Management Information Systems
The objective of an MIS is to provide information for decision making on planning, initiating,
organizing and controlling the operations of subsystems of the firm and to provide a synergistic
organization in the process.
A system is a group of interrelated or interacting elements forming a unified whole, and working
together towards a common goal by accepting inputs and producing outputs in an organized transformation
Such a system has three basic (it can become more useful by including others) interacting components or
It could also include:
• Feedback / Storage as the case may be
• Control (monitoring and evaluating feedback or information) to maintain performance
An open system interacts with other systems, whereas a closed system does not interact with other
systems. A system that has the ability to change itself or its environment in order to survive is an adaptive
system e.g. organization as a system.
Terms used in the system’s concept.
1. A system’s purpose is the reason for its existence and the reference point for measuring its
success e.g. the purpose of Dell’s order fulfillment system is to efficiently produce and deliver
what the customer ordered.
2. A system’s boundary defines what is inside the system and what is outside e.g. ordering system
might consider delivering outside its boundary.
3. A system’s environment is everything pertinent to the system that is outside of its boundaries.
4. A system’s inputs are the physical objects and information that cross the boundary to enter it
from its environment.
5. A system’s outputs are physical objects and information that go from the system into its
Work systems in businesses need to change frequently to accommodate to changing conditions in their
environments and changing customer needs.
System Analysis aims at studying the present and/or proposed information flows in order to find the
ways of meeting the objectives of the organization, in the best way possible. These ways may include methods
of information collection and provisions at various organizational levels, improvements in information formats
and procedures being adopted by the organization, etc. The information should be at the right time, in the right
format, through the right medium, with the right contents and no redundancies.
System Design must be implementable within the given resources and must be maintainable easily. The
design process should consider that resources spent on them should be minimal, maintainability should be made
easy with less complex design, the benefit derived should be more than the cost, flexibility to adapt to changes
and the organization should be integrated.
An Information System can be any organized combination of people, hardware, software,
communications networks, and data resources that collects, transforms, and disseminates information in an
An Information System model consists of the following:-
• Resources such as people, data, hardware, software and networks are used by Information Systems.
• Information Processing consists of system activities of input, processing, output, storage and control.
The major roles of Information Systems are:-
1. Support Business Processes
2. Support Decision Making
3. Support Competitive Advantage
Types of Information Systems
1. Operations support systems produce a variety of information products for internal and external use,
which process data used by business operations. These have three further categories:-
a. Transaction processing systems record and process data resulting from business transactions.
Transactions are processed in two basic ways:
i. Batch, where transactions are accumulated over a period of time. A group of entries are
made at a time; which are accepted by the information system, on a command by the
user, for updating the records.
ii. Real-time or on-line, where processing is done immediately. Whenever an activity takes
place in the organization, an entry is made in the information system in the form of a
record and the computer automatically updates it’s all other records affected by the entry
b. Process control system monitors and controls physical process
c. Enterprise collaboration systems enhance team and workgroup communication and productivity
and are also called office automation systems.
2. Management support Systems provide information and support for effective decision-making. These are
of following types
a. Management Information Systems provide information in the form of reports and displays to
managers and many business professionals
b. Decision support systems give direct support to managers during the decision-making process. It
provides some indications to a user on the basis of information stored in the system and the
parameters provided by the user.
c. Executive information systems provide critical information from a wide variety of internal and
external sources, in easy-to-use displays, to executives and managers.
3. Expert systems provide expert advice from operational chores like equipment diagnostics or decisions
for loan portfolio management.
4. Knowledge management systems support the creation, organization and dissemination of business
knowledge to employees and managers throughout the company.
5. Functional business systems focus on operational and managerial applications in support of basic
business functions such as accounting or marketing.
6. Strategic information systems apply IT to firm’s products, services, or business processes to help it gain
a strategic advantage over its competitors.
7. Cross functional Information Systems interact with several types of Information Systems that provide a
variety of functions.
The success of an Information System is measured not only by its efficiency in terms of minimizing costs,
time and the use of information resources, but also by the effectiveness of Information Technology in
supporting an organization’s business strategies, enabling its business processes, enhancing its organizational
structures and culture, and increasing the customer and business value of the enterprise.
Information systems can be classified on the following basis
1. By function
a. Operations (Resources, processes, products)
b. Administrative (support functions)
c. Planning and control (management use)
d. Environmental (e.g. competition)
2. By type of processing
b. Online, real-time
3. By usage
a. Transaction processing
b. Management Information
c. Decision support
d. Expert system
4. By application
5. By levels of management
a. For operational control
b. For management control
c. For strategic control
6. By resources
a. Financial information resource
b. Marketing information resource
c. Personnel information resource
Management Information System (Definition)
Management comprises the process or activities that describe what managers do in the operation of their
organization: plan, organize, initiate and control operations.
Because decision making is a fundamental pre-requisite to each of the forgoing processes, the job of an MIS
becomes that of facilitating decisions necessary for planning, organizing and controlling the work and functions
of the business,
Information is different from data. Data is the plural of ‘datum’. Data are raw facts and figures or observations,
typically about physical phenomena or business transactions e.g. the sale transaction. Data may not currently be
used in a decision process and usually takes the form of historical records that are recorded and filed without
immediate intent to retrieve for decision making.
Information is data that has been converted into a meaningful and useful context for specific end users. It
consists of data that have been retrieved, processed, or otherwise used for informative or inference purposes,
argument, or as a basis for forecasting or decision making. It is placed in a context that gives its value for
specific end users. The value added process for data is where
(i) Its form is aggregated, manipulated, and organized
(ii) Its content is analyzed and evaluated
(iii) It is placed in a proper context for human user
Processing of data into information can involve anything from calculating, comparing, sorting, classifying, and
summarizing to updating existing data. The input for processing is data the output is information
System is a set of elements joined together for a common objective. A subsystem is part of a larger system with
which we are concerned.
The system concept of MIS is therefore one of optimizing the output of the organization by connecting the
operating systems through the medium of information exchange.
The objective of an MIS is to provide information for decision making on planning, initiating, organizing
and controlling the operations of subsystems of the firm and to provide a synergistic organization in the process.
MIS is the automating of routine and structured tasks to support decision making.
• MIS support decision making in both structured and un-structured problem environments
• MIS support decision making at all levels of the organization
• MIS are intended to be woven into the fabric of the organization, not standing alone
• MIS support all aspects of the decision making process.
• MIS are made of people, computers, procedures, databases, interactive query facilities, and so on. They
are intended to be evolutionary / adaptive and easy for people to use.
The need for synergy in organization calls for the systems approach in management. It has been accelerated
by two major reasons:
• The increased complexity of business
• The increased complexity of management
The increased complexity of business can be attributed to four primary causes
(i) Technological revolution
(ii) Research and development
(iii) Product changes
(iv) Information explosion
The increased complexity of management can be met by following four breakthroughs or developments:
(i) The theory of information feedback systems
(ii) A better understanding of the decision making process
(iii) Operations research or management science techniques that permit an experimental or simulation
approach to complex problems
(iv) The electronic computer
Management Information System consists of a group of people, a set of manuals, and data processing
equipment (a set of elements) select, store, process and retrieve data (operate on data and matter) to reduce the
uncertainty in decision-making (seek a common goal) by yielding information for managers at the time they can
most efficiently use it (yield information in a time reference).
A business process is a related group of steps or activities in which people use information and other
resources to create value for internal or external customers. These steps are related in time and place, having a
beginning and end, and have inputs and outputs.
A process’s value added is the amount of value it creates for its internal or external customer.
There are three different types of business processes.
(i) Processes that cross functional area
(ii) Processes related to a specific functional area
(iii) Activities and sub processes occurring in every functional area.
The set of processes a firm uses to create value for its customers is often called its value chain.
The Managers of tomorrow
Changes in behavior of people and our understanding of how to motivate people in the work environment
have progressed quite slowly despite many promised gimmicks.
Changes in physical systems such as the factory production system, the physical distribution system, the
data processing system or the engineering development and test system are occurring rapidly with the
accelerating progress in technology.
Management has existed since people first realized that a co-operative society was necessary to accomplish
their goals. There are many different ways to do any particular type of work. A crucial management
responsibility is to identify ways to do work more efficiently and to produce better products and services.
Many organizations and manager make the basic mistake of believing that a management information system
can be designed or made operational without the backup of an adequate management system. Given an adequate
management system, an information system can be designed upon its foundation.
An information system provides the manager with the information needed in the form, place and time to
perform the job according to the specifications of the management system.
A new system (such as Information system) when introduced, provides newly emerging behavioral patterns.
