PPM 1-2

1. SQUARE BOOKS

Square Books is a well-established, global publishing conglomerate. The corporation is structured to allow each country of operation to function as an autonomous business unit, that reports back to head office. The data from each business unit is entered onto the mainframe computer at head office. Each business unit can make use of any service offered by other business units and can also offer services to the other units. The services include translation into different languages, typesetting, printing, storage and so forth. In each country of operation there is at least one, and usually several, retail outlets.

The core business was traditionally based upon the provision of fictional stories for the mass market. For the past decade Square Books has diversified into publishing textbooks and technical literature. The organisation currently enjoys a good reputation in both areas of the business and global sales are increasing annually at a rate of 5% for fictional books and 2% for textbooks. Last year 700 million fictional works and 25 million textbooks were sold.

The corporate management team wish to increase the growth in sales of textbooks but realise that they cannot afford to allocate significant resources to this task as the market, and profit margin, for textbooks is very much smaller than for fiction. They also wish to improve the sales performance of the fictional books.

Square Books is currently having trouble in maintaining a corporate image in some countries of operation. For example, several business units may be unaware of additions to the product range. Another example is that a price change in a book is not simultaneously altered by all the business units, leading to pricing discrepancies.

Some members of the corporate management team see possible advantages to upgrading the existing computer system to one that is fully networked. Other members are more sceptical and are reluctant to consider enhancing the system. Some members have also wondered whether big data could provide useful information to aid decision-making for Square Books, but others think there may be problems with actually using big data.

Required:

A. Discuss the issues involved in upgrading the existing information system and the proposed changes, with reference to both the wider business environment and the decision-making process.

B. Management information systems (MIS) allow managers to make timely and effective decisions using data in an appropriate form. List three types of MIS and how they would be used in an organisation.

C. Explain the problems Square Books may have trying to capture and use big data.

2. K3 CARS

K3 Cars manufactures motor vehicles for sale to the general public and companies. Several other motor vehicle manufacturers operate within the industry, which is highly competitive: there is a trade association which collects a wide range of information.

K3 Cars has five manufacturing plants and 53 sales outlets in the country in which it operates. Information for the company’s executive information system (EIS) is obtained both from internal sources such as the production plants, and also external sources such as customers. Internally-generated information is sent to head office over a wide area network.

Due to the overall escalating cost of the company’s EIS, the board has decided to collect only internally-produced information. This decision has been taken against the advice of the chief information officer.

Required:

A. Suggest and explain reasons why the company’s EIS could be becoming expensive to operate.

B. Discuss the decision of the board to concentrate on internally-produced information. Clearly describe the information sources that will be lost and explain the effects on the company’s information systems and its products.

3. PRINT CO

During 2015, Print Co designed and installed a Management Information System that met the business needs of a commercial environment which was characterised at that time by:

• A unitary structure with one profit centre
• Central direction from senior managers
• 100% internal resourcing of ancillary services
• The employment exclusively of permanent full-time employees
• Customers holding large stocks who accepted long delivery times
• Most of the work concerned with long print runs for established large publishing houses

A radical change in the business environment has resulted in the following outcomes:

• The development of a divisionalised structure with four profit centres that utilise each other’s services
• Empowerment of team leaders and devolved decision making
• Considerable outsourcing of activities
• A significant proportion of the employees work part-time and/or on temporary contracts
• Customers now commonly operate JIT systems requiring immediate replenishment of stocks
• The typical customer requires specialist low volume but complex high value printing.

Required:

Recommend the significant changes in the Management Information Systems that would probably be required to meet the needs of this new situation. Explain the reasons for your recommendations.

Note: your answer does not require a consideration of technical matters.

B. Recommend to the board how it should go about improving its budgetary allocations for IT and how it should evaluate the benefits of ERPS and EIS.

5. ABC

ABC is a manufacturer of almost hundred different automotive components that are sold in both large and small quantities on a just-in-time (JIT) basis to the major vehicle assemblers. Business is highly competitive and price sensitive. The company is listed on the stock exchange, but ABC’s share performance has not matched that of its main competitors.

ABC’s management accounting system uses a manufacturing resource planning (MRP II) system to control production scheduling, inventory movements and inventory control, and labour and machine utilisation. The accounting department carries out a detailed annual budgeting exercise, determines standard costs for labour and materials, and allocates production overhead on the basis of machine utilisation. Strict accounting controls over labour and material costs are managed by the detailed recording of operator and machine timesheets and raw material movements, and by calculating and investigating all significant variances.

While the information from the MRP II system is useful to management, there is an absence of integrated data about customer requirements and suppliers. Some information is contained within spreadsheets and databases held by the Sales and Purchasing departments respectively. One result of this lack of integration is that inventories are higher than they should be in a JIT environment.

The managers of ABC (representing functional areas of sales, production, purchasing, finance and administration) believe that, while costs are strictly controlled, the cost of the accounting department is excessive and significant savings need to be made, even at the expense of data accuracy. Managers believe that there may not be optimum use of the production capacity to generate profits and cash flow and improve shareholder value. ABC’s management wants to carry out sensitivity and other analyses of strategic alternatives, but this is difficult when the existing management accounting system is focused on control rather than on decision support.

Required:

A.

i) Outline the different types of information system available to manufacturing firms like ABC.

ii) Recommend with reasons the information system that would be appropriate to ABC’s needs.

B. Given the business environment that ABC faces, and the desire of management to reduce the cost of accounting:

i) Discuss the relevance of the current management accounting system; and

ii) Recommend how the system should be improved.

6. HENRY INVESTMENTS

Henry Investments invests money on behalf of its customers. The company guarantees its customers a favourable interest rate in return for long-term investments. Edward Henry started the company five years ago and he was originally the only investment analyst, making all the investment decisions. The company was initially very successful, due to a combination of Henrys’ expertise and a favourable world economic climate. Specialising in investing in the emerging markets of Asia and Africa, Henry Investments achieved excellent returns on their investments; This allowed them to meet guarantees given to clients as well as funding the expansion of the company itself.

The company has grown, and it currently employs 60 staff of whom 12 are investment analysts. However, investment returns have declined, and the company is now having problems providing its guaranteed return to investors. Consequently, Edward Henry is reviewing investment procedures and exploring options for returning the company to the profitability it enjoyed in its early years.

Required:

A. One of the options Edward Henry is considering is the use of a decision support system to help his investment analysts make appropriate investment decisions.

Briefly describe what is meant by a decision support system and comment on its possible contribution to the investment decisions made by analysts at Henry Investments.

B. Edward Henry is also considering the development of an expert system.

Briefly describe what is meant by an expert system and comment on its possible contribution to the investment decisions made by analysts at Henry Investments.