An information system is a set of interrelated components that collect,
manipulate and disseminate data & information & provide a feedback mechanism
to meet an objective.
We all interact daily with information system, both personally & professionally.
We use automated teller machine at banks, checkout clerks scan our purchases
using barcodes & scanners, we access information over the internet and we get
information with touch screen.
--> Data: Data consists of raw facts, such as an employees name and number of hours
worked in a week, inventory part numbers or sales orders.
Information: Information is a collection of facts organized in such a way that they have
additional value beyond the value of the facts themselves.
Data Vs information: Data consists of raw facts, such as an employees name and number of hours
worked in a week, inventory part numbers and sales orders. Several types of data
can be used to represent these facts. When these are organized or arranged in a
meaningful manner, they become information.
Information is collection of facts organized in such a way that they have
additional value beyond the value of the facts themselves. E.g. a particular
manager might find the knowledge of total monthly sales more suited to his
purpose than the number of sales for individual sales representatives.
Data represents real world things, as we have stated data, simply raw facts has
little value beyond its existence.
The type of information created depends on the relationships defined among
Turning data into information is a process or a set of logically related tasks
performed to achieve a define outcome.
The process of defining relationships among data to create useful information
requires knowledge. Knowledge is awareness & understanding of a set of
information & ways that information can be made useful to support a specific task
or reach to a decision.
The Process of Transforming Data into Information: -
Characteristic of Valuable Information: OR Value of Information:
To be valuable to managers and decision makers, information should have the
characteristics. These characteristics also make the information more valuable to
the organization. If the information is inaccurate or incompatible poor decision can
be made. Furthermore, if information is not pertinent to the situation, not
delivered to decision makers in a timely fashion or too complex to understand, it
may be little value to the organization. The following are the characteristics of
1. Accurate: Accurate information is error free. In some cases, inaccurate information is
generated because incorrect data is fed into the transformation process.
2. Complete: Complete information contains all the important facts. E.g. an investment report
that does not include all important costs is not complete.
3. Economical: Information should also be relatively economical to produce decision makers
must always balance the value of information with the cost of producing it.
4. Flexible: Flexible information can be used for a verity & purposes. E.g. information on
how much inventory is on hand for a particular part can be used by a sales
representative in closing sale.
5. Reliable: Reliable information ca be depended on in many cases, the reliability &
information depends on the reliability & the data collection method.
6. Relevant: Relevant information is important to the decision maker. Information that
lumber prices might drop may not be relevant to a computer chip manufacture.
7. Simple: -
Information should also be simple, not overly complex, sophisticated & detailed
information may not be needed. Infect, too much information can cause
8. Timely: Timely information is delivered where it is needed. Knowing last week’s
whether conditions will not help when trying to decide what coat to wear today.
9. Verifiable: Information should be verifiable. This means that you can check it to make sure
it is correct, perhaps by checking many sources for the same information.
10. Accessible: Information should be easily accessible by authorized user to be obtained in the
right format and at the right time meet their needs.
11. Secure: Information should be secure from access by unauthorized users.
Components of Information System: OR What is Information System:The value of information is directly linked to how it helps decision makers
achieve their organizational goals. An information system is a specialized type of
system and can be defined in a number of different ways. As mentioned previously,
it is a set of interrelated elements or components that collects, manipulate and
determinate data & information and provide a feedback mechanism to meet an
Input: In information system, input is the activity of gathering and capturing raw data.
In producing paycheck, e.g. the number of hours worked for every employee must
be collected before paycheck can be calculated or printed. In a university grading
system, student grades must be obtained from instructions before a total summary
of grades for the semester or quarter can be compiled and sent to the appropriate
Processing: In information system, processing involves converting or transforming data
into useful output. Processing can involve making calculating, making comparisons
and taking alternate action, and storing data for future use.
Output: In information system, output involves producing useful information, usually in
the form of documents & reports. Output can include paychecks for employee.
Reports for managers and information supplied to stockholders, banks,
government agencies and other groups. In some cases output from one system can
become input for another.
Feedback: In information system, feedback is output that is used to make changes to input
or processing activities. The feedback is used to check and correct the input on the
number of hours worked.
Computer Based Information System(CBIS): A computer based information system is a single set of hardware, software,
database, telecommunication, people and procedures that are configured to
collect, manipulate, store and process data into information. A business technology
infrastructure includes all the hardware, software, database, telecommunication,
people and procedures that are configured to collect, manipulate, store and
process data into information.
Hardware consists of computer equipments used to perform input processing
and output activities. Input devices include keyboards, automatic scanning devices,
equipment that can read magnetic ink and many other devices. Processing device
include CPU and main memory. There are many output devices like printers and
Software: Software is the computer programs that govern the operation of the computer.
This program allows the computer to provide managers with information to
increase profits reduce cost and provide better customer service. There are two
types of software,
System Software: System software controls basic computer operation such as start up.
Application Software: Application software allows specific task to be accomplished such as word.
Database: A database is an organized collection of facts and information. An organized
database contains facts & information on customers, employees, inventory,
competitor’s sales information and much more. Host managers and executives
believe a database is one of the most valuable & important parts of a computer
based information system.
Telecommunication, Network and Internet: -
Telecommunication is the electric transmission of signals for communication
and enables organization to carry out their processes and tasks through effective
Networks are used to connect computers and computer equipment in a
building, around the country or around the world to enable communications.
The internet is the world’s largest computer network, actually consisting of
thousands of interconnected networks, all freely exchanging information.
People: People are the most important element in most computer based information
system. Information system personnel include all the people who manage, run
program and maintain the system. Users are any people who use information
system to get results.
Procedures: Procedures include the strategies, polices, methods and rules for using a
computer based information system. E.g. some procedure describes when each
program is to be run or executed. Other describes who can have access to facts in
the database. Other procedure describes what is to be done incase of disaster.
Organizations and Information system: An organization is a formal collection of people and other resources established
to accomplish a set of goals.
Organizational Structure: It refers to organizational subunits and the way they relate to overall
organization. Depending on the goals of the organization and its approach to
management, a number of structures can be used. An organization structure can
affect how information systems are viewed and what kinds are used. Although
there are many possibilities organizational structure typically falls into one of the
1. Traditional Organizational Structure: In this type of structure known as traditional organizational structure, a
managerial pyramid shows the hierarchy of decision making and authority from
the strategic management to operational management and non management
employee. The strategic level, including the president of the company and vice
president has a higher degree of decision authority, more impact on corporate
goals and more unique. In most cases, major department heads report to a
president or top level manager. The major department divided according t
function and can include marketing production, is etc. The departments that are
associated with making, packing or shipping goods are called line positions. Other
department may not be directly involved with formal chain but department or
area; these are known as staff positions.
The traditional organization structure is also known as hierarchical structure,
since it can be viewed as a series of levels, with those at higher levels having more
power and authority within the organization.
A structure with a reduced number of management layers is often called as flat
Empowerment gives employees and their manager more responsibility and
authority to make decision, take certain actions and in general have more control
over their jobs.
2. Project Organizational Structure: A project organizational structure is centered on major products or services.
E.g. in a manufacturing firm that produced body products, each type is produced
by a separate unit. Traditional functions like marketing, finance & production are
positioned within these major units. Many project teams are temporary when the
project is complete; the members go on to new teams formed for another project.
3. Team Organizational Structure: The team organizational structure is centered on work teams or groups. In
some cases, these teams are small; in other they are very large. Typically each
team has a team leader who reports to an upper level manager in the organization.
Depending on the task being performed, the team can be either temporary or
4. Multidimensional Organizational Structure: A multidimensional organizational structure, also called matrix organizational
structure, incorporate several structure at the same time. E.g. an organization
might have both traditional functional area & major project units.
One advantage of the multidimensional organizational structure is the ability to
simultaneously stress both traditional corporate area & product lines.
Manual Information System: In manual information system some investment analysts manually draw charts
and trend lines to help them make investment decision. Tracking data on stock
prices over the last few months or years, these analysts develop patterns on graph
paper that help them determine what stock prices are likely to do in the next few
days or weeks. Some investors have made millions o dollars using manual stock
analysis information system.
Many information systems begin as manual system and become computerized.
