Management information system

By M.P.Jayarama Shetty

INTRODUCTION

• Information system consists of all the components that work together to process data and produce information.

• All business information systems consists of many subsystems with sub goals, all contributing to the organizations main goal.

TERMS-INFORMATION SYSTEM & INFORMATION TECHNOLOGY

• Information system:

• An organized combination of people, hardware, software and communication networks and data resources that store, retrieve, transform and disseminate information in an organization.

• Information technology:

• Various hardware components necessary for the system to operate.

Purpose of information system

• Personal: For entertainment, enlightenment or to get information.

• Business: To arrive at sound decisions and solve critical problems.

• Efficient gathering of information, storing it for further use and manipulating it as and when necessary, helps an organization to achieve its business goals.

Role of information system• Supports business process: receipts,

payments, sales, purchases, inventory management etc.

• Support decision making: Date of purchase, how to minimize cost, how to maximize profitability etc.

• Supports competition, competitive advantage, customer friendly, offer innovative products, use of intranet, IVRs[interactive voice response] etc.

Components of information system

• 1.Data: Input that takes the system to produce information.

• 2.Hardware: Computer and its peripheral equipments, Input, Output and storage devices and also data communication equipments, eg: telephone.

Components

• 3.Software:

• Set of instructions that instructs the computer to take data, process it, display information and store data and information.

• 4.Telecommunication: hardware and software that facilitates fast transmission and reception of text, pictures, sound and animations in the form of electronic data.

Components …..

5.People: professionals and users who analyze organizational information needs, design and construct information system, write computer programmes, operate the hardware and maintain the software.

6. Procedures: Rules for achieving optimal and secure information in data processing[data security, back up, virus attacks, passwords, piracy/privacy etc.

Stages of processing in information system

• Input: Entering data in to the information system.

• Processing: Changing and manipulating the data in information system.

• Output: Getting the information out of information system.

• Storage: Storage of data and information for future use.

Capabilities of information system

• Data processing- fast and accurate.

• Data storage: capacity to store large volume.

• Information: Instant access/real time access.

• Coordination: facilitates greater coordination through accurate information sharing and effective communication.

Capabilities……

• Supports: Decision making.

• Facilitates organizational memory and learning.

• Enables differentiation of products and services.

• Facilitates modeling.

• Supports automation.

Unit-1 Introduction to information system.

• Data:Data is derived from the Latin word ‘datum’- raw facts or observations.

• Data are objective measurement of attributes/characteristics of entities like people/place/things/events.

• It may be in the form of number, a statement or a picture.

• It is a raw material in the production of information

Information• Facts or conclusions that have meaning

with the situation.

• Data to be manipulated to become information.

• Data is raw material and information is output.

• Information thus consists of data that have been retrieved processed or otherwise used for information purposes or as a basis of forecasting or decision making.

Characteristics of useful information

• Relevant-Related to a particular objective.

• Complete-All information required, incomplete information is useless.

• Accurate-Correct and true data.

• Current-Latest/updated information needed.

• Economical-deriving information at lowest operational cost.

Users of information• 1.Within the organization:

• Finance personnel, public relations, production, purchase etc.

• 2.Outside the organization:

• Government, Regulators, Auditors, Share holders etc.

• Government interferes during frauds etc, regulators- SEBI/RBI/IRDA.

• Auditors-External/Internal/Concurrent/RBI.

System and subsystem• A system is a range of components that

work together to achieve a common goal or multiple goals by accepting inputs, processing it and producing output in an organized manner.

• A subsystem is a part of a larger system.

• Organization is the system and the parts[divisions, departments, functions units etc] are the subsystems.

Types of information systems

• 1. Operations Support Systems:

• A)Support business operations- process data generated by and used in business operations.

• B)Transaction processing systems:

• Record and process data, update operational database.

Types of information systems• C)Batch processing & Real time

processing:

• Eg: Order/payrolls/sales/inventory processing.

• D) Process control system:

• Monitor and control physical process, eg: power generation, steel production, bottling plant etc.