This change has two facets: technological and social. The social change gains resistance. Three positive steps
for effecting change based on our knowledge of organizational behavior are:
1. Create a climate for change
2. Develop effective agents of change
3. Modify the required organizational system in the light of anticipated emergent behavior.
The management process and information needs
Environmental information consists of:
(1) Political and governmental considerations
(2) Demographic and social trends
(3) Economic trends
(4) Technological environment
(5) Factors of production such as source, cost, location, availability, accessibility, and productivity of the
major production factors of labor, materials and parts and capital
Competitive information considers:
(1) Industry demand
(2) Firm demand
(3) The competition:-
a. Past performance
b. Present activity (price strategy, advertising, campaigns etc)
c. Future plan (new products)
Internal Information such as
(1) Sales Forecast
(2) Financial Plan
(3) Supply factors (labor, capital, plant and equipment, organization etc)
“Management is the art of getting things done”. In the process of, a manager uses human skills, material
resources and scientific methods to perform all activities leading to the achievement of goals.
The advantage of viewing management as a system is that it enables us to see the critical variables, constraints
and their interaction with one another. It forces the manager to look at the situation in such a way that due
regard is given to the consequences arising out of interaction with the related elements or subjects.
Approaches to management
1. Fredrick W Taylor, recognized as the father of scientific management states his rules as follows:
a. Replace the rules of thumb with scientific rules
b. Obtain a harmony in group action
c. Achieve cooperation of human beings, rather than chaotic individualism.
d. Work for a maximum output
e. Develop all workers to the fullest possible potential for their own highest possible prosperity
2. Henry Fayol states his principles of operational management as:
a. Division of work
b. Authority and responsibility
d. Unity of command
e. Unity of direction
f. Subordination of individual to corporate interest
i. Scalar chain
l. Stability of tenure
Functions of the Manager
1. Planning is a process of determining the goals and objectives and evolving strategies, policies, programs
and procedures for the achievement of these goals. The essence of the process is decision making. The
planning process consists of three steps (i) Forecasting (ii) Determining the alternative course of action
(iii) Evaluating the best course of action.
2. Organization involves evolving the structure of the people working in the organization and their roles.
Building a meaningful effective structure of authority and the relationship is known as organizing. It
should consider the span of control, the centralization and decentralization methods, delegation of
authority, formal and informal setup.
3. Staffing involves manning the positions in the organization structure. It requires appropriate selection of
the person or persons ensuring that they together will achieve the goals and objectives of the
organization. Ensuring that the right person is at the right place, and has a good job environment. The
WBS helps in determining the job specifications. The schedules for projects play an important role in
determining number of employees.
4. Directing is a complex task of implementing the process of management. In the process, the manager is
required to guide, clarify and solve the problems of the people and their activities. It is necessary to
motivate the people to work for the goals with an interest and a confidence. Different methods of
leadership are present. Autocrative leader decides what should be done. Supportive leader encourages
initiatives by employees.
5. Coordinating is the function which brings a harmony and smoothness in the various group activities and
individual effort directed towards the accomplishment of goals. It is a process of synchronizing
individual actions and the efforts which may differ because of the differences in the personal goals and
the common goals, the difference in the interpretation of methods and directions.
6. Controlling is a process of measurement of an output, comparing it with the goals, the objectives and the
target, and taking corrective actions, if the output is falling short of the stated norms. Controlling ensures
the achievement of the plan. Controlling has following three functions (i) establish standards (ii)
measure performance (iii) correct deviations if they occur.
Managers and the Environment
1. Economic environment consists of capital, labor, price changes, productivity, fiscal and monetary policy
2. Technological environment
3. Social environment is built around the attitudes, the desires, the expectations, the degree of intelligence
and education, the beliefs and customs, the religion, the caste and creed of the people.
4. Political environment
5. Ethical environment consists of laws and business ethics which emerge from the professional conduct,
the business norms and codes on confidentiality, the payment and documentation, the adherence to
generally accepted accounting standards.
Management by Exception
When the management operates under time constraint, each manager has to allocate specific time for the several
demands made on his time. An efficient manager tries for selective attention to manage within the available
time resource. The principle evolved, therefore, is of the management by exception.
The organization system consists of:
(1) The formal organizational system as described in the charts, policies and procedures.
(2) The informal organization
(3) The individual as a system
(4) The Management Information System
(5) The organizational communication system
(6) The power system
(7) The functional system
(8) The management process system
(9) Material logistics system
Delegation of authority in an organization depends upon the following factors
(1) Cost: The more costly the decision, the more likely it is to be centralized
(2) Uniformity of policy: The more uniform and centralized a policy (the less need there is to delegate
(3) Complexity of the organization: the more complex the organization, the greater the need for
coordination and centralization of authority.
(4) Custom of the business: The authority determines authority delegation.
(5) Availability of good managers encourages delegation.
Information and Organizing
The system’s view of the organization takes into account the interaction and flow of information. The
organization should be designed according to the information flow and other factors of information chosen to
plan and control performance.
Diagram showing methods of departmentalization
When a transaction is recorded manually, a copy of the document is usually used for data preparation.
Special data preparation methods are keydisk (i.e. through a keyboard), optical character recognition (OCR)
or magnetic ink character recognition (MICR)
The data is validated to determine its correctness and completeness. Subsequently the machine-readable
stored data (master file) related to or affected by the transaction is updated and outputs are prepared in the
form of documents and reports.
Reasons for preparing transaction documents are:-
(1) Informational: To report, confirm, or explain proposed or completed action
(2) Action: To direct a transaction to take place (e.g. shipping orders etc)
(3) Investigational: for background information or reference by recipient
A single document or different copies of it may serve both action and informational purposes. E.g.
one copy of the sales order confirmation may be sent to the customer to confirm the order; a second copy may
be used as an action document to initiate filling of the order.
Transaction records are distributed to other departments to respond to queries, can be saved on
terminal for authorized reference, or scanned by managers for unusual occurrences. However reports and
analyses solve the managerial purpose better.
Transaction can be processed in batch or in real-time. One advantage of real-time processing is that
the error checking or validation is done immediately, causing early detection and tracing or error. The time
delay in case of batch processing can make tracing of error difficult.
The processing trial is needed by external auditors and certain tax regulators. It should meet
following three requirements
(1) Any transaction can be traced from the source document through processing to outputs and to totals
(2) Any output or summary data can be traced back to the transactions or computations used to arrive at the
output or summary.
Information as a System
The information system receives inputs of data and instructions, processes the data according to the
instructions, and outputs and results. The information system can be divided into five major subsystems, each of
which can be further divided.
1. Hardware and system software: The computer hardware and the system software necessary for hardware
2. Management and administration
4. Application system development and maintenance
5. Application systems
Information is efficient if it is correct, complete, unambiguous, validated, timely and organized. Information is
effective if it serves the purpose of decision correctly.
The value of information may be theoretically determined by the value of a change in decision-making
Utility of information
1. Form utility: As the form closely matches decision maker, its value increases
2. Time utility: Information has greater value to the decision maker if it is available when needed.
3. Place utility: Information has greater value if it can be accessed or delivered easily.
4. Possession utility: If the dissemination of information to others is controlled.
There are two aspects to information. The first is to derive information from the data, through data processing,
and the second is to communicate it properly to the concerned people.
Methods of improving communication are massage summarizing (to reduce the amount of data to be
transmitted) and message routing (sending information only to the people concerned). The information
distribution can be controlled to improve communication. In message delay, transmission is delayed to avoid
overload, to distort, inhibit, or suppress transmission. In message modification or filtering summarizes data or
blocks certain data by filtering. In uncertainty absorption, inferences are drawn for the data, and inferences,
instead of the data are transmitted. In presentation bias, the information is presented in a way to convey the
Value of information in decision making: The value of information is the value of the change in decision
behavior caused by the information less the cost of obtaining the information.
Value of information other than in decision: The information can be used for motivation, background building
and model building.
Information resource management is an approach to management based on the concept that information is an
organized resource. The scope if IRM includes data communication, word processing, personal computers and
traditional data processing. It emphasizes the organizational effectiveness of the information system resource
rather than the technical sophistication or efficiency of the hardware and software.
Component activities that make up the overall information resources function are:
1. Data processing
3. Office automation
Information Resource Executive (Chief Information officer (CIO))
His responsibility includes the following
1. responsibility for central data processing and data communication systems
2. Coordination of organization wide information system planning
3. Maintaining infrastructure for technical services
4. Acquisition and dissemination of knowledge and expertise regarding new technology
Structure of MIS
Operating Elements of an Information System
• Physical Components
– Hardware relates to physical computer equipment for input, output, storage, processing and
– Procedures such as User instructions, data preparation for input and operating the instructions
– Operations personnel such as computer operators, system analysts, programmers, data
• Processing Functions
– Process transactions such as purchase or sale
– Maintain master files
– Produce reports
– Process inquiries
– Process interactive support applications
• Outputs for the user
– Transaction documents
– Preplanned reports
– Preplanned inquiry responses
– User-machine dialog results
Reports can be used for information, action description or for investigational purposes
Management Information System
MIS for Strategic planning
MIS for tactical planning
MIS for Operational planning
• Strategic planning: Definition of goals, policies, and general guidelines charting course for organization.
