Chapter 2: Business Processes and Decision Making Flashcards
Business process (aka business system)
a series of activities, tasks, or steps designed to produce a product or service. A business process is best thought of as a system
An inventory management system
supports the inventory process by collecting information
An inventory database
might keep track of what the customers have ordered (quantity ordered) and what is currently in inventory (quantity on hand)
reorder point.
When a good in stock hits this point, the inventory management system advises the manager that it is time to order new supplies.
purchase order (PO)
which lists the items ordered and the quantity desired
purchase order (PO) List
This purchase order is sent to the supplier.
The supplier receives the purchase order and then ships the appropriate goods along with the shipping invoice to the restaurant.
The shipped goods are first checked to make sure the restaurant received what was ordered.
The newly received goods are then placed in inventory and the inventory database is updated with the quantity received.
The supplier is then paid for the goods the supplier has shipped.
A business process consists of
1) activities,
2) resources,
3) facilities, and
4) information.
Activities
can consist of purely manual actions (people following procedures), automated or controlled procedures used by computers (hardware directed by software), or, as is often the case, a combination of manual and automated procedures.
Reources
are items of value. A case of milk is a resource, a person working is a resource, and the customer’s cash is a resource. In Figure 2-1, both suppliers and customers are considered resources because they have value in this process. They are not considered activities because they are external and, therefore, not under the restaurant’s direction and control.
Facilities
are structures used within the business process. Resources can be stored within facilities. Examples of facilities include factories, pieces of equipment, trucks, filing cabinets, and the like. In the case of digital resources, facilities might include inventories and databases
Information
the fourth element of a business process. Activities use information to determine how to transform the inputs received into the outputs produced. Because this book is about information systems, and understanding the nature of information and ways of defining it are crucial, information created in processes will be our focus.
Business Process Modelling Notation (BPMN)
software industry standards organization called the Object Management Group (OMG) created this
BPMN provides four graphical elements that can be used to document a process
Information definition
Very hard to have one specific one
most common definition is that information is knowledge derived from data, whereas data is defined as recorded facts or figures.
Another definition of information
information is processed data or, sometimes, information is data processed by summing, ordering, averaging, grouping, comparing, or other similar operations.
characteristics of good information.
1) Accurate
2) Timely
3) Relevant
- To context
- To subject
4) Just barely sufficient
5) Worth its cost
1) Accurate information
Information that is factual and verifiable
information system (IS)
Function can develop a bad reputation in the organization if the system is known to produce inaccurate information. In such a case, the IS becomes a waste of time and money as users develop workarounds to avoid the inaccurate data.
2) timely information
produced in time for its intended use.
Relevant information
both to the context and to the subject
Sufficient
Adequate information to perform the task
Just barely so
Information that meets the purpose for which it is generated, but barely so
worth its cost
When an appropriate relationship exists between the cost of information and its value
Any time there is a physical flow,
there is the potential to capture a flow of information.
business process management (BPM)
Process of generating information that will be useful for management and strategy decisions
total quality management (TQM)
Method focussed on improving quality
Six signma
Method focussed on improving quality (motorola)
Lean production
Focused on using resources as efficiently as possible
Automated system
means that work formerly done by people who followed procedures has been changed so that computers now do that work by following instructions in software
Manual system
Done by people without the use of automated processing
information systems support decision making by
providing the information—the raw material—for many decisions.
decisions occur at three levels in organizations:
1) operational
2) Managerial
3) Strategic
1) operational decisions
concern day-to-day activities. Typical operational decisions include the following, for example: How many widgets should we order from vendor A? Should we extend credit to vendor B? Which invoices should we pay today?
transaction processing systems (TPS).
Information systems that support operational decision making
Managerial decisions
concern the allocation and utilization of resources.
Examples of typical managerial decisions include the following: How much should we budget for computer hardware and programs for department A next year? How many engineers should we assign to project B? How many square metres of warehouse space do we need for the coming year?
Information systems that support managerial decision making are called
management information systems (MIS)
management information systems (MIS)
Information systems that help businesses achieve their goals and objectives
Strategic decisions
concern broader organizational issues. Examples of typical decisions at the strategic level include the following: Should we start a new product line? Should we open a centralized warehouse in Calgary? Should we acquire company A?
Note that, in general, the decision time frame increases as we move from operational to managerial to strategic decisions
Operational decisions normally involve actions in the short term: What should we do today or this week? Managerial decisions involve longer time frames: What is an appropriate goal for the next quarter or year? Strategic decisions involve the long term; their consequences may not be realized for years.
Structured decision
Type of decision for which there is a formalized and accepted method for making the decision
A formula for computing the reorder quantity of an item in inventory is an example of a structured decision process
Unstructured decision
one for which there is no agreed-upon decision making method. Predicting the future direction of the economy or the stock market is a common example.
The prediction method varies from person to person; it is neither standardized nor broadly accepted
Again, keep in mind that the terms structured and unstructured refer to the decision making process, not to the underlying subject.
IMPORTANT
intelligence gathering
the decision makers determine what is to be decided, what the criteria for the decision will be, and what data are available
Alternatives formulation
is the stage in which decision makers lay out various alternatives. They analyze the alternatives and select one during the choice step, and then they implement the decision in the implementation step.
Choice
Analyze alternatives and select one
Implementation
Decision makers implement the alternative they have selected
Review
Final step in decision making process
Makers evaluate results of their decision and if necessary repeat the process to correct or adapt the decision
