Transcript What is an Enterprise Wide Application?

Business and IS Performance
(IS 6010)
MBS BIS 2010 / 2011
21st October 2010
Fergal Carton ([email protected])
Accounting Finance and Information Systems
Last week
• Apple reporting exercise
– Steve Jobs about to report results
– You are asked to provide gift card revenue figures for Cork
• Channels used to sell gift cards eg. HMV
• Denominations sold (pre-set values or user definable?)
• Do retailers pay for cards up front?
• At what point are Apple able to recognise revenue from sale?
• What is the impact for sales reporting?
– Make up of actual spend of gift card by product not known
– Inventory impact versus non-inventory?
• Framework for reporting gift card performance?
This week
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Co-ordination strategies
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Information sharing
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Basic flows of information
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Integration of demand and supply
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Types of data
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Production planning
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How do managers do their work
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Virtualisation
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Integration framework
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“One version of the truth”
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Integration benefits and downsides
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Control objective is undermined by lack of flexibility
Co-ordination strategies
• Co-ordination consists of:
– Protocols, tasks and decision mechanisms to achieve concerted
action between interdependent units (Thompson, 1967)
– Decomposing goals to activities (Malone & Crowston, 1990)
– People, resources and systems (Hepp & Roman, 07)
• Two key co-ordination strategies:
– Centralisation of decision making (purpose agenda)
– Standardisation of process (efficiency agenda)
• Inherent tension between individual and organisation
• Strategies impact flexibility of organisation differently
• IT only provides means of co-ordination, not reason
How can data be shared
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Face to face
Hard copy
Soft copy or email
Interface between applications
Access to a shared database
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Criteria for information sharing
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Integrity
Timing of information exchange
Knowing information is up to date
Ownership of data
Accountability if information is incorrect, incomplete
Decision responsibility
Basic flows
Sales
Finance
Manufacturing
Basic flows
Sales
Finance
Manufacturing
Inventory = common denominator
Finance
Sales
Manufacturing
ERP integration: demand & supply
Production
Sales
Distribution
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Types of data 1
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Volume data (production)
consumption data (raw material, packaging…)
personnel data
maintenance data
time related measurements
productivity data
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• All form the basis of the calculations used to
monitor manufacturing activities
Type of data 2
• Primary data:
– taken straight from the floor (input and output)
– e.g. production, consumption, labour,
maintenance
– ad-hoc reports - e.g. accidents, defects
• Secondary data or calculated data:
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allocated costs
productivity
pay bonuses
variances
• High level data:
– investigations of variances
– soft information about staff morale etc...
Type of data: soft information
• Data collection – Grapevine
– factory tours (talking and observing)
• Data storage – managers’ minds
– special reports
• Data usage:
– ad-hoc basis
– decision making
Production planning and forecast
In theory, it’s simple
– Sales forecast future demand for products
– Production plan to meet forecast sales
But, in real life, there are many contingencies:
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Sales tend to be optimistic
Most businesses exhibit seasonality
Customers are unpredictable
Forecasts are based on average prices
Yield may be poor due to quality issues
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How managers do their work
• What is happening?
• What should be happening?
Actual
Plan
• What therefore would happen if?
What-if?
• Adjust plan and/or change actual
Manage
Virtualisation
• Virtualisation: capturing & storing data
relating to changes in the physical
environment in an information system
• A measure of the degree to which
information systems can reflect business
reality
• Pre-supposes a structure (database), as
data captured is related to a logical entity
Integration framework
Virtual
Measure
Plan
Plan
Plan
Resource
visibility
Physical
Execute
Schedule
Supply
Demand
Performance control
Why is “one truth” so hard?
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Eg. Up to date picture of revenue?
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Easy bit:
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Hard bit:
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all product shipped to date
Spares, loaners, replacement machines, …
Deduct any current credit notes
Add any outstanding debts from previous invoices
Apportion revenue from service contract (12 months)
Allow for discount to be applied if paid on time
Currency exchange rate fluctuations …
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Revenue recognition “rules”
What does integration mean?
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Dearden 72
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As computer use expands, control is vital
Single group of experts design a completely integrated
supersystem = absurd
Specialist expertise is functional by nature
Finance, logistics, sales = different expertise
Centralisation of control of systems = dangerous
Examine the interfaces
Vizard 06
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Data used to be in disparate databases
Data now in databases, file systems, applications, …
“One truth” concerning the state of a business process
Interdependent business processes (eg. sales & service)
Meta-data structures
Enterprise Application Integration vs. BI tools
Who benefits?
• Finance gain greater visibility
• Manufacturing?
– Demand may be too unstable for MRP
– Production planning needs more “nuance”
– ERP is too literal
– Much planning still done on Spreadsheets
• Sales: need of integration
Integration downsides
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Response times
Vulnerability: single point of failure
Limitations on expansion
Dependence on single vendor
Flexibility to change system
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Access to basic information is
complicated
Control objectives of integration undermined
Control
Centralisation
Co-ordination
More analysis potential
Integration
Granularity
Accuracy / consistency
Inflexibility
Deteriorating data integrity
Technical skills required for reporting
Latency
Manual