information systems

INFORMATION SYSTEMS
FORMATION 2 EXAMINATION - APRIL 2009
NOTES:
Section A - You are required to answer Questions 1 and 2.
Section B - You are required to answer any three out of Questions 3 to 6.
(If you provide answers to all of Questions 3 to 6, you must draw a clearly distinguishable line through the answer
not to be marked. Otherwise, only the first answers to hand for these four questions will be marked.)
TIME ALLOWED:
3 hours, plus 10 minutes to read the paper.
INSTRUCTIONS:
During the reading time you may write notes on the examination paper but you may not commence
writing in your answer book.
Marks for each question are shown.
The pass mark required is 50% in total over the whole paper.
Start your answer to each question on a new page.
You are reminded that candidates are expected to pay particular attention to their communication skills
and care must be taken regarding the format and literacy of the solutions. The marking system will take
into account the content of the candidates' answers and the extent to which answers are supported with
relevant legislation, case law or examples where appropriate.
List on the cover of each answer booklet, in the space provided, the number of each question(s)
attempted.
The Institute of Certified Public Accountants in Ireland, 17 Harcourt Street, Dublin 2.
THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN IRELAND
INFORMATION SYSTEMS
FORMATION 2 EXAMINATION - APRIL 2009
Time Allowed: 3 hours, plus 10 minutes to read the paper.
SECTION A
1.
Answer BOTH Question 1 and Question 2 in this Section.
(Both Compulsory)
RECYC Ltd is a medium sized recycling consultancy firm, which is currently experiencing rapid growth. This is
evidenced by increased turnover. It has been able to develop a range of new consultancy and specialist business
advisory services that it offers to its growing customer base. To cope with these developments, several
organisation-wide initiatives have been launched over the past two years.
The existing financial systems are struggling to cope with these developments, but replacement software is due
to be installed within the next six months. The new system was justified partly because it could reduce costs,
although precise details have not been given. The application software selected does not fit existing business
processes exactly. However, it has the clear advantage of giving RECYC access to an industry best practice
system and is identical to that used by all its main competitors and some of its clients.
A three-person Project Steering Group has recommended that a phased approach to introduction should be used
and has undertaken most of the project planning. A programme of events for implementing the system has been
agreed, but is not yet fully operational. This group has not met for a while because the designated Project
Manager has been absent from work through illness. You are Head of RECYC’s Central Support Unit. You also
serve on the Project Steering Group.
A Directors’ meeting is due to take place soon. The firm’s Managing Director has asked you to prepare and
present a PowerPoint presentation to the other Directors on project management and implementation issues. You
understand that the Directors are conscious that system implementation represents a form of further
organisational change. They are asking questions about the approach that will be taken to the introduction of the
new system, likely changes to practices, critical areas for success, system testing, support after implementation,
system effectiveness, etc.
REQUIRED:
(a)
(b)
(c)
List and describe the project management activities and variables addressed by your steering group.
(8 marks)
Describe the available options for the systems implementation and explain why a ‘phased’ approach to
introducing the system is, in this case, more suitable.
(7 marks)
Name and describe the methods you are using to evaluate this information systems project and outline the
limitations of financial models for establishing the value of information systems.
(10 marks)
[Total: 25 Marks]
Page 1
2.
Write brief notes on ANY FIVE of the following.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Semi-structured decisions.
Outsourcing.
RFID.
Data versus Information.
XBRL.
Disaster recovery planning.
Business process reengineering.
[Total: 15 Marks]
Note: Each part carries 3 marks.
SECTION B
Answer ANY THREE of the four questions in this Section.
3.
4.
5.
(a)
Explain why information systems are so essential in business today?
(8 Marks)
(c)
Define the term ‘Extranet’ and outline its business uses in a medium sized organisation.
(6 Marks)
(a)
What is an enterprise system and how does it provide value for a business?
(6 Marks)
(c)
What are supply-chain management systems and what functions do they perform for a business?
(7 Marks)
(b)
(b)
(a)
(b)
6.
Identify and describe the three dimensions of information systems.
(6 Marks)
[Total: 20 Marks]
Describe the capabilities and benefits of customer relationship management software.
(7 Marks)
[Total: 20 Marks]
Define and list the benefits of ‘disintermediation’. In your answer, give an example of where it has been
successfully applied.
(7 Marks)
Define the term ‘digital goods’ and describe their distinguishing features compared to traditional goods.
(7 Marks)
(c)
Name and describe six principal electronic payment systems used on the Internet.
