MANAGEMENT INFORMATION SYSTEM

UNIT-I
INTRODUCTION TO MIS
MANAGEMENT
Management means - To get the work done through and with the help of people by performing
basic functions of management
Basic functions of management are
Planning
Organizing
Staffing
Directing
Controlling
Essence of Management
Whatever a manager does, he/she does it through DECISION-MAKING
Decision-Making Is an Essence of Management-Peter Drucker
For Decision Making INFORMATION is the necessary and vital input
Management Hierarchy
Levels of Management
Strategic Planning: make long-range strategic decisions about products and services
Management Control: Carry out the programs and plans of senior management
Operational Control: monitor the firms daily activities

Data vs. Information

Data
A stream of raw facts about anything
Examples:
Record of all the players in one day cricket matches.
Detailed Marks of all students in a class.

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Business data as obtained from various business houses.

Distinct pieces of information usually formatted in a special way. All software is divided into
two general categories: data and programs. Programs are collections of instructions for
manipulating data.
Data can exist in a variety of forms -- as numbers or text on pieces of paper, as bits and bytes
stored in electronic memory, or as facts stored in a person's mind.
Information
A collection of facts organized in such a way that they have additional value beyond the value
of the facts themselves
Information is processed data, which is useful to the recipient.
Examples:
Profit of the company in the current year
The highest ever score in one day cricket
First ten toppers in a class
The top 50 business houses of India.

Data Transformation
Information

SYSTEM
A set of elements or components that interact to accomplish goals
A combination of components working together
For example, a computer system includes both hardware and software. A Windows system is a
personal computer running the Windows operating system. A desktop publishing system is a
computer running desktop publishing software.
System Elements
Input: Data is collected and entered into computer.
Processing: Data is manipulated into information using mathematical, statistical, and other tools.
Output: Information is displayed or presented.
Storage: Data and information are maintained for later use.

Input Process Output

A system is a set of interrelated elements that collectively work together to achieve some common
goal or objective.
All systems function within some kind of environment.

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Types of Systems
Closed system: Stand-alone system that has no contact with other systems
Open system: System that interfaces with other systems

Input Proce
Feed Back /Control Loop Outpu
ss t
Input
The activity of gathering and capturing data
Whatever goes into the computer
Processing
Converting or transforming data into useful outputs
Output
Useful information, usually in the form of documents and/or reports
Anything that comes out of a computer
Feedback
Output that is used to make changes to input or processing activities
Forecasting
A proactive approach to feedback
Use for estimating future sales or inventory needs

Management Information System

Management Information System is a system of set of interrelated components which collect,
retrieve, process, store and distribute information to support decision making of managers in an
organization.
Provides information to support managerial functions like Planning, organizing, directing,
controlling.
Collects information in a systematic and a routine manner which is in accordance with a well
defined set of rules.
Includes files, hardware, software and operations research models of Processing, storing,
retrieving and transmitting information to the users.

OBJECTIVES OF MIS:-
An effective MIS has the following objectives

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1. Facilitate the decision - making process by furnishing information in the proper time frame.
This helps the decision - maker to select the best course of action.
2. Provide requisite information at each level of management to carry out their functions.
3. Help in highlighting the critical factors to the closely monitored for successful functioning
of the organization.
4. Support decision-making in both structured and unstructured problem environments.
5. Provide a system of people, computers, procedures, and interactive query facilities,
documents for collecting, sorting, retrieving and transmitting information to the users.

Components of an IS
In an organization, information systems consist of the following components. These components
will formulate a system, which will help us to gather the required information for making decision
in various levels of management. We will now see these components in brief and discuss them in
detail in the later lectures.
Data - Input that the system takes to produce information
Hardware - Computer itself and its peripheral equipment: input, output, storage devices;
includes data communication equipment
Software - Sets of instructions that tell the computer how to input, process, output and store data
Communication networks - Hardware and software specializing in transmission and reception
of electronic data
People - IS professionals and users who design, construct, operate and maintain IS
Procedures - Rules to process data, e.g. priorities in running different applications, security
measures, and routines for malfunctioning IS, etc.