Determination of organizational objectives. (Long term)
• Management control and tactical planning: Acquisition tactics, plant location, new products,
establishment and monitoring of budgets. (medium tenure)
• Operational planning and control: Effective and efficient use of existing facilities and resources to carry
out activities with budget constraints. (Short term)
Decisions making in management comprises of Structured and unstructured decisions. Structured decisions
have a pattern and logic. Unstructured decisions are made by intuition and human judgment is involved
Two approaches exist to defining the subsystems of an MIS.
• According to the organizational functions such as marketing, production, logistics, personnel, finance
and accounting, information processing, top management
• According to managerial activities such as transaction processing, operational control, management
control, strategic planning
Quality in Information Systems
An application has quality relative to its primary and secondary users, operations personnel, control personnel,
maintenance personnel, and so forth.
Quality in information systems has a number of characteristics. The importance of each depends on the
application and its context. The following are some of the characteristics included in the concept of quality in
Complete Data All data items are captured and stored for use. Data items are
properly identified with time periods.
Accurate data The correct data values are recorded
Precise data Measurement of variables meets user needs for precision
Understandable output The output of the system is understandable
Timely output The output of the application is available in time for actions
Relevant output The outputs are relevant to the actions and decisions to be
Meaningful output The format, labeling, data provided, and context in which data
is presented makes the output meaningful for actions and
User friendly operation The system provides user interfaces that are understandable
and designed to confirm to human capabilities
Error resistant Suitable error prevention and detection procedures are in
operations place. There are procedures for reporting and correcting
errors. Various audit procedures are applied.
Authorized use Only authorized personnel have access to facilities,
applications and data
Protection system and The system and its operations are protected from various
operations environmental and operational risks. There are provisions for
recovery in the event of failure or destruction of part or all of
The role of top management in information system quality control is to establish the overall organization
structure, select the information system executive, approve the information system plan and budget, and
The information system executive has the responsibility for organizing and supervising the various control and
quality assurance activities in information systems.
There are certain control and quality assurance functions that need to be performed in information system
operations. The major functions are:
2. Processing control
3. Access control
4. Database administration
5. Backup and recovery
6. Application development quality assurance
Architecture of MIS
Transaction Databases Management Executive
Business processing of information Application support
transactions systems valid systems databases systems
Drill-down reports Expert
Exception reports systems
Operational Key-indicator reports
Input and Scheduled
error list reports
Structure of MIS in Business
Internet An Organization’s
Drill down reports
Transaction Databases MIS Exception reports
valid Demand reports
MIS Scheduled reports
transactions Databases Human
•Targeted marketing includes five components namely community, content, context, Online behavior,
•Sales force automation
• Warehouse management
Inputs to Marketing MIS
•Strategic plan and corporate policies
Databases of Manufacturing
internal data external data DSS
Business processing of valid
transactions systems transactions MIS Marketing
for each applications
Sales by customer
Sales by salesperson Manufacturing
Operational Sales by product ES
databases Pricing report
Total service calls
Manufacturing Information Systems
•Quality control and testing
•Just-in-time inventory and manufacturing
•Computer integrated Manufacturing simplifies, automates and integrates all production and support processes.
It also uses CAD, MES
•Machine control using PLCs
Inputs to the Manufacturing MIS
•Strategic plan or corporate policies.
–Receiving and inspecting data
Databases of Manufacturing
internal data external data DSS
processing of valid
systems transactions MIS Manufacturing
for each applications
Business Quality control reports
Process control reports Manufacturing
databases JIT reports
Extranet MRP reports
Human Resource System
•Training and development
Inputs to the Human Resource MIS
•Strategic plan or corporate policies
–Order processing data
Databases of Manufacturing
internal data external data DSS
Transaction Databases Human
Business processing of valid Resource Human
transactions systems transactions
Salary surveys Manufacturing
Operational Scheduling reports ES
databases Training test scores
Job applicant profiles
Needs and planning
Financial Management Systems
•Profit planning/ Profit Centre Accounting
•Online investment management
•Capital budgeting, Funds management
• Enterpise controlling
•Financial Forecasting and planning
Inputs to the Financial Information System
•Strategic plan or corporate policies
–Contains major financial objectives and often projects financial needs.
•Transaction processing system (TPS)
–Important financial information collected from almost every TPS - payroll, inventory control, order
processing, accounts payable, accounts receivable, general ledger.
–Annual reports and financial statements of competitors and general news items.
Databases of Financial
internal data external data DSS
processing of valid
systems transactions MIS Financial
for each applications
Operational Uses and management ES
Internet or databases of funds
Extranet Financial statistics
Accounting Information System
•Cost accounting, activity based costing, product cost controlling, overhead cost controlling
•Online accounting System
Review of Hardware and Software Technologies
Peripherals is the generic name given to all input, output and secondary storage devices that are part of a
computer system. Peripherals depend on direct connections or telecommunications links to the central
processing unit of a computer system.
2. Pointing devices
1. Electronic mouse
4. Pointing stick
5. Touch screens use infrared beam, sound waves, or a slight electric current that is broken when
the screen is touched
3. Handwriting recognition through pen-based computing. PDAs have a pressure sensitive layer like a
graphics pad under their slate like liquid crystal display screen.
4. Speech recognition systems digitize, analyze, and classify your speech and its sound patterns. The
software compares your speech patterns to a database of sound patterns in its vocabulary and passes
recognized words to your application software.
5. Optical scanning devices read text or graphics and convert them into digital input for your computer.
Another technology is optical character recognition.
6. Magnetic stripe
7. Smart cards
8. Digital cameras
9. Magnetic ink character recognition detects iron oxide-based ink
1. Video output
1. Video monitors use a cathode ray tube technology
2. Liquid crystal displays (LCDs)
2. Printed output
1. Inkjet printers spray ink onto a page one line at a time.
2. Laser printers use an electrostatic process similar to a photocopying machine.
1. Magnetic tape records data in the form of magnetized spots on the iron oxide coating of the plastic tape.
2. Magnetic disks contain metal disks that are coated on both sides with an iron oxide recording material.
Several disks are mounted together on which data is stored in the form of tiny magnetized spots to form
the binary digits
1. Floppy disks
2. Hard disk drives
3. RAID (redundant arrays of independent disks)
3. Optical disks are used by business for image processing
1. CD-ROM use a laser device to read the binary codes created by burning microscopic pits in a
spiral track by laser
2. CD-R records permanently
3. CD-RW use magneto optical technology
Types of programming languages
1. Machine language/ Ist generation language: It is a series of 0s and 1s
2. Assembler language/ IInd generation language: It uses mnemonic names for operations
3. High level language/ IIIrd level language: Instructions are in the form of statements which are
compiled or interpreted before being executed
4. Fourth level languages are more non-procedural with simpler syntax
5. Object oriented language
Classification of software
1. Application software which performs processing for end user
2. System software that supports operations of computer networks and systems
Types of software
1. Software suites are two or more packages bundled together e.g. Microsoft office, Lotus notes suite
2. Software packages are a combination of some functions of several programs e.g. Microsoft works
3. Web browsers enable easy use of internet
4. E-mail is a way of communicating with people
5. Word processors e.g. Microsoft word
6. Electronic spreadsheets e.g. Microsoft excel
7. Presentation graphics e.g. Microsoft PowerPoint
8. Database management systems (DBMS)
9. Technologies for multimedia
10. Personal information managers e.g. lotus notes
11. Operating systems
12. Model generators facilitate the development of models and DSS. It includes programming language,
spreadsheets, and statistical packages. A good model generator should have easy usability, access t o
wide variety of data and analysis capability.
13. Model Base Management Systems (MBMS) manage models and analysis programs in much the same
way as the DBMS manages data.
Decision Support Systems
Business decisions are those, which are made in the process of conducting business to achieve its objectives in a
given environment. Their major characteristics are:
• Sequential in nature
• Exceedingly complex due to risks and trade offs
• Influenced by personal values
• Made in institutional settings and business environment
Problems in making rational Decisions
• Ascertaining knowledge
• Insufficient knowledge
• Not enough time to be rational
• The environment may not cooperate
• Other limitations
• Intelligence: Searching the environment for conditions calling for decisions
• Design: Inventing, developing, and analyzing possible courses of action.
• Choice: Selecting an alternative or course of action from those available.
Important aspects of these phases
• Problem finding is conceptually defined as finding a difference between some existing situation and
some desired state. Expectations can be based on historical models, planning models, models of other
people such as superiors, extra organizational models.
