Utilizing Advanced Information Technology

Utilizing Advanced Information Technology

Chapter

18 1

Learning Objectives After studying the chapter, you should be able to: 









Differentiate between data and information, and list the attributes of useful information Describe three reasons why managers must have access to information to perform their tasks and roles effectively. Describe the computer hardware and software innovations that have created the IT revolution. Differentiate among seven different kinds of management information systems. Explain how advances in information systems can give an organization a competitive advantage. 18-2

McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Information and the Manager’s Job Data 

Raw, unsummarized, and unanalyzed facts.

Information 

Data that are organized in a meaningful fashion

18-3 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Attributes of Useful Information Attributes Quality

The accuracy and reliability of available information affects the quality of decisions that managers make using the information.

Timelessness

The availability of real-time information that reflects current conditions allows managers to maximize the effectiveness of their decisions.

Completeness

Complete information allows managers to consider all relevant factors when making decisions.

Relevance

Having information specific to a situation assists managers in making better decisions.

18-4 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Factors Affecting the Usefulness of Information

Figure 18.1 McGraw-Hill/Irwin

18-5

© 2006 The McGraw-Hill Companies, Inc. All rights reser

What is Information Technology? Information Technology – set of techniques for acquiring, organizing, storing, manipulating, and transmitting information Management Information System – specific form of IT that managers utilize to generate the specific, detailed information they need to perform their roles effectively (inventory systems, customer relationship management (CRM)

18-6 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Information and Decisions Most

of management is about making decisions To make effective decisions, managers need information, both from inside and outside the organization (eg. marketing manager needs to determine the price of the product, production manager needs to decide how much of product to make and how to make it etc) 18-7 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Information and Control Managers

achieve control by: establishing measurable goals, measuring actual performance, compare actual performance with goals, take any corrective action Managers must have information to achieve control over any organizational activity Eg. Fedex – shipment of goods – tracing number 18-8 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Information and Coordination Coordination

problems that managers face in managing global supply chains are increasing Managers have adopted sophisticated IT that helps them coordinate the flow of materials, semifinished goods, and finished goods throughout the world 

Boeing can track the flow of 3 million component parts through the production process in real time 18-9

McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

The Information Technology Revolution The Tumbling Price of Information 

The cost of computer hardware has dropped dramatically while the power of computers has risen sharply.

Wireless communications  

Cellular service has grown rapidly to over 110 million users. Wireless access now connects laptops to networks.

18-10 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

The Information Technology Revolution Computer Networks 

Networking  The

exchange of information through a group or network of interlinked computers  Servers are powerful computers that relay information to client computers connected on a Local Area Network (LAN).  Mainframes are large computers processing vast amounts of information .  The Internet is a world wide network of computers. 18-11 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Moore’s Law: Intel’s Evolving Microprocessors

$2,400.00

$2,400.00

18-12 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

A Typical Three-Tier Information System Figure 18.2 McGraw-Hill/Irwin

18-13

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Software Developments Operating

system software – software that tells computer hardware how to run Applications software – software designed for a specific task or use Artificial intelligence – behavior performed by a machine that, if performed by a human being, would be called intelligent 18-14 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

The Organizational Hierarchy Traditionally, managers have used the organizational hierarchy as the main system for gathering information necessary to make decisions and coordinate and control activities Drawbacks Can reduce timeliness of information Reduces quality of information Tall structure can make for an expensive information system 18-15 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Six Computer-Based Management Information Systems

Figure 18.3 McGraw-Hill/Irwin

18-16

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Types of Information Systems Transaction 

Processing Systems (TPS)

Systems designed to handle large volumes of routine transactions.  Were

the first computer-based information systems handling billing, payroll, and supplier payments.

Operations 

Information Systems (OIS)

Systems that gather, organize, and summarize comprehensive data in a form of value to managers.  Can

help managers with non-routine decisions such as customer service and productivity. 18-17

McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Types of Information Systems Decision Support Systems (DSS) 

Provide interactive models to help managers make non-routine decisions.  Analyzes



investment potential, new product pricing.

Executive Support System (ESS)  Sophisticated

version of a DSS matched a top manager’s

needs. 

