Management Information System

Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Semester: FIVTH Semester
Name of the Subject:
MANAGEMENT INFORMATION
SYSTEM

2
Management
• The act, art, or manner of managing, handling,
controlling directing, etc.
• Origin: to train (a horse) in his paces; cause to
do exercises of the manage
• To control the movement or behavior of; handle;
manipulate
• To have charge of; direct; conduct; administer
• To get (a person) to do what one wishes

3
Objectives
• Understand the systems approach
• Why is technology important?
• Understand Porters 5 forces framework
• Understand the Value chain framework
• Differentiate between types of systems

TRANSACTION PROCESSING
SYSTEMS
An efficient transaction processing system is a pre-
requisite for developing efficient management
information systems.
A transaction may be defined as an activity, such as
making a purchase or a sale, manufacturinf a
product,promoting an employee and so on.

Performance of a transaction
requires records to:
1. Direct a transaction to take place.
2. Report,confirm, or explain its performance
3. Communicate the transaction to those needing a record for
background information or reference.
To ensure the performance of transactions involved in
organizational activities, transaction processing system is
required.TPS is mostly used by lower level management to
make operational decisions

Types of Transactions
Note that the transactions can be internal or external.
When a department orders office supplies from the purchasing
department, an internal transaction occurs, when a customer places
an order for a product, an external transaction occurs.
• Internal Transactions: Those transactions, which are internal to the
company and are related with the internal working of any organization.
For example Recruitment Policy, Promotion Policy, Production policy
etc
• External Transactions: Those transactions, which are external to the
organization and are related with the external sources, are regarded
as External Transaction. For example sales, purchase etc.

Characteristics of Transaction Processing
Systems
1. A TPS records internal and external transactions for a company. It is a
repository of data that is frequently accessed by other systems
2. A TPS performs routine, repetitive tasks. It is mostly used by lower-level
managers to make operational decisions
3. Transactions can be recorded in batch mode or online. In batch mode, the files
are updated periodically; in online mode, each transaction is recorded as it
occurs.
4. There are six steps in processing a transaction. They are data entry, data
validation, data processing and revalidation, storage - output generation, and
query support.

FEATURES OF TRANSACTION PROCESSING SYSTEMS
There are certain features of TPS which distinguish these from other information
systems of an organisation:
1. In many cases organizations are required to process transactions in a way
that is required by its external stakeholders.e. a large business organisation is
required to maintain its financial transactions as prescribed by Incomr Tax Act.
2. TPS are major procedure of information for other types of systems.e.g.
purchase processing systems supply data to the organization‘s general ledger
systems which are responsible for maintaining records of the organization for
producing reports,such as trail balance,profit and loss account,and balance
sheet.
3. TPS handel detail of data and these data shows the result of various
activities usually on historical basis.
4. TPS span the boundary of the organization and connect the elements of its
environment.

COMPONENTS OF TRANSACTION
PROCESSING SYSTEMS
A computer-based transaction processing system has the following
sixcomponents:
1. Input.
2. Data capture
3. Data validation
4. ProcessIng and revalidation
5. Storage and Output generation
6. Query support

Methods for Data Entry:
• Keyboard/video display terminals
• Optical character recognition (OCR) devices, such as optical scanning
wands and grocery check-out scanners.
• Magnetic ink character recognition (MICR) devices, such as MICR
reader/sorters used in banking for check
• Other technologies, including electronic mice, light pens, magnetic stripe
cards, voice input, and tactile. Input also be used as input device depending
upon the application requirement

2. Data Capture
We could capture transaction data as close as possible to the source that
generates the data. Salespersons capture data that rarely changes by
prerecording it on machine-readable media, or by storing it on the
computer system.
Ways of Data Capturing
• Capture data by using machine-readable media initially (bar-coded and
magnetic stripe credit cards), instead of preparing written source
documents
• Captures data directly without the use of data media by optical
scanning of bar codes printed on product packaging. It ensures the
accuracy and reliability of data by comparing

METHODS FOR PROCESSING TRANSACTIONS
There are three different methods commonly used for
processing transactions and updating master files:
1. On-line entry with immediate processing
2. On-line entry with subsequent processing
3. Batch processing

