Management Information System & ERP

MANAGEMENT INFORMATION SYSTEM & ERP

UNIT-I: INTRODUCTION
INTRODUCTION TO MIS:
What is MIS?
A Management Information System (MIS) is a systematic organization and presentation of
information that is generally required by the management of an organization for taking better decisions for
the organization. The MIS data may be derived from various units of the organization or from other sources.
However it is very difficult to say the exact structure of MIS as the structure and goals of different types of
organizations are different. Hence both the data and structure of MIS is dependent on the type of
organization and often customized to the specific requirement of the management.
The meaning of MIS is well represented by the three it consists. Management the information
system is built for management and not for the operational staff. Information System - an information
system that takes care of sourcing, organizing and managing the required data and presenting in the desired
formats that may be useful in a context and for a purpose.
Information is the basis for every decision taken in an organization. The efficiency of management
depends upon the availability of regular and relevant information. Thus it is essential that an effective and
efficient reporting system be developed as part of accounting system. The main object of management
information is to obtain the required about the operating results of an organization regularly in order to use
them for future planning and control.
Management Information Systems Concept:
The concept of the MIS has evolved over a period of time comprising many different facets of the
organizational functions. MIS is necessity of all the organizations. The initial concept of MIS was to
process data from the organization and presents it in the form of reports as regular intervals. The system was
largely capable of handling the data from collection to processing. It was more impersonal, requiring each
individual to pick and choose the processed data and use it for his requirements. This concept was further
modified when a distinction was made between data and information. The information is a product of an
analysis of data. This concept is similar to a raw material and the finished product. What is needed is
information and not a mass of data. However, the data can be analyzed in a number of ways, producing
different shades and specifications of the information as a product. It was, therefore, demanded that the
system concept should be an individual oriented, as each individual may have a different orientation towards
the information. This concept was further modified, that the system should present information in such a
form and format that it creates an impact on its user, provoking a decision, an action or an investigation. It
was later realized that even though such an impact was a welcome modification, some sort of selective
approach was necessary in the analysis and reporting. Hence, the concept of exception reporting was
imbibed in MIS.
The concept remained valid till and to the extent that the norm for an exception remained true and
effective. Since the environment turns competitive and is ever changing, fixation of the norm for an
exception becomes a futile exercise at least for the people in the higher echelons of the organization. The
concept was then evolved that the system should be capable of handling a need based exception reporting.
This need may be either of an individual or a group of people. This called for keeping all data together in
such a form that it can be accessed by anybody and can be processed to suit his needs. The concept is that
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Management Information System & ERP

the data is one but it can be viewed by different individuals in different ways. This gave rise to the concept
of Database, and the MIS based on the database proved much more effective.
The concept of MIS gives high regard to the individual and his ability to use the information. An
MIS gives information through data analysis. While analyzing the data, it relies on many academic
disciplines. These include the theories, principles and concepts from the Management Science, Management
Accounting, Operations Research, Organization Behavior, Engineering, Computer Science, Psychology and
Human Behavior, making the MIS more effective and useful. These academic disciplines are used in
designing the MIS, evolving the decision support tools for modelling and decision-making.
MIS uses the concept of management control in its design and relies heavily on the fact that the
decision maker or the manager is a human being and is a human processor of information. A management
Information System can be evolved for a specific objective if it is evolved after systematic planning and
design. It calls for an analysis of a business, management views and policies, organization culture and the
management style. The information should be generated in this setting and must be useful in managing the
business. This is possible only when it is conceptualized as a system with an appropriate design. The MIS,
therefore, relies heavily on the systems theory. The systems theory offers solution to handle the complex
situations of the input and output flows. It uses theories of communication which helps to evolve a system
design capable of handling data inputs, process, and outputs with the least possible noise or distortion in
transmitting the information from a source to a destination. It uses the principles of System Design, viz., an
open system or a closed system. An open system of the MIS offers an ability of continuous adjustment or
correction in the system in line with the environmental changes in which the MIS operates. Such a design
helps to keep the MIS tuned with the business management needs of the organization.
The concept, therefore, is a blend of principles, theories and practices of the Management,
Information and System giving rise to single product known as Management Information System (MIS).
The MIS is a product of a multi-disciplinary approach to the business management. It is a product which
needs to be kept under a constant review and modification to meet the corporate needs of the information.
The MIS model of organization changes over a time, as the business passes through several phases of
developmental growth cycle. It supports the management of business in each phase by giving the
information which is crucial in that phase. Every business has critical success factors in each phase of
growth cycle and the MIS model gives more information on the critical success factors for decision making.

