Introduction to Information Systems

The "Harry Potter" example that leads off this reading provides an excellent example of pre-planning, organized business processes, and the need for flexibility in information systems. Each Potter volume increased the pre-orders exponentially, and Amazon used its prior experiences to create policies and practices designed to improve customer experience. As you will see, business processes are a blueprint for success, supported by technology, information systems, and a range of other required services.

Logical Components of a Business Process

A business process has three component processes that work together to support its logical activities. The IS supports all three processes in that it frequently embodies many of the policies and procedures that help define each process.

Review Question

What are three logical components of a business process? Define the functions of each. How do the components interact with one another?

The information process is that portion of the overall IS related to a particular business process. The information process plays a critical role in the way all three processes work together.

An operations process is a human-made system consisting of the people, equipment, organization, policies, and procedures whose objective is to accomplish the work of the organization. Operations processes typically include distribution, manufacturing, human resources, and their sub-processes.

The management process is a human-made system consisting of the people, authority, organization, policies, and procedures whose objective is to plan and control the operations of the organization. The three most prominent management activities are planning, controlling, and decision making.

These processes work together to accomplish the objectives of the business process - and therefore the organization. In order to accept and fill a customer order for a Harry Potter book from, all three processes engage in a set of activities, as shown in Figure 1.4. The activity numbers refer to the labeled flows in Figure 1.4.

Flows are numbered in the order that activities occur.

[Insert Figure 1.4 here]

The management process:

(1) hires personnel and establishes the means for accomplishing the work of the organization. For example, management designs the procedures used to warehouse inventory and then to ship those goods to the customers.
(2) establishes broad marketing objectives and assigns specific sales quotas by which progress toward the long-run objectives can be measured. Also designs the information processes' procedures for facilitating operations, such as the procedures used to pick and ship goods to the customer.

The information process:

(3) receives a customer's order over the Internet for a Harry Potter book.
(4) prepares an invoice and sends it electronically to the credit card company/bank.
(5) receives an electronic payment acknowledgement from the credit card company/bank.
(6) acknowledges the customer's order by sending an e-mail message to the customer.
(7) sends to the warehouse a request to ship a Harry Potter book to the customer. This request identifies the book and its location in the warehouse. Also sends a packing slip to be attached to the book.

The operations process:

(8) attaches to the shipment a document (i.e., a packing slip) identifying the customer and the book and ships the book to the customer.
(9) reports to the IS that the book has been shipped.

The information process:

(10) sends a shipping acknowledgement to the customer via e-mail.
(11) sends management a report comparing actual sales to previously established sales quotas.

These 11 activities highlight several important concepts.

  • The information process facilitates operations by maintaining inventory and customer data and by providing electronic signals (such as those used in automated warehouses) and paper documents with which to execute business events, such as shipments to customers.
  • The information process provides the means by which management monitors the operations process. For example, management learns sales results only from the sales report.
  • Management designs the operations and information processes and establishes these processes by providing people, equipment, other physical components, and policies.
  • Information process users include operations personnel, management, and people outside the organization, such as the customer.

Figure 1.5 represents data flows related to the processing of business events. In this figure, the top three layers represent the management process. The bottom layer represents the organization's operations processes. The information process supports all layers through horizontal and vertical information flows. By studying these flows more closely, we can improve our understanding of the Information System and its relationships with the operations and the management processes. At the level of operations and business events processing, the flows are horizontal as the information moves through operational units such as sales, the warehouse, and accounting. In the sales example above, the operational documents and records are the outputs of these horizontal flows.

[Insert Figure 1.5 here]

The data captured at the operations and business event processing level constitute the foundation for the vertical information flows that service a multilevel management function. At the operations management level, personnel such as supervisors use information to monitor the daily functioning of their operating units. The vertical information useful to operations management is a summarized and tailored version of the information that flows horizontally. For example, horizontal flows relate to specific business events, such as one shipment, or to individual inventory items. On the other hand, information useful to operations management personnel is often an aggregate of data related to several business events. For example, a report summarizing shipments made each day might be useful to the shipping manager.

At the tactical management level, middle managers such as a warehousing or distribution manager, might want information about the timeliness of shipments each month. Such information is more summarized and broader in scope than is the information used by operations management.

Finally, at the strategic management level, senior managers such as division managers, chief financial officers (CFOs), and chief executive officers (CEOs), require information that is even more summarized and broader in scope than is the information used by tactical management. For these managers information must relate to longer time periods, be sufficiently broad in scope, and be summarized to provide a means for judging the long-term effectiveness of management policies. External financial statements, annual sales reports, and division income statements are but a few examples of strategic-level information. Note, however, that information technology facilitates access to detailed data at all management levels.

How does the IS support the multiple information uses suggested by the preceding discussion? For example, how does the IS support such users as the organization's operations units, the organization's management, and people outside the organization? How does the IS supply the information needed by three levels of management? One key component enabling the IS to meet the needs of this diverse constituency is the entitywide database. The entitywide database is the central repository for all of the data used by the organization. Information processes, such as order entry, billing, and inventory, update the database. Output can be obtained by other information processes and by other users such as management. When processes or other users access the entitywide database, they get a view of the database appropriate for their needs. For example, when entering the customer order in the earlier example, the information process had access to that portion of the database that was required, such as the applicable customer and inventory data.