Chapter 7

1. Chapter 7 Transaction Processing, Innovative Functional Systems, CRM, and Integration

2. Functional Information Systems • Traditionally, IS were designed within each functional area to increase their internal effectiveness & efficiency • This may not suit some organizations, because certain processes may involve activities that are performed in several functional areas • Solution 1: Reengineer the organization • For example, the company can create cross-functional teams, each responsible for performing a complete business process. • Solution 2: The integrated approach (e.g. Colonial on pg 276). • Keeps the functional departments but creates a supportive information system to help communication, coordination, and control.

3. Functional Departments and the Value Chain

4. Characteristics of Functional IS • A functional information system consists of several smaller information systems that support specific activities performed in the functional area. • The specific IS applications in any functional area can be integrated to form a coherent departmental functional system, or they can be completely independent • Functional information systems interface with each other to form the organization-wide information system. • Some organizational information systems interface with the environment. • Information systems applications support the three levels of an organization’s activities: operational, managerial, and strategic.

5. Transactions • Transaction: something is given and something is received, or there is an exchange • Inside/outside transactions • Product is given, cash is received • Internal-only transactions • Employee paycheck given, employee labor received • Material is withdrawn from inventory, a material requisition is given • Every transaction involving cash or other real assets is recorded in the TPS, and most lesser transactions (such as an internal transfer of finished products to inventory) also are recorded • It is the TPS that collects, records, stores, processes, and accesses the transactions

6. Transaction Processing Systems • Transaction Processing Systems (TPS) • The information system that support business processes, mainly accounting & finance transactions, with some sales, personnel, & production activities as well • TPS is the backbone of an organization’s information systems • It monitors, collects, stores, processes & disseminates information for all routine core business transactions. • These data are input data to functional information systems applications, DSS, and CRM

7. Primary Goal of TPS • To provide all the information needed by law and/or by organizational policies to keep the business running properly and efficiently

8. Specific Goals of TPS • To allow for efficient & effective operation of the organization • To provide timely documents and reports • To increase the competitive advantage of the corporation • To provide the necessary data for tactical & strategic systems, such as Web-based applications • To ensure accuracy & integrity of data & information. • To safeguard assets & security of information

9. Activities of TPS • First, data are collected & entered into the computer via any input device • The system then processes data in one of the following ways: • Batch processing: the firm collects data from transactions as they occur, placing them in groups or batches. The system then processes the batches periodically. • Online processing: data are processed as soon as a transaction occurs. • Hybrid system (a combination of batch & online processing) collects data as they occur but process them at specified intervals.

10. Benefits of Web-Based Transaction Processes • Flexibility to accommodate unpredictable growth in processing demand. • Cost effectiveness for small dollar amounts. • Interactive, automatic billing, enabling companies to offer services to anyone, not just subscribers. • Timely search and analysis of large databases. • Ability to handle multimedia data such as pictures and sound effectively and efficiently. • High data throughput to support inquiries requiring massive file size. • Fast response time. • Effective storage of huge graphics and video databases.

11. Logistics/Materials/Inventory Management Transaction Systems • Very important • Handled in OPIM 204

12. Channel Systems • Channel Systems: all the systems involved in the process of getting a product or service to customers & dealing with all customers’ needs. • FOUR MAIN CHANNEL SYSTEM ACTIVITIES: • The Customer is King/Queen • Telemarketing • Distribution channels • Marketing management

13. It is essential for companies today to be aware of their customers and treat them like royalty. Innovative products & services and superb customer service are becoming a necessity for many organizations. For example: Customer Profiles and Preference Analysis Prospective Customer Lists & Marketing Databases Mass Customization Personalization The Customer is Always Right

14. Telemarketing • A telemarketing process can be divided into five major activities, all of which are supported by IT & can be done on the Web, even in a wireless environment. • Advertisement and reaching customers • Order processing • Customer service • Sales support • Account management

15. Distribution Channels • Organizations can distribute their products & services through several available delivery channels • A company may use its own outlets or distributors. The company also needs to decide on the delivery mode (trains, planes, trucks). • Distribution Channels Management • Once products are in the distribution channels, firms need to monitor and track them to guarantee customer satisfaction. • Improving Sales at Retail Stores • Using information technology, it is possible to improve sales by reengineering the checkout process.

16. Marketing Management • Many marketing management activities are supported by computerized information systems. Some areas where this is being done include: • Pricing of Products or Services • Salesperson Productivity • Productivity Software (Sales automation software) • Product-Customer Profitability Analysis • Sales Analysis and Trends • New Product, Service, and Market Planning • Web-Based Systems in Marketing

17. Managing Accounting & Finance Systems

18. Managing Accounting & Finance Systems • An accounting/finance information system is responsible for: • Gathering the raw data necessary for the accounting/finance TPS • Transforming the data into information • Making the information available to users • Many packages exist to execute routine accounting transaction processing activities. • Some software packages are integrated, e.g. MAS 90 and MAS 200 • The accounting/finance TPS also provides a complete, reliable audit trail of all transactions transmitted through the network

19. Financial Planning and Budgeting • Appropriate management of financial assets is a major task in financial planning and budgeting • Financial and Economic Forecasting • Knowledge about the availability and cost of money is a key ingredient for successful financial planning • Planning for Incoming Funds  • Funds for organizations come from several sources • Using the information generated by financial and economic forecasts, the organization can build a decision support model for planning incoming funds

20. Control and Auditing • Specific forms of financial control are: • Budgetary controls • Internal and External audits • Financial Ratio Analysis • Profitability Analysis & Cost Control • Product Pricing

21. Managing Human Resource Systems • Developments in Web-based systems increased the popularity of human resources information systems (HRISs) as of the late 1990s. • Initial HRIS applications were mainly related to transaction processing systems. • However, in the last decade we have seen considerable computerization activities in the managerial and even strategic areas.