Group Decision Support System  An

executive support system that links top managers so that they can function as a team. 18-18

McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Types of Information Systems Expert Systems and Artificial Intelligence 

Employ human knowledge embedded in a computer to solve problems usually requiring human expertise.  Uses

artificial Intelligence to recognize, formulate, solve problems, and learn from experience.

18-19 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Types of Information Systems Enterprise Resource Planning Systems – multi-module application software packages that coordinate the functional activities necessary to move products from the product design stage to the final customer stage

18-20 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Types of Information Systems E-Commerce Systems – Trade that takes place between companies, and between companies and individual customers, using IT and the Internet

18-21 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Types of E-Commerce

Figure 18.4 McGraw-Hill/Irwin

18-22

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Types of E-Commerce Business-to-business

(B2B) – trade that takes place between companies using IT and the Internet to link and coordinate the value chains of different companies B2B marketplace – Internet-based trading platform set up to connect buyers and sellers in an industry Business-to-customer (B2C) – trade that takes place between a company and individual customers using IT and the Internet 18-23 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Forrester Research [[email protected]]

The Top 10 New Technologies For State And Local Gov IT View and Business View Quick Take, by Mike Gilpin

State and local government agencies' IT organizations

are hardly a homogenous lot. However, state and local IT departments have many concerns in common, including the goals of cutting IT costs, improving IT security, ensuring regulatory compliance, and improving communication with citizens. 18-24

McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Forrester cont… Forrester has identified the 10 technologies that can do the most to help state and local government agencies achieve these goals:  composite applications, portals, and collaboration technology;  content-centric applications;  service-oriented architecture,  Web services, and application integration;  Agile processes and IT process improvement;  open source; RFID and other X-Internet technologies;  voice over IP (VoIP), voice/data and voice/speech technology, and call center applications;  Organic IT;  identity management and content security; and  wireless LANs.

18-25 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Forrester contd.. Data Center Automation: Buyers Are Torn Between Proprietary And Multivendor Choices IT View Quick Take, by Galen Schreck, Frank E. Gillett

Tools that support Organic IT like server and storage provisioning software suffer from a split personality. The products with the best hardware integration are usually proprietary, while the products supporting the broadest range of platforms have more generic support. Which is the lesser of two evils? Forrester asked 129 large North American firms about their purchase preferences for data center automation products. The bottom line: A majority of respondents prefer heterogeneous software products over systems — but are almost evenly divided on whether to buy one solution or do homegrown integration of best-of-breed tools.

18-26 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

IT Cost Cutting Is Still A High Priority IT View and Business View Quick Take, by Galen Schreck, Frank E. Gillett  Forrester

surveyed 149 US firms about their IT priorities for this year and beyond.  The majority still say that their top short-term priority is reducing the cost of IT.  When

asked about future plans for 2005, lowering business and IT labor costs takes a back seat to building improved business capabilities. 18-27

McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

What Marketing Wants From Technology IT View and Business View Data Overview, by Tom Pohlmann  

 

In this Data Overview, Pohlmann et.al. examine what business leaders outside of IT want from IT. Almost all marketing executives see information technology as being vital to the success of marketing efforts, but most want new ways to turn customer data into actions that drive quantifiable business results. Two-thirds of companies employ cross-functional committees to oversee spending on marketing technology, but 53% describe their IT shops as having an inadequate understanding of how technology can support marketing processes.

18-28 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Forrester Wave™: HR Management Systems IT View Tech Choices, by Paul Hamerman 

 





A human resources management system (HRMS) is a core enterprise application for managing administrative and strategic processes related to an organization's most critical asset — its people. The vast majority of large organizations use an HRMS from one of the three major ERP vendors — SAP, PeopleSoft, or Oracle. In the past, PeopleSoft enjoyed a clear functional advantage, but the gap has narrowed to the extent that the choice is now driven most often by an enterprise's overall ERP strategy. With the upper end of the HRMS market already heavily committed to these vendors, organizations are focusing on consolidating multiple HR systems to a single global instance and expanding the use of self-service and strategic HR components. The midmarket is less mature in terms of HRMS adoption, and the large vendors are battling for share against smaller and more specialized vendors and those emphasizing hosted deployment and process outsourcing services. 18-29

McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

The Impact and Limitations of Information Systems Computer-based Information Systems 



Are increasingly associated with decentralization of managerial decision making. Flattening (“delayering”) organizations Information systems reduce the need for the hierarchy to control the firm.  Managers control and coordinate using the system, not workers. 