E.g. postal service sorts mail. At one time most letters were visually scanned by
postal employees to determine the ZIP code and were than manually placed in an
appropriate bin. Today the bar-coded address on letters passing through the
postal system are read electronically & automatically routed to appropriate bin via
System: System is a set of elements or components that interact to accomplish goals.
The elements themselves and the relationships among them determine how the
system works. Systems have inputs, processing mechanism output and feedback.
System Components and Concepts: The system boundary defines the system & distinguishes it from everything
The way system elements are organized or arranged is called the configuration.
Much like data, relationships among elements in a system are defined through
knowledge. In most cases, knowing the purpose or desired outcome of a system is
the first step in defining the way system elements are configured.
System Types: Systems can be classified along numerous dimensions. They can be simple or
complex, open or close, stable or dynamic, adaptive or non adaptive and
permanent or temporary.
Simple: Simple system has few components, and the relationship or interaction
between elements is uncomplicated & straight forward.
Complex: Complex system has many elements that are highly related and interconnected.
Open: Open system interacts with its environment.
Closed: Close system has no interaction with environment.
Stable: Stable system undergoes very little change over time.
Dynamic: Dynamic system undergoes rapid & constant change over time.
Adaptive system is able to change in response to changes in the environment.
Non-adaptive: Non-adaptive system is able to change in response to changes in the
Permanent: Permanent system exists for a relatively long period of time.
Temporary: Temporary system exists for only a relatively short period of time.
System Performance and Standards: 1. Efficiency: It is a measure of what is produced divided by what is consumed. It can be
range from 0 to 100%.
2. Effectiveness: It is a measure of the extent to which a system achieves its goals; it can be
compacted by dividing the goals actually achieved by the total of the stated goals.
3. System Performance Standards: It is a specific objective of the system.
System Variables & Parameters: System Variables: System variables are quality or item that can be controlled by the decision
maker. E.g. price of product.
System Parameters: System Parameters are value or quantity that cannot be controlled such as the
cost of a raw material. E.g. number of ponds of chemical to produce a certain type
of plastic which is control by laws of chemistry not the decision makers.
Business Information System: Workers at all levels, in all kinds of forms, and in all industries are using
information system to improve their own effectiveness. At the corporate level, the
most common types of is used in business are E - Commerce system, transaction
processing system, management information system and decision support system.
Transaction Processing System: A transaction is any business related exchange such as payments to employees,
sales to customers and payments to suppliers. Thus, processing business
transaction was the first application of computer for most organization.
A transaction processing system is an organized collection of people,
procedures, software, database and devices used to record completed business
The primary inputs for a payroll transaction processing system are the
numbers of employee hours worked during the week and pay rate.
The primary output consists of pay checks. Early payroll systems were able to
produce employee pay checks along with important employee related reports. In
improved forms, these systems are still vital to most modern organization.
Transaction processing system represent the application of information concepts
and technology to routine, repetitive and usually ordinary business transactions
but transactions that are critical to the daily functions of that business.
Workflow System: A workflow system is ruled based management software that directs,
coordinates and monitors execution of an interrelated set of task arranged to form
a business process. The primary purpose of workflow system is to provide
employees with tracking, rooting, document imaging and other capabilities
designed to improve business process. Transactional workflow system holds the
promise of improving the productivity & dependability of business processes.
The system streamlines the reimbursement process by simplifying expense
entries & automating the approval process.
Enterprise Resource Planning: An enterprise resource planning system is a set of integrated programs capable
of managing a company’s vital business operations for an entire multi side, global
organization. The scope of an enterprise resource planning system may very from
company to company; most enterprise resource planning system provides
integrated software to support the manufacturing and finance business function of
The enterprise resource planning system checks what is already avail in
finished product inventory to meet the projected demand.
The enterprise resource planning system checks the raw material & packing
material inventory & determines what needs to be ordered to meet the planned
The primary benefits of implementing an enterprise resource planning system
include adopting & improved work processes & improving access to timely data
for operational decision making.
Management Information System: A management information system is an organized collection of people,
procedures, software, database and devices used to provide routine information to
managers and decision makers. The focus of a management information system is
primarily on operational efficiency.
Marketing, production, finance and other functional areas are supported by
management information system and linked through a common database.
Management information systems are characterized by the use of information
system to produce managerial reports.
In most cases these reports periodically daily, weekly, monthly or yearly. They
were called scheduled reports.
These scheduled reports helped managers perform their duties. Other types of
reports were also developed during the early stages of management information
Demand reports were developed to give decision maskers certain information
upon request. The exceptions reports describe unusual or critical situations, like
low inventory levels. This report is produced only if a certain condition exists.
Decision Support System: A decision support system is an organized collection of people, procedures,
software, database and devices used to support problem specific decision making.
The focus of decision support system is on decision making effectiveness whereas
a management information system helps an organization “do things rights” a
decision support system helps a manager “do the right thing”.
A decision support system supports & assists all aspects of problem specific
decision making. It goes beyond the traditional management information system.
A decision support system can provide immediate assistance in solving complex
problem not supported by a management information system.
Decision support systems are used when the problem is complex & the
information needed to make the best decision is difficult to obtain and use. So a
decision support system also involves management judgment. A decision support
system operates from a managerial perspective and it recognizes that different
managerial styles and decision type require different system. The essential
elements of a decision support system include a collection of models used to
support a decision maker or user.
Business System Planning: Business is needed for a wide verity of task.
The business system helps firms to supervise employee control production
process. Forecast future events and maintain records for managers.
Business system planning is define by IBM as a structural approach that assists
on help organization in developing is plans to satisfy its short & long term
Business system planning has 3 major objectives.
1. Translate the mission, strategies, objectives & structure of business into an
information system mission, strategies, objectives & structure of business.
2. Determine information system priorities & allocate information system
resource to high return project that support business goals.
3. Plan long life information system based on enduring business process.
Information Utility: It is a powerful technology to efficiently store multimedia information available
in geographically dispersed location indexed them for easy retrieval & access
information from anywhere in the world using a personal computer connected to
the international network of computer.
Utility: 1. Information sources & geographically distributed & interconnected by high
speed digital communication links.
2. Access and store methods are standard to enable any user connected to the
net to access information store any where.
3. Regulations are formulated to control storage & access of information &
charges for usage.
Components: 1. Information Resources: Information resource can be of various types including textual data, numerical
data, graphical data, audio data, video data and photographs.
A. Textual Data: Textual data consists of book & journals. E.g. Books, Text File.
B. Numerical Data: Numerical data consists of tables of various types. E.g. experiments property
C. Graphical Data: Graphical data can be photographs maps, drawings etc.
D. Audio Data: Audio data are digital compress using a commonly accepted standard.
E. Video Data: Video data consists of enormous storage space due to need for repeating
frameset 30 times/sec.
F. Photography: Both color & monochromic photographs are store in bitmap form using
2. Indexing: Indexing and interlinking multimedia data are extremely important for case of
Keywords interval documents are selected and linked to related works with
logical link by appropriate software. This is called hypertext.
For material in other media related elements are selected & link in what is
known as hypermedia.
Such link would allow a user to navigate through multimedia material.
3. Linking: Collection of information of digital library will normally not be store in one
It will be distributed in many computers known as servers. All these servers
will be linked by high speed communication list.
The fact that information is distribution need not be known to a user as it is not
relevant from his point of view.
A user gets access to the information based on his request regardless of its
4. Searching: Information resources are spread over many computers and it is not feasible
for every user to keep a directory of available resources. User requires assistance
from the system for retraining information. This is done by search engine. These
are pieces of software which accept keyword given by user & search using on all
servers index using the keyword to facilitate search.
5. User: A user may accessed information from any where at any time using a terminal
or a computer connected to network to which information. Servers are connected
with the emergence of wireless network; it would also become possible to access
an information utility from a portable computer.
Advantages of Information Utility: 1. Unlike traditional library, documents are not physically handled by a user. A
user views the necessary documents & paints the portion of interest in his/her
2. Unlike printed text where tables of number can be studied but not easily
process if they are in the digital form the number in a table can be processed.
3. An information utility can store unconventional information such as reading
obtains from some scientific instruments such as spectral.
