Management Information Systems

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Management Information Systems
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Data versus Information
Yummy Bday Cake
Raw ingredients
Information
Data
Information is raw data combined with knowledge
of the business climate and processes to produce
actionable information and recommendations.
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Information Technology RULES the world!!!
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INFORMATION SYSTEMS
Set of interrelated components Collects, stores
and distributes information Supports decision
making and control in an organization Key
elements
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ENVIRONMENT
Suppliers
Customers
ORGANIZATION
PROCESSING Classify Arrange Calculate
OUTPUT
INPUT
Feedback
Competitors
Regulatory Agencies
Stockholders
INFORMATION SYSTEM
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INFORMATION SYSTEMS COMPONENTS

• Inputs raw data
• May be physical, electronic or conceptual
• May use a manual or automated process
• Processing conversion of inputs to outputs
• May be comprised of computations, data storage,
  choosing alternatives
• May be a manual or automated process
• Outputs information used to make decisions
• May be delivered in paper form or electronically
• Outputs of one system may be inputs to another
  system
• Feedback/assessment outputs used to improve
  system performance
• Can flag for incorrect processing
• Cue for managerial interventions
• Supply estimates of future input values
  (forecasting)

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NEED FOR INFORMATION SYSTEMS

• Globalization opportunities
• Emergence of the internet

• Emerging Digital Firm
• digital firm one in which all significant
  business relationships are digitally enabled and
  core business processes are accomplished through
  digital networks.
• any information ? available anytime ? anywhere
• responds rapidly to environments
• flexibility
• time shifting ? 24x7 work culture
• space shifting ? global workshop

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The Toyota Example
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Toyota views IT as an indispensable tool
Toyota uses Oracle-based Vehicle Order
Management System
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Vehicle Order Management System
Manufacturing plants
Inventories
Factories
Data

• From customer
• Dealer Identification
• Model
• Color

INFORMATION SYSTEM

• Shipping instructions
• Invoices
• Production reports

Information
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OBJECTIVES OF INFORMATION SYSTEMS
IMPROVED DECISION MAKING
OPERATIONAL EXCELLENCE
INFORMATION SYSTEMS
CUSTOMER- SUPPLIER INTIMACY
COMPETITIVE ADVANTAGE
SURVIVAL
NEW PRODUCTS, SERVICES BUSINESS MODELS
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OBJECTIVES OF INFORMATION SYSTEMS - 1
OPERATIONAL EXCELLENCE
IMPROVE EFFICIENCY
HIGH PRODUCTIVITY
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The Wal Mart Example

• It is the world's largest public corporation by
  revenue,
• according to the 2008 Fortune Global 500
• largest private employer in the United States
• and the largest grocery retailer in the United
  States

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Information Systems Brilliant business
practices Supportive management Success
Wal Mart uses RetailLink System
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Supplier 1
Supplier 2
Supplier n
Informs about the purchase
RetailLink System
Replacement shipped
Wal Mart 5289
Wal Mart 1
Wal Mart 3
Wal Mart 2
One of the most efficient retail store in the
industry.
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OBJECTIVES OF INFORMATION SYSTEMS - 2
NEW PRODUCTS, SERVICES BUSINESS MODELS
A SAMPLE BUSINESS MODEL
ENABLING TOOL TO CREATE NEW PRODUCTS, SERVICES
BUSINESS MODELS
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The Apple Example
CD
NANO
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iTunes Video player
iTunes Music Service
iPod nano
The iPod business model
iPod original
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OBJECTIVES OF INFORMATION SYSTEMS - 3
CUSTOMER- SUPPLIER INTIMACY
Revenue Profits up
KNOW YOUR CUSTOMER
Good service
Cost down
KNOW YOUR SUPPLIER
Engaging suppliers
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TAL Apparel, a shirt maker in Hong Kong
(China), retail giant JC Penney in the United
States Power Synchronization
The JCPenney Example
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TAL (Hong Kong)
Point of sales data
JCPenney Store 1
JCPenney Store 2
JCPenney Store n
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Analyse this relation called VENDOR-MANAGED-INVENT
ORY
JCPenney cedes functions to TAL TAL responds
directly to customer-demand Manufacturer-customer
link is strong TAL analyses sales of a new design
in JCPenney Stores TAL, not JCPenney, decides how
many more of the new design to manufacture Sales
forecasting was now done by TAL and not JCPenney

• Advantages
• Saves time
• Saves money

• Hurdles
• Suitable only for big firms because it requires
  high investments.

