Management Information System

Information System

An Information system is a set of people, procedures, and resources that collects, transforms, and disseminates information in an organization. An information system (IS) is typically considered to be a set of interrelated elements or components that collect (input), manipulate (processes), and Produce (output) data and information and provide a feedback mechanism to meet an objective.

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For example: Todays end users rely on many types of Information Systems (IS). Some are simple manual information systems, where people use tools such as pencils and paper, or machines such as calculators and typewriters. A computer based information system uses the resources of people (end users and IS specialists), hardware (machines and media), and software (programs and procedures), to perform input, processing, output, storage, and control activities that convert data resources into information products

Components of I S

Fig. 13.1: The Components of an Information System

Different Resources of Information Systems

computer based information system consists of four major resources: People Hardware Software and Data.

Continued
People Resources: Specialists systems analysts, programmers, and computer operators. End users anyone else who uses information systems. Hardware Resources: Machines computers, video monitors, magnetic disk drives, printers, and optical scanners. Software Resources: Programs operating system programs, spreadsheet programs, word processing programs, and payroll programs. Procedures data entry procedures, error correction procedures, and paycheck distribution procedures. Data Resources: Product descriptions, customer records, employee files, and inventory databases. Information Products: Management reports and business documents using text and graphics displays, audio responses, and paper forms.

I S Vs I T

Types of Information System

Information Systems

Operations Support System

Management Support System

Transaction processing systems

Process control systems

Office automation systems

Management information systems

Decision support systems

Executive information systems

Transaction Processing System

A transaction processing system (TPS) collects, stores, modifies and retrieves the transactions of an organization. Examples of such systems are automatic telling machines (ATMs), electronic funds transfer at point of sale (EFTPOS also referred to as POS). There are two types of transaction of processing: Batch processing: where all of the transactions are collected and processed as one group or batch at a later stage.

Real-time processing: where the transaction is processed immediately

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Transaction Processing System

Sales and Marketing

Manufacturing & Production

Finance & Accounting

Human Resource System

Order Processing. Advertising Sales

Statistical Analysis Ordering Raw Material

Accounting Budgeting General Ledger

Wage System Attendance Application

Process Control System

1)
Process control systems monitor and control industrial processes. Establish management information needs and formulate broad systems objectives so as to delineate important decision areas (e.g., general management, financial management or human resources management). Within these decision areas there will be factors relevant to the management decision areas, e.g., general management will be concerned about its relationship with the managing board, institute-client relationships and information to be provided to the staff. This will then lead the design team to ask what information units will be needed to monitor the identified factors of concern. Positions or managers needing information for decision making will be identified. Develop a general description of a possible MIS as a unpolished design. This design will have to be further refined by more precise specifications. For efficient management of information processing, the MIS should be based on a few databases related to different sub-systems of the organization.

2)

Process Control System

3) Once the information units needed have been determined and a systems design developed, decide how information will be collected. Positions will be allocated responsibility for generating and packaging the information. 4) Develop a network showing information flows. 5) Test the system until it meets the operational requirements, considering the specifications stipulated for performance and the specified organizational constraints. 6) Re-check that all the critical data pertaining to various sub-systems and for the organization as a whole are fully captured. Ensure that information is generated in a timely manner. 7) Monitor actual implementation of the MIS and its functioning from time to time.

Office Automation Systems

The term office automation refers to all tools and methods that are applied to office activities which make it possible to process written, visual, and sound data in a computer-aided manner.
An office automation system (OAS) facilitates everyday information processing tasks in offices and business organizations. These systems include a wide range of tools such as spreadsheets, word processors, and presentation packages. Office Automation Systems are software packages such as MS Office which include word processors, spreadsheets, databases, presentation software, email, internet, desktop publishing programs and project management software.

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A Continuum (scale) of Human Control and Automation

Fig: Human Control and Automation

Management Information System (MIS)

The MIS is defined as an integrated system of man and machine for providing the information to support the operations, the management, and the decision-making function in the organization.

Management Information System (M.I.S.) is basically concerned with processing data into information, which is then communicated to the various Departments in an organization for appropriate decision-making.

Features of MIS
An MIS must have the following features: It must be capable of handling voluminous data. The data as well as transactions must be validated. It must be able to perform operations on the data irrespective of the complexity of the operations. Often time multi-dimensional analysis is required. An MIS should facilitate quick search and retrieval of information. An MIS must support mass storage of data and information. The information must be communicated to the recipient in time. Moreover, the communicated information must be relevant.

