Types of Information systems

Transaction processing systems and Management information systems

Different Kinds of Systems

Four main types of IS serve four different organizational levels:

1. Operational-level systems2. Management-level systems3. Strategic-level systems

Operational level systems

• To answer routine questions and track the flow of transactions through the organization. Therefore, information generally must be easily available, current, and accurate.

• Supporting operational managers by keeping track of the elementary activities and transactions of the organization, such as sales, receipts, cash deposits, payroll, credit decisions, and the flow of materials in a factory

Management-level Systems

• To serve the monitoring, controlling, decision-making, and administrative activities of middle managers

• Typically providing periodic reports rather than instant information on operations

– Including control systems for annual budgeting and inventory, and management systems for sales and human resources

Strategic-level systems

• To match changes in the external environment with existing organizational capability

• Helping senior management deal with and address strategic issues and long-term trends, both in the firm and in the external environment

– Including a system to forecast sales trends over a five-year period or systems for profit planning and personnel planning

Major Types of systems

• Executive Support Systems (ESS)• Decision Support Systems (DSS)• Management Information Systems (MIS)• Transaction Processing Systems (TPS)

Transaction processing systems• Definition: A Transaction Processing System (TPS) is a type of

information system that collects, stores, modifies and retrieves the data transactions of an enterprise.

• – E.g. sales order entry, payroll, shipping

• – For example McDonald's, which sells a large number of hamburgers every day, orders raw materials from its suppliers. Each time the company places an order with a supplier, a transaction occurs and a transaction system records relevant information, such as the supplier's name, address, and credit rating, the kind and quantity of items purchased, and the invoice amount.

Types of transactions

• Transactions can be internal or external.• When a department orders office supplies

from the purchasing department, an internal transaction occurs

• When a customer places an order for a product, an external transaction occurs.

Transaction processing systems are the data lifeline of the company

• If a company fails to capture a transaction it may lead not only to customer dissatisfaction and lost profit but also to serious penalties and lawsuits.

• TPS s become the source of data for other systems in the organization. If analyzed and integrated it will give business key information about new company plans. A better plan how to meet customer needs and preferences.

• TPS is a link between the organization and external entities, such as suppliers, customers & distributors.

Batch processing

• Transactions are accumulated over time and processed identically.

• Batch processing may be done on a daily, weekly, or monthly basis or any other time period appropriate to the application. – For example, a company may process the travel

expenses of its employees on a monthly basis

Real time processing

• The immediate processing of data with the database updated as the transaction is being carried out.

– An example may be the Bank ATM and POS terminal, both of which have user input which requires immediate feedback.

Characteristics of a transaction processing system

• Records internal and external transactions that take place in a company

• Is used mostly by lower-level managers to make operational decisions

• Stores data that are frequently accessed by other systems• Is ideal for routine, repetitive tasks• Records transactions in batch mode or on-line• Requires six steps to process a transaction—data entry,

validation, data processing, storage, output generation, and query support

TPS payroll system

Management Information Systems

– Serve middle management– Provide reports on firm’s current performance,

based on data from TPS– Provide answers to routine questions with

predefined procedure for answering them– Typically have little analytic capability

Management Information Systems

• An MIS provides managers with information and support for effective decision making, and provides feedback on daily operations.

• MIS provides information to the users in the form of reports

• Output, or reports, are usually generated through accumulation of transaction processing data.

– Example: Annual budgeting

Management Information Systems

Transaction Processing Systems (TPS)– Support operation– Management and control– Routine, normal operations– Structured decisions

Management Information Systems (MIS)– Provide decision-making support for routine,

structured decisions– Closely linked to and fed by TPS– Structured and Semi-structured decisions

Structured decisions

• Structured decisions are those which are made according to specified procedures of rules or structured decisions are those that are easily made from a given set of inputs.

• Deciding to send a reminder notice to a customer for an overdue balance is considered to be structured decision

Semi-structured decisions

• Semi-structured decisions are those for which information obtained from a computer system or information system is only a portion of the total knowledge needed to make decision.

• Advertise a new product or how much to spend on MIS.

Unstructured decisions• Unstructured decisions are novel, and insignificant. • There is no cut and dried method for handling the

problem because it hasn't arisen before or because it's precise nature and structure are mysterious or complex, or because it so important' that it deserves a custom tailored treatment.

• These, types of decisions often , involve a high degree of freedom.

• They may require a lot of creativity and intuitions from the decision maker to tell what factors will come into play in an unstructured play.

MIS systems obtain data from TPS systems

MIS report

MIS report types

• Scheduled reports• Key-indicator reports• Exception reports• Ad hoc (demand) reports• Drill-down reports

Scheduled reports• Produced periodically,

or on a schedule (daily, weekly, monthly

Key-Indicator report

• Summarizes the previous day’s critical activities and typically available at the beginning of each day.

Demand and exception reports• Gives certain

information at a manager’s request.

• Automatically produced when a situation is unusual or requires management action

Drill Down Reports

• Provide detailed data about a situation.

Management• Management is decision making• The manager is a decision maker• Organizations are filled with decision makers at different level.• Management is considered as art: a talent acquired over years by

trial-and-error.• However decision making today is becoming more complicated:

– Technology / Information/Computers : increasing More alternative to choose

– Structural Complexity / Competition : increasing larger cost of error

– International markets / Consumerism : increasing more uncertainty about future

– Changes, Fluctuations : increasing need for quick decision

Management problems• Most management problems for which decisions are sought can be

represented by three standard elements – objectives, decision variables, and constraints. These problems can be structured, semi-structured and unstructured in nature:

• Objective– Maximize profit– Provide earliest entry into market– Minimize employee discomfort/turnover

• Decision variables– Determine what price to use– Determine length of time tests should be run on a new product/service– Determine the responsibilities to assign to each worker

• Constraints– Can’t charge below cost– Test enough to meet minimum safety regulations– Ensure responsibilities are at most shared by two workers

Information Systems to support decisions

Management Information Systems

Decision Support Systems

Decision support provided

Provide information about the performance of the organization

Provide information and techniques to analyze specific problems

Information form and frequency

Periodic, exception, demand, and push reports and responses

Interactive inquiries and responses

Information format

Prespecified, fixed format Ad hoc, flexible, and adaptable format

Information processing methodology

Information produced by extraction and manipulation of business data

Information produced by analytical modeling of business data

Decision support systems• A Decision Support System (DSS) is an interactive

computer-based system or subsystem intended to help decision makers use communications technologies, data, documents, knowledge and/or models to identify and solve problems, complete decision process tasks, and make decisions.

• Decision Support System is a general term for any computer application that enhances a person or group’s ability to make decisions; can be as simple as an excel spread sheet to a complicated system involving large databases, statictical modelling techniques and applying A.I. to dervive information.

Question

• Explain the difference between a structured, semi-structured and unstructured decision.

• (6 marks)• Describe, using suitable examples the parts played by

both a transaction processing system (T.P.S.) and an Management information system (M.I.S. in the generation of information required for strategic level decision making

• (24 marks)