Management Information Systems

Data versus Information Information is raw data combined with knowledge of the business climate and processes to produce actionable information and recommendations. Raw ingredients Yummy B’day Cake Data Information

Information Technology RULES the world!!!

Set of interrelated components Collects, stores and distributes information Supports decision making and control in an organization Key elements: IS ITData People Business Process INFORMATION SYSTEMS

INPUT PROCESSING Classify Arrange Calculate OUTPUT Regulatory Agencies Stockholders Competitors Customers Suppliers ENVIRONMENT ORGANIZATION Feedback INFORMATION SYSTEM

INFORMATION SYSTEMS COMPONENTS Inputs: raw data –May be physical, electronic or conceptual –May use a manual or automated process Processing: conversion of inputs to outputs –May be comprised of computations, data storage, choosing alternatives –May be a manual or automated process Outputs: information used to make decisions –May be delivered in paper form or electronically –Outputs of one system may be inputs to another system Feedback/assessment: outputs used to improve system performance –Can flag for incorrect processing –Cue for managerial interventions –Supply estimates of future input values (forecasting)

NEED FOR INFORMATION SYSTEMS Globalization opportunities  Emergence of the internet Emerging Digital Firm  digital firm – one in which all significant business relationships are digitally enabled and core business processes are accomplished through digital networks.  any information  available anytime  anywhere  responds rapidly to environments  flexibility  time shifting  24x7 work culture  space shifting  global workshop

The Toyota Example

Toyota views IT as an indispensable tool Toyota uses Oracle-based Vehicle Order Management System

From customer Dealer Identification # Model Color Data Shipping instructions Invoices Production reports INFORMATION SYSTEM Information Vehicle Order Management System Manufacturing plants Inventories Factories

OBJECTIVES OF INFORMATION SYSTEMS INFORMATION SYSTEMS IMPROVED DECISION MAKING COMPETITIVE ADVANTAGE NEW PRODUCTS, SERVICES & BUSINESS MODELS CUSTOMER- SUPPLIER INTIMACY OPERATIONAL EXCELLENCE SURVIVAL

OPERATIONAL EXCELLENCE OBJECTIVES OF INFORMATION SYSTEMS - 1 IMPROVE EFFICIENCY HIGH PRODUCTIVITY

The Wal Mart Example It is the world's largest public corporation by revenue, according to the 2008 Fortune Global 500 largest private employer in the United States and the largest grocery retailer in the United States

Information Systems + Brilliant business practices + Supportive management = Success Wal Mart uses RetailLink System

Wal Mart 1 Wal Mart 2 Wal Mart 3 Wal Mart 5289 Supplier 1 Supplier 2 Supplier n RetailLink System Informs about the purchase Replacement shipped One of the most efficient retail store in the industry.

OBJECTIVES OF INFORMATION SYSTEMS - 2 NEW PRODUCTS, SERVICES & BUSINESS MODELS ENABLING TOOL TO CREATE NEW PRODUCTS, SERVICES & BUSINESS MODELS A SAMPLE BUSINESS MODEL

The Apple Example CDNANO

iTunes Music Service iPod original iTunes Video player iPod nano The iPod business model

CUSTOMER- SUPPLIER INTIMACY KNOW YOUR CUSTOMER Good service Revenue & Profits up KNOW YOUR SUPPLIER Cost down Engaging suppliers OBJECTIVES OF INFORMATION SYSTEMS - 3

The JCPenney Example TAL Apparel, a shirt maker in Hong Kong (China), + retail giant JC Penney in the United States = Power Synchronization

JCPenney Store 1 JCPenney Store 2 JCPenney Store n TAL (Hong Kong) Point of sales data

JCPenney cedes functions to TAL TAL responds directly to customer-demand Manufacturer-customer link is strong TAL analyses sales of a new design in JCPenney Stores TAL, not JCPenney, decides how many more of the new design to manufacture Sales forecasting was now done by TAL and not JCPenney Analyse this relation called VENDOR-MANAGED-INVENTORY Advantages: Saves time Saves money Hurdles: Suitable only for big firms because it requires high investments.