MIS DEFINITION:
The Management Information System (MIS) is a concept of the last decade or two. It has been understood
and described in a number of ways. It is also popularly known as the Information System, the Information
and Decision System, the Computer-based Information System.
The MIS has more than one definition, some of which are given below:

The MIS is defined as a system which provides information support for decision making in the
organization.

The MIS is defined as an integrated system of man and machine for providing the information to support
the operations, the management and the decision making function in the organization.

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Management Information System & ERP

The MIS is defined as a system based on the database of the organization evolved for the purpose of
providing information to the people in the organization.

The MIS is defined as a Computer-based Information System.

The MIS is a system to support the decision making function in the organization. The difference lies in
defining the elements of the MIS. However, in today's world, the MIS is a computerized business
processing system generating information for the people in organization to meet the information needs for
decision making to achieve the corporate objectives of the organization.

In any organization, small or big, a major portion of the time goes in data collection, processing,
documenting and communicating it to the people. Hence, a major portion of the overheads goes into this
kind of unproductive work in the organization. Every individual in an organization is continuously looking
for some information which is needed to perform his/her task. Hence, the information is people-oriented and
it varies with the nature of the people in the organization.
In order to get a better grip on the activity of information processing, it is necessary to have a formal
system which should take care of the following points:

Handling of a voluminous data

Confirmation of the validity of data and transaction

Complex processing of data and multidimensional analysis

Quick search and retrieval

Mass storage

Communication of the information system to the user on time

Fulfilling the changing needs of the information.

The management information system uses computers and communication technology to deal with these
points of supreme importance.

Components of Management Information System:

To the managers, Management Information System is an implementation of the organizational systems and
procedures. To a programmer it is nothing but files structures and file processing. However, it involves much
more complexity. The three components of MIS provide a more complete and focused definition, where
System suggests integration and holistic view, Information stands for processed data, and Management is
the ultimate user, the decision makers. Management information system can thus be analyzed as follows:
Management: Management covers the planning, control, and administration of the operations of a concern.
The top management handles planning; the middle management concentrates on controlling; and the lower
management is concerned with actual administration.
Information: Information, in MIS, means the processed data that helps the management in planning,
controlling and operations. Data means all the facts arising out of the operations of the concern. Data is
processed i.e. recorded, summarized, compared and finally presented to the management in the form of MIS
report.
System: Data is processed into information with the help of a system. A system is made up of inputs,
processing, output and feedback or control. Thus MIS means a system for processing data in order to give
proper information to the management for performing its functions.

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Management Information System & ERP

Nature and Scope of MIS:

MIS is neither a pure science nor an art; it is recognized as a combination of both. It has been much
analyzed on the issue whether MIS is management oriented or computer oriented. Applications in MIS are
found in computers and because of this MIs may be described as Computer-Based MIS (CBMIS).
The concept of MIS is interdisciplinary in nature, i.e. it has borrowed its concepts from a large
number of disciplines like accounting, computers, organizations, management, operations research and
behavioural sciences, etc.
Because of its interdisciplinary nature, MIS is neither termed as a pure science nor an art; rather it is
considered as a combination of both. An information system is a logical system, which is concerned with
how something is being accomplished and thus may be differentiated from a physical system, which is the
process itself and is concerned with the content or what is going on. MIs, in fact, encompasses both
physical and information systems.

Fig-1.1: Nature and Scope of Management Information System

There has been a lot of debate on the issue whether MIs is more management-oriented pr computeroriented. Though there are advocates of both the sides, MIS should be considered more of a Management
subject than of computers because of the simple logic that computers are just a tool in the hands of
managers, computers are used for their characteristics like accuracy, speed and capacity to handle large
amount of data.

