Information and Managers Thinking of an organization in terms of its suborganizations or subsystems —called systems

Information and Managers Thinking of an organization in terms of its suborganizations or subsystems —called systems

thinking —is a powerful management approach because it creates a framework for excellent problem solving and decision making. To solve problems, managers need to identify them, which they do by recognizing the subsystems in which the problems occur and solving the problems within those subsystems’ constraints and strengths.

Systems thinking can also help keep managers focused on the overall goals and operations of

a business. It encourages them to consider the entire system, not only their specific subsystem, when solving problems and making decisions. A satisfactory solution for one subsystem might be inadequate for the business as a whole. For example, when the sales department creates a Web site to take online customer orders, it automates a formerly labor-intensive activity of the sales subsystem. This saves cost. However, increased orders may cause understocking of finished goods. With systems thinking, improving the sales process could also improve other company processes. Without systems thinking, managers from other departments aren’t involved in the decision, so they don’t benefit. In the case of the sales department, if other managers are involved in planning for automated online ordering, they could suggest that sales data recorded on a shared database —a large collection of electronic records—connected to the Web also be accessible to other departments such as shipping and manufacturing. The shipping department could use the records to expedite packaging and shipping, thanks to the information that appears on a computer monitor rather than a sheet of paper. The manufacturing units could use the order records for planning resources such as laborers and inventory. Figuratively, by applying systems thinking, effective managers view their areas of responsibility as puzzle pieces. Each piece is important and should fit well with adjacent pieces, but the entire picture should always be kept in view.

Consider the different approaches Wal-Mart and Kmart took in the 1980s and 1990s. Kmart spent millions of dollars on information systems that helped it advertise and market products. Wal-Mart, on the other hand, spent money on developing information systems that support the entire supply chain —the processes from purchasing through stocking and selling. Kmart suc- ceeded in creating more demand, but often could not satisfy it. Wal- Mart’s systems thinking helped it adjust inventories based on demand, saving the costs involved in overstocking and avoiding lost sales due to understocking. Kmart later filed for bankruptcy while Wal-Mart became the world’s largest company.

One of an information system’s most important contributions to the sound workings of an organization is the automation of information exchange among subsystems (such as depart-

ments and divisions). Consider the earlier example: customer orders taken via a Web site by the sales department could be automatically routed to the manufacturing and shipping units and processed by their own information systems for their specific purposes. In fact, such information exchanges make up a major portion of all interactions among business subsystems.

Chapter 1 Business Information Systems: An Overview □ 13 Chapter 1 Business Information Systems: An Overview □ 13