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Chapter 7
Transaction Processing,
Functional Applications, CRM,
and Integration
Functional Areas in a Business
•Compensation
•Vacation
•Skills/Training
Human
Resources
Accounting
•A/R
•A/P
•Payroll
•General Ledger
•Receiving
•Fulfillment
•Process control
•Purchasing
Business
Functions
Operations
•Order Taking
•CRM
•Self-service
Sales
Financing
Marketing
•Cash
Management
•Asset
Management
•Budgeting
•Retail Pricing
•Sales Promotions
•Sales Force
Management.
•Customer Loyalty
•Interactive
Marketing
Functional Information Systems
Traditionally, ISs 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.
Ex.: the company can create cross-functional teams, each
responsible for performing a complete business process
Solution 2: The integrated approach
Keeps the functional departments but creates a supportive
information system to help communication, coordination, and
control.
==> Cross functional boundaries
Functional Areas – Supply Chain Perspective
The supply chain is a business process that links all the
procurement from suppliers, the transformation activities inside a
firm (the value chain) and the distribution of goods or services to
customers via wholesalers and retailers.
Major Characteristics of Functional ISs
 Composed of smaller systems
A functional IS consists of several smaller information systems
that support specific activities performed in the functional area
 Integrated / independent systems
The specific IS applications in any functional area can be
integrated to form a coherent departmental functional system,
they can be integrated across departmental lines to match a
business process or be completely independent.
 Interfacing
Functional information systems may interface internally with
each other to form the organization-wide information system or
externally systems outside the organization
 Supportive of different levels
Information systems applications support the three levels of an
organization’s activities: operational, managerial, and strategic
A model of IS
in the production/operations functional area
Functional Information Systems
Strategic
Datamining ops
that support
management
Dynamic and what-if
features.
Decision Support
Back office
administrative
tasks and ops.
Operation Level of the
company is normally highly
structured and predefined.
Data Analysis
and statistical
forecasting.
Office
Integrated
Clerical documents,
schedules, mail,
manuals, etc.
Business transactions, events
and processes. Support of the
business and customers.
Transactional
Transaction Processing System
(TPS)
Overview
the backbone of an organization’s information systems
supports transaction processes
monitors, collects, stores, processes, and disseminates information
for all routine core business transactions
includes accounting and finance transactions and some sales,
personnel, and production activities
These data are input data to functional information systems
applications, DSS, and CRM
Computerization of routine transaction processes
Objectives of TPS
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.
Specific objectives of a 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
Major characteristics of TPS
 Large amounts of data are processed.
 The sources of data are mostly internal.
 TPS processes information on a regular basis.
 Large Storage capacity is required.
 High processing speed is needed due to the high volume.
 TPS basically monitors and collects past data.
 I/O data are structured.
 High level of detail is usually observable.
 Low computation complexity.
 A high level of accuracy, data integrity, and security is needed.
 High reliability is required.
 Inquiry processing is a must.
Activities of TPS
First, data are collected & entered into the computer
via any input device.
3 ways that the system processes data
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.
The flow of information in
transaction processing
Web-based & Online TPS
 OLTP (online transaction processing) - Client / server systems
 OLTP and Web technologies, suppliers can look at the firm’s inventory
level or production schedule in real time
• responsibility for inventory management and ordering
 Interactive Internet TPS
 expands OLTP to provide enhanced real time transaction processing
over the Internet or intranets
Internet transaction processing
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Flexibility to accommodate unpredictable growth
Cost effectiveness
Interactive automatic billing
Timely search
Multimedia data
High data throughput to support queries requiring massive file size
Fast response time
Effective storage
Typical Tasks in TPS
 Order processing
 The ledger
 Accounts payable and receivable
 Receiving and shipping
 Fixed assets management
 Payroll
 Personnel files and skills
inventory
 Government reports
 Periodic reports and statements
Innovative IT Applications
in the Functional Areas
Managing production/operations and logistics
POM - The production and operations management
transform inputs into useful outputs
very diversified, and so its supporting IS(s)
related to finance and sales, engineering and design, and
purchasing and logistics
Managing marketing and sales
Managing the accounting and finance systems
Managing human resource systems
POM functions
In-house logistics & material management
Logistics Management
deals with ordering, purchasing, inbound logistics
(receiving), and outbound logistics (shipping) activities.
• All of these activities can be supported by ISs
E-procurement
Inventory management
determines how much inventory to keep
• when to order – reorder point
• how much to order
Three costs play important roles in inventory decisions
• cost of maintaining inventories
• cost of ordering (a fixed cost per order)
• cost of not having inventory when needed (the shortage or
opportunity cost)
Vendor-managed inventory (VMI)
Quality control
Planning Procedures/ Operations
Material Requirements Planning (MRP)
SW that facilitates the plan for acquiring parts,
subassemblies, or materials
Manufacturing Resource Planning (MRP II)
connects the regular MRP to other functional areas
MRP + determines the costs of parts and the cash flow
needed to pay for parts
Just-in-time (JIT)
an approach that attempts to minimize waste of all kinds
and continuously improve processes and systems
Planning Procedures/Operations (cont.)
