Itme Chapter 65

ITME

CHAPTER 6

Lim, Jim Axel Dee B. Ms. Agnes NercuaC2-IT

MODELSA model is an abstraction of something. It represents some object or activity, which is called an entity.

TYPES OF MODELS

Physical Models – A physical model is a three-dimensional representation of its entity. Physical models used in the business world include scale models of shopping centers and prototypes of new automobiles.

Narrative Models - One type of model that managers use daily is the narrative model, which describe its entity spoken or written words.

Graphic Models - A graphic model represents its entity with an abstraction of lines, symbols, or shapes. The graphic model in Figure 6.1 illustrates one of the most popular concepts in business- economic order quantity. The economic order quantity(ECQ) is the optimum quantity of replenishment stock to order from a supplier. The ECQ balances the costs of purchasing the stock and the costs of maintaining it.Graphic models also are used in the design of information systems.

Mathematical Models – Any mathematical formula or equation is a mathematical model.

ECQ = √ 2PS M

cost

Total cost

Maintenance cost

Purchasing cost

Order quantityECQ

Figure 6.1 A graphicModel of the EconomicOrder Quantity Concept

Where P is the unit purchasing cost (in dollars), S is the annual sales (in units), and M is the annual maintenance cost per unit (in dollars). The maintenance cost includes all the costs incurred in storing the item, such as insurance, spoilage, and loss due to theft.

Uses of Models

All four types of models facilitate both understanding and communication. Mathematical models have, in addition, a predictive capability.

Facilitate Understanding A model is typically simpler than its entity. The entity is more easily understood when its elements and their relationships are presented in a simplified way. A physical model can represent only features of interest; a narrative can be boiled down to a summary ; a diagram can show only the main relationships; and a mathematical equation can contain only primary ingredients.

Sales orders

Edit Sales

Orders

Salesorders

Enter salesOrder data

PrepareSales order

report

Sales orderreport

Sales orders

Sales orderHistory file

Customers

1Edit

Salesorders

2EnterSalesOrderdata

Sales orderHistory

life

3PrepareSalesOrderreport

Sales manager

Salesorders

Edited Salesorders

SalesOrderreport

Entered sales

orders

SalesOrderdata

FIGURE 6.2 Graphic ModelsAre Used to DocumentInformation Systems

A.A flowchart B.A data flow diagram

However, the models still only represent their entities and never match them exactly.

Facilitate Communication All four types of models can communicate information quickly and accurately to people who understand the meaning of the shapes, words, graphics, and mathematics.

Predict the Future The precision with which the mathematical model can represent its entity endows it with a special capability that is not available with the other model types. The mathematical model can predict what might happen in the future, but it is not 100 percent accurate.

THE GENERAL SYSTEMS MODEL

The vehicle that we us as the main basis of your description is called the general systems model of the firm. It is a graphic diagram with an accompanying narrative that depicts all organizations in a general way, using a system framework.

The Physical System

Figure 6.3 shows the physical system of the firm that transforms input resources into output resources. The input resources come from the firm’s environment, a transformation occurs, and the output resources are returned to the same environment. The physical system of the firm is an open system, interacting with its environment by means of physical resource flows.

Material Flow Input materials are received from suppliers of raw materials, parts, and assembled components. These materials are held in a storage area until they are required for the transformation process. Then they are released to the manufacturing activity. In a manufacturing firm, two functional areas are involved with this material flow. The manufacturing function transforms the raw materials into finished products; the marketing function distributes the finished products to the customers.

Personnel Flow Prospective employees come from the global community and perhaps from labor unions and competitors. This personnel input usually is processed by the human resources function and then assigned to different functional areas. Others remain until retirement. The human resources function processes to the termination, and the resource is returned to the environment.

Machine Flow Machines are obtained from suppliers and usually remain in the firm for a long period-from three to twenty years. While in the firm, machines are seldom stored. Rather, they are continually available. Control of the machine flow is diffused among all functional areas that use the machines.

Money Flow Money is obtained primarily from the owners, who provide investment capital, and from the firm’s customers, who provide sales revenue. Whereas several sources provide money, the primary responsibility for controlling the money flow lies with the finance function. The money flow, therefore, connects the firm to its financial institutions, customers, suppliers, stockholders, and employees.

THE CONCEPTUAL SYSTEM

Control is achieved by means of a loop that is built into the system. The loop, called a feedback loop, provides a pathway for signals from the system to a control mechanism, and from the control mechanism

Input resources

Transformationprocess

Output resources

Figure 6.3 The Physical

System of the Firm

back to the system. The control mechanism is a device of some type that uses the feedback signals to evaluate system performance and determine whether corrective action is necessary.

Open-Loop Systems The system in Figure 6.3, in addition to being an open system, is an open-loop system. There is no feedback from the system to affect necessary changes in the system.

Closed-Loop Systems Figure 6.4 shows a closed-loop system – one with a feedback loop and control mechanism. Such a system can control its output by making adjustments to its input.

