ITU Industrial Engineering

1. DATA PROCESSING IN INDUSTRIAL SYSTEMS
Associate Prof.Dr. Ufuk Cebeci
INTRODUCTION to INFORMATION SYSTEMS in BUSINESS
Why Information Systems Are Important
Why study information systems and information technology? That’s the same as
asking why anyone should study accounting, finance, operations management, marketing,
human resource management, or any other major business function. Information systems
and technologies have become a vital component of successful businesses and
organizations. They thus constitute an essential field of study in business administration
and management. That’s why most business majors must take a course in information
systems. Since you probably intend to be a manager, entrepreneur, or business
professional, it is just as important to have a basic understanding of information systems
as it is to understand any other functional area in business.
Information System Resources And Technologies
An information system is an organized combination of people, hardware, software,
communications networks, and data resources that collects, transforms, and disseminates
information in an organization. People have relied on information systems to
communicate with each other using a variety of physical devices (hardware), information
processing instructions and procedures (software), communications channels (networks),
and stored data (data resources) since the dawn of civilization.
Today’s end users rely on many types of information systems (IS). They might
include simple manual (paper-and-pencil) hardware devices and informal (word-of-mouth)
communications channels.
An End User Perspective
Anyone who uses an information system or the information it produces is an end
user. This usually applies to most people in an organization, as distinguished from the
smaller number of people who are information system specialists, such as systems analysts
or professional computer programmers. A managerial end user is a manager,
entrepreneur, or managerial-level professional who personally uses information systems.
So most managers are managerial end users. This course is for potential managerial end
users like you and other students of business administration, engineering and
management.
1

2. Definition. A stakeholder in the architecture of a system is an individual, team, organization, or classes thereof, having
an interest in the realization of the system.
An Enterprise Perspective
Today’s internetworked information systems play a vital role in the business
success of an enterprise. For example, the Internet and Internet-like internal networks, or
intranets, and external interorganizational networks, called extranets, can provide the
information infrastructure a business needs for efficient operations, effective
management, and competitive advantage.
A Global Information Society
We are living in an emerging global information society, with a global economy that
is increasingly dependent on the creation, management, and distribution of information
resources over interconnected global networks like the Internet. So information is a basic
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3. resource in today’s society. People in many nations no longer live in agricultural societies,
composed primarily of farmers, or even industrial societies, where a majority of the
workforce consists of factory workers. Instead, much of the workforce in many nations
consists of workers in service occupations or knowledge workers, that is, people who
spend most of their time communicating and collaborating in teams and workgroups and
creating, using, and distributing information. Knowledge workers include executives,
managers, and supervisors; professionals such as accountants, engineers, scientists,
stockbrokers, and teachers; and staff personnel such as secretaries and clerical office
personnel.
Success And Failure With IT
It is important that you realize that information technology and information
systems can be mismanaged and misapplied so that they create both technological and
business failure.
Why Information Technology Development Projects Succeed Or Fail
Top five reasons for success: Top five reasons for failure:
- User involvement - Lack of user input (GARBAGE IN GARBAGE OUT
- Executive management support - Incomplete requirements and specifications
- Clear statement of requirements - Changing requirements and specifications
- Proper planning - Lack of executive support
- Realistic expectations - Technological incompetence
dilbert-talks-it-failure.gif
The Fundamental Roles Of Information Systems
Information systems perform three vital roles in any type of organization:
- Support of business operations
- Support of managerial decision making
- Support of strategic competitive advantage
The Increasing Value Of Information Technology
Today’s managers need all the help they can get. Their firms are being buffered on
all sides by strong, frequently shifting winds of change. Organizations’ strategic objectives
(chosen markets, product strategy, expected outcomes) and their business processes (such
as research and development, production, cash-flow management, and order fulfillment)
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4. are undergoing significant and volatile changes, placing great pressure on firms and their
managers.
The rapid pace of change in today’s business environment has made information
systems and information technology vital components that help keep an enterprise on
target to meet its business goals. Information technology has become an indispensable
ingredient in several strategic thrusts that businesses have initiated to meet the challenge
of change. These include the internetworking of computing, internetworking the
enterprise, globalization, business process reengineering, and using information
technology for competitive advantage. They are just some of the major reasons why
today’s businesses need information technology.
The Internetworking Of Computing
The internetworking of computing is one of the most important trends in
information technology. From the smallest microcomputer to the largest mainframe,
computers are being networked, or interconnected by the Internet, intranets, and other
telecommunications networks. This networked distribution of computer power
throughout an organization most frequently takes the form of a client/server approach,
with networks of end user microcomputers (clients) and network servers tied together to
share processing, software, and databases. In some client/server systems, midrange
computers or mainframes may act as superservers.
