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CHAPTER 22

SYSTEMS DESIGN, IMPLEMENTATION, AND OPERATION

SUGGESTED ANSWERS TO DISCUSSION QUESTIONS

22.1 Prism Glass is c!"#r$i!% $ a !#& i!'rma$i! s(s$#m. T #)*#+i$# a!+ s*##+ *im*l#m#!$a$i!, $-# CEO as#+ (r c!sl$i!% $#am $ *s$*!# #s$a/lis-i!% s$a!+ar+s

a!+ c!$rls !$il a'$#r $-# s(s$#m is 'll( *#ra$i!al. H& s-l+ ( r#s*!+ $ $-#

CEO0s r##s$

The consulting team should strongly advise the CEO that postponing standards and controls

is not advisable. Rather than save time and money, the company will probably lose time in the

future when unanticipated problems and weaknesses arise due to the lack of standards and

controls. The following are reasons why performance standards and control procedures should be

established before the system becomes operational:

• nternal control considerations must be taken into account when assigning !ob

responsibilities.

• "ob descriptions and work schedules must include the various control procedures.

• #erformance standards associated with each position must be considered when selecting

personnel to operate the system.

• $ocumentation standards and data security provisions must be formulated before the system

can be operational.

• Error checks must be built into all computer software systems.

• #rocedures for guiding users and operators through the system and the various error

conditions must be established before the users and operators begin working with the newsystem.

• f the information system is not properly controlled, the information it produces will be of

little value. Controls must be built into the system to ensure its effectiveness, efficiency, and

accuracy.

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%ccounting nformation &ystems

22.2 W-#! a cm*a!( c!"#r$s 'rm !# s(s$#m $ a!$-#r, ma!( ar#as &i$-i! $-# r%a!i3a$i!

ar# a''#c$#+. E)*lai! -& c!"#rsi! $ a !#& s(s$#m &ill a''#c$ $-# 'll&i!% %r*s, /$-

i!+i"i+all( a!+ cll#c$i"#l(.

The following are possible responses to each of the five areas:

a. P#rs!!#l: Employees will be affected in at least two important ways.

'. They may be reluctant to accept the new system. They may fear for their !obs, feel as if

they are no longer vital components of the organi(ation, or they may completely re!ect

the new system, and refuse to utili(e it.

). They will have to learn new policies and procedures to work with the new system.

nitially, this may cause a slight reduction of overall productivity until they learn the

system.

/. Da$a S$ra%#: One of the primary logistical concerns of implementing a new system ismaking the re*uired data accessible to the new system. This often re*uires that files be

converted to new formats and that the company+s databases are restructured to accommodate

the new system+s information re*uirements. n addition, new sources of input may bere*uired which will increase the need for employee instruction and training.

c. O*#ra$i!s: ew personnel may have to be hired or current employees may need to be

trained to run the new system. -sers will have to ad!ust to new system inputs and outputs.

The company as a whole will be affected by changes in employee morale and productivity

until the personnel are accustomed to and proficient with the system.

+. Plici#s a!+ Prc#+r#s: % new information system usually re*uires new operating policies

and procedures, including those for data security and control, error checking, documentation, backup and recovery procedures, and file maintenance. These new policies and procedures

should be disseminated to the employees before the actual conversion takes place to ensure

that the employees are aware of the new re*uirements and to facilitate the system conversion.

#. P-(sical 4acili$i#s: The effect on the physical facilities will be largely determined by the

si(e and nature of the system being installed. or e/ample, a server will only re*uire a corner

or perhaps a small room, whereas a mainframe may re*uire a large facility. n any event, the

company will need to be concerned about physical access to the system0 off1site backup and

recovery procedures0 protection from fire, flooding, and other disasters0 office space for programmers and operators0 lighting, air conditioning, and humidity control0 and data

communications facilities.

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22.3 The following notice was posted in the employee cafeteria on Monday morning:To: All Accounting and Clerical Employees From: I.M. Krewel, PresidentSubject: Termination of Employee Positions Effective this Friday, all accounting and clerical employees not otherwise contacted will be terminated. Our new computer system eliminates the need for most of these jobs. We’re grateful for the loyal service you’ve rendered as employees and wish you success. You maywish to pick up your final checks on Friday before you go.

Discss $-# *r#si+#!$0s a**rac- $ -ma! r#src# ma!a%#m#!$.

This approach is clearly unproductive and it would not work.

W-a$ ar# $-# *ssi/l# r#*#rcssi!s ' $-is #*is+#

• &abotage of the new system by disgruntled employees.

• Employees not released will probably harbor ill feelings towards the company.

Employees may reflect these feelings through poor work performance, lower productivity, higher absentee rates, and resentment towards the new system.

Assmi!% $-a$ 5/ $#rmi!a$i! is $-# /#s$ al$#r!a$i"# a"aila/l#, -& s-l+ ma!a%#m#!$

a**rac- $-# si$a$i!

• 2anagement should discuss the situation in person with each employee.

• The changes that are being made should be clearly communicated to each employee.

• Every effort should be made to relocate employees within the company and offer early

retirement incentives where possible.

• Terminated employees should be told in person.

• 3iving employees a week+s notice that they are 4being replaced by a computer4 may wellresult in the system being sabotaged.

• Employees should be terminated on riday afternoon and given the appropriate severance

pay.

• The termination should not come as a complete surprise to the employees. The

employees should have already known that every effort was made to relocate them within

the company and that termination was a last resort.

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22.6 I! &-ic- *-as# ' $-# s(s$#ms +#"#l*m#!$ li'# c(cl# &l+ #ac- ' $-# 'll&i!% *si$i!s

/# ms$ ac$i"#l( i!"l"#+ 7s$i'( (r a!s&#rs.

a. Ma!a%#rial acc!$a!$ 1 The managerial accountant is usually involved in the analysis

phase as designers assess their needs as users. The pro!ect development team may also askthe accountant to help with an economic feasibility analysis. n addition, the accountant may

also assist in the design phases, helping design reports.

/. Pr%ramm#r 1 2ost of the programmer+s involvement comes during the physical design and

the implementation and conversion phases - coding, testing, and debugging computer

programs. The programmer is also involved with the maintenance phase, making

modifications to the system and fi/ing bugs.

c. S(s$#ms a!al(s$ 1 The analyst is usually involved in all phases of the &$5C.

+. 4i!a!cial "ic# *r#si+#!$ 1 The financial vice1president is usually involved in the systems

analysis phase. 6owever, as a member of the steering committee the financial 7# willoversee all phases of the &$5C.

#. I!'rma$i! s(s$#ms ma!a%#r 8 The & manager is responsible for overseeing all

information systems activities0 she will be involved in all phases of the &$5C.

'. I!$#r!al a+i$r 1 The auditor is often consulted during the systems analysis phase when

security re*uirements for the new system are determined. $uring the design phase, the

auditor will often test controls to insure their ade*uacy. The operation and maintenance

phase lasts indefinitely and it is during this phase that the auditor conducts his routine audit

tests.