Qualities of Emerging Digital Firm

A digital firm is one where nearly all of the organization's significant business relationships with
customers, suppliers, and employees are digitally enabled and mediated.
Core business processes are accomplished through digital networks spanning the entire
organization or linking multiple organizations.
Business processes refer to the set of logically related tasks and behaviors that organizations
develop over time to produce specific business results and the unique manner in which these
activities are organized & coordinated. Developing a new product, generating and fulfilling an
order, hiring an employee are examples of Business processes.
Key corporate assetsintellectual property, core competencies, financial, and human assets
are managed through digital means.
In a digital firm, any piece of information required to support key business decisions is available
at anytime and anywhere in the firm.
Digital firms sense and respond to their environments far more rapidly than traditional firms,
giving them more flexibility to survive in unstable times.
Digital firms offer extraordinary opportunities for more global organization and management.

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In digital firms both time shifting and space shifting are the norm
Time shifting refers to business being conducted continuously 24x7 rather than narrow work
day time bands of 9a.m. to 5p.m.
Space shifting means that work takes place in a global work shop as well as within national
boundaries.

Dimensions of Information Systems

An information system is an organizational and management solution, based on information

technology, to a challenge posed by the environment.
To fully understand information systems, a manager must understand the broader organization,
management, and information technology dimensions of systems and their power to provide
solutions to challenges and problems in the business environment.

Organizations
Information systems are an integral part of organizations.
The key elements of an organization are its people, structure, operating procedures, politics, and
culture.
Organizations are composed of different levels and specialties. Experts are employed and trained
for different functions.
An organization coordinates work through a structured hierarchy and formal, standard operating
procedures.
The hierarchy arranges people in a pyramid structure of rising authority and responsibility.
The upper levels of the hierarchy consist of managerial, professional, and technical employees,
whereas the lower levels consist of operational personnel.

Management
Managers perceive business challenges in the environment, they set the organizational strategy for
responding and allocate the human and financial resources to achieve the strategy and coordinate
the work.

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Management's job is to "make sense" out of the many situations faced by organizations and
formulate action plans to solve organizational problems. They must also create new products and
services and even re-create the organization from time to time

Information technology can play a powerful role in redirecting and redesigning the organization.
It is important to note that managerial roles and decisions vary at different levels of the
organization.
Senior managers make long-range strategic decisions about what products and services to
produce.
Middle managers carry out the programs and plans of senior management.
Operational managers are responsible for monitoring the firm's daily activities.
All levels of management are expected to be creative, to develop novel solutions to a broad range
of problems. Each level of management has different information needs and information system
requirements.

Technology
Information technology is one of many tools managers use to cope with change.
Computer hardware is the physical equipment used for input, processing, and output activities
in an information system.
It consists of the following: the computer processing unit; various input, output, and storage
devices; and physical media to link these devices together.
Computer software consists of the detailed preprogrammed instructions that control and
coordinate the computer hardware components in an information system.
Storage technology includes both the physical media for storing data, such as magnetic or
optical disk or tape, and the software governing the organization of data on these physical media.
Communications technology, consisting of both physical devices and software, links the
various pieces of hardware and transfers data from one physical location to another.
All of these technologies represent resources that can be shared throughout the organization
and constitute the firm's information technology (IT) infrastructure.
Each organization must carefully design and manage its information technology infrastructure
so that it has the set of technology services it needs for the work it wants to accomplish with
information systems.

System Approaches of Information systems

Structure of MIS

The different approaches to understand the structure of MIS

Physical Components

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Quantitative techniques
IS processing functions
Decision Support
Levels of Management Activities
Organizational functions

Information systems can be divided into technical and behavioral approaches. Information systems
are socio-technical systems. Though they are composed of machines, devices, and "hard" physical
technology, they require substantial social, organizational, and intellectual investments to make
them work properly.
The study of information systems deals with issues and insights contributed from technical and
behavioral disciplines.

