems

• Robotics control systems

• Process control systems

Some of the benefits of CIM are:

• Increased efficiency through:

- work simplification and automation,

- better production schedule planning

- better balancing of production workloads in production capacity

• Improved utilization of facilities, higher productivity, better quality control through:

- continuous monitoring

- feedback and control of factory operations, equipment and robots.

• Reduced investments in production inventories and facilities through:

- work simplification

- just-in-time inventory policies

- better planning and control of production

- better planning and control of finished goods requirements

• Improved customer service through:

- reducing out-of-stock situations

- producing high-quality products that better meet customer requirements

Process Control is the use of computers to control an ongoing physical process. A process control computer systems requires the use of special sensing devices that measure physical phenomena such as temperature or pressure changes. These continuous physical measurements are converted to digital form by analog-to-digital converters and relayed to computers for processing.

Machine Control is the use of computers to control the actions of machines. This is also popularly called numerical control. The computer-based control of machine tools to manufacture products of all kinds is a typical numerical control application used by many factories throughout the world.

Manufacturing information system in different levels of an Organisation

Human Resource Systems

The human resource management (HRM) function involves the recruitment, placement, evaluation, compensation, and development of the employees of an organization. The goal of HRM is the effective and efficient use of the human resources of a company.

Human resource information systems are designed to support:

• Planning to meet the personnel needs of the business

• Development of employees to their full potential

• Control of all personnel policies and programs

Traditionally, businesses used computer-based information systems to:

• Produce paychecks and payroll reports

• Maintain personnel records

• Analyze the use of personnel in business operations

Many firms have gone beyond these traditional personnel management functions and have developed human resource information systems (HRIS) that also support:

• Recruitment, selection and hiring

• Job placement

• Performance appraisals

• Employee benefit analysis

• Training and development

• Health, safety, and security

HRM and the Internet

The Internet has become a major force for change in human resource management. For example, companies are:

• Recruiting employees through recruitment sections of their corporate websites.

• Using commercial recruiting services and databases on the World Wide Web

• Posting messages in selected Internet newsgroups

• Communicating with job applicants by Internet e-mail.

HRM and the Corporate Intranet

Intranet technologies allow companies to process most common HRM applications over their corporate intranets. For example:

• Intranets allow the HRM department to provide around-the-clock services to their customers

– the employees

• Intranets allow for the dissemination of valuable information faster than through previous company channels

• Intranets can collect information online from employees for input to their HRM files

• Intranets enable employees department

to perform HRM tasks with little intervention by the HRM

• Intranets can serve as a superior training tool

• Intranets enable employees to produce automated paychecks.

Human resource information system in different levels of an Organisation

Accounting Systems

Accounting information systems are the oldest and most widely used information systems in business.

Computer-based accounting information systems:

• Record and report the flow of funds through an organization on a historical basis and produce important financial statements such as balance sheets and income statements

• Produce forecasts of future conditions such as projected financial statements and financial budgets

• Operational accounting systems focus on transaction processing systems. They emphasize legal and historical record-keeping and the production of accurate financial statements.

• Typically, operational accounting systems include:

• Order Processing: Captures and processes customer orders and produces data for inventory control and accounts receivable.

• Inventory control: Processes data reflecting changes in inventory and provides shipping and reorder information.

• Accounts receivable: Records amounts owed by customers and produces customer invoices, monthly customer statements, and credit management reports.

• Accounts payable: Records purchases from, amounts owed to, and payments to suppliers, and produces cash management reports.

• Accounts payroll: Record employee work and compensation data and produces pay checks and other payroll documents and reports.

• General ledger systems: Consolidates data from other accounting systems and produces the periodic financial statements and reports of the business.

• Management accounting systems focus on the planning and control of business operations.

They emphasize:

• Cost accounting reports

• Development of financial budgets and projected financial statements

• Analytical reports comparing actual to forecasted performance

Figure 5.4

Financial Management Systems

Computer-based financial management systems support financial managers in decisions concerning:

• The financing of a business

• The allocation and control of financial resources within a business

Major financial information system categories include

• Cash and investment management

• Capital budgeting

• Financial forecasting

• Financial planning

Figure 5.5

Capital Budgeting

The capital budgeting process involves evaluating the profitability and financial impact of proposed capital expenditures.

• Long term expenditure proposals for plants and equipment can be analyzed using a variety of techniques

• This application makes heavy use of spreadsheet models that incorporate present value analysis of expected cash flows and probability analysis of risk to determine the optimum mix of capital projects for a business.

Financial Forecasting and Planning

A variety of financial forecasting packages provide analytical techniques that result in economic or financial forecasts of national and local economic conditions, wage levels, price levels, and interest rates.

Financial Planning systems use financial planning models to evaluate the present and projected financial performance of a business or of one of its divisions or subsidiaries. Financial planning systems:

• Help determine the financial needs of a business and analyze alternative methods of financing the business

• Use financial forecasts concerning the economic situation, business operations, types of financing available, interest rates, and stock and bond prices to develop an optimal financing plan for the business

• Frequently use electronic spreadsheet packages and DSS generators to build and manipulate models.

• Are used to answer what-if and goal-seeking questions in order to evaluate financial and investment alternatives.