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OBJECTIVES OF INFORMATION SYSTEMS - 4
IMPROVED DECISION MAKING
Over Production
forecast
Under Production
Lack of Information
best guesses
luck
Misallocation of resources
Poor response times
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OBJECTIVES OF INFORMATION SYSTEMS - 5
COMPETITIVE ADVANTAGE
CUSTOMER- SUPPLIER INTIMACY
Charging less for superior products
Responding to customers and suppliers in real time
IMPROVED DECISION MAKING
COMPETITIVE ADVANTAGE
NEW PRODUCTS, SERVICES BUSINESS MODELS
Higher sales
Higher profits
OPERATIONAL EXCELLENCE
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THE DELL EXAMPLE
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• Dell Computer has changed the competitive
  landscape by
• Offering customized products directly to
  customers on demand without premiums in either
  price or lead time
• Minimizing inventory to unthinkable levels
• Being agilequickly responding to the
  market/technology changes
• Eliminating the cost and risk of finished goods
  inventory
• Successfully executing a mass customization
  strategy quarter after quarter, year after year

Mass customization is the use of flexible
computer-aided manufacturing systems to produce
custom output. Those systems combine the low unit
costs of mass production processes with the
flexibility of individual customization.
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OBJECTIVES OF INFORMATION SYSTEMS - 6
SURVIVAL
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END OF SESSION - 1 September 7, 2009 - Section
A September 8, 2009 - Section B
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DIMENSIONS OF INFORMATION SYSTEMS
Effective understanding of organization,
management IT
Technology
Organizations
Information Systems
Management
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Organizations

• Key elements
• People
• Structure
• Business Process
• Politics
• Culture

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Organizations

• People

• Executives
• Knowledge workers
• Data workers
• Production workers
• Service workers

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• Structure

Organizations
Ad Hoc Unscheduled Summarized Infrequent Forward
Looking External Wide scope
Strategic Management
Unstructured
Information
Decisions
Semi-structured
Tactical Management
Pre-specified Scheduled Detailed Frequent Historic
al Internal Narrow Focus
Operational Management
Structured
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President/ Vice President/ CEO/ Directors
Strategic Level

• Requires even less detailed
• information
• Overall branch performance
• To open/ close a branch
• Strategies

Branch Manager
Tactical Level

• Requires less detailed
• information more general
• information
• How much stock to order?
• How much floor space
• required?
• Dollar value of sales

Operational Level
Supervisor

• Requires detailed information
• How many items available?
• How many items on order?

illustration
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• Business Process

Organizations

• Manner in which work is organized, coordinated,
  focused to produce a valuable product or service
• These processes can be decomposed into several
  sub-processes, which have their own attributes.
• All these sub-processes contribute towards
  achieving of the major goal.

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SALES
Generate order
Submit order
ACCOUNTING
Check audit
Approve credit
Generate invoice
MANUFACTURING PRODUCTION
Ship product
Assemble product
A sample business process
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• Politics

Organizations

• Political Behavior
• Activities that are not required as part of ones
  formal
• role in the organization
• But influence, or attempt to influence, the
  distribution
• of advantages or disadvantages within the
  organization

resources
about
Conflict
Different people
Different view points
rewards
punishment
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• Culture

Organizations

• Bedrock, unassailable, unquestioned assumptions
  that define goals and products
• What the organization should produce?
• How the organization should produce the
  products?
• Rarely publicly spoken

• Powerful unifying force
• Restrains political conflict
• Promotes common understanding, agreement on
  procedures common practices

• Powerful Restraint on change
• Resists change to any basic assumptions

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Management
?

• BERATE ANYONE WHOS SLIGHTLY LATE
• UNNECESSARY MEETING
• PROMOTE THE UNQUALIFIED
• DUCK OUT AT 300 PM TO PLAY GOLF

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Management

• Manager must
• perceive business challenges in the environment
• set organizational strategy to address these
  challenges
• allocate human and financial resources to
  coordinate work
• exercise responsible leadership
• create new products and services
• be creative

Success
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Technology

• Computer Hardware
• physical equipments
• Computer Software
• preprogrammed instructions
• Data Management Technology
• software concerning storage of data on physical
  storage media
• Networking and Telecommunications Technology
• physical devices and software to link various
  systems for data transfer
• networks - internet/ intranet/ extranet

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INFORMATION SYSTEMS Vs INFORMATION TECHNOLOGY
Technology
Payroll System
INFORMATION TECHNOLOGY Hardware Software Databases
Networks Other related components
Inventory System
is used to build
INFORMATION SYSTEMS
Marketing System
Customer Service System
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INTERDEPENDENCE BETWEEN ORGANIZATIONS AND
INFORMATION SYSTEMS
Hardware
Business Strategic Objectives Business Processes
Software
Data Management
Tele- communications
Business Firm
Information System
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A BUSINESS PERSPECTIVE ON INFORMATION SYSTEMS