(a)
What are the advantages organisations gain by integrating their information systems?
(6 Marks)
Describe the information systems supporting a business’s finance and accounting function.
(6 Marks)
(b)
(c)
Define and describe a TPS, MIS, DSS and ESS and the relationship between them.
(6 Marks)
[Total: 20 Marks]
(8 Marks)
[Total: 20 Marks]
END OF PAPER
Page 2
SUGGESTED SOLUTIONS
THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN IRELAND
INFORMATION SYSTEMS
FORMATION 2 EXAMINATION - APRIL 2009
Tutorial Notes:
Purpose: The case study question aims to be a written summary or syntheses of a real-life scenario. It requires
the candidate to isolate and think through the key issues involved against both theory and the larger
comparative environment. This case tests the candidates’ ability to identify the objectives of project
management and why it is so essential in developing information systems. Candidates should demonstrate
their understanding of different approaches to systems implementation. Finally, the candidates should also
be able to compare models for selecting and evaluating information systems projects.
Links: No major links on other topics or papers in Formation 1.
Options: The candidate’s answer may vary slightly form the answer format used below.
Essential Components: The candidates will demonstrate understanding of project management activities and
variable. Also, the candidates should understand the concept of implementation when managing the
organisational change surrounding a new information system. They should also understand the different
models for selecting and evaluating information systems projects and the limitations of each.
Responses for each sub question are expected to be brief and concise, in a form that might include a few
sentences and bullet points. This limit simulates a real life scenario in which accuracy, brevity and clarity is
called for and also hopefully prevents candidates from spending a disproportionate amount of time on each
sub-question. When answering a sub-question, candidates might use purposeful illustrations based upon
aspects of the scenario.
SOLUTION 1:
(a)
List and describe the project management activities and variables addressed by your steering group.
Candidates should provide an explanation of project management, and outline the activities and variables
addressed in the course of examining this case. Project management refers to the application of knowledge,
skills, tools, and techniques to achieve specific targets within specified budget and time constraints.
Project management activities include:
•
Planning the work
•
Assessing risk
•
Estimating resources required to accomplish the work
•
Organising the work
•
Acquiring human and material resources
•
Assigning tasks
•
Directing activities
•
Controlling project execution
•
Reporting progress
•
Analysing results
Project management for information systems must deal with five major variables:
•
Scope: Defines what work is or is not included in a project
•
Time: The amount of time required to complete the project
•
Cost: Based on the time to complete a project multiplied by the cost of human resources required to
complete the project
•
Quality: How well the end result of a project satisfies the objectives specified by management
•
Risk: Refers to potential problems that would threaten the success of a project
(8 Marks)
(Definition – 2 Marks +Any 3 activities + Any 3 variables similar to above x 1 marks each)
Page 4
(b)
(c)
Describe the available options for the systems implementation and explain why a ‘phased’ approach to
introducing the system is, in this case, more suitable.
Candidates should:
Describe each of the possible approaches for systems implementation, including Pilot, Phased, Big
•
Bang and Parallel.
•
Identify key points indicating a suitability of phased approach within the context of the scenario.
•
Clearly identified issues in favor of phased approach strongly related to the scenario.
(7 Marks)
(1 Mark each approach x 4 + 3 Marks suitability of Phased against others)
Name and describe the methods you are using to evaluate this information systems project and outline the
limitations of financial models for establishing the value of information systems.
The value of systems from a financial perspective essentially revolves around the issue of return on invested
capital. Does this particular information system investment produce sufficient returns to justify its costs?
Costs include the costs of hardware, telecommunications, software, services, and personnel.
The tangible benefits of information systems can be quantified and assigned a monetary value. Intangible
benefits, such as more efficient customer service or enhanced decision making, cannot be immediately
quantified but may lead to quantifiable gains in the long run.
Total cost of ownership (TCO) is designed to identify and measure the components of information
technology expenditures, but does not take into account benefits, cost categories such as complexity costs,
and "soft" and strategic factors
Capital budgeting is one of several techniques used to measure the value of investing in long-term capital
investment projects. Information systems are considered long-term capital investment projects. To
determine the financial basis for an information systems project, a series of financial models helps
determine the return on invested capital. The principal capital budgeting models for evaluating information
technology projects are:
•
•
•
•
The payback method: Measures the amount of time required to pay back the initial investment of a
project. It is calculated by dividing the amount of the original investment by the annual net cash inflow
generated by the investment.