Management Control - As shown in Figure 6.5, management receives information that describes the system’s output. Many management reports include this type of information – production, volume, distribution costs, sales analysis, and so on. Because the main purpose of the firm is to produce some type of output, a measure of the output is an integral part of system control.

Figure 6.6 is an example of a report system output - a sales report of fast moving products.Output feedback is a valuable to the manager, but the manager also must know the status of the inputs and transformation processes. Figure 6.7 reflects the addition of information-gathering activities to the input and processing parts of the physical system.

Outputresources


Output resources

Output resources

Output resources

ControlMechanism


Management

Feedback

InformationInformation

Feedback

Figure 6.4 A Closed-LoopSystem

Figure 6.4 A Closed-LoopSystem

Figure 6.5 The PhysicalSystem of the Firm as a

Controlled System

ITEM NUMBER ITEM DESCRIPTION PERCENT OF TOTAL YEAR-TO-DATE SALES

YEAR TO DATE SALES VOLUME

400293319421786402190796001007739792722210410615963214000123

BRAKE PIPEDOOR HANDLE GASKETCLUTCH DRIVEN PLATE

CARPET SNAPSPARK PLUGHOSE CLIP

RUBBER PLUGUPPER DOOR HINGEREAR TUBE SHOCK

NEEDLE VALVE

$1, 702.931,624.001,403.971,102.001,010.79949.20946.73938.40922.19919.26

068065056044040038038038037037

Figure 6.6 A Sales Report of Fast-

Moving Products

Figure 6.8 is a report that describes an aspect of the system’s input. This supplier analysis compares the suppliers of a particular type of raw material in terms of price, delivery, and quality.

Figure 6.9 illustrates how the status of transformation processing can be reported to management.This example show how the conceptual system can keep the manager up to date of the status of the physical system.

The Information Process Information does not always travel directly from the physical system to the manager. Many managers are located some distance from the physical activity. We call the information-producing mechanism the information processor.

ITEM NUMBER ITEM NUMBER

TOTALS $11, 519.47 461

BASED ON YEAR-TO-DATE SALES OF $24, 988.00

Output resources

Inputresources


ManagementInformation Information

Figure 6.7 Information Is

Gathered from All of the Physical System

Elements

SUPPLIER LAST TRANSACTION

UNIT DAYS TO PCTNUMBER NAME DATE P.O NO. QTY PRICE RECEIPT REJECTS

3062 CARTER AND SONS 7/12 1048-10 360 $8.75 12 00 4189 PACIFIC MACHINING 4/13 962-10 350 9.10 8 02

0140 A.B. MERRIL & CO. 1/04 550-10 350 8.12 3 002111 CARTER AND SONS 8/19 1196-10 360 11.60 19 04

ITEM NUMBER

ITEM DESCRIPTION

410615

UPPER DOOR HINGE

Figure 6.8 A Supplier Analysis

Report

Figure 6.10 includes the addition of the information processor, which, in this discussion, we assume to be a computer. However, a computer is not required.

Dimensions Of Information As managers define the output that the information processor is to provide, they consider four basic dimensions of information. These dimensions contribute to information value.

1.) Relevancy Information has relevancy when it pertains specifically to the problem at hand.

2.) Accuracy Ideally, all information should be accurate, but features that contribute to system accuracy add to the cost. Applications involving money, such as payroll, billing, and accounts receivable, seek 100 percent accuracy.

3.) Timeliness Information should be available for problem solving before crisis situation develop or opportunities are lost.

4.) Completeness The manager should be able to obtain information that presents a complete picture of a problem or a solution. The term information overload suggest the harm that can come from too much information.

Standard For the manager to exercise control over his or her area of responsibility, there must be information that describes what the area is accomplishing and performance standards that reflect what the area should accomplish.We can define an objective as the overall goal that a system is to attain. A system must have at least one objective, but multiple objectives are common. Objectives tend to be stated in a general manner.

JOB NUMBER 84-182CUSTOMER WANKEL AUTOMOTIVE

CURRENT STATUS STEP 4-WELD SUPPORTS TO FRAME DEPARTMENT 410-WELDING DATE AND TIME BGUN-10/8, 10:15A PROJECTED JOB COMPLETION-10/14; 9:30ANEXT PROCESS STEP 5-PAINT FRAME DEPRARTMENT 632-PAINT

Figure 6.9 A Job Status Report

Provides Information about the

Transformation Process

Input resources

Output resources


Management Information processor


DataFigure 6.10 The

Information Processor

Transforms Data Into Information

A standard is a measure of acceptable performance, ideally stated in specific terms. Table 6.1 illustrates the difference between the general nature of objectives and the specific nature of standards.

TABLE 6.1

The manager uses standards to control the physical system by comparing actual performance, as reported by the information processor, with the standards. Figure 6.11 illustrates the addition of the required standards to the general model.