Types of information systems

• E) Enterprise collaboration system:

• Enhance team and work group communications and productivity.

• Examples:

• Email, Video conferencing and other office automation systems.

2.Management support systems• Provide information to support effective

decision making by the managers.

• A) Management information system:

• Is an integrated user machine system for providing information to support operations, management and decision making functions in an organization. The system utilizes computer hardware and software models for analysis, planning, control and decision making.

Management support system

• B. Decision support system:

• Provides direct, interactive support during decision making process.

• Eg: Product pricing, sales/service[online services] profitability[future forecast], other financial forecasting, risk calculations etc.

Management support system

• C. Executive Information system:

• Provide critical information from variety of internal and external sources.

• Easy to use displays.

• Eg: Five years sales trend forecasting, profit planning, personnel planning, evaluating actions of competitors.

3. Other types of information system

• Expert systems: are knowledge based, act as expert consultants eg: Diagnostics systems, process monitoring system etc.

• Knowledge management systems: are knowledge based[e-learning] supports creation and dissemination of business knowledge. eg: marketing/sales strategies and access to best practices.etc.

Strategic information system

• Support activities that have strategic advantage.

• Give competitive edge.

• Eg: Ecommerce

• web systems

• shipment tracking etc.

Functional business systems

• Support operational and managerial applications related to business functions.

• Eg: Information systems that support various applications in marketing, accounting etc.

Development of infrastructure

• Access information requirements of a business.

• Identify the software requirement for getting the relevant information to support the risks.

• Go for hardware requirements to run the software.

• Use telecom/network facilities for access.

Basic hardware components

• Input devices.

• Central processing unit. CPU

• Internal memory-RAM/ROM.

• External storage – hard disk/cd/dvd.

• Output devices.

Classification of computers

• 1.Super Computers:

• Largest in physical size,

• Costs heavily,

• Use multiple processor,

• High processing speed,

• Used in weather forecasting, simulations…

2.Mainframe computers

• Less powerful and less expensive

• Ability to run multiple operations systems

• Have multiple processors

• Used in banks, Insurance companies etc.

Classification of computers• 3. Mid range computers:

• Smaller than mainframe and less powerful.

• Used as shared resources.

• Acts as server.

• 4. Micro Computers:

• PCs, Notebook computers etc.

• Generally called as workstations, used for CAD[computer aided design] and cam[computer aided manufacturing].

Business software-types of software

• What is a software!

• A series of instructions, to a computer to execute any and all process including displaying texts, manipulating numbers or copying/deleting documents etc.

• Application software

• System software

• Open source system.

Application software• A programme developed to address a

specific need.

• Performs information processing tasks for end users.

• It can be application specific or general purpose.

• Eg: software for payroll, CRM-customer relationship management, spread sheets,

• Word processor, presentation tools, graphics etc.

System software• Manage computer resources and perform

routine tasks.

• Acts as a n interface between computer and user.[file loading, copying, deleting]etc

• Develop to work in association with as many applications as possible. Application work with system software when they are developed to be compatible with that software. Eg: operating systems[Linux, windows, XP etc. Network management systems.

Open source software

Proprietary software v/s open source s/w:

Software developed and sold for profit v/s

Software developed and made available free of cost.

Sharing of source codes, solving programming problems, recognition of one’s contribution.

Eg: Mozilla Firefox, thunderbird, SQL.

Business networks & telecommunications

Advantages of telecommunications in business:

Better business communications[intranet-within organization]. Efficient business processes.[streamlined/standardized process]. Quick transmission/distribution of data [real time]. Facilitates transactions over the net. Workforce can be mobile and flexible[use of networks can easily transfer data fast].

Bandwidth and media• Bandwidth: It is speed [transmission rate]

at which data are communicated.

Transmission rate measured as bits per second[bps]. Dial up connections through regular phone lines carry only one transmission at a time.

Cable television, fiber optic cables, wireless connections carry multiple transmissions simultaneously.

Media

It is the means through which bits are transmitted.