Globalization And Information Technology
As we mentioned earlier, many companies are in the process of globalization; that
is, becoming internetworked global enterprises. For example, businesses are expending
into global markets for their products and services, using global production facilities to
manufacture or assemble products, raising money in global capital markets, forming
alliances with global partners, and battling with global competitors for customers from all
over the globe. Managing and accomplishing these strategic changes would be impossible
without the Internet, intranets, and other global computing and telecommunications
networks that are the central nervous system of today’s global companies.
Business Process Reengineering
When IT substitutes for human effort, it automates a task or process.
When IT augmetns human effort, it informates a task or process.
When IT restructures, it transforms a set of tasks or process.
Businesses have used information technology for many years to automate business
processes and support the analysis and presentation of information for managerial
decision making. However, business process reengineering (BPR) is an example of how
information technology is being used to restructure work by transforming business
processes. A business process is any set of activities designed to produce a specified
output for a customer or market. The new product development process and the customer
order fulfillment process are typical examples.
How Information Technology Can Help Reengineer Business Processes:
• Old rule: Managers make all decisions.
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5. Information technology: Decision support tools (database access, modeling
software)
New rule: Decision making is part of everyone’s job.
• Old rule: Only experts can perform complex work.
Information technology: Expert systems
New rule: A generalist can do the work of an expert.
• Old rule: Information can appear in only one place at one time.
Information technology: Shared databases via the Internet, intranet, and extranets.
New rule: Information can appear simultaneously in as many places as needed.
• Old rule: Field personnel need offices where they can receive, store, retrieve, and
transmit information.
Information technology: Internet/intranet, Web sites and portable computers
New rule: Field personnel can send and receive information wherever they are.
How Information Technology Reengineered Business Process At Several Levels Of A
Business:
IT Initiative Process Changed Business Benefit
Salesperson Laptop Sales Sales Increased
Call System Call Sales
Marketing Team Web Site Product Product Greater Customer
Database Distribution Satisfaction
Business Unit Product Marketing Improved
Management Channel Competitive
System Communications Position
Competitive Advantage with IT
• Cost strategies: Using information technology to help you become a low-cost
producer, lower your customers’ or suppliers’ costs, or increase the costs your
competitors must pay to remain in the industry. For example, using computer-
aided manufacturing systems to lower production costs. Or creating Internet Web
sites for electronic commerce to lower marketing costs.
• Differentiation strategies: Developing ways to use information technology to
differentiate your company’s products or services from your competitors’ so your
customers perceive your products or services as having unique features or benefits.
For example, providing fast and complete customer support services via an Internet
Web site. Or using targeted marketing systems to offer individual customers the
products and services that appeal to them.
Purple cow
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6. Examples of the use of competitive strategies to confront each of the competitive forces
facing a company. Information technology can support and enable such strategies.
Customers Suppliers Competitors New Entrants Substitutes
Strategic Attact new Lock in Lock out Create Make
Objectives customers suppliers by competitors barriers to substitution
and lock in creating by locking in entry into unattractive
present switching customers the industry
customers costs and suppliers
by creating
switching
costs
Customers Suppliers Competitors New Entrants Substitutes
Cost Offer lower Help Undercut Make entry Make substitution
Leadership prices suppliers competitor investment economically
Strategy lower costs prices unattractive unfeasible
Differentiation Provide Help Toughen Complicate Provide features
Strategy better suppliers competition entry of substitutes
quality, improve with unique decision
features, and services features
service
Innovation Provide new Develop Provide Enter Produce
Strategy products and unique unmatched businesses substitutes
services to supply products of potential
new markets services or and services entrants
alliances with
suppliers
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7. (mass customization)
Examples of how companies used information technology to implement strategies for
competitive advantage
Strategy Company Strategic Information System Business Benefit
Cost Leadership Levitz Centralized Buying Cut Purchasing
Costs
Furniture Medical Care Monitoring Cut Medical Costs
Metropolitan Machine Tool Control Cut Manufacturing
Life Costs
Deere &
Company
Differentiation Navistar Portable Computer-Based Increase in Market
Customer Needs Analysis Share
Setco Computer Aided Job Estimation Increase in Market
Industries Share
Innovation Merrill Customer Cash Management Market Leadership
Lynch Bank Accounts
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8. Federal Online Package Tracking and Market Leadership
Express Flight Management
McKesson Customer Order Entry and Market Leadership
Corp. Merchandising
FUNDAMENTALS of INFORMATION SYSTEMS
Fundamental Information System Concepts
System concepts underlie the field of information systems. That’s why this section
shows you how generic system concepts apply to business firms and the components and
activities of information systems. Understanding system concepts will help you
understand many other concepts in technology, applications, development, and
management of information systems that we will cover in this text. For example, system
concepts help you understand:
• That computer networks are systems of information processing components.
