Information Systems

System Performance and Standards

System performance can be measured in various ways. Efficiency is a measure of what is produced divided by what is consumed. It can range from 0 to 100 percent. For example, the efficiency of a motor is the energy produced (in terms of work done) divided by the energy consumed (in terms of electricity or fuel). Some motors have an efficiency of 50 percent or less because of the energy lost to friction and heat generation.

Efficiency is a relative term used to compare systems. For example, a gasoline engine is more efficient than a steam engine because, for the equivalent amount of energy input (gas or coal), the gasoline engine produces more energy output.

Effectiveness is a measure of the extent to which a system achieves its goals. It can be computed by dividing the goals actually achieved by the total of the stated goals. For example, a company may have a goal to reduce damaged parts by 100 units. A new control system may be installed to help achieve this goal. Actual reduction in damaged parts, however, is only 85 units. The effectiveness of the control system is 85 percent (85/100 = 85%). Effectiveness, like efficiency, is a relative term used to compare systems. See the “Information Systems @ Work” box, which describes how Delta’s low-fare, all-digital spin-off airline called Song is attempting to make Delta more efficient and effective with enhanced services for passengers. Evaluating system performance also calls for the use of performance standards. A system performance standard is a specific objective of the system. For example, a system performance standard for a particular marketing campaign might be to have each sales representative sell $100,000 of a certain type of product each year (see Figure 1.5a). A system performance standard for a certain manufacturing process might be to have no more than 1 percent defective parts (see Figure 1.5b). Once standards are established, system performance is measured and compared with the standard. Variances from the standard are determinants of system performance.

System Variables and Parameters

Parts of a system are under direct management control, while others are not. A system variable is a quantity or item that can be controlled by the decision maker. The price a company charges for its product is a system variable because it can be controlled. A system parameter is a value or quantity that cannot be controlled, such as the cost of a raw material. The number of pounds of a chemical that must be added to produce a certain type of plastic is another example of a quantity or value that is not controlled by management; it is controlled by the laws of chemistry.

efficiency

A measure of what is produced divided by what is consumed.

effectiveness

A measure of the extent to which a system achieves its goals; it can be computed by dividing the goals actually achieved by the total of the stated goals.

system performance standard

A specific objective of the system.

system variable

A quantity or item that can be controlled by the decision maker.

system parameter

A value or quantity that cannot be controlled, such as the cost of a raw material.

Delta Sings a New Song with a Focus on Information Systems

Times are tough for U.S. airlines. With the economy in a slump, heightened security in airports, and a cautious public less willing to fly, many airlines are struggling at the brink of bankruptcy. The old airline giants, which maintain large fleets, are particularly at a disadvantage as smaller and more streamlined airlines enter the market and win over customers with lower fares. Airlines are experimenting with new business models and practices hoping to find one that works in this highly competitive environment. Delta’s low-fare, all-digital spin-off airline called Song is one such experiment. Song uses technology, state-of-the-art information systems, and good old-fashioned customer service to win customers.

Song caters to its passengers through a number of in-flight amenities. Each of its thirty-six 757s is furnished with roomy leather seats throughout the aircraft. Passengers are offered an extensive menu of beverages and snacks from well-known vendors such as Pizzeria Uno, Cinnabon, Lender’s, and Yoplait—all of which they can pay for with the swipe of a credit card. But the most innovative and appealingofSong’sservicestopassengersislocatedintheseatback above the fold-down tray: a personal video monitor with “touchscreen” technology and credit card “swipe” capability. Passengers can choose from 24 free, all-digital live DISH Network TVchannelsorpay-per-viewprogramming.Theycanusethedisplay todesign apersonalplaylistoffavoritesongsdeliveredasstreaming MP3 music. They can even join in an interactive multiplayer video game with other passengers on the flight. Other featuresof the LCD display include an interactive map program to view landmarks below, connecting gate information at the upcoming stop, or shopping from an online version of the Sky-mall catalog.

To make such luxurious accommodations available to passengers at a low fare, Song has streamlined its information systems to reduce overhead and turn flights around more quickly. Song prides itself on spending 23 percent more time in the air than aircraft in Delta’s main line. Song’s planes require only 50 minutes between landing and taking off. Moretime in the air and lesson land allows for more flights and more income for the company. Song’s information screens at airport gates double as movie screens, where mock horror films such as The Thing That Wouldn’t Get Out of the Aisle are featured. These minifilms entertain passengers as they wait for their flight and educate them on how to make the boarding process run more smoothly and quickly.

