MANAGEMENT INFORMATION SYSTEM

UNIT 1

NOTES AS PER SYLLABUS

FOC BHU

MBA FT SEM 1

PREPARED BY –

AKASH KUSHWAHA

&

CHANDAN PANDEY

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 MIS MEANING & DEFINITION

- MIS is the use of information technology, people, and business processes to

record, store and process data to produce information that decision makers can
use to make day to day decisions.

MIS is the acronym for Management Information Systems. In a nutshell, MIS is a

collection of systems, hardware, procedures and people that all work together to
process, store, and produce information that is useful to the organization

The need for MIS

The following are some of the justifications for having an MIS system

• Decision makers need information to make effective

decisions. Management Information Systems (MIS) make this possible.
• MIS systems facilitate communication within and outside the
organization – employees within the organization are able to easily access
the required information for the day to day operations. Facilitates such as
Short Message Service (SMS) & Email make it possible to communicate with
customers and suppliers from within the MIS system that an organization is
using.

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 • Record keeping – management information systems record all business
transactions of an organization and provide a reference point for the
transactions.

Components of MIS

The major components of a typical management information system are;

• People – people who use the information system

• Data – the data that the information system records
• Business Procedures – procedures put in place on how to record, store and
analyze data
• Hardware – these include servers, workstations, networking equipment,
printers, etc.
• Software – these are programs used to handle the data. These include
programs such as spreadsheet programs, database software, etc.

Types of Information Systems

The type of information system that a user uses depends on their level in an
organization. The following diagram shows the three major levels of users in an
organization and the type of information system that they use.

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Transaction Processing Systems (TPS)

This type of information system is used to record the day to day transactions of a
business. An example of a Transaction Processing System is a Point of Sale (POS)
system. A POS system is used to record the daily sales.

Management Information Systems (MIS)

Management Information Systems are used to guide tactic managers to make

semi-structured decisions. The output from the transaction processing system is
used as input to the MIS system.

Decision Support Systems (DSS)

Decision support systems are used by top level managers to make semi-
structured decisions. The output from the Management Information System is
used as input to the decision support system.DSS systems also get data input from
external sources such as current market forces, competition, etc.

Manual Information Systems VS Computerized Information Systems (MIS)

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Data is the bloodstream of any business entity. Everyone in an organization needs
information to make decisions. An information system is an organized way of
recording, storing data, and retrieving information.

In this section, we will look at manual information systems vs. computerized

information systems.

Manual Information System

A manual information system does not use any computerized devices. The
recording, storing and retrieving of data is done manually by the people, who are
responsible for the information system.

The following are the major components of a manual information system

• People –people are the recipients of information system

• Business Procedures –these are measures put in place that define the rules
for processing data, storing it, analyzing it and producing information
• Data –these are the recorded day to day transactions
• Filing system – this is an organized way of storing information
• Reports –the reports are generated after manually analyzing the data from
the filing system and compiling it.

The following diagram illustrates how a typical manual information system works

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Advantages and Dis-advantages of a manual information system

Advantages:

The following are the advantages of manual information systems

• Cost effective – it is cheaper compared to a computerized system because

there is no need to purchase expensive equipment such as servers,
workstations, printers, etc.
• Flexible –evolving business requirements can easily be implemented into
the business procedures and implemented immediately

Disadvantages:

The following are some of the disadvantages of a manual information system.

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 • Time consuming –all data entries need to be verified before filing, this is a
time consuming task when done by humans. Retrieving data from the filing
system also takes a considerable amount of time
• Prone to error – the accuracy of the data when verified and validated by
human beings is more prone to errors compared to verification and
validation done by computerized systems.
• Lack of security – the security of manual systems is implemented by
restricting access to the file room. Experience shows unauthorized people
can easily gain access to the filing room
• Duplication of data –most departments in an organization need to have
access to the same data. In a manual system, it is common to duplicate this
data to make it easy to accessible to all authorized users. The challenge
comes in when the same data needs to be updated
• Data inconsistency – due to the duplication of data, it is very common to
update data in one file and not update the other files. This leads to data
inconsistency
• Lack of backups – if the file get lost or mishandled, the chances of
recovering the data are almost zero.

Computerized information system

Computerized systems were developed to address the challenges of manual

information systems. The major difference between a manual and computerized
information system is a computerized system uses a combination of software and
hardware to record, store, analyze and retrieve information.