• That business uses of computer networks are really interconnected business
information systems.
• That developing ways to use computer networks in business includes designing the
basic components of information systems.
• That managing information technology emphasizes the quality, business value, and
security of an organization’s information systems.
As we will see in this chapter, the AMS Knowledge Center is one of many types of
information systems, whose basic system components include:
• people, hardware, software, data, and network resources,
• which support input, processing, output, storage and control activities,
• that produce a variety of information products for end users like Andrew Jewell
and Susan Hanley.
And as we will see in several chapters of this text, knowledge management systems
can help many companies do a better job of capturing new business knowledge,
disseminating it within their organizations, and building it into new products and services.
System Concepts
What is a system? A system can be simply defined as a group of interrelated or
interacting elements forming a unified whole. Many examples of systems can be found in
the physical and biological sciences, in modern technology, and in human society. Thus, we
can talk of the physical system of the sun and its planets, the biological system of the
human body, the technological system of an oil rafinery, and the socioeconomic system of
a business organization. However, the following generic system concept provides a more
appropriate framework for describing information systems:
A system is a group of interrelated components working together toward a
common goal by accepting inputs and producing outputs in an organized transformation
process. Such a system (sometimes called a dynamic system) has three basic interacting
components or functions:
• Input involves capturing and assembling elements that enter the system to be
processed. For example, raw materials, energy, data, and human effort must be
secured and organized for processing.
8

9. • Processing involves transformation processes that convert input into output.
Examples are a manufacturing process, the human breathing process, or
mathematical calculations.
• Output involves transferring elements that have been produced by a
transformation process to their ultimate destination. For example, finished
products, human services, and management information must be transmitted to
their human users.
SYSTEM
INPUT OUTPUT
INPUT
DATA INFORMATION
MANAGEMENT INFORMATION SYSTEM
Feedback And Control
The system concept becomes even more useful by including two additional
components: feedback and control. A system with feedback and control components is
sometimes called a cybernetic system, that is, a self-monitoring, self-regulating system.
• Feedback is data about the performance of a system. For example, data about
sales performance is feedback to a sales manager.
• Control involves monitoring and evaluating feedback to determine whether a
system is moving toward the achievement of its goal. The control function then
makes necessary adjustments to a system’s input and processing components to
ensure that it produces proper output. For example, a sales manager exercises
control when he or she reassigns salespersons to new sales territories after
evaluating feedback about their sales performance.
Components Of An Information System
• People, hardware, software, data, and networks are the five basic resources of
information systems.
• People resources include end users and IS specialists, hardware resources consist of
machines and media, software resources include both programs and procedures,
data resources can include data and knowledge bases, and network resources
include communications media and networks.
• Data resources are transformed by information processing activities into a variety
of information products for end users.
• Information processing consists of input, processing, output, storage, and control
activities.
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PROCESS

10. Information System Resources
Our basic IS model shows that an information system consists of five major
resources;
people, hardware, software, data, and networks. Let’s briefly discuss several basic
concepts and examples of the roles these resources play as the fundamental components
of information systems. You should be able to recognize these five components at work in
any type of information system you encounter in the real world.
People Resources
People are required for the operation of all information systems. These people
resources include end users and IS specialists.
• End users (also called users or clients) are people who use an information system or
the information it produces. They can be accountants, salespersons, engineers,
clerks, customers, or managers. Most of us are information system end users.
• IS specialists are people who develop and operate information systems. They
include systems analysts, programmers, computer operators, and other
managerial, technical, and clerical IS personnel. Briefly, systems analysts design
information systems based on the information requirements of end users,
programmers prepare computer programs based on the specifications of systems
analysts, and computer operators operate large computer systems.
Examples Of Information System Resources And Products
People Resources
Specialists – systems analysts (INDUSTRIAL ENGINEERS ARE PREFERRED for THIS JOB
TITLE), programmers, computer operators.
End Users – anyone else who uses information systems.
Hardware Resources
Machines – computers, video monitors, magnetic disk drives, printers, optical scanners,
barcode readers, barcode printers, 3D printers.
Media – USB, DVD, CD, floppy disks, magnetic tape, optical disks, plastic cards, paper
forms.