Decision Support Systems (DSS)
A decision support system can be defined as a system that provides information
for making semistructured and unstructured decision.
Keen and Scoff Morton have defined DSS as follows:
"Decision support systems (DSS) represent a different approach to information
system support for semi-structured and unstructured decisions. They support a
variety of unstructured decision processes.
According Laudon and Laudon :-
―A decision support system is a computer system at the management level of an
organization that combines data, sophisticated analytical tools, and user-friendly
software to support semi-structured and unstructured decision making.‖
Decision Support Systems (DSS) help executives make better decisions by using
historical and current data from internal Information Systems and external sources.
By combining massive amounts of data with sophisticated analytical models and
tools, and by making the system easy to use, they provide a much better source of
information to use in the decision-making process. Decision Support Systems
(DSS) are a class of computerized information systems that support decision-
making activities.

Features of Decision Support Systems
1. The philosophy of decision support systems is to give users the tools
necessary to analyze important blocks of data, using easily controlled
sophisticated models in flexible manner‘s are designed to deliver capabilities, not
simply to respond to information needs.
2. DSS are tightly focused on a specific decision or set of decisions, such as
routing, queuing, and evaluating and so on. Thus they are not used for general
purpose.
3. DSS are aimed at higher-middle and top management with emphasis on
change, flexibility and quick response. A greater emphasis is placed on models,
graphics, and assumptions.
4. The design of DSS applies a different set of skills than the design of
structured, operational systems
5. The technology required DSS is based on the need for flexible access. Reliable
communication networks, availability of computer terminals, and even stand-
alone microcomputers are more important than large-scale data processing
systems.

Types of decisions
1. Programmed Decisions (Structured Decisions):- It involves situations that
have occurred often enough to enable decision rules to be developed and
applied in the future. These decisions are those that have been made
persistently in the earlier period that managers have developed rules or
guideline to be applied when certain situations are expected to happen.
Programmed decision making is used when an inventory manager of mc
Donald‘s decides to order beef patty stocks because the stocks are three-
quarters empty. Programmed decisions making are a routine that you make
every time so that the organization run smooth. Managers can develop rules
and guidelines to regulate all routine organizational activities. Most decisions
are related to daily activities.

2. Non Programmed Decisions (unstructured
Decisions)
Non-programmed decisions are made in response to situations that
are unique, are poorly defined and largely unstructured.
Nonprogrammed decision making is used when mc Donald‘s are
deciding to invest in new deep fryers. It is a non-routine decision
making. This means it is made for big decisions that will affect an
organization for a long time. This type of decision making does not
need rules or guidelines to be followed because the situation is
unexpected or uncertain. For example if mc Donald‘s plans to launch a
new line of menu, they will have to make decision base on their
intuition and reasoned judgments.

Introduction to Executive Information Systems
Executive Information Systems (EIS) supplies the necessary tools to senior
management. This system provides relevant information to top management
for strategic planning and control. The decisions at this level of the company
are usually never structured and could be described as "educated guesses."
Executives rely as much, if not more so, on external data than they do on
data internal to their organization. Decisions must be made in the context of
the world outside the organization. The problems and situations senior
executives face are very fluid, always changing, so the system must be
flexible and easy to manipulate.
An EIS can supply the summarized information executives need and yet
provide the opportunity to drill down to more detail if necessary.

Features of Executive Information
Systems
1. EIS are relevant for top management of an organization. The level at which
strategic decisions affecting the organization as a whole or its major parts are
made.
2. These systems may derive data from different functional areas but the
decisions that are made by integrating these data are not meant for any specific
functional area but for the organization as a whole.
3. The information generated through EIS are in t he form of summary reports
and graphics. Through these reports executives draw conclusion quickly without
waste in their time.
4. Executives are helped by EIS coaches and chauffeurs. An EIS coach is a
member of the executive's staff, information services, or an outside consultant
who provides help in settil1g up the EIS. An EIS chauffeur is a member of the
executive's staff who operates the equipment for the executive.
5. EIS combines both internal and external information for the top management.

Characteristics of EIS
An EIS has many distinct characteristics that differentiate it from other
applications software. A list of these features is presented in table below. A
successful executive information system minimizes hard copy reports while
keeping high-level executives up dated. With an EIS, qualitative information is
obtained without producing volumes of paper.
Advanced internal control and communication are typical focuses of an ESS.
The ability to view exception reporting on the computer screen is an example
of an EIS-facilitated management control technique. Most Executive Support
Systems highlight the areas of the business that are going astray. Color codes
are used to display data that are in an acceptable or unacceptable range as
defined by the executive. This technique allows the computer to track
important project assignments within a company using the executive
information system. An EIS allows access to external as well as company
internal information.