4. Searching for information is much easier due to global indexing & use of
hyper text & search engine.
5. The ability to digitally store & retrieve multimedia data allows one to
effectively provided access to audio & video information.
Intranet and Extranet: -
Intranet: It is an internal network based on web technologies that allows people within
organization exchange information & works on projects. Intranet support work
Intranet support real time meting with people with over network, instead of
making them travel to one face. Only authorized employees are able to use it. It is
expensive compare to extranet. Intranet operates as private with limited access.
Intranet can be used to entrance communication & collaboration among
authorized employee customers, suppliers & other business partner. It allows
access through intranet. It doesn’t require any additional implementation of leased
network. It provides infrastructure for many internal business commercial
Extranet: Extranet is a network based on web technology that allows selected outsiders,
such as business partners and customers to access authorized resources of
intranet and companies.
It is a network that links selected resources of the intranet of a company with
its customer, supplier or other business partners. An extranet uses TCP/IP
protocol of internet.
It cannot people who are external to company. It support activities such supply
change management etc. Authentication & privacy are critical on an extranet so
that information is protected. Performance is good to provide quick response.
It provides secure connectivity between corporation intranet & intranet of its
business partner material supplier, financial services, government & customer.
Transaction Processing System: Transaction processing was one of the first business process to be
computerized & without information system. System recording and processing
business transactions would consumed huge amount of an organization resources.
The transaction processing system also provides employee involved in other
business process the management information system and special purpose
information system to achieve their goals.
A transaction processing system serves the foundation for the other systems.
Transaction processing system performs routine operations such as sales ordering
and billing often performing the same operations daily or weekly. These systems
require a large amount of input data & produced an amount of output without
requiring sophisticated o complex processing.
As we move from transaction processing to MI/DS and AI/ES we can see less
routine move decision support less input and output an move sophisticated &
complex processing & analysis.
Every organization has manual and automated transaction processing system,
which process the detailed data necessary to update records about fundamental
business operations of the organization.
These systems includes
Impact of these systems
The result of processing business transaction is that
Hardware device used to process transactions.
The processing activities include
Tradition Transaction Processing System: When computerized transaction processing system first evolved, all
transactions were collected group, called batches & processed together.
1. Batch Processing System: Batch processing system is the method of computerized processing in which
business transactions are accumulated over a period of time & for processing as a
single unit or batch.
E.g. it may be important to process invoices and customer payments for the
account receivable system daily, on the other hand the payroll system may receive
time cards & process them weekly to create checks, update employee earning
records & to distribute labor cost.
The essential characteristic of the batch processing system is that there is some
delay between the occurrence of the event and the final processing of the related
transaction to update the organization’s records.
For many applications batch processing is more appropriate and cost effective.
Payroll transactions and billing are typically done via batch processing.
2. On - Line Real Time or On - Line Transaction Processing : The on - line transaction processing is computerized processing in which each
transaction is processed immediately without the delay of accumulating
transaction into a batch. As soon as the input is available, a computer program
performs the necessary processing & updates the records affected by that single
At any time the data in an on - line system always reflect the current status.
When you make an airline reservation, for instance the transaction is processed
and all databases, such as seat occupancy & account receivable are update
immediately. This type of processing is essential for business that requires data
quickly & update if often such as airline ticket agency etc.
3. On - Line Entry with Delayed Processing: On - line entry with delayed processing is a compromise between batch and on line processing.
With this type of system, orders or transactions are entered into computer
system, when they occur by they are not processed immediately. E.g. when you call
a toll free number & order a product your order is typically entered into the
computer when you make the call. However the order may not processed until that
evening after business hours.
Transaction processing Activities: All transaction processing systems perform a common set of basic data
processing activities. Transaction processing systems capture and process data
that describes fundamental business transactions. This data is used to update
databases & to produce a variety of reports for use by people both within and
outside the enterprise.
1. Data Collection: Data collection is the process of data capturing & gathering all data necessary to
complete transactions. It can be done manually or automated. Data collection
begins with a transaction results in the organization of data that is input to the
transaction processing system.
Data should be captured at its source, and it should be recorded accurately with
minimal effect and in a form that can be directly entered into computer rather than
keying the data from some type of documents. This approach is called source data
An example of source data automation is the use of devices at a retail store
checkout to read the Universal Product Code automatically. The Universal Product
Code reading is more accurate and faster than having a cash registers clerk enter
Another example of automation is industrial data collection devices. These
devices allow employees to scan their magnetized ID cards to enter data in payroll
transaction processing system when they start or end the job.
2. Data Editing: -
It is process of checking data for validity & completeness to detect any
problems with the data. E.g. quantity and cost data must be numeric and names
must be alphabetic otherwise the data is not valid. Often the codes associated with
an individual transaction are edited against database containing valid codes. If any
code entered is not present in the database, the transaction is rejected.
3. Data Correction: It is not valid to reject invalid data. The system should provide error message
that alert those responsible for the data edit function. This error message not
specifies what problem is occurring so that correction can be made.
Data corrections is the process o reentering miss keyed or miss scanned data
that was found during data editing. E.g. a Universal Product Code that is scanned
must be in a master table of valid Universal Product Codes. It doesn’t have it than
the appropriate action can be taken.
4. Data Manipulation: Data manipulation is the process of performing calculations and other data
transformations related to business transaction.
Data manipulation can include
Sorting data into categories
Storing data in the organization databases.
In payroll transaction processing system data manipulation include
Multiplying an employees hours worked by his pay rate.
Deductions are also performed
5. Data Storage: It involves updating one or more databases with new transactions. This data
can be further processed and manipulated by other systems so that it is available
for management decision making. Thus although transaction database can be
considered a by product of transaction processing, they have a pronounced effect
on other information system & decision making process in an organization.
6. Document Production & Reports: It involves generating output records & reports. These documents may be hard
copy paper reports or displayed on computer screens. E.g. paychecks are hard
copy document produced by payroll transaction processing system while an
outstanding balance report for invoices might be a soft copy report displayed by
an account report for invoices might be a soft copy report displayed by an accounts receivable
transaction processing system.
Often result from on transaction processing systems are passed downstream as
input to other system where the results of updating the inventory database are
used to create the stock exception report of items whose inventory level is less
than the recorder point. These reports can be printed or displayed on computer
A transaction processing system can also produce reports required by local &
federal agencies such as stat of tax withholding & quarterly invoice statement.
An Objective of Transaction Processing System: Process data generated by and about transactions. The primary objective of any
transaction processing system is to capture process and store transactions and to
produce a verity of document related to routine business activities. These business
activities can be directly or indirectly related to selling products and services to
Following activities are results from customer order & result in transactions
that are processed by
Paying suppliers & employees
1. Maintain a High Degree of Accuracy & Integrity: One objective of any transaction processing system is error free data input &
processing. In early day employees visually inspected all document & reports
introduced into or produced by the transaction processing system. Because human
are fallible the transaction were often inaccurate, resulting in wastage time and
effort and requiring resources to correct them. It is important to avoid fraudulent
transactions. E - Commerce companies face these problems when accepting credit
or debit card information. One solution is for this, the digital certificate. It is small
computer file that serves as both ID card and a signature.
2. Produce Timely Documents and Reports: Manual transaction processing system can take days to produce routine
documents frequently the use of computerized transaction processing systems
significantly reduces the response time. Improvements in information technology
especially hardware & telecommunication links allow transaction to be processed
in a matter of seconds.
Timing is also crucial for related application such as order processing,
invoicing, account receivable, inventory control & account payable. Balance of
electronic recording and transmission of sales information the transaction can
process in second rather than overnight.
3. Increase Labor Efficiency: Before computer existed, manual processes often required full of clerk &
equipment to process necessary business transactions.
Today transaction processing system substantially reduce clerical and other
labor requirement. A small minicomputer linked to company cash registers
replaces a room full of clerk, typewriter & filing cabinets. Many transaction
processing system are cost justified by labor savings.
4. Help Provide Increased Service: We are quickly becoming service oriented economy. A transaction processing
system tickets from ticket master, for e.g. allows concert enthusiasts to order
tickets over the internet instead of standing in line for hours or even days.