Technical Approach
The technical approach to information systems emphasizes mathematically based models to study
information systems, as well as the physical technology and formal capabilities of these systems.
The disciplines that contribute to the technical approach are computer science, management
science, and operations research.
Computer science is concerned with establishing theories of computability, methods of
computation, and methods of efficient data storage and access.
Management science emphasizes the development of models for decision-making and
management practices.
Operations research focuses on mathematical techniques for optimizing selected parameters
of organizations, such as transportation, inventory control, and transaction costs.
Behavioral Approach
An important part of the information systems field is concerned with behavioral issues that arise
in the development and long-term maintenance of information systems.
Issues such as strategic business integration, design, implementation, utilization, and management
cannot be explored usefully with the models used in the technical approach. Other behavioral
disciplines contribute important concepts and methods.
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Sociologists study information systems with an eye toward how groups and organizations shape
the development of systems and also how systems affect individuals, groups, and organizations.
Psychologists study information systems with an interest in how human decision makers
perceive and use formal information.
Economists study information systems with an interest in what impact systems have on control
and cost structures within the firm and within markets.

Types of Information Systems

Categories of ISs

TPS-Transaction Processing System

MIS-Management Information System
DSS-Decision Support System
ESS-Executive Support System
CRM-Customer Relationship Management
SCM-Supply Chain Management
ERP- Enterprise Resource Planning

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Transaction Processing Systems

Transaction processing systems (TPS) are the basic business systems that serve the operational
level of the organization.
A transaction processing system is a computerized system that performs and records the daily
routine transactions necessary to the conduct of the business.
Examples are sales order entry, hotel reservation systems, payroll, employee record keeping,
and shipping.

Management Information Systems

The term management information systems (MIS) also designates a specific category of
information systems serving management-level functions.
Management information systems (MIS) serve the management level of the organization,
providing managers with reports or with on-line access to the organization's current performance
and historical records.
MIS primarily serve the functions of planning, controlling, and decision making at the
management level. Generally, they depend on transaction processing systems for their data.
MIS summarize and report on the company's basic operations. The basic transaction data from
TPS are compressed and are usually presented in long reports that are produced on a regular
schedule.

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Systems development
New information systems are an outgrowth of a process of organizational problem solving.
A new information system is built as a solution to some type of problem or set of problems the
organization perceives it is facing.
The problem may be one in which managers and employees realize that the organization is not
performing as well as expected or it may come from the realization that the organization should
take advantage of new opportunities to perform more successfully.
The activities that go into producing an information system solution to an organizational
problem or opportunity are called systems development.
These activities consist of systems analysis, systems design, programming, testing, conversion,
and production and maintenance.
System analysis
System analysis is the analysis of a problem that an organization will try to solve with an
information system.
o It consists of
o Defining the problem
o Identifying its causes
o Specifying the solution and
o Identifying the information requirements
The system analyst creates a road map of the existing organization and systems, identifying the
primary owners and users of data along with existing hardware and software.
System analyst will examine documents, work papers and procedures, observes system
operations and interviewing key users of the system, the analyst can identify the problem areas
and objectives a solution.
System analysis would include a feasible study to determine whether that solution was feasible
or achievable from financial, technical and organization standpoint.
Systems Design

