Management Information System

Conceptual Foundations

MIS

What is MIS?

What is Management?

What is Information?

What is Systems?

Why MIS?

Today’s Manager is confronted with TWO main challenges:

he/she has to

TAKE QUICK DECISIONS PROCESS A LARGE VOLUMINOUS INFORMATION

Input in Decision Making

For Decision Making

INFORMATION is the necessary and vital input

Data

A stream of raw facts about anything

Examples:.

Record of all the players in one day cricket matches.

Detailed Marks of all students in a class.

Business data as obtained from various business houses.

Information

Processed data, which is useful to the recipient. Examples:

Profit of the company in the current year The highest ever score in one day cricket First ten toppers in a class The top 50 business houses of India.

Data and Information

System

A system is a group of interrelated components working together towards a common goal by accepting inputs and producing outputs in an organized process.

System has three basic components:

Input – Data, Raw material, human effort.Processing- Manufacturing process, calculation , manipulation.Output- reports, finished goods, services.

System has two additional Components:

Feedback – data about sales performance is feedback to sales manager.Control- monitoring and evaluating to determine whether the system is

moving towards the achievement of goal.

A business is an organizational system where economic resources ( input) are transformed by various organizational processes ( processing) into goods and services ( output).

Information system provide information ( feedback) on the operation of the system to management for the direction and maintenance of the system ( control).

Economic Resources - People, Money, Material

Organizational Processes – Production, Marketing, Finance, HR

Goods & Services- Products, Services, InformationPhases of an Information System

Information system

It is an organized combination of people, hardware, software, communication networks and data that collects, transform and share information in organization for a specific purpose.

Information System Components

Information system Components

People Resources: People are required for the operation of all information system. These people resources include end users and IS specialist.

End Users: They are people who use an information system or information it produces. They can be accountant, salesperson, clerks, customers or managers.

IS specialists: They are people who develop and operate information system. They include system analyst, programmers and other technical persons.

System analyst design information system based on information requirements of end users.Programmers prepare program based on the specification of system analyst.

Hardware resources: It include all physical devices and material used in information processing.

Computer system: It consists of CPU, video monitors, printers, scanners, keyboard, mouse, floppy disk, track ball etc.

Software resources: It include all set of information processing instructions as well as instruction to control hardware. E.g. of software resources:System software: OS that control and support the operation of computer.

Application software: These are program that direct processing for particular use of computers by end users. e.g. Payroll program.

Data Resources: Data is the raw material for information system. E.g. Product description, customer records, employee files and inventory database.

Network resources: Networking is essential for successful operation of organization and their computer based information system. Network resources includes:

Communication media : Twisted pair cable, coaxial cable, fiber-optics cable and communication satellite system.

Network support: Modem, hub, routers, NIC,TCP/IP and other communication control software.

Information products: Management reports and business documents using text and graphics display etc.

Information Systems in Organizations

Information Systems are a critical component of a successful organization today.

Information Systems provide a high level of computer automation to support business functions such as: Accounting Finance Marketing Customer Service Human Resource Management Operations

Information systems include hardware, software, processes, and people. The role of an information system is to process data into information using

information technology, business processes, and people resources. Information Technology is thus a component of Information Systems.

Information systems generally use a three-phased model of input, process, and output.

Role of Information Systems in the Enterprise

Business organizations have become more complex due to increased layer of management hierarchy and increased level of coordination across departments. Each department has different information needs.

No single information system can support all the business needs of an organization.

Management is generally categorized into three levels- Strategic, Middle, and Operational. Each management level has different information requirements.

Information system perform three vital role in any type of organization.

Support business operation: E.g. Retail store use information system to record customer purchase, keep track of inventory and evaluate sales.

Support Decision making: E.g. Decision on what need to be added or discontinued or what kind of investment they require so they gain advantage over other retailers in the competition for customers.

Support strategies for competitive advantage: E.g. Decision to install touch-screen catalog ordering system in all stores with web sites for online shopping. This attract new customers and that give a business comparative advantage over its competitors.

Management Pyramid with Information Requirements

Decision support in business

Level of management decision makingTop management : Board of directors , CEO and top executives develop

overall organizational goals, strategies and objectives.Middle management: Managers, they develop short range plans,

schedules and objectives for their sub-units of the company.They allocate resources and monitor the performance of their organizational sub-units.