Some companies have EDI systems that allow customers to place orders
electronically thus by passing slower & more error methods of written or oral
5. Help Build & Maintain Customer Loyalty: A firm’s transaction processing systems are often the means for customer to
communicate. It is important that the customer interaction with this system keeps
customer satisfied and returning.
6. Archive Competitive Advantage: One goal of almost all organization is to gain & maintain a competitive
advantage. A competitive advantage provides a significance & long term benefit for
the organization where a transaction processing system is developed or modified,
the personnel involved should carefully consider how the new or modified system
might provide a significant & long term benefit.
Depending on the specific nature & goals of the organization, any of these
objectives may be more important than others. By meeting these objectives
transaction processing system can support corporate goals such as reducing costs
in productivity quality an. Customer satisfaction & running more efficient &
Traditional Transaction Processing System: 1. Order Processing System: It includes order entry, sales configurations, shipment planning, shipment
execution, inventory control, invoicing, customer interaction and routing &
scheduling. The business process supported by there system are so critical to in an
operation of the enterprise that the order processing system are sometimes
referred to as the “Life Blood of the Organization”.
The following figure sows the various systems and the information that flows
between them. A rectangle represents a system; a line represents the flow of in
from one system to another. The circle represents any entity outside the system.
Order Entry: It captures the basic data needed to process a customer order. The DFD of a
typical entry system shows the various business processes that are supported by
the system and flow of data between the processes. A rectangle with the rounded
corners represents the business process.
With an on - line order processing system, the inventory status of each
inventory item on the order is checked to determine whether sufficient finished
product is available. If an order it cannot be filled a substitute item maybe
suggested or a back order is created the order will be filled later.
Order processing system suggests related item order takes to mention to
promote add on sales. Order takes also review customer payment history data
from the accounts receivable system determine whether credit can be extended.
Open Order: Once an order is entered & accepted, it becomes an open order typically, a daily
sales journal is generated.
Sales Configuration: It ensures that the products & services ordered are efficient to accomplish the
customer’s objectiveness and will work together.
1. Sales representative
2. Suggest optional equipment.
Sales configuration software can solve customer problems and give the
answers of customer’s questions.
Sales configuration program can eliminate mistakes, reduce cost and
Shipment Planning: -
Shipment planning system determines which open orders will be filled a form
which location they will be shipped. It is an extremely complicated task for a large
Output: 1. Plan show where each order is to be filled? Precise schedule for shipping.
2. Picking list from the shipment planning system.
Shipment Execution: The shipment execution system coordinates the outflow a products and. Goods
from the organization. The objective is delivering quality products on time to
The shipping department is usually given responsibility for physical packing &
delivering all products to customer & suppliers. This delivery can include mail
services, tracking operation and rail service. The output will be back order request
generate customer invoice packing document.
Inventory Control: It is defined as the system that updates computerized inventory records to
reflect exact quality on hand.
Once products have been picked out of inventory, other document & reports
are generated. E.g. the inventory status report summarizes all inventory items
shipped over a specified time period.
It can include stock numbers, decryption, number of units on hand, number
of units order back order units, average cost and related information.
It is used to determine when to order more inventory and how much of each
item to order.
It helps minimize stock outs and back orders.
One objective is to minimize the amount of cash tied up in inventory by
placing just the right amount of inventory.
To gain a competitive advantage, many manufacturing organizations use real
time inventory control system based on bar-coding.
The inventory data is more accurate and correct for people performing
order entry, production planning & shipment planning.
Inventory control is essential for industries are the service sector. Such
organizations hotels, airlines etc.
Invoicing: Customer invoices are generated based on received from the shipment
execution transaction processing system. This application encourages follow up on
existing sales activities, increases productivity and improves customer service.
Most invoicing programs automatically compute discount, sales taxes and other
Many invoicing applications require only information on the items orders
are the client identification number. The invoicing application does the rest. It
looks up the full name and address of the customer, determines whether the
customer has the credit routine, automatically computes discounts and taxes and
other charges & prepare invoices & envelopes for mailing.
Customer Interaction: To keep current customers happy, some companies use a customer interaction
system to monitor & track each customer interaction with the company. The goal
of such system is to build customer loyalty. These software systems capture data
whenever a customer contacts the company. Often the initial contact is a request
for a proposal or a request for product information from a potential customer.
Valuable data about the potential customer can be gathered at this time.
The customer interaction system captures valuable data from each interaction
and passes the data to others in the organization that can use it. The customer
interaction data represents a gold mine of data that can be used to keep customers
satisfied, generate new leads for future sales and lead to new products or product
It helps an organization build large database about its customer that describes
relationships in sufficient detail so that management, sales people, customer
service providers and customers can access information to match customer needs
with product plans and offering remained customers of service requirements
know what other products a customer has purchased.
Routing & Scheduling: A routing system helps determine best way to get products from one location to
Scheduling system determine best time to pick up or deliver goods and services.
2. Purchasing System: -
Inventory Control: -
A manufacturing firm has several kinds of inventory such as raw materials,
packing materials, finished goods and maintenance parts. In addition the firm
needs to ensure that sufficient raw material; packing material and maintenance
parts are available. The same or similar transaction processing system can be used
to manage the inventory of these items.
Purchase Order Processing: This system helps purchasing departments complete their transactions quickly
and efficiently. Every organization has its own policies, practices and procedure
for purchasing supplies and equipments. E.g. IBM has a policy to use the internet to
streamline its own operations.
The purchasing department can facilitate the buying process by keeping data on
supplier’s goods & services. The increased use of telecommunications has given
many purchasing departments easier access to this information. For instance
technologies like internet and public networks allow purchasing managers to
compare products & prices listed in internet catalogs & large scale consumer
database. One the supplier is selected, order can be sent via EDI reducing
purchasing cost and time spent and helping companies maintain low yet adequate
Receiving: Like centralized purchasing, many organizations have centralized receiving
department responsible for taking passion of all incoming items, inspecting them
& routing them to the people or department that ordered them. In addition the
receiving department notifies the purchasing department when items have been
received. This notification may be done using a proper form called a receiving
report or electronically through a business transaction created by entering data
into the receiving transaction processing system. An important function of many
receiving department is quality control by inspection. Inspecting procedure &
practices are setup to monitor the quality of incoming items. Any items that fail
inspecting are sent back to the supplier.
Account Payable: The accounts payable system attempt to increase an organizations control over
purchasing, improve cash flow, increase profitability & provide more effectiveness
management of current liabilities. Most accounts payable applications strive to
manage cash flow and minimize manual data entry. Input from the purchase order
processing system provides an electronic record to account payable application
that updates the accounts payable database to create a liability record showing
that the firm has made a commitment to purchase a specific good or service.
A common reports produced by the accounts payable application is the
purchases journal. This report summarized all the organizations bill paying
activities for particular periods. Financial managers use this report to analyze bills
that have been paid by the organization. This information is also used to help
analyze current & future cash flow needs.
The accounts payable applications into other information system, including
cash flow analysis, which helps an organization, ensure that sufficient funds are
available for the accounts payable application.
3. Accounting System: -
1) Budget: A budget is a financial plan that identifies items & amounts that the
organization estimates it will spend. In some organization budgeting can be
expensive & time consuming process manually distributing & consolidating
The budget transaction processing system is a system that automates many of
the tasks required to amass budget data, distribute it to user and consolidate the
Automating budget process gives more time to manage it to meet
organizational goals by setting enterprise wide budgeting targets, ensuring a
consistent budget model & assumption across the organization & monitoring
status of each department’s spending.
2) Accounts Receivable: It is a system that manages the cash flow of the company by keeping track of the
money owned the company on charges for goods & services performed when
goods are shipped to a customer, the customer’s accounts payable system receives
a business transaction from the invoicing system, and the customer’s account is
update in the accounts receivable system of a supplier. The major output of the
accounts receivable application is monthly bills or statements sent to customers.
The bills can include,
I. The data items are purchased.
III. Allowances for discount.
The accounts receivable application should monitor sales activity, improve cash
flow by reducing the time between a customer’s receipt of items ordered &
payments of bills for those items. Most system can handle payment in a variety of
I. Standard bank cheques.
II. Credit cards.
III. Money wiring services.
IV. Electronic funds transfer via EDI.
The account receivable system is vital to managing the cash flow of the firm.