• Problem formulation clarifies the problem, so that design and choice activities operate on the right
problem. Strategies of reducing complexity are determining boundaries, factoring problem into smaller
problems, focusing on controllable elements.
• Developing alternatives involves creativity which can be enhanced by aids such as scenarios, analogies,
brainstorming, checklists, templates etc.
• Decision making involves consideration of certainty, risk and uncertainty of occurrence
Nature of decisions
Programmed verses non-programmed decisions
• Non-programmed decisions have no pre-established decision rules or procedures
• Programmed decisions can be pre-specified by a set of rules or decision procedures. They imply
decision making under certainty because all outcomes are known.
Users of DSS
1. Subscription mode: Regular reports received by user
2. Terminal user: Online access through system
3. Clerk mode: Direct use but like batch processing
4. Intermediary mode: Intermediaries perform analysis and interpret the report
The primary requirement of DSS for intelligence is the ability to search the database for opportunities and
problems. These searches can be summarized as:
1. Structured, continuous search (On regular basis)
2. Structured ad hoc search (Once in a while)
3. Unstructured search (through trial and error)
Report elements that assist in problem finding
1. Summarization (Totals and ordering)
2. Comparison (with plans or competitors)
3. Prediction (forecast)
4. Confirmation (for audit or validation)
Types of business decisions
Decision Operational Management Tactical Management Strategic Management
Unstructure Cash management Business Process New e-business initiatives,
d Reengineering, Workgroup Company reorganization
Semi Credit management, Employee performance Product planning, Mergers
structured Production scheduling, Daily appraisal, Capital budgeting, and acquisitions, Site
work assignment Program budgeting location
Structured Inventory control Program control
• Decision making at the operation level is a situation of certainty. Decision making at the middle level is
of the risk type because of difficulty in forecasting. At the top level it a situation of total uncertainty on
account of insufficient knowledge of the external environment.
Types of Models
• Behavioral Models are useful in understanding the behavior amongst the business variables. Examples
– Regression models (Y=C+R.X)
– Time series analysis
– Market research methods
– Ratio analysis for financial assessment e.g. current ratio=current assets/current liabilities
• Management science models
– Budgeting models
– Break even analysis model (revenue=fixed cost + variable cost)
– Return on investment analysis model
– Cash budgeting
– Procedural models (Economic order quantity/minimum inventory)
• Operation research models
– Linear programming
– Inventory control models
– Material requirement planning
Methods for selection of decision alternatives
• Optimization Technique such as linear programming. These methods are used in cases where decision
making situation is closed, deterministic and requires to optimize the use of resources under conditions
• Payoff Analysis is used when the alternatives and outcomes are not known. A matrix is prepared to
evaluate the decisions. (probabilities are set for occurrence)
• Utility and indifference curve considers non monetary benefits of decision also and evaluates using the
matrix of Payoff Analysis.
• Decision Tree Analysis is used when a sequence of decisions are to be made.
• Uncertainty avoidance. Example: Choosing to earn $10 with 90% probability than choosing to earn
$100 with 12% probability
• Organizational learning helps in influencing decision making
• Game Theory
• Statistical inference such as regression and correlation, testing of hypothesis.
Decision Support Systems
Decision Support Systems are computer-based information systems that provide interactive information
support to managers and business professionals during decision making process. Decision support systems use
analytical models, specialized databases, a decision maker’s own insights and judgments and an interactive,
computer based modeling process to support the making of semi structured and unstructured business decisions.
Decision Support Analytical Modeling
Type of Example
What-if What if we cut advertising by 10% what would happen to sales?
Sensitivity Let’s cut advertising by 1% repeatedly so we can see its relationship to sales
Goal-seeking Let’s try increasing advertising until sales reach $1 million
Optimizatio What level of advertising maximizes our overall profit?
Typical MIS Reporting
• Periodic Scheduled Reports
– Example: Monthly Financial Statements
• Exception Reports
– Example: List of items out of stock
• These reports contain information but they might not directly help you determine the best decision to
• Demand Reports and Responses
– Available whenever a manager needs them, updated in real-time.
• Push Reporting
– Information is pushed to a managers computer
– Example: Report is pushed every time a supplier is late with a shipment
• MIS Reporting is all about giving managers feedback and doesn’t necessarily help directly with decision
DSS and concepts in decision making
Decision concept Application of decision support system
Programmed Vs Non- Both programmed and non-programmed decisions are supported by DSS
Satisfying factor Expansion of search beyond satisfying level can be provided
Behavioral model Stimulates analysis and stimulates recognition of effects of changing goals
Decision making under Interactive decision making during tough times is easy
Alternative approaches Provides alternatives and guidance in selection
Quality of decision It can provide checklists to assessing quality
DSS Vs. MIS
Support Info about performance Info and modeling to analyze problems
Report Periodic reports Interactive Inquiries
Form or On Demand
Format Pre-specified Flexible and Adaptable
Processing Extract and manipulate data Analytical modeling
Artificial Intelligence Technologies in Business
Artificial Intelligence is a field of science and technology based on disciplines such as computer science,
biology, psychology, linguistics, mathematics, and engineering.
The goal of IT is to develop computers that can think, as well as see, hear, walk, talk and feel.
Attributes of Intelligent Behavior
• Think and reason
• Use reason to solve problems
• Learn or understand from experience
• Acquire and apply knowledge
• Exhibit creativity and imagination
• Deal with complex or perplexing situations
• Respond quickly and successfully to new situations
• Recognize the relative importance of elements in a situation
• Handle ambiguous, incomplete, or erroneous information
Expert systems are built using an expert system shell (knowledge base for expert system without kernel,
consisting of facts and heuristics) coupled with inference and user interface capabilities. But it has a limitation
in terms of learning of system, development cost and maintenance.
End User Computing
End-User Development (EUD)
Specifically, the practice of users developing their own information systems, is often but not always with the
support of professional systems developers. The practical involvement of end-users in application development
necessitates the easy access to computing facilities. This may be
• Timesharing on a centralized mainframe
• The use of stand alone personal computers
• The use of personal computers which are connected to local area networks and mainframes.
In addition to being provided with hardware and software, extra facilities are a necessary condition of
successful End user applications development. In particular:
• Education and training on the use of software tools
• Assistance in the technical aspects of writing, testing, and debugging applications
• Availability of reference material
• Aid in accessing the corporate database
Applications Suitable for End-user Development
Applications suitable for end-user development can be grouped into the following 5 categories:
• One time enquiries
• Simple Reports
• Minor Changes to Reports or Enquiries
• Presentation of Data in Alternate Forms
• 'What if' Analyses
Applications not suitable for end-user development:
• data entry involving organization files and databases (where the data must be validated for accuracy and
• high volumes of transactions, requiring processing efficiency and multiple processing steps
• use of 'traditional' computer languages designed for use by professional programmers, requiring detailed
statement of processing procedures and controls
• changing of data values in existing databases and files
• applications spanning several departments or divisions in the organization
• applications requiring formal documentation
• applications requiring a long development process
• applications requiring detailed formal specifications.
Who Are The End Users?
In general an end-user is anyone who has to interface to a computer who is not employed specifically to do so
(ie is not a data entry clerk or an operator). This includes executives interfacing to EIS facilities, middle
managers or technicians who use a PC or a terminal to an on-line system, clerks accessing a central database to
download data for local processing, individuals using a PC in stand alone mode for their own work, individuals
using a PC in stand alone mode for an activity which the corporate management has decided shall be done by
computer (eg office automation), clerks interfacing to a computer system which has replaced their manual
system (without their having any input) and clerks writing data preparation documents.
Web integration is, however, creating a new class of end-user. (S)he is an end-user in one organization who,
through integration (3-tier client / server), has suddenly become a user of a system in another organization. A
further complication is that now a system may have to cope with two different kinds of end-user at the same
time. For example the parcel tracking system at FEDEX could be accessed by both a company employee and an
external customer, both trying to track a parcel (though not necessarily the same parcel). We may group them
into the following categories:
• Non programming
• Command level
• End-user programmers (including senior management professionals)
• Functional support personnel
• End user computing support personnel
• DP Programmers
This list covers a very wide range of personnel carrying out a wide range of tasks throughout
organization - and the list continues to grow.
Advantages of User-developed systems
• Relieves shortage of system development personnel
• Eliminates the problem of information requirements determination by information systems personnel
• Transfers the information system implementation process to users
• Enhanced productivity of professional and white-collar workers.
• Provision of user-friendly and responsive systems.
It became clear very quickly that the managers had bought something that they didn't understand and either had
to discard the machine (as happened in many schools who were encouraged
by government to acquire computers) or had to be supported to get the most out of their purchases.
The particular problems which were posed for the organizations into which these PCs had been
(a) Lack of standardization between the various purchases leading to:
(i) inability to share data;
(ii) no economy of scale in purchasing;
(iii) a variety of requirements for maintenance, in the few cases where the problem had
actually been considered.