Tangible v/v intangible-cable v/s radio waves.

Twisted pair cables: electric power lines, radio and satellite transmissions.

Ch-3. Applications of information system.

An information system is strategic if its objective is to improve competitive positions of the organization.

May include system that supports operations, management or knowledge work.

Helps firms to attract customers and retain them for an extended period of time.

Characteristics of strategic information system

• External focus:

• they change the way the firms compete in the market place.

• Innovative use of I.T:

• It is all about how to use the technology rather than which technology you use.

• High degree of projectors.

Strategies in competitive market• Differentiation of service: offering value

added service/special schemes etc of product, offering free products/credit facility for regular customers/bonus, vouchers for special customers.

• Cost leadership-for product-use of I T is to reduce process/labour cost.

• For service-use of Web/IVR etc

• For customer service-change from labor intensive to technology intensive.

Companies that focus on narrow customer segment

• Focused differentiation-company identifies a segment of the market which it can serve in a superior way. Smaller firms compete by specializing in product or service for a limited size slot.

• It could be customer segment or a geographical region. It helps in identify the customers to be served and customizing the product or service for their needs.

Cost focus

• Company serving a narrow market segment with which product or service that it offers at a significantly lower cost than competitors.

• Relatively difficult to pursue for smaller companies.

• Use of IT facilitates operational efficiencies.

Competitive focus of the companies.

• Customers

• Suppliers

• Existing competitors

• Potential substitute prodcts[diversification]

Using I S to our advantage

• 1.threat of new competitors: Use technology/expertise that is available to the competitors.

• Use barriers to entry[for the competitors]

• Obtain legal protection/IPR [intellectual property rights] for and artistic work.

• Eg: Microsoft patenting software, cell companies offering TV on mobiles etc.

I.S advantages

• 2.Intensify rivalry among the existing competitors:

• Change the basis of competition

• Eg: FED express facilitating parcel tracking. Real estate business going web etc.

I S advantages

• 3. pressure from potential substitute products:

• Track the market changes using information service and be the first mover/introducer.

• Eg:e-bay dominating on line auctions etc.

I S-advantages• 4.Bargaining power of the customer:

• Introduces switching cost eg: selling of ink jet printers bellow cost-replace a depleted ink or toner with the one that the printer manufacturer’s sell.

• Competitive tactics: the alternative the firm has-internal innovation[technology, cost-cutting, quality], Merger/Acquisition[two companies to agree], strategic alliance[for a given output/processing/capitalization etc]

Types of MIS/applications of MIS

• 1.Human resource management: I.S:

Types of applications:

a) Employee record management. Maintenance of personal records for internal and external regulations.

Payrolls, tax calculations-TDS on salary, deposits, promotion, employee photographs etc.

HRM related I.Sb) Recruitment and promotion.

Use of Intranets for posting vacancies linked to employees, PC’s enable data base search, automates selection process, automated recruitment and selection software, web searching for qualified candidates with job openings and use of tracking system to Email candidates and updates the corporate HR database with their resumes.

HRM related I S

C] Training: Improving employee skills by using multi media software/simulated trainings etc reduces training costs.

D]evaluation: evaluation of technical ability, communication skills, professional conduct etc by using evaluation software for standardizing the evaluation process, access employee and departments.

HRM related IS

E]compensations and benefits management.

Manage compensation-salary, hourly pay, commission, bonuses etc and benefits like health insurance, life insurance, retirement plans etc. Reduced amount of work of HR staff decrease the companies overhead costs if given access to the system.

Customer relationship management system.

Phases of CRM:

Acquire[new customer]: by superior job of contact management, sales, prospecting [for a certain group], marketing and order fulfillment.

Enhance[customer satisfaction]: by supporting superior service through a responsive team of sales and service specialists.

CRM-phases of CRM contd..

Retain: help identify and reward most loyal, profitable customers. Companies must not only acquire new customers but also retain existing customers. Customer profitability analysis statement. Concessions of various nature extended to HNI/corporate customers who facilitate volume growth and profitability, production and productivity.