Operational management: Supervisors , sales executives , develop short range plans such as weekly production schedules.They direct the use of resources and perform the task according to procedures and within the budget and on schedule time.

Decision structure

Operational management: Decision at this level is Structured.Structure decision involve situation where the procedures to follow when decision is needed can be specified in advance.

E.g. Inventory reorder decision.Middle management: Decision at this level is Semi structured.

Some decision procedures can be specified , but not enough to lead to a definite decision.E.g. Setting market budgets for consumer products.

Top management: decision at this level is Unstructured.Unstructured decision involve situation where it is not possible to specify in advance most of the decision procedures to follow.e.g. decision related to long term strategy.Development projects for the next year

Management Level Functions

Information Needs of Different Level Managers

Strategic Planning Level

Operational Control Level

•Structured•Programmed•Historical•Exact•Internal

•Unstructured•Non-programmed•Futuristic•Inexact•External

Information system activities

Input of data resources: E.g. Data about sales transaction can be recorded on source document such as sales forms. Then salesperson capture sales data using computer keyboards or scanning device.

Processing of data into information: E.g. Data received about sales can be :(1) added to a total sales result.(2) compared to standard to determine eligibility for a sales discount.(3) sorted in numerical order based on product identification number.(4) classified into product categories ( such as foods or non foods items) (5) summarize to provide a sales manager with information about various products categories.(6) use to update sales record

Output of information products: Information in various forms is transmitted to end users and made available to them in output activity. Common information products are video display, paper documents, message,, forms, reports, graphics display etc.

Storage of data resources: It is the basic system components of information system. Storage is the information system activity in which data and information are retained in an organized manner for later use. Common data elements are fields, records, files and database.

Levels of information system

Personal information system: An individual is using personal computer to perform some business functions. Components are data, program and individual person.

Workgroup information system: In this personnel computer connected together in a LAN . Many users collect , share data using the interconnected hardware. ( e.g. Sales Department).

Enterprise Information system: In this system is based around a centralized database with computers for users in each department.

Classification of MIS

Types of Information system

Types of Information Systems

Transaction Processing Systems

Decision Support Systems

Management Information Systems

Executive Support Systems

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Level- II

Level- III

Operation Support System

Transaction Processing System: This system record and process data resulting from business transaction.

E.g. Information system that process sales , purchase , and inventory changes.

They produce customer statement , sales receipts, purchase order , financial statement etc.

Transaction Processing System

TPS support routine business activity such as monitoring, collecting, storing, processing information for business activities.

TPS is the backbone of organization’s information system. Business transaction occurs when a company produce a product or provide

a services.

E.g. To produce a LCD, a manufacture need to buy materials, pay for labor and electricity, ship LCD to customer, bill customers and collect money. A bank that maintain the company account must keep account balance up-to-date, accept deposit and mail a monthly statement.

Each transaction may generate a additional transaction.E.g. purchasing material may change the inventory level, paying an employee reduce the cash on hand.

Objective of TPS

Primary goal of organization is to provide all the information to needed functional areas so to keep the business running properly and efficiently.

To provide timely documents and reports, to provide necessary data for top and middle system such as MIS, DSS, to assure accuracy and integrity of data and also to protect data from unauthorized users.

Characteristics of TPS

Large amounts of data are input, processed and output. TPS processes information on a regular basis. Daily, weekly etc. High reliability is required because TPS can be viewed as blood line of

organization, interruption in the flow of TPS data can be failure for the organization.

A high level of security , integrity is needed. Issues such as privacy of data are strongly related to TPS.

High level of details is observable. Structured format for input and output of data. Output data are formatted in

standard way.

Activities of TPS

First data re collected by people and entered into the computer via any input devices.

System process the data in two ways : batch or real time processing.

Batch Processing:Transaction data is accumulated over a period of time and processed periodically.

Real time processing : Data is processed immediately after a transaction occurs.

E.g. system at many retail store use electronic cash register terminal to electronically transmit sales data over telecommunication links to regional computer center for immediate ( real-time) or weekly( batch) processing.

The data of TPS stored in two file: Transaction file and Master file.

Transaction file: It contain the individual transactions that took place during a specified time. E.g. a purchase order from a vendor or the receivable amount of specified client on given data include in transaction files.

The information in transaction file is updated whenever the transaction occurs.

Master file: It is a Parent file. Every transaction of transaction file are stored in master file.

