Dimensions of Information Systems
To fully understand information systems, you must understand the broader organization, management, and information technology dimensions of systems (see Figure 1.5)
and their power to provide solutions to challenges and problems in the business environment. We refer to this broader understanding of information systems, which
encompasses an understanding of the management and organizational dimensions of systems as well as the technical dimensions of systems, as information systems
literacy. Computer literacy, in contrast, focuses primarily on knowledge of information technology.
The field of management information systems (MIS) tries to achieve this broader information systems literacy. MIS deals with behavioral issues as well as technical
issues surrounding the development, use, and impact of information systems used by managers and employees in the firm.
Let’s examine each of the dimensions of information systems—organizations, management, and information technology.
Figure 1.5 Information Systems are More Than Computers
Using information systems effectively requires an understanding of the organization, management, and information technology shaping the systems. An information system
creates value for the firm as an organizational and management solution to challenges posed by the environment.
Organizations
Information systems are an integral part of organizations. Indeed, for some companies, such as credit reporting firms, there would be no business without an
information system. The key elements of an organization are its people, structure, business processes, politics, and culture. We introduce these components of
organizations here and describe them in greater detail in Chapters 2 and 3.
Organizations have a structure that is composed of different levels and specialties. Their structures reveal a clear-cut division of labor. Authority and
responsibility in a business firm are organized as a hierarchy, or a pyramid structure. The upper levels of the hierarchy consist of managerial, professional, and
technical employees, whereas the lower levels consist of operational personnel.
Senior management makes long-range strategic decisions about products and services as well as ensures financial performance of the firm. Middle management carries out
the programs and plans of senior management, and operational management is responsible for monitoring the daily activities of the business. Knowledge workers, such as
engineers, scientists, or architects, design products or services and create new knowledge for the firm, whereas data workers, such as secretaries or clerks, assist
with scheduling and communications at all levels of the firm. Production or service workers actually produce the product and deliver the service (see Figure 1.6).
Experts are employed and trained for different business functions. The major business functions, or specialized tasks performed by business organizations, consist of
sales and marketing, manufacturing and production, finance and accounting, and human resources (see Table 1.2). Chapter 2 provides more detail on these business
functions and the ways in which they are supported by information systems.
An organization coordinates work through its hierarchy and through its business processes, which are logically related tasks and behaviors for accomplishing work.
Developing a new product, fulfilling an order, and hiring a new employee are examples of business processes.
Figure 1.6 Levels in a Firm
Business organizations are hierarchies consisting of three principal levels: senior management, middle management, and operational management. Information systems
serve each of these levels. Scientists and knowledge workers often work with middle management.
Most organizations’ business processes include formal rules that have been developed over a long time for accomplishing tasks. These rules guide employees in a variety
of procedures, from writing an invoice to responding to customer complaints. Some of these business processes have been written down, but others are informal work
practices, such as a requirement to return telephone calls from coworkers or customers, that are not formally documented. Information systems automate many business
processes. For instance, how a customer receives credit or how a customer is billed is often determined by an information system that incorporates a set of formal
business processes.
Table 1.2 Major Business Functions
Function Purpose
Sales and marketing Selling the organization’s products and services
Manufacturing and production Producing and delivering products and services
Finance and accounting Managing the organization’s financial assets and maintaining the organization’s financial records
Human resources Attracting, developing, and maintaining the organization’s labor force; maintaining employee records
Each organization has a unique culture, or fundamental set of assumptions, values, and ways of doing things, that has been accepted by most of its members. You can see
organizational culture at work by looking around your university or college. Some bedrock assumptions of university life are that professors know more than students,
the reasons students attend college is to learn, and that classes follow a regular schedule.
Parts of an organization’s culture can always be found embedded in its information systems. For instance, UPS’s first priority is customer service, which is an aspect
of its organizational culture that can be found in the company’s package tracking systems, which we describe later in this section.
Different levels and specialties in an organization create different interests and points of view. These views often conflict over how the company should be run and
how resources and rewards should be distributed. Conflict is the basis for organizational politics. Information systems come out of this cauldron of differing
perspectives, conflicts, compromises, and agreements that are a natural part of all organizations. In Chapter 3, we examine these features of organizations and their
role in the development of information systems in greater detail.
Management
Management’s job is to make sense out of the many situations faced by organizations, make decisions, and formulate action plans to solve organizational problems.
Managers perceive business challenges in the environment; they set the organizational strategy for responding to those challenges; and they allocate the human and
financial resources to coordinate the work and achieve success. Throughout, they must exercise responsible leadership. The business information systems described in
this book reflect the hopes, dreams, and realities of real-world managers.
But managers must do more than manage what already exists. They must also create new products and services and even re-create the organization from time to time. A
substantial part of management responsibility is creative work driven by new knowledge and information. Information technology can play a powerful role in helping
managers design and deliver new products and services and redirecting and redesigning their organizations. Chapter 12 treats management decision making in detail.
Information Technology
Information technology is one of many tools managers use to cope with change. Computer hardware is the physical equipment used for input, processing, and output
activities in an information system. It consists of the following: computers of various sizes and shapes (including mobile handheld devices); various input, output,
and storage devices; and telecommunications devices that link computers together.