Advantages and Disadvantages of a computerized information system (MIS)

The following are some of the disadvantages of a computerized information

system.

Advantages:

The following are the advantages of computerized information systems

• Fast data processing and information retrieval – this is one of the biggest
advantages of a computerized information system. It processes data and
retrieves information at a faster rate. This leads to improved
client/customer service

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 • Improved data accuracy – easy to implement data validation and
verification checks in a computerized system compared to a manual
system.
• Improved security – in addition to restricting access to the database server,
the computerized information system can implement other security
controls such as user’s authentication, biometric authentication systems,
access rights control, etc.
• Reduced data duplication – database systems are designed in such a way
that minimized duplication of data. This means updating data in one
department automatically makes it available to the other departments
• Improved backup systems – with modern day technology, backups can be
stored in the cloud which makes it easy to recover the data if something
happened to the hardware and software used to store the data
• Easy access to information – most business executives need to travel and
still be able to make a decision based on the information. The web
and Mobile technologies make accessing data from anywhere possible.

Disadvantages:

• It is expensive to set up and configure – the organization has to buy

hardware and the required software to run the information system. In
addition to that, business procedures will need to be revised, and the staff
will need to be trained on how to use the computerized information
system.
• Heavy reliance on technology – if something happens to the hardware or
software that makes it stop functioning, then the information cannot be
accessed until the required hardware or software has been replaced.
• Risk of fraud – if proper controls and checks are not in place, an intruder
can post unauthorized transactions such as an invoice for goods that were
never delivered, etc.

Summary

• MIS is the acronym for Management Information System. It is a collection

of people, procedures, data, and information technology that aids
managers to make informed decisions.

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 • Computerized information systems are more efficient compared to manual
information systems. Manual information systems are cheaper compared
to computerized information systems.
• Transaction processing systems (TPS) are by operational staff to record day
to day business transactions, and they are used to make structured
decisions
• Management Information Systems (MIS) are used by middle-level
managers to make semi-structured decisions
• Decision Support Systems are used by top level managers, and they help
top level managers to make unstructured decisions

Following are the key characteristics of MIS:

1. System approach:
MIS follows the system approach, which implies a step by step approach to the
study of system and its performance in the light of the objective for which it has
been constituted. It means taking an inclusive view at sub-systems to operate
within an organization.
2. Management-oriented:
The management-oriented characteristic of MIS implies that top-down approach
needs to be followed for designing MIS. A top-down method says the initiation of
system development determines management requirements as well as business
goals. MIS implies the management dynamically to the system development
towards the completion of management decision.
3. As per requirements:
The design and development of MIS should be as per the information required by
the managers. The required design and development information is at different
levels, viz., strategic planning, management control and operational control. It
means MIS should cater to the specific needs of managers in the hierarchy of an
organization.
4. Future-oriented:
The design and development of MIS should also be future purpose so that the
system is not restricted to provide only the past information.
5. Integrated:
A complete MIS is a combination of its multiple sub-components to provide the
relevant information to take out a useful decision. An integrated system, which
blends information from several operational areas, is a necessary characteristic of
MIS.

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6. Common data flows:
This concept supports numerous basic views of system analysis such as avoiding
duplication, combining similar functions and simplifying operations. The
expansion of common data flow is a cost-effectively and logical concept.
7. Long-term planning:
MIS should always develop as a long term planning because it involves logical
planning to get success of an organization. While developing MIS, the analyst
should keep future oriented analysis and needs of the company in mind.
8. Relevant connection of sub-system planning:
The MIS development should be decomposing into its related sub-systems. These
sub-systems must be meaningful with proper planning.
9. Central database:
it contains data in tabular form. The data base is responsible to operations like
insertion, deletion, updation of records. This database covers information related
to inventory, personnel, vendors, customers, etc. the data stored in the database

Why MIS?
A manager has to take decisions with two main challenges:

First, a manager has to take quick decisions, or else there’s a chance of the
business being taken over by his competitors. The liberalization and globalization,
in which organizations are required to compete globally, has further enhanced
the necessity for such a system.

Second, information is doubling up every two or three years, a manager has to

process a large voluminous data; failing which he may end up taking a strong
decision that may prove to be very costly to the company.

Hence, Management Information System has proved to be the one of the most
important in today’s business environment.

Important roles of the MIS:

• MIS satisfies the diverse needs through a variety of systems such as Query
System, Analysis System, Modelling System and Decision Support System.