CRM-phases

Goals of CRM system:

Finding Data-reduce time

Knowledge- enable sharing across the company.

Sales force-streamlining and automation.

Marketing efforts-Market research[looking for references].

CRM

CRM systems:

Credit information about customers' likes and dislikes’. Use statistical models to predict sales volumes of different products and different designs of the same products aiding manufacturing capacities and production live, enabling budgeting.

Inventory information systemsWhat is inventory:

Stock of raw material and finished goods available for the firm for production and sale.

It needs to be controlled to have optimum level of investment in all types of inventories.

Stock levels should be always balanced. High level of inventory leads to financial burden.

Objectives of inventory-I STo maintain optimum level of raw material

and finished goods.

To prepare purchase order and inventory status reports accurately and on time.

To prepare various analysis reports-defective materials, quantity ordered and received etc…..

To generate reports to assist the management for making effective and timely decisions

Inputs to the systemData of suppliers, vendors, buyers, raw

materials and finished goods.

Goods received notes indicating the quantity

received. Material requisition slips indicating the quantity used.

Delivery challans indicating quantity sold of various items to buyers.

Material rejection note indicating quantity of items rejected to vendors and reasons.

Targeted marketingUse database to define ‘prospective

customer’(consistent) accurately.

Using of telemarketing and web for personalized marketing.

Use personal information of the customer to identify their interests, tastes, buying habits etc when they use the web.

Customer service: web enabled service, automated customer service, use of IVR etc, answers to FQRs on the website etc..

Sales force automationNote books with internet facilities to sales

people with specialized software for manipulating the customer information.

Generation of e-bills and electronic payment of bills.

Enabling immediate order fulfillment, loading the sales information to enable order processing, manufacturing shipping and invoicing.

What CRM system does ?Instant and complete view of the customer.

Single and complete view of the company and its products/services for customers.

Integrating and automation of customer servicing processes.

Integration of related business operation with IT framework of web enabled software and databases.

Better service for customers.

Inventory information systemWhat is inventory:

Stock of raw material and finished goods available in the firm for production and sale.

It needs to be controlled to have optimum level of investment in all types of inventories. Stock levels should be always balanced. High level of inventory leads to financial burden.

Objectives of inventory I.S.

To maintain optimum levels of raw materials and finished goods. To prepare purchase order and inventory status reports accurately and on time. To prepare various analysis reports-defective materials, quantity ordered and received etc. To generate reports to assist the management for making effective and timely decisions.

Inputs to the system

Data of suppliers, vendors, buyers, raw materials and finished goods.

Goods received notes indicating the quantity received, material requisition slips indicating the quantity used. Delivery chalans indicating quantity sold of various items to buyers.

Material rejection note indicating quantity of items rejected to vendors and reasons.

Output from the system1.Purchase order with details.

2.Purchase book-for quantity & other details.

3.Inventory status report-quantity sold, received, issued and closing balance.

4.Materials return receipt-quantity of items rejected with details.

5.Materials transfer reports- issued to other branches or departments.

6.Purchase analysis report-indicating quantity and other details of items purchased from various suppliers.

Output from the system contd..

7.Inventory management system does not make decisions or manage operations. It provides information to efficiently manage materials, people and equipment and communicate with the suppliers and customers.

8.It also provides information to managers to make accurate and timely decisions to manage operations.

Accounting information system-AIS

AIS is the system of records that a business keeps to maintain its accounting system.

It records, processes, and reports events using accounting methods to achieve accounting objectives.

Purpose of AIS is to accumulate data and provide decision makers, investors, creditors and managers with information to make decisions/generate reports.

What AIS does?Help record transactions, collect and process

transaction data, produce periodic statements, disseminate the information to the interested parties and helps in creating the reports to the managers.

AIS facilities:

Cost accounting, accounts payable & accounts receivable details/data.

Creation of financial reports.

Generation of sales information.

Expert systemArtificial intelligence-AI.