OBJECTIVES OF INFORMATION SYSTEMS - 4 IMPROVED DECISION MAKING Lack of Information forecast best guesses luck Over Production Under Production Poor response times Misallocation of resources

OBJECTIVES OF INFORMATION SYSTEMS - 5 COMPETITIVE ADVANTAGE IMPROVED DECISION MAKING CUSTOMER- SUPPLIER INTIMACY NEW PRODUCTS, SERVICES & BUSINESS MODELS OPERATIONAL EXCELLENCE COMPETITIVE ADVANTAGE Charging less for superior products Responding to customers and suppliers in real time Higher sales Higher profits

THE DELL EXAMPLE

Dell Computer has changed the competitive landscape by: Offering customized products directly to customers on demand without premiums in either price or lead time Minimizing inventory to unthinkable levels Being agile—quickly responding to the market/technology changes Eliminating the cost and risk of finished goods inventory Successfully executing a mass customization strategy quarter after quarter, year after year Mass customization is the use of flexible computer-aided manufacturing systems to produce custom output. Those systems combine the low unit costs of mass production processes with the flexibility of individual customization.

SURVIVAL OBJECTIVES OF INFORMATION SYSTEMS - 6

END OF SESSION - 1 September 7, Section A September 8, Section B

DIMENSIONS OF INFORMATION SYSTEMS Information Systems Organizations Technology Management Effective understanding of organization, management & IT

Organizations Key elements  People  Structure  Business Process  Politics  Culture

 People Executives Knowledge workers Data workers Production workers Service workers Organizations

 Structure Strategic Management Tactical Management Operational Management Information Decisions Structured Semi-structured Unstructured Ad Hoc Unscheduled Summarized Infrequent Forward Looking External Wide scope Pre-specified Scheduled Detailed Frequent Historical Internal Narrow Focus Organizations

Supervisor Requires detailed information How many items available? How many items on order? Branch Manager Requires less detailed information & more general information How much stock to order? How much floor space required? Dollar value of sales Operational Level Tactical Level Strategic Level President/ Vice President/ CEO/ Directors Requires even less detailed information Overall branch performance To open/ close a branch Strategies illustration

 Business Process Manufacturing & Production Assembling the product FUNCTIONAL AREA BUSINESS PROCESS checking for quality Producing bills of materials Sales & Marketing Identifying customers making customers aware of the product selling the product Finance & Accounting Paying creditors creating financial statements managing cash accounts Human Resources Hiring Employees Evaluating employees’ job performance Enrolling employees in benefit plans Manner in which work is organized, coordinated, focused to produce a valuable product or service These processes can be decomposed into several sub-processes, which have their own attributes. All these sub-processes contribute towards achieving of the major goal. Organizations

SALES ACCOUNTING MANUFACTURING & PRODUCTION Generate order Submit order Check audit Approve credit Generate invoice Assemble product Ship product A sample business process

 Politics Political Behavior Activities that are not required as part of one’s formal role in the organization But influence, or attempt to influence, the distribution of advantages or disadvantages within the organization Different people Different view points resources rewards punishment about Conflict Organizations

 Culture Bedrock, unassailable, unquestioned assumptions that define goals and products What the organization should produce? How the organization should produce the products? Rarely publicly spoken Powerful unifying force Restrains political conflict Promotes common understanding, agreement on procedures & common practices Powerful Restraint on change Resists change to any basic assumptions Organizations

Management MANAGER BERATE ANYONE WHO’S SLIGHTLY LATE UNNECESSARY MEETING PROMOTE THE UNQUALIFIED DUCK OUT AT 3:00 PM TO PLAY GOLF

Manager must perceive business challenges in the environment set organizational strategy to address these challenges allocate human and financial resources to coordinate work exercise responsible leadership create new products and services be creative Success Management

Technology Computer Hardware  physical equipments Computer Software  preprogrammed instructions Data Management Technology  software concerning storage of data on physical storage media Networking and Telecommunications Technology  physical devices and software to link various systems for data transfer  networks - internet/ intranet/ extranet