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22.8 Dri!% &-ic- ' $-# 'i"# SDLC s$a%#s is #ac- $as, la/#l#+ 9a: $-r%- 9m:, *#r'rm#+

Mr# $-a! !# a!s&#r ma( a**l( 'r #ac- ac$i"i$(.

a. Wri$i!% *#ra$i!% *rc#+r#s ma!als 1 #hysical 9detailed systems design phase and

mplementation and conversion phase

/. D#"#l*i!% *r%ram a!+ *rc#ss c!$rls 1 #hysical 9detailed systems design phase and

mplementation and conversion phase

c. I+#!$i'(i!% al$#r!a$i"# s(s$#ms +#si%!s 1 Conceptual 9general systems design phase

+. D#"#l*i!% a l%ical m+#l ' $-# s(s$#m 1 Conceptual 9general systems design phase

#. I+#!$i'(i!% #)$#r!al a!+ a+mi!is$ra$i"# c!$rls 1 Conceptual 9general systems design

phase

'. T#s$i!% $-# s(s$#m 1 mplementation and conversion phase

%. Trai!i!% *#rs!!#l 1 mplementation and conversion phase and Operation and maintenance

phase

-. E"ala$i!% $-# #)is$i!% s(s$#m 1 &ystems analysis

i. A!al(3i!% $-# ac-i#"#m#!$ ' s(s$#ms /#!#'i$s 1 Operation and maintenance

5. M+i'(i!% a!+ al$#ri!% *r%rams 1 Operation and maintenance

. A!al(3i!% $$al ali$( ma!a%#m#!$ 9TQM: *#r'rma!c# m#asr#s 1 This can be done in

all phases, but is most likely in the first 9systems analysis and last 9Operation and

maintenance.

l. C!+c$i!% a '#asi/ili$( a!al(sis 1 easibility tests are conducted at all phases of the &$5C.

m. Ali%!i!% AIS +#"#l*m#!$ *la!s &i$- /si!#ss /5#c$i"#s 1 &ystems analysis phase

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SUGGESTED ANSWERS TO THE PRO;LEMS

22.1 You were hired to manage the accounting and control functions at the Glass JewelryCompany. During your introductory meeting, the president asked you to design and

implement a new AIS within six months. Company sales for the past year were $10 million,and they are expected to double in the next 18 months.

Outline the procedures you would follow to complete the assigned project.

a. ;ou would perform the following steps to design and implement a new %&:

• systems analysis 9initial investigation, systems survey, feasibility study, and determining

information needs and system re*uirements

• conceptual design 9evaluate design alternatives, prepare design specifications, prepare

conceptual systems design report

• physical design 9output, file and database, input, program, procedures, and control

design

• implementation of the system 9implementation planning, prepare site, select and train

personnel, complete documentation, test system, and convert to the new system

• operate and maintain the system

I!cl+# a +#scri*$i! ' $-# 'll&i!%<

'. Src#s ' I!'rma$i!

o company documents 9organi(ation charts, !ob descriptions, and procedure manuals

o current system outputs, reports, and documentation

o interview users and management

o observation of the current procedures

). M#$-+s ' R#cr+i!% I!'rma$i!

o prepare narrative descriptions and organi(ation charts

o prepare data models

o prepare document, systems, and program flowcharts

o prepare data flow diagrams

o complete *uestionnaires

<. M#$-+s ' =#ri'(i!% $-# S(s$#m D#scri*$i!

o discussion with users

o transaction testing

o observation

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/. T-# acc!$s *a(a/l# s(s$#m &ill c!$ai! a !m/#r ' *r%rams, i!cl+i!% E!$#r

I!"ic#s a!+ Pri!$ Pa(a/l# C-#cs. 4r #ac- *r%ram, +#scri/# i$s *r*s# a!+ $li!#

a**lica$i! c!$rl c!si+#ra$i!s.

'. Enter nvoices

This program permits operators to enter unpaid vendor invoices into the %ccounts

#ayable system. The program should enable the distribution of the invoice to specific

general ledger accounts. Controls include:

o check to ensure that the vendor number is on file, i.e., valid vendor number

o ensures that the invoice has not been previously entered, i.e., duplicate entry

o ensures that the invoice has been fully allocated to general ledger accounts

o ensures that the general ledger account numbers are valid

o ensures that items were ordered and received and that prices and other charges are ok

). #rint #ayable Checks

This program generates supplier checks to pay outstanding invoices. Controls include:

o ensures that the vendor number on the invoice is valid 9i.e., vendor is still on file

o ensures that checks are used in se*uential order

o ensures that only the outstanding invoice amount is paid

o lists the invoices and the amount paid by the check 9i.e., the remittance list

o ensures that negative checks are not printed

o ensures that checks do not e/ceed a predetermined amount

o ensures that there is an approved, unpaid invoice in the %ccounts #ayable file before

making a payment

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22.2 Wa!% La/0s $r#m#!+s %r&$- l#'$ $-# cm*a!( &i$- a s#ris *r/l#m. Cs$m#rs &l+

'$#! &ai$ m!$-s 'r Wa!% $ 'ill r+#rs a!+ *rc#ss i!"ic#s. R#*#a$#+ a$$#m*$s /(

Wa!%0s !+#rs$a''#+ IS +#*ar$m#!$ $ sl"# $-#s# *r/l#ms m#$ &i$- 'ailr#. 4i!all(, Wa!%

-ir#+ a c!sl$i!% 'irm $ sl"# i$s r#"#!# $raci!% *r/l#ms a!+ #)*#+i$# *rm*$ r#c#i*$

' *a(m#!$s. T-# 1>?m!$- *r5#c$ $r!#+ i!$ a +/l( l!% !i%-$mar#. A'$#r $-r## (#arsa!+ @1 milli!, $-# c!sl$a!$s &#r# +ismiss#+ 'rm $-# !'i!is-#+ *r5#c$.

T-# *r5#c$ 'ail#+ 'r ma!( r#as!s. T-# s(s$#ms +#"#l*m#!$ *rc#ss &as s +(!amic $-a$

$-# 'ailr# $ cm*l#$# $-# *r5#c$ icl( /#cam# s#l'?+#'#a$i!% as m+i'ica$i!s $ "#r

$-# ri%i!al +#si%!. S#c!+, ma!a%#m#!$ +i+ !$ -a"# a cl#ar "isi! ' $-# !#& AIS a!+

lac#+ a s$r!% s**r$ s$a''. As a r#sl$, a !m/#r ' i!cm*a$i/l# $raci!% s(s$#ms

s*ra!% 'rm $-# cm*a!(0s +is$ri/$#+ cm*$#r s(s$#m. T-ir+, $-# *r5#c$ &as $ lar%#

a!+ cm*l#) 'r $-# c!sl$i!% 'irm, &- -a+ li$$l# #)*#ri#!c# &i$- $-# cm*l#) +a$a/as# a$

$-# -#ar$ ' $-# !#& s(s$#m. 4i!all(, $-# *r5#c$ -a+ $ ma!( a**lica$i!s.

I!$#r+#*#!+#!ci#s am!% s/*r%rams l#'$ c!sl$a!$s &i$- '#& cm*l#$#+ *r%rams.

E"#r( *r%ram &as li!#+ $ s#"#ral s/*r%rams, &-ic- i! $r! &#r# li!#+ $ s#"#ral

$-#r *r%rams. Pr%ramm#rs #"#!$all( '!+ $-#ms#l"#s ls$ i! a mrass ' s/r$i!#s

&i$- ! cm*l#$#+ *r%ram.

T-# IS +#*ar$m#!$ 'i!all( +#"#l*#+ a s(s$#m $ sl"# $-# *r/l#m, /$ $-#ir r#"#!#

$raci!% s(s$#m s''#r#+ ali$( *r/l#ms 'r (#ars.

Wa!% La/s as#+ (, a m#m/#r ' $-# IS s$a'', $ &ri$# a m#m #)*lai!i!% $-# 'ailr# '

$-# s(s$#ms +#"#l*m#!$ *r5#c$.

a. W-( +i+ $-# +#"#l*m#!$ *r5#c$ 'ail W-a$ rl# +i+ $-# c!sl$a!$s *la( i! $-#

'ailr#

• D(!amic r#ir#m#!$s. The development process was so dynamic that the failure to

complete the pro!ect *uickly was self1defeating as modifications took over the original

design. &ystem re*uirements were never =fro(en> so the pro!ect could be completed.

