Chapter 3a: Business Functions and Supply Chains

1. Chapter 3a: Business Functions and Supply Chains Business Functions Role of ISs in Bus. Functions Supply Chains ERP

2. Background: (page 64) • TheTrainline Co. • Sell rail tickets over the phone (1997) • 1999: see the opportunity created by Internet • Launched TheTrainline Website • Success! • Enhance services to customers by providing • Timetable Information • Information on ticket prices • Special deals

3. TheTrainline: cont. • The company form alliances with three other rail companies • This expansion of services lead to incremental growth in the IT system: it was in response to short-term business needs rather than long term planning • In 2002 they decided to migrate to a newer more appropriate technology: • To support growth & reduce maintenance costs.

4. Problems: • Even having the web site services, customers preferred to use the telephone! • They were receiving 120 000 calls per week • 40% of the calls received an engaged tone • Average call length was 6 minutes • 65% of calls did not convert into a sale

5. Solution: It’s all about ‘efficiency’ • Calls are answered by an automated system, collecting information from the customer • Speech recognition sw records the detail and feeds it into data format within the IT system • The ‘data’ demand then trigger automatic and instantly retrieve all ‘supply side’ information from the database • Data are sent to the screen of a sales agent, and at the same time the customer call is patched through to the same agent

6. Benefits: • Operating costs have been reduced by 10% that translates into million pounds • Conversation rates have increased by 4 000 extra calls per week • Customer satisfaction has improved • Resources usage has improved • “The TrainLine” company has been able to grow its business in a very competitive market place

7. Introduction: • Our economy produces/consumes Information • You as professionals must know how to use ISs in every business activity • Managers must have an overall understanding of all elements of a system to control Quality, Costs and Resources

8. Outcomes: • Identify various business functions and the role of ISs in these functions • Explain how ISs in the basic business functions relate to each other • Articulate what supply chains are and how information technology supports management of supply chains • Explain the notion of enterprise resource planning systems (ERP systems)

9. Effectiveness/Efficiency (Intro.): • The better a person performs a job, the more effective he/she is. • Efficiency is measured as the ratio of OUTPUT to INPUT or Output/Input. It will increase when • More output with the same input or • Less input with the same output • IS’s can help companies attain more effective and efficient business processes

10. Effectiveness and Efficiency: • It all relates to ‘Productivity’, because introducing IS in any business function, productivity increases! • Example: Productivity Tools? • Effectiveness: the degree to which a goal is achieved • How much of a goal is achieved? • The degree to which it achieves better outcomes

11. Efficiency: • Efficiency: the relationship between resources expended and benefits gained in achieving a goal • Efficiency = Benefits/Costs = Output/Input Example: Operating costs are lower for a better quality product • Productivity: efficiency of human resources

12. Productivity Tools: • Productivity increased with software applications • Workers produce more in less time.

13. Business Functions: • Accounting • Finance • Engineering • HR • Marketing • Let’s look at these functions (supporting systems) in terms of a typical business cycle: • Beginning with marketing and sales  Customer placing an Order  Supply Chain

16. CRM, SCM • Customer relationship management system: serves customers better and faster • Service continues after delivery of goods as customer service • Supply Chain: The activities performed from the purchase of raw material to the shipping of goods • Supply Chain Management: The coordination of the above activities

17. Accounting: • Purpose is to track every financial transaction • Make sure company is pulling a profit • Accounts payable and receivable track who owes who what • Balance sheet: picture of financial situation • Includes profit-and loss report

18. Accounting IS: • Accounting information system pulls information from transaction processing system • Automatically routes purchases to accounts payable (cheques/fund transfer) and • Sales to accounts receivable (invoices). • Generates reports on demand or on schedule • Cost-accounting systems accumulate data about costs involved in producing specific products

20. Finance: • Firm’s health is measured by its finances • Financial managers try to manage money as efficiently as possible • Information systems improve financial management

21. Finance (continued): • Financial managers have many goals • Collect payables as soon as possible • Making payments at the latest time allowed by contract or law • Ensuring that sufficient funds are available for day-to-day operations • Taking advantage of opportunities to accrue highest yield on funds possible

23. Cash Management: • Financial information systems help managers track company finances • Record every payment/cash receipt  cash movement • Cash management systems: deal specifically with cash • IS reduces interest and fees/increases the yield • Electronic funds transfer: huge cash transactions • From one bank to another

24. Investment Analysis and Service • Investor’s goal is to buy asset and sell higher • Must know current prices of securities in real time • Information systems provide investors and clients with financial news, stock prices, and exchange rates • Real time analysis, therefor using onlinesystem • Factors to consider in investing are variability, expected return, and liquidity • IS will calculate these factors

25. Engineering: • Time to market: time between generating an idea for product and completing a prototype • Engineering includes designing and building the prototype • Brainstorming: group meeting and collaborating to generate ideas • Minimizing time to market is key to maintain competitive edge • Information systems contribute significantly to minimizing time to market. See next slide

26. Engineering (continued): • Computer-aided design: tools to create, modify and store designs and drawings • Rapid prototyping: creating one-of-a-kind products to test design in three dimensions • Takes hours rather than days or weeks to produce product • Computer-aided manufacturing: systems that instruct machines to manufacture parts and assemble product

28. Supply Chain Management • Supply Chain: procurement of raw materials, processing materials, and delivering goods • Processing goods also known as manufacturing • Supply Chain Management: monitoring, controlling, facilitating supply chains • CAD systems often automatically transfer data to CAM systems • IT helps scheduling, planning, allocating, analyzing manufacturing operations  ERP

29. Material Requirements and Purchasing • Material requirements planning: Inventory control • Determines when inventory needs to be restocked • Can predict future need based on demand forecasts • Bill of materials: raw material and subcomponent demands • Economic order quantity: optimal quantity to be bought

30. Manufacturing Resource Planning • MRP II: plans entire manufacturing process • Uses master production schedule • Master production schedule: specifies how production capacity must be used to meet customer demands AND maintain inventory • Balances production economics, demand, manufacturing capacity and inventory levels • Just-in-time manufacturing: suppliers ship parts directly to assembly lines

31. Monitoring and Control • Information systems help control manufacturing processes • Controlling processes ensures quality

32. Shipping • IS help speed up delivery and cutting costs • Many variables that affect cost and speed of shipping. See page 99 • Sophisticated software to optimize shipping efficiency necessary to stay competitive • Examples: • Vehicles equipped with computers and satellite communication • See Fig 3.8

33. RFID in SCM: Self study!! • Radio frequency identification: allows recording of information about product • Electronic product code: replaces universal product code with much more information • Info includes date of manufacturing, plant location, expiring date, destination • Ensures genuineness of products • Read page 100 – 101, especially Fig 3.9