Information Systems (Steven Alter, 2002, Prentice Hall)

Chapter 1 Businesses perate !hrou"h Systems

Business Processes an# the $alue Chain
%&'usiness is 'ecomin" 'usiness as usual 'ecause or"ani(ations that cannot a#apt to this
environment are increasin"ly noncompetitive unless they are fortunate enou"h to have
uni)ue pro#ucts, s*ills or a location that others cannot match+ ,e still encounter many
companies -hose pro#ucts an# services seem lac*luster, 'ut other than luc*y e.ceptions,
companies that cannot meet to#ay/s hi"h e.pectations -ill "ra#ually 'e ta*en over or -ill
"o out of e.istence+
0our !hemes
1+ Businesses operate throu"h systems in -hich people perform 'usiness processes usin"
technolo"y an# information+ !he 'asic i#eas for thin*in" a'out these systems are the
same re"ar#less of -hether the Internet is involve#+
2+ Business professionals participate in all the ma1or phases of 'uil#in" an# maintainin"
these systems, an# therefore nee# *no-le#"e an# s*ills necessary for effective
participation+
2+ A#vances in I! have 'een an# continue to 'e a #rivin" force in 'usiness innovation in
"eneral an# e&'usiness in particular+
3+ !he success of I!&ena'le# systems is in no -ay "uarantee# even -hen the latest
technolo"y is use#+
Businesses operate throu"h systems an# the systems are compose# of su'systems+ A
system has its purpose, 'oun#ary, environment, inputs an# outputs+
Here is the #efinition of the 'usiness process4
5A 'usiness process is a relate# "roup of steps or activities in -hich people use
information an# other resources to create value for internal or e.ternal customers6
!his process has time, space, input, output, 'e""in" an# en#+
Su' processes are parts of a process that are processes in their o-n ri"ht of process+
A process/s value a##e# is the amount of value it creates for its internal or e.ternal
customer+ 0or e.ample, at 7ell Computer, the process 5 assem'le a computer6 starts -ith
the computer/s component parts an# en#s -ith a completely assem'le# computer+ !he
value a##e# is the #ifference 'et-een the value of the components an# the value of the
assem'le# computer+
Business processes re)uirin" coor#inate# -or* from many functional areas4
Creatin" a ne- pro#uct
Creatin" a coor#inate# plan for an entire 'usiness
0ulfillin" customer or#ers
Business processes typically -ithin a functional area
%n"ineerin"
Sales an# 8ar*etin"
Pro#uction
Accountin" an# 0inance
Human 9esources
$alue Chain
!he set of processes a firm uses to create value for its customers is often calle# its value
chain+ !he value chain inclu#es primary processes that #irectly create the value the firm/s
customer perceives an# support processes that a## value in#irectly 'y ma*in" it easier for
others to perform the primary processes+
%.ample (a hypothetical restaurant)
:fi"ure 1+;<
Supply Chain Systems
!he supply chain is the transactions, coor#ination, an# movement of "oo#s 'et-een the
firm/s suppliers an# the firm+ Supply chain mana"ement systems can create stan#ar#i(e#
electronic lin*s an# lon"&term a"reements -ith suppliers+ An# the system can improve
service processes 'y maintainin" customer recor#s an# hastenin" response+
%&'usiness can 'e #efine# as the practice of performin" an# coor#inatin" critical 'usiness
processes throu"h the e.tensive use of computer an# communication technolo"ies an#
computeri(e# #ata+
!he #istinction 'et-een B2B an# B2C is cite# fre)uently in #iscussin" e&commerce
opportunities+ B2B ('usiness&to&'usiness) refers to usin" the Internet as a primary
channel for sellin" pro#ucts to other 'usinesses+ B2C ('usiness&to&consumer) refers to
usin" the Internet as a primary channel for sellin" pro#ucts to consumer+
:!a'le 1+2<
Case 1 (7ell)
!ra#itionally pc manufactures pro#uce computers 'ase# on #eman# estimation+ !hose
manufactures ma#e contract -ith #istri'utors that sol# the computers to in#ivi#uals or
'usinesses+ 7ell eliminates mi##leman/s char"es an# ris* of lar"e inventories 'y ta*in"
or#ers #irectly from the customers an# 'uil#in" computers accor#in" to the customer/s
Purchase
0oo#
Seat
Customers
Store 0oo#
!a*e
r#ers
Coo* 0oo#
Serve foo#
Create Bill
9eceive
Payment
specification+ 7ell uses electronic lin*s to its suppliers that tell them e.actly -hen the
parts are nee#e#+ An# 7ell also uses outsourcin" efficiently+
Chapter ; !ypes of Information Systems
Supply Chain Systems
9e"ar#less of -hether the firm is a manufacturer or a retailer, its supply chain for ra-
materials an# components shoul# assure relia'le, lo-&cost ac)uisition of -hatever it
nee#s+
Supply chain systems start -ith information a'out -hat inventory is availa'le, -hen
previously or#ere# material -ill arrive, an# -hen material -ill pro'a'ly 'e nee#e# 'ase#
on manufacturin" sche#ules or sales forecasts+ !his information is use# to4
7etermine material re)uirements for future -ee*s or months
=enerate ne- or#ers
Sen# the or#ers to suppliers
'tain commitment #ates for li*ely receipt+
$erify that the or#ere# material actually arrive#+
8aterial re)uirement plannin" (89P) systems attempte# to inte"rate purchasin" an#
pro#uction activities+
%lectronic #ata interchan"e (%7I) system connects lar"e companies an# their suppliers
electronically+ Since electronic #ata transmission is virtually instantaneous, the supplier/s
information system can chec* for availa'ility an# respon# )uic*ly -ith a confirmation+
!he more current i#ea of supply chain mana"ement (SC8) "oes 'eyon# automatin" #ata
transfers+ It is the overall system of coor#inatin" closely -ithy suppliers so that 'oth the
firm an# its suppliers reap the 'enefits of smaller inventories, smoother pro#uction, an#
less -aste+