A very interesting and in-depth article about ERP and why you should consider using it. A very good read that gives a lot of good information.
ERP combines software systems from departments like finance, human resources and warehouse management. It combines it into a single, integrated software program running off a single database. This way the various departments can more easily share information and collaborate. It’s a tall order, but that integrated approach can have a tremendous payback if companies install the software correctly.
I just love learning how things began. It’s so interesting to see how computers came to being, isn’t it? Hard to believe that in the early 1600’s the word computer was first used.
Even though there’s proof of the ancient Greeks having a form of computer which is awesome. It’s fun to see how far technology has progressed. Computer technology will always change. It’s the nature of the beast. What are you going to do to keep up to date with all the updates?
You can define business by four primary functions: 1) Marketing and Sales, 2) Production 3) Accounting and Finance and 4) Human Resources (HR). It is all about finding ways of supporting your business operations and management.
Marketing and Sales IS
Information systems go towards planning, promoting and selling the products or services. They support decision-making through:
This is the entire marketing IS where it has to draw on many sources of results to find information. Completing marketing research helps focus on finding answers supporting decision-making. Marketing subsystems help support decision-making. The decisions are then integrated with the sales forecast and marketing plan, comparing sales results.
- Product subsystem – The planning of introductions of new products
- Place subsystem – Making the product available to the customer at the right place and time
- Promotion subsystem – Supports both personal selling and advertising
- Price subsystem – Contain industry prices and help set up pricing goals
- Sales forecasting – Forecasting and developing a full marketing plan comes with planned marketing and outstanding orders
Components for information systems for accounting include:
- Accounts receivable
- Accounts payable
- Payroll records
- Inventory control
- General ledgers
They rely heavily on online databases and reports custom-built. Essential functions of financial systems are:
- Financial forecasting and planning – Predicting funds coming into and out of your company long-term. Using cash-flow models help find needs of funds locations along with where they’re coming from.
- Financial control – Budgeting and Return on Investment (ROI)
- Funds management – Managing liquid assets for high yields with lowest degree of loss risk
- Internal auditing – Auditing reviews and shows independent appraisals of your accounting, financial, and operational procedures.
- Human Resources IS support through providing information to the HR office. It has grown immensely over the years to keep up with needs to adapt to new laws and regulations.
Giving access to stakeholders including:
- Employees of the HR department
- Personnel of your company wishing to see their records
- Workers wishing to see open positions and benefit plans
- People taking computer training classes for work and completing evaluations
- Managers can rate their subordinates and make decisions
- Executives creating tactical and strategic planning
Other databases include:
- Applicant databases
- Position inventory
- Skills inventory
- Benefits databases
- External databases
As we can see, all these different information systems have to work together smoothly to give superior results for your company. If not, it is bound to disappoint your customers. They expect timely delivery of products and services, perform QA to their own standards and flexible credit terms to name a few. Information systems offer support integrating business processes, cutting across functional lines to do it. In turn it makes everyone happy, from business partners to customers and suppliers.
Strategic Information Systems
Strategic information systems (SIS) are used to support and shape business competitive advantages. SIS is defined by its way to be able to change how business is conducted. It is not classified by structure, functionality of areas, or support systems. Anything that is used to change goals or processes of companies add competitive advantage, therefore becoming strategic information systems.
The competitive strategy is how the company is going to compete in the future. What the goals will be, and new plans and/or policies needed to implement everything. The advantage is being able to measure cost, quality and speed over competition. SIS assists businesses gain the advantage through adding to strategic goals of organizations. It is also measured through the increase in performance and productivity, therefore making them more powerful than the competition.
The digital economy is affected all the time as changes in technology occur. This causes change in business models in order to keep up. The core business isn’t changed to keep up with the digital economy even though it feels like it has. For the most part, businesses use the tools offered by the Internet, but nothing else. There are two questions to ask here…
Where does my competitive advantage come from in my business and industry?
How can information technology and the Internet help?
How is SIS Looked at Now?
Most companies consider SIS more of an outwardly focused tool. It aims at increasing direct competition and is visible to all. Now it is more used internally. It focuses on employees’ productivity, smoothing business processes, and helping to make strategic decisions and isn’t visible to all.
