Activities
There are no activities in this chapter.
Case Studies
Case Study 6.1: IT near its limit in satisfying customers
1. Explain the quote in the case study ‘It is people-driven activities, not process-driven ones that define the real success of an organisation.’
Although information systems (IS) can store and process information, ideas about what information should be stored, how information should be processed and what action to take from information provided is taken by people.
In customer-facing situations, the customer experience is in large part determined by their experience with the organisation’s staff. Although IS can support staff in their roles, decisions on issues like design and dealing with customers are ultimately made by people.
Case Study 6.2: Retail applications of TPS by Sainsbury’s
1. Draw a diagram summarising the links between all the parties who access Sainsbury’s transaction processing systems (TPS).
2. What benefits will Sainsbury’s gain compared to the time before the introduction of TPS?
3. Can you think of any problems with using TPS so extensively? What can be done to counter these problems?
1. This diagram should be similar to Figure 6.2, with the following parties shown:
• Customers (possibly via the Internet or through checkout assistants)
• Suppliers (direct and indirect via merchants)
• Branch managers and departmental managers at each branch
• Distribution and logistics managers at head office and regional distribution centres.
2. Benefits at different management levels include the following:
Operational:
• Better customer service through better availability of products for customers and better quality of perishable products
• Lower cost of managing supply chain through just-in-time ordering in response to fluctuations in demand.
Tactical:
• Analysis of customer buying behaviour in response to sales promotions and loyalty card schemes
• Better matching of fluctuating demand and supply.
Strategic:
• Increased customer loyalty from card schemes and better customer service
• Related services such as banking that can be tied into TPS
• More choice of and competition between suppliers
• Better cost management.
3. The problems anticipated are those that occur when the system fails since it is so critical to customer service. On the day of failure, losses in sales and loss of loyalty could result. The solution lies in the careful testing of new systems and in building ‘fault tolerance’ into new systems. For example:
• Ensuring the system can deal with a power failure (extra generators)
• Providing dual or mirrored servers or disks that can take over in the event of failure
• Well-defined service levels with the IT and networking suppliers to agree that problems are resolved quickly
• Ensuring that the local system is decoupled from the company network, so that if the company network fails, the system in the branch can continue to operate.
Exercises (p. 271)
Self-assessment exercises
1. What is the difference between an enterprise system and an enterprise resource planning (ERP) system?
Enterprise systems and ERP can refer to the same concept. In this text the term enterprise system refers to a collection of systems that aims to support business processes across functions within an organisation. ERP is one of these systems that deals with internal production, distribution and financial processes. Other enterprise systems include customer relationship Management (CRM), supply chain management (SCM), supplier relationship management (SRM) and product lifecycle management (PLM).
2. Evaluate the role of transaction processing systems (TPS) in an organisation.
TPS perform routine transactions that serve the operational level of the organisation, e.g. sales order processing. Although supporting routine transactions, TPS are often essential to the operation of the organisation.
3. How can information systems support the manufacturing process?
Support for the manufacturing process includes:
• Production planning and materials management. Information is provided on the progress of work through the manufacturing system in relation to the due date for a customer order.
Enables plans to be developed for resources (e.g. labour, materials and equipment) needed for production and to schedule order and quantity of components on a day-to-day basis.
Materials management approaches include Materials requirements planning (MRP), Just-in-time (JIT) and optimised production technology (OPT).
• Product/service design. A database of information required for aspects such as customer needs and material costing for the design process. Computer-aided design (CAD) provides graphic design assistance.
• Facility design. Software allows the use of the statistical process control (SPC) technique for quality control.
• Computer-integrated manufacture (CIM). Provides a range of facilities coordinated over a network system using the manufacturing automation protocol (MAP).
4. Explain how decision support systems can support different parts of an organisation.
Decision support systems can support the full range of organisational decisions from strategic through tactical to operational. We can draw on the following examples from different functions:
• Manufacturing – see question 6 of this section.
• Marketing – see question 8 of this section.
• Finance – identifying debtors.
5. Describe the purpose of workflow management and groupware.
Both of these solutions are used to increase the efficiency of internal processes and are implemented as intranet/e-mail systems. The type of processes include the following:
• Procurement – authorisation of new purchases
• Production – alerts about problems
• Marketing – managing customer interactions during purchase, managing product dispatch, managing new product development
• Finance – integrating with procurement and marketing systems
• Human resources – online systems for booking holidays and training courses (administrative workflow).
6. Which information systems tools can be used to support the marketing function?
Marketing information systems include:
• Sales information systems. Employees involved in the sales area are required to identify potential customers, negotiate the sale of goods and services with those customers and provide a follow-up service. Systems are available to support each of these tasks. Prospect information systems provide lists of potential customers by categories such as product range or geographic area.
