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Management Information Systems
Data versus Information
Information is raw data combined with knowledge of the business climate and processes to produce actionable information and recommendations.
Raw ingredients Yummy B’day Cake
Data Information
Information Technology RULES the world!!!
Set of interrelated componentsCollects, stores and distributes informationSupports decision making and control in an organization
Key elements:
IS
IT Data
People Business Process
INFORMATION SYSTEMS
INPUT INPUTPROCESSING
ClassifyArrange
Calculate
PROCESSINGClassifyArrange
Calculate
OUTPUTOUTPUT
Regulatory Agencies
Stockholders Competitors
CustomersSuppliers
ENVIRONMENT
ORGANIZATION
Feedback
INFORMATION SYSTEM
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)
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
Toyota views IT as an
indispensable tool
Toyota uses Oracle-based Vehicle Order Management System
From customer• Dealer Identification #• Model• Color
Data
• Shipping instructions• Invoices• Production reports
INFORMATION SYSTEM
INFORMATION SYSTEM
Information
Vehicle Order Management System
Manufacturing plants
Manufacturing plants InventoriesInventories FactoriesFactories
OBJECTIVES OF INFORMATION SYSTEMS
INFORMATION SYSTEMS
IMPROVED DECISION MAKING
COMPETITIVE ADVANTAGE
NEW PRODUCTS,
SERVICES & BUSINESS MODELS
CUSTOMER-SUPPLIER INTIMACY
OPERATIONAL EXCELLENCE
SURVIVAL
OPERATIONAL
EXCELLENCE
OBJECTIVES OF INFORMATION SYSTEMS - 1
IMPROVE EFFICIENCY
HIGH PRODUCTIVITY
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
Information Systems+
Brilliant business practices+
Supportive management
=
Success
Wal Mart uses RetailLink System
Wal Mart 1
Wal Mart 2
Wal Mart 3
Wal Mart 5289
Supplier 1
Supplier 2
Supplier n
RetailLink System
Informs about the purchase
Replacement shipped
One of the most efficient retail store in the industry.
OBJECTIVES OF INFORMATION SYSTEMS - 2
NEW
PRODUCTS,
SERVICES &
BUSINESS
MODELS
ENABLING TOOL TOCREATENEW PRODUCTS, SERVICES & BUSINESS MODELS
A SAMPLE BUSINESS
MODEL
The Apple Example
CD NANO
iTunes Music Service
iPod original
iTunes Video player
iPod nano
The iPod business model
CUSTOMER-
SUPPLIER
INTIMACY
KNOW YOUR CUSTOMER
Good service
Revenue&
Profits up
KNOW YOUR SUPPLIER
Cost down
Engaging suppliers
OBJECTIVES OF INFORMATION SYSTEMS - 3
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The JCPenney Example
TAL Apparel, a shirt maker in Hong Kong (China),+
retail giant JC Penney in the United States
=Power Synchronization
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JCPenneyStore 1
JCPenneyStore 2
JCPenneyStore n
TAL(Hong Kong)
Point of s
ales data
JCPenney cedes functions to TALTAL responds directly to customer-demandManufacturer-customer link is strongTAL analyses sales of a new design in JCPenney StoresTAL, not JCPenney, decides how many more of the new design to manufactureSales forecasting was now done by TAL and not JCPenney
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Analyse this relation called VENDOR-MANAGED-INVENTORY
Advantages:
•Saves time •Saves money
Hurdles:
•Suitable only for big firms because it requires high investments.
OBJECTIVES OF INFORMATION SYSTEMS - 4IM
PROVED
DECISION
MAKING
Lack of Information
forecast
best guesses
luck
Over Production
Under Production
Poor response
times
Misallocationof
resources
OBJECTIVES OF INFORMATION SYSTEMS - 5COMPETITIVE
ADVANTAGE
IMPROVED
DECISION
MAKING
CUSTOMER-
SUPPLIER
INTIMACY
NEW
PRODUCTS,
SERVICES &
BUSINESS
MODELS
OPERATIONAL
EXCELLENCE
COMPETITIVE
ADVANTAGE
Charging less for superior products
Responding to customers and suppliers in real time
Higher salesHigher profits
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THE DELL
EXAMPLE
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 agile—quickly 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
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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.
SURVIVAL OBJECTIVES OF INFORMATION SYSTEMS - 6
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END OF SESSION - 1
September 7, 2009 - Section ASeptember 8, 2009 - Section B
DIMENSIONS OF INFORMATION SYSTEMS
Information Systems
Organizations Technology
Management
Effective understanding of organization, management & IT
Organizations
•Key elements
People Structure Business Process Politics Culture
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People
• Executives• Knowledge workers• Data workers• Production workers• Service workers
Organizations
Structure
Strategic Management
Tactical Management
Operational Management
InformationD
ecis
ions
Structured
Semi-structured
Unstructured
Ad HocUnscheduledSummarizedInfrequentForward LookingExternalWide scope
Pre-specifiedScheduledDetailedFrequentHistoricalInternalNarrow Focus
Organizations
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Supervisor
• Requires detailed information• How many items available?• How many items on order?