It is a field of study that explores how computers can be used for tasks that require the human characteristics of intelligence, imagination and intuition.

It includes the following branches of study:

Problem solving

Natural languages

Robotics

Expert system-how the computer learns

Computers learn, given a knowledge base(a set of facts and rules about those facts).

Next, the computer uses an ‘inference engine’(a software) to access, select and interpret a set of rules to make up new facts.

Inference engine-combines data with the data relationships stores to diagnose interpret, suggest the solution.

What expert system does?Performs at a human expert level in a

specialized domain.

Uses symbolic reasoning to solve the problems.

Artificial intelligence(AI) applications process strings of characters that represent real world/entities or concepts.

The term ‘customer’ and ‘profit’ are examples of such symbolic strings.

E.g.-sales, purchases etc

What expert system does

Applies proceedings to a solution based on experience/informal methods by trial and error to guide reasoning process.

Expert system used in….1.classifications-identifying an object based

on certain characteristics.

2.diagnosis-detect and understand malfunction disease from data.

3.monitoring-continuous observations of data to check any deviations to take remedial action.

4.Process control-controlling a physical process based on monitoring.

Expert systems-benefits

Faster completion of a task than a human expert.

Enables immediate response, decision, diagnosis.

Error rate of successful expert system is very low, as it has high performance.

Expert system makes consistent recommendations.

Expert system benefits…..

Ease to get everything at one place, as it operates through networks and engines.

Captures scarce expertise, best professionals.

Facilitates building up of organizational knowledge, e-knowledge, e-learning.

Can operate in an environment that are hazardous for human experts.

Expert systems-limitations

Limitations of technology-no automatic learning capacity.

Problems with knowledge acquisition-lack of data accessibility. Unwillingness/non availability of domain experts.

Long term weakening of innovation in the performance of the people.

Unit-4.Decision making and support systems

Introduction:

Decision-act or process of deciding.

Deciding a settlement of a question.

Arriving at a formal judgement.

Decision supportDecision support:

Why support-to make quality decisions.

To arrive at right decision. Large amount of information requires great amount of processing.

Use of computers facilitates effective and efficient processing.

Decision making-making the decision a necessity.

Decision making process

1.intelligence-collection of facts and ideas.

2.design-method of considering the data.

3.choice-collecting the optimum course of action.

Types of problems(decisions)

1.Structured problem: programmed decision

-can be delegated or outsourced.

-cost of solving the problem is low compared to the non programmed problems.

-can be made with the help of computer system.

Unstructured problems-non programmed decisions

-cannot be delegated as they are managed directly.

-higher authority cannot delegate but take decisions.

-are difficult to structure in logical or mathematical forms.

-computers may be used to process large volumes of data.

Unstructured problems……

-acquisition of capital projects or purchase of scarce and capital items under fluctuations/fluctuating price conditions, new product service/new product development(NPD) etc…

-cost is high. Hence higher authority must be in charge.

Unstructured problems….

Semi structured problems or semi programmed decisions.

Intelligence-design-choice.

-at least one phase of the three phases of decision making can be handled by defined procedure.

-middle level officials taking decision.

-considering factors-demand and supply.

Decision support systemDSS is a computer based information

system.

Helps managers select one of many alternative solutions to a problem.

DSS are used at all levels of organization.

It is also used as business intelligence or management support systems.

Evaluate various alternatives, select the best-use of intranet to cut cost, just in time(JIT) for stock etc…

How decision support system works(DSS)?

Process of DSS

Users enter a request in a convenient manner(dialogue management module).

Computer searches vast amount of data to focus on relevant facts(data management module).

Computer processes the data through desired modules.

Computer presents the results/output in easy to understand formats.

Component/structure of DSS

Decision support system:

1.Data management sub system.

2.Module management sub system.

3.Dialogue management system.

Component/structure DSS….1.Data management system.

It is data base/data warehouse. Data base may be specially created or already existing.

Takes care of data mapping, data validation, data integration and data processing.

Mapping-selecting required customer.

