Information Technology Reference
In-Depth Information
Figure 2.1
ENVIRONMENT
A General Model of an
Organization
Information systems support and
work within all parts of an
organizational process. Although
not shown in this simple model,
input to the process subsystem can
come from internal and external
sources. Just prior to entering the
subsystem, data is external. After it
enters the subsystem, it becomes
internal. Likewise, goods and
services can be output to either
internal or external systems.
Organizational system
Supply chain
and customer
relationship
management
Process subsystem
Product
transformation
Input
Output
Material & physical flow
Decision flow
Value flow
Data flow
Information system(s)
system—a clean but wet car—is worth more than the mere collection of ingredients (soap
and water), as evidenced by the popularity of automatic car washes. Consumers are willing
to pay for the skill, knowledge, time, and energy required to wash their car. The second
process is drying—transforming the wet car into a dry one with no water spotting. Again,
consumers are willing to pay for the additional skill, knowledge, time, and energy required
to accomplish this transformation.
Providing value to a stakeholder—customer, supplier, manager, shareholder, or
employee—is the primary goal of any organization. The value chain, first described by
Michael Porter in a 1985
Harvard Business Review
article, reveals how organizations can add
value to their products and services. The
value chain
is a series (chain) of activities that
includes inbound logistics, warehouse and storage, production, finished product storage,
outbound logistics, marketing and sales, and customer service (see Figure 2.2). You investi-
gate each activity in the chain to determine how to increase the value perceived by a customer.
Depending on the customer, value might mean lower price, better service, higher quality, or
uniqueness of product. The value comes from the skill, knowledge, time, and energy that
the company invests in the product or activity. The value chain is just as important to com-
panies that don't manufacture products, such as tax preparers, legal firms, and other service
providers. By adding a significant amount of value to their products and services, companies
ensure success. Combining a value chain with just-in-time (JIT) inventory means companies
can deliver materials or parts when they are needed. Ball Aerospace, for example, uses JIT to
help reduce inventory costs and enhance customer satisfaction.
1
value chain
A series (chain) of activities that
includes inbound logistics, ware-
house and storage, production, fin-
ished product storage, outbound
logistics, marketing and sales, and
customer service.
Combining a value chain with just-
in-time (JIT) inventory means
companies can deliver materials or
parts when they are needed. Ball
Aerospace uses JIT to help reduce
inventory costs and enhance
customer satisfaction.
(Source: AP Photo/Denver Post,
R. J. Sangosti.)