• support of business operations
• automation of business process
• simplification of business processes
• reengineering of business processes
• support of managerial decision making
• Improved co-ordination among various functional
  areas
• Dynamic scheduling among the different functional
  areas
• support of strategic competitive advantage
• Shortening of response time
• Up-to-date information on revenues, budget
  performance
• E-business opportunities

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The Indian Railways Passenger Reservation System
example

• Largest and busiest rail networks in the world
• 18 million passengers and more than 2 million
  tonnes of freight daily
• 6,909 stations over a total route length of more
  than 63,327 kilometers

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Impact of Information Systems

• Reduction in cost of labor
• Reduction in transaction cost for customers,
  suppliers, distributors
• Faster decision support resulting in customer
  satisfaction
• Higher productivity and performance

Speaks of ecommerce viability in India
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CONTEMPORARY APPROACHES TO INFORMATION SYSTEMS
TECHNICAL APPROACH
BEHAVIORAL APPROACH
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TECHNICAL APPROACH

• Features
• Use of mathematical models to study IS
• Physical technology Formal capabilities of IS

MANAGEMENT SCIENCE
OPERATIONS RESEARCH
COMPUTER SCIENCE
Mathematical Techniques
Decision-making models Management practices
Theories of computability Methods of
computation Methods of efficient data storage
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BEHAVIORAL APPROACH
Features

• Does not ignore technology
• Development and Maintenance of IS

SOCIOLOGY
ECONOMICS
PSYCHOLOGY
Studies dynamics of digital markets and how IS
can affect cost and structures within a firm
Studies how decision-makers use information
Studies how Groups, Organizations Individuals
influence system development and vice versa
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HOW BUSINESSES USE INFORMATION SYSTEMS
BUSINESS PROCESSES AND INFORMATION SYSTEMS

• What is a business process?
• Unique ways of workflows
• A business is a collection of business processes
• Source of competitive strength if they enable the
  organization to innovate
• Liability if based on outdated ways
• Tied to a specific functional area
• May cross different functional areas

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HOW DO INFORMATION SYSTEMS ENHANCE BUSINESS
PROCESSES ?

• Increasing the efficiency of existing processes
• Automating business processes
• Enabling entirely new processes that are capable
  of transforming the business
• Changing flow of information
• Simultaneous access to information
• Eliminates delay in decision-making
• Examples iTunes
• Amazon

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END OF SESSION - 2 - Section B
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TYPES OF BUSINESS INFORMATION SYSTEMS
FUNCTIONAL PERSPECTIVE
SALES MARKETING SYSTEMS
SALES

• Contacting customers
• Selling the products and services
• Taking orders
• Following up on sales

MAREKTING
?Identifying customers ?Determining customer
needs ?Planning and Developing products
services to meet customer need ?Advertising and
promoting products services
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MARKETING INFORMATION SYSTEMS

• For monitoring the efficiency and effectiveness
  of the distribution of their products and
  services, sales managers need information to plan
  and monitor the sales force
• Management needs information on the performance
  of specific products, product lines, or brands
• Price, revenue, cost and growth information can
  be used for pricing decisions, for evaluating the
  performance of current products, and for
  predicting the performance of future products

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Locating prospective customers Tracking
sales Processing orders
System Description Groups Served
Order processing Enter, process track orders Operational Management
Pricing analysis Determine prices for products services Middle Management
Sales trend forecasting Prepare five-year sales forecasts Senior Management
Monitor trends affecting new products Planning
for new products Monitor performance of
competitors
Supports market research Analyses advertising
promotional campaigns
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SALES SUPPORT SYSTEMS

• Sales support systems are applications that
  facilitate the interface between the sales force
  and the corporation in the support of the
  customer

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To inventory production systems
Sales data
Sales System
Management reports
Sales file
Sales Report November 2008 Sales Report November 2008 Sales Report November 2008
Item Description Units sold
1234 ABC 850
5678 XYZ 1050
Data elements in Sales File
Store Item Item description Color
Online Queries
A SALES INFORMATION SYSTEM
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MANUFACTURING PRODUCTION SYSTEMS
MANUFACTURING PRODUCTION

• Planning
• Development
• Maintenance of production facilities
• Establishment of production goals
• Facilities, materials, labor
• Scheduling of equipment
• Availability of production materials