One major way to increase a cash flow is by identifying overdue an account.
Reports are generated to identify customer whose accounts are overdue by more
than 30, 60 or go ways. Special action may be initiated to collect funds or reduce
the customer credit limit.
An important function of the accounts receivable application is to identify bad
credit risks. Because a sizable amount of an organizations assets can be tied up in
accounts receivable. One object of an account receivable application is to minimize
losses due to bad dept through early identification of potential bad dept
customers. The accounts receivable aging report is valuable aspect of an accounts
receivable application. This reports sorts all outstanding dept or bill by date.
3) Payroll: The two primary outputs of the payroll system are the payroll cheque & stub,
which are distributed to the employees and the payroll register, which is a
summary report of all payroll transactions. The payroll system prepares W-2
statement of the end of year for tax purposes.
Rather than write their own payroll application, many firms rely on a
purchased software application for payroll processing. In most cases, the number
of hour worked by each employee is collected using a verity of data entry devices,
including time clocks, time cards and industrial data collection deices.
Payroll system can handle overtime, vacation pay, variable & multi rate salary
structures and incentive programs & commissions. Most payroll application
automatically generates both federal & state tax, deduction, saving plans &
government saving bonds. Often payroll applications have EDI arrangements with
employees’ banks to make direct deposit into employees’ account.
In addition to pay cheques, most payroll program produces a payroll journal. A
typical payroll journal contains,
The areas where employees worked during the week.
Hours worked, the pay rate
A premium factor for overtime pay
Earnings, the earning types
Net pay calculation
Payroll transaction processing system application also provides input into
various weekly, quarterly and yearly reports. Most of these reports are used by
financial management to help control payroll costs and cash flow. All payroll
entries are entered to the general ledger system. These can be a direct link
between payroll activities & production/inventory control operation.
4) Asset Management: Capital assets represent major investment for the organization whose value
appears on the balance sheet under fixed assets. The assets have a useful life of
several years or more over which their value is depreciated resulting in tax
The Asset Management Transaction Processing System: The asset management transaction processing system is a system that controls
investments in capital equipment and manages depreciation for maximum tax
benefits. Key feature of this application includes,
Efficient handling of a wide range of depreciation methods.
Country specific tax reporting & depreciation structures for the various
countries in which the firm does business.
Workflow managed processes to easily add, transfer and retire assets.
5) General Ledger: Every monetary transaction that occurs within an organization must be
properly recorded. Payment of a supplier’s invoice, receipt of payment from a
customer and payment to an employee are examples of monetary transactions. A
computerized general ledger system is designed to allow automated financial
reporting & data entry. The general ledger application produces a detailed list of
all business transactions and activities. The reports includes,
Profit & loss statements
General ledger statement
Historical data can be kept & used to generate trend analyses & reports for
various accounts & groups of accounts used in the general ledger package. Various
incomes & expense accounts can be generated for the account period, year to date
& month to date as required.
The reports generated by the general ledger application are used by accounting
& financial managers to monitor the profitability of the organization & to control
Financial reports that summarized sales by customer & inventory items can
also be produced. These reports are used by marketing & financial managers to
determine which customers are control bating sales & inventory items that a
selling as expected.
Business as a System: -
A business firm is an open, adaptive organizational system operating in
business system components. A business consists of following interrelated system
Feedback & control
A business must maintain appropriate relationship with other economics,
political and social system in its environment.
The group includes its stock holders such as customers, suppliers, competitors,
stock holders, labor union, financial institute, government agencies and
community. All of which have a share in the proper & successful operation of the
Business is a system of many subsystems. These subsystems are having
relationship between them. This relationship is complex because of the amount of
information that must be generated to meet the needs of business. These systems
are connected by information oriented & product oriented flow. The information
needs are founds in three levels.
1. The top management needs strategic information.
2. Middle management needs tactical information supervisory information.
3. Bottom management needs operational information.
Management Information System: Management information system can often give companies competitive
advantage by providing the right information to the right people in the right
format & at the right time.
The primary purpose of the management information system is to help an
organization achieve its goals by providing manage with insight into the regular
operations of the organization so that they provide control organize & plan more
effectively & efficiently. In short management information system provides
managers with information & support for effective decision making & provides
feedback on daily operation. A manufacturing management information system,
foe e.g. is a set of integrated systems that can help managers monitor a
manufacturing process to maximize the value of raw materials as they are
assembled into finished products. This monitoring is accomplished by various
summary reports produced by the management information system. These reports
can be obtained by filtering & analyzing the detailed data contained in transaction
processing databases & presenting the result to manage in a meaningful way.
Inputs of The Management Information System: Data that enters a management information system originates from both
internal & external sources. The most significant internal source of data for the
management information system is the organizations various transaction
processing systems. One of the major activities of the transaction processing
system is to capture & store the data resulting from on going business transaction.
With every business transactions, various transactions processing systems
application make changes to & update the organization database.
E.g. billing application, these updated databases are primary internal sources of
data or the management information system.
Other internal data comes from specific functional areas throughout the firm.
External sources of data can include customers, suppliers, competitors and
stockholders whose data is not already captured by the transaction processing
system, as well as other sources such as an internet.
The management information system uses the data obtained from these
sources and processes it into information more usable to managers, primarily in
the form of predetermined reports.
Outputs / Reports of The Management Information System: The output of most management information system is a collection of reports
that are distributed to managers.
1. Schedule Reports: These reports are produced periodically, or on a schedule, such as daily,
weekly, or monthly. E.g. a production manager could use a weekly summary report
that lists total payroll costs to monitor and control labor and job costs. A
manufacturing report produced once a day to monitor the production of a new
product is another example of scheduled reports. Other schedule can help
managers control customer credit the performance of sales representatives
inventory levels and more.
2. Key Indicator Reports: It summarizes the previous day’s critical activities and is typically available at
the beginning of each workday. These reports can summarize inventory levels,
production activity, sales volume and the like. Key indicator reports are used by
managers & executives to take quick corrective action on significant aspects of the
3. Demand Reports: These are developed to give certain information of the manager’s request. In
other words, these reports are produced on demand.
E.g. an executive may want to know the production of a particular item; a
demand report can be generated to give the requested information. Other example
of demand reports include reports requested by executives to show the hours
worked by particular employee total sales to date for a product and so on.
4. Exception Reports: These are the reports that are automatically produced when a situation is
unusual or requires management action.
E.g. a manager might set a parameter that generates a report of all inventory
items with fewer than the equivalent of five days of sales on hand.
This unusual situation requires prompt action to avoid running out of stock on
the item. The exception report generated by this parameter would contain only
items with fewer than five days of sales in inventory. As with key indicator reports,
exception reports are most often used to monitor aspects important to an
organization success. In general, when an exception report is produced a manager
or executive takes an action.
5. Drill Down Reports: Drill down reports provides increasingly detailed data about a situation.
Though the use of drill down reports, analysis can see data at a high level first,
then at a more detailed level and then at a very detailed level.
Characteristics of the Management Information System: Provide Reports with Fixed & Standard Formats: For example, scheduled reports for inventory control may contain the same
types of information placed in the same locations on the reports. Different
managers may use the same report for different purposes.
Produce Hard - Copy & Soft - Copy Reports: Some management information system reports are printed on paper and
considered hard - copy reports. Most output soft - copy using visual displays on
computer screen. Soft - copy output is typically formatted in a report like fashion.
Use Internal Data Stored in the Computer System: Management information system reports use primarily internal sources of data
that are contained in computerized. Some management information systems use
external sources of data about competitors, the market place & so on. The internet
is a frequently used source for external data.
Allow End Users to Develop Their Own Custom Reports: -
Although analysts & programmers may be involved in developing &
implementing complex management information system reports that require data
from many sources & users are increasingly developing their own simple
programs to query dbase & produce basic reports.