Role of IT in Strategic Management
- Innovative Applications
- Competitive Weapons
- Changes in Processes
- Links with Business Partners
- Cost Reductions
- Relationships with Suppliers and Customers
- New Products
- Competitive Intelligence
How To Use The Internet As a Tool
The Internet is the most important tool in competitive intelligence. It is so easy to look up information on the competition. The information that is gathered then can be analyzed further by what is called intelligent agents and data mining. Both deal with software products to help them do their job. Here are some ways to do research on the competition:
- Review Competitor’s Web Sites
- Analyze Related Electronic Discussion Groups
- Examine Publicly Held Financial Documents
- Market Research on Your Own Web Site
- Use Information Delivery Services like My Yahoo
- Use Corporate Research Companies
There are numerous other ways to gain competitive advantages over your competitors. The key is to gain and maintain a sustainable strategic advantage that can be held for years to come. It is suggested that people, technology and shared risk and responsibility will help keep the advantage now. It is so difficult to otherwise as there is so much innovation occurring now.
The use of information technology (IT) has dramatically increased in the business world in the past decade. It has been acknowledged that information systems (IS) is a very important step to compete and grow. There are four elements of IS that new systems need to work correctly.
- Customers – The main function of IS is to be able to better support the end user or customer. This is both internal and external. Externally it could be an online shopper who wants to buy from a website. Internal customers would be something like employees or one department in a company who needs supplies from another department. IS was developed in order to better support external customers. Also something to focus on is flexibility supporting internal customers.
- Products and Services – This deals in data transformation. The IS has to work well in any industry. It helps prepare many types of services and/or products based on design. Customer expectations have to be satisfied in order to be considered successful.
- Business Processes – Improvements to processes directly influence performance. It provides relevant information to the company. This improves said company’s processes by adding or removing steps as needed.
- Communication Technology and Computers – This is the central piece of the information system. They have to be able to deliver efficient business processes and make the customers happy. This is done through either delivery of product or services rendered. Technology helps to improve communication through email and chat internally. Externally it provides a good website that people will enjoy visiting. Information can be accessed much more quickly which increases the competitive edge.
Why Use IS?
Information systems helps improve relations between customers and the business, or business to business relationships. The question is, which type of system does your company need? A lot of questions to consider before making the leap to upgrading
Whether or not a company wants to believe it, information systems (IS) are a very important part of how the business runs now. This includes how data is stored, transferred and understood by all the different departments in the agency. The problem is, it seems that business owners are not really aware of how important IS to their companies in being able to be managed in designated systems.
10 Reasons to Have New Information Systems
10 reasons that it is so important for companies are:
- Control Creation and Growth of Records – Less paper wasted as everything becomes computerized
- Reduces Operating Costs – Storing inactive records in IS costs less per linear foot for the company
- 3. It Improves Both Efficiency and Productivity – Helps to upgrade record keeping so retrieval of information needed is vastly improved
- Assimilate New Records Management Technologies – Can be used in any area of the company, helps analyze manual recordkeeping and applied automation
- Ensures Regulatory Compliance – Companies have to be able to make sure that they are in regulations by having a good IS that is responsible for regulatory compliances
- Minimize Litigation Risk – The main reason IS is used is to reduce the risk of litigation and penalties. A newer system put in place will help to ensure this happens.
- Safeguard Vital Information – This is necessary in order to protect records and information as all agencies are susceptible to attack or natural disasters. This will provide backups and save the information in a safe place of the company’s choosing, for retrieval later.
- It Helps to Support Better Management Decision Making Capabilities – A newer system put into place will help managers and executives to better find information that they need when they need it to make critical business decisions. ERP systems would be perfect here instead of doing everything manually.
- It Helps to Preserve Corporate Memory – This is done through everyday activities and record keeping.
- Foster Professionalism in Running the Company – Neatness and cleanliness are key in running a smooth organization
Why Update at All?
Good, solidly built IS means that companies that use it will be able to align their strategies together into a clear point of view as to where they want to go. It also helps to find relationships that would be considered critical and gaps in their company culture and infrastructure. Good information systems find answers on how to gain competitive advantage against their competition by improving alignment to strategic decision making.