The accounting rate of return on investment (ROI): Calculates the rate of return from an investment
by adjusting cash inflows produced by the investment for depreciation. It gives an approximation of
the accounting income earned by the project. The net benefit is divided by the total initial investment
to arrive at the rate of return (ROI).
The net present value: The amount of money an investment is worth, taking into account its cost,
earnings, and the time value of money. (Present value is the value in current dollars of a payment or
stream of payments to be received in the future.)
The internal rate of return (IRR): The rate of return or profit that an investment is expected to return,
taking into account the time value of money. IRR is the discount (interest) rate that will equate the
present value of the project's future cash flows to the initial cost of the project.
In some cases, not all of the benefits of making this investment can be established in advance. Real options
pricing models (ROPMs), which apply the same techniques for valuating financial options to systems
investments, are useful for evaluating highly uncertain information system investments. In real options
theory, the value of the IT project (real option) is a function of the value of the underlying IT asset (present
value of expected revenues from the IT project), the volatility of the value in the underlying asset, the cost
of converting the option investment into the underlying asset, the interest rate at which the company could
invest the same amount of money as the investment without any risk, and the options time to maturity
(length of time the project can be deferred).
The disadvantages of this model are primarily in estimating all the key variables, especially the expected
cash flows from the underlying asset, and changes in the cost of implementation.
Page 5
Financial models assume all relevant alternatives have been examined, that all costs and benefits are
known, and that these costs and benefits can be expressed in terms of money. These assumptions are
rarely met in the real world.
Limitations
Only tangible benefits can be quantified and assigned a monetary value. Intangible benefits cannot be
immediately quantified, but perhaps may lead to quantifiable gains in the long run. These models can be
selectively used to support political decisions made for organisational reasons having nothing to do with the
cost and benefits of a system.
Financial models do not always express the risks and uncertainty of their own cost and benefit estimates.
They also fail to consider the fact that costs are usually up-front, while benefits tend to be back-loaded. No
financial model can adjust for the fact that information technology can easily change during the course of
the project.
In addition, firms can invest in capital projects for many non-economic reasons that are not captured by
financial models. They may be undertaken to support strategic considerations, to meet government
requirements, or to satisfy some non-market public demand.
(10 marks)
(1 Mark for each method x 5 + 1 Mark each limitation x 3 + 2 Overall)
Page 6
ANSWER 2
Tutorial Notes:
Purpose: Responses for each sub question are expected to include a few sentences and possibly bullet points.
This limit simulates a real life scenario in which accuracy, brevity and clarity is called for and also hopefully
prevents candidates from spending a disproportionate amount of time on each sub-question. When
answering a sub-question, candidates might use purposeful illustrations based upon aspects of the
scenario.
Links: No major links on other topics or papers in Formation 1.
Options: Candidates may select five from seven questions. Answers may vary slightly from those given below.
Essential Components: Candidates should demonstrate knowledge of the topics. Their definitions should be
expanded upon and should demonstrate a competent understanding of each topic and how each adds or
affects business value.
SOLUTION 2:
3 Marks (2 Marks Definition, 1 Mark Business Value)
(a)
Semi-structured decisions
Decisions in which some aspect of the problem are structured and others are unstructured. In the middle of
this continuum are semi-structured decisions, and this is where most of what are considered to be true
decision support systems are focused. Decisions of this type are characterized as having some agreement
on the data, process, and/or evaluation to be used, but are also typified by efforts to retain some level of
human judgment in the decision making process. An initial step in analyzing which support system is
required is to understand where the limitations of the decision maker may be manifested (i.e., the data
acquisition portion, the process component, or the evaluation of outcomes).
(b)
Outsourcing
Outsourcing is subcontracting a process, such as product design or manufacturing, to a third-party
company. Candidates should related their definition to an IT context.
The decision to outsource is often made in the interest of lowering firm costs, redirecting or conserving
energy directed at the competencies of a particular business, or to make more efficient use of labor, capital,
technology and resources.
Organisations that outsource are seeking to realise benefits or address the following issues:
•
Cost savings. The lowering of the overall cost of the service to the business. This will involve reducing
the scope, defining quality levels, re-pricing, re-negotiation, cost re-structuring. Access to lower cost
economies through offshoring called "labor arbitrage" generated by the wage gap between
industrialised and developing nations.
•
Cost restructuring. Operating leverage is a measure that compares fixed costs to variable costs.
Outsourcing changes the balance of this ratio by offering a move from fixed to variable cost and also
by making variable costs more predictable.
•
Improve quality. Achieve a step change in quality through contracting out the service with a new
Service Level Agreement.