Advantages
• Simple for high-level executives to use Operations
do not require extensive computer experience
• Provides timely delivery of company summary
information
• Provides better understanding of information
• Filters data for better time management
• Provides system for improvement in information
tracking

Disadvantages
• Computer skills required to obtain results
• Requires preparation and analysis time to get
desired information
• Detail oriented Provides detailed analysis of a
situation
• Difficult to quantify benefits of DSS How do you
quantify a better decision?
• Difficult to maintain database integrity
• Provides only moderate support of external data
and graphics capabilities

Expert Systems (ES)
Introduction to Expert
Systems
Expert systems are a common form of artificial intelligence.
They are used to assist humans in the decision-making
process, but they don't replace humans. Many of the decision
we make are based on past experience, but we have the
added benefit of reasoning and intuition. Expert systems ask
questions, then give you advice and reasons why you should
take a certain course of action based on hard data, not on
hunches. Again, they don't make the final decision.
Most of the problems an expert system helps resolve can in
fact be solved by a human. But since the computer is faster or
safer, businesses choose to use them instead.

System Development

Six Phases of the System Development
Life Cycle
• Preliminary Investigation
– Assesses feasibility and practicality of system
• System Analysis
– Study old system and identify new requirements
– Defines system from user's view
• System Design
– Design new/alternative system
– Defines system from technical view

Six Phases of the System Development Life Cycle
• System Development
– New hardware and software is acquired, developed, and tested
• System Implementation
– System installation and training
• System Operation & Maintenance
– Daily operation
– Periodic evaluation and updating

SDLC Phases
Preliminary
Investigation
System Operation
& Maintenance
System
Analysis
System
Implementationn
System
Design
System
Development

Phase 1:
Preliminary Investigation
• Determine if a new system is needed
• Three primary tasks:
– Define the problem
• By observation and interview, determine what information is
needed by whom, when, where and why
– Suggest alternative solutions
– Prepare a short report

• In depth study of the existing system to determine what the new
system should do.
– Expand on data gathered in Phase 1
• In addition to observation and interviews, examine:
– Formal lines of authority (org chart)
– Standard operating procedures
– How information flows
– Reasons for any inefficiencies
Phase 2:
System Analysis

Phase 2: System Analysis
Tools Used
• Checklists - list of questions
• Top-down analysis - start with top level components, break down into
smaller parts through each successive level
• Grid charts - to show relationship between inputs and outputs
• System flowcharts - charts flow of input data, processing, and output
which show system elements and interactions

Phase 2: System Analysis
Documentation Produced
• Complete description of current system and its problems
• Requirements for for new system including:
– Subject
– Scope
– Objectives
– Benefits
• Possible development schedule

Phase 3:
System Design
• Uses specifications from the systems analysis to design alternative
systems
• Evaluate alternatives based upon:
– Economic feasibility - Do benefits justify costs?
– Technical feasibility - Is reliable technology and training available?
– Operational feasibility - Will the managers and users support it?

Phase 3: System Design
Tools Used
• Computer-Aided Software Engineering (CASE) tools are software-
based products designed to help automate the production of
information systems.
• Examples:
– Diagramming Tools
– Data Repositories
– Prototyping Tools
– Test Data Generators
– Documentation Tools
– Project Management Tools

Phase 3: System Design
Documentation Produced
• System Design Report
– Describe Alternatives including:
• Inputs/Outputs
• Processing
• Storage and Backup
– Recommend Top Alternative based upon:
• System Fit into the Organization
• Flexibility for the future
• Costs vs. benefits

Phase 4:
System Development
• Build the system to the design specifications
– Develop the software
• Purchase off-the-shelf software OR
• Write custom software
– Acquire the hardware
– Test the new system
• Module (unit) test - tests each part of system
• Integration testing - tests system as one unit
– Create manuals for users and operators

Phase 5:
System Implementation
• Convert from old system to new system
• Train users
• Compile final documentation
• Evaluate the new system

Phase 5: System Implementation
Types of Conversion
• Direct/plunge/crash approach – entire new system completely
replaces entire old system, in one step
• Parallel approach - both systems are operated side by side until the
new system proves itself
• Pilot approach - launched new system for only one group within the
business -- once new system is operating smoothly, implementation
goes company-wide
• Phased/incremental approach - individual parts of new system are
gradually phased-in over time, using either crash or parallel for each
piece.