Horizontal Information Flows 

Information networks can bridge functional departments which allows information to flow horizontally between departments, leading to much higher productivity, quality, and innovation. 18-30

McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

How Computer-Based Information Systems Affect the Organizational Hierarchy

Figure 18.5 McGraw-Hill/Irwin

18-31

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Communication Flows at Tel Co. and Soft Co.

Figure 18.6 McGraw-Hill/Irwin

18-32

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Information Systems and Competitive Advantage Competitive   

Improved managerial decision-making capability Reduced need for hierarchical control systems Increased efficiency by reducing requirements for personnel

Virtual 

Advantages of Information Systems

Products

Firms can use their information systems to custom tailor goods and services individually for each of their customers.

18-33 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Limitations of Information Systems Loss of the Human Element 

Information systems cannot present all kinds of information accurately. Thick information, which is rich in meaning and not quantifiable, is best suited to human analysis.  Information systems should support face-to-face communication, and not be expected to replace it 

Causes of Difficult Implementations  

Information systems can be hard to develop and put into service. Consistent standards for systems do not exist. 

Makers of hardware use different standards which makes it hard to share information between systems.

18-34 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Limitations of Information Systems Difficult Implementations 

To avoid problems:  List

major organization goals and the information types require measure those goals.  Audit the current system to verify that information collected is accurate, reliable, timely, and relevant.  Investigate other sources of information  Build support for the system with workers.  Create formal training programs.  Emphasize that face-to-face contact is important. 18-35 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Chapter

18 1 Value Chain Management

Functional Strategies to Increase Quality, Efficiency, and Responsiveness to Customers

Learning Objectives After studying the chapter, you should be able to:  Explain the role of value-chain management in achieving superior quality, efficiency, and responsiveness to customers.  Describe what customers want, and explain why it is so important for managers to be responsive to their needs.  Explain why achieving superior quality is so important.  Describe the challenges facing managers and organizations that seek to implement total quality management.  Explain why achieving superior efficiency is so important.  Differentiate among facilities layout, flexible manufacturing, just-in-time inventory, and process reengineering. 18-37 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Value Chain Management Development of a set of functional-level strategies that increase the performance of the operating system a company uses to transform inputs into finished goods and services

18-38 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Operating System Various functional activities an organization uses to acquire inputs, convert inputs into outputs, and dispose of outputs

18-39 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Value Chain Refers to the idea that a company is chain of functional activities that transform inputs into an output of goods and services that customers value     

Production function Marketing and Sales Service function Materials management function Information systems function

McGraw-Hill/Irwin

18-40

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Value Chain 

Production function 



Marketing and Sales function 



Provide after-sales service and support

Materials management function 



Increase value customer perceives to be contained in a product

Service function 



Responsible for the creation of a good or service

Controls the movement of physical materials through the value chain

Information systems function 

Controls the electronic system for managing inventory, tracking sales, pricing products, etc.

18-41 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Functional Activities and the Value Chain

18-42 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Functional Strategies and Competitive Advantage 1. 2. 3.

4.

To attain superior efficiency To attain superior quality To attain superior speed, flexibility, and innovation To attain superior responsiveness to customers 18-43

McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Improving Responsiveness to Customers Without customers, organizations would cease to exist.  

Non-profit and for-profit firms all have customers. Managers need to identify who the customer is and their needs.

What do customers want? 

Usually customers prefer: A lower price to a higher price.  High-quality products to low-quality products.  Quick service to slow service (also prefer good after-sale support)  Many features over few features.  Products that are customized or tailored to their specific needs. 

18-44 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Price versus Attributes An output’s attributes is determined by the production system. 



