Systems

Systems theory
Knowledge of the structure of systems and how they work provides a powerful means of analysing and improving business performance. Systems theory is applied to many problems and it is particularly useful in understanding the business application of information systems. A system may be defined as:

A collection of interrelated components that work towards a common goal

Generally, the goal of a business is described as it mission statement

Systems
What is a mission statement?
A statement intended to summarise the overall goals of a business For example, McDonalds mission statement reads:

"McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile."

Systems
What is the purpose of a system?
To receive inputs and transform these into outputs.

Compare with transforming data into information

Inputs are gathered from the environment, e.g.:
data (information systems); raw materials (industrial system).

Outputs are returned to the environment, e.g.:

information (information system); finished product (industrial system).

The most basic of systems is the Open Loop system ...

Open-loop System

Environment

Input

Transformation Process

Output

Systems
Features of an open loop system
Focuses on the systems objective.

No action taken to adjust the process once it has begun.

Unsuitable for business due to the uncertain nature of the environment.

Therefore, there is a need for performance measurement and control.

Systems
Control System
The performance of the systems is collected by a feedback mechanism or feedback loop The feedback mechanism compares required performance against actual performance. A control mechanism ensures the system meets its objects ... ... by acting on information received from the feedback mechanism.

Systems
System components summary
Input Output Feedback mechanism Control mechanism Theoretically, a system which includes all these components is known as a generic system ...

A Generic System

Control Mechanism

Feedback Mechanism

Input

Process

Output

Environment

Systems
Task 1
Can each of the following be described as a system?

For each item, identify at least two inputs, processes and outputs.
What are the feedback and control mechanisms? A human being A plant A house A country A computer

Systems
System characteristics
All systems share the following characteristics.
System objective: the components of a system work towards a common goal. Environment: systems do not operate in complete isolation Boundary: the scope of a system. Everything outside of the boundary is the systems environment Interface: the exchanges (inputs/outputs) between the system and its environment.

Systems
System characteristics - continued
Subsystems: smaller systems that are part of a larger system and related to each other by means of their inputs and outputs. Suprasystems: systems made up of smaller systems (sub-systems) Interaction (Interface): exchanges between subsystems Coupling: defines the linkages between subsystems close-coupled or decoupled. Hierarchy (interdependence): system made up of subsystems that may also be made up of other subsystems
changes in one subsystem may lead to changes in another.

The largest system being considered is the suprasystem

Subsystem of group

Subsystem of social system

Hierarchy

Suprasystem

Connected systems
Environment

System made up of sub-systems

Input

sub-system 2
Output Inputs Output Inputs

sub-system 1
Input

Outputs

Input

sub-system 4
Output

Input

sub-system 3

Interactions between systems

Hierarchical relations between subsystems in a manufacturing organisation

Company System

Accounts

Sales order processing

Production

Sales ledger processing

Purchase ledger processing

Material production

Operations Control

Manufacturing process

Assembly process

Flow diagram for a manufacturing company

Accounts

Sales order processing

Purchasing

Production

Inventory

Distribution & goods inward

Production subsystem of a manufacturing company

External data
Managerial goal setting and decisions

Management

Inputs from the environment

Demand

Production planning

Production monitoring

Production control

Computer systems monitoring and control

Quality control and supervision

Operations control

Raw materials

Manufacturing process

Intermediate inventory

Assembly process

Material Production (Output)

Materials flow

Information flow

Subsystem coupling and decoupling

Production

Sales

Production

Sales

Inventory

Slack capacity Sales Production

Systems
System control business information system
A business information system supports managers in making decisions.

To make effective decisions, managers require information (feedback)

The information system is the feedback mechanism

Decision making is the control mechanism.

Objectives will be realised If control is being achieved throughout the organisation (all subsystems).

Environment

Management

Control Mechanism

Information System

Input

Process

Output

Business Information System as an organisational control mechanism

Systems
Task 2
Consider the following questions:
1. What are your department's objectives? 2. Indentify a range of typical inputs, processes and outputs 3. What feedback mechanisms are in place and what kinds of information do they produce? 4. What control mechanisms exist?

Systems
Closedloop Control Systems
Includes two types: 1. Feedback control (reactive)
Respond to changes in system or environment after they have occurred
Inexpensive and usually effective form of control Disadvantages: i. they may over-correct; ii. time-delay.

Closed-loop feedback control system

Environment

Control Mechanism

Input

Process

Output

Systems
Closedloop Control Systems
2. Feed-forward control (pro-active)
suffers from delays in control loop can overcome time-delay and over-correction problems of feedback control not common in business

Closed-loop feedforward control system

Environment Control Mechanism

Input

Process

Output

Systems
Feedback types
Two types of feedback:

1. Positive feedback
Positive refers to the direction of change rather than the desirability of the outcome. Responds to a difference between required (objective) and actual output by increasing that difference. Unsustainable in many cases. Eventually results in internal or external corrective action. Unintended positive feedback may not be "positive" in the sense of being desirable, e.g., bank runs; animals stampeding.

Systems
2. Negative feedback
reverses the difference between required (objective) and actual output

suffers from delays in control loop effect of change may take time to be realised ...
which leads to an effect known as oscillation around the desired output.

Oscillation in negative feedback systems

Actual output during control Time lag Desired Output Deviation from desired output

Time

Systems
System types
Common terms for describing types of business system:
1. Deterministic systems
sometimes know as mechanistic system outputs can be predicted by examining its inputs example: electronic calculator

2. Probabilistic systems
sometimes known as stochastic system outputs cannot be predicted with any accuracy. example: sales forecasting

Systems
System types
3. Adaptive systems
sometimes known as self-organising or cybernetic systems can monitor and regulate its performance

example: human beings; businesses

4. Hard and soft systems

a hard system has a clear objective and fixed rules and procedures

example: production line

a soft system works in an unpredictable environment uncertain conditions which are liable to rapid change usually involve people or socio-technical situations

Case Study 4
1. Describe at least four possible sub-systems within one of McDonalds restaurants identifying the inputs and outputs for each. 2. Describe how the feedback and control mechanism may work for each sub-system described. 3. Describe a supra-system that the McDonalds restaurant forms a part of.