INFORMATION TECHNOLOGY Hardware Software Databases Networks Other related components is used to build INFORMATION SYSTEMS Payroll System Inventory System Marketing System Customer Service System INFORMATION SYSTEMS Vs INFORMATION TECHNOLOGY Technology

Business Strategic Objectives Business Processes Software Hardware Data Management Tele- communications Business Firm Information System INTERDEPENDENCE BETWEEN ORGANIZATIONS AND INFORMATION SYSTEMS

A BUSINESS PERSPECTIVE ON INFORMATION SYSTEMS support of business operations  automation of business process  simplification of business processes  reengineering of business processes support of managerial decision making  Improved co-ordination among various functional areas  Dynamic scheduling among the different functional areas support of strategic competitive advantage  Shortening of response time  Up-to-date information on revenues, budget performance  E-business opportunities

The Indian Railways Passenger Reservation System example Largest and busiest rail networks in the world 18 million passengers and more than 2 million tonnes of freight daily 6,909 stations over a total route length of more than 63,327 kilometers

Aug 2005 Aug 2006 Aug 2007 Aug e-tickets 295, 062 e-tickets 1,093,961 e-tickets 3,269,681 e-tickets Speaks of ecommerce viability in India Impact of Information Systems Reduction in cost of labor Reduction in transaction cost for customers, suppliers, distributors Faster decision support resulting in customer satisfaction Higher productivity and performance

CONTEMPORARY APPROACHES TO INFORMATION SYSTEMS MIS Sociology Economics Psychology Management Science Computer Science Operations Research BEHAVIORAL APPROACH TECHNICAL APPROACH

TECHNICAL APPROACH Features: Use of mathematical models to study IS Physical technology & Formal capabilities of IS COMPUTER SCIENCE Theories of computability Methods of computation Methods of efficient data storage MANAGEMENT SCIENCE Decision-making models Management practices OPERATIONS RESEARCH Mathematical Techniques

BEHAVIORAL APPROACH Features: Does not ignore technology Development and Maintenance of IS SOCIOLOGY Studies how Groups, Organizations Individuals influence system development and vice versa PSYCHOLOGY Studies how decision-makers use information ECONOMICS Studies dynamics of digital markets and how IS can affect cost and structures within a firm

HOW BUSINESSES USE INFORMATION SYSTEMS BUSINESS PROCESSES AND INFORMATION SYSTEMS What is a business process?  Unique ways of workflows  A business is a collection of business processes  Source of competitive strength if they enable the organization to innovate  Liability if based on outdated ways  Tied to a specific functional area  May cross different functional areas

HOW DO INFORMATION SYSTEMS ENHANCE BUSINESS PROCESSES ? Increasing the efficiency of existing processes  Automating business processes Enabling entirely new processes that are capable of transforming the business  Changing flow of information  Simultaneous access to information  Eliminates delay in decision-making  Examples: iTunes Amazon

END OF SESSION Section B

TYPES OF BUSINESS INFORMATION SYSTEMS FUNCTIONAL PERSPECTIVE SALES  Contacting customers  Selling the products and services  Taking orders  Following up on sales MAREKTING  Identifying customers  Determining customer needs  Planning and Developing products & services to meet customer need  Advertising and promoting products & services SALES & MARKETING SYSTEMS

MARKETING INFORMATION SYSTEMS  For monitoring the efficiency and effectiveness of the distribution of their products and services, sales managers need information to plan and monitor the sales force  Management needs information on the performance of specific products, product lines, or brands  Price, revenue, cost and growth information can be used for pricing decisions, for evaluating the performance of current products, and for predicting the performance of future products

SystemDescriptionGroups Served Order processingEnter, process & track orders Operational Management Pricing analysisDetermine prices for products & services Middle Management Sales trend forecastingPrepare five-year sales forecasts Senior Management Monitor trends affecting new products Planning for new products Monitor performance of competitors Supports market research Analyses advertising & promotional campaigns Locating prospective customers Tracking sales Processing orders