Firms must strike a balance between cost and attributes Firms offering high quality, fast service and other attributes customers desire, often must raise prices to cover their additional costs.  Operations

management focuses on improving production to lower costs or produce more attributes at the same cost.  By enhancing the price/attribute relationship, a firm can increase its competitive position. 18-45 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Improving Quality The concept of quality applies to the products of both manufacturing and service firms 



A firm that provides higher quality than others at the same price is more responsive to customers. Higher quality can also lead to better efficiency through lower waste levels and operating costs. 18-46

McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Impact of Increased Quality on Organizational Performance

Figure 9.4 McGraw-Hill/Irwin

18-47

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Total Quality Management Total Quality Management (TQM) 





A management technique that focuses all activities on improving the quality of a firm’s goods or services. TQM is a company-wide management philosophy developed by Deming, Juran, and Feigenbaum. The TQM philosophy is that the customer defines quality.

18-48 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Steps to Successful TQM Implementation  Build

organizational commitment to quality  Focus on the customer  Find ways to measure quality  Set goals and create incentives  Solicit input from employees

 Identify

defects and trace to source.  Introduce just-in-time (JIT) inventory systems.  Work closely with suppliers.  Design for ease of production.  Break down barriers between functions. 18-49

McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Improving Efficiency The fewer the inputs required to produce a given output, the higher the efficiency of a production system. 

A common measure of the organization’s efficiency of turning all of the inputs into outputs is called total factor productivity:

outputs Total factor productivi ty = all inputs 18-50 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Improving Efficiency 

A comparison measure of a single input (such as labor) to total output is called partial productivity: outputs Labor productivity = direct labor

18-51 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Improving Efficiency Calculating

labor productivity allows labor comparisons between organizations. Improved efficiency leads to lower costs and better performance. TQM and Efficiency 

TQM can lead to much higher labor productivity.  When

quality rises, less is wasted on scrap.

18-52 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Facilities Layout, Flexible Manufacturing, and Efficiency Facilities 

The operations management technique whose goal is to design the machine-worker interface to increase production system efficiency.

Flexible 

Layout

Manufacturing

Operations management techniques that attempt to reduce the setup costs associated with a production system. 18-53

McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Three Facilities Layouts Figure 9.5 McGraw-Hill/Irwin

18-54

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Facilities Layout 

Product layout 

Machines are organized so that each operation is performed at work stations arranged in a fixed sequence. 



Example: mass production systems where workers are stationary and a belt moves work to them.

Process Layout 

Self contained work stations not organized in a fixed sequence. 

Provides flexibility in making a wide variety of products tailored to customers.

Fixed-Position Layout 

The product stays in a fixed spot and components produced at remote stations are brought the product for to final assembly. 

Large jet aircraft assembly uses this type of layout.

18-55 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Changing a Facilities Layout

Figure 9.6 McGraw-Hill/Irwin

18-56

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Flexible Manufacturing Most firms face major expenses when setting up to produce a product. 

These costs must be paid before production begins.  The

more often products to be built change, the higher setup costs become.



Flexible manufacturing reduces setup costs by reducing the time required to reset the production line for a different product.  Using

easily replaced manufacturing equipment  Redesigning the production system itself to be more productive. 18-57 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Just-in-Time Inventory and Efficiency Just-in-Time (JIT) Inventory 

Originally developed for TQM, also adds to efficient production.  JIT

reduces inventory holding costs for warehousing, storage, inventory tracking, and the cost of capital tied up in inventory.  A drawback to JIT is that a firm does not have a large buffer stock of parts which makes the firm vulnerable to strikes or supply problems that can quickly deplete on-hand inventories. 18-58 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Efficient Manufacturing Self-managed teams boost efficiency by allowing for a flatter organization structure.  The

team takes on the role of the supervisor.  Teams working together often become very skilled at enhancing productivity.

18-59 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Process Reengineering and Efficiency Process Reengineering 

The fundamental rethinking and radical redesign of the business process to achieve dramatic improvement in critical measures of performance.  Boosts

efficiency by directing efforts to activities that add value to the good or service produced.  Top managers must support efficiency improvements for them to be accepted by workers. 18-60 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

Value Chain Management Boundary-Spanning

roles – Interacting with individuals and groups outside the organization to obtain valuable information from the environment Gatekeeping – Deciding what information to allow into the organization and what information to keep out 18-61 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser

The Nature of Boundary-Spanning Roles

18-62 McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc. All rights reser