•
Knowledge. Access to intellectual property and wider experience and knowledge.
•
Contract. Services will be provided to a legally binding contract with financial penalties and legal
redress. This is not the case with internal services.
•
Operational expertise. Access to operational best practice that would be too difficult or time
consuming to develop in-house.
•
Staffing issues. Access to a larger talent pool and a sustainable source of skills.
•
Capacity management. An improved method of capacity management of services and technology
where the risk in providing the excess capacity is borne by the supplier.
•
Catalyst for change. An organisation can use an outsourcing agreement as a catalyst for major step
change that can not be achieved alone. The outsourcer becomes a Change agent in the process.
•
Reduce time to market. The acceleration of the development or production of a product through the
additional capability brought by the supplier.
Page 7
•
•
•
•
(c)
Commodification. The trend of standardising business processes, IT Services and application
services enabling businesses to intelligently buy at the right price. Allows a wide range of businesses
access to services previously only available to large corporations.
Risk management. An approach to risk management for some types of risks is to partner with an
outsourcer who is better able to provide the mitigation.
Time zone. A sequential task can be done during normal day shift in different time zones - to make it
seamlessly available 24x7. Same/similar can be done on a longer term between earth's hemispheres
of summer/winter.
Customer Pressure. Customers may see benefits in dealing with your company, but are not happy
with the performance of certain elements of the business, which they may not see a solution to except
through outsourcing.
RFID
Radio-frequency identification (RFID) is an automatic identification method, relying on storing and remotely
retrieving data using devices called RFID tags or transponders.
An RFID tag is an object that can be applied to or incorporated into a product, animal, or person for the
purpose of identification using radiowaves. Some tags can be read from several meters away and beyond
the line of sight of the reader.
Most RFID tags contain at least two parts. One is an integrated circuit for storing and processing information,
modulating and demodulating a (RF) signal and can also be used for other specialised functions. The
second is an antenna for receiving and transmitting the signal. A technology called chipless RFID allows for
discrete identification of tags without an integrated circuit, thereby allowing tags to be printed directly onto
assets at a lower cost than traditional tags.
Today, a significant thrust in RFID use is in enterprise supply chain management, improving the efficiency
of inventory tracking and management.
(d)
However, a threat is looming that the current growth and adoption in enterprise supply chain market will not
be sustainable. A fair cost-sharing mechanism, rational motives and justified returns from RFID technology
investments are the key ingredients to achieve long-term and sustainable RFID technology adoption.
Data versus Information
Data are plain facts. The word "data" is plural for "datum." When data are processed, organized, structured
or presented in a given context so as to make them useful, they are called Information.
It is not enough to have data (such as statistics on the economy). Data themselves are fairly useless. But
when these data are interpreted and processed to determine its true meaning, they becomes useful and can
be called Information.
DATA AND INFORMATION
Page 8
(e)
XBRL
XBRL (Extensible Business Reporting Language) is an XML-based format to define and exchange business
and financial information. XBRL is a standards-based way to communicate business and financial
information. These communications are defined by metadata set out in taxonomies. Taxonomies capture the
definition of individual reporting concepts as well as the relationships between concepts.
The XBRL format is governed and marketed by a international consortium (XBRL International Incorporated)
of approximately 600 organisations, including, companies, regulators, government agencies, infomediaries
and software vendors.
(f)
XBRL International is supported by its jurisdictions — independent bodies, generally organised on a countryspecific basis — that work to promote the adoption of XBRL and the development of taxonomies that define
the information requirements of their particular domains. XBRL is being adopted around the world in order
to migrate business information process from paper-based and legacy electronic proprietary formats more
fully onto Internet oriented processes (both for external and internal reporting processes).
Disaster recovery planning
Disaster recovery planning is the process, policies and procedures related to preparing for recovery or
continuation of technology infrastructure critical to an organization after a natural or human-induced disaster.
With the increasing importance of information technology for the continuation of business critical functions,
combined with a transition to an around-the-clock economy, the importance of protecting an organizations
data and IT infrastructure in the event of a disruptive situation has become an increasing and more visible
business priority in recent years..
(g)
It is estimated that most large companies spend between 2% and 4% of their IT budget on disaster recovery
planning, with the aim of avoiding larger losses in the event that the business cannot continue to function
due to loss of IT infrastructure and data. Of companies that had a major loss of business data, 43% never
reopen, 51% close within two years, and only 6% will survive long-term.