Computer software consists of the detailed, preprogrammed instructions that control and coordinate the computer hardware components in an information
system. Chapter 5 describes the contemporary software and hardware platforms used by firms today in greater detail.
Data management technology consists of the software governing the organization of data on physical storage media. More detail on data organization and access methods
can be found in Chapter 6.
Networking and telecommunications technology, consisting of both physical devices and software, links the various pieces of hardware and transfers data from one
physical location to another. Computers and communications equipment can be connected in networks for sharing voice, data, images, sound, and video. A network links
two or more computers to share data or resources, such as a printer.
The world’s largest and most widely used network is the Internet. The Internet is a global “network of networks” that uses universal standards (described in Chapter 7)
to connect millions of different networks with nearly 3 billion users in over 230 countries around the world.
The Internet has created a new “universal” technology platform on which to build new products, services, strategies, and business models. This same technology platform
has internal uses, providing the connectivity to link different systems and networks within the firm. Internal corporate networks based on Internet technology are
called intranets. Private intranets extended to authorized users outside the organization are called extranets, and firms use such networks to coordinate their
activities with other firms for making purchases, collaborating on design, and other interorganizational work. For most business firms today, using Internet technology
is both a business necessity and a competitive advantage.
The World Wide Web is a service provided by the Internet that uses universally accepted standards for storing, retrieving, formatting, and displaying information in a
page format on the Internet. Web pages contain text, graphics, animations, sound, and video and are linked to other Web pages. By clicking on highlighted words or
buttons on a Web page, you can link to related pages to find additional information and links to other locations on the Web. The Web can serve as the foundation for
new kinds of information systems such as UPS’s Web-based package tracking system described in the following Interactive Session.
All of these technologies, along with the people required to run and manage them, represent resources that can be shared throughout the organization and constitute the
firm’s information technology (IT) infrastructure. The IT infrastructure provides the foundation, or platform, on which the firm can build its specific information
systems. Each organization must carefully design and manage its IT infrastructure so that it has the set of technology services it needs for the work it wants to
accomplish with information systems. Chapters 5 through 8 of this book examine each major technology component of information technology infrastructure and show how
they all work together to create the technology platform for the organization.
The Interactive Session on Technology describes some of the typical technologies used in computer-based information systems today. UPS invests heavily in information
systems technology to make its business more efficient and customer oriented. It uses an array of information technologies, including bar code scanning systems,
wireless networks, large mainframe computers, handheld computers, the Internet, and many different pieces of software for tracking packages, calculating fees,
maintaining customer accounts, and managing logistics.
Let’s identify the organization, management, and technology elements in the UPS package tracking system we have just described. The organization element anchors the
package tracking system in UPS’s sales and production functions (the main product of UPS is a service—package delivery). It specifies the required procedures for
identifying packages with both sender and recipient information, taking inventory, tracking the packages en route, and providing package status reports for UPS
customers and customer service representatives.
The system must also provide information to satisfy the needs of managers and workers. UPS drivers need to be trained in both package pickup and delivery procedures
and in how to use the package tracking system so that they can work efficiently and effectively. UPS customers may need some training to use UPS in-house package
tracking software or the UPS Web site.
UPS’s management is responsible for monitoring service levels and costs and for promoting the company’s strategy of combining low cost and superior service. Management
decided to use computer systems to increase the ease of sending a package using UPS and of checking its delivery status, thereby reducing delivery costs and increasing
sales revenues.
Interactive Session: Technology UPS Competes Globally with Information Technology
United Parcel Service (UPS) started out in 1907 in a closet-sized basement office. Jim Casey and Claude Ryan—two teenagers from Seattle with two bicycles and one
phone—promised the “best service and lowest rates.” UPS has used this formula successfully for more than a century to become the world’s largest ground and air
package-delivery company. It’s a global enterprise with nearly 400,000 employees, 96,000 vehicles, and the world’s ninth largest airline.
Today UPS delivers 16.3 million packages and documents each day in the United States and more than 220 other countries and territories. The firm has been able to
maintain leadership in small-package delivery services despite stiff competition from FedEx and Airborne Express by investing heavily in advanced information
technology. UPS spends more than $1 billion each year to maintain a high level of customer service while keeping costs low and streamlining its overall operations.
It all starts with the scannable bar-coded label attached to a package, which contains detailed information about the sender, the destination, and when the package
should arrive. Customers can download and print their own labels using special software provided by UPS or by accessing the UPS Web site. Before the package is even
picked up, information from the “smart” label is transmitted to one of UPS’s computer centers in Mahwah, New Jersey, or Alpharetta, Georgia and sent to the
distribution center nearest its final destination.
Dispatchers at this center download the label data and use special software to create the most efficient delivery route for each driver that considers traffic, weather
conditions, and the location of each stop. In 2009, UPS began installing sensors in its delivery vehicles that can capture the truck’s speed and location, the number
of times it’s placed in reverse and whether the driver’s seat belt is buckled. At the end of each day, these data are uploaded to a UPS central computer and analyzed.