Require User Requests for Reports Developed by System Personal: When information system personnel develop and implements management
information system reports, a formal request to the information system
department may be required. If a manager, for example wants a production
reports to be used by in his or her department a formal request for the report is
Functional Aspects of The Management Information System: Financial Management Information System: A financial management information system provides financial information not
only executives but also for a broader set of people who need to make better
decisions on a daily basis. Finding opportunities and quickly identifying problems
can mean the difference between a business’s success and failure. The financial
management information system performs following functions.
Integrates financial and operational information from multiple sources,
including the internet, into a single management information system.
Provide easy access to data for both financial and non financial users, often
through use of the corporate internet to access corporate web pages of financial
data and information.
Makes financial data available on a timely basis to shorten analysis
Enable analysis of financial data along multiple dimensions such ad time,
geography, product, plant and customer.
Analysis historical and current financial activity.
Monitors and controls the use of funds over time.
Profit/Loss and Cost Systems: Two specialized financial functional systems are profit/loss and cost systems,
which organized revenue and cost data for the company. Revenue and expense
data for various departments is captured by the transaction processing system and
becomes a primary internal source of financial information for the management
Many departments within an organization are profit centers, which mean they
track total expenses and net profits. Other departments may be revenue centers,
which mean they track total expenses and net profits. Other departments may be
revenue centers which are divisions within the company that primarily track sales
or revenues such as a marketing or sales department. Other departments are cost
centers which are used for manufacturing or research and development.
Auditing: Auditing involves analyzing the financial condition of an organization and
determining whether financial statements and reports produced by the financial
management information system are accurate. Auditing can reveal potential fraud
such as credit card fraud. It can also reveal false or misleading information.
Internal Auditing: It is performed by individual within the organizations. E.g. financial department
of a corporation may use a team of employees to perform an audit. It is conduct to
see how well the organization is doing in terms of meeting established company
goals and objectives.
External Auditing: It is performed by an outside group like an accounting or consulting firms. The
purpose of an external audit is to provide an unbiased picture of the financial
condition of an organization.
Uses and Management of Funds: Another important function of the financial management information system is
funds usage and management companies that do not manage and use funds
effectively often how lower profits or face bankruptcy. Output from the funds
usage and management subsystem.
Internal uses of funds include use as additional inventory new or updated
plants and equipment, additional labor, the acquisition of other companies, new
computer systems, marketing and advertising, raw materials, land, investments in
new products and research and developments. External uses of funds are typically
investment related. On occasion, a company might have access cash from sales that
is placed into an external investment. External uses of funds often include bank
accounts, stocks, bonds, bills, notes, futures, options and foreign currency.
Manufacturing Management Information System: The subsystems and output of the manufacturing management information
system monitor and control the flow of materials, products and services through
the organization. The objective the manufacturing management information
system is to produce products that meet customer needs from the raw materials
provided by suppliers to finished goods & services delivered to customers at the
lowest possible cost. The activities of the manufacturing management information
system subsystems support value added business processes. As raw materials are
converted to finished goods, the manufacturing management information system
monitors the process at almost every stage.
Design & Engineering: During the early stages of product development engineering departments are
involved in many aspects of design. The size & shape of parts, the way electrical
components are attached to equipment, the placement of control on a product. In
some cases Computer Assisted Design (CAD) assists this process which help
salesmen selects the right colors, styles and configurations. The design software is
inexpensive and very effective in developing attractive & functional offices. CAD
can be used to determine how a product will respond to various conditions.
Master Production Scheduling: The overall objective of master production scheduling is to provide detailed
plans for both short term and long range scheduling of manufacturing facilities.
Master production scheduling software packages can include forecasting
techniques that attempt to determine current and future demand for products and
services. Master production scheduling package can determine the best way to
engage the manufacturing facility and all its related equipment. Most programs
also perform sensitivity analysis which allows a manager to determine how the
production schedule would change with different assumptions concerning demand
forecasts or cost figures.
The production schedule is critical to the entire manufacturing process.
Information generated from this application is used with all aspects of production
and manufacturing. Inventory control, labor force planning, product delivery and
maintenance programs depend on information generated from the master
Inventory Control: An important key to the manufacturing process is inventory control. Great
strides have been made in developing cost effective inventory control program and
software packages that allow automatic reordering, forecasting, generation of shop
documents and reports, determination of manufacturing costs, analysis of
budgeted costs versus actual cost and the development of master manufacturing
schedulers resources requirements and plans.
One method of determining how much inventory to order is called the
Economic Order Quantity (EOQ). This quantity is determined in such a way as to
minimize the total inventory cost. Reorder Point (ROP) which is a critical
inventory quantity level.
Some inventory items are dependent on one another. This technique is called
Material Requirement Planning (MRP). The basic goal of MRP is to determining
when finished products are needed, then to work backward in determining
deadlines & resources needed to complete the final product on schedule.
Manufacturing resource planning refers to an integrated companywide system
based on network scheduling that enables people to run their business with a high
level of customer service and productivity while lowering the cost and inventory.
Just-in-time Inventory and Manufacturing: High inventory levels on the factory floor means higher cost, the possibility of
damage & an effective manufacturing process. Thus, one objective of a
manufacturing management information system is to control inventory to the
lowest levels. One way to do this is to adopt the JIT approach.
With this approach inventory and materials are delivered just before they are
used in a product. Although JIT has many advantages, it also renders firms more
vulnerable to process disruptions. The JIT manufacturing approach requires better
coordination and cooperation between suppliers & manufacturing companies,
substantially reducing inventory costs.
Process Control: Managers can use number of technologies to control & streamline the
E.g. the computer can be used to directly control manufacturing equipment
using systems called Computer Assisted Manufacturing (CAM). CAM systems have
the ability to control drilling machines, assembly lines, & more. Some of them
operate quietly are easy to program have self diagnostic routines to test for
difficulties with the computer system or the manufacturing equipments.
Computer integrated manufacturing involves the use of computer to link the
components of the production process into an effective system. CIM’s goal is to be
tie together all aspects of production including order processing product design,
manufacturing, inspection & quality control & shipping. CIM system also increaser
efficiency by coordinating the action of various production units.
A Flexible Manufacturing (FMS) is an approach that allows manufacturing
facilities to rapidly & efficiently change from making one product to making
another. In the middle of a production run e.g. changes can be made to the
production process to make a different product or change manufacturing material.
By using an FMS, the time and cost to change manufacturing jobs can be
substantially reduced and companies can react quickly to market needs
competition. FMS is normally implemented using computer system, robotics and
other automated manufacturing equipments.
Quality Control & Testing: The manufacturing organizations are placing more emphasis on quality control,
a process that ensures that the finished product meets the customer’s needs. For
continues process, control charts are used to measure weight, volume temperature
or similar attributes. When the manufacturing operation is not continuous,
sampling plans can be developed that allow the producer or consumer to accept or
reject one or more products.
Whether the manufacturing operation is continuous or discrete, the results
from quality control are analyzed closely to identify opportunities fro
improvements. Information generated from quality control program can also be
used to design better products.
Marketing Management Information System: A marketing management information system supports managerial activities in
product development distribution, pricing decision, promotional effectiveness &
sales forecasting. Marketing functions are increasingly performed on the internet.
Subsystems for the marketing management information system include marketing
research product development, promotion & advertising & product pricing. These
subsystems & their output help marketing managers & executives increase sales,
reduce marketing expenses & develop plans for future products & services to meet
the changing needs of customers.
Marketing Research: Surveys, questionnaires, pilot’s studies & interviews are popular marketing
research tools. The purpose of marketing research is to conduct a formal study of
the market & customer preferences. Marketing research can identify prospects as
well as the features that current customers really want in a goods or services. Once
entered into the marketing management information system, data collected from
marketing research projects is manipulated to generate reports on key indicators
like customer satisfaction and total service calls. Reports generated by marketing
management information system help manager be better informed to help the
organization meet its performance goals.
Product Development: This involves the conversion of raw materials into finished goods & services &
focuses primarily on the physical attributes of the product. Many factors, including
plant capacity, labor skills, engineering factors and materials are important in
product development decisions. In many cases computer program is used to
analyze these various factors & to select the appropriate mix of labor, materials,
plant & equipment and engineering designs.
Promotion & Advertising: One of the most important functions of any marketing effort is promotion &
advertising. Product success is a direct function of the type of advertising and sales
promotion done. The size of promotion budget & the allocation of this budget to
the various promotional campaigns are important factors in deciding on the type
of campaign that will be launched.