Song provides an innovative online reservation system for booking flights. Unlike most online flight reservation systems, Song customers can easily compare prices across a variety of departure and return days and times. Reservations made through Song’s Web site save Song $4 per flight over those made through traditional reservationsystems.Ane-ticketingkioskallowscustomerstocheck themselves in when they arrive at the terminal and automatically dispenses a boarding pass, saving the company $5 per customer

perflight.Automatedkiosksshortenlinesintheterminalandreduce the need for customer service agents.

Technology is deeply infused into the Song business model to provide both customer benefits and reduced costs for the airline. Delta considers Song to be a testing ground for new innovations. Dozens of streamlined information systems and new technologies are being tested. The effects of each new system are analyzed in termsof time saved, money saved, and customer satisfaction. Every second or penny saved is crucial. Ideas that prove to be successful with Song will be integrated into Delta’s primary fleet. Song is far from uniquein itsuseof technologyandinformation systemstogain an advantage in a challenging marketplace. Businesses in all markets rely on information systems and technology to assist them in accomplishing more for less.

The implementation of new and improved information systems are, in many cases, dramatically changing the way employees do their jobs. The goal is to allow business processes to proceed as smoothly as possible, with as little inconvenience to employees, management, and customers as possible. By allowing people to do whattheyneedtodowithoutdelay,theyareabletoaccomplishmore in a given period. Frustration is minimized, and interaction between management, employees, and customers becomes less stressed and more enjoyable.

Discussion Questions

1.How have the information systems used at Song affected the duties of check-in agents and flight attendants?

2.What do you think are the biggest challenges for check-in agents and flight attendants in dealing with customers in the traditional airline business model? How do the information systems Song uses allow these workers to be more efficient and effective?

Critical Thinking Questions

3.Consider the hardships of air travel: the search for cheap rates, long check-in lines at the terminal, backups at security checkpoints, delayed and canceled flights, crowded seating, and hours of waiting time. How has Song used technology and information systems to soften these hardships? What more could the company do?

4.Consider other transportation modes: train, ship, taxi, and bus. Do these other modes share any of the same challenges that Song has addressed with information systems? Could other transportation areas benefit from Song’s approach?

SOURCES: Kathleen Melymuka, “Delta’s Test Pilot: IT at Song, Delta’s New Low-Cost Airline Unit,” Computerworld, August 18, 2003, www.computerworld.com; “Song Unveils the World’s Most Sophisticated Single Aisle In-Flight Entertainment System,” PR Newswire, November 17, 2003; Song Web site, www.flysong.com, accessed January 16, 2004.

Modeling a System

The real world is complex and dynamic. So when we want to test different relationships and their effects, we use models of systems, which are simplified, instead of real systems. A model is an abstraction or an approximation that is used to represent reality. Models enable us to explore and gain an improved understanding of real-world situations.

Since the beginning of recorded history, people have used models. A written description of a battle, a physical mock-up of an ancient building, and the use of symbols to represent money, numbers, and mathematical relationships are all examples of models. Today, managers and decision makers use models to help them understand what is happening in their organizations and make better decisions.

There are various types of models. The major ones are narrative, physical, schematic, and mathematical, as shown in Figure 1.6. A narrative model, as the name implies, is based on words; thus, it is a logical and not a physical model. Both verbal and written descriptions of

Figure 1.5

System Performance

Standards

model

An abstraction or an approximation that is used to represent reality.

Figure 1.6

Four Types of Models

Narrative (words, spoken or written), physical (tangible), schematic (graphic), and mathematical (arithmetic) models.

