System performance can be measured in various ways. Efficiency is a measure of what is produced divided by what is consumed. It can range from 0 to 100 percent. For example, the efficiency of a motor is the energy produced (in terms of work done) divided by the energy consumed (in terms of electricity or fuel). Some motors have an efficiency of 50 percent or less because of the energy lost to friction and heat generation.
Simple Has few components, and the relationship or interaction between elements is uncomplicated and straightforward Open Щ^шттш Interacts with its environment Stable ••■Щоъ Undergoes very little change over time Adaptive ^шннянмнн Is able to change in response to changes in the environment Permanent Exists for a relatively long period of time |
Efficiency is a relative term used to compare systems. For example, a gasoline engine is more efficient than a steam engine because, for the equivalent amount of energy input (gas or coal), the gasoline engine produces more energy output.
Complex
Has many elements that are highly related and interconnected
Closed
Has no interaction with the environment Dynamic
Undergoes rapid and constant change over time Nonadaptive
Is not able to change in response to changes in the environment
Temporary
Exists for only a relatively short period of time
ffectiveness
"easure of the extent to which a =:eTi achieves its goals; it can т;omputed by dividing the goals:"-ally achieved by the total of e staled goals
> stem performance
:andard
icecific objective of the system
The energy efficiency ratio (energy input divided by energy output) is high for gasoline engines when compared with that of steam engines.
Effectiveness is a measure of the extent to which a system achieves its goals. It can be computed by dividing the goals actually achieved by the total of the stated goals. For example, a company may have a goal to reduce damaged parts by 100 units. A new control system may be installed to help achieve this goal. Actual reduction in damaged parts, however, is only 85 units. The effectiveness of the control system is 85 percent (85/100 = 85%). Effectiveness, like efficiency, is a relative term used to compare systems.
Evaluating system performance also calls for the use of performance standards. A system performance standard is a specific objective of the system. For example, a system performance standard for a particular marketing campaign might be to have each sales representative sell 8100,000 of a certain type of product each year (Figure 1.5a). A system performance standard for a certain manufacturing process might be to have no more than 1 percent defective parts (Figure 1.5b). Once standards are established, system performance is measured and compared with the standard. Variances from the standard are determinants of system performance.
■ stem variable
: _ antity or item that can be con-: by the decision maker
- stem parameter
i ue or quantity that cannot be "oiled, such as the cost of a
■ material
SYSTEM VAR1ABEES AND PARAMETERS.
Parts of a system are under direct management control, while others are not. A system variable is a quantity or item that can be controlled by the decision maker. The price a company charges for its product is a system variable because it can be controlled. A system parameter is a value or quantity that cannot be controlled, such as the cost of a raw material. The number of pounds of a chemical that must be added to produce a certain type of plastic is another example of a quantity or value that is not controlled by management; it is controlled by the laws of chemistry.
>del
-cstraction or an approximation -'; used to represent reality
MODELING A SYSTEM
The real world is complex and dynamic. So when we want to test different relationships and their effects, we use models of systems, which are simplified, instead of real systems. A model is an abstraction or an approximation that is used to represent reality. Models enable us to explore and gain an improved understanding of real-world situations.
Since the beginning of recorded history, people have used models. A written description of a battle, a physical mock-up of an ancient building, and the use of symbols to represent money, numbers, and mathematical relationships are all examples of models. Today, managers and decision makers use models to help them understand what is happening in their organizations and make better decisions.