Characteristics of MIS:
Management information being a specialized information system conforms to certain characteristics. These
characteristics are generic in nature. These characteristics remain more or less the same even when the
technology around such management information system changes:
1) System approach: The information system follows a Systems approach. The systems approach implies
a holistic approach to the study of the system and its performance to achieve the objective for which it has
been formed.
2) Management oriented: For designing of MIS top-down approach should be followed. Top-down
approach suggests that the system development starts from the determination of the management needs and
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overall business objectives. Management oriented characteristic of MIS also implies that the management
actively directs the system development efforts.
3) Need based: MIS design and development should be as per the information needs of managers at
different levels that are strategic planning level, management control level and operational control level.
i)

Exception based: MIS should be developed on the exception based reporting principle, which means
an abnormal situation that is the maximum, minimum or expected values vary beyond the limits. In
such cases there should be exception reporting to the decision-maker at the required level.

ii)

Future oriented: Besides exception based reporting, MIS should also look at the future. In other
words MIS should not merely provide past or historical information; rather it should provide
information on the basis of projections based on which actions may be initiated.

iii)

Integrated: Integration is significant because of its ability to produce more meaningful information.
For example, in order to develop an effective production scheduling system, it is necessary to
balance such factors as: set-up costs, work force, overtime rates, production capacity, inventory level,
capital requirements and customer services. Integration means taking a comprehensive view of the
subsystems that operate within the company.

iv)

Common data flows: Because of the integration concept of MIS, there is an opportunity to avoid
duplication and redundancy in data gathering, storage and dissemination. System designers are aware
that a few key source documents account for much of the information flow. For example, customers
orders are the basis for billing the customer for the goods ordered, setting up accounts receivables,
initiating production activity, sales analysis, sales forecasting etc.

Following are some of additional characteristics of an MIS:

It should be based on a long-term planning.
It should provide a holistic view of the dynamics and the structure of the organization.
It should work as a complete and comprehensive system covering all interconnecting subsystems within
the organization.
It should be planned in a top-down way, as the decision makers or the management should actively take
part and provide clear direction at the development stage of the MIS.
It should be based on need of strategic, operational and tactical information of managers of an
organization.
It should also take care of exceptional situations by reporting such situations.
It should be able to make forecasts and estimates, and generate advanced information, thus providing a
competitive advantage. Decision makers can take actions on the basis of such predictions.
It should create linkage between all sub-systems within the organization, so that the decision makers can
take the right decision based on an integrated view.
It should allow easy flow of information through various sub-systems, thus avoiding redundancy and
duplicity of data. It should simplify the operations with as much practicability as possible.
Although the MIS is an integrated, complete system, it should be made in such a flexible way that it
could be easily split into smaller sub-systems as and when required.
A central database is the backbone of a well-built MIS.

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Characteristics of Computerized MIS:

Following are the characteristics of a well-designed computerized MIS:
It should be able to process data accurately and with high speed, using various techniques like operations
research, simulation, heuristics, etc.
It should be able to collect, organize, manipulate, and update large amount of raw data of both related and
unrelated nature, coming from various internal and external sources at different periods of time.
It should provide real time information on ongoing events without any delay.
It should support various output formats and follow latest rules and regulations in practice.
It should provide organized and relevant information for all levels of management: strategic, operational,
and tactical.
It should aim at extreme flexibility in data storage and retrieval.

MIS FUNCTIONS:
The broad functions of MIS are as given below:
1.

To improve decision-making: MIS helps management by providing background information on a

variety of issues and helps to improve the decision-making quality of management. The fast and
accurate information supplied by MIS is leveraged by the managers to take quicker and better decisions
thereby improving the decision-making quality and adding to the bottom line of the company.

2.

To improve efficiency: MIS helps managers to conduct their tasks with greater ease and with better
efficiency. This reflects in better productivity for the company.

3.

To provide connectivity: MIS provides managers with better connectivity with the rest of the
organization.

OBJECTIVES OF MIS:
The goals of an MIS are to implement the organizational structure and dynamics of the enterprise for the
purpose of managing the organization in a better way and capturing the potential of the information system
for competitive advantage.
Following are the basic objectives of an MIS:
Capturing Data: Capturing contextual data, or operational information that will contribute in decision
making from various internal and external sources of organization.
Processing Data: The captured data is processed into information needed for planning, organizing,
coordinating, directing and controlling functionalities at strategic, tactical and operational level. Processing
data means:
making calculations with the data
sorting data

classifying data and

summarizing data

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Information Storage: Information or processed data need to be stored for future use.
Information Retrieval: The system should be able to retrieve this information from the storage as and when
required by various users.
Information Propagation: Information or the finished product of the MIS should be circulated to its users
periodically using the organizational network.