Phase 5: System Implementation
• User Training
– Ease into system, make them comfortable, and
gain their support
– Most commonly overlooked
– Can be commenced before equipment delivery
– Outside trainers sometimes used

Phase 6: Operations &
Maintenance
• Types of changes:
– Physical repair of the system
– Correction of new bugs found (corrective)
– System adjustments to environmental changes
– Adjustments for users’ changing needs (adaptive)
– Changes to user better techniques when they become available
(perfective)

Phase 6: Operations &
Maintenance
• Evaluation Methods
– Systems audit - performance compared to
original specifications
– Periodic evaluation - “checkups” from time to
time, modifications if necessary

Deliverables of the SDLC
Begin building
new system
System converted
Users trained
Coded and
Tested System
Design Specifications
Preliminary
Investigation
System
Analysis
System
Design
System
Implementation
System
Development
System
Maintenance
Approved Feasibility
Study
Operational System
Documentation completed
Abort Project
Goto next phase
Goto Previous phaseProblem
Specifications

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Information
•Derived from the Latin verb informo, informare,
meaning to “give form to”
• Information etymologically connotes an
imposition of organization upon some
indeterminate mass or substratum, the
imparting form that gives life and meaning to
otherwise lifeless or irrelevant matter
• Data that have been shaped by humans into a
meaningful and useful form.
Schode Chanderprabhu Jain College of Higher Studies & School of Law

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SYSTEM
Webster’s New World Dictionary
• A set or arrangement of things so related or
connected as to form a unity or organic whole
• A set of facts, principles, rules, etc. classified
or arranged in a regular, orderly form so as to
show a logical plan linking the various parts.
• A method or plan of classification or
arrangement

45
SYSTEM
A system is defined as (1) a set (2) of objects (3)
together with relationships (4) between the objects and
between their attributes (5) related to each other and to
their environment (6) so as to form a whole.
SET — any well defined collection of elements or objects within some
frame of reference
OBJECTS — objects are elements of a system [INPUTS (serial, probable,
or feedback), PROCESS (transformation), OUTPUTS (Intended, waste, or
pollution)] Efficiency - ratio of output to input
RELATIONSHIPS — the bonds that link objects together (Symbiotic,
synergistic, and redundant)
ATTRIBUTES — attributes a properties of both objects and
relationships (defining/accompanying characteristics)
ENVIRONMENT — includes not only that which lies outside the system’s
complete control but that which at the same time also determines in some
way the system’s performance.

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Individual Information Processing System
Sensory Information
- Visual
- Auditory
- Kinesthetic
- Olfactory
Brain
Cognitive Frames
- Assumptions
- Criteria
Internal States
Behaviors
Macro
- Speaking
- Eating
- Pointing
Micro
- Heart Rate
- Voice Temp
- Skin Temp
Input Processing Output
Memory Personal History
Environment

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The Organization as a System
Money
Labor
Input Process Output
Science Technology
Products,
goods and
services
Marketable
waste
Government
Pollution
Public
Management
Management
Materials
and
Equipment
Environment
Political, Legal, Social, Physical, Economic, …

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Diagram of a System’s Parameters, Boundary, and Environment
Feedback
o
p
i
I
p
0
op
i
op
i
o
p
i
To other systemsFrom other systems
System’s boundary
System’s environment

The Organization, Its Resources and Its Environment
Feedback
Material and
Equipment
Government
Ecology
Competitors
General
Public
Land
Capital
Labor
Technology
Customers
The organization

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Socio-Technical System
Social
System
Technical
System
STRUCTURE
PEOPLE
TECHNOLOGY
TASKS
MIS
(Direct)
Socio-Technical Model as a Work System

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CHALLENGES
• Technology advances
• Productivity challenge
• Strategic business challenge
• People challenge

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Information Systems1 -- FOCUS
•People
•Organizations
•Technology
•Problem Solving
1 A set of interrelated components that collect, retrieve, process,
store and distribute information for the purpose of facilitating planning,
control, coordination, analysis, and decision making in organizations.