• Ma!a%#m#!$ +i+ !$ -a"# a cl#ar "isi! ' $-# !#& s(s$#m. %s a result, incompatible

tracking systems sprung up throughout the company+s distributed processing system.

• Ma!a%#m#!$ lac#+ a s$r!% IS s$a''. % *ualified & staff could have planned and

managed the development pro!ect better, improving the chances for success.

• T-# *r5#c$ &as $ lar%# a!+ $ cm*l#) a!+ $-# c!sl$i!% 'irm -a+ li$$l#

#)*#ri#!c#. The firm had little understanding of the desired technology: a comple/

database that represented the heart of the new system.

• T-# *r5#c$ -a+ $ ma!( a**lica$i!s. nterdependencies among subprograms and

subroutines left consultants with few completed programs.

/. I+#!$i'( $-# r%a!i3a$i!al iss#s $-a$ ma!a%#m#!$ ms$ a++r#ss i! $-# '$r#.

• Ma!a%#m#!$ s-l+ +#"#l* a !i'i#+ s$ra$#%ic i!'rma$i! *la!. Organi(ations

should reinforce their business strategy with a complementary information strategy.

• Wa!% s-l+ #s$a/lis- a! IS s$##ri!% cmmi$$## $ %"#r! $-# +#"#l*m#!$ *rc#ss

a!+ s**r$ $-# s$ra$#%ic *la!. % steering committee monitors systems development

activities and could have provided management oversight to the consulting team.

• Wa!% s-l+ s**r$ $-# s$ra$#%( &i$- a! #)*a!+#+, ali'i#+ IS s$a''. % company+s

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reputation is tarnished when it develops an inade*uate and unreliable system.

2anagement should hire a larger & staff, adding more *ualified employees 8 ones that

have the necessary skills to support the information strategy.

• Wa!% s-l+ s#$ *lici#s %"#r!i!% s(s$#ms +#"#l*m#!$. ?ell1established

procedures governing the planning, scheduling, design, implementation, anddocumentation of a new information system can minimi(e the risk of runaway pro!ects.

2anagement must also set standards governing the selection of consultants, if necessary.

c. R#cmm#!+ s$#*s $-# cm*a!( cl+ $a# $ %ara!$## c!sl$i!% s#r"ic# ali$(.

• Wa!% s-l+ im*r"# #)is$i!% +#"#l*m#!$ *lici#s. ?ang must first establish its

internal development policies that govern the systems development process. or

e/ample, a more effective internal 2& staff can provide the consultants with necessary

support.

• Wa!% s-l+ #s$a/lis- c!sl$i!% s#r"ic#s #"ala$i! cri$#ria. 2anagement must

view consultants as vendors and evaluate which consulting firm provides the best service

at a fair price. This may include closed bidding, background checks, credential checks,and probing meetings to determine if the firm has the skills to complete the pro!ect.

• Wa!% s-l+ s# a! IS s$##ri!% cmmi$$## a!+ *r5#c$ +#"#l*m#!$ $#ams $

m!i$r c!sl$a!$s. %n oversight body can reinforce the information strategy and hold

the consulting team accountable for the development process.

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22.3 Tiny Toddlers, a manufacturer of children’s toys and furniture, is designing andimplementing a distributed system to assist its sales force. Each of the 10 sales offices inCanada and 20 in the United States maintains its own customers and is responsible forgranting credit and collecting receivables. Reports used by each sales office to maintain thecustomer master file and to enter the daily sales orders are shown in Figures 22-4 and 22-5.

E"ala$# $-# r#*r$s s-&! i! 4i%r#s 22?6 a!+ 22?8 si!% $-# 'll&i!% 'rma$<

W#a!#ss E)*la!a$i! R#cmm#!+a$i!9s:

Cs$m#r Mai!$#!a!c# 4rm

?eakness E/planation Recommendation9s

o fields for recording a

new customer@s phone

number, email address,or website.

Tiny Toddlers cannot call or email

the customer or visit their website

without this data.

The form should have fields for this

information after the address

information.

The form is not pre1

numbered.

There is no way to ensure that all

maintenance forms are processed

and accounted for.

The form should have a preprinted

number in the upper right or left

corner.

o indication that

information has been

entered into the

computer system.

The person entering the data does

not initial the form after the data

is entered into the system. % form

may be missed or entered twice.

The report should have a space to

record the initials of the person

entering the data and the date it is

entered.

There is no space

provided for recording

date the form is created

9or the effective date of

the change.

The company would not know the

effective date of the change nor

when the form was created.

%n effective change date should be

added to this report. f the effective

change date can be different from

the date the form is created, a field

for that date should also be

included.

The form does not have

a place where the person

who fills out the form

can sign or initial.

f the data entry clerk could not

read or understand the

information on the form, she

would not know who filled out

the form.

% place should be provided for the

person who fills out the form to sign

or initial it.

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22.B 9c!$i!#+:

Sal#s Or+#r 4rm

?eakness E/planation Recommendation9s

There is no indication

that the customer

approves of the order.

?here possible, all orders should be

signed by the customer to ensure that

the customer is responsible for

re*uesting the order.

#rovision should be provided on

the form for the customer+s order

approval.

The form is not pre1

numbered.

There is no way to ensure that all sales

orders are processed and accounted for.

The form should have a

preprinted number in the upper

right corner.

There is no space to

enter a ship to address

or shippinginstructions

The goods cannot be shipped to a

different address than the customer@s

office address, as there is no ship toaddress. or is there any want to

know a customer@s special shipping

instructions.

%dd a ship to address to the sales

order form as well as a space to

record special shippinginstructions.

There is no space for

the customer@s

purchase order number

There is no way for the company to

reference back to purchase order from

the customer

%dd as space on the form for the

customer purchase order number

There is no room for

the unit price or

e/tended amounts on

the sales order form

There is no way to know if the

customer was given a special price, a

sale price, or a standard price.

nclude columns for -nit #rice

and E/tended %mount.

&ome students may refer to the sales order form shown in the Revenue Cycle chapter.

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22.6 Mici# L+#rma! is $-# !#& assis$a!$ c!$rll#r ' Pic#!s P/lis-#rs. S-# &as $-#

c!$rll#r ' a cm*a!( i! a similar i!+s$r(, &-#r# s-# &as i! c-ar%# ' acc!$i!% a!+ -a+

c!si+#ra/l# i!'l#!c# "#r cm*$#r c#!$#r *#ra$i!s. Pic#!s &a!$s $ r#"am* i$s

i!'rma$i! s(s$#m, *laci!% i!cr#as#+ #m*-asis ! +#c#!$rali3#+ +a$a acc#ss a!+ !li!#

s(s$#ms. 7-! Ric-ar+s, $-# c!$rll#r, is !#ar r#$ir#m#!$. H# -as *$ Mici# i! c-ar%# '

+#"#l*i!% a !#& s(s$#m $-a$ i!$#%ra$#s $-# cm*a!(0s acc!$i!%?r#la$#+ '!c$i!s. H#r

*rm$i! $ c!$rll#r &ill +#*#!+ ! $-# scc#ss ' $-# !#& AIS.