TPS for Ford Motor Company

Existing system : When the purchasing department wrote a purchase order, it sent copy to accounts department.

Later on when material received, the inventory department sent a copy of receiving documents to accounts department.

Meanwhile the vendor also sent an invoice to accounts department.

If the purchase order, receiving documents and invoice matched then accounts department issued a payment in case of mismatching hold up the payment.

New System: Invoice less Processing.

When the purchasing department initiates an order, it enter the information into an online database.

It doesn’t send a copy of purchase order to anyone.

When the goods arrive at the receiving point, the receiving clerk check the database to see if the goods correspond to outstanding purchase order. If so, he accept them and enter the transaction into the computer system, if he can’t find a database entry for the received goods, or if there is mismatch, he simply return the order.

New approach matching done automatically. And computer prepare check and send to the vendor.

Business Transaction in organization

PayrollEmployee Time cardEmployee Pay and deduction

PurchasingPurchase orderPayment

SalesSales recordInvoice and billingAccounts receivableSales returnShipping

ManufacturingProduction reportsQuality control report

Finance & AccountingFinancial statementsTax recordsExpense accounts

Inventory Management

Material usageInventory levels

Components Of TPS and Processes

The ledger: Maintain the ledger involve large number of simple transaction.

Order processing: Order for goods or services flow to company electronically, by phone or on paper.

Account payable and receivable: It list the credit, debit and balance of each customer or vendor.

Receiving and shipping: whenever goods are received or shipped transactions are created. E.g.. when item are shipped customer need to be billed, inventory need to be updated.

Inventory: There are three categories of inventory: finished goods, work in process and raw material.

Periodic reports and statements: cash-flow statements, payroll summaries, productivities summaries etc.

Fixed assets management: Organizations own a large amount of fixed assets such as buildings, cars and machines. These assets depreciate over a time. It is necessary to keep record of original cost of each item, the depreciation rate used for tax purpose, book value for each assets.

Payroll: Preparing the periodic payroll was one of the first application of computer in business. Preparing payroll is a routine computer job that involve computing gross salary during a given period , deduction etc.

Structured Problems and their Software

Problem Software

Allocation of resources Linear, nonlinear programming

Project management PERT

Inventory control Inventory management model

Forecasting results Forecasting models, regression analysis

Transporting and distributing goods Transportation models

Matching item to each other Assignment Model

Predicting market share Markov chain analysis, simulation

Process Control System: This system monitor and control physical processes. In which decision adjusting a physical production process are automatically made by computers.

E.g. Automatic inventory reorder decision. Office Automation System: It is a type of information system that use a

variety of information technologies to help people work together.

It use e-mail, chat, videoconferencing to share ideas , share resources etc.

Goal of this system is to use IT to enhance the productivity and creativity of teams and workgroup in modern business enterprise.

Management Support system: When information system focus on providing information and support for effective decision making by managers ,they are called management support system.

Management Information System: MIS are most common form of management support system.

It provide end users with information that support their day to day decision making needs.

It provide variety of reports.

E.g. weekly sales analysis reports etc.

Role of MIS

Role of MIS in organization can be compared to the role of heart in the body. The information is the blood and MIS is the heart.

MIS ensure that inappropriate data is collected from various sources, processed and sent further to all the needy destination.

The system is expected to fulfill the information needs of an individual, group of individuals, managers etc.

MIS reports

Types of report provided by system:

Periodic Scheduled Reports: It provide information to managers in pre specified format designed to provide managers with information on regular basis. E.g. Weekly sales analysis reports and monthly financial statements.

Exception Reports: Reports are produced only when exceptional condition occur. E.g. Credit Manager can be provided with reports that contain only information on customers who exceeds their credit limits.

Demand Reports and responses: Information is provided whenever a manager demand it. E.g. DBMS query language and report generators allow managers at online workstations to get immediate response or reports as a result of their request for information. Manager do not have to wait for periodic reports to arrive as scheduled.

DSS

Decision support system is an computer based system which help decision makers utilize data and models to solve unstructured problem.

DSS are computer based information system that provide information support to managers during decision making process.

Decision Support system: It allow decision makers to retrieve data and test alternative solution during the process of problem solving.

E.g. Airline DSS helps manager to decide how much to overbook and how to set price for each seat so that plane is filled up and profit are maximized.