Business process reengineering
BPR analyzes, simplifies, and redesigns business processes with a mind to radically reduce business costs.
It is the radical redesign of business processes, combining steps to cut waste and eliminating repetitive,
paper-intensive tasks in order to improve cost, quality, and service, and to maximize the benefits of
information technology.
Business process reengineering involves radical restructuring of business processes before applying
information technology to make them more efficient. An example would be where the mortgage industry has
benefited from extensive reengineering of the mortgage application process to replace "desk-to-desk"
sequential work on documents with a "work cell" approach in which many people work on the same
document simultaneously. Reengineering sometimes uses workflow management software to move
documents easily and efficiently between different users and locations.
Effective reengineering requires understanding which business processes need improvement and how this
improvement helps the firm execute its strategy. Identifying the business processes with the highest priority
includes performing a strategic analysis and identifying pain points, processes that produce the most
complaints.
After identification, the business process itself must be analyzed in terms of its inputs and outputs, flow of
products or services, activities, resources, information flow and structure, and process owners, actors, and
decision makers.
Further analysis identifies the process costs and time taken to perform the process. Business processes are
typically measured along the following dimensions:
•
Process cost
•
Process time
•
Process quality
•
Process flexibility
Page 9
Once a business process is understood, a variety of techniques or principles can be used to improve it, such
as:
•
Replace sequential steps in the process with parallel steps
•
Enrich jobs by enhancing decision authority and concentrating information
Enable information sharing throughout to all participants
•
•
Eliminate buffers (decision delays and inventories)
•
Transform batch processing and decision making into continuous flow
•
Processes
•
Automate decision tasks where possible
Page 10
ANSWER 3
Tutorial Notes:
Purpose: To test the candidate’s knowledge on the general area of Information Systems. This question will
examine the candidate’s knowledge of the importance of information systems to the modern organisation
and the different dimensions of a successful information system. Finally, this question will test the
candidate’s knowledge of extranets.
Links: No major links on other topics or papers in Formation 1.
Options: Candidates will not be able to vary too much from the format of answers given below.
Essential Components: The candidates need to demonstrate an understanding of the value of information
systems and the constituent parts of same. The candidate should demonstrate their understanding of an
organisational extranet and the benefits it can bring to an organisation.
Solution 3
(a)
(b)
Explain why information systems are so essential in business today.
Information systems are a foundation for conducting business today. In many industries, survival and even
existence without extensive use of IT is inconceivable and IT plays a critical role in increasing productivity.
Although information technology has become more of a commodity, when coupled with complementary
changes in organization and management, it can provide the foundation for new products, services, and
ways of conducting business that provide firms with a strategic advantage. Information technology has
become the largest component of capital investment for firms in the United States and many industrialized
societies.
In summary, information systems can:•
Achieve operational excellence through higher levels of efficiency and productivity;
•
Create new products, services and business models;
•
Increase customer and supplier intimacy that can reduce costs and increase profits;
•
Improve decision making for employees and managers;
•
Increase the competitive advantage of a firm;
•
Ensure the firm survives in a changing environment.
(8 Marks
(2 Marks for each reason x 4)
Identify and describe the three dimensions of information systems.
The dimensions of information systems include organizations, management, and information technology.
INFORMATION SYSTEMS ARE MORE THAN COMPUTERS
Page 11
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.
Organization: Information systems are part of organizations, and in some cases (such as credit card
companies and financial information services), they are the organization. Information systems will have the
standard operating procedures (SOPs) and the culture of an organization imbedded within them.
Management: Information systems supply tools and information needed by managers to allocate,
coordinate, and monitor their work, make decisions, create new products and services and make long-range
strategic decisions.
(c)
Technology: Management uses technology (hardware, software, storage, and telecommunications) to carry
out their functions. It is one of the many tools managers use to cope with change.
(6 Marks )
(2 Marks each Dimension / inter-relationship x 3)
Define the term ‘Extranet’ and outline its business uses in a medium sized organisation.
An extranet is a private network that uses Internet protocols, network connectivity, and possibly the public
telecommunication system to securely share part of an organisation's information or operations with
suppliers, vendors, partners, customers or other businesses. An extranet can be viewed as part of a
company's Intranet that is extended to users outside the company (e.g.: normally over the Internet). It has
also been described as a "state of mind" in which the Internet is perceived as a way to do business with a
pre-approved set of other companies business-to-business (B2B), in isolation from all other Internet users.
In contrast, business-to-consumer (B2C) involves known server(s) of one or more companies,
communicating with previously unknown consumer users.