Need of MIS
To store and manage data Management and organizations facing constantly changing problems, diverse managerial styles, and ever present information needs offer a challenging context for developing computer based information systems. MIS uses computer technology to provide information and decision support to managers, helping them becomes more effective. Developments in the young computer industry are changing corporate management style. Managers at all levels use similar data. Operating managers require data which is timely, precise, detailed, internal and historical. Upper level managers need data which is aggregated, external as well as internal, future oriented as well as historical and covering a longer span time. An effective MIS cannot be built without viable data management tools. Such tools were not generally available previously. Moreover, most organizations did not effectively use DBMS technology until two decades before. An important key to a successful MIS is the effective management of an organization's data resources.

Objective of MIS
Reach an understanding of the relevant processes on the basis of the available historic information. This element forms the basis for the development of models, required for forecasting and simulation. Provide information on the current situation, especially for early warning purposes, for instance related to issues impacting on food security, water resources or pest and disease status. Forecast changes and impacts, either natural or man-made , as an element in vulnerability assessments. Forecast the consequences of policy decisions and measures before they are implemented in reality. This implies evaluating options for several given scenarios based on the possible results and predicted consequences, and selecting the most acceptable alternative

Contemporary Approaches to information systems

Behavioral Approach
Deals with behavioral issues that arise in the development, and long term maintenance of the information system. Different disciplines, such as psychologists, sociologists, Economists, study information systems, and the impacts they have in the organizational environment. Behavioral changes can occur within the organization during, and after information system development. The key to this approach is to find the solution to the behavior, which is not a technical issue.

Contemporary Approaches to information systems

Although information systems are a collection of electrical and mechanical devices, they require the organization, and the people that work within the organization for them to be successful. Technical Approach
The technical approach uses mathematical models to test the capabilities of information systems. These disciplines include: Computer Science - concerned with methods of computability, computation & data storage and access. Management Science - emphasized the development of models for decision making, and management practices.

Operations Research
focuses on mathematical techniques for optimizing selected parameters of organizations.(inventory control, transaction costs).

Information for Competitive Advantages

Information for Competitive Advantages

Way to understand competitive advantage Five competitive forces shape fate of firm 1. Traditional competitors

2.

Competitors in market space continuously devise new products, new efficiencies, switching costs Some industries have low barriers to entry E.g. food industry vs. microchip industry Newer companies may have advantages Newer equipment, younger workforce, etc.

New market entrants

Information for Competitive Advantages

3. Substitute products and services

4.

Substitutes customers can purchase if your prices too high

E.g. Internet music service vs. CDs Can customers easily switch to competitors products? Can customers force firm and competitors to compete on price alone (transparent marketplace) The more suppliers a firm has, the greater control it can exercise over suppliers

Customers

5.

Suppliers

Information for Competitive Advantages

Information System Strategies for Dealing with Competitive Forces

Basic strategy: Align IT with business objectives

75% of businesses fail to align their IT with their business objectives, leading to lower profitability To align IT:
Identify business goals and strategies Break strategic goals into concrete activities and processes Identify metrics for measuring progress Determine how IT can help achieve business goals Measure actual performance

Information for Competitive Advantages

Low-cost leadership
Use information systems to achieve the lowest operational costs and the lowest prices E.g. Wal-Mart Inventory replenishment system sends orders to suppliers when purchase recorded at cash register Minimizes inventory at warehouses, operating costs Efficient customer response system

Information for Competitive Advantages

Information System Strategies for Dealing with Competitive Forces

Product differentiation
Use information systems to enable new products and services, or greatly change the customer convenience in using your existing products and services E.g. Googles continuous innovations, Apples iPhone Use information systems to customize, personalize products to fit specifications of individual consumers
Dell Lands Ends mass customization

Information for Competitive Advantages

Figure 3-1

Information for Competitive Advantages

On the Dell Inc. Web site, customers can select the options they want and order their computer custom built to these specifications. Dells assemble-to-order system is a major source of competitive advantage.

Information for Competitive Advantages

Information System Strategies for Dealing with Competitive Forces

Strengthen customer and supplier intimacy Strong linkages to customers and suppliers increase switching costs and loyalty Chrysler: Uses IS to facilitate direct access from suppliers to
production schedules Permits suppliers to decide how and when to ship suppliers to Chrysler factories, allowing more lead time in producing goods.