(b) Lack of control over the requirements of legislation, such as software copyright, data
protection, health and safety and the specific legal constraints covering the organization.
(c) Demands for assistance with:
(i) systems analysis and design;
(iii) software procurement;
(iv) sizing - machines which have been purchased but are too small for the job;
(vii) lack of documentation;
(viii) data security;
(ix) environmental control;
(x) file conversion and data acquisition;
(xi) data organization.
Issues requiring training
• Validation of data
• Audit trials
• Operating control
• Backup and recovery
Software tools for development
• Interactive programming software
• Programming language
• Application generators
• Report generator / Query language for query jobs
• Online documentation software
• Data dictionary
• Graphics languages
• Statistical analysis tools
Concept of Planning in Organization
• A plan is a predetermined course of action to be taken in future. It identifies the goal to be achieved and
the steps to be taken to achieve the desired results.
• Planning is the function that determines in advance what should be done. It consists of selecting the
enterprise objectives, policies, programs, procedures and other means of achieving these objectives
Characteristics of planning
1. Planning is goal oriented
2. Planning is a primary function
3. Planning is all-pervasive
4. Planning is an intellectual or rational process
5. Planning is continuous
6. Planning is forward looking
7. Planning involves choice
8. Planning is an integrated process
9. Planning is directed towards efficiency
Importance of planning
1. Focuses attention on objectives and results
2. Reduces uncertainty and risk
3. Provides sense of direction
4. Encourages innovation and creativity
5. Helps in coordination
6. Guides decision making
7. Provides a basis for decentralization
8. Provides efficiency in operations
9. Facilitates control
Limitations of planning
1. Lack of accurate information
2. Time and cost
4. Resistance to change
5. Lack of commitment to planning
6. False sense of security
7. Environmental constraints
Essentials of a good plan
1. It should be based on clearly defined objectives
2. It must be simple and easily understandable
3. It should be flexible and adaptable to changing conditions
4. It should be balanced in all respects and should be reasonably comprehendible
5. It should provide standards for the evaluation of performance and actions
6. It should be economical, i.e. permit optimum use of available resources before creating new authorities
and new resources.
7. It should be practicable or action-oriented
8. It should be prepared with the consultation of concerned persons
9. Different plans must be properly integrated and harmonized with one another
Principles of planning
1. Principle of contribution to objectives
2. Principle of efficiency of plans
3. Principle of primacy of planning
4. Principle of planning premises ( The assumptions about future derived from forecasting and used in
planning are known as planning premises)
5. Principle of policy framework
6. Principle of timing
7. Principle of alternatives
8. Principle of limiting factor
9. Principle of commitment
10. Principle of flexibility
11. Principle of navigational change
12. Principle of competitive strategies
Steps in planning process
1. Identify goals
2. Develop planning premises
3. Determine alternative courses of action
4. Evaluate the alternatives
5. Select a course of action
6. Formulate Derivative plans
Correct assessment of planning premises is helpful in the preparation of reliable plans, because when the
assumptions about the future environment are accurate, the plans based on such assumptions will be
dependable. Planning premises may be classified as under
1. External and Internal premises
2. Tangible and Intangible
3. Controllable and Uncontrollable
Types of planning
On the basis of time period
1. Long-range planning
2. Medium-term planning
3. Short-range planning
2. On the basis of level of formulation
1. Corporate planning
2. Divisional or Business planning
3. Functional or Unit planning
3. Strategic planning
4. Operational planning
Comparison between Strategic planning and operational planning
Point of comparison Strategic planning Operational planning
Scope For the enterprise as a whole For particular department or
Range of choice Wide-broad directions for Narrow-specific ways and means
planned allocation of resources
Type of environment External environment Internal environment
Time span Long-range Short-range
Question answered Where should we go How will we get there
Primacy Precedes operational planning Succeeds strategic planning
Level of formulation Top-level management Operating and middle level
Resources Acquisition of new resources Within the framework of existing
End result Objectives and strategies Detailed program
Types of policies
1. Originate policy
2. Appealed policy’
3. Imposed policy
Difference between Policy and Strategy
S. No Policies Strategies
1. Guides to thinking and actions Provides direction in which human
and physical resources will be
2. Guidelines for decision making in repetitive Contingent decisions
3. Taken for problems about which facts are Taken for problems where alternatives
known. Only time of occurrence is not cannot be analyzed in advance
4. Implementation of policy can be delegated Implementation of strategy cannot be
delegated as it requires last minute
5. Standing plan or long lasting Non-repetitive plans, may need
6. Not based specifically on the moves of Formulated in the light of competitor’s
Difference between Strategies and Tactics
S. No Strategies Tactics
1. Long-lasting but flexible time perspective Short-term and definite time
2. Formulated at the top level of management Formulated at lower level of
3. Continuous process but irregular timing of Continuous process and periodic
the decision decision e.g. budget preparation
4. Based on information generated outside Based on information generated within
about the external environment the organization, particularly from
5. Affected by personal values of strategy Taken within the control of strategic
6. Critical importance for the future of the Less important as concerned with
organization, concerned with the total specific parts of the organization
Summary of various plans
Name of Plan Definition Nature Example
Objective Goal or target to be Basis of all plans Increase sales by 10
Policy General statement or Boundary within which Employees are to be
understanding to guide decisions are to be made promoted on the
thinking basis of seniority
Strategy Action plan to face Relates the organization Combative
environmental to its environment advertising to face
uncertainties price cuts by
Procedure Manner in which activities Sequence of steps Purchase procedure
are to be performed
Rule State what should or Rigid plan, no scope of No smoking in the
should not be done in a discretion factory
Programme Combination plan for goal States activities and Installation of a
achievement, non repetitive resources to be computer
Schedule Time-table for activities Specifies priority of work Complete
and time for each activity installation of
computer within 3
Budget Statement of expected Quantitative and time Produce 10,000
results and resources to be bound plan of action tones of sugar
Project Cluster of interrelated Scheme for deployment Construction of a
activities-a separate unit of resources flyover
Information System Plan
Process of Information System Plan Development
• Planning is the process of deciding what will be done, who will do it, when they will do it, how it will be
done, and what are the desired results.
Challenges in IS planning
• Difficulty foreseeing and assessing Opportunities
• Difficulty Assuring consistency with organizational plans and objectives
• Difficulty building systems
• Difficulty maintaining Information System performance
• Difficulty collaborating with IT professionals
Principles for Information Systems Planning
• Support the firm’s Business strategy with appropriate technical architecture
• Evaluate technology as a component of a larger system
• Reorganize life cycle costs, not just acquisition costs
• Design information systems to be maintained
• Recognize the human side of technological use
• Support and control the technical system
Planning role of IS and User departments
• Multiple role for
Allocating resources between new and old information systems
• User support projects
• Bug fixes
• Major new applications
• IT infrastructure project
• Research projects
Strategic alignment of business and IT
• Consistency with business priorities
• Reengineering and downsizing (BPR)
• Enterprise-wide and inter-organizational systems
• Information system architecture
• Centralization Vs Decentralization
• International issues
Advantages of planning Support Systems
1. Reduced information overload
2. Information selection
3. Economic solutions
4. Fast turnaround
5. Interrelation of operations and planning system
6. Communication aid
7. Direct involvement as can be used directly by decision makers
Planning for Information System
• The complexity of the information resources environment suggests that planning is vital to success.
• The plan describes the structure and content of the information system and how it is to be developed.
• The organization’s strategic plan should be the basis for the MIS strategic plan.
• The overall responsibility of IS planning is the responsibility of Chief Information Officer (CIO)
Approaches to organizing and supervising the information system planning effort
• Planning staff within information systems functions (planning specialists)
• Ad hoc planning groups within information systems
• Planning group with representatives from various functions
Review of plan
• Master plan is reviewed by the steering committee which comprises of executives from major functional
areas and is executives.
• The committee also periodically reviews progress against the plan.
• The master plan is integrated in the organizational plan by top management after review and approval.
• Information system policies and procedures are defined.
