Management

Information Systems,
10/e
Raymond McLeod Jr. and George P. Schell

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Raymond McLeod and George Schell
 Chapter 8
Information in Action

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Raymond McLeod and George Schell
 Learning Objectives
► Know that a firm’s ability to develop effective information
systems can be a key factor in its success.
► Recognize that the transaction processing system
processes describes the firm’s basic daily operations.
► Be familiar with the processes performed by a transaction
processing system for a distribution firm.
► Recognize that organizational information systems have
been developed for business areas and organizational
levels.
► Be familiar with architectures of marketing, human
resources, manufacturing, and financial information
systems.
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Raymond McLeod and George Schell
 Learning Objectives (Cont’d)
► Know the architecture of an executive information system.
► Understand what customer relationship management is
and why it requires a large computer storage capability.
► Recognize how a data warehouse differs from a database.
► Understand the architecture of a data warehouse system.
► Know how data are stored in a data warehouse data
repository.
► Know how a user navigates through the data repository.
► Know what on-line analytical processing (OLAP) is.
► Know the two basic ways to engage in data mining.

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Raymond McLeod and George Schell
 Information as a Critical Success
Factor
► Critical success factor (CSF) was coined by
Ronald Daniel to identify a few key activities that
spell success or failure for any type of
organization.
► Transaction processing system (TPS) is the
information system that gathers data describing
the firm’s activities, transforms the data into
information, and makes the information available
to users both inside and outside the firm.
 1st business application to be installed on computers.
► Also electronic data processing (EDP) system and
accounting information system.

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Raymond McLeod and George Schell
 Figure 8.1 A Model of a Transaction
Processing System

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Raymond McLeod and George Schell
 System Overview
► Distribution system is a TPS used by
distribution firms.
► Distribution firms distribute products or
services to their customers.
► We will use data flow diagrams, or DFDs, to
document the system.
► Figure 8.2 represents the highest level.
► Figure 8.3 identifies the three major
subsystems.
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Raymond McLeod and George Schell
 Figure 8.2 A Context Diagram of
Distribution System

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Raymond McLeod and George Schell
 Figure 8.3 A Figure 0 Diagram of the
Distribution System

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Raymond McLeod and George Schell
 Major Subsystems of Distribution
System
► Systems that fill customer orders.
 Order entry system enters customer orders into the
system.
 Inventory system maintains the inventory records.
 Billing system prepares the customer invoices.
 Accounts receivable system collects the money from
the customers.
► Systems that order replenishment stock.
 Purchasing system issues purchase orders to
suppliers for needed stock.
 Receiving system receives the stock.
 Accounts payable system makes payments.

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Raymond McLeod and George Schell
 Figure 8.4 A Figure 1 Diagram of the
System that Fills Customers Orders

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Raymond McLeod and George Schell
 Figure 8.5 A Figure 2 Diagram of
Systems That Order Replenishment
Stock

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Raymond McLeod and George Schell
 Major Subsystems of Distribution
System (Cont’d)
► Systems that perform general ledger processes.
 General ledger system is the accounting system that
combines data from other accounting systems for the
purpose of presenting a composite financial picture of
the firm’s operations.
 General ledger is the file that contains the combined
accounting data.
 Updated general ledger system posts records that
describe various actions and transactions to the general
ledger.
 Prepare management reports system uses the
contents of the general ledger to prepare the balance
sheet, income statement, and other reports.

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Raymond McLeod and George Schell
 Figure 8.6 A Figure 3 Diagram of the Systems
that Perform General Ledger Processes

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Raymond McLeod and George Schell
 Organizational Information Systems
► Organizational information systems are
developed to meet the needs for
information relating to those particular parts
of the organization.
► Marketing information system (MKIS)
provides information that relates to the
firm’s marketing activities.
 Consists of a combination of input and output
subsystems connected by a database.

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Raymond McLeod and George Schell
 Figure 8.7 A Model of Marketing
Information System

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Raymond McLeod and George Schell
 Marketing Information System
► Output subsystems provide information about critical
elements in marketing mix.
► Marketing mix consists of four main ingredients that
management manages in order to meet customers’ needs
at a profit.
 Product subsystem provides information about the firm’s
products.
 Place subsystem provides information about the firm’s
distribution network.
 Promotion subsystem provides information about the firm’s
advertising and personal selling activities.
 Price subsystem helps the manager make pricing decisions.
 Integrated-mix subsystem enables the manager to develop
strategies that consider the combined effects of the ingredients.

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Raymond McLeod and George Schell
 Marketing Information System
(Cont’d)
► Database is populated with data from the three
MKIS input subsystems.
► Input subsystems
 Transaction processing system gathers data from
both internal and environmental sources and enters the
data into the database.
 Marketing research subsystem gathers internal and
environmental data by conducting special studies.
 Marketing intelligence subsystem gathers
environmental data that serves to keep management
informed of activities of the firm’s competitors and
customers and other elements that can influence
marketing operations.
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Raymond McLeod and George Schell
 Other Organizational Information
System
► Human Resources information system
(HRIS) provides information to managers
throughout the firm concerning the firm’s human
resources.
► Manufacturing information system provides
information to managers throughout the firm
concerning the firm’s manufacturing operations.
► Financial information system provides
information to managers throughout the firm
concerning the firm’s financial activities.