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Systems design shows how the system will fulfill the objectives identified in system analysis.
The design of an information system is the overall plan or model for the system.
Like the blue print of a building or house. It consists of all the specifications that give the
system its form and structure.
The systems designer details the system specifications that will deliver the functions identified
during system analysis.
These specifications should address all of the managerial, organizational and technological
components of the system solution.
Programming
During the programming stage, system specifications that were prepared during the design stage
are translated into software program code.
Testing
Testing must be conducted to ascertain whether the system produce the right results.
Testing is time consuming.
Test data must be carefully prepared, results reviewed, and corrections made in the system.
Testing is divided into three types
o Unit testing: In unit testing each program separately tested in the system.
o The purpose of this testing is to guarantee that programs are error free.
o System testing: It tests the functioning of the information system as a whole.
o It tries to determine whether discrete modules will function together as planned. We also
examine few areas like performance time, capacity for file storage and handling peak loads,
recovery and restart capabilities and manual procedures.
o Acceptance testing: Acceptance testing provides the final certification that the system is
ready to be used in a production setting.
System tests are evaluated by users and reviewed by management. When all parties are
satisfied with the new system then the system is formally accepted for installation
Conversion
Conversion is the process of changing from the old system to the new system.
Conversion strategies can be employed:
The parallel strategy: Both the old system and its potential new system are run together for a
time until everyone is assured that the new one functions correctly. This is the safest conversion
approach because in the event of errors or processing disruptions, the old system can still be used
as a backup.
Direct cut over strategy: It replaces the old system entirely with the new system on an
appointed day. It is very risky approach. If new system fails then there will not be old system to
fall back on.
The pilot study strategy: This strategy introduces the new system to only a limited area of the
organization, such as a single department or operating unit. When this pilot version is complete
and working smoothly, it is installed throughout the organization.

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The phased approach strategy: It introduces the new system in stages either by functions or
by organizational units.
o Function: A new payroll system might begin with hourly workers who are paid
weekly, followed six months later by adding salaried employees to the system.
o Organizational: Corporate head quarters might be converted first, followed by
outlying operating units four months later.
End users will be given training to use the new system.
Detailed documentation showing how the system works from both a technical and end-user
standpoint will be provided.

Production and maintenance

After the new system is installed and conversion is complete, the system is said to be in
production. During this stage system will be reviewed by both users and technical specialists to
determine how well it has met its original objectives and to decide whether any revisions or
modifications are present.
Changes in hardware, software, documentation or procedures to a production system to correct
errors, meet new requirements or improve processing efficiency are termed maintenance.

Decision-Support Systems

Decision-support systems (DSS) also serve the management level of the organization. DSS
help managers make decisions that are unique, rapidly changing, and not easily specified in
advance.
They address problems where the procedure for arriving at a solution may not be fully
predefined in advance. Although DSS use internal information from TPS and MIS, they often
bring in information from external sources, such as current stock prices or product prices of
competitors.
DSS have more analytical power than other systems. They are built explicitly with a variety of
models to analyze data, or they condense large amounts of data into a form in which they can be
analyzed by decision makers.
DSS are designed so that users can work with them directly; these systems explicitly include
user-friendly software.

MIS Office Automation

The use of computer is to execute a variety of office operations, such as word processing,
accounting, and e-mail. Office automation almost always implies a network of computers with a
variety of available programs

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Office automation refers to the varied Computer machinery and Software used to digitally create,
collect, store, manipulate, and relay office information needed for accomplishing basic tasks. Raw
data storage, electronic transfer, and the management of electronic business information comprise
the basic activities of an office automation system. Office automation helps in optimizing or
automating existing office procedures.The backbone of office automation is a LAN, which allows
users to transfer data, mail and even voice across the network. All office functions, including
dictation, typing, filing, copying, fax, Telex, microfilm and records management, telephone and
telephone switchboard operations, fall into this category. Office automation was a popular term in
the 1970s and 1980s as the desktop computer exploded onto the scene.

Advantages are:
1. Office automation can get many tasks accomplished faster.
2. It eliminates the need for a large staff.
3. Less storage is required to store data.
4. Multiple people can update data simultaneously in the event of changes in schedule
5. Businesses can easily purchase and stock their wares with the aid of technology. Many of the manual tasks
that used to be done by hand can now be done through hand held devices and UPC and SKU coding. In
the retail setting, automation also increases choice. Customers can easily process their payments through
automated credit card machines and no longer have to wait in line for an employee to process and manually
type in the credit card numbers.
6. Office payrolls have been automated which means no one has to manually cut checks, and those checks
that are cut can be printed through computer programs. Direct deposit can be automatically set up and this
further reduces the manual process and most employees who participate in direct deposit often find their
paychecks come earlier than if they'd have to wait for their checks to be written and then cleared by the
bank.
7. Other ways automation has reduced employee manpower on tasks is automated voice direction. Through
the use of prompts, automated phone menus and directed calls, the need for employees to be dedicated
to answer the phones has been reduced, and in some cases, eliminated.