There are various types of models. The major ones are narrative, physical, schematic, and mathematical, as shown in Figure 1.6. A narrative model, as the name implies, is based on words; thus, it is a logical and not a physical model. Both verbal and written descriptions of reality are considered narrative models. In an organization, reports, documents, and conversations concerning a system are all important narratives. A physical model is a tangible representation of reality. Many physical models are computer designed or constructed. An engineer may develop a physical model of a chemical reactor to gain important information about how a large-scale reactor might perform, or a builder may develop a scale model of a new shopping center to give a potential investor information about the overall appearance and approach of the development. A schematic model is a graphic representation of reality. Graphs, charts, figures, diagrams, illustrations, and pictures are all types of schematic models. Schematic models are used extensively in developing computer programs and systems. A blueprint for a new
building, a graph that shows budget and financial projections, electrical wiring diagrams, and graphs that show when certain tasks or activities must be completed to stay on schedule are examples of schematic models used in business. A mathematical model is an arithmetic representation of reality. Computers excel at solving mathematical models. Retail chains, for example, have developed mathematical models to identify all the activities, effort, and time associated with plan-
-------------------- Ч*)---------------- ning, building, and opening a new store so that they can forecast how long it will
System Performance Standards take to complete a store.
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a::ve (words, spoken or written), cat (tangible), schematic
~"ю), and mathematical ■^etic) models.
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In developing any model, accuracy is critical. An inaccurate model will usually lead to an inaccurate solution to a problem. Most models contain many assumptions, and it is important that they be as realistic as possible. Potential users of the model must be aware of the assumptions under which the model was developed.
WHAT IS AN INFORMATION SYSTEM?
An information system is a specialized type of system and can be defined in a number of different ways. As mentioned previously, an information system (IS) is a set of interrelated elements or components that collect (input), manipulate (process), and disseminate (output) data and information and provide a feedback mechanism to meet an objective (see Figure 1.7).
Feedback
---------------- &-------------- -------------------------;*--;----------------------------------------------
Components of an Information * *
em ■ I ■ Щ
:zack is critical to the sue- t input ■------------------ Processing " gy
operation of a system.
input
the activity of gathering and capturing raw data
processing
converting or transforming data into useful outputs
output
production of useful information, usually in the form of documents and reports
INPUT, PROCESSING, OUTPUT, FEEDBACK Input
In information systems, input is the activity of gathering and capturing raw data. In producing paychecks, for example, the number of hours every employee works must be collected before paychecks can be calculated or printed. In a university grading system, individual instructors must submit student grades before a summary of grades for the semester or quarter can be compiled and sent to the students.
Input can take many forms. In an information system designed to produce paychecks, for example, employee time cards might be the initial input. In a 911 emergency telephone system, an incoming call would be considered an input. Input to a marketing system might include customer survey responses. Car manufacturers are experimenting with a fingerprint identification input device in their car security systems.^ You may soon be able to gain entry to a car and start it with the touch of a finger. This unique input device will also adjust mirrors, the steering-wheel position, the temperature, and the radio for an individual's size and preferences. Regardless of the system involved, the type of input is determined by the desired output of the system.
Input can be a manual or automated process. A scanner at a grocery store that reads bar codes and enters the grocery item and price into a computerized cash register is a type of automated input process. Regardless of the input method, accurate input is critical to achieve the desired output.
Processing
In information systems, processing involves converting or transforming data into useful outputs. Processing can involve making calculations, making comparisons and taking alternative actions, and storing data for future use. Processing data into useful information is critical in business settings. Airline manufacturer Boeing, for example, streamlined its processing operations for needed parts.9 According to Candace Ismael, Director of Supplier Management and Procurement, "The vision was to create a single process and supporting system for purchasing indirect parts."
Processing can also be done manually or with computer assistance. In the payroll application, each employee's number of hours worked must be converted into net, or take-home, pay. The required processing can first involve multiplying the number of hours worked by the employee's hourly pay rate to get gross pay. If weekly hours worked exceed 40 hours, overtime pay may also be included. Then deductions—for example, federal and state taxes, contributions to health and life insurance or savings plans—-are subtracted from gross pay to get net pay.