Validation-verification of data& be available throughout. Eg: data about raw materials, price, demand, etc for last 5 years.

2.Module management sub system

Offers different models for representation.

Models are used to predict output on the basis of different inputs.

Models may be based on experience or mathematical research to establish relationship between the factors.

Models can be fixed or dynamic.

2. Module management contd…

Companies usually do not share the details of the models-private/confidential due to other competitors.

Used for research and development.

Images/modules on how to produce

Control of price/demand and supply(market)

Eg:Models developed by airline industry to maximize revenue or engineering model.

3.Dialogue management sub system.

DSS answers the question like, if increase the price of the product ‘x’ by Rs:2 what will be the demand?-what, if analysis.

OR

What would it take in terms of input factors to achieve a particular performance? (goal seeking analysis).

Facilitates user interaction.

Dialogue management subsystem….

Prompts a user to select a model, access and select database, enter programmes.

Dialogue may be in the form of menus, commands etc….

Results may be displayed in a table graph.

Better interpretation and contradiction can be made easily.

Features of DSS

Supports decision making-even to process larger volume of data, computer assistance is required.

Compatibility-faster processing speeds.

Faster rate of reaching a decision-facilitated by in built models-customized mode to satisfy one’s needs.

Features of DSS……..

supports easy modification of models, eg;

CBS Software-modification & Customization.

Finacle introduced & upgraded for better operations.

High quality decision taking is made possible by integration of available information.

Features of DSS……

User friendly-facilitating problem solving at all levels in the organization.

Efficient and effective.

Assists the user at any time.

Problems solved.

Benefits of DSSImproves personal efficiency.

Expedites problem solving(speed up the progress of problems solving in the organization)

Facilitates interpersonal communication.

Promotes learning and training.

Increases organizational control.

Generates new evidence in support of a decision.

Benefits of DSS…….

Creates a competitive advantage over others.

Encourage exploration and discovery on the part of the decision maker.

Reveals new approaches to thinking about the problem space.

Helps automate the managerial problem(all branches are inter connected).

Decision-analytic DSS

User of informationa) Within the organization-finance

personnel, public relations, production, purchases, etc…

b) Outside the organization: Government, Regulators, auditors, shareholders etc..

Government interferes during frauds etc.

Regulators-SEBI(securities and exchange board of India)

Auditors: external-outside the organization

Internal-within the organization.

System and subsystemA system is a range of components that

work together to achieve a common goal or multiple goals by accepting input, processing it and producing output in an organized manner.

A subsystem is a part of a larger system.

Organization is the system and the parts(divisions, departments, functions, units etc..) are the subsystems.

CH-3 applications of inf. system

Strategic information system.

An information system is strategic if its objective is to improve competitive positions of the organization.

May include system that supports operation, management or knowledge work.

Helps firms to attract customers and retain them for an extended period of time.

Characteristics of strategic I.S.

External focus: they change the way the firms compete in the market place. E-market-online purchasing.

Innovative use of I.T: it is all about how to us the technology rather than which technology you use.

High degree of projectors: standardized/streamlined/processed.

Strategies in competitive market1.Differentiation:

Of service-offering value added service/special schemes etc…

Of products: offering free products/credit facility for regular customers, bonus, vouchers for special customers.

2.Cost leadership-for product-use if IT is to reduce process/labor cost.

For service-use of web/IVR etc..for customer service change from labor intensive to technology intensive.

Companies that focus on narrow customer segment

1.Focussed differentiation:

Company identifies a segment of the market which it can serve in a superior way. Smaller firms compete by specializing in product or service for limited size slot.

It could be a customer segment or a geographical region.

It helps in identify the customers to be served and customizing the product or service for their needs.

Focus on narrow cust.segment

2.Cost focus:

Company serving a narrow market segment with which products or service that it offers at a significantly lower cost than competitors.

Relatively difficult to pursue for smaller companies.

Use of I T facilitates operational efficiencies.

Competitive forces of the companies

Customers

Suppliers

Existing competitors

Potential substitute products