(Source: © Bob Daemmrich/

PhotoEdit; © PhotoDisc/Getty

Images)

reality are considered narrative models. In an organization, reports, documents, and conversations concerning a system are all important narratives. A physical model is a tangible representation of reality. Many physical models are computer designed or constructed. An engineer may develop a physical model of a chemical reactor to gain important information about how a large-scale reactor might perform, or a builder may develop a scale model of a new shopping center to give a potential investor information about the overall appearance and approach of the development. A schematic model is a graphic representation of reality. Graphs, charts, figures, diagrams, illustrations, and pictures are all types of schematic models. Schematic models are used extensively in developing computer programs and systems. A blueprint for a new building, a graph that shows budget and financial projections, electrical wiring diagrams, and graphs that show when certain tasks or activities must be completed to stay on schedule are examples of schematic models used in business. A mathematical model is an arithmetic representation of reality. Computers excel at solving mathematical models. Retail chains, for example, have developed mathematical models to identify all the activities, effort, and time associated with planning, building, and opening a new store so that they can forecast how long it will take to complete a store.

As mentioned previously, an information system (IS) is a set of interrelated elements or components that collect (input), manipulate (process) and store, and disseminate (output) data and information and provide a feedback mechanism to meet an objective (see Figure 1.7). The feedback mechanism helps organizations achieve their goals, such as increasing profits or improving customer service.

FEEDBACK

Input, Processing, Output, Feedback

Input

In information systems, input is the activity of gathering and capturing raw data. In producing paychecks, for example, the number of hours every employee works must be collected before paychecks can be calculated or printed. In a university grading system, individual instructors must submit student grades before a summary of grades for the semester or quarter can be compiled and sent to the students.

Input can take many forms. In an information system designed to produce paychecks, for example, employee time cards might be the initial input. In a 911 emergency telephone system, an incoming call would be considered an input. Input to a marketing system might include customer survey responses. Car manufacturers are experimenting with a fingerprint identification input device in their car security systems. You may soon be able to gain entry to a car and start it with the touch of a finger. This unique input device will also adjust mirrors, the steering-wheel position, the temperature, and the radio for an individual’s size and preferences. Regardless of the system involved, the type of input is determined by the desired output of the system.

Input can be a manual or automated process. A scanner at a grocery store that reads bar codes and enters the grocery item and price into a computerized cash register is a type of automated input process. Regardless of the input method, accurate input is critical to achieve the desired output.

Processing

In information systems, processing involves converting or transforming data into useful outputs. Processing can involve making calculations, making comparisons and taking alternative actions, and storing data for future use. Processing data into useful information is critical in business settings.

Processing can also be done manually or with computer assistance. In the payroll application, each employee’s number of hours worked must be converted into net, or take-home, pay. Other inputs often include employee ID number and department. The required processing can first involve multiplying the number of hours worked by the employee’s hourly pay rate to get gross pay. If weekly hours worked exceed 40 hours, overtime pay may also be included. Then deductions—for example, federal and state taxes, contributions to health and life insurance or savings plans—are subtracted from gross pay to get net pay.

Once these calculations and comparisons are performed, the results are typically stored. Storage involves keeping data and information available for future use, including output, discussed next.

Figure 1.7

The Components of an

Information System

Feedback is critical to the successful operation of a system.

input

The activity of gathering and capturing raw data.

processing

Converting or transforming data into useful outputs.

output

Production of useful information, usually in the form of documents and reports.

feedback

Output that is used to make changes to input or processing activities.

forecasting

Predicting future events to avoid problems.

Output

In information systems, output involves producing useful information, usually in the form of documents and reports. Outputs can include paychecks for employees, reports for managers, and information supplied to stockholders, banks, government agencies, and other groups. In some cases, output from one system can become input for another. For example, output from a system that processes sales orders can be used as input to a customer billing system. Often, output from one system can be used as input to control other systems or devices. For instance, the design and manufacture of office furniture is complicated with many variables. The salesperson, customer, and furniture designer can go through several design iterations to meet the customer’s needs. Special computer programs and equipment create the original design and allow the designer to rapidly revise it. Once the last design mock-up is approved, the computer creates a bill of materials that goes to manufacturing to produce the order.

Output can be produced in a variety of ways. For a computer, printers and display screens are common output devices. Output can also be a manual process involving handwritten reports and documents.