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The term office automation refers to all tools and methods that are applied to officeactivities
which make it possible to process written, visual, and sound data in a computer-aided manner.
Office automation is intended to provide elements which make it possible to simplify, improve,
and automate the organization of the activities of a company or a group of people (management of
administrative data, synchronization of meetings, etc.).
Considering that company organizations require increased communication, today, office
automation is no longer limited to simply capturing handwritten notes. In particular, it also
includes the following activities:
exchange of information
management of administrative documents
handling of numerical data
meeting planning and management of work schedules
The term "office suite" refers to all software programs which make it possible to meet office
needs. In particular, an office suite therefore includes the following software programs:
word processing
a Spread sheet
a presentation tool
a Database
a scheduler
The main office suites are:
Open Office (freeware)
Apple Works
Corel word Perfect
IBM/Lotus Smart Suite
Microsoft Office

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Decision Support System

The term decision support system refers to a class of systems, which support the process of making
decisions. The emphasis is on support rather than on automation of decision. Decision support
systems allow the decision maker to retrieve data and test alternative solutions during the process
of problem solving.

Decision support system is a specialized MIS designed to support an executives skills at all stages
of decision making i.e. problem identification, selecting relevant data, picking the approach to be
used in decision making and evaluating the alternative courses of action.

Decision support systems are computer bases information systems that provide interactive
information support to managers and business professionals during the decision -making process.

Decision support systems use:

Analytical models
Specialized databases
Decision makers own insights and judgments

Characteristics of Decision Support System

Decision support systems have many characteristics that allow them to be effective management
support tools. Following are some characteristics of DSS

Provide rapid access to information

Some DSSs provide fast and continuous access to information; for example, the gauges on the
dashboard of a car or truck are used to see how the vehicle is running.

Handle large amounts of data from different sources

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For instance, advanced database management systems and data warehouses have allowed decision
makers to search for information

Provide report and presentation flexibility

Managers can get the information they want, presented in a format that suits their needs. Further,
output can be displayed on computer screens or printed, depending on the needs and desires of the
problem solvers

Offer both textual and graphical orientation

Todays DSSs can produce text, tables, line drawings, pie charts, trend lines, and more. By using
these managers can get better idea of the situation.

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 viewing the overall project cost or
drilling down and seeing the cost for each phase, activity and task.

Perform complex, sophisticated analysis and comparison using advanced software

packages

Marketing research surveys, for example, can be analyzed in a variety of ways using programs that
are part of a DSS. Many of the analytical programs associated with a DSS are actually stand-alone
programs and the DSS brings them together.

Benefits of DSS

Improving personal efficiency

Many DSS do not do anything. A person could not do himself or herself. People could not do
himself or herself. People prepared budgets for centuries before spread sheet software came into
use. DSS help them do it faster and with less changes of error.

Improving problem solving

DSS can make it possible for a person or a group to solve problem faster or better, than they could
without it.

Facilitating communications

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After found that DSS facilitating interpersonal communication in several ways. The system can
indicate when a particular action should be taken in the future (offensive) or when a particular
action was justified in the past (defensive use).

Promoting Learning or training

Using DSS can also help people learned more about using computers and about software package
that are in the DSS although this is seldom a specific objective of development of the DSS it can
be valuable by project.

Increasing organizational control

Some DSS can also control information about an individuals decision to his or her managers. This
information can then be used to access the productivity of the individual questions in terms of how
many decisions they make and how good their decisions turned out to be.

Expert System

An expert system acts or behaves like a human expert in a field or area.

Advisory programs that attempt to imitate the reasoning process of human experts

Reasons to build Expert Systems

to make the expertise of an individual available to others in the field

to capture knowledge from an expert who is likely to be unavailable in the future

to provide consistency in decision making

Components of an Expert System

An expert system consists of a collection of integrated and related components,

including

Knowledge Base

An Inference Engine

Explanation Facility

Knowledge Acquisition Subsystem

A User Interface.