• Distribution information systems. Speed of delivery is often an important aspect of service to the customer. In order to ensure this, it is important that tracking systems that can locate products during the distribution process are in place.
• Sales order processing (SOP) systems. The sales order processing (SOP) system is usually based in the financial area and provides a variety of data that can be used for marketing purposes such as assessing the timing and value of orders from customers. These can be used for applications such as sales forecasting, which is a major input into the sales planning process. Other data supplied by the SOP system include inventory levels. If inventory levels are high, then this might trigger a discount programme for a particular product line.
• Sales and campaign management information systems. The sales management information system provides information in support of decision making at the tactical level. It will hold information on such aspects as sales performance by geographical area, by product group and by sales person. This information can be used to determine sales effort in different areas and products and level of bonus payments to an individual sales person. The data can also be used to investigate the strength of relationship between such factors as customer types and product sales. This information can be used as the basis for a marketing plan based around an advertising and promotion scheme aimed at a particular customer segment (e.g. targeting designer label drinks at people in the 18–25 age range).
• Product pricing information systems. The price of a product will be dependent on a variety of factors such as the cost of producing the product or providing the service, the required profit margin and the price of competitors’ goods. The price may also be affected by a marketing strategy to build market share by lowering the price. The product pricing information system will collate information on costs and predicted market demand at different price points and discounts in order to support the pricing decision. More sophisticated software in the form of a pricing model enables the user to input various market and product attributes, and provides a suggested price on the basis of relationships formalised in the model.
• Sales forecasting information systems. At a strategic level it is necessary to provide sales forecast data in order to help form the long-range strategic plan. Sales forecast data is essential so that demands can be met and resources employed in the correct areas. For instance, marketing needs to inform other functions such as operations of a predicted demand so that they can organise their resources to meet this demand. The information system is required because of the range of data that goes into the forecast and the need to continually update the database in order that the forecast is as accurate as possible.
• Marketing research and analysis information systems. In order to ensure that there is a demand for the goods and services of the organisation, it is necessary to undertake market research. For a new product this may include information on demographic changes and customer feedback from questionnaires and interviews that indicate customer preferences.
• Competitive tracking. Knowledge of competitors’ prices, products, sales and promotions is an important factor in the development of a marketing strategy. For example, the
organisation would need to consider its reaction to a competitor’s move to build market share.
• Telemarketing software. This software is designed to dial potential customers automatically based on customer files maintained in a database. The software will also allow notes to be stored on customer requests, generate follow-up letters and display information gathered on the customer for reference as the call is taking place.
• Geographical information systems (GIS). GIS are used to display information on maps.
Performance of distribution channels such as branches can be shown by colour coding them. Colour-coded areas on the map can be used to show variation in the demand from customers for products or the characteristics of people living in different areas such as average disposable income.
Discussion questions
1. Discuss the concept of customer relationship management (CRM).
CRM covers the whole process by which relationships with customers are built and maintained.
CRM systems are designed to integrate the range of information systems that contain information regarding the customer. These include applications such as customer details and preference databases, sales order processing applications and sales force automation. The idea is to acquire customers, retain customers and increase customer involvement with the organisation.
Common applications which would be integrated in a CRM system include the following:
Customer data collection: This can include personal details such as age, sex and contact address, also a record of purchase transactions undertaken in terms of factors such as location, date, time, quantity and price. This information can be used by call centre staff to improve and tailor their services to individual customers.
Customer data analysis: The captured data allow the categorisation and targeting of customers according to criteria set by the firm. This information can be used to improve the effectiveness of marketing campaigns.
Salesforce automation: The entire sales cycle from lead generation to close of sale and after-sales service can be facilitated using CRM.
2. ‘Workflow systems are currently mainly in large organisations. This is likely to remain the case.’Discuss.
To answer this question adequately requires a distinction between large-scale production workflow systems and smaller scale administrative and ad hoc workflow systems. The former tends to be for functions such as operational processing of customer services such as issuing a loan or processing an insurance claim – these tend to be the preserve of the large companies.
The latter are e-mail–enabled administrative applications for purchase order processing or in travel claims, for example. These could be used by small companies since the expenditure will be justified by the cost. Given the above, the arguments against the first statement are weak, but there are stronger arguments against the second statement. As more small companies use e-mail and intranets and as the cost of administrative workflow falls, adoption in small companies will grow. This is less likely to be the case with production workflow that is likely to remain expensive for small to medium organisations.
C H A P T E R 7