Product Pricing: -
Product pricing is another important & complex marketing function. Retail
price, wholesale price and price discounts must be determined. A major factor in
determining pricing policy is analysis of the demand curve which attempts to
determine the relationship between price and sales. Computer program can help
determine price elasticity and various pricing policies, such as supply and demand
curves for pricing analysis. Sales analysis is also important to identify products,
sales personnel & customers that contribute to profit and loss that do not. Several
reports can be generated to help marketing managers’ make good sales decision.
These reports show which products are doing well & which ones need
improvement or should be discarded altogether.
Human Resource Management Information System: The human resource management information system is also known as
personnel management information system, is concerned with activities related to
employees and potential employees of the organizations. Because the personnel
function relates to all other functional areas in the business, the human resource
management information system plays a valuable role in ensuring organizational
success. Some activities performed by this management information system are
work-force analysis and planning; hiring; & training; job & task assignment etc.
human resource subsystems & output range from the determination of human
resource needs & hiring through retirement & out placement. Most medium sized
and large organization has computer system to assist with human resource
planning; hiring; training & skills inventory and wages & salary administration.
Outputs of the human resource management information system include reports
such as human resource planning reports, job application review profiles, skill
inventory reports and salary surveys.
Human Resource Planning: One of the first aspects of any human resource management information
system is determining personnel needs. The overall purpose of this management
information system subsystem is to put the right number & kinds of employees in
the right jobs when they are needed. Effective human resource planning requires
defining the future number of employees needed & anticipating information future
supply of people for these jobs.
Personnel Selection & Recruiting: If the human resource plans reveals that additional personnel are required, the
next logical step is recruiting & selection o personnel. This subsystem performs
one of the most important & critical functions of any organization especially in
service organizations where employees can define the company’s success.
Management information systems can be used to help rank & select potential
employees for every applicant, the results of interviews, tests and company visits
can be analyzed by the system & printed. This report called a job applicant review
profile, can assists corporate recruiting teams in find selections.
Training & Skills Inventory: Some jobs, such as programming, equipment repair & tax preparation, require
very specific training. Other jobs may require general training about the
organizational, culture, orientation, dress standards & expectation of the
organization. Today, many organizations conduct their own training with the
assistance of information system & technology. Self paced training can involve
computerized tutorials, video programs & CD-ROM books & materials. This text
and supporting material for example can be used in a distance learning
environment. When training is complete, employee may be required to take
computer scored tests to reveal their mastery of skills & new material. The results
are given to the employee supervisor or boss in the form of skill inventory reports.
In some cases skill inventory reports are used for job placement. The skill
inventory report would help them evaluate current employees to determine their
potential for the position.
Scheduling & Job Placement: Scheduling people & jobs can be relatively straightforward or extremely
complex. For some service companies, scheduling &job placement are based on
which customer walk through the door. Determining the best schedule for flights &
airline pilots, the placement of military recruits to jobs and the truck delivers and
equipments that should be used to transport materials across the country require
good computer program. Employee schedules are developed for each employee
showing their job assignments over the next week or month. Job placements are
often determined based on skill inventory reports, which show which employee
might be nest suited to particular task or job.
Wage & Salary Administration: The last of the major human resource management information system
subsystem involves determining wages, salaries & benefits including medical
payments, saving plans ans. Retirement accounts, huge data such as industry
averages for positions can be taken from the corporate database & manipulated by
human resource management information system to provide wage information &
reports to higher levels of management. These reports are called salary surveys
can be used to compare salaries with budget plans, the cost of salaries versus sales
& the wages required for any one department or office. The report help show
backup of key positions in the company wage & salary administrator also entails
designing retirement program for employee.
Other Management Information System: In addition to finance, manufacturing, marketing and human resource
management information system some companies have other functional
management information system.
1. Accounting Management Information System: -
An accounting management information system performs a number of
important activities, providing aggregate information on accounts, accounts
receivable, payrolls & many other applications. The organization’s transaction
processing system captures accounting data which is also used by most other
functional information system.
Some smaller companies hire outside accounting firms to assist them with their
accounting functions. These outside companies’ produces reports for firm using
raw accounting data. Depending on the needs of the small organization & its
personnel’s computer experience, using these computerized accounting systems
can be very cost effective approach to managing information.
2. Geographic Information System (GIS): A geographic information system (GIS) is a computer system capable of
assembling, storing, manipulating & displaying geographically referenced
information that is data identified according to their location. A GIS enables users
to pair predawn maps or map outlines with tabular data to describe aspects of a
particular geographic region.
For example sales managers may want to plot total sales for each country in the
states they serve. Using GIS, they can specify that each county be drawn with a
degree of shading that indicates the relative amount of sales.
Decision Support System (DSS): -
A decision support system is an organized collection of people, procedures,
software, dbases, & devices used to support problem specific decision making &
problem solving. The focus of a decision support system is on decision making
effectiveness when faced with unstructured or semi-structured business problem.
Decision support system offers the potential to generate higher profits, lower costs
& better products & services. Decision support system should be designed,
developed & used to help the organization achieve its goals & objectives. Many
organizations face a bureaucracy of complex rules, procedures & decision.
Decision support systems are used to bring more structure to these problems to
aid the decision making process. In addition because of the inherent flexibility of
decision support system, managers at all levels can use. Decision support system
to assist in some relatively routine, programmable decision in lieu of more
formalized management information system.
Characteristics of Decision Support System: Decision support systems have a number of characteristics that allow them to
effective management support tools.
1. Handle Large Amount of Data From Different Sources: For instance, advanced database management system & data warehouses have
allowed decision makers to search dbases for information when using a decision
support system, even when some data sources reside in different dbases stored in
different computer system or network.
2. Provide Report & Presentation Flexibility: Managers can get the information they want, presented in a format that suits
their needs. Furthermore output can be presented on computer screens or
produced on printers, depending on the needs & desires of the problem solver.
3. Offer Both Textual & Graphical Orientation: Today’s decision support systems can producer text, tables, line drawings, pie
chart & more. By using their preferred orientation, managers can use decision
support system to get a better understanding of a true situation if require & to
convey this understanding to other.
4. Support Drill-Down Analysis: A manager can get more levels of detail when needed by drilling down through
data. For example a manager can get more detailed information for a project if
needed. Here he can view the overall project cost or drill-down & see the cost for
each project phase, activity & task.
5. Perform Complex, Sophisticated analysis & Comparisons Using Advanced
Software Packages: Marketing research surveys for example can be analyzed in a verity of ways
using analysis program that are part of decision support system. Many of the
analytical programs associated with decision support system are actually stand
alone program. The decision support system provides minas of bringing these
6. Support Optimization Satisfying & Heuristic Approaches: By supporting all types of decision making approaches, a decision support
system gives the decision maker a great deal of activity in getting computer
support for decision making activities. The process of making hypothetical changes
to problem data & observing the impact on the results can be used to control
inventory with what-if analysis a manager can make changes to problem data.
7. Simulation: It is the ability of the decision support system to duplicate the feature of a real
system. In most cases, probability or uncertainty is involved. For example the
mean time between failure & the mean time to repair key components of a
manufacturing line can be calculated to determine the impact on the number of
products that can be produced each shift. Engineers use this data to determine
which components need to be reengineered to increase the mean time between
failures and which components need to have an ample supply of spare parts to
reduce the mean time to repair.
8. Goal Seeking Analysis: -
It is a process of determining the problem data require for a given result. For
example a financial manager is considering an investment with a certain monthly
net income. Further more the manager might have a goal to earn a return of 9% on
the investment. Goal seeking allows the manager to determine what monthly net
income is needed to have return of 9%.
Capabilities of Decision Support System: Developers of decision support system strive to make them more flexible than
management information system & to give them the potential to assist decision
makers in a variety of situation. Decision support system approaches can also help
at all levels of the decision making process.
1. Support for Problem Solving Phases: The objective of most decision support system is to assist decision makers with
the phases of the problem solving process. As previously discussed these phases
include intelligence and monitoring. A specific decision support system might
support only one or a few problem solving phases.