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• It helps in strategic planning, management control, operational control and
transaction processing.
• It helps in the clerical transaction processing.
• It answers the queries on the data pertaining to the transaction, the status of a
particular record and reference on a variety of documents.
• MIS for Junior Management: Providing the operational data for planning,
scheduling and control, and helps them further in decision-making at the
operation level to correct an out of control situation.
• MIS for Middle Management: In short-term planning, target setting and
controlling the business functions which is supported by the use of the
management tools of planning and control.
• MIS for Top- Level Management: in goal setting, strategic planning and evolving
the business plans and their implementation.
• It plays the role of information generation, communication, problem
identification and helps in the process of decision-making.
In conclusion, organizations today just cannot survive and grow without properly
planned, implemented and maintained MIS.

Why MIS?
A manager has to take decisions with two main challenges:

First, a manager has to take quick decisions, or else there’s a chance of the
business being taken over by his competitors. The liberalization and globalization,
in which organizations are required to compete globally, has further enhanced
the necessity for such a system.

Second, information is doubling up every two or three years, a manager has to

process a large voluminous data; failing which he may end up taking a strong
decision that may prove to be very costly to the company.

Hence, Management Information System has proved to be the one of the most
important in today’s business environment.

Important roles of the MIS:

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• MIS satisfies the diverse needs through a variety of systems such as Query
System, Analysis System, Modelling System and Decision Support System.
• It helps in strategic planning, management control, operational control and
transaction processing.
• It helps in the clerical transaction processing.
• It answers the queries on the data pertaining to the transaction, the status of a
particular record and reference on a variety of documents.
• MIS for Junior Management: Providing the operational data for planning,
scheduling and control, and helps them further in decision-making at the
operation level to correct an out of control situation.
• MIS for Middle Management: In short-term planning, target setting and
controlling the business functions which is supported by the use of the
management tools of planning and control.
• MIS for Top- Level Management: in goal setting, strategic planning and evolving
the business plans and their implementation.
• It plays the role of information generation, communication, problem
identification and helps in the process of decision-making.
In conclusion, organizations today just cannot survive and grow without properly
planned, implemented and maintained MIS.

MyReport is one of the few MIS tools which collaborates ETL as well as the
Reporting tool. The free-flowing connectivity with the databases makes MyReport
an integral asset while working on your data; Native Drivers are especially
dedicated to connecting your most commonly used databases!

Definition of data and information and characteristics of good information

Data refers to raw basic facts i.e. price of a product, the number of products
purchased, etc. that haven't yet been processed.

For example, a price of $6 and a quantity of 10 do not convey any meaning to a

customer at a point of sale till. Information should be processed data that conveys
meaning to the recipient.

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For example, multiplying $6 by 10 gives us $60, which is the total bill that the
customer should pay.

Good information should be timely and available when it is needed.

The following are the characteristics of good information.

• Accurate – information must be free from errors and mistakes. This is

achieved by following strict set standards for processing data into
information. For example, adding $6 + 10 would give us inaccurate
information. Accurate information for our example is multiplying $6 by 10.
• Complete – all the information needed to make a good decision must be
available. Nothing should be missing. If TAX is an application to the
computation of the total amount that the customer should pay then, it
should be included as well. Leaving it out can mislead the customer to think
they should pay $60 only when in actual fact, they must pay tax as well.
• Cost Effective – the cost of obtaining information must not exceed the
benefit of the information in monetary terms.
• User-focused – the information must be presented in such a way that it
should address the information requirements of the target user. For
example, operational managers required very detailed information, and
this should be considered when presenting information to operational
managers. The same information would not be appropriate for senior
managers because they would have to process it again. To them, it would
be data and not information.
• Relevant – the information must be relevant to the recipient. The
information must be directly related to the problem that the intended
recipient is facing. If the ICT department wants to buy a new server,
information that talks about a 35% discount on laptops would not be
relevant in such a scenario.
• Authoritative – the information must come from a reliable source. Let's say
you have a bank account and you would like to transfer money to another
bank account that uses a different currency from yours. Using the exchange
rate from a bureau de change would not be considered authoritative
compared to getting the exchange rate directly from your bank.
• Timely – information should be available when it is needed. Let's say your
company wants to merge with another company. Information that
evaluates the other company that you want to merge with must be

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 provided before the merger, and you must have sufficient time to verify the
information.