STRUCTURE OF MIS:
MIS structure may be described by following a variety of different approaches, such as:
a) Physical Components
b) Information system processing functions
c) Decision support
d) Levels of management activities, and
e) Organizational functions
A) Structure of MIS based on Physical Components:
1. Hardware: Hardware refers to the physical data processing equipment and peripheral devices, for
example: CPU, Monitor, Keyboard, Printer, Drives, Tapes, Communication devices etc.
2. Software: Software is a broad term given to the instructions or programs that direct the operating of
the hardware. Software could be of two types, i.e., system software and application software.
3. Database: The database consists of all data utilized by application software. Data is stored in files.
4. Procedure: Formal operating procedures, which are required to operate a system, such as manuals,
are also regarded as physical elements.
5. Operating Personnel: Personnel like Computer Operators, Computer Programmers, System
Analysts, System Managers etc., are the operating people of the information systems.
6. Input and Output: Various physical inputs and outputs from the information system, existing in
forms like printout, reports etc.
B) Information System Processing Functions:
Information system structure can also be understood in terms of its processing functions. The
functions of an MIS explain what the system does. The main processing functions of information systems
are described below.
1. To Process Transactions: Information systems process transactions, where transaction may be
defined as an activity taking place in an organization. For example, making a purchase or a sale or
manufacturing a product. It may be within the organization or may be external in nature.
2. To Maintain Master Files: Information systems create and maintain master files in an organisation.
A master file stores relatively permanent or historical data about organizational entities. For example,
data processing to prepare an employees salary requires data items for the employees basic pay,
allowances, deductions etc.
3. To Produce Reports: Reports are significant products of an information system. Many reports are
produced on a regular basis, which are called scheduled reports. An information system also
produces reports on ad hoc requests. These are known as special or ad hoc reports.
4. To Process Enquiries: An information system is used to process enquiries. For processing such
queries, the information system uses its database. These may be regular enquiries with a pre-defined
format or ad hoc enquiries.
5. To Process Interactive Support Applications: The information system, contain applications
designed to support systems for planning, analysis and decision making. Various types of models are
used for processing such applications. The mode of operation, as the name suggests, in interactive, in
which the user responds to questions and requests for data and receives results so as to make changes
in the inputs until an optimum solution is found.
C) Decision Support:
Structure of MIS can also be described on the basis of its support in decision-making in an
organization. Decisions vary with respect to the structure that can be provided for making them. A highly

structured decision can be pre-planned, whereas a highly unstructured decision cannot. A structured
decision, because of its will-defined nature can be said to be programmable. However, it should not be
taken to necessarily mean that the decision is automated, although many programmable decisions are
automated.
An unstructured decision is said to be non-programmable. The structured programmable decision
tends to be routine and frequently repeated; the unstructured decision tends to occur with less frequency
and tends to be irregular. Information system support will fit easily into this classification, but some
decisions are more or less structured and have some elements that are programmable and some that are not.
Such decisions are called semi-structured decisions.
D) Levels of Management Activities:
Management information systems support various management activities in an organization. This implies
that the structure of an information system can be categorized in terms of levels of management activities.
Anthony, on the basis of activities, has classified the management hierarchy into three levels. These are:
i)
ii)
iii)

Strategic Planning Level: Strategic planning deals with long range considerations. The decisions
include the choice of business directions, market strategy, product mix, etc.
Management Control Level: Management control level includes acquisition and organization of
resources, structuring of work, and acquisition and training of personnel.
Operational Control Level: Operational control level is related to short-term decisions for current
operations. Pricing, production levels, etc., are a result of operational control activities.
Management activities and information processing for the three levels are interrelated.

E) Organizational Functions:
The structure of management information system can also be described in terms of organizational
functions. Though there is no standard classification of functions, a typical set of functions in a
manufacturing organization includes production, sales and marketing, finance and accounting, materials
personnel and information systems. Each of these functions, as already discussed, has unique information
needs and each requires information system support designed specifically for it.
Moreover, a management information system is essentially an integration of the organization systems
that are designed to support the functional sub-systems of the organization. Each sub-system requires
applications to perform all information processing related to the function, within each functional sub-system,
there will be applications for transaction processing, operational control, management control and strategic
planning.