Amazon: Keeps track of user preferences for purchases, and recommends titles purchased by others

Information for Competitive Advantages

Information System Strategies for Dealing with Competitive Forces

Some companies pursue several strategies at same time

Dell emphasizes low cost plus customization of products Parker Hannifin offers products with unique features but competes on price

Successfully using IS to achieve competitive advantage requires precise coordination of technology, organizations, and people

Read the Interactive Session and then discuss the following questions: What is strategic pricing? How does it work? What data are required?

What role do information systems play in strategic pricing? What role do people play in getting a strategic pricing system to work?
What kind of impact does strategic pricing have on a business such as Parker Hannifin? What other kinds of businesses could benefit from strategic pricing? How are value chain and competitive forces analysis related to Parker Hannifins strategic pricing?

Information for Competitive Advantages

The Internets Impact on Competitive Advantage

Enables new products and services

Transforms industries Increases bargaining power of customers and suppliers

Intensifies competitive rivalry

Creates new opportunities for building brands and large customer bases

Information for Competitive Advantages

The Internets Impact on Competitive Advantage

Existing competitors: Widens market, increasing competitors,

reducing differences, pressure to compete on price

New entrants: Reduces barriers to entry (e.g. need for sales force
declines), provides technology for driving business processes

Substitute products and services: Facilitates creation of new

products and services

Customers bargaining power: Bargaining power shifts to

customer

Suppliers bargaining power: Procurement over Internet raises

power over suppliers, suppliers can benefit from reduced barriers to entry and elimination of intermediaries

Information for Competitive Advantages

The Business Value Chain Model

Highlights specific activities in a business where competitive strategies can best be applied and where information systems are likely to have a strategic impact

Primary activities

Support activities
Benchmarking Best practices

Information for Competitive Advantages

The Value Chain Model

Information for Competitive Advantages

Extending the Value Chain: The Value Web

A firms value chain is linked to the value chains of its suppliers, distributors, and customers A value web is a collection of independent firms that use information technology to coordinate their value chains to produce a product collectively Value webs are flexible and adapt to changes in supply and demand

Information for Competitive Advantages

The Value Web

The value web is a networked system that can synchronize the value chains of business partners within an industry to respond rapidly to changes in supply and demand.

Figure 3-3

Decision Support System

A DSS can be defined as a computer based information system that aids a decision maker in taking decisions for semi-structured problems. A DSS is an interactive, flexible and adaptable computer based information system that utilizes decision rules, models and model base coupled with comprehensive database and the decision makers own insights, leading to specific, implementable decisions in solving problems.

Executive Information System (EIS)

An EIS, executive Information System is a form of MIS designed for upper management and provides information which might help them make decisions on a strategic level about future directions or issues concerning managers. An executive information system (EIS) is a highly interactive system that provides managers and executives flexible access to information for monitoring operating results and general business conditions. These systems are sometimes called executive support systems (ESS). EIS attempts to take over where the traditional MIS approach falls short. EISs provide executives with internal and competitive information through userfriendly interfaces that can be used by someone with little computer-related knowledge. EISs are designed to help executives find the information they need whenever they need it and in whatever form is most useful.

DECISION-MAKING CONCEPT
A decision is choice out of several alternatives (options) made by the decision maker to achieve some objective s in a given situation. Business decisions are those, which are made in the process of conducting business to achieve its objective in a given environment. Managerial decisionmaking is a control point for every managerial activity may be planning, organizing, staffing, directing, controlling and communicating. Decisionmaking is the art of reasoned and judicious choice out of many alternatives. Once decision is taken, it implies commitment of resources. The business managers have to take variety of decision. Some are routine and others are long-term implementation decision. Thus managerial decisions are grouped as:
(a) Strategic decision (b) Tactical decision (c) Operation decision

DECISION-MAKING CONCEPT
Strategic Decision:
these are known as major decision influence whole or major part of the organization. Such decisions contribute directly to the achievement of common goals of the organization; have long range effect upon the organization. Generally, strategic decision is unstructured and thus, a manager has to apply his business judgment, evaluation and intuition into the definition of the problem. These decisions are based on partial knowledge of the environmental factors which are uncertain and dynamic, therefore such decision are taken at the higher level of management.

Tactical Decision:
tactical decision relate to the implementation of strategic decisions, directed towards developing divisional plans, structuring workflows, establishing distribution channels, acquisition of resources such as men, materials and money. These decisions are taken at the middle level of management.