Competitive advantage of information and MIS

Competitive advantage is a position that makes a business more profitable than

its competitors. For example, producing products at a lower cost than your
competitors makes you more profitable.

Information systems have the capacity to help an organization into such a

position. They do so in the following ways

Operational excellence – operational excellence seeks to improve the operations

of the business. Let's take an example of a retail store. A retail store can use
information systems to automatically place an order with a supplier once the
inventory level reaches the re-order limit. This ensures that the retail store never
runs out of inventory and customers can always count on it to find what they
need.

New business models, products, and services – let's continue with the example
of a retail store. The retail store can develop a web based order system or
smartphone application that clients can use to buy items from the comfort of
their homes or wherever they are. The order system can be linked to a delivery
business and have support for online payments. This is a new business model
compared to customers walking in to make purchases vs doing it from web based
or smartphone apps.

Improved supplier and customer relations – historical data is used to understand

the needs of the customers and suppliers. This data is then used to create services
and products that address the needs. This leads to long-term relationships with
customers and business which puts an organization in a more profitable position.

Improved decision making – information is critical when making decisions.

Information systems if designed and operated efficiently, output information that
has all the characteristic of good information described in the above section. This
enables an organization to make decisions that will profit the organizations.

Components of MIS and their relationship

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A management information system is made up of five major components namely
people, business processes, data, hardware, and software. All of these
components must work together to achieve business objects.

People – these are the users who use the information system to record the day to
day business transactions. The users are usually qualified professionals such as
accountants, human resource managers, etc. The ICT department usually has the
support staff who ensure that the system is running properly.

Business Procedures – these are agreed upon best practices that guide the users
and all other components on how to work efficiently. Business procedures are
developed by the people i.e. users, consultants, etc.

Data – the recorded day to day business transactions. For a bank, data is collected
from activities such as deposits, withdrawals, etc.

Hardware – hardware is made up of the computers, printers, networking devices,

etc. The hardware provides the computing power for processing data. It also
provides networking and printing capabilities. The hardware speeds up the
processing of data into information.

Software – these are programs that run on the hardware. The software is broken
down into two major categories namely system software and applications
software. System software refers to the operating system i.e. Windows, Mac OS,
and Ubuntu, etc. Applications software refers to specialized software for
accomplishing business tasks such as a Payroll program, banking system, point of
sale system, etc.

Porter's Value chain

Think of a company such as Apple Inc. Why are they successful? Why do
customers love and buy the iPhone? It is because the iPhone adds value to their
lives. This is why Apple Inc. is a successful business. Value chain refers to activities
that a company performs to create value for its customers.

The concept of a value chain was developed by Michael Porter. Porter's value
chain has two activities namely;

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 • Primary activities – these are activities that are related to the creating
products/services, marketing and sales, and support. Primary activities
consist of inbound logistics, operations, outbound logistics, marketing and
sales, and service.
• Support activities – these are activities that support the primary activities.
Support activities consist of procurement (purchasing), human resource
management, technological development and infrastructure.

The following diagram depicts the value chain

The following illustration shows the value chain for Apple Inc.

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The overall goal of the value chain is to help a business gain competitive
advantage. Competitive advantage is a business's position in a market that makes
it to be more profitable than its direct competitors.

Influence of IT on organizational goals

Organizational goals refer to objectives and the mission of the organization,

especially in the long term. Regardless of the type of business that an organization
engages in, the overall goal is to create value for the customers or clients as
stated in the above section.

Business Information Technology alignment is concerned with using information

technology to effectively achieve business goals.

Two of the most common ways that an organization can provide value is by
offering a quality product at a lower price than the competitor or at a high price
but with more features that add value to the customers.

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 Information technology enables businesses to process and analyze large amounts
of data at a cheaper cost and within the shortest possible time. This enables
organizations to provide quality products at a cheaper price.

Let's take a bank example. A bank can use ATM to allow the clients to withdraw
money and other automated means to deposit money. Customers with queries
can be directed to a website that has frequently asked questions. Both individuals
and businesses can view the statements online if they subscribe to internet
banking.

The above IT business practices lead to reduced costs of doing business and
creating new products and services. Reduced cost of doing business enables a
bank to reduce the bank charges, therefore, offering a quality product or service
at a cheaper rate.