Mici# s#s $-# sam# +#si%! c-arac$#ris$ics a!+ r#*r$i!% 'rma$ s-# s#+ a$ -#r 'rm#r

cm*a!(. S-# s#!+s +#$ails ' $-# !#& AIS $ $-# +#*ar$m#!$s $-a$ i!$#r'ac# &i$- acc!$i!%,

i!cl+i!% i!"#!$r( c!$rl, *rc-asi!%, -ma! r#src#s, *r+c$i! c!$rl, a!+

mar#$i!%. I' $-#( + !$ r#s*!+ &i$- s%%#s$i!s /( a *r#scri/#+ +a$#, s-# &ill c!$i!# $-#

+#"#l*m#!$ *rc#ss. Mici# a!+ 7-! -a"# #s$a/lis-#+ a !#& sc-#+l# 'r ma!( ' $-#

r#*r$s, c-a!%i!% $-# 'r##!c( 'rm &##l( $ m!$-l(. A'$#r a m##$i!% &i$- $-# +ir#c$r '

IS, Mici# s#l#c$s a *r%ramm#r $ -#l* -#r &i$- $-# +#$ails ' $-# !#& r#*r$i!% 'rma$s.

Ms$ c!$rl '#a$r#s ' $-# l+ s(s$#m ar# mai!$ai!#+ $ +#cr#as# $-# i!s$alla$i! $im#, &i$-

a '#& !#& !#s a++#+ 'r !sal si$a$i!s. T-# *rc#+r#s 'r mai!$ai!i!% $-# c!$rls ar#

s/s$a!$iall( c-a!%#+. Mici# ma#s all $-# AIS c!$rl c-a!%# a!+ *r%ram?$#s$i!%

+#cisi!s, i!cl+i!% scr##!i!% $-# c!$rl '#a$r#s r#la$#+ $ *a(rll, i!"#!$r( c!$rl,

acc!$s r#c#i"a/l#, cas- +#*si$s, a!+ acc!$s *a(a/l#.

As #ac- m+l# is cm*l#$#+, Mici# -as $-# crr#s*!+i!% +#*ar$m#!$ im*l#m#!$ $-#

c-a!%# imm#+ia$#l( $ $a# a+"a!$a%# ' $-# la/r sa"i!%s. I!cm*l#$# i!s$rc$i!s

accm*a!( $-#s# c-a!%#s, a!+ s*#ci'ic im*l#m#!$a$i! r#s*!si/ili$( is !$ assi%!#+ $

+#*ar$m#!$al *#rs!!#l. Mici# /#li#"#s *#ra$i!s *#*l# s-l+ l#ar! as $-#( %, r#*r$i!%

#rrrs as $-#( ccr.

Acc!$s *a(a/l# a!+ i!"#!$r( c!$rl ar# im*l#m#!$#+ 'irs$, a!+ s#"#ral *r/l#ms aris#.

T-# s#mim!$-l( *a(rll r!s, &-ic- -a+ /##! &##l( !+#r $-# l+ s(s$#m, -a"# a/!+a!$

#rrrs, r#iri!% !m#rs ma!al *a(c-#cs. Pa(rll r! c!$rl $$als $a# -rs $

r#c!cil# &i$- $-# cm*$#r *ri!$$. T #)*#+i$# ma$$#rs, Mici# a$-ri3#s $-# *a(rll cl#r

$ *r#*ar# *a(rll 5r!al #!$ri#s.

T-# !#& i!"#!$r( c!$rl s(s$#m 'ails $ im*r"# $-# carr(i!% l#"#l ' ma!( s$c i$#ms.

T-is cas#s cri$ical s$c $s ' ra& ma$#rial $-a$ r#sl$ i! #)*#!si"# rs- r+#rs. T-# !#&

s(s$#m0s *rimar( c!$rl *rc#+r# is $-# a"aila/ili$( ' r+#ri!% a!+ s#r i!'rma$i!. T-#

i!'rma$i! is a"aila/l# $ /$- i!"#!$r( c!$rl a!+ *rc-asi!% *#rs!!#l s $-a$ /$-

+#*ar$m#!$s ca! iss# $im#l( *rc-as# r+#rs. ;#cas# $-# i!"#!$r( l#"#ls ar# *+a$#+ +ail(,

Mici# +isc!$i!#s $-# *r#"is &##l( r#*r$.

;#cas# ' $-#s# *r/l#ms, s(s$#m +cm#!$a$i! is /#-i!+ sc-#+l#, a!+ *r*#r /ac*

*rc#+r#s -a"# !$ /##! im*l#m#!$#+. Mici# -as r##s$#+ /+%#$ a**r"al $ -ir# $&

s(s$#ms a!al(s$s, a! acc!$a!$, a!+ a! a+mi!is$ra$i"# assis$a!$ $ -#l* -#r im*l#m#!$ $-#

!#& s(s$#m. 7-! is +is$r/#+ /( -#r r##s$ /#cas# -#r *r#+#c#ssr -a+ !l( !# *ar$?$im#

assis$a!$. %dapted from the C2% E/am.

a. Lis$ $-# s$#*s Mici# s-l+ -a"# $a#! +ri!% &-il# +#si%!i!% $-# AIS $ #!sr# $-a$#!+?s#r !##+s &#r# sa$is'i#+.

• nterviews should have been conducted with users affected by the changes to understand

e/isting system and business processes, what organi(ational units are affected by the

changes, procedures used to provide information, decision users make and the

information needed to make them, current problems users face, needed improvements,

and future information needs

7/21/2019 Rais12 SM CH22


• The capabilities of the new system should have been e/plained so users can determine

how the capabilities can be used to improve the system 8 ways the developers may not

have thought of. n other words, employees in the individual departments should have

been encouraged to make suggestions for changes and improvements.

• 2ickie should not have automatically assumed that the things that worked for her

previous employer would work at #ickens. ?hile they can be used as a starting point,

2ickie needs to make sure that the human aspect of systems development is not ignored.That is, #ickens employees have to buy into the new system.

• %s the different parts of the system are developed, the changes should be reviewed with

the affected users to ensure that their needs are met. 2ickie should have been more

proactive in this process. t is not acceptable to give them a date to respond and then

proceed with development if she does not hear from them. The users should have been

actively involved in the development process all during development. This would endure

that all affected users approve of the changes and buy into the change.

• 2ickie and "ohn should not take upon themselves the responsibility of determining what

information users need or when they need it. They should not have established a new

schedule for many of the reports, changing the fre*uency from weekly to monthly.

• 2ickie should not have assumed that the control features of the old system were

sufficient in the new system. ?hile this may save time, it does not ensure ade*uate

controls. 2ickie should not change the procedures for maintaining the controls withoutuser input and approval. n fact, all controls issues should be approved by the users.

• 2ickie cannot possibly understand the system and user needs well enough to made all the

control change and program testing decisions. The departments affected by the changes

should have been consulted.

• ?hile having departments implement changes immediately might produce labor savings,

there are more important things to consider when deciding when to implement the

system. These include whether it has been completely tested and how it interfaces with

the rest of the changes. This is evidenced by the problems that surfaced when the

changes were introduced too soon.

• ncomplete instructions accompanied the changes, and specific implementation

responsibility was not assigned to departmental personnel. That, and 2ickie@s belief that

operations people should learn as they go and report errors as they occur, is very bad

development policy.

• $ocumentation should be complete and back up procedures should be in place before a

systems conversion takes place.

/. I+#!$i'( a!+ +#scri/# $-r## &a(s Mici# "ila$#+ i!$#r!al c!$rl *ri!ci*l#s +ri!% $-#

AIS im*l#m#!$a$i!.