Feedback

In information systems, feedback is output that is used to make changes to input or processing activities. For example, errors or problems might make it necessary to correct input data or change a process. Consider a payroll example. Perhaps the number of hours an employee worked was entered into a computer as 400 instead of 40 hours. Fortunately, most information systems check to make sure that data falls within certain ranges. For number of hours worked, the range might be from 0 to 100 hours because it is unlikely that an employee would work more than 100 hours for any given week. So, the information system would determine that 400 hours is out of range and provide feedback, such as an error report. The feedback is used to check and correct the input on the number of hours worked to 40. If undetected, this error would result in a very high net pay on the printed paycheck! Some blame the August 14, 2003, power blackout in the U.S.’s Northeast on a faulty computer system that wasn’t able to provide second-by-second feedback.2

Feedback is also important for managers and decision makers. For example, a bedding maker used a computerized feedback system to link its suppliers and plants. The output from an information system might indicate that inventory levels for a few items are getting low— a potential problem. A manager could use this feedback to decide to order more inventory from a supplier. The new inventory orders then become input to the system. In addition to this reactive approach, a computer system can also be proactive—predicting future events to avoid problems. This concept, often called forecasting, can be used to estimate future sales and order more inventory before a shortage occurs.

improved system performance. If the underlying information system is flawed, the act of computerizing it might only magnify the impact of these flaws.

Computer-Based Information Systems

A computer-based information system (CBIS) is a single set of hardware, software, databases, telecommunications, people, and procedures that are configured to collect, manipulate, store, and process data into information. For example, a company’s payroll systems, order entry system, or inventory control systems are examples of a CBIS. The components of a CBIS are illustrated in Figure 1.8. (Information technology, IT, is a related term. For our purposes, IT refers to the technology components of hardware, software, databases, and telecommunications.) A business’s technology infrastructure includes all the hardware, software, databases, telecommunications, people, and procedures that are configured to collect, manipulate, store, and process data into information. The technology infrastructure is a set of shared IS resources that form the foundation of each individual computer-based information system.

Hardware

Hardware consists of computer equipment used to perform input, processing, and output activities.3 Input devices include keyboards, automatic scanning devices, equipment that can read magnetic ink characters, and many other devices. Investment firms often use voice response to allow customers to get their balances and other information using ordinary spoken

computer-based information system (CBIS)

A single set of hardware, software, databases, telecommunications, people, and procedures that are configured to collect, manipulate, store, and process data into information.

technology infrastructure

All the hardware, software, databases, telecommunications, people, and procedures that are configured to collect, manipulate, store, and process data into information.

Figure 1.8

The Components of a

Computer-Based Information

System

hardware

Computer equipment used to perform input, processing, and output activities.

Hardware is a component of a Computer-Based Information System and includes input, processing, and output.

(Source: Courtesy of Acer America

Inc.)

software

The computer programs thatgovern the operation of the computer.

sentences. The Scripps Institution of Oceanography developed a special underwater computer optical input device to allow a diver as deep as 100 feet to control an underwater camera, which was formerly controlled by a computer system and mouse on the surface.4 Processing devices include the central processing unit and main memory.5 Processor speed is important in creating video images.6 Lifelike movie characters such as Gollum in the Lord of the Rings show what is possible with today’s fast processors. Mental Images of Germany and Pixar of the United States have used such award-winning image-rendering techniques. The technology is also used to help design cars, such as the sleek shapes of Mercedes Benz vehicles. Specialized, inexpensive hardware has also been used in schools to help students learn a variety of subjects.7

There are many output devices, including secondary storage devices, printers, and computer screens. One company, for example, uses computer hardware in its stores to allow customers to order items that are not on store shelves. The hardware helps the company “save the sale” and increase revenues. Michael Dell, founder of Dell Inc., believes that hardware will increasingly include very small devices that are connected to other hardware devices. He said, “Nanotechnology and communications will be in everything. All kinds of other devices will attach and link together, centered, I think, with the PC.”8 Nanotechnology can involve molecule-sized hardware devices.9 There are also many special-purpose hardware devices. Computerized event data recorders (EDRs) are now being placed into vehicles. Like an airplane’s black box, EDRs record a vehicle’s speed, possible engine problems, a driver’s performance, and more. The technology is being used to monitor vehicle operation, determine the cause of accidents, and investigate whether truck drivers are taking required breaks. In Florida, an EDR was used to help convict a driver of vehicular homicide.10 A surgeon watching a 3-D computer screen and using a joystick can view up to 2,000 slices or crosssectional areas of a patient’s body before precisely removing a cancerous tumor. Sophisticated input and output devices are making surgery more precise, which can save lives.11