Briefly, an extranet can be understood as a private intranet mapped onto the Internet or some other
transmission system not accessible to the general public, but is managed by more than one company's
administrator(s). For example, military networks of different security levels may map onto a common military
radio transmission system that never connects to the Internet. Any private network mapped onto a public
one is a virtual private network (VPN). In contrast, an intranet is a VPN under the control of a single
company's administrator(s).
Possible advantages are:
•
Exchange large volumes of data using Electronic Data Interchange (EDI)
•
Share product catalogs exclusively with wholesalers or those "in the trade"
•
Collaborate with other companies on joint development efforts
•
Jointly develop and use training programs with other companies
•
Provide or access services provided by one company to a group of other companies, such as an
online banking application managed by one company on behalf of affiliated banks
•
Share news of common interest exclusively with partner companies
(6 Marks)
(2 Marks – Definition + 4 Marks Business uses)
Page 12
ANSWER 4
Tutorial Notes:
Purpose: To test the candidate’s knowledge of enterprise systems and the value they can provide to a business.
This question will specifically assess the candidate’s knowledge of customer relationship management
software and supply-chain management systems.
Links: No major links on other topics or papers in Formation 1.
Options: Candidates will not be able to vary from the format of answers given below.
Essential Components: The candidate needs to demonstrate how enterprise systems achieve operational
excellence by integrating and coordinating diverse functions and business processes in the firm. The
candidate also needs to demonstrate how customer relationship management systems achieve customer
intimacy and how supply-chain management systems coordinate planning, production and logistics with
suppliers.
SOLUTION 4
(a)
What is an enterprise system and how does it provide value for a business.
Enterprise systems focus on integrating the key internal business processes of the firm. Enterprise software
is used by enterprise systems and is a set of integrated software modules for finance and accounting,
human resources, manufacturing and production, and sales and marketing that allows data to be used by
multiple functions and business processes.
Companies can use enterprise systems to support organizational structures that were not previously
possible or to create a more disciplined organizational culture. They can also improve management
reporting and decision making. Furthermore, enterprise systems promise to provide firms with a single,
unified, and all-encompassing information system technology platform and environment. Lastly, enterprise
systems can help create the foundation for a customer-driven organization.
Benefits include creating an enterprise-enabled organization, providing firmwide knowledge-based
management processes, providing a unified information system technology platform and environment, and
enabling more efficient operations and customer-driven business processes.
(b)
(6 Marks)
(3 Marks definition + 3 Marks for Business Value [3 points])
Describe the capabilities and benefits of customer relationship management software.
CRM systems capture and integrate customer data from all over the organization, consolidate the data,
analyze them, and distribute the results to various systems and customer touch points across the enterprise.
Well-designed CRM systems provide a single enterprise view of customers that is useful for improving both
sales and customer services. These systems also provide customers with a single view of the company
regardless of what touch point the customer uses.
Benefits include: better customer service, make call centers more efficient, cross-sell products more
effectively, help sales staff close deals faster, simplify marketing and sales processes, acquire new profitable
customers, sell additional products and services, provide customer information for developing new products,
increase product utilization, reduce sales and marketing costs, identify and retain profitable customers,
optimize service delivery costs, retain high-lifetime value customers, improve customer loyalty, improve
response rates to direct mail, increase product profitability, respond quickly to market opportunities.
(7 Marks)
(3 Marks Tools + 4 Marks Benefits/Capabilities)
Page 13
(c)
What are supply-chain management systems and what functions do they perform for a business?
Supply chain management systems help an organization better manage its supply chain, including planning,
sourcing, making, delivering, and returning items. Supply chain management software can be categorized
as a supply chain planning system or as a supply chain execution system.
•
•
A supply chain planning system enables a firm to generate demand forecasts for a product and to
develop sourcing and manufacturing plans for that product. Supply chain planning systems enable
the firm to generate demand forecasts for a product and to develop sourcing and manufacturing plans
for that product. They help companies make better operating decisions such as determining how
much of a specific product to manufacture in a given time period; establishing inventory levels for raw
materials, intermediate products, and finished goods; determining where to store finished goods; and
identifying the transportation mode to use for product delivery. One of the most important functions is
demand planning, which determines how much product a business needs to make to satisfy all of its
customers’ demands. These functions are referred to as order planning, advanced scheduling,
demand planning, distribution planning, and transportation planning.
A supply chain execution system manages the flow of products through distribution centers and
warehouses to ensure that products are delivered to the right locations in the most efficient manner.