Content of Master development plan/ Information System plan/ Information Resource plan
• The master plan has two components:- a long-range plan and a short-range plan. The long-range plan
provides general guidelines for direction and the short-range plan provides a basis for specific
accountability as to operational and financial performance. It consists of the following subheadings:-
– Information system goals, objectives, and architecture
– Inventory of current capabilities
– Forecast of developments against the plan
– The specific plan
Information system goals, Objectives, and architecture
– Organizational goals, objectives, and strategies
– External environment (industry, government regulations, customers, and suppliers)
– Internal organizational constraints such as management philosophy
– Assumptions about business risks and potential consequences
– Overall goals, objectives, and strategy for the information system
– Architecture of the information system
– Current capabilities
– Inventory of
– Software (System software, DBMS, etc)
– Application systems (classified on the basis of functional systems, organizational
strategy, maintenance need)
– Analysis of
– Hardware utilization
– Software utilization
– Personnel utilization (further classification such as job, skill, functional area)
– Status of projects in progress
– Assessment of strengths and weaknesses
• Forecast of developments Affecting plan
– Hardware and software technological availabilities should be forecasted with expected impact on
– Methodology changes should be forecasted
– Environmental developments such as government regulations, tax laws and competitors affecting
IS should be stated
• Specific plan
– Hardware acquisition schedule
– Purchased software schedule
• System Software
• Applications software
– Application development schedule
– Software maintenance and conversion schedule
– Personnel resources required and schedule of hiring and training
– Financial resources required by object of expenditure
The master plan is prepared from the CIO’s point of view and focuses on the planning strategy e.g. if the
planning strategy for consideration is the end-user computing, then the plan will highlight the end users in the
Maintenance of master plan
• IS plan requires updating
– Changing organizational setup
– Changes in technology
– Changing needs of system
– Internal events
– Progress of new systems
– External events
Information system growth models
Assumptions of NOLAN model
• Organizational learning
• Stages cannot be skipped
• Other than the natural process, these processes can be planned, coordinated, and managed to move
through the stages effectively and efficiently
• The NOLAN stage model
The organization must go through each stage of growth before it can progress to the next one, thus giving an
insight to planning regarding the stage of an IS
Stages of Information system growth
Stages of growth Description
Initiation Early use
Expansion Experimentation, rising cost
Formalization Organizational controls
Maturity Integration of applications
NOLAN six stage model
Stage Level of control or slack
I Low control. Some slack. No planning
II Greater slack due to encouraged use, integration and lack of planning
III High controls, planning given importance
IV Use of databases for integration
V Slack due to focus on strategically important systems
VI Application portfolio complete and matches organizational objectives
NOLAN alternative model
Due to technological changes the growth curve shifts as follows
Advantages and disadvantages of NOLAN model
– Evolutionist model as it focuses on development
– Lack of specificity as it does not define the mechanism for change
Three stage model of the planning process
• It clarifies the generic planning activities, the order of activities, and the alternative techniques and
methodologies that apply
Strategic planning stage
• McFarlan-McKenney Strategic Grid
Position in grid Organization and management of IS planning
Strategic Significant general management guidance. Integration of corporate
planning and IS planning
Turnaround Same as strategic
Factory Less involvement from top management. Guidance from corporate
plan to maintain IS alignment
Detailed operational and capacity planning by IS function
Support Little top management involvement
Little or no guidance from corporate plan
• Each organization has a culture which reinforces values, norms, and beliefs about the organization.
Goals, objectives, and strategy for information systems should fit with the culture in order to avoid high
resistance and high risk of failure.
Strategy Set Transformation
• Explicate the organization’s strategy set
– Delineate the organization structure for users
– Identify goals of claimants
– Identify organizational goals and strategies for each claimant group
• Validate the organizational goals from management
• Transform organizational strategy set into the information system strategy set
– Identify IS objectives for each organizational strategy
– Identify IS constraints from organizational strategy
– Identify IS design strategy based on organizational attributes
Analysis of Organizational information requirements
• Information requirements are required at the organizational level for information system planning,
identifying applications, and planning an information architecture.
• More detailed information requirements are required for detailed design of applications.
Strategy approach to the determination of Information requirements
– Humans as information processors
– Variety and complexity
– Complex patterns of interaction
– Unwillingness of some users
• Levels of requirements
– Organizational level
– Database level
– Detailed requirements for an application
• Identify those characteristics of the four elements in the development process that affect uncertainty in
the determination of information requirements
– Utilizing system
– Information system or application
• Evaluate the effect of the characteristics of the four elements in the development process on three
– Existence and availability of a set of usable requirements
– Ability of users to specify requirements
– Ability of analysis to elicit and evaluate requirements
• Evaluate the combined effect of the process uncertainties on overall requirements uncertainty
• Select a primary strategy for requirements determination based on the overall requirements uncertainty.
• Closed questions
• Open questions
• Guided brainstorming
• Group consensus
– Deriving from an existing information system
• Existing system being replaced by the new system
• Existing system in another , similar organization
• Proprietary system or package
• Descriptions in textbooks, handbooks, industry studies etc.
– Synthesizing from characteristics of the utilizing system
• Normative analysis
• Strategy set transformation
• Critical factors analysis approach (critical success factors CSFs)
• Process analysis (Business systems planning BSP)
• Ends-means analysis
• Decision analysis
• Socio-technical analysis
• Input-process-output analysis
– Discovering from experimentation with an evolving information system
• Select one or more methods from the set of methods to implement the primary strategy
Organizing for development of MIS
Major issues are:
• Centralization and Decentralization
• Allocation of hardware and software
• Maintenance of the service level
• Fitting the organization of the MIS in corporate organization, its culture and management philosophy
Organization and management of the Information resource function
• The management of IS in many organizations is experiencing a transition from computers and data-
based information processing to information as a strategic resource and to an expanded role for
Information technology termed as information resource management.
• Reasons for such shifts are the stage of development, and technology. In the six-stage NOLAN model,
the maturity stage replicates organizational processes and there is a joint information-systems-user
accountability for information resources. There is also a match between organizational and IS structure.
The technology is highly integrated with organizational processes and thus should be managed by single
Information Resource functions
• Data processing
• Office Automation
Information resource executive
His responsibilities include:
• Operational responsibility for central data processing
• Coordination of information wide information system planning
• Maintaining infrastructure for technical services
• Acquisition and dissemination of knowledge
• Establishment and enforcement of standards and guidelines for all major IS applications
• Aiding of adequate placement of information systems expertise and responsibilities
Organization of the information resource function
There are three alternatives, centralization, decentralization or combined forms such as function and matrix.
Pressures for decentralized control
• Availability of low cost technology
• Backlog of development work
• User-control over operations
• Organizational Behaviour
– Psychological value of unused information
– Symbol of commitment to rational choice
Pressures for centralized control
• Staff professionalism
• Corporate Database control
• Technical competence and control
• Comparative cost advantage
Centralization and decentralization of System operations
(Factors affecting location)
• Economies of scale for computer equipment
• Integration of processing
• Data communications cost
• Technological expertise to support computer operations
• Hardware installation risks
Centralization Vs Decentralization of system Development (Role of user liaison) : The development work
can be performed at one location or can be distributed along various locations of the organization. But getting
the user and developer together helps achieve effectiveness.
Centralization Vs decentralization of Allocation of Scarce Information Resources
Advantages of centralization are that it facilitates integration and overall balance of development of IS
applications. It also facilitates close adherence to an overall MIS master plan.
Decentralization is implemented using a chargeback system. A chargeback system provides a cost recovery. A
good chargeback method should have the following characteristics:
• Understand ability
• Control ability
• Cost/Benefit incidence
Thus it should be based on a standard rate per unit processed, such as transactions, inquiries, or reports. Fixed
prices are appropriate for development.
Information cost scan be handled as per the following:
• Allocation of expense
• Standard resource rates
• Standard rate per unit processed
• Fixed price
• Charges are based on CPU utilization and disk storage costs.
Management of IS personnel
• Information Analyst helps gather relevant information
• System Designer designs and models the system
• Application programmer develops the application
• Maintenance programmer helps keep the application in good form
• Program librarian takes care of all the documentation associated with the application
• Systems programmer help in system level programming
• Data communications specialist helps in communication data correctly
• Data administrator takes care of the data kept in the DBMS
• User liaison interacts with the user
• Office automation coordinator ensures tools work correctly
• Information centre analyst handles all the information
• Operator uses the application
• Data control clerk validates the data
• Data entry clerk enters the data
• Security coordinator ensure security features
Concept and process of control
Managerial control implies the measurement of accomplishment against the standard and the correction of
deviations to assure attainment of objectives according to plans.
It is a continuous process of verifying whether actions are being taken as planned and taking corrective action to
ensure that events conform to plans as closely as possible.
Nature of control
1. Control process is universal
2. Control is a continuous process
3. Control is forward looking
4. Control involves measurement
5. Control is an influence process
6. Management control is a system
7. Control is best aimed at results
8. Control is goal oriented
Elements of control
2. Information feedback
3. Delegation of authority
4. Remedial action
Interrelationship between planning and control
Planning is meaningless without control and control is aimless without planning. Control helps understand
the need for revision of plans if required.