This all started back in the day. Someone would need a system made specifically for them to handle one problem. Soon enough that it was discovered that different problems needed similar solutions, but not always in the same manner of getting them. This is where defining of the information systems began and why it is still needed. When the company in question decides that they need to upgrade, they have to go through a process in order to find the right applications and hardware to handle their data. Classification comes to play here, so that categorizing information can be completed correctly. This will help to make the data one unit instead of many.
How Do You Identify Different Types of Systems?
There is no simple answer to the question. Every company builds an information system (IS) that is tailored to their specific needs. There are many different types of IS that are used in some manner or another. Classifying IS relies on how tasks are performed and responsibilities are divided in the agency. This becomes a pyramid model as most companies are hierarchical, so classes of IS are categorized following the hierarchy going down.
To compare different information systems:
- Transaction Processing Systems (TPS)– These are operational level systems. They are used by shop floor workers and front line staff. Data is gained here through tracking of low-level activities and basic transactions. They function as simple data processing systems only. This is the system that produces information for other systems to use. They are used internally and externally, are used by operational personnel and supervisors and are focused on efficiency. Examples: Payroll, Order processing, Reservations, Payments and Funds Transfers.
- Management Information Systems (MIS) – Management level used by middle managers. This system ensures smooth running of the company for short to medium terms. Information is given out highly structured and helps managers to evaluate the company’s performance through comparison of outputs. MIS is built on data given by TPS. They are based on internal information flow, support structured decisions, but are inflexible with not much analytical ability. Examples: Sales Management, Inventory control, Budgeting, Management Reporting, and Personnel.
- Decision Support Systems (DSS) – Knowledge based system used by senior managers. They analyze existing structured information, allowing managers to estimate any potential effects on decisions they are thinking of implementing. These systems are interactive and are used to solve problems. They can access databases, offer analytical tools, allow simulations to be completed, and can support exchanges of information in the company. This system can alter and build solutions provided by MIS and TPS, that can create insights plus new information to go off on. DSS helps to support badly or semi-structured decisions already being built, and have analytical and modeling capacities. Examples: Group Decision Support Systems (GDSS), Computer Supported Co-operative work (CSCW), Logistics, and Financial Planning.
- Executive Information Systems (EIS) – Strategic level used by executives and senior managers. These systems analyze environments that the company works in, find long-term trends, and plan courses of action. The information gathered is gathered from internal and external sources, and is weakly structured. These systems are designed to be able to be used directly by the executives and are user friendly with the ability to be customized to whomever is using it. EIS gathers and presents data from the MIS or TPS so senior management and executives can see what is going on a make decisions based off what they see. The people who use this want ease of use and being able to predict what will happen to the company in the future. It has to be effective, flexible, and support unstructured decisions. Examples: There are none. These systems are tailored to individual wants of the user, in other words are custom made. There are off the shelf packages that can be customized too.
The Importance of Planning
There is no easy way to explain why there are so many different types of information systems. Every company out there is not the same, or runs their agency in the same manner as others. This is why modifications are made to the systems in order for them to work specifically with what said company uses and the data they keep. Also every level of the agency uses different systems. Not everyone has to have a need to know of everything going on. It is better to keep it at the level that the systems are going to be used at the most. This is why planning for upgrades is so important. If the wrong system is used, or the wrong programs…
When upgrading what type of business information system you use at your company, everything has to be taken into account. As the saying goes, no stone goes unturned. If something is ignored or overlooked, it could potentially ruin the entire upgrade. No system is the same and one system won’t provide all the information for one agency.
What Are The Different Systems?
There will always be a collection of systems in place to take care of different actions. The different systems can be called either functional or constituency. Functional perspectives look at systems by the business function that they perform. Constituency perspectives look at systems through looking at the organization that they serve.
The four main information systems serving functional systems:
- Sales and Marketing – They can improve how the company monitors sales transactions, can analyze sales trends and effectiveness of marketing campaigns.
- Manufacturing and Production – It provides information about numbers of items available in inventory so that they can build more product without interruption.
- Finance and Accounting – Provides accounts receivable system to track and store customer data.
- Human Resources – Maintains data on company data supporting HR functions.
The four categories of constituency are:
- Transaction Processing Systems (TPS) – Basic systems serving at the operation level of companies. They record daily routine transactions needed to conduct business like sales receipts.
- Management Information Systems (MIS) – Support middle managers’ interests. Support through giving historical performance information to perform decision making actions at the management level. MIS and TPS data work together to build reports of basic operations.
