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Types of information systems

Transaction processing to executive decision making

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SALES & MANUFACTURING FINANCE ACCOUNTING HUMAN

Types of system Groups Served

STRATEGIC LEVEL SENIOR MANAGERS

MANAGEMENT LEVEL MIDDLE MANAGERS

OPERATIONAL OPERATIONALLEVEL MANAGERS

KNOWLEDGE LEVEL KNOWLEDGE &DATA WORKERS

RESOURCESMARKETING & ENGINEERING

Horizontal information flows

Verti

cal i

nfor

mati

on fl

ows

Information System from business perspective

Management Structures and Information Requirements

• Higher up the pyramid, the less structured the decision– Less defined (structured)– internal/External orientation – More summarized information

• Lower down the pyramid, the more structured the decision– More defined (structured)– Internal orientation– More detailed information

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Classification (types) of for IS

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

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Transaction Processing Systems (TPS)

Computerized system that performs and records the daily routine transactions necessary to conduct the business; these systems serve the operational level of the organization

• TYPE: Operational-level • INPUTS: transactions, events• PROCESSING: updating; e.g. stock levels)• OUTPUTS: detailed reports• USERS: operations personnel, supervisors• DECISION-MAKING: highly structured. (sale of products)

EXAMPLE: payroll, accounts payable, point of sale (P.O.S.)

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TPS payroll system

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Management information systems(MIS)

• Information system at the management level of an organization that serves the functions of planning, controlling, and decision making by providing routine summary and exception reports.

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Differences between the TPS and the MIS

Transaction Processing Systems (TPS)– Support operation– Management and

control– Routine, normal

operations– structured

Management Information Systems (MIS)– Provide decision-making

support for routine, structured decisions

– Closely linked to and fed by TPS

– Structure and sem-structure

Characteristics of Management information Systems

1. MIS support structured decisions at the operational and management control levels. However, they are also useful for planning purposes, semi-structured problems, of senior management staff.

2. MIS are generally reporting and control oriented. They are designed to report on existing operations, sales , production costs…, and therefore to help provide day-to-day control of operations.

3. MIS rely an existing corporate data-and data flows.

4. MIS have little analytical capability.5. MIS generally aid in decision

making using past and present data.

6. MIS are relatively inflexible.7. MIS have an internal rather than

an external orientation. 9

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Management problems• Most management problems, involving decisions have three elements –

objectives, decision variables, and constraints.

• 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

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Structured Decision

• 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

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Semi-structured Decision

• 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.

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Unstructured Decision• Unstructured decisions are novel. • 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.

• 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.– Deciding whether to use an integrated or intensive strategy for a

product that is the star quadrant of the BCG matrix– How successful to improving market size was the recent

marketing campaign

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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

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Decision support system

• Information system at the management level of an organization that combines data and sophisticated analytical models or data analysis tools to support semi-structured and unstructured decision making.– E.g.:sales region

analysis [OLAP systems]

Characteristics of Decision-Support Systems

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• DSS offer users flexibility, adaptability, and a quick response.

• DSS provide support for decisions and problems whose solutions cannot be specified in advance.

• DSS use sophisticated data analysis and modelling tools.• Decision support system (DSS) tends to be used in planning,

modelling, analysing alternatives, and decision making by using small, simple models which can easily be understood and used by the manager

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ExamplesTypical information that a decision support application might gather and present would be:• Accessing all of your current information assets, including

legacy and relational data sources, cubes, data warehouses, and data marts

• Comparative sales figures between one week and the next

• Projected revenue figures based on new product sales assumptions

• The consequences of different decision alternatives, given past experience in a context that is described

• Could be use to aid Strategic systems: SCM / CRM

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Tools used in aiding the DSS

• Functions– Functions: pre-stored formulas that enable a user to perform a

calculator type task as soon as the function is invoked• Analysis

– Analysis: review a set of facts and to assist in drawing conclusions based on there facts.

• Statistical Tools: regression/correlation • Optimizing tools: best decision for “structured”: maximise

production capacity (labour, capacity) • What if analysis: if increase cost what is the effect on

sales; check for various increases (€1, €2….)

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Executive Support Systems (ESS)

Information system at the strategic level of an organization that address unstructured decision making through advanced graphics and communications.

TYPE: Strategic level• INPUTS: aggregate data; internal and external• PROCESSING: interactive• OUTPUTS: projections• USERS: senior managers• DECISION-MAKING: highly unstructured

EXAMPLE: 5 year operating plan

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Executive Support Systems: other properties

• Tailored to individual executives– Not to managers in other levels

• Easy to use• Drill down capabilities (more specific details)• Support need for external data: demographics,

competitors…• Can help when uncertainty is high• Future-oriented• Linked to value-added processes: competitive advantage…

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Sample questions answered by ESS

• What business should we be in?• What are the competitors doing?• What new acquisitions' would protect us from

cyclical business swings?• Which units should we sell to raise cash for

acquisitions?

Question • Management information systems (MIS); Decision support

systems (D.S.S); and Executive information systems (EIS) are important types of information systems used by management to solve structured, semi-structured and unstructured problems . – Describe, using suitable examples, the types of problems

each one is designed to solve• (6 marks)

– The M.I.S. and D.S.S. play a significant role in the formulation of strategic decisions: compare and contrast, using suitable examples both types of information systems.

• (24 marks)

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