53
5 forces and value chain
Organizational processes

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Competitive Intelligence
• Such information-gathering drives business performance
– by increasing market knowledge
– improving knowledge management
– raising the quality of strategic planning
One of the most important aspects in developing a competitive
advantage is to acquire information on the activities and actions
of competitors.
However once the data has been gathered it must be
processed into information and subsequently business
intelligence.
Porters 5 Forces is a well-known framework that
aids in this analysis.

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Porter’s Competitive Forces Model
• The threat of entry of new competitors
• The bargaining power of suppliers
• The bargaining power of customers (buyers)
• The threat of substitute products or services
• The rivalry among existing firms in the industry
The model recognizes five major forces that could endanger a
company’s position in a given industry.
External Competitive Forces

56
Competitive Forces
Porter’s Competitive Forces Model

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The Value Chain
Value Chain -- The set of processes a firm uses to
create value for its customers ( see pg 58)
(an abbreviated version of the term value added chain from economics)
The Value Chain includes:
Primary Processes -- that directly create the value the firm’s customer
perceives, and
Support Processes -- that add value indirectly by making it easier for
others to perform the primary processes

58
The Value Chain
According to the value chain model (Porter, 1985), the activities
conducted in any organization can be divided into two parts: primary
activities and support activities.
 Primary activities are those activities in which
materials are purchased, processed into
products, and delivered to customers. Each adds
value to the product or service hence the value
chain.
 Inbound logistics (inputs)
 Operations (manufacturing and testing)
 Outbound logistics (storage and distribution)
 Marketing and sales
 Service

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The Value Chain (Continued)
 Unlike the primary activities, which directly add value to
the product or service, the support activities are
operations that support the creation of value (primary
activities)
 The firm’s infrastructure (accounting, finance, management)
 Human resources management
 Technology development (R&D)
 Procurement
The initial purpose of the value chain model was to analyze the internal
operations of a corporation, in order to increase its efficiency,
effectiveness, and competitiveness. We can extend that company
analysis, by systematically evaluating a company’s key processes and
core competencies to eliminate any activities that do not add value to
the product.

60
The Value Chain (Continued)
Secondary Activities
Primary Activities
Value

61
IBM’s Value Chain Model
High-Volume, Easily Configured Products
Complex Configured Hardware
OEM Hardware
Distributed Software
Entitled Software
Services
Financing
Enterprise Information
Management
Business Policies and Rules
Customer
Collaberation
Self-Service Knowledge Management Collaboration and e-Learning
Ibm.com
Fufillment
Sales
CRM
Supplier
Collaberation
Integrated
Supply Chain
Procurement
Integrated
Product
Development
Value Chains
Customers Suppliers
Employees

62
Information System Focus
Executive
Management
Middle
Management
Operational Management 1960’s - 1970’s
1980’s
1990’s
Focus on
information
systems advantage
has moved upward
through the
organization.

MIS/DSS/GSS/EIS
Organization Levels and Types of IS
Used
Strategic Level
Tactical Level
Knowledge Level
Operational Level
TPS
GSS/EIS
MIS/DSS/KWS
Top Level ???

• Transaction Processing Systems (TPS) -
- handles and processes daily exchanges (transactions)
• Office Automation Systems (OAS) -
- produces documents, plans, schedules
• Management Information Systems (MIS)
– produces managerial reports
Information System Focus
Operational Level

• Decision Support Systems (DSS) -
– supports and assists in all problem-specific decision making.
• Artificial Intelligence (AI) and Expert Systems (ES) --
Knowledge Work Systems (KWS)
- is an information system that can make suggestions
and reach solutions in much the same way as a human
expert.
Information System
Focus
Knowledge Level

• Executive Support System (ESS)
• Group Support System (GSS)
- is an information system that can make
suggestions and reach solutions in much the
same way as a human expert.
Information System
Focus
Strategic Level
Tactical LevelChanderprabhu Jain College of Higher Studies & School of Law

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TYPES OF INFORMATION SYSTEMS
SALES & MANUFACTURING FINANCE ACCOUNTING HUMAN
KIND OF SYSTEM GROUPS SERVED
STRATEGIC LEVEL SENIOR MANAGERS
MANAGEMENT LEVEL MIDDLE MANAGERS
OPERATIONAL OPERATIONAL
LEVEL MANAGERS
KNOWLEDGE LEVEL KNOWLEDGE &
DATA WORKERS
RESOURCESMARKETING