22. HRISs and Recruitment • Using the Web for Recruitment • With millions of resumes available online, companies are trying to find appropriate candidates on the Web. • Position Inventory • Large organizations need to fill vacant positions frequently. An advanced intranet-based position inventory system keeps the position inventory list current & matches openings. • Employee Selection • To expedite the testing and evaluation process and ensure consistency in selection, companies use information technologies such as expert systems

23. HR Maintenance and Development • Performance Evaluation • Once digitized, evaluations can be used to support many decisions, ranging from rewards to transfers to layoffs. • Training and Human Resources Development • IT can support the planning, monitoring, and control of training and retraining activities by using workflow applications. • Intelligent computer-aided instruction (ICAI) and application of multimedia support for instructional activities. • Training can be improved using Web-based video clips & virtual reality.

24. HR Planning and Management • Personnel Planning • Large companies develop qualitative and quantitative workforce planning models, which can be enhanced if IT is used to collect, update, and process the information • Labor–Management Negotiations • Some companies have developed computerized DSS models that support negotiations • These models can simulate financial & other impacts of fulfilling any demand made by employees and provide answers to queries in seconds • Benefits Administration • Using computers for benefits selection can save a tremendous amount of labor and time • Some companies have automated benefits enrollments

25. So What is CRM? • CRM stands for Customer Relationship Management • It is a strategy used to learn more about customers' needs and behaviors in order to develop stronger relationships with them • There are many technological components to CRM, but thinking about CRM in primarily technological terms is a mistake • The more useful way to think about CRM is as a process that will help bring together lots of pieces of information about customers (Market research, historical data), sales (Historical data), marketing effectiveness (Sales/Advertising, Sales/Sales Rep), responsiveness (Response to price, promotion, distribution), and market trends (Market research….)

26. Customer Relationship Management • CRM is an approach that recognizes that customers are the core of the business and that the company’s success depends on effectively managing relationships with them • Customer service is a series of activities designed to enhance the level of customer satisfaction

27. CRM, cont’d. • Relationship marketing: the “overt attempt of exchange partners to build a long-term association, characterized by purposeful cooperation and mutual dependence on the development of social, as well as structural, bonds” (Mowen & Minor, 1998). • E-Service: customer service that is performed on the Web, sometimes automatically.

28. Introduction to CRM • Contact Points: • Advertisements, Retail counters, Website visits, Purchase, Direct sales, Catalogs, direct mail, Telemarketing, Call centers, Internet email, Sales promotions, Banner advertisements, Market research…… • What do we get: Data, Data, Data • What do we want? Information and knowledge of customers • Why do we want this? Retain customers, Target customers, Change strategies, Make it easy for customers to access information, product, services. Identify profitable customers

29. Goal of CRM • To use technology and human resources to gain insight into the behavior of customers and the value of those customers • Provide better customer service • Make call centers more efficient • Cross sell products more effectively • Help sales staff close deals faster • Simplify marketing and sales processes • Discover new customers • Increase customer revenues

30. CRM in Action • According to Seybold and Marshak (1998) there are five steps in building IT-supported CRM. These are: • Make it easy for customers to do business with you. • Focus on the end customer for your products and services. • Redesign your customer-facing business processes from the end customer’s point of view. • Wire your company for profit: design a comprehensive, evolving electronic business architecture. • Foster customer loyalty. In e-Commerce, especially, this is the key to profitability.

31. IT in CRM

32. Customer Service • Providing Search and Comparison Capabilities • Providing Free Products and Services • Providing Technical and Other Information and Service • Allowing Customers to Order Customized Products and Services Online • Letting Customers Track Accounts or Order Status

33. Tools for Customer Service • Personalized Web Pages • FAQs • Tracking Tools • Chat Rooms • E-mail and Automated Response • Help Desks and Call Centers • Troubleshooting Tools

34. CRM is Cool But How Does It Happen? • Buy software, install it, and you are all set (Wrong!) • Identify what information you need and what to do with it! • What are the sources of information, where, when, how data come? Where to store this data? How data is used currently? • CRM systems link these points. • Data flow between operational system (Sales, Inventories, etc.) to Analytical systems (Logical system/software to identify trends, patterns, behavior…by sorting through this records) • Analysts can analyze these patterns to make conclusion about customer needs, profile, profitability to make crucial business decisions

35. Examples of Data That CRM Needs to Collect • Responses to campaigns • Shipping and fulfillment dates • Sales and purchase data • Account information • Web registration data • Service and support records • Demographic data • Web sales data

36. Managerial Issues • Integration of functional information systems. Integration of existing stand-alone functional information systems is a major problem for many organizations. • Priority of transaction processing. Transaction processing may not be an exotic application, but it deals with the core processes of organizations. • The customer is king/queen. In implementing IT applications, management must remember the importance of the customer, whether external or internal.

37. Managerial Issues, cont’d. • Finding innovative applications • Tools such as Lotus Notes, intranets, and the Internet enable the construction of many applications that can increase productivity and quality. • System integration • Although functional systems are necessary, they may not be sufficient if they work independently. • Using the Web • Web-based systems should be considered in all functional areas. They are effective, inexpensive & user friendly. • Ethical Issues • Many ethical issues are related to the code of ethics followed in CRM and privacy policies.