Types of information systems Transaction processing to executive decision making

Information System from business perspective Types of system Groups Served STRATEGIC LEVEL SENIOR MANAGERS MANAGEMENT LEVEL MIDDLE MANAGERS Vertical information flows KNOWLEDGE LEVEL KNOWLEDGE & DATA WORKERS OPERATIONAL OPERATIONAL Horizontal information flows LEVEL MANAGERS SALES & MANUFACTURING FINANCE ACCOUNTING HUMAN MARKETING & ENGINEERING RESOURCES

Management Structures and Information Requirements Higher up the pyramid, the less structured the decision Less defined (structured) internal/External orientation More summarized information Lower down the pyramid, the more structured the decision More defined (structured) Internal orientation More detailed information

Classification (types) of for IS Executive Support Systems (ESS) Management Information Systems (MIS) Decision Support Systems (DSS) Transaction Processing Systems (TPS)

Transaction Processing Systems (TPS) Computerized system that performs and records the daily routine transactions necessary to conduct the business; these systems serve the operational level of the organization TYPE: Operational-level INPUTS: transactions, events PROCESSING: updating; e.g. stock levels) OUTPUTS: detailed reports USERS: operations personnel, supervisors DECISION-MAKING: highly structured. (sale of products) EXAMPLE: payroll, accounts payable, point of sale (P.O.S.)

TPS payroll system

Management information systems(MIS) Information system at the management level of an organization that serves the functions of planning, controlling, and decision making by providing routine summary and exception reports.

Differences between the TPS and the MIS Transaction Processing Systems (TPS) Support operation Management and control Routine, normal operations structured Management Information Systems (MIS) Provide decision-making support for routine, structured decisions Closely linked to and fed by TPS Structure and sem-structure

Characteristics of Management information Systems 1. MIS support structured decisions at the operational and management control levels. However, they are also useful for planning purposes, semi-structured problems, of senior management staff. 2. MIS are generally reporting and control oriented. They are designed to report on existing operations, sales , production costs…, and therefore to help provide day-to-day control of operations. 3. MIS rely an existing corporate data-and data flows. 4. MIS have little analytical capability. 5. MIS generally aid in decision making using past and present data. 6. MIS are relatively inflexible. 7. MIS have an internal rather than an external orientation.

Management problems Most management problems, involving decisions have three elements – objectives, decision variables, and constraints. Objective Maximize profit Provide earliest entry into market Minimize employee discomfort/turnover Decision variables Determine what price to use Determine length of time tests should be run on a new product/service Determine the responsibilities to assign to each worker Constraints Can’t charge below cost Test enough to meet minimum safety regulations Ensure responsibilities are at most shared by two workers

Structured Decision Structured decisions are those which are made according to specified procedures of rules or structured decisions are those that are easily made from a given set of inputs. Deciding to send a reminder notice to a customer for an overdue balance is considered to be structured decision

Semi-structured Decision Semi-structured decisions are those for which information obtained from a computer system or information system is only a portion of the total knowledge needed to make decision. Advertise a new product or how much to spend on MIS.

Unstructured Decision Unstructured decisions are novel. There is no cut and dried  method for handling the problem because it hasn't arisen before or because it's precise nature and structure are mysterious or complex, or because it so important' that it deserves a custom tailored treatment. They may require a lot of creativity and intuitions from the decision maker to tell what factors will come into play in an unstructured play. Deciding whether to use an integrated or intensive strategy for a product that is the star quadrant of the BCG matrix How successful to improving market size was the recent marketing campaign

Information Systems to support decisions Management Information Systems Decision Support Systems Decision support provided Provide information about the performance of the organization Provide information and techniques to analyze specific problems Information form and frequency Periodic, exception, demand, and push reports and responses Interactive inquiries and responses Information format Prespecified, fixed format Ad hoc, flexible, and adaptable format Information processing methodology Information produced by extraction and manipulation of business data Information produced by analytical modeling of business data

Decision support system Information system at the management level of an organization that combines data and sophisticated analytical models or data analysis tools to support semi-structured and unstructured decision making. E.g.:sales region analysis [OLAP systems]

Characteristics of Decision-Support Systems DSS offer users flexibility, adaptability, and a quick response. DSS provide support for decisions and problems whose solutions cannot be specified in advance. DSS use sophisticated data analysis and modelling tools. Decision support system (DSS) tends to be used in planning, modelling, analysing alternatives, and decision making by using  small, simple models which can easily be understood and used by the manager

Examples Typical information that a decision support application might gather and present would be: Accessing all of your current information assets, including legacy and relational data sources, cubes, data warehouses, and data marts Comparative sales figures between one week and the next Projected revenue figures based on new product sales assumptions The consequences of different decision alternatives, given past experience in a context that is described Could be use to aid Strategic systems: SCM / CRM

Tools used in aiding the DSS Functions Functions: pre-stored formulas that enable a user to perform a calculator type task as soon as the function is invoked Analysis Analysis: review a set of facts and to assist in drawing conclusions based on there facts. Statistical Tools: regression/correlation Optimizing tools: best decision for “structured”: maximise production capacity (labour, capacity) What if analysis: if increase cost what is the effect on sales; check for various increases (€1, €2….)

Executive Support Systems (ESS) Information system at the strategic level of an organization that address unstructured decision making through advanced graphics and communications. TYPE: Strategic level INPUTS: aggregate data; internal and external PROCESSING: interactive OUTPUTS: projections USERS: senior managers DECISION-MAKING: highly unstructured EXAMPLE: 5 year operating plan

Executive Support Systems: other properties Tailored to individual executives Not to managers in other levels Easy to use Drill down capabilities (more specific details) Support need for external data: demographics, competitors… Can help when uncertainty is high Future-oriented Linked to value-added processes: competitive advantage… Although executive support systems have much in common with decision support systems, they have important differences. Generally, a DSS provides a number of modeling tools and is designed to help a user answer a question. Executive support systems allow executives to ask the right questions. An ESS is interactive and helps an executive focus, filter and organize data and information. Unlike a DSS, an ESS is usually customized for a specific individual. Content and format can both be customized. Since executives are typically busy, an ESS must be easy to learn and to use – or it won’t be used.

Sample questions answered by ESS What business should we be in? What are the competitors doing? What new acquisitions' would protect us from cyclical business swings? Which units should we sell to raise cash for acquisitions?

Question Management information systems (MIS); Decision support systems (D.S.S); and Executive information systems (EIS) are important types of information systems used by management to solve structured, semi-structured and unstructured problems . Describe, using suitable examples, the types of problems each one is designed to solve (6 marks) The M.I.S. and D.S.S. play a significant role in the formulation of strategic decisions: compare and contrast, using suitable examples both types of information systems. (24 marks)