Overview of business systems

Management Functions Levels of Management and their information requirements

Measure And Evaluate PerformanceAgainst Budgets/Targets

Establish Organizational Mission,Goals, objectives And Policies

Develop Strategic, TacticalAnd Operational Plans

Execute Plans

Classical Management functions have been enumerated as:

Planning Organising Staffing Directing Controlling Integrating

Planning includes formulation of:

Mission Objectives Policies Programmes Budgets Schedules Procedures

Organising:

Establishment of authority-responsibility relationships.

It includes: Identification and grouping of activities Definition & delegation(authorizing

subordinates to make certain decisions) of responsibility

Authority

Staffing : Provision of adequate human

resources It includes: Selection Communication Participation Counselling Training Compensation Dismissal

Directing:

It includes : Supervising Guiding Communication & Motivating Decision-making

Controlling :

It includes : Laying down performance standards Performance measurement Variance interpretation Corrective action

The decisions, a manager takes depend upon the manager’s responsibilities and his position in the organizational hierarchy.

Top Level Managers Middle Level Managers Low level Managers

Top Level Managers: These must have general understanding of the organization's activities. Since they have charged with risks and making major policy decisions on such matters as new product development, new plant authorizations and etc they need to type information that will support these long-range strategic plans and decisions.

Middle Level Mangers: These are responsible for making tactical decisions that will allocate the resources and establish the control needed to implement the top level plans.

Low Level Managers: These make day-to-day operational decisions to schedule and control specific tasks. The actual results of an operation may be checked against planned expectations and take corrective measures.

The word data is the plural of datum, which means fact. Data are independent entities and are unlimited in number.

The term information is generally considered to designate data arranged in ordered and useful form.

Thus, information will usually be thought of as relevant knowledge, produced as output of processing operations

Information is needed in virtually every field of human thought and action. At a personal level, if you always had high-quality information you could take better advantage of your future career opportunities and you would be better equipped to make other personal decisions

But besides being essential to individuals, information is also needed by managers in organizations. Managers at all levels must perform such basic management tasks or functions as planning, organizing, staffing, and controlling

Managers at the lower operating levels need information to help them make day-to-day operating decision. At the top levels, however, information is needed to support long range planning and policy decisions.

  

In figure above, we see that at the lower managerial level’s more time is generally spent in performing control activities, while at the upper levels more time is spend on planning

Planning is most pervasive of all managerial functions.

It also requires maximum information support for decision making.

Normally planning is undertaken at three levels in organizations:

1. Strategic or long term planning2. Tactical or medium term planning3. Operational or short-term planning

Effective functioning of any organization depends on existence of a system which manages flow of data and supplies relevant information to concerned decision makers.

This system is the means by which data flows from one person or department to another and it can encompass everything from inter office mail and telephone links to a computer system that generates periodic reports for various users.

Information systems, serve all the functions or department of a business, linking them in such a way that they effectively work towards the organizational purpose.

Modern organizations have to maintain large volumes of data about various entities of interest - products, processes, people, customers, competitors, equipment, facilities, suppliers, etc.

Therefore efficient data management / information systems are essential for managing organizations effectively.

Data is basic building block of organizational information system.

 

Primary key is the key data element which will identify the entity uniquely. With this data element we can enter other data elements. It is possible that there are two or more data elements which can uniquely identify an entity.

Example: A student can be identified uniquely both by his/her roll number as well as student registration number

Data elements, other than the primary

data element, are called secondary data elements.

Example: For a invoice, invoice number is the primary key and other details such as its date, customer number, value etc. are secondary data elements.

Used for reference and analysis purposes.

Organization stores data for planning, forecasting and taking different decisions and actions.

These actions are largely based on the historical data.

Information has economic value-costs, benefits, and opportunity costs. Therefore, we would like to maximize its value.

Accuracy:

It is a ratio of correct information to the total amount of information produced over a period.

Reliability:

Ensures that system should not produce dangerous or costly failures when it is used in a reasonable way.

Timeliness:

The value of information also depends on when it is made available to the decision maker and how quickly system responds to user request for information.

All these qualities of information are major concerns of the information system manager.

Not only the information must be readily available but if not stored properly, intact in a classified and indexed manner, its retrieval time will be high even for a computer.

Computer-based data processing systems can be used in practically all areas of business to improve efficiency and increase productivity.

Major Applications:

Listed below are some of the major data processing applications in a typical manufacturing organization:

Marketing and sales management: Market research Order processing Sales analysis

Production management:

Production planning and scheduling Progress monitoring and control Maintenance planning and control

Materials management: Materials requirement planning Purchasing Stores and inventory control Human resources management: Manpower planning Recruitment and selection Training and development Accounting and financial management: Payroll Budgeting and budgetary control Financial

A typical business data processing system consists of the five parts as shown below.

 

Outputs: • The very purpose of designing a business

system is to produce outputs which should help managers in taking various decisions.

Inputs: • For producing outputs, the system will require

data about various activities that are taking place both within as well as outside the

organization. Stored Data: For producing useful outputs, a business

system needs to store a lot of data about entities of concern to the system. The stored data may relate to the past as well as current status of business.

Processing Logic:

• Step-By-Step logic of generating outputs, starting with inputs and using stored data. This becomes the basis for writing computer programs.

Procedures:

• Procedures are designed to link and tie-up the above mentioned four components of business system together. Procedures lay down the methods, schedules, and responsibilities for various activities necessary to operate the business system successfully.

Examples for business Processing Applications:

The Payroll System The Inventory Control System The Financial Accounting System

The Payroll System:• The purpose of the system is to ensure

accurate and prompt payment of wages and salaries to all employees.

• Various parts of the system will be as follows:Inputs : Employee-no, attendance date,

overtime date, loan, etc.Outputs : Pay-slip, pay ledger.Stored Data : Employee-no, name, designation,

department, salary grade, basic salary,increment date, leave record, cumulative salary

data, etc.

Processing Logic• Compute salary using basic salary and

attendance and leave data. Add poverty payment to get gross salary.

• Compute deductions - P.F., income tax, loan recovery etc.

• Compute net salary.• Print pay slip, pay ledger, etc. Procedures• Attendance data will be provided by the time

office by first of every month for the previous month.

• Leave records will be provided by the head of the department in which employee is working.

• Input data will be used to update employee record as well as produce various outputs. The data processing department, will process data and distribute the outputs to the concerned departments.

Inventory Control SystemThis system controls the contents and

changes made in the inventory of various items in the organization.

• Supporting data files contain details of all items in the inventory and related costs.

Input: Vendor invoices; Memos of Goods : Received, Returned Transferred; Requests for stock, etc.

Output: Listings of All Inventory Items; Stock on Order; Specially Ordered Goods; Critical Stock Items; Cost data are the outputs. Considering the AJC of money that can be tied-up in an inventory, management must have reliable information.

Financial Accounting System: The classification, recording and summarization

of monetary transactions is defined as financial accounting.

Although there is some management information generated in financial accounting, the primary purpose is to paint a financial picture of the organization for investors and creditors and to satisfy legal requirements.

Monetary transactions receipts and expenditure of funds are made available to the financial accounting module through the database and are maintained in journals.

Periodically, journals are used to update basic financial statements, such as

• Balance sheet• Income statement, etc.• The process involved in the preparation of

these statements rarely go beyond simple calculation and report generation