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Branch Manager
• Requires less detailed information & more general information• How much stock to order?• How much floor space required?• Dollar value of sales
Operational Level
Tactical Level
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Strategic Level President/ Vice President/ CEO/ Directors• Requires even less detailed information • Overall branch performance• To open/ close a branch• Strategies
illustra
tion
Business Process
Manufacturing & Production Assembling the product
FUNCTIONAL AREA BUSINESS PROCESS
• checking for quality• Producing bills of materials
Sales & Marketing Identifying customers
• making customers aware of the product• selling the product
Finance & Accounting Paying creditors
• creating financial statements• managing cash accounts
Human Resources Hiring Employees
• Evaluating employees’ job performance• Enrolling employees in benefit plans
•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.
Organizations
SALES
ACCOUNTING
MANUFACTURING & PRODUCTION
Generate order
Submit order
Check audit
Approve credit
Generate invoice
Assemble product
Ship product
A sample business process
Politics
Political Behavior
•Activities that are not required as part of one’s formal role in the organization•But influence, or attempt to influence, the distribution of advantages or disadvantages within the organization
Different people Different view points
resources
rewards
punishment
about
Conflict
Organizations
Culture
• 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
Organizations
Management
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MANAGER
• BERATE ANYONE WHO’S SLIGHTLY LATE• UNNECESSARY MEETING• PROMOTE THE UNQUALIFIED• DUCK OUT AT 3:00 PM TO PLAY GOLF
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
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Success
Management
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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
INFORMATION TECHNOLOGY
Hardware
Software
Databases
Networks
Other related components
is used to buildINFORMATION SYSTEMS
Payroll System
Inventory System
Marketing System
Customer Service System
INFORMATION SYSTEMS Vs INFORMATION TECHNOLOGYTechnology
Business StrategicObjectives
Business Processes
Business StrategicObjectives
Business ProcessesSoftware
Hardware
Data Management
Tele-communicationsBusiness Firm Information
System
INTERDEPENDENCE BETWEEN ORGANIZATIONS AND INFORMATION SYSTEMS
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
The Indian Railways Passenger
Reservation System example
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• 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
Aug2005
Aug2006
Aug2007
Aug2008
299 e-tickets
295, 062e-tickets
1,093,961 e-tickets
3,269,681e-tickets
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Speaks of ecommerce viability in India
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
CONTEMPORARY APPROACHES TO INFORMATION SYSTEMS
MIS
Sociology
Economics
PsychologyManagementScience
ComputerScience
Operations Research
BEHAVIORAL APPROACH
TECHNICAL APPROACH
TECHNICAL APPROACH
Features:
•Use of mathematical models to study IS•Physical technology & Formal capabilities of IS
COMPUTER SCIENCE
Theories of computabilityMethods of computationMethods of efficient data storage
MANAGEMENT SCIENCE
Decision-making modelsManagement practices
OPERATIONS RESEARCH
Mathematical Techniques
BEHAVIORAL APPROACH
Features:
•Does not ignore technology•Development and Maintenance of IS
SOCIOLOGY
Studies how Groups, OrganizationsIndividuals influence system development and vice versa
PSYCHOLOGY
Studies how decision-makers use information
ECONOMICS
Studies dynamics of digital markets and how IS can affect cost and structures within a firm
HOW BUSINESSES USE INFORMATION SYSTEMS
BUSINESS PROCESSES AND INFORMATION SYSTEMS
• What is a business process?