Output
In information systems, output involves producing useful information, usually in the form of documents and reports. Outputs can include paychecks for employees, reports for managers, and information supplied to stockholders, banks, government agencies, and other groups. In some cases, output from one system can become input for another. For example, output from a system that processes sales orders can be used as input to a customer billing system. Often, output from one system can be used as input to control other systems or devices. For instance, the design and manufacture of office furniture is complicated with many variables. The salesperson, customer, and furniture designer can go through several design iterations to meet the customer's needs. Special computer programs and equipment create the original design and allow the designer to rapidly revise it. Once the last design mock-up is approved, the computer creates a bill of materials that goes to manufacturing to produce the order.
Output can be produced in a variety of ways. For a computer, printers and display screens are common output devices. Output can also be a manual process involving handwritten reports and documents.
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Redback
."rut (hat is used to make. - =^ges to input or processing "■:'. ties
■ recasting
r^ctmg future events to avoid
:c ems
Feedback
In information systems, feedback is output that is used to make changes to input or processing activities. For example, errors or problems might make it necessary to correct input data or change a process. Consider a payroll example. Perhaps the number of hours an employee worked was entered into a computer as 400 instead of 40 hours. Fortunately, most information systems check to make sure that data falls within certain ranges. For number of hours worked, the range might be from 0 to 100 hours because it is unlikely that an employee would work more than 100 hours for any given week. So, the information system would determine that 400 hours is out of range and provide feedback, such as an error report. The feedback is used to check and correct the input on the number of hours worked to 40. If undetected, this error would result in a very high net pay on the printed paycheck!
Feedback is also important for managers and decision makers. For example, bedding maker Sealy Corp. used a computerized feedback system to link its suppliers and plants.10 According to Jim Packer, director of procurement, "We're building 90% of our products to order, and this communications link between us, our suppliers, and the transportation network and plants closes the loop." For Sealy, output from an information system might indicate that inventory levels for a few items are getting low—a potential problem. A manager could use this feedback to decide to order more inventory from a supplier. The new inventory orders then become input to the system. In addition to this reactive approach, a computer system can also be proactive—predicting future events to avoid problems. This concept, often called forecasting, can be used to estimate future sales and order more inventory before a shortage occurs.
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yam trading systems allow ers to keep up with swift "jes in stock prices and make f decisions for their investors. ':e (D Reuters NewMedia
:orbis)
MANUAL AND COMPUTERIZED INFORMATION SYSTEMS As discussed earlier, an information system can be manual or computerized. For example, some investment analysts manually draw charts and trend lines to assist them in making investment decisions. Tracking data on stock prices (input) over the last few months or years, these analysts develop patterns on graph paper (processing) that help them determine what stock prices are likely to do in the next few days or weeks (output). Some investors have made millions of dollars using manual stock analysis information systems. Of course, today many excellent computerized information systems have been developed to follow stock indexes and markets and to suggest when large blocks of stocks should be purchased or sold (called program trading) to take advantage of market discrepancies.
Many information systems begin as manual systems and become computerized. For example, consider the way the U.S. Postal Service sorts mail. At one time most letters were visually scanned by postal employees to determine the ZIP code and were then manually placed in an appropriate bin. Today the bar-coded addresses on letters passing through the postal system are read electronically and automatically routed to the appropriate bin via conveyors. The computerized sorting system results in speedier processing time and provides management with information to help plan transportation needs. It is important to stress, however, that simply computerizing a manual information system does not guarantee improved system performance. If the underlying information system is flawed, the act of computerizing it might only magnify the impact of these flaws.
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computer-based information system (CBIS)
consists of hardware, software, databases, telecommunications, people, and procedures that are configured to collect, manipulate, store, and process data into information
technology infrastructure
all the hardware, software, databases, telecommunications, people, and procedures that are configured to collect, manipulate, store, and process data into information
computer equipment used to perform input, processing, and output activities
software
the computer programs that govern the operation of the computer
COMPUTER-BASED INFORMATION SYSTEMS
A computer-based information system (CBIS) consists of hardware, software, databases, telecommunications, people, and procedures that are configured to collect, manipulate, store, and process data into information. For example, a company's payroll systems, order entry system, or inventory control systems are examples of a CBIS. The components of a CBIS are illustrated in Figure 1.8. A business's technology infrastructure includes all the hardware, software, databases, telecommunications, people, and procedures that are configured to collect, manipulate, store, and process data into information. The technology infrastructure is a set of shared IS resources that form the foundation of each individual computer-based information system.