Benefits of control
1. Guide to operations
2. Policy verification
3. Managerial accountability
4. Employee morale
5. Psychological pressure
6. Coordination in action
Types of control
1. Historical or feedback control
2. Concurrent control
3. Feedforward control
Information feedback systems
Open and closed loop
Information feedback is essential to an understanding of the self regulating nature of systems in general and
how this attribute can be applied in a MIS to aid in decision making
Control and feedback
Steps in control process
1. Establishment of standards
a. Quantitative standards
b. Qualitative standards
2. Measurement of Performance
3. Comparing Performance with Standards
4. Analysis of deviations
5. Taking corrective action
Essentials of an effective Control system
1. Focus on Objectives and needs
2. Forward looking
4. Critical Point Control
Techniques of managerial control
1. Traditional Techniques
a. Personal observation
b. Good organization structure
c. Unity of objectives
d. Statistical reports and analysis
e. Breakeven analysis
f. Budgetary control
2. Modern Techniques
a. Management Audit
b. Return on investment
c. Responsibility accounting
d. PERT and CPM
Steps in System Analysis and Design
1. Need for information (Nature of information)
2. Define the system (Nature of system)
3. Feasibility study (Technical, Economic, Operational)
4. Detailing the requirements (Precise requirements)
5. Conceptual System Design (Input, Process, Output)
6. Detailing the System design (DFDs, Data flows)
7. Structuring the system design (Hierarchy)
8. Conceptual model of computer system (processes)
9. Break the system in programmable modules
10. Develop the test data for checking the system ability
11. Install the system
13. Review and maintenance
Enterprise Resource planning
In order to manage information, in order to deliver high quality information to the decision-makers at the right
time, in order to deliver high quality information to the decision-makers at the right time, in order to automate
the process of data collection, collation and refinement, organizations have to make IT an ally, harness its full
potential and use it in the best possible way.
For any organization to succeed, all business units or departments should work towards this common goal. At
the organizational level, IT should assist in specifying objectives and strategies of the organization. At the
departmental level, IT must ensure a smooth flow of information across departments, and should guide
organizations to adopt the most viable business practices.
As the departments are large, they remain closed except at the top level, unless a common system is
An Enterprise is a group of people with a common goal, which has certain resources at its disposal to achieve
that goal. Resources included are money, material, man-power and all other things that are required to run the
enterprise. Planning is done to ensure that nothing goes wrong. Thus Enterprise Resource planning is a method
of effective planning of all the resources in an organization.
ERP is primarily an enterprise-wide system, which encompasses corporate mission, objectives, attitudes,
beliefs, values, operating style, and people who make the organization.
ERP covers the techniques and concepts employed for the integrated management of businesses as a whole,
from the viewpoint of the effective use of management resources, to improve the efficiency of an enterprise. It
is a mirror image of the major business processes of an organization, such as customer order fulfillment and
manufacturing. Its set of generic processes, produce the dramatic improvements they are capable of only, when
used to connect parts of an organization and integrate its various processes seamlessly.
Reasons for the growth of the ERP market
1. To enable improved business performance through reduces cycle time, increased business agility,
inventory reduction, order fulfillment improvement
2. To support business growth requirements through new product lines, new customers, meeting global
3. To provide flexibility, integrated, real-time decision support through improved responsiveness across
4. To eliminate limitation in legacy systems of century dating , fragmentation of data, inflexibility to
5. To take advantage of the untapped mid-market by increasing functionality at a reasonable cost, vertical
market solutions etc.
The advantages of ERP
1. Business Integration through automatic data updations
2. Flexibility to adapt to global differences
3. Better analysis and Planning capabilities by utilizing many types of support systems
4. Use of latest technology to sustain growth.
Why do many ERP implementations fail?
1. Wrong product
2. Incompetent and hazardous implementation.
3. Lack of training for employees
Integrated Management Information
An information system is an open, purposive system that produces information using the ‘input-process-output’
cycle. The minimal information system consists of three elements-people, procedures and data. People follow
procedures to manipulate data to produce information.
a. Financial Accounting e.g. General Ledger, Accounts receivable and payable, Asset accounting,
legal consolidation, controlling, overhead cost controlling, cost centre accounting, overhead
orders, activity based costing, product cost controlling, cost object controlling, profitability
b. Investment Management e.g. Investment Planning
c. Controlling e.g. Overhead cost Control
d. Treasury e.g. Cash Management, treasury management, market risk management, funds
e. Enterprise Controlling e.g. EIS
f. Profit Centre Accounting
a. Material and Capacity Planning
b. Shop Floor Control
c. Quality Management
d. JIT/ Repetitive Manufacturing
e. Cost management
f. Engineering Data Management
g. Engineering Change Control
h. Configuration Management
i. Serialization/ Lot Control
3. Sales and Distribution
a. Master Data Management
b. Order management e.g. Sales Order Management, Purchase Order Management,
c. Warehouse Management includes inventory planning, inventory handling, intelligent location,
inventory reporting, inventory analysis, lot control, distribution data collection, etc.
g. Sales Support
i. Foreign Trade
4. Plant Maintenance
a. Preventive Maintenance Control
b. Equipment Tracking
c. Component Tracking
d. Plant Maintenance Calibration Tracking
e. Plant Maintenance Warranty Claims Tracking
5. Quality Management
a. Quality planning
b. Quality inspection
c. Quality control
6. Materials Management
a. Pre-purchase Activities
c. Vendor Evaluation
d. Inventory management
e. Invoice verification and material inspection
7. Human Resources
a. Personnel Management includes personnel administration, employee master data, recruitment
management, travel management, benefits administration, salary administration
b. Organizational Management includes payroll accounting
c. Payroll Accounting
d. Time Management includes shift planning
e. Personnel Development includes training and event management
ERP Market consists of the big 5 vendors (Sap, Oracle, Peoplesoft, Baan, JD Edwards) and others. The big 5
account for 61% of the market share.
SAP (Systems, Applications and products in Data Processing)
SAP ERP packages come in two versions: the mainframe version (SAP R/2) and the client/server version (SAP
SAP products feature a sophistication and robustness unmatched by other business software solutions. SAP has
developed an extensive library of more than 80 predefined business processes, spanning each functional
The 3-tier architecture separates a system into three functional layers, each structured to support the demands of
1. The database layer resides on central servers or mainframe host computers
2. The application layer holds the processing logic of the system, preparing and formatting data for
individual offices or departments.
3. The presentation layer typically on personal computers, handles all the tasks related to the presentation
of data, including user interfaces that enable easy access to complex applications and data.
SAP also incorporated And integrated the intranet and internet technologies into business solutions for its
Although designed as an integrated system, R/3’s modules can also be used individually
SAP has recently come out with BAPIs (Business application programming interface) which helps SAP interact
with third party applications
The Baan series-based product family includes Baan Enterprise Resource Planning (Baan ERP), Baan Front
Office, Baan Corporate Office Solutions, Baan Supply Chain Solutions etc.
Baan serves a number of industries like Aerospace & Defense and Automative.
The Baan ERP modules include the following
Oracle’s Warehouse Technology Initiative provides customers with a complete data warehousing solution.
Oracle’s Integrated Business Intelligence Solutions deliver powerful capabilities to users anywhere in the
enterprise, at any time. Products include Oracle Reports, Oracle’s Enterprise Reporting Tool, Oracle
Discoverer, Oracle’s Query and Analysis tool etc.
Oracle Applications is a leading provider of packaged and integrated front office and ERP solutions for the
enterprise. It follows internet computing model.
Oracle has 45+ modules divided into following categories
• Oracle Financials
• Oracle Human Resource
• Oracle Projects
• Oracle Manufacturing
• Oracle Supply Chain
• Oracle Front Office
It provides industry specific enterprise solutions to customers in select markets, including communications,
financial services, healthcare, manufacturing, higher education.
Its applications can be implemented as a single application, or a complete enterprise-wide solution
Peoplesoft tools include several tools for reporting, customization and workflow.
Peoplesoft implementation toolkit has a modular application structure, which lends itself to the use of phasing-
an incremental process. It has four phasing strategies:
1. Geographical: Applicable when business practices and processes in various locations are independent to
justify separate implementations.
2. Departmental: Your initial phase is focused on full implementation for a given department, additional
departments incremented later.
3. Core and then support processes
4. No phasing required in some situations.
JD Edwards WorldVision is a thin client bridge that provides the Graphical User Interface (GUI) with a look
and feel common to the PC, while protecting your investment in WorldSoftware and the AS/400. The different
product modules available from JD Edwards are:
• Foundation Suite
• Financial Suite
• Logistics/Distribution Suite
• Services Suite
• Manufacturing Suite
• Architecture, Engineering, Construction, Mining and Real Estate Suite
• Energy and Chemical Suite
• Payroll Suite
• Human Resource Suite
• Customer Service Management Suite
• Government, Education, and Not-for-profit Solutions
• Utility and Energy Solutions
ERP Implementation lifecycle
Gap Analysis Reengineering Configuration
Implementation Team building Testing End-user Training
What is CRM?