Knowledge base

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Stores all relevant information, data, rules, cases, and relationships used by the
expert system

Inference engine

Seeks information and relationships from the knowledge base and provides
answers, predictions, and suggestions in the way a human expert would

Rule

A conditional statement that links given conditions to actions or outcomes

Fuzzy logic

A specialty research area in computer science that allows shades of gray and does
not require everything to be simply yes/no, or true/false

Backward chaining

A method of reasoning that starts with conclusions and works backward to the
supporting facts

Forward chaining

A method of reasoning that starts with the facts and works forward to the conclusions

Explanation facility

A part of the expert system that allows a user or decision maker to understand
how the expert system arrived at certain conclusions or results

Knowledge acquisition facility

Provides a convenient and efficient means of capturing and storing all

components of the knowledge base

User interface software is used for designing, creating, updating, and makes use of an expert
system easier for users and decision makers.

Advantages of Expert Systems

Easy to develop and modify

It improves quality by providing consistent advice and by making reduction in the error
rate.

It leads to cost reduction as the human expertise is costly.

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Expert systems work faster than human expertise.

It improves problem solving.

It built knowledge based database for the organization

Limitations

Not widely used or tested

Limited to relatively narrow problems

Cannot readily deal with mixed knowledge

Possibility of error

Cannot refine own knowledge base

Difficult to maintain

May have high development costs

Applications

Manufacturing

Analyzing quality and providing corrective measures

Scheduling job-tasks

Selecting transportation routes

Marketing

Responding to customer inquiries

Assisting with marketing timing decisions

Determining discount policies

Accounting and finance

Providing tax advice and assistance

Helps in credit authorization decisions

Selecting forecasting models

Personnel

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Assessing applicant qualifications

Giving employees assistance in filling out forms

Explanation Inference
facility engine

Knowledge
Knowledge base
base acquisition

Experts User

Knowledge work systems

Knowledge work systems

Systems for knowledge workers to help create new knowledge and ensure that
knowledge is properly integrated into business

Knowledge workers

Researchers, designers, architects, scientists, and engineers who primarily create

knowledge and information for the organization

Requirements of knowledge work systems

Knowledge workers require highly specialized knowledge work systems

Substantial computing power for graphics, complex calculations

Powerful graphics, and analytical tools

Communications and document management capabilities

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Access to external databases

User-friendly interfaces

Optimized for tasks to be performed (design engineering, financial analysis)

Components of Knowledge work systems

Examples of knowledge work systems

CAD: Automates creation and revision of engineering or architectural designs, using

computers and sophisticated graphics software

Virtual reality systems: Software and special hardware to simulate real-life

environments. Interactive software creates photorealistic simulations of real world
objects. (VRML)

E.g. 3-D medical modeling for surgeons

Investment workstations: High-end PCs used in finance to analyze trading situations,

facilitate portfolio management

Streamline investment process and consolidate internal, external data for brokers,
traders, portfolio managers

Artificial intelligence (AI)

Computers with the ability to mimic or duplicate the functions of the human brain

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Artificial intelligence systems

The people, procedures, hardware, software, data, and knowledge needed to develop computer
systems and machines that demonstrate the characteristics of intelligence

Intelligent behaviour

Learn from experience

Apply knowledge acquired from experience

Handle complex situations

Solve problems when important information is missing

Determine what is important

React quickly and correctly to a new situation

Understand visual images

Process and manipulate symbols

Be creative and imaginative

Use heuristics

Major Branches of AI

Perceptive system

A system that approximates the way a human sees, hears, and feels objects

Vision system

Capture, store, and manipulate visual images and pictures

Robotics

Mechanical and computer devices that perform tedious tasks with high
precision

Expert system

Stores knowledge and makes inferences

Learning system

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Computer changes how it functions or reacts to situations based on

feedback

Natural language processing

Computers understand and react to statements and commands made in a

natural language, such as English

Neural network

Computer system that can act like or simulate the functioning of the
human brain

Artificial
intelligence

Group Decision Support System (GDSS)