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Information Systems
Process Systems and Knowledge Systems
Type of system Process systems Knowledge systems
Type of Data
Quantitative /
Structured
Quantitative /
Structured
Qualitative /
Unstructured
Examples of
technology ERP / TPS Business intelligence Content Management
SCM Data Mining Information Portals
CRM Collaborative tools
Example When customers make a
purchase from anywhere
in the world using
EBay's' online auctions,
the firms' sales process
integrates with a variety
of partner and processes
that include payment
process and its internal
process. (Sambamurthy
et al., 2003)
Sara Lee uses its ability to
analyze the sales of
retailers it serves. In
doing so, they can
identify trends and
exceptions, draw
comparison, perform
calculations and obtain
fast answers (Turban &
Aronson, 2000).
BP uses 3-D imaging rooms
equipped with state-of-the
art videoconferencing
systems for helping its
engineers gather in any of
the company's 15 imaging
rooms and tap into and
share data over the
network (Echikson, 2001).

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Characteristics of
Information System Capabilities
Capability Orientation Level Focus Nature
TPS Data Operational Task, Efficiency Structured
MIS Information Management control Resource Structured
DSS Decision All, strategic Alternatives Unstructured
OAS Productivity Operational Task, Efficiency Structured
EIS Problem Executive Status, Problem Flexible, easy
AI/ES Knowledge Operational Problem Structured
IOS Data Operational Task, Efficiency Structured
Strategic Information Systems -- Information systems that play a major role in a product’s value chain.
Although there is no clear-cut separation between strategic information systems and other systems, a number of
characteristics indicate whether an information system should be considered strategic.
Systems should be considered strategic if :
•they help differentiate the product form its competitors;
•if the customers directly perceive the value of the information system to them; or
•if the product’s production, sales, and service require the system.

70
Lewin’s Change Model
•Unfreezing
• preparing for change
• create felt need
• disrupt existing attitudes, behaviors
•Changing
• modify situation
• sustain effort
• clear goals
• adequate preparation
•Refreezing
• Reinforce desired behavior
• Support
• Evaluation

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Resistance to
Change
Causes
Fear of unknown
Security
No felt need
Power/threatened
Rumors
Timing
Resources
Strategies
Communicate
Clarify
Show benefit
Enlist key people
Accurate info
Delay
Provide support
Targets of Change
Purpose, strategy, objectives
Structure
Technology
Culture
Tasks
People
All are interrelated
Planned Change
Deliberate and intentional
Response to performance gap
Gap between actual & desired state
Radical
• massive restructuring “frame-breaking”
Incremental
• “frame-bending”
• continuous improvement
Change

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Change Strategies
Force-coercion
Authority power
Good for unfreezing stage
Rational persuasion
Expert power
Convince of benefits of change
Shared power
Active, real involvement
Takes longest, lasts longest
Resistance to Change
• Attitudes and behaviors
• View as useful feedback
• Educate / communicate
• Participation = commitment
• Provide support re: external constraints
• Negotiate trade-offs
• Manipulation: speed, use power
Change

73
Strategic Role of IS
How Businesses Use Information Systems
&
Information Systems: Challenges and Opportunities

74
SYSTEM INTERDEPENDENCE
BUSINESS
Strategy
Rules
Procedures
ORGANIZATION INFORMATION SYSTEM
INTERDEPENDENCE
SOFTWARE
HARDWARE
DATABASE
TELE-
COMMUNICATIONS

Enterprise Resource Planning Systems
Computer, electronics, communication, and audio video
technologies have converged closely to produce a new style of
operating business. The dynamic business environment of today is
full of challenges and opportunities. The dependence on the
information, as a driving energy source, is increasing. Every
business activity has additional dimensions, viz., speed and time.
The business needs of today are beyond the transaction processing.
It requires an instant real time response in every case, wherever it
occurs.