Software

Software consists of the computer programs that govern the operation of the computer. These programs allow a computer to process payroll, send bills to customers, and provide managers with information to increase profits, reduce costs, and provide better customer service.12 With software, people can work anytime at any place. On a trip back to the United States from Australia and New Zealand, Steve Ballmer, CEO of Microsoft commented, “I could carry my slides, I could carry my e-mail. I could carry anything I needed to read. I could carry my life with me. It was very powerful.”13 There are two basic types of software: system software, such as Windows XP, which controls basic computer operations such as start-up and printing, and applications software, such as Office 2003, which allows specific tasks to be accomplished, such as word processing or tabulating numbers.

Databases

A database is an organized collection of facts and information, typically consisting of two or more related data files. An organization’s database can contain facts and information on customers, employees, inventory, competitors’ sales information, online purchases, and much more. Most managers and executives believe a database is one of the most valuable and important parts of a computer-based information system. Increasingly, organizations are placing important databases on the Internet, discussed next.14

Telecommunications, Networks, and the Internet

Telecommunications is the electronic transmission of signals for communications, which enable organizations to carry out their processes and tasks through effective computer networks.15 Large restaurant chains, for example, can use telecommunications systems and satellites to link hundreds of restaurants to plants and corporate headquarters to speed credit card authorization and report sales and payroll data. Networks are used to connect computers and computer equipment in a building, around the country, or around the world to enable electronic communication.Investment firms can use wireless networks to connect thousands of people with their corporate offices. Hotel Commonwealth in Boston uses wireless telecommunications to allow guests to connect to the Internet, get voice messages, and perform other functions without plugging their computers or mobile devices into a wall outlet.16 Wireless transmission is also allowing drones, like Boeing’s Scan Eagle, to monitor power lines, buildings, and other commercial establishments.17 The drones are smaller and less-expensive versions of the Predator and Global Hawk drones that were used successfully in the Afghanistan and Iraq conflicts by the U.S. military. One company uses a private network to connect offices in the United States, Germany, China, Korea, and other companies. It doesn’t use a public network available to everyone, such as the Internet, discussed next.

The Internet is the world’s largest computer network, actually consisting of thousands of interconnected networks, all freely exchanging information. Research firms, colleges, universities, high schools, and businesses are just a few examples of organizations using the Internet.

The Internet is used by most businesses and industries. ChemConnect, for example, is an Internet site that allows companies to buy and sell chemicals and chemical products online.18 The Internet site is the largest online chemical trading site with more than $8 billion in annual sales. In addition to being able to cheaply download music, audio software and the Internet allow people to change a song’s tempo, create mixes of their favorite tunes, and modify soundtracks to suit their personal taste. It is even possible to play two or more songs simultaneously, called mashing.19 Mortgage companies use the Internet to help make loans to customers. Lending through the Internet has grown dramatically from about $260 billion in 2001 to more than $800 billion in 2003, representing almost 30 percent of the total loan market.20 Medco Health Online, a subsidiary of Merck & Company, received more than a billion dollars in sales through its Internet site.21 The Internet has also been used in public elections.22 Aniers, a suburb of Geneva, was the first city in Switzerland to use the Internet in a public, binding vote. Businesses are increasingly using instant messaging (IM) to communicate.23 IM allows managers and employees to instantly communicate over the Internet using text messages, video, and even sound. Today, bedrooms, studies, kitchens, and living rooms are being connected to the Inte rnet.24 In addition, travelers who can gain access to the Internet can communicate with anyone else on the Internet, including those who are in flight. Some airline companies are starting Internet service on their flights to allow people to send and receive e-mail, check investments, and browse the Internet. According to Vinton Cerf, one of the pioneers of the Internet, “There will be a very large number of devices on the Net—appliances, things you wear and carry around, and things that are embedded in passive things like wine corks and your socks.”25 Table 1.4 lists companies that have used the Internet to their advantage.

database

An organized collection of facts and information.

telecommunications

The electronic transmission of signals for communications; enables organizations to carry out their processes and tasks through effective computer networks.

networks

Computers and computer equipment in a building, around the country, or around the world to enable electronic communications.

Internet

The world’s largest computer network, actually consisting of thousands of interconnected networks, all freely exchanging information.