Machine control Controls the actions of machines equipment Operational Management
Production Planning Decides when and how many products should be produced Middle Management
Facilities location Decides where to locate new production facilities Senior Management
System
Groups Served
Description
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Shipment Order data
Inventory Control System
Management reports
Inventory Master file
Item Code Description Units on hand Units on order
1234 Fan belt 10, 211 0
5678 Power cord 55, 710 77,000
Data elements in inventory master file
Item Code Description Units on order Reorder point
Online Queries
AN INVENTORY SYSTEM
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FINANCE AND ACCOUNTING SYSTEMS

• managing firms financial assets (cash, stocks,
  bonds etc)
• managing the capitalization of the firm
• determining ROI

FINANCE

• maintaining and managing firms financial
  records
• oversee and manage flow of funds into the firm

ACCOUNTING
System Description Groups Served
Accounts receivable Tracks money owed by the firm Operational Management
Budgeting Prepares short-term budget Middle Management
Profit Planning Prepares long-term profit Senior Management
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To general ledger
Invoice Customer data
Accounts Receivable System
Management reports
A/R Master file
Cust Name Current Balance
1234 ABC 2011.00
5678 XYZ 5510.00
Data elements in A/R Master file
Customer Name Address Credit limit Invoice
number
Online Queries
AN ACCOUNTS RECEIVABLE SYSTEM
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HUMAN RESOURCES SYSTEMS
HUMAN RESOURCES

• responsible for attracting, developing and
  maintaining firms workforce

System Description Groups Served
Training Development Tracks employee training, skills performance appraisals Operational Management
Compensation analysis Monitors the range and distribution of employee wages, salaries benefits Middle Management
HR Planning Plans the long-term labor force needs of the organization Senior Management
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To payroll
Employee data
Human Resources System
Management reports
Employee Master file
Employees before December 2008 Employees before December 2008 Employees before December 2008
Emp Name Date of Join
1234 ABC 13/05/2007
5678 XYZ 06/11/2008
Data elements in Employee Master file
Employee Name Address Age Educational
Background
Online Queries
AN EMPLOYEE RECORD KEEPING SYSTEM
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TYPES OF BUSINESS INFORMATION SYSTEMS
CONSTITUENCY PERSPECTIVE

• Examines systems in terms of level of management
  and types of decision that they support

Operational Managers
Middle Managers
Senior Managers
Transaction-level info
Specific Info on specific Functional areas
Knowledge workers
Summary info
External or internal databases
INFORMATION
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Operational Managers
TRANSACTION PROCESSING SYSTEMS (TPS)

• Keeps track of elementary activities and
  transactions of the organizations
• Performs and records the daily routine
  transactions necessary to conduct business
• most suitable for pre-defined, structured tasks
• usually has high volumes of inputs and outputs
• repetitive in nature
• central to a business
• major producers of information for other types
  of systems
• managers use TPS to monitor internal operations
  and relations with external environment

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MIS
TPS
managers
MIS files
Order Processing System
Sales data
Order file
Unit product cost data
Materials Resource Planning System
reports
Production master file
Product change data
MIS
General ledger System
Expense data
Accounting file
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Middle Managers
MANAGEMENT INFORMATION SYSTEMS

• serves middle management
• normally draw data from TPS
• converts data into information for monitoring
  performance
• transactions in TPS are analysed and reported by
  MIS
• large volumes of inputs summary report outputs
• generally provide answers to routine questions
  specified in advance
• follows a predefined procedure for answering
  questions
• not flexible
• have little analytical capability

MarketStar case Exhibit 2
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Employees
SOURCES OF MIS
Corporate databases ofinternaldata
Databasesofexternaldata
Corporateintranet
Decisionsupportsystems
Databasesofvalidtransactions
Application databases
Transactionprocessingsystems
Managementinformationsystems
Executivesupportsystems
Businesstransactions
Operationaldatabases
Expertsystems
Drill-down reports
Exception reports
Demand reports
Key-indicator reports
Input anderror list
Scheduledreports
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OUTPUTS OF A MANAGEMENT INFORMATION SYSTEM

• Scheduled reports
• Produced periodically, or on a schedule (daily,
  weekly, monthly)
• Key-indicator report
• Summarizes the previous days critical activities
• Typically available at the beginning of each day
• Demand report
• Gives certain information at a managers request
• Exception report
• Automatically produced when a situation is
  unusual or requires management action