• 2ost of the control features of the 4old4 system were retained in the 4new4 system0

however, the procedures for maintaining controls were substantially changed. The

procedures and controls were not coordinated. 2ore importantly, controls appropriate for

the 4new4 systems were not properly developed and evaluated.

• #roper backup procedures were not implemented in many areas. This put the system and

overall operations in a vulnerable position.

• &ystems, programming, and operating documentation were behind schedule.

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$ocumentation should be complete before a systems conversion takes place.

• &eparation of duties was violated by allowing

o both inventory control and purchasing personnel to issue purchase orders

o payroll clerks to prepare !ournal entries for payroll processing

c. Identify and describe the weaknesses in Mickie’s approach to implementing the new

AIS. How could you improve the development process for the remaining parts of the

AIS?

W#a!#ss#s R#cmm#!+a$i!s

o systems analysis or feasibility

study.

#erform a thorough systems analysis that includes a

feasibility study.

#oor planning #repare a development plan, a budget, and a schedule for

pro!ect completion. %n accepted implementation plan for

each module must be formali(ed and followed

&ystems testing and reviews were notconducted prior to implementation.

%ll modules should be properly tested for processing,informational, and control effectiveness. .

5ittle or no user involvement -sers must participate in the development of the systems

plan, the tests of information content and controls, and final

implementation acceptance.

&ystem modules implemented without

ade*uate training, documentation, or

instructions.

ew modules should not be implemented until ade*uate

documentation is prepared and all affected organi(ations and

personnel have been appropriately trained.

7/21/2019 Rais12 SM CH22


22.8 R(! Plsi*-#r, ma!a%#r ' Clm/ia0s *r*#r$( acc!$i!% +i"isi!, -as -a+ +i''icl$(

r#s*!+i!% $ $-# 'll&i!% +#*ar$m#!$al r##s$s 'r i!'rma$i! a/$ 'i)#+ ass#$s.

1. T-# c!$rll#r -as r##s$#+ i!+i"i+al 'i)#+ ass#$s sc-#+l#s $ s**r$ $-# %#!#ral

l#+%#r /ala!c#. Al$-%- R(! -as 'r!is-#+ $-# i!'rma$i!, i$ is la$#. T-# &a( $-#

r#cr+s ar# r%a!i3#+ ma#s i$ +i''icl$ $ /$ai! i!'rma$i! #asil(.

2. T-# mai!$#!a!c# ma!a%#r &a!$s $ "#ri'( $-# #)is$#!c# ' a *!c- *r#ss $-a$ -#$-i!s &as r#*air#+ $&ic#. H# -as as#+ R(! $ c!'irm $-# ass#$ !m/#r a!+ $-#

lca$i! ' $-# *r#ss.

B. T-# i!sra!c# +#*ar$m#!$ &a!$s +a$a ! $-# cs$ a!+ / "al#s ' ass#$s $ i!cl+#

i! i$s r#"i#& ' crr#!$ i!sra!c# c"#ra%#.

6. T-# $a) +#*ar$m#!$ -as r##s$#+ +a$a $ +#$#rmi!# &-#$-#r Clm/ia s-l+ s&i$c-

+#*r#cia$i! m#$-+s 'r $a) *r*s#s.

8. T-# i!$#r!al a+i$rs -a"# s*#!$ si%!i'ica!$ $im# i! $-# *r*#r$( acc!$i!% +i"isi!

$ c!'irm $-# a!!al +#*r#cia$i! #)*#!s#.

R(!0s *r*#r$( acc!$ r#cr+s, #*$ i! a! E)c#l s*r#a+s-##$, s-& $-# ass#$ acisi$i!

+a$#, i$s acc!$ !m/#r, $-# +llar am!$ ca*i$ali3#+, a!+ i$s #s$ima$#+ s#'l li'# 'r

+#*r#cia$i! *r*s#s. A'$#r ma!( 'rs$ra$i!s, R(! r#ali3#s -is r#cr+s ar# i!a+#a$#

a!+ $-a$ -# ca!!$ s**l( +a$a #asil( &-#! r##s$#+. H# +iscss#s -is *r/l#ms &i$- $-#

c!$rll#r, Gi% Gri''i$-.

RYON< Gi%, sm#$-i!% -as $ %i"#. M( *#*l# ar# &ri!% "#r$im# a!+ ca!0$ ##*

*. Y &r#+ i! *r*#r$( acc!$i!% /#'r# ( /#cam# c!$rll#r. Y !& I

ca!0$ $#ll $-# $a), i!sra!c#, a!+ mai!$#!a!c# *#*l# #"#r($-i!% $-#( !##+ $ !&

'rm m( r#cr+s. I!$#r!al a+i$i!% is li"i!% i! m( ar#a, a!+ $-a$ sl&s +&! $-#

&r. T-# r##s$s ' $-#s# *#*l# ar# r#as!a/l#, a!+ &# s-l+ /# a/l# $ a!s&#r

$-#ir #s$i!s a!+ *r"i+# $-# !##+#+ +a$a. I $-i! &# !##+ a! a$ma$#+ *r*#r$(

acc!$i!% s(s$#m. I &a!$ $ $al &i$- $-# AIS *#*l# $ s## i' $-#( ca! -#l* m#.

GIG< I $-i! $-a$0s a %r#a$ i+#a. 7s$ /# sr# ( ar# *#rs!all( i!"l"#+ i! $-#

+#si%! ' a!( s(s$#m s ( %#$ all $-# i!' ( !##+. ##* m# *s$#+ ! $-#*r5#c$0s *r%r#ss. %dapted from the C2% E/am.

a. I+#!$i'( a!+ 5s$i'( 'r ma5r /5#c$i"#s Clm/ia0s a$ma$#+ *r*#r$( acc!$i!%

s(s$#m s-l+ *ss#ss $ r#s*!+ $ +#*ar$m#!$al r##s$s 'r i!'rma$i!.

Chapter ' lists the following seven characteristics of useful information

• Relevant . nformation is relevant if it reduces uncertainty, improves decision1making, or

confirms or corrects prior e/pectations.

• Reliable. nformation is reliable if it is free from error or bias and accurately represents

organi(ation events or activities.

• Complete. nformation is complete if it does not omit important aspects of the events or

activities it measures.

• Timely. nformation is timely if it is provided in time for decision makers to make

decisions.

• Understandable. nformation is understandable if it is presented in a useful and

intelligible format.

7/21/2019 Rais12 SM CH22


• Verifiable. nformation is verifiable if two independent, knowledgeable people produce

the same information.

• Accessible. nformation is accessible if it is available to users when they need it and in a

format, they can use.

The C2% e/am answer included a characteristic not on the above list:

• Flexibility. le/ibility ensures that the computer will adapt to changing business needswithout a complete redesign.

/. I+#!$i'( $-# +a$a $-a$ s-l+ /# i!cl+#+ i! $-# +a$a/as# 'r #ac- ass#$.

• %sset name

• 2anufacturer

• 2odel

• &erial number

• %sset class code

• Company assigned asset number

•3eneral ledger account number

• 5ocation data 9plant, department, building

• %c*uisition date

• Original cost

• $ata for book depreciation and ta/ depreciation

• 2aintenance record: cycle, date, amount

• Estimated salvage value

7/21/2019 Rais12 SM CH22


22. A cr#+i$ !i! is +#"#l*i!% a !#& AIS. T-# i!$#r!al a+i$rs s%%#s$ *la!!i!% $-# s(s$#ms

+#"#l*m#!$ *rc#ss i! accr+a!c# &i$- $-# SDLC c!c#*$. T-# 'll&i!% !i!# i$#ms ar#

i+#!$i'i#+ as ma5r s(s$#ms +#"#l*m#!$ ac$i"i$i#s $-a$ &ill -a"# $ /# cm*l#$#+.