INFORMATION AT DIFFERENT LEVELS OF MANAGEMENT

What Is Management ? Levels of Management

For the better part of our productive life, most of us are a part of one organization
or another. The organization that we are part of may be very structured, like the
armed forces or corporate entities or it may be loosely structured like a
neighborhood cricket team. Even though organizations may be of different types,
they have some common characteristics like the existence of a common
goal/mission towards which each member of the organization works for, a plan or
an agenda to make the goal/mission a reality and the utilization of resources to
achieve the goal.
Managements the practice of shaping organizations and its people to achieve its
goal/s and mission. Management generally involves the following activities or
techniques,
1. Planning: Making informed decisions about what to do in the future.
2. Organizing: Making arrangements to fulfill the plan requirements.
3. Staffing: Employing the right people for the right job.
4. Leading: Influencing the members of the organization to move towards the
common goal of the organization.

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5. Controlling: Making checks to find the deviations/hold ups and taking corrective
action/s.
A manager in the course of his duties performs the above activities effectively to
do justice to his profession. However, it will be worthwhile to mention here that
management itself is an evolving concept. Some consider it as an exact science and
others consider it as art. Actually, it is based on practice. The practice of
management makes it what it is. The other important criterion for defining
management is that management as a profession is associated with the most
important activity of an organization and that is decision-making. The only
distinguishing attribute of a manager in an organization is his authority and
capability to take decisions. This quality makes the profession distinct.
Decisions however cannot be taken in isolation. To take a decision a manager
needs information on the problem on which decision is required, information to
help generate alternatives, information about the different alternatives and also
information about the implications of choosing the alternative. At each phase of
the decision-making process, a manager needs information and this is the vital link
between management and information. Without information a manger's ability to
take decision is seriously impaired.

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Levels of Management
Management however, is not a monolithic entity. Every manager has a distinct role
and even though all managers take decisions, some managers take more important
decisions than others, which have a greater impact on the entire organization.
Management actually is itself divided into levels. Each level of hierarchy has got
specific roles, a level of authority, responsibility, accountability and deliverables.
Decision-making therefore is of different levels of complexity and impact at the
different levels of management. Hence, information requirement is also different
for each level.
Antony (1965) has suggested a framework that is widely accepted in which
management is divided into three levels-top, middle and operational. Each level
has a distinct role and responsibility and the structure is pyramidal. This means that
in middle management there are less number of managers than at the operational
level and in the top level there are still lesser number of managers than even the

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middle level. However, the responsibilities grow exponentially as one move up the
ladder of the pyramid.
The top level managers are responsible for planning and other strategic activities.
Ideally this top management constitutes the CEO, the board and other heads. The
top management decision would include strategic issues that will have a lasting
impact on the whole organization like the decision to open a factory in say China or
the decision to launch a new product, etc. The middle level works on tactical issues.
They are responsible for the smooth functioning of the company and also to pass
on critical information to the top management about markets and competitors, etc.
The middle level managers take decisions regarding say, whether to have a
preventive maintenance in the factory or have breakdown maintenance. As can be
understood their impact even though important, is not a lasting impact. In different
organizations this middle level function is handled by different designated people.
In a large firm a Vice President may also perform the role of a middle level manager
and in some cases the General Manager may perform a middle level role. The
operational management takes decisions on operational issues like taking decisions
on which worker will be deployed for what work, etc. They are basically
implementers of broad decisions taken by the higher tiers of management. For
example, if the top management has decided to make a new product using the
same assembly line of the organization then the middle level managers have to
completely reschedule the production planning and scheduling. This new
production plan will then pass on to the supervisors at the operational level whose
job will be to see to it that the broad objectives of the plan remain intact. They can
however decide (like decisions on floor level action, decisions on manpower
decision on overtime) on the best way to make the plan a reality.

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The tier-wise structure of management helps in maintaining order. Even though in
modern organizations the levels have blurred a bit, the broad contours remain.
However, in different cultures the levels of management take on new meaning like
in Japanese companies. In Japanese companies the shop floor level managers have
a much greater authority than in other American or Indian companies. This has got
more to do with cultural issues than anything else.
The role of information is vital at each level. As is evident, each level takes decisions
with varying degree of complexity and impact. However, all the decisions are vital
for the smooth functioning of the company. Each level requires a very distinct type
of information. At the shop floor level one needs operational information about
people, processes, guidelines, etc. All such information is very structured. The
manager who goes through the process of taking the decision at this operational
level knows that the decision that he is going to take has been taken by him or
someone before him several times. Uncertainty about the outcome is minimal.
Even then to take the decision, he needs information in a structured format. Like
say, at the shop floor level if a supervisor has to decide on shutting down a machine
after observing deviations in the output and behavior of the machine he needs to
know what the ideal characteristics of the machine are, what the deviation
characteristics are and what needs to be done at the first onset of deviation. This