Project management
The characteristics
• Most projects are unique undertakings, and participants have little
prior experience in the area.
• Uncertainty exists due to the long completion times.
• There can be significant participation of outsiders, which is
difficult to control.
• Extensive interaction may occur among participants.
• Projects often carry high risk but also high profit potential.
The tools
• PERT (Program evaluation and review technique)
• Critical path method (CPM)
Work Management Systems (WMS)
automatically manage the prioritization and distribution of work
deal with resource allocation and reallocation

CIM-Computer-integrated manufacturing
Definition - a philosophy about the implementation of
various integrated computer systems in factory automation
3 basic goals
Simplification of all manufacturing technologies & techniques.
Automation of as many of the manufacturing processes as possible
by the integration of many IT.
Integration and coordination of all aspects of design,
manufacturing & related functions via computer HW and SW.
Typical integrated technologies
FMS (Flexible-manufacturing systems), JIT, MRP
CAD (Computer Aided Design)
• a system that enables industrial drawings to be constructed on a
computer screen & stored, manipulated & updated electronically.
CAE (Computer Aided Engineering)
• enables designers to analyze the design and determine whether it
will work the way the designer thought it would.
GT - Group technology
The CIM
model
Product Lifecycle Management (PLM)
PLM
 is a business strategy that enables manufacturers to
control and share product-related data as part of a products
design and development efforts.
Web-based supply chains and other technologies are
employed to automate this collaborative effort.
This electronic-based collaboration can
reduce product cost
travel expenses
reduce costs associated with product-change management
reduce the time it takes to get a product to market
Managing Marketing and Sales
 Channel systems - the TPS involved in the process of getting a
product or service to customers and dealing with their needs
 The customer is king (queen) - customer relations
 Telemarketing
• Telemarketing has been moving to cell phones, using Short message service
(SMS), which consists of messages you can receive on your cell phone.
• 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
 Distribution channels & in-store innovations
• Distribution channels management
• Improving sales at retail stores
 Marketing management
Channel systems
Customer Relations
 CRM
Customer Profiles and Preference Analysis
• Sophisticated ISs are being developed to collect data on existing and potential
customers, their demographics (age, gender, income level), and preferences.
Prospective Customer Lists and Marketing Databases
• All firms need to know and track who their existing and potential customers are.
• These prospective-customer lists can be analyzed and sorted by classification
for direct mailing, e-mailing, or telemarketing.
Mass Customization
• Today’s customers prefer customized products.
• Through mass customization, the practice of maintaining WIP inventory,
manufacturers can offer different product configurations at reasonable prices.
Personalization
• Special product offers are made, based on where the customer spent their time
and on what they may have purchased.
Advertising and Promotions
• Special promotions, coupons are presented to the customer via mails, email,
wireless and pervasive computing applications.
Distribution Channels & In-Store Innovations
 New IT-Supported Distribution Channels
Internet
Location Based Mapping
Self-service convenience stores
 Improving Shopping and Checkout at Retail Stores
Hand-held wireless devices that scan the bar code UPC
Smart card or credit card
Information kiosk enable customers to view catalogs in stores
Self-checkout machines
Check-writers attached to cash registers
Computerization of various activities in retail stores
Video-based systems count and track shoppers in a physical store
 Distribution Channels Management
Marketing Management
 Many marketing management decision applications are
supported by CBIS.
 Some examples
 Pricing of Products or Services
• Sales volumes are largely determined by the prices of products or services as is profit.
 Salesperson Productivity
• Sales-force automation - increases salesperson productivity by providing them
with mobile devices, access to information
• Productivity SW
 Profitability Analysis
• profit contribution of certain products and services can be derived from costaccounting systems
 Sales Analysis And Trends
• Marketing TPS collect sales figures that can be searched for trends and
relationships
 New Products, Services, and Market Planning
• Requires careful analysis, planning, forecasting and Market research.
 Web-Based Systems - support marketing and sales through data capture
Marketing decision support
Marketing data
Internet usage
sales reports
market reports
Industry reports
Government reports
News
Competition
Expert judgements
Statistical &
other models
Marketing models
Regression analysis
Factor analysis
Cluster analysis
Discriminant analysis
Forecasting
Data mining
Media mix
Site location
Product design
Advertising budget
Web metrics
Marketing
evaluation &
recommendations
Standard Management
Science models
Corporate
knowledge
base
Decision output
Linear programming
Decision tables
Inventory
Project management
Ec tools
Web evaluation
Intelligent agents
Databases
User interface
User
An accounting
/ finance
system
Managing Accounting & Finance Systems
An accounting/finance IS is responsible for:
Gather raw data necessary for the accounting/finance TPS
Ttransforming 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.
Accounting & Finance Systems
Financial planning & budgeting
Financial & 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.
Budgeting
Capital budgeting
Managing financial transactions
Financial and Economic Forecasting
Planning for Incoming Funds
Budgeting
Capital Budgeting
Accounting & Finance Systems (cont.)