EVOLUTION OF ERP
The nineties saw unprecedented global competition, customer focus and
shortened product lifecycles. To respond to these demands, corporations had to
move towards agile manufacturing of products, continuous improvements of
processes and business process re-engineering. This called for integration of
manufacturing with other functional areas including accounting, marketing, fi
nance and human resource development because activity-based costing would
not be possible without the integration of manufacturing and accounting. Mass
customization of manufacturing needed integration of marketing and
manufacturing. Flexible manufacturing with people empowerment necessitated
the integration of manufacturing with HRD function. In a sense, the 1990s truly
called for integration of all the functions of management. ERP systems are such
integrated information systems that helps to meet the information and decision
needs of an enterprise spanning all the functions of management. Nowadays, the
advanced ERP systems, which are known as ERP-II or Enterprise Systems,
extend beyond the boundaries of an organization, and capture inter-
organizational processes such as supply chain management (SCM), customer
relationship management (CRM) and so on Such enterprise software focuses on
supporting integrated groups of business processes rather than information
processing requirements of the respective business function.

ERP Architecture
Any information system has three basic components, viz., the Data
Management, the Application Logic, and the Presentation. These components
can be built with the client server role definitions. The client is a user and the
server provides the service required by the user to run the system. Since, the
information needs are dynamically changing, the architecture required is to
separate the data and its management from its application. The user requires
the choice of using the data as it suits him the most. Hence the application logic
has to be separate from the data. There is variability in the manner how the
application logic is developed and presented.
Since, the ERP is a generic solution for the business operations, in each case
of implementation; customization should suit the specifics of the business or
customer. The architecture choice is influenced by this requirement.

ERP Model and Modules
The generic ERP package represents the commonly operated business
model of the organization. It is built with the function models like the Finance,
Materials, Marketing, Sales and Personnel and their sub-modules. These
modules are then integrated to perform, ensuring data and information
consistency and concurrency.
The seamless integration of the modules allows the user at any level to take
a micro and a macro view of the function and process view of the transaction
across the function. A typical ERP solution has the following modules:
• Business forecasting, planning and control (Business)
• Sales, distribution, invoicing (Sales)
• Production planning and control (Production)
• Materials management (Materials)
• Finance and accounting (Finance)
• Personnel management (Personnel)
• Basic Features of ERP and its Modules

General Features
• Separation of the programme code and the
data areas
• Command language
• Screen based flow control
• Application logic
• Common service functions such as the
currency, date, editing and help
• Diagnostic functions
• Transaction flow control
• Help functions

Business System
• Business forecasting for product, groups, markets
• Target fixing and allocation by the key parameters
• Business planning in terms of the resources to execute
• Strategy formulation and implementation
• MIS for strategy monitoring and control
• Business modeling for the strategy development and testing,
DSS for resource planning
• Information base management for management applications

Sales
• Basic data (master) management
• Order processing
• Dispatching and invoicing
• Order analysis, forecasting
• Sales analysis budgets and control
• Finished goods stores management
• Dealer, distributor management
system
• Receivable analysis

Production
• Basic master data management
• Bill of materials, classification
• Process sheet, routing
• Work order generation, scheduling and control
• Production Planning: BOM, MRP, MPS and capacity planning
• Interface of CAD/CAM/CAE systems
Materials
• Purchasing and procurement
• Goods receipt and issue system
• Stock management and valuation
• Inventory analysis
• Stores ledger, valuation, analysis, disposal
• Excise/customs interface

Benefits of the ERP
• Better management of resources reducing the cost of operations.
• Planning at functional and process level. Simultaneous increase in the
productivity of the business possible
• Customer satisfaction increased due to shorter delivery cycle. Closer contact
with the customer.
• Simultaneous activisation of the decision centers because of instant
inducement through triggers or updates.
• Business operations transparency between business partners cutting down
the execution time of critical business operations.
• Intelligent ERP downloads the decision making at lower level, releasing the
burden on the middle management.
• Due to faster processing technology and SQL, management can see the
information in their perspective and take different view of the business.
• Due to strong interface capabilities, the human resource can be utilized
better due to access to information across the database distributed over the
organization.
• Since, the ERP design is proactive; it makes the management alert at a
number of points demanding the decision or action.
• The process becomes faster due to work group technology and application
of workflow automation.

Advantages of ERP system:
• ERP system provide a number of benefits, which
include
• Reduced inventory
• Reduced carrying cost of inventory
• Reduced workforce
• Reduced cycle time
• Reduced data transfer time
• Reduced errors
• Reduced quality costs
• Improved information accuracy
• Improved decision making capability
• Improved customer satisfaction, etc

Management Information System

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