First computer in the world
Ufuk_cebeci@yahoo.com
Software Resources
Programs – operating system programs, spreadsheet programs, word processing
programs, payroll programs.
Procedures – data entry procedures, error correction procedures, paycheck distribution
procedures.
Data Resources
Product descriptions, customer records, employee files, inventory databases.
Network Resources
Communications media, communications processors, network access and control
software.
Information Products
10

11. Management reports and business documents using text and graphics displays, audio
responses, and paper forms.
Hardware Resources
The concept of hardware resources includes all physical devices and materials used
in information processing. Specifically, it includes not only machines, such as computers
and other equipment, but also all data media, that is, all tangible objects on which data is
recorded, from sheets of paper to magnetic disks. Examples of hardware in computer-
based information systems are:
• Computer systems, which consist of central processing units containing
microprocessors, and a variety of interconnected peripheral devices. Examples are
microcomputer systems, midrange computer systems, and large mainframe
computer systems.
• Computer peripherals, which are devices such as a keyboard or electronic mouse
for input of data and commands, a video screen or printer for output of
information, and magnetic or optical disks for storage of data resources.
Software Resources
The concept of software resources includes all sets of information processing
instructions. This generic concept of software includes not only the sets of operating
instructions called programs, which direct and control computer hardware, but also the
sets of information processing instructions needed by people, called procedures.
It is important to understand that even information systems that don’t use
computers have a software resource component. This is true even for the information
systems of ancient times, or the manual and machine-supported information systems still
used in the world today. They all require software resources in the form of information
processing instructions and procedures in order to properly capture, process, and
disseminate information to their users.
The following are examples of software resources:
• System software, such as an operating system program, which controls and
supports the operations of a computer system.
• Application software, which are programs that direct processing for a particular use
of computers by end users. Examples are a sales analysis program, a payroll
program, and a word processing program.
• Procedures, which are operating instructions for the people who will use an
information system. Examples are instructions for filling out a paper form or using a
software package.
Data Resources
Data is more than the raw material of information systems. The concept of data
resources has been broadened by managers and information systems professionals. They
realize that data constitutes a valuable organizational resource. Thus, you should view
data as data resources that must be managed effectively to benefit all end users in an
organization.
Data can take many forms, including traditional alphanumeric data, composed of
numbers and alphabetical and other characters that describe business transactions and
other events and entities. Text data, consisting of sentences and paragraphs used in
11

12. written communications; image data, such as graphic shapes and figures; and audio data,
the human voice and other sounds, are also important forms of data.
The data resources of information systems are typically organized into:
• Databases that hold processed and organized data.
• Knowledge bases that hold knowledge in a variety of forms such as facts, rules, and
case examples about successful business practices.
For example, data about sales transactions may be accumulated and stored in a
sales
database for subsequent processing that yields daily, weekly, and monthly sales analysis
reports for management. Knowledge bases are used by knowledge management systems
and expert systems to share knowledge and give expert advice on specific subjects. We
will explore these concepts further in later chapters.
Data versus Information. The word data is the plural of datum, though data commonly
represents both singular and plural forms. Data are raw facts or observations, typically
about physical phenomena or business transactions. For example, a spacecraft launch or
the sale of an automobile would generate a lot of data describing those events. More
specifically, data are objective measurements of the attributes (the characteristics) of
entities (such as people, places, things, and events).
The Systems Approach
The systems approach to problem solving uses a systems orientation to define
problems and opportunities and develop solutions. Studying a problem and formulating a
solution involve the following interrelated activities:
1- Recognize and define a problem or opportunity using systems thinking.
2- Develop and evaluate alternative systems solutions.
3- Select the system solution that best meets your requirements.
4- Design the selected system solution.
5- Implement and evaluate the success of the designed system.
Let’s now examine each step of the systems approach to problem solving to see
how it can help you develop solutions to business problems. Then we will apply the
systems approach to a business case study example.
The Systems Approach To Problem Solving
Note the major activities involved in developing system solutions to business
problems. Also note that you can recycle back to a previous step if further work is needed.
M
O
N
I
T
O Define - Define the problem or opportunity using
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13. R the systems thinking.
Problem
a ↓↓↓↓↓↓↓
n Develop - Develop and evaluate alternative system
d Alternative solutions.
Solutions
E ↓↓↓↓↓↓↓
V Select - Select the system solution that best meets
A the your requirements.
L Solution
U ↓↓↓↓↓↓↓
A Design - Design the selected system solution to meet
T the your requirements.
E Solution
↓↓↓↓↓↓↓
R Implement - Implement and evaluate the success of the
E the designed system.
S Solution
U
L
T
S
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