2. Support for Different Decision Frequencies: Decision can range on continues from one of kind to repetitive decisions. One of
kind decisions are typically handled by an ad hoc decision support system. An ad
hoc decision support system is concerned with situations or decisions that come
up only a few times during the life of organization for example a company might be
faced with a decision on whether to build a new manufacturing facility in another
area of the country.
An institutional decision support system handles situations or decisions that
occur more than ones, usually several times a year of more. An institutional
decision support system is used repeatedly & refined over the years.
3. Support for Different Problem Structures: As discussed previously decisions can range from highly structured &
programmed to unstructured & non-programmed. Highly structured problems are
straightforward requiring known facts & relationship semi-structured or
unstructured problems on the other hand are move complex.
4. Support for Various Decision Making: Decision support system can often help for managers at different levels when
the organizational operational level managers can be assisted with daily and
routine decision making. Tactical level decision makers can be supported with
analyzer tools that assist in proper planning and control. At the strategic level
decision support system can help managers by providing analysis for long-term
decisions required by the internal and external infrastructure.
Information System: -
Decision support system differs from the management information system in
numerous ways including the types of problems.
Decision support system
A decision support
The management information
system is good at handling
system is normally used only
unstructured problems that with more structured problems.
cannot be easily
A decision support
The management information
system supports individual
system supports primarily the
small groups and the entire
organization. In the short run
organization. In the short
users have less control over on
run user typically have
management information system.
more control over a decision
A decision support
This is not true of all
system support all aspects management information system
and phases of decision
some make automatic decision
making it does not replace
and replace the decision maker.
the decision maker people
still make the decisions.
A decision support
The management information
system emphasis actual
system usually emphasized
decision and decision
A decision support
The management information
system is direct support
system is typically an indirect
system that provides
support system that uses
interactive support on the
regularly produced reports.
A decision support
The management information
system provides decisions system using printed reports that
support is usually on-line &
maybe delivered to managers
related to real time.
once a week no immediate
Decision support system
The management information
is flexible & can be
system response time is usually
implemented by users to
usually take time to develop
& is better able to respond
to user request.
Decision support system
The management information
reports are usually screen
system however typically is
oriented with the ability to oriented towards printed reports
print the reports with
Users are usually more
The management information
directly involves units’
system is several years old and
often writes a shell script that can
involvement usually means develops for people who are no
better system that provides
longer performing the work
supported by the management
Components of Decision Support System: At the core of decision support system is a database & model base. In addition
typical decision support systems contains a dialogue manager which allows
decision makers to easily access & manipulate the decision support system & use
comment business terms & phrases. External dbase access allows the decision
support system to tap into vast stores of information contained in the corporate
database, letting the decision support system retrieve information on inventory,
sales, personnel, production, finance, accounting and other areas.
The Model Base: The purpose of the model base in a decision support system is to give decision
makers access to variety of model and & assist them in the decision making
process. The model base can include Model Management Software (MMS) that
coordinates the use of models in a decision support system including financial
statistical analysis graphical and project management model.
1. Financial Model: -
It provides cash flow, internal rate of return and other investment analysis
spreadsheet programs such as excel is often used for this purpose. In addition
more sophisticated financial planning and modeling programs can be employed.
Some organization develops customized financial models to handle the unique
situation and problems faced by the organization.
2. Statistical Analysis Model: It can provide summary statistics trend projections, hypothesis testing and
more. These programs are available on both personnel & mainframe system. Many
software packages including SPSS & SAS provide outstanding statistical analysis
for organization of all sizes. These statistical problems can compute averages,
standard deviation, correlation & coefficient and regression analysis; do
hypotheses testing. Some statistical programs also have the ability to produce
graphic displays that reveal the relationship between variables or quantities.
3. Graphical Model: These are software packages that assist decision makers’ decision making in
designing, developing & using graphic displays of data & information PC programs
that can perform this type of analysis.
4. Project Management Model: These are used to handle and coordinate large project; they are also used to
identify critical activities and tasks that could delay or jeopardize an entire project
if they are not completed in time & cost effectively. Some of these programs can
also determine the best way to speed up a project by using additional resources,
including cash, labor & equipment. This allows managers to keep tight control over
projects of all size & types.
The Dialogue Manager: The dialogue manager allows users to interact with the decision support system
to obtain information. It assists with all aspects of communications between the
user & the hardware and software that constitute the decision support system. In a
practical sense to most decision support system users the dialogue manager is the
decision support system. Upper-level decision makers are often less interested in
where the information come from or how it write a shell script that can gathered
than that the information is both understandable & accessible.
The Group Decision Support System (GDSS): The decision support system approach has resulted in better decision making
for all levels of individual users. However many decision support system
approaches & techniques are not suitable for a group decision making
environment. Although not all workers & managers are involved in committee
meets and group decision making sessions. Some tactical and strategic level
managers can spend time for group decision. This can be done by group decision
Characteristics of Group Decision Support System: The following are the characteristics of the group decision support system.
1. Special Design: The group decision support system approach acknowledges that special
procedure devices and approaches are needed in group decision making settings.
These procedures must faster, creative thinking, effective communication and
group decision making technique.
2. Ease of Use: Like an individual decision support system, a group decision support system
must be easy to learn and use. Systems that are complex and hard to operate will
seldom be used. Many groups have less tolerance that does individual decisions
makers for poorly developed systems.
3. Flexibility: Two or more decision makers working on the same problem may have different
decision making styles and preferences. Each managers makes decisions in a
unique way, an effective group decision support system not only has to support
the different approaches that managers perspectives into a common view of the
task at hand.
4. Decision Making Support: A group decision support system can support different decision making
approaches including the Delphi approach in which group decision makers are
geographically dispersed throughout the country or the world. This approach
encourages diversity among group members and fosters creativity and original
thinking in decision making. Brain storming which often involves members
offering ideas “off the top of their heads”. The group consensus forces members in
the group to reach unanimous decisions with nominal group technique, each
decision maker can participate; this technique encourage feedback from individual
5. Anonymous Input: Many group decision support systems allow anonymous input, where the
person giving the input is not known to other group members. For example some
organizations use a group decision support system to help rank the performance
of managers. Anonymous input allows the group decision makers to concentrate
on the merits of the input without considering who gave it. In other words input
given by a top-level manager is giving the same consider action as input from
lower-level employees to other members of the group.
6. Reduction of Effective Group Behavior: One key Character of any group decision support system is the ability to
suppress or eliminate group behavior that is counter productive or harmful to
effective decision making. In some group settings dominant individuals can take
over the discussion which can prevent other member of the group from presenting
7. Parallel Communications: With traditional group meeting people must take turns addressing various
issues. One person normally tasks at a time with group decision support system
it’s possible for every group member to address issue or make comments at the
same time by entering them to PC or workstation.
8. Automated Record Keeping: Most group decision support system have the ability to keep detailed records of
a meeting automatically. Each comment that is meeting into a group member’s PC
or workstation can be anonymously recorded.
Group Decision Support System Software: Group decision support system software often called groupware or workgroup
software helps with joint workgroup scheduling, communication and
management. One popular package Lotus Notes can capture, store, manipulate and
distribute memos and communication that are developed working group project.
This software allows users to setup electronic bulletin boards, schedule, and group
meetings and use email in a group setting. Other software is Collabra Share, Open
Mind and Team Ware.
Group Decision Support System Alternatives: Group decision support system can take on a number of alternative network
configurations depending on the needs of group.
1. The Decision Room: This is ideal for situation in which decision makers are located in the same
building or geographic are and decision makers are occasional users of group
decision support system. The decision room alternative combines face-to-face
verbal interaction with the client.
2. The Local Area Decision Network: The local area decision network can be used when group members are located
in the same buildings or geographic area and under conditions in which group
decision making is frequent.
3. The Teleconferencing Alternative: The teleconferencing alternative is used for situations in which the decision
frequency is low and location of group member is distant. Using long distance
communication technology there decisions rooms are electronically connected in
teleconference and video conference. This provides high degree of flexibility.
4. The Wide Area Decision Network: The wide area decision network is under for situations in which the decision
frequency is high and the location of group member is distant. This group decision