- Decision Support Systems (DSS) – The business intelligence system. Helps managers with unique, fast changing and not easily found decisions that have to be made. For example, they might be used to help the manager to develop a bid on contracts.
- Executive Support Systems (ESS) – Used by senior managers to find answers to strategic issues and long-term trends in both the company and their environment. This type of system pools data from both internal and external sources, consolidating the data found into a form that is easy to use.
Integration and Implementation
In order for these systems to work correctly it is good to use them with others. For example, TPS is a major source of data for other systems while ESS is a recipient of data from external sources and lower systems. They all work together interdependently in some manner or another. But as it is, most businesses are starting to use new technologies that they create themselves. This better combines information from all the different systems mentioned beforehand, therefore making the said company more competitive.
SISP can be defined as the process to determine the computer applications that help achieve business objectives. SISP can be considered a critical management tool as it focuses on strategic goals of organizations. It’s needed in order to move strategic directions of organizations. Otherwise things could get sloppy really fast. SISP keeps things organized when change is being implemented in agencies, especially with information technology (IT).
Why Use Any Methodology of SISP
Different methodologies that SISP uses is:
1. Business System Planning
2. Strategic Systems Planning
3. Information Engineering
4. Information Quality Analysis
5. Business Information Analysis
Whichever changes are chosen by the agency will influence methodology of implementation. It may also be more prudent to choose a bunch of different ways to complete it. This will help to keep a balancing act together when planning for the future.
Why Use SISP At All?
It seems that top management still doesn’t fully support using SISP methods in order to better compile and implement new changes. Research suggests agencies cannot reach success if there isn’t proper alignment of business and information systems strategies. There has to be a good mesh in order for the changes to be fully implemented with no problems. If there is no fit, it’s unlikely that there will be a proper alignment between information technology (IT) and the agency in question.
The Different Methodologies
The different methodologies are:
1. Business planning
2. Competitive impact
3. Computer-based applications
4. Conceptual analysis
5. Information systems planning
6. Information technology resource planning
8. Strategic alignment
9. Strategic information systems planning (SISP)
10. Strategic management
11. SISP approach
12. SISP methodology
13. Strategic management planning
14. Strategic planning
The Why of All This
These methods can all be switched around and used in different ways in order to better find solutions. It has to be done correctly or a large amount of money will be invested with no results. Benefits from investing in IT can only be seen when there is a strategic alignment between IT and strategic business strategies. IT resources have to be able to target areas in the agency that are considered the most critical to their success. This has to be done with upper management, to include CEOs, CIOs and managers. This is why I have suggested in past posts that upper management is critical in SISP. If they are not willing to change initiatives and programs, there will be no change in the agency.
This is based off of Dr. Bozarth’s research on ERP implementation efforts in 2006. It’s based off of two arguments.
1. A firm’s information systems investment needs to be aligned up to what the business strategy is.
2. Company’s best achieve IS-based alignment and/or competitive advantages through following proactive, formal and comprehensive actions. This includes development of a broad list of requirements that the organization has to build themselves.
Six Areas in Defining…
There are six areas that help to define a strong SISP process:
1. Comprehensiveness – This is where the said company tries to create and implement strategic decisions to the best of their abilities.
2. Formalization – This is where structure, techniques, procedures and policies are all written down. This is to help complete the planning process as a whole that will help to guide the company.
3. Focus – Targeting solutions that looks at both opportunities and possible threats to their system. Key is that it has to underscore control. This is done through budgeting, resource allocation and good management of assets.
4. Top-Down Flow – This is something that has to be adopted fully by management down to the staff in order to work.
5. Broad Participation – Participation has to be followed. This makes sure that all areas of the company implement new changes due to decisions being made by top-level managers. All stakeholders and areas where the changes are being implemented have to know what’s going on. When will the changes will take place?
6. High Consistency – When using SISP conduct numerous meetings. The new process has to be periodically reassessed to make sure that the new strategies are being used.
There needs to be a development of some kind of top-down plan in order to better connect upcoming information systems strategies to business needs. Classes will have to be conducted. Orientation of employees to new steps will need to be done in order to familiarize them to new actions. It will also help with organizing, controlling and planning of the new IT functions.