Supply chain management benefits include improved customer service and responsiveness, cost
reduction, and cash utilization. Supply chain execution systems manage the flow of products through
distribution centers and warehouses to ensure that products are delivered to the right locations in the
most efficient manner. They track the physical status of goods, the management of materials,
warehouse and transportation operations, and financial information involving all parties. These
functions are referred to as order commitments, final production, replenishment, distribution
management, and reverse distribution.
In a push-based model, production master schedules are based on forecasts or best guesses of demand
for products, and products are “pushed” to customers. In a pull-based model, actual customer orders or
purchases trigger events in the supply chain.
Effective supply chain management systems enhance organizational performance in the following areas:
•
Improved customer service and representatives
•
Cost reduction
•
Cash utilization
In contemporary supply chain management systems, the Internet and Internet technology make it possible
to move from sequential supply chains, where information and materials flow sequentially from company to
company, to concurrent supply chains, where information flows in many directions simultaneously among
members of a supply chain network. Members of the network immediately adjust to changes in schedules
or orders.
•
Matching supply to actual demand
•
Reducing inventory levels
•
Improving delivery service
•
Speeding product time to market
•
Using assets more effectively
•
Improving customer service
•
Reducing cost through the supply chain
•
Cash utilization
•
Increasing firms profitability
•
Increasing sales
(7 Marks)
(3 Marks Definition + 4 Marks Benefits/Functions)
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ANSWER 5
Tutorial Notes:
Purpose: To test the candidate’s knowledge of the disintermediation in relation to e-commerce and their
understanding of the term digital goods. Also, the question tests the candidate’s knowledge of the main ecommerce payment systems available.
Links: No major links on other topics or papers in Formation 1.
Options: The candidate’s answer should not vary too much form the answer format used below.
Essential Components: The candidates should be able to describe the features and benefits of disintermediation
to the business and consumer. The candidate should also demonstrate their understanding of digital goods
and the principal online payment systems.
SOLUTION 5
(a) Define and list the benefits of ‘disintermediation’. In your answer, give an example of where it has been
successfully applied.
Disintermediation is the elimination of intermediaries such as distributors or retailers The removal of
organizations or business process layers responsible for certain intermediary steps in a value chain.
THE BENEFITS OF DISINTERMEDIATION TO THE CONSUMER
The typical distribution channel has several intermediary layers, each of which adds to the final cost of a
product, such as a sweater. Removing layers lowers the final cost to the consumer.
(b)
(7 Marks)
(2 Marks Definition & 3 Marks Features & 2 Marks Example)
Define the term ‘digital goods’ and describe their distinguishing features compared to traditional goods.
In electronic commerce, ‘digital goods’ is a general term that is used to describe any goods that are stored,
delivered and used in its electronic format. Digital goods are shipped electronically to the consumer through
e-mail or download from the Internet. Usually when you purchase digital goods online, after payment has
been received the merchant will provide you with your digital item as an e-mail attachment or they may
provide you with a secure link where you can download the item.
Examples of digital goods include e-books, music files, software, digital images, Web site templates,
manuals in electronic format, and any item which can be electronically stored in a file or multiple files.
Digital goods may also be called electronic goods or e-goods.
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Candidates should also refer to how digital goods affect the following:•
Marginal cost/unit
•
Cost of production
•
Copying cost
Distributed delivery cost
•
•
Inventory cost
•
Marketing cost
•
Pricing
(c)
(7 Marks)
(3 Marks - Definition & 4 Marks – Features)
Name and describe six principal electronic payment systems used on the Internet.
The electronic payment systems include digital credit card payment, digital wallet, accumulated balance
payment, stored value payment systems, digital cash, peer-to-peer payment systems, digital checking, and
electronic billing presentment and payment.
Digital credit card payment systems provide secure services for credit card payments on the Internet and
protect information transmitted among users, merchant sites, and processing banks. Digital wallets store
credit card and owner identification information and provide these data automatically during electronic
commerce purchase transactions. Accumulated balance payment systems accumulate micro-payment
purchases as a debit balance that must be paid periodically on credit card or telephone bills. Stored value
payment systems enable customers to make instant online payments from a value stored in a digital
account. A smart card is a credit card-size plastic card that stores digital information and can be used for
electronic payments. Digital cash is an electronic form of currency, moves outside the normal network of
money, and is used for micropayments or larger purchases. A peer-to-peer payment system is an electronic
payment system for people who want to send money to vendors or individuals who are not set up to accept
credit card payments. A digital check is an electronic check with a secure digital signature. An electronic
billing presentment and payment system is used to pay routine monthly bills; it allows users to view their
bills electronically and pay them through electronic funds transfers from bank or credit card accounts.