Sales support systems are applications that facilitate the interface between the sales force and the corporation in the support of the customer SALES SUPPORT SYSTEMS

Sales file Sales System Data elements in Sales File Store # Item # Item description Color Sales data Management reports Online Queries A SALES INFORMATION SYSTEM Sales Report : November 2008 Item#DescriptionUnits sold 1234ABC XYZ1050 To inventory & production systems

MANUFACTURING & PRODUCTION SYSTEMS MANUFACTURING & PRODUCTION  Planning  Development  Maintenance of production facilities  Establishment of production goals  Facilities, materials, labor  Scheduling of equipment  Availability of production materials Machine controlControls the actions of machines & equipment Operational Management Production PlanningDecides when and how many products should be produced Middle Management Facilities locationDecides where to locate new production facilities Senior Management System Description Groups Served

Inventory Master file Inventory Control System Data elements in inventory master file Item Code Description Units on order Reorder point Shipment & Order data Management reports Online Queries AN INVENTORY SYSTEM Item Code DescriptionUnits on hand Units on order 1234Fan belt10, Power cord55, 71077,000

FINANCE AND ACCOUNTING SYSTEMS FINANCE ACCOUNTING  managing firm’s financial assets (cash, stocks, bonds etc)  managing the capitalization of the firm  determining ROI  maintaining and managing firm’s financial records  oversee and manage flow of funds into the firm SystemDescriptionGroups Served Accounts receivableTracks money owed by the firm Operational Management BudgetingPrepares short-term budgetMiddle Management Profit PlanningPrepares long-term profitSenior Management

A/R Master file Accounts Receivable System Data elements in A/R Master file Customer # Name Address Credit limit Invoice number Invoice Customer data Management reports Online Queries AN ACCOUNTS RECEIVABLE SYSTEM Cust # NameCurrent Balance 1234ABC XYZ To general ledger

HUMAN RESOURCES SYSTEMS HUMAN RESOURCES  responsible for attracting, developing and maintaining firm’s workforce SystemDescriptionGroups Served Training & DevelopmentTracks employee training, skills & performance appraisals Operational Management Compensation analysisMonitors the range and distribution of employee wages, salaries & benefits Middle Management HR PlanningPlans the long-term labor force needs of the organization Senior Management

Employee Master file Human Resources System Data elements in Employee Master file Employee # Name Address Age Educational Background Employee data Management reports Online Queries AN EMPLOYEE RECORD KEEPING SYSTEM Employees before December 2008 Emp#NameDate of Join 1234ABC13/05/ XYZ06/11/2008 To payroll

CONSTITUENCY PERSPECTIVE TYPES OF BUSINESS INFORMATION SYSTEMS Examines systems in terms of level of management and types of decision that they support INFORMATION Senior Managers Middle Managers Operational Managers Knowledge workers Summary info Specific Info on specific Functional areas Transaction-level info External or internal databases

TRANSACTION PROCESSING SYSTEMS (TPS) Keeps track of elementary activities and transactions of the organizations Performs and records the daily routine transactions necessary to conduct business most suitable for pre-defined, structured tasks usually has high volumes of inputs and outputs repetitive in nature central to a business major producers of information for other types of systems managers use TPS to monitor internal operations and relations with external environment Operational Managers

Order Processing System Materials Resource Planning System General ledger System MIS files Sales data Unit product cost data Product change data TPS Expense data MIS Order file Production master file Accounting file MIS reports managers

Middle Managers MANAGEMENT INFORMATION SYSTEMS serves middle management normally draw data from TPS converts data into information for monitoring performance transactions in TPS are analysed and reported by MIS large volumes of inputs & summary report outputs generally provide answers to routine questions specified in advance follows a predefined procedure for answering questions not flexible have little analytical capability MarketStar case Exhibit 2

Corporate databases of internal data Databases of external data Databases of valid transactions Operational databases Transaction processing systems Management information systems Decision support systems Executive support systems Expert systems Business transactions Input and error list Drill-down reports Exception reports Demand reports Key-indicator reports Scheduled reports Employees Corporate intranet Application databases SOURCES OF MIS