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Raymond McLeod and George Schell
 Figure 8.8 A Model of a Human
Resource Information System

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Raymond McLeod and George Schell
 Figure 8.9 A Model of Manufacturing
Information System

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Raymond McLeod and George Schell
 Figure 8.10 A Model of Financial
Information System

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Raymond McLeod and George Schell
 The Executive Information System
► Executive information system (EIS) is a
system that provides information to upper-level
managers on the overall performance of the firm;
also called Executive support system (ESS).
► Drill-down capability allows for executives to
bring up a summary display and then successively
display lower levels of detail until executives are
satisfied that they have obtained as much detail as
is necessary.

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Raymond McLeod and George Schell
Figure 8.11 An Executive Information
System Model

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Raymond McLeod and George Schell
 Figure 8.12 Drill-Down Technique

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Raymond McLeod and George Schell
 Customer Relationship Management
► Customer relationship management (CRM) is
the management of the relationships between the
firm and its customers so that both the firm and
its customers receive maximum value from the
relationship.
► CRM system accumulates customer data over a
long term–5 years, 10 years, or more-and uses
that data to produce information for users.
 Uses a data warehouse.

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Raymond McLeod and George Schell
 Data Warehousing
► Data warehouse describes data storage that has
the following characteristics:
 Storage capacity is very large.
 Data are accumulated by adding new records, as
opposed to being kept current by updating existing
records with new information.
 Date are easily retrievable.
 Date are used solely for decision making, not for use in
the firm’s daily operations.
► Data mart is a database that contains data
describing only a segment of the firm’s operations.
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Raymond McLeod and George Schell
 The Data Warehousing System
► Data warehousing is the creation and use
of a data warehouse or data mart.
► Primary data sources are TPS and data
obtained from other sources, both internal
and environmental; any data identified as
having potential value in decision making.
► Staging area is where the data undergoes
extraction, transformation, and loading
(abbreviated as ETL process)
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Raymond McLeod and George Schell
 Data Warehousing System (Cont’d)
► Extraction process combines data from the various
sources.
► Transformation process cleans the data, puts it into
standardized format, and prepares summaries.
 Data stored in both detail and summary form.
► Loading process involves the entry of the data into
the data warehouse repository.
► Metadata
 “Data about data”
 Data that describes the data in the data repository
 Tracks data as it flows through the data warehouse system

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Raymond McLeod and George Schell
 Figure 8.13 A Model of a Data
Warehousing System

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Raymond McLeod and George Schell
 Storing Data in the Warehouse Data
Repository
► Dimension tables store the identifying and
descriptive data.
 Dimension provides the basis for viewing the data
from various perspectives or dimensions.
► Fact tables are separate tables containing the
quantitative measures of an entity.
 Combined with dimension table data, various analyses
can be prepared.
 Users can request information that involves any
combination of the dimensions and facts.

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Raymond McLeod and George Schell
 Figure 8.14 A Sample Dimension
Table

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Raymond McLeod and George Schell
 Figure 8.15 A Sample Fact Table

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Raymond McLeod and George Schell
 Storing Data … (Cont’d)
► Information package identifies all of the
dimensions that will be used in analyzing a
particular activity.
► Star schema-for each dimension, a key identifies
the dimension and provides the link to the
information package that results in a structure that
is similar to the pattern of a star.
 The warehouse data repository contains multiple star
schemas, one for each type of activity to be analyzed.

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Raymond McLeod and George Schell
 Figure 8.16 Information Package
Format

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Raymond McLeod and George Schell
 Figure 8.17 A Sample Information
Package

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 Figure 8.18 Star Schema Format

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Raymond McLeod and George Schell
 Figure 8.19 A Sample Star Schema

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Raymond McLeod and George Schell
 Information Delivery
► Drill down-the process of navigating down
through the levels of detail.
► Roll up-enables the user to begin with a detail
display and then summarizes the details into
increasingly higher summary levels.
► Drill across-moving from one data hierarchy to
another.
► Drill through-going from a summary level to the
lowest level of detail.

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Raymond McLeod and George Schell
 Figure 8.20 Navigating Through the
Warehouse Data Repository

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Raymond McLeod and George Schell
 Figure 8.21 Drilling Across
Hierarchies Produces Multiple Views

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Raymond McLeod and George Schell
 OLAP
► On-line analytical processing (OLAP) enables the user
to communicate with the data warehouse either through a
GUI or a Web interface and quickly produce information in
a variety of forms, including graphics.
► Relational OLAP (ROLAP) uses a standard relational
database management system.
 ROLAP data exists in detailed form.
 Analyses must be performed to produce summaries.
 Constrained to a limited number of dimensions.
► Multidimensional OLAP (MOLAP) uses a special
multidimensional database management system.
 MOLAP data are preprocessed to produce summaries at the various
levels of detail and arranged by the various dimensions.
 Faster summary ability, can use many dimensions–10 or more.

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Raymond McLeod and George Schell
 Figure 8.22 ROLAP and MOLAP
Architectures

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 Figure 8.23 An Example of a Report
than Could Be Produced with ROLAP

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Raymond McLeod and George Schell
 Figure 8.24 An Example of a Report
that Could Be Produced with MOLAP

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Raymond McLeod and George Schell
 Data Mining
► Data mining is the process of finding
relationships in data that are unknown to the user.
► Hypothesis verification begins with the user’s
hypothesis of how data are related.
 Retrieval process guided entirely by user.
 Selected information can be no better than user’s
understanding of the data.
 Traditional way to query a database.
► Knowledge discovery is when the data
warehousing system analyzes the warehouse data
repository, looking for groups with common
characteristics.
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Raymond McLeod and George Schell