(6 Marks)
(1 Mark per system x 6)
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ANSWER 6
Tutorial Notes:
Purpose: To test the candidate’s ability to explain the rationale behind integating an organisation’s business
processed. This question will examine the candidate’s knowledge of TPS, MIS, DSS and ESS and the
interrelationship between them. Finally, it will specifically test the candidate’s knowledge of the information
systems supporting a business’s finance and accounting function
Links: No major links on other topics or papers in Formation 1.
Options: Candidates may vary slightly from the format of answers given below.
Essential Components: The candidates need to demonstrate an understanding of the importance of integrating
a firm’s business processes and how it can be achieved through enterprise applications and intranets. The
candidates need to demonstrate a specific understanding of the various information systems that span the
different levels of management and the major business functions.
Solution 6
(a)
What are the advantages organisations gain by integrating their information systems?
No single system can provide all the information an organization needs. Even small firms have a collection
of different systems: e-mail systems, sales tracking systems, etc. Integrating business processes across the
different functional areas enhance the performance of the organization as a whole.
ENTERPRISE APPLICATION ARCHITECTURE
Reliable data in an easy-to-access format is critical to defining potential problems, analyzing them and
determining if they’ve been fixed. This data can be derived from various sources, including manufacturing
processes, equipment and instrumentation, to document manufacturing performance and process changes,
and subsequent results. As seen in the diagram above, integrating an organisations systems across the
functional areas and across the major organisational groups that they serve can bring these benefits.
Enterprise-wide integrated applications automate processes that span multiple business functions and
organizational levels.
(6 Marks)
(3 Marks Reasons + 3 Marks Rationale & Understanding)
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(b)
Describe the relationship between a TPS, MIS, DSS and ESS. Define and describe a TPS, MIS, DSS and
ESS and the relationship between them.
Candidates should provide a definition of each of the four systems. There are four major types of information
systems in contemporary organizations.
•
•
•
•
Operational-level systems are transaction processing systems (TPS), such as payroll or order
processing that track the flow of the daily routine transactions that are necessary to conduct business.
Management-level systems (MIS) provide the management control level with reports and access to
the organization’s current performance and historical records. Most MIS reports condense
information from TPS and are not highly analytical.
Decision-support systems (DSS) support management decisions when these decisions are unique,
rapidly changing, and not specified easily in advance. They have more advanced analytical models
and data analysis capabilities than MIS and often draw on information from external as well as internal
sources.
Executive support systems (ESS) support the strategic level by providing data of greatest importance
to senior management decision makers, often in the form of graphs and charts delivered via portals.
They have limited analytical capabilities but can draw on sophisticated graphics software and many
sources of internal and external information.
The various types of systems in the organization exchange data with one another. TPS are a major source
of data for other systems, especially MIS and DSS. ESS primarily receive data from lower-level systems.
Ideally, these constituency-based systems are interrelated. TPS are typically a major source of data for other
systems, whereas ESS are primarily a recipient of data from lower-level systems and external sources. The
various types of systems in the organization have interdependencies. TPS are major producers of
information that is required by many other systems in the firm, which, in turn, produce information for other
systems. These different types of systems are loosely coupled in most business firms, but increasingly firms
are using new technologies to integrate information that resides in many different systems.
Interrelationships Among Systems
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(8 Marks)
(4 X 2 Marks each system)
(c)
Describe the information systems supporting a business’s finance and accounting function.
Finance and accounting information systems keep track of the firm's financial assets and fund flows. Typical
examples would be:•
•
•
Accounts receivable
Budgeting
Profit planning
Differentiating between the two functions, the finance function is responsible for managing the firm’s
financial assets, such as cash, stocks, bonds, and other investments, to maximize the return on these
financial assets. The finance function is also in charge of managing the capitalization of the firm. To
determine whether the firm is getting the best return on its investments, the finance function must obtain a
considerable amount of information from sources external to the firm.
The accounting function is responsible for maintaining and managing the firm’s financial records – receipts,
disbursements, depreciation, payroll – to account for the flow of funds in a firm. The accounting function
obtains information from sources internal to the firm.
ACCOUNTS RECEIVABLE SYSTEM
An accounts receivable system tracks and stores important customer data, such as payment history, credit
rating, and billing history.
(6 Marks)
(2 marks x 3 systems)
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