Decision Support System

DSS rely on model base as well as database as system resources. DSS model base is a software component that consists of model used in

computational purpose and analytical routine that mathematically express relationship among variables.

E.g. how changes to selected variable affects other variable.

If we cut advertising by 10% what would happen to sales.

Making repeated changes to selected variable until a chosen variable reaches a target value.

Let try to increase in advertising cost until sales reach 1 million.

DSS software package can combine model components to create integrated model that support specific type of decision.

DSS software typically contains built in analytical modeling and also enable you to build your own models.

DSS Packages e.g.

Insurance: Risk advisor .

Telecom: NCR custom retention program.

Analytical Modeling

What –if analysis: observing how changes to selected variables affects other variables.

E.g. If we cut advertising by 10 percent what would happen to sales. Sensitive analysis: Observing how repeated changes to a single variable

affect other variables.

E.g. Let’s cut advertising by $100 repeatedly so we can see it s relationship to sales.

Goal-seeking analysis: Making repeated changes to a selected variable until a chosen variable reaches a target value.

E.g. Let’s try to increase advertising until sales reaches $1 million.

Optimization analysis: Finding an optimum value for selected variables, given certain constraints.

E.g. You could try to determine the highest possible level of profits that could be achieved by varying the value for selected revenue sources and expense categories.

Changes to such variable could be subject to constraints such as limited capacity of production process or limit to available financing.

Characteristics of DSS

DSS provides support for decision makers mainly in semi structured and unstructured situations by bringing together human judgment and computerized information.

Support to provide for various managerial levels, from top executive to managers.

A DSS is easy to construct ( even by end users). User friendliness, flexibility, strong graphic capabilities and language that resemble English can greatly increase the usability of DSS.

Components of DSS

Data management: It include database which contain relevant data for situation, managed by DBMS.

User interface: User can communicate and command the DSS. Model management: This include software package with financial,

statistical models that provide the system analytical capabilities.

These components constitute the software portion of DSS. They are housed in computer and can be facilitated by additional hardware and software.

DSS Components

Who use DSS

Decision makers use DSS in two ways.

In terminal mode decision makers is the direct users of system.

In intermediary mode decision maker use the system through intermediaries, who perform the analysis and interpret and report the result.

The decision makers does not need to know how the intermediary used the system to arrive at the requested information.

Three type of intermediaries are:Staff assistant: Person have specialized knowledge about management problems and some experience with decision support technology.

Expert tool users: Person is skilled in the application of one or more types of specialized problem solving tools.

Business Analyst: This person has general knowledge of the application area, administration education and skills in DSS construction tools.

Technology level of DSS

Specific DSS: The final product or DSS application that actually accomplishes the work called specific DSS.

DSS generators: They are integrated package of software that provide a set of capabilities to build a specific DSS quickly, inexpensively and easily.

DSS tools: It is the lowest level of DSS technology. They are the software utilities or tools. These elements facilitate the development of either a DSS generator or specific DSS.E.g. DSS tools are programming language, graphics, query system, random number generators and spreadsheets.

Building DSS

The development process of DSS is similar to the development of any other applications except that the process of prototyping .

This involves series of short construction steps with immediate feedback from users on issues ranging form the correct information needs to the way the output is to be presented.

This approach involves four activities: Select an important sub problem:

The user and the builder jointly identify a sub problem for which the initial DSS is constructed. The sub problem should be small enough so that the nature of the problem, the need for computer based support, and the nature of that support are clear.

Develop a small but useable system to assist the decision makers:No major system analysis is involved. The system should be simple.

Evaluate the system and improve it, then evaluate it again:At the end of each cycle, the system is evaluated by the user and the builder. The evaluation mechanism is what keeps the cost and the effort of developing a DSS consistent with its value.

Expand and modify the system in cycles:All the analysis-design-construction-implementation-evaluation steps are repeated in each successive refinement.

This process is repeated several timers until a stable system evolves.

There is always balance of effort and cooperation between the user and the builders, the users takes the lead in utilization and evaluation activities while the builder is stronger in design and implementation phases.

DSS in health care sector

Department heads receive four graphs on a single piece of paper to see their departmental productivity, their workload, their hours worked and the impact of their productivity on salary.

MIS and DSS

MIS DSS

Provide information about the performance of the organization.

Provide information and decision support techniques to analyze specific problem.

Pre specified format Flexible format

Information produced by extraction and manipulation of business data

Information produced by analytical modeling of business data.