Hardware
Hardware consists of computer equipment used to perform input, processing, and output activities, Input devices include keyboards, automatic scanning devices, equipment that can read magnetic ink characters, and many other devices. Investment firmT. Rowe Price, for example, uses voice response to allow customers to get their balances and other information using ordinary spoken sentences.11 Processing devices include the central processing unit and main memory. Wal-Mart spent about $50 million to upgrade its central processing units and related equip-
ment. There are many storage and output devices, including secondary storage devices, printers, and computer screens. One company, for example, uses computer hardware in its stores to allow customers to order items that are not on store shelves.13 The hardware helps the company "save the sale" and increase revenues.
Software
Software consists of computer programs that govern the operation of the computer. These programs allow a computer to process payroll, to send bills to customers, and to provide managers with information to increase profits, to reduce costs, and to provide better customer service. There are two basic types of software: system software, such as Windows XP, which controls basic computer operations such as start-up and printing, and applications software, such as Office XP, which allows specific tasks to be accomplished, such as word processing or tabulating numbers.14 stabase
organized collection of facts z information
I e communications
e electronic transmission of sig-=> for communications; enables z anizations to carry out their:;esses and tasks through active computer networks
^tworks
—lected computers and com-'~r equipment in a building,:.nd the country, or around the r о to enable electronic ~Tiunications
lernet
■.vorld's largest computer net-'■<. actually consisting of thou-":Js of interconnected networks, "eely exchanging information
ranet
-:ernal network based on Web " 'ologies (hat allows people " " an organization to exchange: —ation and work on projects
.ranet
■r.vork based on Web lech-
: es that allows selected out--': such as business partners:;-stomers, to access author-" "^sources of the intranet of a
Databases
A database is an organized collection of facts and information. An organization's database can contain facts and information on customers, employees, inventory, competitors' sales information, online purchases, and much more. Most managers and executives believe a database is one of the most valuable and important parts of a computer-based information system.13
Telecommunications, Networks, and the Internet
Telecommunications is the electronic transmission of signals for communications, which enables organizations to carry out their processes and tasks through effective computer networks. Bob Evans Farms, for example, uses a telecommunications system and satellites to link its 459 restaurants to its plants and headquarters in Columbus, Ohio, to speed credit card authorization and report sales and payroll data.10 Networks are used to connect computers and computer equipment in a building, around the country, or around the world to enable electronic communications. Merrill Lynch uses a wireless network that sends data through the air to connect 2,000 people between Manhattan and New Jersey.17 Mike Brady, Merrill's first vice president for global network services, described the network equipment: "They look like searchlights on small refrigerators," he joked.
Telecommunications and networks help people communicate using electronic mail (e-mail) and voice mail. These systems also help people work in groups.The Internet is the world's largest computer network, actually consisting of thousands of interconnected networks, all freely exchanging information. Research firms, colleges, universities, high schools, and businesses are just a few examples of organizations using the Internet. PC Magazine listed seven organizations that made excellent use of the Internet (see Table 1.4).18 But anyone who can gain access to the Internet can communicate with anyone else on the Internet, including those who are in flight. American and Delta Air Lines announced plans to launch Internet service on 1,500 aircraft.
The World Wide Web is a network of links on the Internet to documents containing text, graphics, video, and sound. Information about the documents and access to them are controlled and provided by tens of thousands of special computers called Web servers. The Web is one of many services available over the Internet and provides access to literally millions of documents.