1. S(s$#m $#s$

2. Us#r s*#ci'ica$i!s

B. C!"#rsi!6. S(s$#ms sr"#(

8. T#c-!ical s*#ci'ica$i!s

. Ps$?im*l#m#!$a$i! *la!!i!%

. Im*l#m#!$a$i! *la!!i!%

>. Us#r *rc#+r#s a!+ $rai!i!%

F. Pr%rammi!%

%dapted from the C% E/am.

a. Arra!%# $-# !i!# i$#ms i! $-# s##!c# i! &-ic- $-#( s-l+ l%icall( ccr.

The logical se*uence of occurrence is as follows:

'. &ystems &urvey

). -ser &pecifications

<. Technical &pecifications

A. mplementation #lanning

B. #rogramming

. -ser #rocedures and Training

D. &ystem Test

. Conversion

F. #ostimplementation #lanning

/. O!# ma5r ac$i"i$( is c!"#r$i!% +a$a 'il#s 'rm $-# l+ s(s$#m $ $-# !#& !#. Lis$

$-r## $(*#s ' 'il# c!"#rsi! +cm#!$a$i! $-a$ &l+ /# ' *ar$iclar i!$#r#s$ $ a!

a+i$r.

'. Conversion completion documentation indicating that all previously e/isting files have

been converted at a satisfactory level of *uality.

). Operating test documentation indicating that the converted files are able to support the

volume of work in the application.<. %pplication approval documentation indicating that the implemented system had proper

user and E$# management approval.

7/21/2019 Rais12 SM CH22


22.7 MetLife, an insurance company, spent $11 billion to acquire Travelers Life and Annuity fromCiticorp in one of the largest insurance company acquisitions of all time. The Metlife CIOestimated it would take three years to integrate the two systems. Because the integrationproject was especially critical, he figured he could accomplish the integration in 18 months if he pulled out all the stops. The MetLife CEO gave him nine months to complete the task. Topull off the integration in nine months, he had to:

Integrate over 600 IS applications, all with their own infrastructure and businessprocesses. The new systems had to comply with “One MetLife,” a company policy that allinformation systems had to have a common look and feel companywide and be able tofunction seamlessly with other MetLife systems.

Work with over 4,000 employees located in 88 offices scattered all over the globe.

Supervise an oversight team and 50 integration teams in seven project managementoffices.

Work with hostile, uncooperative Travelers employees for the six months it took to getregulatory approval and close the deal. The systems had to be integrated three months

after the deal closed.

Identify integration deliverables (144 in total) and manage the process to deliver them.

Negotiate with Citicorp for hundreds of transition services that would not be immediatelyconverted to MetLife’s systems.

a. What tasks do you think MetLife would have to perform to successfully integrate the

Traveler systems into MetLife’s?

• &eparate Travelers@ & operations and assets from Citicorp@s so 2et5ife could begin the

systems integration process.

• $etermine what systems had to be integrated before the deadline and which could be

outsourced to Citicorp until they could be integrated into 2et5ife@s system.

• $evelop a critical path for the integration process so delays in critical path activities did not

delay the whole process.

• Train large numbers of employees in pro!ect planning activities and tools.

• dentify and free(e systems re*uirements as soon as possible. The pro!ect management

team should establish early deadlines for systems re*uirements and hold users to them.

• ncrease system capacity to handle all of the new data from the Travelers@ systems.

• $evelopGmodify transaction1processing systems to handle all of Travelers@ transaction data.

• #erform a security and privacy analysis of all of Travelers@ systems and determine needed

upgrades to comply with 2et5ife@s security policies.

• Change Travelers@ laptop and desktop infrastructure so that it matched that of 2et5ife.

• Enlarge 2et5ife@s distribution system by integrating over 'BH annuity and life insurance

wholesalers and giving them appropriate access to 2et5ife@s systems.

• %dd all AHHH plus Travelers@ employees to 2et5ife@s 6uman Resources and #ayroll

systems and to their email system.

• 2ove Travelers@ life insurance and ) annuity product lines to 2et5ife@s systems.

7/21/2019 Rais12 SM CH22


Travelers@ investment portfolio had to be made accessible to 2et5ife managers before the

deal closed. Ioth pro!ects re*uired 2et5ife and Travelers employees to analy(e thedifferences between the ways data were stored in the two companies. They then had to

map all data elements in each system so they could convert Travelers data to the 2et5ife

data storage format. This was one of the most difficult ac*uisition tasks.

• ntegrate the two company@s data centers. This re*uired some data centers to be combined

and others to be e/panded.• $etermine system test capacities, build test environments, and lock down testing

procedures and capabilities. &tress and user acceptance testing had to be performed at least

< months prior to the integration date.

• Travel to every country and every ma!or Travelers office to train former Travelers

employees on the 2et5ife systems.

/. S#arc- $-# I!$#r!#$ 'r ar$icl#s $-a$ +#scri/# $-# i!$#%ra$i! *rc#ss. Wri$# a $&?*a%#

smmar( ' $-# *r/l#ms a!+ scc#ss#s $-a$ M#$Li'# #)*#ri#!c#+ &-il# i!$#%ra$i!% $-#

$& s(s$#ms.

% number of articles describe 2et5ife@s e/perience. % particularly good article is =ine

2onths to 2erge> found in the ebruary )H, )HH issue of nformation ?eek.

7/21/2019 Rais12 SM CH22


22.> Dri!% 'i!al $#s$i!%, 5s$ /#'r# la!c-i!% a !#& *a(rll s(s$#m, $-# *r5#c$ ma!a%#r a$

R#$3#l L#%al S#r"ic#s '!+ $-a$ $-# *rc-as#+ *a(rll s(s$#m &as +i!% $-# 'll&i!%<

Wri$i!% c-#cs 'r !#%a$i"# am!$s

Pri!$i!% c-#cs &i$- !am#s a!+ #m*l(## !m/#rs $-a$ +i+ !$ ma$c-

Mai!% #rrrs 'r #)am*l#, @> *#r -r /#cam# @> *#r -r i' a +#cimal *i!$ &as !$ #!$#r#+

Wri$i!% c-#cs 'r am!$s %r#a$#r $-a! a 'll (#ar0s salar(

4r$!a$#l(, *a(rll &as s$ill i!s$all#+ ! $im#, a!+ !l( 1.8 ' $-# c-#cs -a+ $ /#

ma!all( r#iss#+ #"#r( *a(+a( !$il $-# *r/l#m &as sl"#+.

O$-#r *r/l#ms &#r# $-a$ ! !# -a+ ma+# sr# $-# !#& s(s$#m &as cm*a$i/l# &i$- $-#

#)is$i!% *a(rll +a$a/as#, a!+ $-#r# a**#ar#+ $ /# ! 'rmal $ra!si$i! /#$&##! $-#

+#"#l*m#!$ ' $-# *r5#c$ a!+ $-# im*l#m#!$a$i! ' $-# *r5#c$. T-# s(s$#m &as !#"#r r!

i! *arall#l.

Al$-%- $-# *r%rammi!% ma!a%#r ls$ -is 5/, $-# *a(rll *r/l#ms -#l*#+ rais# a&ar#!#ss

' $-# cm*a!(0s %r&i!% +#*#!+#!c# ! IT. Laci!% a ma5r *r/l#m, $-#r# &as a

*#rc#*$i! $-a$ $-# i!'rma$i! s(s$#m +i+ !$ a''#c$ *#ra$i!s.

a. W-a$ +#s $-# s(s$#m &as !#"#r r! i! *arall#lJ m#a!