CRM stands for Customer Relationship Management. It is a process or methodology used to learn more about customers'
needs and behaviors in order to develop stronger relationships with them. There are many technological components to CRM,
but thinking about CRM in primarily technological terms is a mistake. The more useful way to think about CRM is as a process
that will help bring together lots of pieces of information about customers, sales, marketing effectiveness, responsiveness
and market trends.
CRM helps businesses use technology and human resources to gain insight into the behavior of customers and the value of
Sales Force Automation
• Contact management
Contact management software stores, tracks and manages contacts, leads of an enterprise.
• Lead management
Enterprise Lead management software enables an organization to manage, track and forecast sales leads. Also helps
understand and improve conversion rates.
eCRM or Web based CRM
• Self Service CRM
Self service CRM (eCRM) software Enables web based customer interaction, automation of email, call logs, web site
analytics, campaign management.
• Survey Management Software
Survey Software automates an enterprise's Electronic Surveys, Polls, Questionnaires and enables understand customer
• Call Center Software
• Help Desk Software
Partner Relationship Management
• Contract Management Software
Contract Management Software enables an enterprise to create, track and manage partnerships, contracts, agreements.
Example: Upside Software, Accruent Software, diCarta, I-Many.
• Distribution management Software
Using CRM, a business can:
• Provide better customer service
• Increase customer revenues
• Discover new customers
• Cross sell/Up Sell products more effectively
• Help sales staff close deals faster
• Make call centers more efficient
• Simplify marketing and sales processes
The types of data CRM projects collect
• Responses to campaigns
• Shipping and fulfillment dates
• Sales and purchase data
• Account information
• Web registration data
• Service and support records
• Demographic data
• Web sales data
The secret to an effective CRM package is not just in what data is collected but in the organizing and
interpretation of that data. That's where computers come in handy (apart from the Solitaire you can play on
them :-)) Computers can't, of course, transform the relationship you have with your customer. That does take a
cross-department, top to bottom, corporate desire to build better relationships. But computers and a good
computer based CRM solution can increase sales by as much as 40-50% - as some studies have shown.
One of the important activities of CRM is segmenting customers. To achieve this, important subsets of data,
stored in central database by ERP, are copied into a separate repository, called data warehouse. Once the data
warehouse is in place, companies can use data mining technique to help them if through transaction data in the
data warehouse. Companies look for patterns in information to identify the customer relationship.
CRM also allows:
• One-to-one marketing: Once a customer is categorized, products, promotions, and pricing can be
• Sales force automation: Customer contacts are logged in the company's database. The customer can be
understood using past transactions and the sales representative can know the customer before visiting.
• Sales Campaign Management Software: This software lets a company organize a marketing campaign
and compile its results.
• Marketing Encyclopedia: This software serves as a database of all promotional information required by
sales representatives or customers.
• Call centre automation: The representative can get assistance about products.
• CRM needs ERP as a base since an ERP contains all the common transactions of business, relevant for
Types of CRM systems
1. Operational oriented CRM systems: It provides transactional level data on individual products,
transactions and customers
2. Analytical CRM systems: It holds aggregate data and supports for strategic planning process
3. Collaborative CRM systems: It is the use of web technologies to facilitate customer, staff and business
Stages of CRM
1. Customer selection
2. Customer acquisition
3. Customer retention
4. Customer extension
Procurement management system provides a solution to conduct centralized purchase based on the demands
individually submitted and approved by competent authorities. It provides a way to businesses that how they
purchase their inventories at a reasonable price.
Procurement is often regarded as the narrow process of inviting bids and awarding contracts. The cycle
approach to procurement ensures that the early steps in the process and the later steps are given the same
The following may be involved in the procurement cycle as it depends upon individual implementation
1. Those staff assuming project management roles: project owner, project manager, project board, project team
2. The contract or relationship manager
3. Trained procurement staff
4. Stakeholders such as users, existing suppliers, finance section.
5. Other professional advisors such as accountants, legal advisors, technical advisors
Critical Success Factors
1. Do not apply the procurement process in a mechanistic manner. Good judgement, applied ethically and with a
transparent audit train
2. Project management, contract management and a robust procurement process together offer a great chance of
3. Procurement should be recognised as a profession and carried out by skilled staff
4. The gateway process is an essential project management tool particularly for high medium risk procurements.
Procurement Risk Matrix
Ethical Procurement Behavior
1. Disclosure of Interest should be disclosed for any transaction
2. Gifts and hospitality whether accepted or rejected, should be recorded, and under no circumstances
should the supplier be able to influence.
3. Confidentiality of Information should be maintained
4. Fair Competition
6. Responsibilities of setting an ideal behaviour, presenting an open image, ensuring that instructions are
understood, supervising staff, regularly rotating posts, etc.
Supply Chain Management
Supply Chain Management encompasses every effort involved in producing and delivering a final product or
service, from the supplier’s supplier to the customer’s customer. Supply Chain Management includes managing
supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory
tracking, order entry and order management, distribution across all channels, and delivery to the customer.
Supply chain objective
• Maximize overall value generated
• Value strongly correlated to supply chain profitability – the difference between the revenue generated
from the customer and the overall cost across the supply chain
• Example: A customer purchasing a computer from Dell pays $ 700 (the revenue)
• Dell and other stages of the supply chain incur cost to convey information, produce the components,
store them, transport them, transfer funds, etc.
Why is SCM Important?
• Strategic Advantage – It Can Drive Strategy
* Manufacturing is becoming more efficient
* SCM offers opportunity for differentiation (Dell) or cost reduction (Wal-Mart or Big Bazaar)
• Globalization – It Covers The World
* Requires greater coordination of production and distribution
* Increased risk of supply chain interruption
* Increases need for robust and flexible supply chains
• At the company level, supply chain management impacts
* COST – For many products, 20% to 40% of total product costs are controllable
* SERVICE – For many products, performance factors such as inventory availability
and speed of delivery are critical to customer satisfaction.
Dynamics of Material Flow
Material Requirement Planning Demand Planning
Supplier Plant Warehouse Logistics Retailer
Gap Analysis Reengineering Configuration
Supplier Plant Warehouse Logistics Retailer
Implementation Team Testing End-user
Supplier Plant Warehouse Logistics Retailer
Dynamics of Order Flow
Material Requirement Planning Demand Planning
Gap Analysis Reengineering Configuration
Supplier Plant Warehouse Logistics Retailer
Implementation Team Testing End-user
Supplier Plant Warehouse Logistics Retailer
Supply Chain Planning Processes
Material Requirement Planning Demand Planning
Gap Analysis Reengineering Configuration
Supplier Plant Warehouse Logistics Retailer
Implementation Team Testing End-user
Customer order cycle
• Customer arrival
• Customer order entry
• Customer order fulfillment
• Customer order receiving
• Retail order trigger
• Retail order entry
• Retail order fulfillment
• Retail order receiving
• Order arrival from the distributor, retailer, or customer
• Production scheduling
• Manufacturing and shipping
• Receiving at the distributor, retailer, or customer
Modeling for SCM
• Forecasting Models
- These models allow prediction of demand based on past data or other parameters that are
independently available. They enable better planning, given the lead-time necessary for response.
• Location Models
- These models identify the optimal location of facilities such as plants and warehouses, considering the
inbound and outbound transportation costs as well as the fixed and variable costs of operation at the
locations under consideration. These are usually formulated as Mixed Integer Programming Models
• Distribution Network Design Models
- These models are usually comprehensive in nature, deciding between two, three and even four stages
of distribution network, location of warehouses and break-bulk points, and sometimes even the
• Allocation Models
- These models help in optimally allocating commodities from sources to destinations in a multi-source,
multi-destination environment. The costs considered for optimisation are production costs and warehousing
costs. The constraints considered can be due to demand, capacity, route restrictions, etc.
• Inventory Models
- Inventory plays a major role in SCM.
- Inventory can be of various types such as:
- Batching and shipment inventories
- Buffer stocks to take care of uncertainties
- Pipeline inventory ( primary and secondary transportation )
These models minimize the total relevant cost, based on trade-offs among, inter alia, inventory carrying
cost, ordering cost, stock-out cost, transportation cost, taxes & duties, etc.
• Routing Models
- These models allow optimal routing on a transportation network from a given source to a destination.
The models used are the Shortest Path Problem, the Traveling Salesman Problem and the Vehicle Routing
Problem. Decision Support Systems that interactively use the expertise of the decision maker by providing
graphical support through a map (i.e., using a Geographical Information System) are also very useful in such
• Scheduling Models
- These models enable allocation of resources to particular activities. Depending on the criteria of
interest and the number of resources, the models are of aid in evaluating appropriate rules for allocation.
• Alternative Analysis
- This model simply proposes the identification of alternatives, criteria for decision making and analysis
of the alternatives across the criteria to arrive at the best choice. Formal approaches such as simulation and
analytic hierarchy process could be used in assessing the implications of the criteria.