Contains most of the elements of DSS plus software to provide effective support
in group decision-making settings

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Databases

Model base GDSS processor GDSS software

Access to the internet Dialogue External da

and corporate intranet, manager acces
networks, and other

Users

Characteristics of a GDSS

Special design

Ease of use

Flexibility

Parallel communication

Automated record keeping

Cost, control, complexity factors

Decision-making support

Delphi approach (decision makers are geographically dispersed)

Brainstorming

Nominal group technique

Components of a GDSS

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Database

Model base

Dialogue manager

Communication capability

Special software (also called GroupWare)

E.g., Lotus Notes

people located around the world work on the same project, documents, and files,
efficiently and at the same time

Decision Room

Decision Room

For decision makers located in the same geographic area or building

Use of computing devices, special software, networking capabilities, display

equipment, and a session leader

Collect, coordinate, and feedback organized information to help a group make a

decision

Combines face-to-face verbal interaction with technology-aided formalization

Wide Area Decision Network

Characteristics

Location of group members is distant

Decision frequency is high

Virtual workgroups

Groups of workers located around the world working on common problems via a
GDSS

Executive Support Systems

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Senior managers use executive support systems (ESS) to make decisions. ESS serves the
strategic level of the organization.
They address non routine decisions requiring judgment, evaluation, and insight because there is
no agreed-on procedure for arriving at a solution.
ESS is designed to incorporate data about external events such as new tax laws or competitors,
but they also draw summarized information from internal MIS and DSS.
They filter, compress, and track critical data, emphasizing the reduction of time and effort
required to obtain information useful to executives.
ESS employs the most advanced graphics software and can deliver graphs and data from many
sources immediately to a senior executive's office or to a boardroom.

Relationship of Systems to One Another

TPS are typically a major source of data for other systems, whereas ESS are primarily a recipient
of data from lower-level systems. The other types of systems may exchange data with each other
as well.
Data may also be exchanged among systems serving different functional areas.
For example, an order captured by a sales system may be transmitted to a manufacturing system
as a transaction for producing or delivering the product specified in the order.

ESS

MIS
S
DSS

TPS

Interrelationships among systems

Systems from a Functional Perspective

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Information systems can be classified by the specific organizational function they serve as well as
by organizational level. We now describe typical information systems that support each of the
major business functions and provide examples of functional applications for each organizational
level.

Sales and Marketing Information Systems

The sales and marketing function is responsible for selling the organization's product or service.
Marketing is concerned with identifying the customers for the firm's products or services,
determining what they need or want, planning and developing products and services to meet their
needs, and advertising and promoting these products and services.
Sales are concerned with contacting customers, selling the products and services, taking orders,
and following up on sales. Sales and marketing information systems support these activities. .
At the strategic level, sales and marketing systems monitor trends affecting new products and
sales opportunities, support planning for new products and services, and monitor the performance
of competitors.
At the middle management level, sales and marketing systems support market research,
advertising and promotional campaigns and pricing decisions. They analyze sales performance and
the performance of the sales staff.
At the operational level, sales and marketing systems assist in locating and contacting
prospective customers, tracking sales, processing orders, and providing customer service support.
Example of Sales and marketing information systems

System Description Groups served

Order processing Enter, process, and track orders Operational Management
Pricing analysis Determine prices for products and Middle Management
services
Sales trend Prepare 5-year sales forecasts Strategic Management
forecasting

Manufacturing and Production Information Systems

The manufacturing and production function is responsible for actually producing the firm's
goods and services.
Manufacturing and production systems deal with the planning, development, and maintenance
of production facilities; the establishment of production goals; the acquisition, storage, and
availability of production materials; and the scheduling of equipment, facilities, materials, and
labor required to fashion finished products. Manufacturing and production information systems
support these activities.
At Strategic-level manufacturing systems deal with the firm's long-term manufacturing goals,
such as where to locate new plants or whether to invest in new manufacturing technology.