Running in parallel refers to operating the old and new systems simultaneously for a period.

% company processes all transactions with both systems, compares the output, reconciles the

differences, and corrects problems. The old and new systems are run in parallel until the new

system proves itself and the organi(ation is certain that the new system is functioning

properly.

/. I' $-# cm*a!( -a+ r! $-# s(s$#m i! *arall#l, &-a$ s-l+ -a"# ccrr#+

#arallel processing protects companies from errors, but it is costly and stressful because thesame set of transactions and activities must be processed twice. This places a significant

burden on the company, a burden many companies are not willing to undertake. 6owever,

because companies often e/perience problems during conversion, parallel processing has

gained widespread popularity.

f the company had operated the new and old systems in parallel, they should have been able

to use the paychecks produced by the old system until all errors were detected and corrected.

c.W-a$ $-#r $#s$i!% m#$-+l%i#s cl+ -a"# /##! s#+ /( $-# 'irm

The company could have implemented a pilot conversion where one office or branch of the

company could have implemented, tested, and corrected any errors before releasing the

system to the rest of the organi(ation.

%lternatively, the company could have performed a phased conversion where a new system is

implemented, tested, and modified one phase or module at a time.

+. W-a$ $-#r $(*#s ' *r/l#ms ar# #"i+#!$ 'rm r#a+i!% $-# cas#

There does not appear to be proper management or leadership of the system development,

7/21/2019 Rais12 SM CH22


implementation, or testing processes involved in this system. or e/ample

• inal testing should have been attempted prior to !ust before launching the payroll

system.

• 2anagement should have made sure the new system was compatible with the e/isting

payroll database and the new system should have been tested using the e/isting database.

• There should have been a formal transition between the development of the pro!ect andthe implementation of the pro!ect.

7/21/2019 Rais12 SM CH22


22.F A !#& *r%ram a$ 7!#s a!+ Car$#r Cr*ra$i! 97CC: &as s**s#+ $ $rac cs$m#r calls.

U!'r$!a$#l(, $-# *r%ram $ 2 mi!$#s $ la+ ! a PC, a!+ i$ cras-#+ 'r##!$l(. T-#

*r5#c$ +i+ !$ -a"# a $ra+i$i!al r#*r$i!% s$rc$r#, a!+ i$ a**#ar#+ $-a$ ! !# &as

ac$all( i! c-ar%#. T-# l#a+ *r5#c$ ma!a%#r i$ -al'&a( $-r%- $-# *r5#c$, $-# i!?-s#

*r%ramm#rs &#r# r#assi%!#+ $ $-#r *r5#c$s r l#$ %, a!+ $& la(#rs ' ma!a%#m#!$

ls#l( s*#r"is#+ $-# s(s$#ms a!al(s$.

Ma!a%#m#!$ -ir#+ c!sl$a!$s $ 'i) $-# a**lica$i!, /$ a'$#r $-r## m!$-s a!+ @2,, $-#*r5#c$ &as +isc!$i!#+. 7CC +i+ !$ c-#c $-# r#'#r#!c#s ' $-# c!sl$i!% 'irm i$ -ir#+ $

cr#a$# $-# !#& s(s$#m. T-# c!sl$a!$s, &- &#r# lca$#+ $& s$a$#s a&a(, ma+# ma!(

*r%rammi!% #rrrs. Al$-%- $-# s(s$#ms a!al(s$ ca%-$ sm# ' $-# c!sl$a!$0s mis$a#s,

$-#( %r#& i!cr#asi!%l( +is$a!$ a!+ +i''icl$ $ &r &i$-. T-#( &l+ !$ #"#! 'r!is- $-#

src# c+# $ $-# *r5#c$ ma!a%#rs, ms$ li#l( /#cas# $-#( &#r# a'rai+ ' r#"#ali!% $-#ir

i!cm*#$#!c#.

a. I+#!$i'( *$#!$ial cas#s 'r $-# s(s$#m im*l#m#!$a$i! 'ailr#.

J 5eadership and managerial oversight is clearly lacking at "ones and Carter Corp 9"CC.

?hen the pro!ect was managed internally, the following problems e/isted:

o There was no evident reporting structure to support and manage the pro!ect. t

appeared that no one was actually in charge

o The lead pro!ect manager *uit halfway through the pro!ect

o The in1house programmers who were familiar with the pro!ect were reassigned to

other pro!ects or let go.

o Two layers of management loosely supervised the systems analyst.

J 2anagement falsely assumed that the problems could be solved by hiring a consultant.

n truth, the problem with the pro!ect was internal and caused by poor management,

supervision, and pro!ect management.

•

?hen a consulting firm was hired, it does not appear that anyone checked out theircompetence, obtained referrals, or did any other due diligence with regard to the

consulting firm.

/. W-a$ s$#*s s-l+ 7CC -a"# $a#! $ scc#ss'll( +#si%! a!+ im*l#m#!$ $-# call

$raci!% s(s$#m

• &tart and end the process with a clearly designated manager over the pro!ect and with

clearly defined lines of authority.

• nstitute a formal review process for hiring consultants.

• Re*uire change control documentation so managers can see what changes were made

during development.

• %ssign a central manager for the pro!ect team who is the conduit for communication and

decisions.

n summary, "CC should have followed the systems development processes e/plained in

chapters )H1)).

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SUGGESTED ANSWERS TO THE CASES

22.1 Ci$i3#!0s Gas Cm*a!( 9CGC: *r"i+#s !a$ral %as s#r"ic# $ 2, cs$m#rs. T-#

cs$m#r /as# is +i"i+#+ i!$ $-# 'll&i!% $-r## r#"#!# class#s<

R#si+#!$ial cs$m#r %as

sa%# is -i%-l( crr#la$#+ &i$- $-# &#a$-#r. Cmm#rcial cs$m#r sa%# is *ar$iall( &#a$-#r

+#*#!+#!$. I!+s$rial cs$m#r sa%# is %"#r!#+ alms$ #!$ir#l( /( /si!#ss 'ac$rs.

T-# cm*a!( /(s !a$ral %as 'rm 1 *i*#li!# cm*a!i#s i! $-# am!$s s*#ci'i#+ i!

c!$rac$s $-a$ r! 'r 8 $ 18 (#ars. 4r sm# c!$rac$s, $-# s**l( is i! #al m!$-l(

i!cr#m#!$s 'r $-#r c!$rac$s, $-# s**l( "ari#s accr+i!% $ $-# -#a$i!% s#as!. S**l(

"#r $-# c!$rac$ am!$s is !$ a"aila/l#, a!+ sm# c!$rac$s c!$ai! $a#?r?*a( clas#s.

T-a$ is, $-# cm*a!( ms$ *a( 'r $-# %as "lm# s*#ci'i#+ i! $-# c!$rac$, r#%ar+l#ss ' $-#am!$ s#+.