The conceptual system that controls the physical system therefore consists of three key elements-management, the information processor and standards.This arrangement enables the information processor to relieve the manager of much of the monitoring activity. The information processor can tell the manager when actual performance varies too much from the standards.

Management by exception Standards, combined with the information output of the information processor, enable the manger to engage in management by exception.Management by exception is a fundamental capability that is provided by the CBIS. By letting the CBIS assume some of the responsibility for monitoring the physical system, the manager can use his or her time in the most effective way.

Achieve an annual sales volume of at least $25 million.Maintain a 20% share of the market.Maintain an annual growth rate of 15%Pay dividends to stockholders each quarterMaintain the price of the firm’s common stock above $85 per share.Realize an after tax profit of 15% of sales.Maintain a record of accident-free daysKeep employee turnover below 10%Invest a minimum of 15% of sales revenue in research and development.Achieve stock outs on no more than 2% of the items in inventory during the year.Keep the number of backorders to less thank 5% of all orders processed.Have no plant shutdowns due to unavailable raw materials.Have no legal actions filed against the firm by customers ,suppliers, and the government.Invest no less than 10% of sales revenue in automation, computerization, and mechanization.

OBJECTIVES STANDARDS OF PERFORMANCE

A Comparison of Objectives and Standards

Satisfy customer needs

Produce a return on investment for the ownersOperate efficiently

Invest in the futureDevelop sources of supply

Operate ethically

Take advantage of modern methods

Input resources

Output resources




Data

Figure 6.11 Performance

Standards are made available to both

management and the Information Processor

Standards

Critical Success Factors A management concept that is similar to management by exception is called critical success factors. A critical success factor (CSF) is one of the firm’s activities that has a strong influence on the firm’s ability to meet its objectives.The CSF concepts is similar to management by exception in that it focuses attention on a portion of the firm’s operations rather than on the whole.

Decision Flow Another modification to the general model is necessary to reflect how management decisions can change the physical system. Just as the manager must gather data from all three elements in the physical system – input, processing, and output.

Figure 6.12 The feedback from the manager to the physical system is relabeled “Decisions” to reflect the manner in which te manager changes the system’s performance.

The basic feedback loop as drawn initially in Figure 6.4 still represents signals from the physical system , but the signals are in three different forms – data, information, and decisions.

Data is transformed into information by the information processor, and information is transformed into decision by the manager.

The EnvironmentThe final form of the general mode recognizes that resources flow into the firm from the environment and out of the firm and back into the environment.

Physical resources flow through the physical system at the bottom of the model.Conceptual resources(information and data) enter the information processor, where they are either stored or made available to the manager.

Putting the General System Model in Context The model helps you adjust to your firm. The model provides a sense of stability as you learn about your firm.

Problem Solving The term problem solving brings to mind the correction of things that are going wrong, managers respon quickly to harmful influences, seeking to prevent or minimize.

Input resources

Output resources



InformationDecisions

Data

Figure 6.12 Changes are made in the

Physical System through the decision

flow

Standards

Environment

Figure 6.13 The General Systems Model of the FirmManagers also respond to things that are going better than expected, we define a problem as a condition that has the potential to cause exceptional harm or produce exceptional benefit. Problem solving then becomes the act of responding to problems so as to suppress their harmful effects of capitalize on the opportunity for benefit.

Decision Making and Problem SolvingA manager will make many decisions. A decision is the selection of a strategy or action. Decision making is the act of selecting the strategy or action that the manager believes will offer the best solution to the problem.

Standards

Elements of Problem-Solving ProcessSeveral elements must be present if a manager is to successfully engage in problem solving.The solution to a systems problem is one that best enables the system to meet its objectives, as reflected in the system’s performance standards. These standards describe the desired state what the system should achieve. The manager must have available information that describes the current state – what the system is now achieving. If the two states are different, some problem is the cause and must be solved.

The solution criteria, or what it will take to bring the current state to desired state. It is the manager’s responsibility to identify alternative solutions, which always exist. International constraints take the form of limited resources that exist within the firm. Environmental constraints take the form of pressures from various environmental elements that restrict the flow of resources into and out of the firm.

Input resources

Output resources


ManagementInformation processor

InformationDecisions

Data

StandardsInformation

Anddata

Physical resources

Physical resources

Problem

ProblemSolver

(manager)

Standards

Information

Solution

Constraints

AlternativeSolutions

Elements of the conceptual system

Desired state

Current state

Figure 6.15 Elements of Problem Solving

Process

When all of these elements exist and the manager understands them, a solution to the problem is possible.

Problems Versus SymptomsSymptoms are conditions produced by the problem. Very often the manager sees the symptoms rather than the problem. Symptoms do not tell the entire story. A manager faces the same task when confronted with a symptom such as low profits. Something is causing the low profits. The problem is the cause of the low profits. In fact, it is good to think of a problem as the cause of the trouble, or the cause of the opportunity.

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Itme Chapter 65