BASIC BUSINESS CONCEPTS

CHAPTER 12.1

  

One of the most important types of business information systems is the transactions processing systems (TPS).

 

A transaction is a record of an event to which the business must respond. A customer order is a transaction that generates a long chain of events that eventually results in the customerís receipt of a product. Information systems (IS) that tract these events are called TPS and they form the foundation for a firmís information processing activities.

 

TPS are "front-line" systems that often form the first contact with the customer by taking the order but TPS pervades other part of an organization including production, sales and marketing, human resources and finance.

 

All business about transactions, people selling their labor or buying services or products from suppliers to customers. In any given year there are trillions of transactions in our economy. Transaction processing systems keep track of all these events.

 

If TPS fail, or perform poorly, the firm goes out of business

If TPS is efficient, then organizations can end up with a strategic advantage in the marketplace.

 

 

How a Business Works: Purpose, Functions, Structure and Process

 

 

Purpose-profits-to sell goods and services for more than the cost of production

Functions (activities)

Structure (shape)

Process

 

Customers are willing to pay more for the cost of goods because of superior value, from experts making or providing the goods or services

 

Firms that produce physical products are called manufacturing firms

Firms that provide a service like accounting advice, medical or legal advice are service firms

 

Service Firms can be divided into traditional services and information services

Business firms typically engage in four major functions

1. Production responsible for manufacturing the goods. Usually called operations

2. Accounting and financing-responsible for keeping track of the money to pay suppliers, employees, stockholders

3. Marketing and sales-responsible for marketing and selling the product

4. Human resources development-responsible for hiring and training employees

5. Information Systems -usually for firms that have more than 100 employees. Middle to large organizations where a specialized group is need just to operate the information technology needed by production, finance, sales and human resources.

 

Usually these five different business functions are structured in the form of a pyramid, with increasing authority at the top in a few individuals and managers. Newer organizations are more flat in their organization of employees and business hierarchy

 

Generally there are three general categories of employees in a business:

Each of these different levels in the organization are supported by a different form of supporting business IS

1. Managers-make sure the work gets done efficiently and with acceptable quality MSS

2. Information workers-data workers (clerical) or knowledge workers(professionals such as researchers, engineers, designers, lawyers) (office software products or CAD)

3. Production workers-perform the tasks to produce the product or service (TPS)

 

The Value Chain

 

 

Value Chain is quite simple: at each stage in the operation of a business, value is added by transforming some original raw input. A value chain is a set of steps in the production process that adds value to a set of inputs at each step.

 

See chart p. 429

 

Hand-offs are places in the value chain where one unit of business must hand off some information or product to another unit.

 

i.e.

 

Sale -customer-who purchases product from sales- who receives the order and checks with the production group that runs the warehouse to see if the product is on the shelf. If B/O or not available, sales must alert the production facility or factory to make or order and ship more items who sends it to the customer and requests a bill for the goods rendered.

 

 

In this example the sale transaction resulted in 3 departments

Sales took the order

Production produced or found the good

Finance sent the invoice and accepted payment

 

The IS department was probably involved throughout.

IS used to take the order

IS used to produce or find it in inventory

IS used to keep track of the finances behind the transaction

 

THE BASIC IDEA BEHIND CHAIN VALUE ANALYSIS IS TO THINK ABOUT

1) HOW TO ADD MORE VALUE TO THE PRODUCT FOR LESS MONEY INCREASING EFFICIENCY

2) HOW TO FIT INTO THE VALUE CHAINS OF SUPPLIERS AND CUSTOMERS BETTER SO AS TO REDUCE THE COST OF SUPPLIES AND PRODUCTS

 

Information Systems and Productivity

 

 

1) HOW CAN INFORMATION TECHNOLOGY BE USED TO INCREASE THE VALUE OF THE OUTPUT?

2) HOW CAN TECHNOLOGY MAKE THE HAND-OFF FROM ONE POINT TO ANOTHER BETTER OR MORE EFFICIENT?

 

The need to increase productivity or the amount of goods produced per hour of labor.

 

A correlation between productivity gains and wages and standard of living. TRUE OR FALSE?

 

(New technologies such as electricity, internal combustion engines, railroads, telegraphs, telephones, radios, television, fax machines etc. have all contributed t increasing efficiency in factories and offices.

 

In factories IT is used to automate tasks previously done by human workers

Releases labor to work in other higher-value occupations TRUE OR FALSE?

 

To achieve these gains requires that the organization , flow or work and procedures be also changed

 

Strategic Role of IS

 

IT or IS can give some firms a competitive advantage by giving a firm the ability to produce products at a lower coast or create unique products that can not be imitated.

Types of TPS

 

On-line transaction processing systems which immediately record information and respond to users requests i.e. ATM machines

Batch transaction processing systems do not give an immediate response

 

Some of these types of TPS are

 

Centralized systems that sore all the information and do all processing at a single central location

 

Distributed System uses multiple PCís connected by a telecommunications network

 

Most have

 

Fault Tolerant Systems which are specialized systems that contain several redundant computers and programs to protect against the failure of one or more computer.

i.e. stock trading, space missions, financial systems