OUTPUTS OF A MANAGEMENT INFORMATION SYSTEM Scheduled reports Produced periodically, or on a schedule (daily, weekly, monthly) Key-indicator report Summarizes the previous day’s critical activities Typically available at the beginning of each day Demand report Gives certain information at a manager’s request Exception report Automatically produced when a situation is unusual or requires management action

Scheduled Report Example Daily Sales Detail Report Prepared: 08/10/xx Order # Customer ID Sales Rep ID Ship DateQuantityItem #Amount P12453C89321CAR08/12/96144P1234$3,214 P12453C89321CAR08/12/96288P3214$5,660 P12453C03214GWA08/13/9612P4902$1,224 P12455C52313SAK08/12/9624P4012$2,448 P12456C34123JMW08J/13/96144P3214$720

Key Indicator Report Example Daily Sales Key Indicator Report This Month Last Month Last Year Total Orders Month to Date$1,808$1,694$1,014 Forecasted Sales for the Month$2,406$2,224$2,608

Demand Report Example Daily Sales by Sales Rep Summary Report Prepared: 08/10/xx Sales Rep IDAmount CAR$42,345 GWA$38,950 SAK$22,100 JWN$12,350

Exception Report Example Daily Sales Exception Report – ORDERS OVER $10,000 Prepared: 08/10/xx Order # Customer ID Sales Rep ID Ship DateQuantityItem #Amount P12453C89321CAR08/12/96144P1234$13,214 P12453C89321CAR08/12/96288P3214$15,660 P12453C03214GWA08/13/9612P4902$11,224 ………………… …………………

Middle Managers DECISION-SUPPORT SYSTEMS (DSS) support non-routine decision making for middle management follow procedures which are not fully predefined combines information from external sources ( eg: current stock prices) use a variety of models to analyze data condenses data into a form in which decision-makers can analyse include user-friendly software

Characteristics of a DSS (1) Handles large amounts of data from different sources Provides report and presentation flexibility Offers both textual and graphical orientation

Characteristics of a DSS (2) Supports drill down analysis Performs complex, sophisticated analysis and comparisons using advanced software packages

Characteristics of a DSS (3) Performs different types of analyses –“What-if” analysis Makes hypothetical changes to problem and observes impact on the results –Simulation Duplicates features of a real system –Goal-seeking analysis Determines problem data required for a given result

Capabilities of a DSS (1) Supports –Problem solving phases –Different decision frequencies Frequency lowhigh Merge with another company? How many widgets should I order?

Capabilities of a DSS (2) Highly structured problems –Straightforward problems, requiring known facts and relationships. Semi-structured or unstructured problems –Complex problems wherein relationships among data are not always clear, the data may be in a variety of formats, and are often difficult to manipulate or obtain

EXECUTIVE SUPPORT SYSTEMS Characteristics –A specialized DSS that includes all the hardware, software, data, procedures, and people used to assist senior-level executives within the organization Board of directors President Function area vice presidents Function area managers Senior Managers

Characteristics of ESS Tailored to individual executives Easy to use Drill down capabilities Support the need for external data Help with situations with high degree of uncertainty Linked with value-added business processes Address non-routine decisions requiring judgment, insight, evaluation Draw summarized information from external MIS and DSS

ESS MIS DSS TPS INTER-RELATIONSHIP OF SYSTEMS ON ONE ANOTHER

ENTERPRISE SYSTEMS (1) MANUFACTURING SALES & MARKETING FINANCE HUMAN RESOURCES BUSINESS PROCESS ENTERPRISE – WIDE BUSINESS PROCESS Organizational Boundaries VENDORS CUSTOMERS

ENTERPRISE SYSTEMS (2) Also called Enterprise Resource Planning (ERP) systems Integrates key business processes of a firm into a single system Enables information to flow seamlessly throughout the organization Main focus on internal processes May include transactions with customers & vendors Enables speedy communication of information