2 Information Systems in the Enterprise - Main Web

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Chapter 2 ❙ INFORMATION SYSTEMS IN THE ENTERPRISE 21 Supply Chain Management Keeps Inventory Fresh at HP Why is the PC business like the fresh fruit business? Jean-Luc Meyer, a PC group marketing manager at Hewlett-Packard (HP), claims “Every day fresh fruit becomes less valuable because it gets a little rotten. In the PC business, every day prices go down.” New computer technology develops so quickly that computers sitting on the shelf become technically outdated.To help the company sell its computers at full price, HP created a sophisticated supply chain management system that produces PCs to order and gets them to customers within 48 hours. The new system automates much of the process. Orders are placed via computer that in turn forwards the data to HP’s production and delivery computer systems. Some of these systems are linked to the systems of HP’s suppliers. Synnex, located in Fremont, California, is a contract manufacturer of PCs for a number of companies, including HP. When orders arrive at Synnex, computers immediately check the credit of the customer placing the order. Simultaneously they validate the order configuration to make sure it works (so no one wastes time building a computer with incompatible, duplicate, or missing components). Assuming everything checks out, the order is automatically forwarded to a computer that controls production. That computer prints out an instruction ticket for the assembly technician while simultaneously forwarding a parts order to Synnex’s warehouse.The software to be included with the purchased computer is loaded onto that computer and then the whole parts order with the ticket are shipped to the technician’s workstation. One worker assembles the computer and then connects it to a computer that tests it.The new computer is then boxed, tagged, and shipped. Using the bar code on the ticket, even the delivery is monitored by computer. Much of the information in this process is communicated through the Internet. HP’s supply chain management system enables customers to receive its new computers very rapidly while HP reduces production errors.The system also reduces inventory–parts, goods in process, and completed products. Knowing exactly what computers to build helps HP reduce its pipeline of products awaiting the arrival of orders.To keep inventory low, HP makes the supply chain data available to parts suppliers and to production contractors (many HP PCs are produced by outside manufacturers). For computers manufactured by contract producers, HP thus maintains virtually no inventory. Prior to supply chain management software, Synnex maintained four weeks of parts inventory. With the new automated system, their parts inventory has been cut to two weeks.The supply chain management software even monitors the parts inventory and automatically orders more parts when inventory gets low. To Think About: How has HP’s supply chain management system changed the way the company runs its business? It has been said that building a world-class supply chain management system is neither cheap nor easy.Why? organizations Sources: Rory J. O’Connor, “Keeping Inventory Fresh,” Upside, June 2000; and eCompany Staff, “Supply-Chain Software: Hewlett Packard,” eCompany, November 2000. ily with finance to plan for new production. This fragmentation of data in hundreds of separate systems could thus have a negative impact on organizational efficiency and business performance. Figure 2-15 illustrates the traditional arrangement of information systems. Systems for customer relationship management and supply chain management are a step forward in solving this problem. Many organizations are now building enterprise systems, also known as enterprise resource planning (ERP) systems, to provide firmwide integration. Enterprise software models and automates many business processes, such as filling an order or scheduling a shipment, with the goal of integrating information across the company and eliminating complex, expensive links between computer systems in different areas of the business. Information that was previously fragmented in different systems can seamlessly flow throughout the firm so that it can be shared by business processes in manufacturing, HP is using supply chain management software in other parts of its business, and can now efficiently manage its supply chain for plastic parts. enterprise systems Firmwide information systems that integrate key business processes so that information can flow freely between different parts of the firm.
22 Part I ❙ ORGANIZATIONS, MANAGEMENT, AND THE NETWORKED ENTERPRISE Vendors Vendors Vendors Organizational Boundaries Manufacturing Accounting Finance Business processes Manufacturing Systems Figure 2-16 Enterprise systems. Enterprise systems can integrate the key business processes of an entire firm into a single software system that allows information to flow seamlessly throughout the organization. These systems may include transactions with customers and vendors. Business processes Accounting Systems Vendors Business Functions Business processes Finance Systems Information Systems Figure 2-15 Traditional view of systems. In most organizations today, separate systems built over a long period of time support discrete business processes and discrete segments of the business value chain.The organization’s systems rarely include vendors and customers. accounting, human resources, and other areas of the firm. Discrete business processes from sales, production, finance, and logistics can be integrated into company-wide business processes that flow across organizational levels and functions. An enterprise-wide technical platform serves all processes and levels. Figure 2-16 illustrates how enterprise systems work The enterprise system collects data from various key business processes (see Table 2-8) and stores the data in a single comprehensive data repository where they can be used by other parts of the business. Managers emerge with more precise and timely information for coordinating the daily operations of the business and a firmwide view of business processes and information flows. For instance, when a sales representative in Brussels enters a customer order, the data flows automatically to others in the company who need to see it. The factory in Hong Kong receives the order and begins production. The warehouse checks its progress on-line and schedules the shipment date. The warehouse can check its stock of parts and replenish whatever the factory has depleted. The enterprise system stores production information, where it can be accessed by customer service representatives to track the progress of the order through every step of the manufacturing process. Updated sales and production data automatically flow to the accounting department. The system transmits information for calculating the salesperson’s commission to the payroll department. The system also automatically recalculates the company’s balance sheets, accounts receivable and payable ledgers, cost center accounts, and available cash. Corporate headquarters in London can view up-to-the-minute data on sales, inventory, and production at every step of the process as well as updated sales and production forecasts and calculations of product cost and availability. Organizational boundaries Manufacturing Human Resources Marketing and Sales Business processes Marketing and Sales Systems Enterprise System Business process Business process Business process Enterprise-wide business processes Sales and Marketing Human Resources Business processes Human Resources Systems Organizational Boundaries Accounting Customers Customers Customers Finance Organizational boundaries Customers
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2 Information Systems in the Enterprise - Main Web

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