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Scheduled Report Example
Daily Sales Detail Report Prepared 08/10/xx Daily Sales Detail Report Prepared 08/10/xx Daily Sales Detail Report Prepared 08/10/xx Daily Sales Detail Report Prepared 08/10/xx Daily Sales Detail Report Prepared 08/10/xx Daily Sales Detail Report Prepared 08/10/xx Daily Sales Detail Report Prepared 08/10/xx
Order CustomerID Sales Rep ID ShipDate Quantity Item Amount
P12453 C89321 CAR 08/12/96 144 P1234 3,214
P12453 C89321 CAR 08/12/96 288 P3214 5,660
P12453 C03214 GWA 08/13/96 12 P4902 1,224
P12455 C52313 SAK 08/12/96 24 P4012 2,448
P12456 C34123 JMW 08J/13/96 144 P3214 720
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Key Indicator Report Example
Daily Sales Key Indicator Report Daily Sales Key Indicator Report Daily Sales Key Indicator Report Daily Sales Key Indicator Report
ThisMonth LastMonth LastYear
Total Orders Month to Date 1,808 1,694 1,014
Forecasted Sales for the Month 2,406 2,224 2,608
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Demand Report Example
Daily Sales by Sales Rep Summary Report Prepared 08/10/xx Daily Sales by Sales Rep Summary Report Prepared 08/10/xx
Sales Rep ID Amount
CAR 42,345
GWA 38,950
SAK 22,100
JWN 12,350
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Exception Report Example
Daily Sales Exception Report ORDERS OVER 10,000 Prepared 08/10/xx Daily Sales Exception Report ORDERS OVER 10,000 Prepared 08/10/xx Daily Sales Exception Report ORDERS OVER 10,000 Prepared 08/10/xx Daily Sales Exception Report ORDERS OVER 10,000 Prepared 08/10/xx Daily Sales Exception Report ORDERS OVER 10,000 Prepared 08/10/xx Daily Sales Exception Report ORDERS OVER 10,000 Prepared 08/10/xx Daily Sales Exception Report ORDERS OVER 10,000 Prepared 08/10/xx
Order CustomerID Sales Rep ID ShipDate Quantity Item Amount
P12453 C89321 CAR 08/12/96 144 P1234 13,214
P12453 C89321 CAR 08/12/96 288 P3214 15,660
P12453 C03214 GWA 08/13/96 12 P4902 11,224


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Middle Managers
DECISION-SUPPORT SYSTEMS (DSS)

• support non-routine decision making for middle
  management
• follow procedures which are not fully predefined
• combines information from external sources (
  eg current stock prices)
• use a variety of models to analyze data
• condenses data into a form in which
  decision-makers can analyse
• include user-friendly software

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Characteristics of a DSS (1)

• Handles large amounts of data from different
  sources
• Provides report and presentation flexibility
• Offers both textual and graphical orientation

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Characteristics of a DSS (2)

• Supports drill down analysis
• Performs complex, sophisticated analysis and
  comparisons using advanced software packages

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Characteristics of a DSS (3)

• Performs different types of analyses
• What-if analysis
• Makes hypothetical changes to problem and
  observes impact on the results
• Simulation
• Duplicates features of a real system
• Goal-seeking analysis
• Determines problem data required for a given
  result

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Capabilities of a DSS (1)

• Supports
• Problem solving phases
• Different decision frequencies

Merge withanother company?
How many widgets should I order?
low
high
Frequency
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Capabilities of a DSS (2)

• Highly structured problems
• Straightforward problems, requiring known facts
  and relationships.
• Semi-structured or unstructured problems
• Complex problems wherein relationships among data
  are not always clear, the data may be in a
  variety of formats, and are often difficult to
  manipulate or obtain

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Senior Managers
EXECUTIVE SUPPORT SYSTEMS

• Characteristics
• A specialized DSS that includes all the hardware,
  software, data, procedures, and people used to
  assist senior-level executives within the
  organization

Board of directors
President
Function areavice presidents
Function areamanagers
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Characteristics of ESS

• Tailored to individual executives
• Easy to use
• Drill down capabilities
• Support the need for external data
• Help with situations with high degree of
  uncertainty
• Linked with value-added business processes
• Address non-routine decisions requiring judgment,
  insight, evaluation
• Draw summarized information from external MIS and
  DSS

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INTER-RELATIONSHIP OF SYSTEMS ON ONE ANOTHER
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ENTERPRISE SYSTEMS (1)
MANUFACTURING
FINANCE
BUSINESS PROCESS BUSINESS PROCESS ENTERPRISE
WIDE BUSINESS PROCESS
CUSTOMERS
Organizational Boundaries
Organizational Boundaries
VENDORS
HUMAN RESOURCES
SALES MARKETING
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ENTERPRISE SYSTEMS (2)

• Also called Enterprise Resource Planning (ERP)
  systems
• Integrates key business processes of a firm into
  a single system
• Enables information to flow seamlessly
  throughout the organization
• Main focus on internal processes
• May include transactions with customers vendors
• Enables speedy communication of information