T ma$c- cs$m#r +#ma!+ &i$- s**l(, %as is *m*#+ i!$ a s$ra%# 'i#l+ &-#! s**l(

#)c##+s cs$m#r +#ma!+. Gas is &i$-+ra&! &-#! +#ma!+ #)c##+s s**l(. T-#r# ar# !

r#s$ric$i!s ! $-# %as s$ra%# 'i#l+ #)c#*$ $-a$ $-# 'i#l+ ms$ /# 'll a$ $-# /#%i!!i!% ' #ac-

%as (#ar 9S#*$#m/#r 1:. C!s##!$l(, &-#! $-# c!$rac$al s**l( 'r $-# r#mai!? +#r ' $-#

%as (#ar is l#ss $-a! $-a$ r#ir#+ $ sa$is'( *r5#c$#+ +#ma!+ a!+ 'ill $-# s$ra%# 'i#l+, CGC

cr$ails s#r"ic# $ i!+s$rial cs$m#rs 9#)c#*$ 'r -#a$i!% a!$i$i#s:. T-# cr$ailm#!$s ms$

/# car#'ll( c!$rll#+ $ *r#"#!$ #i$-#r a! "#rs**l( a$ (#ar?#!+ r a cr$aili!% '

cmm#rcial r r#si+#!$ial cs$m#rs s $-# s$ra%# 'i#l+ ca! /# 'ill#+ a$ (#ar?#!+.

I! r#c#!$ (#ars, CGC0s *la!!i!% #''r$s -a"# !$ /##! a/l# $ c!$rl $-# s**l( +ri!% $-#

%as (#ar r *r"i+# $-# i!'rma$i! !##+#+ $ #s$a/lis- l!%?$#rm c!$rac$s. Cs$m#r

+#ma!+ -as /##! *r5#c$#+ !l( as a '!c$i! ' $-# $$al !m/#r ' cs$m#rs. Cmm#rcial

a!+ i!+s$rial cs$m#rs0 +#ma!+ 'r %as -as /##! cr$ail#+. T-is -as r#sl$#+ i! ls$ sal#s

a!+ cas#+ a! #)c#ss ' s**l( a$ $-# #!+ ' $-# %as (#ar.

T crr#c$ $-# *r/l#ms, CGC -as -ir#+ a +ir#c$r ' cr*ra$# *la!!i!%. S-# is *r#s#!$#+

&i$- a c!c#*$al +#si%! 'r a! i!'rma$i! s(s$#m $-a$ &ill -#l* a!al(3# %as s**l( a!+

+#ma!+. T-# s(s$#m &ill *r"i+# a m!$-l( %as *la! 'r $-# !#)$ 'i"# (#ars, &i$- *ar$iclar

#m*-asis ! $-# 'irs$ (#ar. T-# *la! &ill *r"i+# +#$ail#+ r#*r$s $-a$ assis$ i! $-# +#cisi!?

mai!% *rc#ss. T-# s(s$#m &ill s# ac$al +a$a +ri!% $-# (#ar $ *r5#c$ +#ma!+ 'r $-#

(#ar. T-# *r#si+#!$ -as i!+ica$#+ $-a$ s-# &ill /as# -#r +#cisi!s ! $-# #''#c$ al$#r!a$i"#

*la!s -a"# ! *#ra$i!% i!cm#. %dapted from the C2% E/am.

1. Discss $-# cri$#ria $ c!si+#r i! s*#ci'(i!% $-# s$rc$r# a!+ '#a$r#s ' CGC0s !#&

s(s$#m.

• eed for market information The factors that affect the demand and supply for gas must

be isolated, their relative importance determined, and their effect *uantified.

• eed for accuracy The level of accuracy re*uired of the system determines the re*uired

level of detail, *uality of the input data, and sophistication of the system logic. ?hile the

system must be designed to provide the accuracy that matches the need, care must be

Class Cs$m#rs Sal#s i! C/ic 4##$ R#"#!#s

R#si+#!$ial 1, > /illi! @1 milli!

Cmm#rcia

l

B>, 18 /illi! @ 28 milli!

I!+s$rial 2, 8 /illi! @ 8 milli!

T$als 168 /illi! @28 milli!

7/21/2019 Rais12 SM CH22


taken to ensure that e/cessive effort is not spent in being overly accurate in specific areas

when the overall accuracy is inherently less due to the planning environment.

• re*uency of use The fre*uency of system use provides direction as to the level of

automation and sophistication needed. f the system will be used only once each month

to pro!ect the effect of the most recent actual data, it may be sufficient to develop a less

sophisticated system. f it is likely that a variety of alternatives will be evaluated each

month, a sophisticated, on1line system will be more desirable.

• Turnaround re*uired The need for timely reporting at month end provides guidance as to

the degree of automation and the level of comple/ity that will be appropriate. Iecause

the system is to be used for both multi1year planning and monthly tactical planning, the

system should be designed to provide for *uick turnaround of results at month end.

%ccordingly, consideration must be given to minimi(ing data input re*uirements.

• CostGbenefit analysis The new system must be !ustified on a costGbenefit basis.

• $ata processing environment Typically, planning systems re*uire a significant amount of

computer resources, both in terms of processing time and data storage.

• &upportability Company personnel must be able to support the system on an ongoing

basis. This includes collecting and entering data as well as updating the system. f thesupport burden is e/cessive, the system will suffer from lack of timely reporting or will

be run using simplifying assumptions that affect the degree of accuracy and credibility of

the system. f the system cannot be readily modified and maintained, it will *uickly fall

into a state of disrepair and will no longer be used.

2. I+#!$i'( $-# +a$a $-a$ s-l+ /# i!cr*ra$#+ i!$ CGC0s !#& s(s$#m $ *r"i+# a+#a$#

*la!!i!% ca*a/ili$(. E)*lai! &-( #ac- +a$a i$#m i$ is im*r$a!$ a!+ $-# l#"#l ' +#$ail

!##+#+ 'r $-# +a$a $ /# s#'l.

• umber of customers The customer count should be pro!ected by month, unless customer

growth is regular, in which case a base customer count can be used in con!unction with agrowth factor. The customer count should be broken into categories based upon use

which will facilitate estimating demand, Ki.e., residential, commercial heating,

commercial nonheating, industrial heating, industrial non1heatingL.

• ?eather data The weather data needed to pro!ect heating re*uirements should be entered

as needed. or the first year, meteorological trends may indicate an unusually warm or

cold year. or the following years, average monthly weather data may be used. %s the

year progresses, more accurate short1term forecasts should be entered to improve the

predictive ability of the panning system

• 6eating factors 6eating factors are data that convert weather data to customers+ demand.

They should be provided for each type of customer which uses heating, i.e., residential,

commercial heating, and industrial heating. The heating factors need not vary by monthunless it is determined that a seasonal relationship e/ists or that trends such as

conservation are likely.

• Customer unit demand The average monthly consumption for each commercial and

industrial nonheating customer must be provided, either as a constant or as varying overtime, to reflect both seasonal fluctuations and longer term trends. This data would also

be used to pro!ect the nonheating portion of commercial and industrial customer demand.

• &ales forecasts The sales to the top industrial accounts should be forecast individually by

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month for the first year of the five1year plan0 future years may make use of annual

growth rates. 6eating and non1heating sales for all other customers will be pro!ected byrevenue class.

• Customer rate structure The customer rate structure should provide monthly rate

information at the revenue class level, i.e., residential, commercial, and industrial. $ata

must be monthly to provide for periodic rate changes by revenue class.

• &upplier contract terms or each supply contract, the contract term 9beginning and end

dates, monthly volumes, unit costs, and take1or1pay conditions must be maintained.

• &torage field capacity The capacity of the gas storage field is re*uired in order to

determine if gas remains in storage that can be withdrawn to supplement pipeline supply.

• #riority system % priority system needs to be established in case the company needs to

curtail service to its customers due to an inade*uate supply of gas.

The first si/ factors are necessary in order to determine the demand for gas. The ne/t two

items are necessary to determine supply. The last item is necessary to give direction

whenever the supply is not ade*uate to meet demand. $ata must be considered on a monthly

basis because of the implied monthly variations of demand and supply.

rais12 sm ch22

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