Unique ways of workflowsA business is a collection of business processesSource of competitive strength if they enable the organization to innovateLiability if based on outdated waysTied to a specific functional areaMay cross different functional areas
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 informationSimultaneous access to informationEliminates delay in decision-makingExamples: iTunes
Amazon
END OF SESSION - 2
- Section B
TYPES OF BUSINESS INFORMATION SYSTEMS
FUNCTIONAL PERSPECTIVE
SALES Contacting customersSelling the products and servicesTaking ordersFollowing up on sales
MAREKTING Identifying customersDetermining customer needsPlanning and Developing products & services to meet customer needAdvertising and promoting products & services
SALES & MARKETING SYSTEMS
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
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 productsPlanning for new productsMonitor performance of competitors
Supports market research
Analyses advertising & promotional
campaigns
Locating prospective customersTracking sales
Processing orders
• Sales support systems are applications that facilitate the interface between the sales force and the corporation in the support of the customer
SALES SUPPORT SYSTEMS
Sales file
Sales System
Data elements in Sales File
Store #Item #Item descriptionColor
Sales data
Management reports
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Online Queries
A SALES INFORMATION SYSTEM
Sales Report : November 2008
Item# Description Units sold
1234 ABC 850
5678 XYZ 1050
To inventory & production systems
MANUFACTURING & PRODUCTION SYSTEMS
MANUFACTURING & PRODUCTION
PlanningDevelopmentMaintenance of production facilitiesEstablishment of production goalsFacilities, materials, laborScheduling of equipmentAvailability 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 Description Groups Served
Inventory Master
file
Inventory Control System
Data elements in inventory master file
Item CodeDescriptionUnits on orderReorder point
Shipment & Order data
Management reports
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Online Queries
AN INVENTORY SYSTEM
Item Code
Description Units on hand
Units on order
1234 Fan belt 10, 211 0
5678 Power cord 55, 710 77,000
FINANCE AND ACCOUNTING SYSTEMS
FINANCE
ACCOUNTING
managing firm’s financial assets (cash, stocks, bonds etc) managing the capitalization of the firm determining ROI
maintaining and managing firm’s financial records oversee and manage flow of funds into the firm
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
A/R Master
file
Accounts Receivable
System
Data elements in A/R Master file
Customer #NameAddressCredit limitInvoice number
Invoice Customer data
Management reports
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Online Queries
AN ACCOUNTS RECEIVABLE SYSTEM
Cust #
Name Current Balance
1234 ABC 2011.00
5678 XYZ 5510.00
To general ledger
HUMAN RESOURCES SYSTEMS
HUMANRESOURCES
responsible for attracting, developing and maintaining firm’s 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
Employee Master file
Human Resources
System
Data elements in Employee Master file
Employee #NameAddressAgeEducational Background
Employee data
Management reports
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Online Queries
AN EMPLOYEE RECORD KEEPING SYSTEM
Employees before December 2008
Emp# Name Date of Join
1234 ABC 13/05/2007
5678 XYZ 06/11/2008
To payroll
CONSTITUENCY PERSPECTIVE
TYPES OF BUSINESS INFORMATION SYSTEMS
• Examines systems in terms of level of management and types of decision that they support
INFORMATION
Senior ManagersMiddle Managers
Operational Managers
Knowledge workers
Summaryinfo
SpecificInfo on specific Functional areas
Transaction-levelinfo
External or internal databases
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
Operational Managers
Order Processing
System
Materials ResourcePlanning System
General ledger System
MIS files
Sales data
Unit product costdata
Productchange data
TPS
Expense data
MIS
Order file
Productionmaster file
Accountingfile
MIS
reports
managers
Middle ManagersMANAGEMENT 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 caseExhibit 2
Corporatedatabasesofinternaldata
Databasesofexternaldata
Databasesofvalidtransactions
Operationaldatabases
Transactionprocessingsystems
Managementinformationsystems
Decisionsupportsystems
Executivesupportsystems
Expertsystems
Businesstransactions
Input anderror list
Drill-down reports
Exception reports
Demand reports
Key-indicator reports
Scheduledreports
Employees
Corporateintranet
Applicationdatabases
SOURCES OF MIS
OUTPUTS OF A MANAGEMENT INFORMATION SYSTEM
• Scheduled reports• Produced periodically, or on a schedule (daily, weekly,
monthly)
• Key-indicator report• Summarizes the previous day’s critical activities
• Typically available at the beginning of each day
• Demand report• Gives certain information at a manager’s request
• Exception report• Automatically produced when a situation is unusual or
requires management action
Scheduled Report Example
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
Key Indicator Report Example
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
Demand Report Example
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
Exception Report Example
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
… … … … … … …
… … … … … … …
Middle ManagersDECISION-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
Characteristics of a DSS (1)
• Handles large amounts of data from different sources
• Provides report and presentation flexibility
• Offers both textual and graphical orientation
Characteristics of a DSS (2)
• Supports drill down analysis
• Performs complex, sophisticated analysis and comparisons using advanced software packages
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
Capabilities of a DSS (1)
• Supports– Problem solving phases– Different decision frequencies
Frequencylow high
Merge withanother
company?
How many widgets
should I order?
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
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
Senior Managers
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
ESS
MIS DSS
TPS
INTER-RELATIONSHIP OF SYSTEMS ON ONE ANOTHER
ENTERPRISE SYSTEMS (1)
MANUFACTURINGMANUFACTURING
SALES & MARKETINGSALES & MARKETING
FINANCEFINANCE
HUMAN RESOURCESHUMAN RESOURCES
BUSINESS PROCESS
BUSINESS PROCESS
ENTERPRISE – WIDE BUSINESS PROCESS
Org
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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
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