 EC Applications of Financial Transactions
 Global stock exchanges & multiple currencies
 E-Bonds
 Factoring online
 Electronic re-presentment of checks
 E-bill presentment and payments
 Virtual Close
 Expense Management Automation
 Investment management
 Access to financial and economic reports
 Financial analysis
• Financial value chain management (FVCM)
 Control and auditing
 Budgetary control & Auditing
 Financial health analysis - Financial Ratio Analysis
 Profitability analysis and cost control
 Product pricing
Managing Human Resource Systems
 Recruitment
 Using the Web for recruitment
 Position inventory
 Employee selection
 HRM Portals and Salary Surveys
 Human resource maintenance and development
 Performance evaluation
 Training and human resource development
 Human Resource Planning and Management
 Personnel planning
 Labor - management negotiations
 Payroll and Employees’ Records
 Benefits administration
 Employee Relationship Management (ERM)
Responsible for the workforce
Customer Relationship Management (CRM)
CRM
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
focuses on building long-term and sustainable customer
relationships that add value both for the customer and the
company
Types of CRM
Operational CRM
• related to typical business functions involving customer services,
order management, invoice/billing, etc
Analytical CRM
• involves capture and analysis of customer data
Collaborative CRM
• deals with all the communication, coordination, and collaboration
between vendors and customers
eCRM (electronic CRM)
eCRM (electronic CRM)
started in the mid-1990s
• when customers began using Web browsers, the Internet, and
other electronic touch points
The use of these technologies made customer services
much more effective and efficient than before.
Through these technologies, data generated about
customers can be easily supplied to marketing, sales, and
customer service applications and analysis.
Scope of eCRM
Foundational services (ex. order fulfillment)
Customer-centered services (ex. order tracking)
Value-added services (ex. online information)
CRM
CRM in Action
 5 steps in building IT-supported CRM (Seybold and Marshak, 1998)
 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.
 CRM failures
 Failure to identify and focus on specific business problems
 Lack of active senior management (non-IT) sponsorship
 Poor user acceptance, which can occur for a variety of reasons such as
unclear benefits and usability issues
 Trying to automate a poorly defined process
CRM Activities and IT Support
CRM Activity (Sample)
IT Support
•Internet; online customer survey
•Groupware
•Expert systems for giving advice
•Customized information & services in many
•E-mail
languages
•Data warehouse for customer
•Discounts based on healthy lifestyle
information
•Appointment reminders
•Data mining
•Information on doctors
•Intelligent translating systems
•Medical research
•Help center to solve HMO member problem •Search engines on the Web help center
Information about choice of doctors, hospitals,
and alternative medicine offered by HMO’s
•Web-based integrated call centers
•Quick reply to customers’ inquiries
Monitoring of customers’ orders inside the
company
•Appointment of account managers
•Creation of specialized teams (BPR)
Seminars and educational activities for customers
•Facilitates help-desk activities
• intelligent agents for answering FAQs
•Workflow software for planning and
monitoring
•Intranets
•Expert systems for advice
•Groupware for collaboration
•Online training & Internet
CRM Activities and IT Support (cont.)
CRM Activity (Sample)
Self-tracking of shipments and orders
Segmenting of customers
Matching customers with products and
services
Customizing products to suit customers’
specific needs
Customer discussion forums
Loyalty programs for repeat customers
.
Customer participation in product
(service) development
Proactive approach to customers based on
their activity level
IT Support
•Web-based training software
•Workflow
Data mining in data warehouses
Web-based intelligent agents
•Intelligent agents to find what customer
wants
•CAD/CAM to reduce cost of customization
Chat room & Sponsored newsgroups
•Data warehouses & data mining of customers’
activities
•Smart cards that record purchasers’ activities
•Online surveys
•Newsgroups & Chat room & e-mail
Data warehouse & Data mining
Information Technology in CRM
Customer Service
 Customer Service on the Web
 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
 Tools for Customer Service
 Personalized web pages, FAQs, Tracking tools, Chat rooms, E-mail &
automated response, Help desks & Call centers, Troubleshooting tools
 Justifying CRM programs
Metrics - to determine how much customer service to provide is to
compare your company against a set of standards
Metrics to evaluate Web-related customer service
• Response time, Site availability, Download time, Timeliness
• Security and privacy, Fulfillment, Return policy, Navigability
Partner Relationship Management
Partnership Relationship Management (PRM) refers
to all of the efforts made to apply CRM to all types of
business partners.
Specific functions of PRM applications:
Partner profiles
Centralized forecasting
Partner communications
 Group planning
Lead management
 E-mail/ Web-based alerts
Targeted information distribution  Messaging
Connecting the extended enterprise  Price lists
Partner planning
 Community bulletin boards
Integrating Functional Systems
Reasons for integration
Helps to reduce cost
Helps to increase employees’ productivity
Helps to facilitate information sharing and
collaboration which are necessary for improving
customer service
IT helps CRM
Enterprise Resource Planning (ERP) and
SAP software
Integrated
IS