Information Systems for Linking the Enterprise

Reviewing all the different types of systems we have just described, you might wonder how a business can manage all the information in these different sys­tems. You might also wonder how costly it is to maintain so many different systems. And you might wonder how all these different systems can share in­formation and how managers and employees are able to coordinate their work. In fact, these are all important questions for businesses today.

1. Enterprise Applications

Getting all the different kinds of systems in a company to work together has proven a major challenge. Typically, corporations are put together both through normal “organic” growth and through acquisition of smaller firms. Over a period of time, corporations end up with a collection of systems, most of them older, and face the challenge of getting them all to “talk” with one another and work together as one corporate system. There are several solutions to this problem.

One solution is to implement enterprise applications, which are systems that span functional areas, focus on executing business processes across the firm, and include all levels of management. Enterprise applications help busi­nesses become more flexible and productive by coordinating their business processes more closely and integrating groups of processes so they focus on efficient management of resources and customer service.

There are four major enterprise applications: enterprise systems, supply chain management systems, customer relationship management systems, and knowledge management systems. Each of these enterprise applications integrates a related set of functions and business processes to enhance the performance of the organization as a whole. Figure 2.6 shows that the archi­tecture for these enterprise applications encompasses processes spanning the entire organization and, in some cases, extending beyond the organization to customers, suppliers, and other key business partners.

Enterprise Systems Firms use enterprise systems, also known as enter­prise resource planning (ERP) systems, to integrate business processes in man­ufacturing and production, finance and accounting, sales and marketing, and human resources into a single software system. Information that was previously fragmented in many different systems is stored in a single comprehensive data repository where it can be used by many different parts of the business.

For example, when a customer places an order, the order data flow auto­matically to other parts of the company that are affected by them. The order transaction triggers the warehouse to pick the ordered products and schedule shipment. The warehouse informs the factory to replenish whatever has been depleted. The accounting department is notified to send the customer an in­voice. Customer service representatives track the progress of the order through every step to inform customers about the status of their orders. Managers are able to use firmwide information to make more-precise and timely decisions about daily operations and longer-term planning.

Supply Chain Management Systems Firms use supply chain management (SCM) systems to help manage relationships with their suppliers. These systems help suppliers, purchasing firms, distributors, and logistics companies share infor­mation about orders, production, inventory levels, and delivery of products and services so they can source, produce, and deliver goods and services efficient­ly. The ultimate objective is to get the right amount of their products from their source to their point of consumption in the least amount of time and at the lowest cost. These systems increase firm profitability by lowering the costs of moving and making products and by enabling managers to make better decisions about how to organize and schedule sourcing, production, and distribution.

Supply chain management systems are one type of interorganizational system because they automate the flow of information across organizational boundaries. You will find examples of other types of interorganizational informa­tion systems throughout this text because such systems make it possible for firms to link digitally to customers and to outsource their work to other companies.

Customer Relationship Management Systems Firms use customer relation­ship management (CRM) systems to help manage their relationships with their customers. CRM systems provide information to coordinate all of the business pro­cesses that deal with customers in sales, marketing, and service to optimize rev­enue, customer satisfaction, and customer retention. This information helps firms identify, attract, and retain the most profitable customers; provide better service to existing customers; and increase sales.

Knowledge Management Systems Some firms perform better than others be­cause they have better knowledge about how to create, produce, and deliver prod­ucts and services. This firm knowledge is unique, is difficult to imitate, and can be leveraged into long-term strategic benefits. Knowledge management systems (KMS) enable organizations to better manage processes for capturing and apply­ing knowledge and expertise. These systems collect all relevant knowledge and experience in the firm and make it available wherever and whenever it is needed to improve business processes and management decisions. They also link the firm to external sources of knowledge.

We examine enterprise systems and systems for supply chain management and customer relationship management in greater detail in Chapter 9. We dis­cuss collaboration systems that support knowledge management in this chapter and cover other types of knowledge management applications in Chapter 11.

2. Intranets and Extranets

Enterprise applications create deep-seated changes in the way the firm con­ducts its business, offering many opportunities to integrate important business data into a single system. They are often costly and difficult to implement. Intranets and extranets deserve mention here as alternative tools for increas­ing integration and expediting the flow of information within the firm and with customers and suppliers.

Intranets are simply internal company websites that are accessible only by employees. The term intranet refers to an internal network, in contrast to the Internet, which is a public network linking organizations and other external networks. Intranets use the same technologies and techniques as the larger Internet, and they often are simply a private access area in a larger company website. Likewise with extranets, which are company websites that are acces­sible to authorized vendors and suppliers and are often used to coordinate the movement of supplies to the firm’s production apparatus.

For example, Six Flags, which operates 18 theme parks throughout North America, maintains an intranet for its 1900 full-time employees that provides company-related news and information on each park’s day-to-day operations, in­cluding weather forecasts, performance schedules, and details about groups and celebrities visiting the parks. The company also uses an extranet to broadcast information about schedule changes and park events to its 30,000 seasonal em­ployees. We describe the technology for intranets and extranets in more detail in Chapter 7.

Source: Laudon Kenneth C., Laudon Jane Price (2020), Management Information Systems: Managing the Digital Firm, Pearson; 16^th edition.