Operational Decision:
operational decisions relate to day-to-day operations of the enterprise having a short-term horizon and are always repeated. These decisions are based on facts regarding the events and do not require much of business judgments. Operational decisions are taken at lower level of management.

The Classical (Rational-Economic) Model

Is prescriptive in that it focuses on how decisions ought to be made. Assumes the decision maker is completely rational (i.e., seeks to maximize the payoff and utilizes a search process that proceeds in a planned, orderly and consistent fashion) and unbiased. Assumes that the decision maker has available all the information needed to make a decision and that all possible alternatives are considered. The decision maker selects the optimum or best choice. Decision making proceeds through the following sequence of steps: problem identification, development of criteria against which alternative solutions can be evaluated, identification of alternative courses of action, evaluation of alternatives, selection of the best alternative, and implementation.

The Administrative (or Behavioral) Model

Is descriptive in that it describes how decisions are actually made. Decision makers seek to simplify problems and make them less complex because they are constrained by their individual capabilities (e.g., limited information processing ability) and by organizational conditions (e.g., availability of resources). Assumes that decision makers operate with limited (or "bounded") rationality; this means that decision makers are rational within a simplified model which contains fewer components (e.g., fewer decision making criteria, fewer options, etc.). Assumes that decision makers identify a limited number of decision making criteria, that they examine a limited range of alternatives (only those which are easy to find, highly visible, have been tried before or are only slightly different from the status quo) and that they do not possess all the information needed to make a decision.

The Administrative (or Behavioral) Model

The decision maker selects a satisficing alternative. This is an alternative that is "good enough" or satisfactory in that it meets the minimum criteria established for a desired solution. Decision making proceeds sequentially: alternatives are examined one at a time and the first satisfactory alternative that is found is selected.

Herbert-Simmons decision-making model

Simmons decision-making model there are four phases 1) Intelligence phase 2) Design phase 3) Choice phase

Herbert-Simmons decision-making model

Initially the problem comes and we are in the intelligence phase thinking of the problem as it comes and then we try to find out what the solution to the given problem and then we move to design phase. In the design phase the way and method to solve the problem is thought and we actually try analyze the problem, we try to find the algorithms and the way that can actually solve the problem and hence we use the genetic algorithm to find the solution to the given problem . After finding the method which is to be applied to the given problem we move to choice phase and here the actual work of finding the best algorithm come A mutation that increases fitness is always accepted. A mutation that lowers fitness is accepted probabilistically based on the difference in fitness and a decreasing temperature parameter.

Herbert-Simmons decision-making model

Decision-making is a process in which the decision-maker uses to arrive at a decision. The core of this process is described by Herbert Simon in a model. He describes the model in three phases as shown in the figure below:
Intelligence: raw data collected, processed and examined, Identifies a problem calling for a decision. II. Design: inventing, developing and analyzing the different decision alternatives and testing the feasibility of implementation. Assess the value of the decision outcome. III. Choice: select one alternative as a decision, based on the selection criteria.
I.

In the intelligence phase, the MIS collects the data. The data is scanned, examined, checked and edited. Further, the data is sorted and merged with other data and computations are made, summarized and presented. In this process, the attention of the manager is drawn to all problem situations by highlighting the significant differences between the actual and the expected, the budgeted or the targeted. In the design phase, the manager develops a model of the problem situation on which he can generate and test the different decision alternatives, he then further moves into phase of selection called as choice. In the phase of choice, the manager evolves selection criteria such as maximum profit, least cost, minimum wastage, least time taken and highest utility. The criterion is applied to the various decision alternatives and the one which satisfies the most is selected.

Herbert-Simmons decision-making model

An example of the Simon model would illustrate further its use in the MIS. For example, a manager finds on collection and through the analysis of the data that the manufacturing plant is underutilized and the products which are being sold are not contributing to the profits as desired. The problem identified, therefore, is to find a product mix for the plant, whereby the plant is fully utilized within the raw material and the market constraints, and the profit is maximized. The manager having identified this as the problem of optimization, now examines the use of linear programming (LP) model. The model is used to evolve various decision alternatives. However, selection is made first on the basis of feasibility and then on the basis of maximum profit.

Attributes of Information
Usability
Relevant Simple Flexible Economical

Quality
Accurate Verifiable Complete Reliable

Delivery
Timely Accessible Secure