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MANAGEMENT INFORMATION SYSTEM

At the middle management level, manufacturing and production systems analyze and monitor
manufacturing and production costs and resources.
At operational level manufacturing and production systems deal with the status of production
tasks.
Example of Manufacturing and Production Information Systems

information systems
System Description Groups served
Machine control Control the actions of machines and Operational Management
equipment
Production Prepare short-term budgets Decide when Middle Management
planning and how many products should be produced
Facilities location Decide where to locate new production Strategic Management
facilities

Finance and Accounting Information Systems

The finance function is responsible for managing the firm's financial assets, such as cash, stocks,
bonds, and other investments in order to maximize the return on these financial assets.
The accounting function is responsible for maintaining and managing the firm's financial
recordsreceipts, disbursements, depreciation, and payroll to account for the flow of funds in
a firm.
Finance and accounting share related problemshow to keep track of a firm's financial assets
and fund flows.
Strategic-level, information systems for the finance and accounting function establish long-term
investment goals for the firm and provide long-range forecasts of the firm's financial performance.
At the middle management level, information systems help managers oversee and control the
firm's financial resources.
At Operational level, finance and accounting systems track the flow of funds in the firm through
transactions such as paychecks, payments to vendors, securities reports, and receipts.

Example of Finance and Accounting Information Systems

information systems
System Description Groups served
Accounts receivable Track money owed the firm Operational
Management
Budgeting Prepare short-term budgets Middle Management
Profit planning Plan long-term profits Strategic Management

Human Resources Information Systems

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MANAGEMENT INFORMATION SYSTEM

The human resources function is responsible for attracting, developing, and maintaining the
firm's work force.
Human resources information systems support activities such as identifying potential employees,
maintaining complete records on existing employees, and creating programs to develop employees'
talents and skills.
At Strategic-level human resources systems identify the manpower requirements (skills,
educational level, types of positions, number of positions, and cost) for meeting the firm's long-
term business plans.
At middle management level, human resources systems help managers monitor and analyze
the recruitment, allocation, and compensation of employees.
At Operational level HR systems track the recruitment and placement of the firm's employees

Example of Human Resources Information Systems

information systems Description Groups served

System
Training and Track employee training, skills, & Operational Management
development performance appraisals
Compensation analysis Monitor the range and distribution of Middle Management
employee wages, salaries, and benefits

Human resources Plan the long-term labor force needs of the Strategic Management
planning organization

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Business Processes and Information Systems

Business processes refer to the manner in which work is organized, coordinated, and focused to
produce a valuable product or service.

On the one hand, business processes are concrete work flows of material, information, and
knowledgesets of logically related activities.

For example almost every business has a way to hire employees. The process of hiring employees
is a business process in the sense that it is a set of activities that a firm uses to hire new employees.
The business process of hiring can be broken down into a number of different steps such as place
advertisements, contact employment agencies, collect resumes, review resumes, interview
candidates, rank candidates, make employment decisions & enroll employee in employment
system such as payroll, health and pension.

Functional Area Business Examples of Business Processes

Process
Manufacturing and production Assembling the product
Checking for quality
Producing bills of materials
Sales and marketing Identifying customers
Making customers aware of the product
Selling the product
Finance and accounting Paying creditors
Creating financial statements
Managing cash accounts
Human resources Hiring employees
Evaluating employees' job performance
Enrolling employees in benefits plans
For example, the order fulfillment process at many companies requires cooperation among the
sales function (receiving the order, entering the order), the accounting function (credit checking
and billing for the order), and the manufacturing function (assembling and shipping the order).
Following figure illustrates how this crossfunctional process might work. Information systems

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The order fulfillment process
Generating and fulfilling an order is a multi-step process involving activities performed by the
sales, manufacturing and production, and accounting functions.
MANAGEMENT INFORMATION SYSTEM

support these cross-functional processes as well as processes for the separate business functions.

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