The technology used to create the Internet is now also being applied within companies and organizations to create an intranet, which allows people within an organization to exchange information and work on projects.20 An extranet is a network based on Web technologies that allows selected outsiders, such as business partners and customers, to access authorized resources of the intranet of a company. Lisa Boothe, the global e-business leader at Du Pont, reported that her company plans to move all of its fabric, chemical, and biotechnology businesses to its extranet site for corporate customers.21 Many people use extranets every day without realizing it—to track shipped goods, order products from their suppliers, or access customer assistance from other companies. Log on to the FedEx site to check the status of a package, for example, and you are using an extranet.
People
People are the most important element in most computer-based information systems. Information systems personnel include all the people who manage, run, program, and maintain the system.22 Bank One Corp., for example, recently hired 600 information systems personnel to speed up its computer-related projects.23 Users are any people who use information systems to get results. Users include financial executives, marketing representatives, manufacturing operators, and many others. Certain computer users are also IS personnel.
Organization
Objective
Description of Internet Usage
Godiva Chocolatier
Environmental Defense
Buckman Laboratories
Siemens
Goldman Industrial Group
Partnership America
Altra Energy Technologies
Increase sales and profits
Alert the public to environmental concerns
Better
employee
training
Reduce costs
Save time
Make better decisions
Get energy to companies that need it
The company developed a very profitable Internet site that allows customers to buy and ship chocolates. According to Kim Land, director of Godiva Direct, "This was set up from the beginning to make money." In two years, online sales have soared by more than 70 percent each year.
The organization, formerly the Environmental Defense Fund, successfully used the Internet to alert people to the practice of catching sharks, removing their fins for soup, and returning them to the ocean to die. The Internet site also helped people fax almost 10,000 letters to members of Congress about the practice. According to Fred Krupp, the executive director of the Environmental Fund, "The Internet is the ultimate expression of 'think global, act local.'"
The company used the Internet to train employees to sell speciality chemicals to paper companies, instead of bringing them to Memphis for training. According to one executive, "Our retention rate is much higher, and we removed a week in Memphis, which meant big savings." Using the Internet lowered the hourly cost of training an employee from $1,000 to only $40.
Using the Internet, the company, which builds and services power plants, was able to reduce the cost of entering orders and serving customers. The Internet solution cost about $60,000 compared with a traditional solution that would have cost $600,000.
The company makes machine tools and was able to slash the time it takes to fill an order from three or four months to about a week using the Internet to help coordinate parts and manufacturing with its suppliers and at its plants.
The company developed an Internet site for wholesalers of computer equipment and supplies. The wholesalers use the Internet site to make better decisions about the features and prices of various pieces of computer equipment. The system allows wholesalers to connect to Partnership America's Internet site using cell phones. "When many of our customers need information, they're not at their desks," says one company representative.
The company developed an Internet site to help companies buy oil, gas, and wholesale power over the Internet.
Uses of the Internet procedures
the strategies, policies, methods, and rules for using a CBIS
Procedures
Procedures include the strategies, policies, methods, and rules for using the CBIS. For example, some procedures describe when each program is to be run or executed. Others describe who can have access to facts in the database. Still other procedures describe what is to be done in case a disaster, such as a fire, an earthquake, or a hurricane, renders the CBIS unusable.
Now that we have looked at computer-based information systems in general, we briefly examine the most common types used in business today. These IS types are covered in more detail in Part III.
USINESS INFORMATION SYSTEMS__________________________________________
The most common types of information systems used in business organizations are electronic commerce systems, transaction processing systems, management information systems, and decision support systems. In addition, some organizations employ special-purpose systems such as artificial intelligence systems, expert systems, and virtual reality systems. Together, these systems help employees in
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organizations accomplish both routine and special tasks—from recording sales, to processing payrolls, to supporting decisions in various departments, to providing alternatives for large-scale projects and opportunities.
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