By combining GPS information and data from fuel-efficiency sensors installed on more than 46,000 vehicles in 2011, UPS reduced fuel consumption by 8.4 million gallons
and cut 85 million miles off its routes. UPS estimates that saving only one daily mile driven per driver saves the company $30 million.
The first thing a UPS driver picks up each day is a handheld computer called a Delivery Information Acquisition Device (DIAD), which can access a wireless cell phone
network. As soon as the driver logs on, his or her day’s route is downloaded onto the handheld. The DIAD also automatically captures customers’ signatures along with
pickup and delivery information. Package tracking information is then transmitted to UPS’s computer network for storage and processing. From there, the information can
be accessed worldwide to provide proof of delivery to customers or to respond to customer queries. It usually takes less than 60 seconds from the time a driver presses
“complete” on a the DIAD for the new information to be available on the Web.
Through its automated package tracking system, UPS can monitor and even re-route packages throughout the delivery process. At various points along the route from
sender to receiver, bar code devices scan shipping information on the package label and feed data about the progress of the package into the central computer. Customer
service representatives are able to check the status of any package from desktop computers linked to the central computers and respond immediately to inquiries from
customers. UPS customers can also access this information from the company’s Web site using their own computers or mobile phones. UPS now has mobile apps and a mobile
Web site for iPhone, BlackBerry, and Android smartphone users.
Anyone with a package to ship can access the UPS Web site to track packages, check delivery routes, calculate shipping rates, determine time in transit, print labels,
and schedule a pickup. The data collected at the UPS Web site are transmitted to the UPS central computer and then back to the customer after processing. UPS also
provides tools that enable customers, such Cisco Systems, to embed UPS functions, such as tracking and cost calculations, into their own Web sites so that they can
track shipments without visiting the UPS site.
A Web-based Post Sales Order Management System (OMS) manages global service orders and inventory for critical parts fulfillment. The system enables high-tech
electronics, aerospace, medical equipment, and other companies anywhere in the world that ship critical parts to quickly assess their critical parts inventory,
determine the most optimal routing strategy to meet customer needs, place orders online, and track parts from the warehouse to the end user. An automated e-mail or fax
feature keeps customers informed of each shipping milestone and can provide notification of any changes to flight schedules for commercial airlines carrying their
parts.
UPS is now leveraging its decades of expertise managing its own global delivery network to manage logistics and supply chain activities for other companies. It created
a UPS Supply Chain Solutions division that provides a complete bundle of standardized services to subscribing companies at a fraction of what it would cost to build
their own systems and infrastructure. These services include supply-chain design and management, freight forwarding, customs brokerage, mail services, multimodal
transportation, and financial services, in addition to logistics services.
For example, UPS handles logistics for Lighting Science Group, the world’s leading maker of advanced light products such as energy-efficient light-emitting diode (LED)
lamps and custom design lighting systems. The company has manufacturing operations in Satellite Beach, Florida and China. UPS conducted a warehouse/distribution
analysis to shape the manufacturer’s distribution strategy, in which finished goods from China are brought to a UPS warehouse in Fort Worth, Texas, for distribution.
The UPS warehouse repackages finished goods, handles returns and conducts daily cycle counts as well as annual inventory. Lighting Science uses UPS Trade Management
Services and UPS Customs Brokerage to help manage import and export compliance to ensure timely, reliable delivery and reduce customs delays. UPS also helps Lighting
Science reduce customer inventory and improve order fulfillment.
UPS manages logistics and international shipping for Celaris, the world’s largest wireless accessory vendor, selling mobile phone cases, headphones, screen protectors,
and chargers. Cellaris has nearly 1,000 franchises in the United States, Canada and the United Kingdom. The company’s supply chain is complex, with products developed
in Georgia, manufactured at more than 25 locations in Asia and 10 locations in the U.S., warehoused in a Georgia distribution center, and shipped to franchisees and
customers worldwide. UPS redesigned Celaris’s inbound/outbound supply chain and introduced new services to create a more efficient shipping model. UPS Buyer
Consolidation for International Air Freight reduces complexity in dealing with multiple international manufacturing sources. UPS Worldwide Express Freight guarantees
on-time service for critical freight pallet shipments and UPS Customs Brokerage enables single-source clearance for multiple transportation modes. These changes have
saved Celaris more than 5,000 hours and $500,000 annually, and the supply chain redesign alone has saved more than 15 percent on shipments.
Sources: “A Good Call Becomes a Thriving Business,” UPS Compass, February 2014;”High-Tech Manufacturer Masters Logistics, UPS Compass, January 2014; www.ups.com,
accessed April 17, 2014; Steve Rosenbush and Michael Totty, “How Big Data Is Transforming Business,” The Wall Street Journal, March 10, 2013; Thomas H. Davenport,
“Analytics That Tell You What to Do,” The Wall Street Journal, April 3, 2013; Elana Varon, “How UPS Trains Front-Line Workers to Use Predictive Analytics,”
DataInformed, January 31, 2013; and Jennifer Levitz and Timothy W. Martin, “UPS, Other Big Shippers, Carve Health Care Niches,” The Wall Street Journal, June 27, 2012.