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information has to be made available to him on a real time basis for him to take
that simple decision of shutting the machine. Similarly, for other levels, the same
logic holds true. Without information, managerial decision-making quality is
severely impaired. In fact, at the higher tiers of management the implications of a
decision and wrong decisions at that are much more severe than at the operational
level.
Characteristics of Different Levels of Management
The different levels of management have different roles and responsibilities. Each
such level works within its own boundary but with the objective of attaining the
overall corporate goal.

Characteristics Top Management Middle Operating

Management Management

Planning Heavy Moderate Low

activity

Control Low Heavy Heavy

activity

Organizing Low Heavy Heavy

activity

Leading Heavy Moderate Low

activity

Decision- Heavy Moderate Low

making
Complexity

Problems Unstructured and Semi structured/ structured

handled semi structured
structured

Type of Strategic Tactical and Operational and

information information, structured/semi
required for

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 decision unstructured/semi structured structured
making structured from information information
both from within the from within the
within the organization organization
organization
and outside
organization
environment

Impacts and Long-term and Medium term Short-term

outcomes organization wide

Understanding High Very high Medium to low

of the
line of
business

Understanding High High to medium Low

on the
business
environment

Understanding High High to medium Low

on the
Compition

The Three Levels of Management

The three levels of management provide a separation between the managerial

positions of the organization. The administrative rank of an organization worker
determines the extent of authority, the status enjoyed and the chain of command

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that can be controlled by the worker. There are three levels of management
found within an organization, where managers at these levels have different roles
to perform for the organization to have a smooth performance, and the levels
are:

1. Top-Level Management/ Administrative level

2. Middle-Level Management/ Executory
3. Low-level Management/ Supervisory

The levels of Management and Their Functions are Discussed Below:

• Top Level Management

The Top-Level Management is also referred to as the administrative level. They

coordinate services and are keen on planning. The top-level management is made
up of the Board of Directors, the Chief Executive Officer (CEO), the Chief Financial
Officer (CFO) and the Chief Operating Officer (COO) or the President and the Vice
President.

The Top level management controls the management of goals and policies and
the ultimate source of authority of the organization. They apply control and
coordination of all the activities of the firm as they organize the several
departments of the enterprise which would include their budget, techniques, and
agendas.
The Top-level management is accountable to the shareholders for the
performance of the organization. There are several functions performed by the
top-level management, but three of them are the most important, and they are:

• To lay down the policies and objective of the organization

• Strategizing the plans of the enterprise and aligning competent
managers to the departments or middle level to carry them out.

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 • Keeping the communication between the enterprise and the outside
world.

• Middle Level of Management

The Middle level Management is also referred to as the executory level, they are
subordinates of the top-level management and are responsible for the
organization and direction of the low-level management. They account for the
top-level management for the activities of their departments.

The middle-level managers are semi- executives and are made up of the
departmental managers and branch manager. They could be divided into senior
and junior middle-level management if the organization is big. They coordinate
the responsibilities of the sub-unit of the firm and access the efficiency of lower-
level managers.

The middle-level managers are in charge of the employment and training of the
lower levels. They are also the communicators between the top level and the
lower level as they transfer information, reports, and other data of the enterprise
to the top-level. Apart from these, there are three primary functions of the
middle-level management in the organization briefed below:

• To carry out the plans of the organization according to policies and

directives laid down by the top level management.
• To organize the division or departmental activities.
• To be an inspiration or create motivation for junior managers to improve
their efficiency.

• Lower Level of Management

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The lower level Management is also referred to as the supervisory or the
operative level of managers. They oversee and direct the operative employees.
They spend most of their time addressing the functions of the firm, as instructed
by the managers above them.

The lower level managers are the first line of managers as they feature at the
base of operations, so they are essential personnel that communicates the
fundamental problems of the firm to the higher levels. This management level is
made up of the foreman, the line boss, the shift boss, the section chief, the head
nurse, superintendents, and sergeants. They are the intermediary, they solve
issues amidst the workers and are responsible for the maintenance of appropriate
relationship within the organization. They are also responsible for training,
supervising and directing the operative employees.
The lower level managers represent the management to the operative workers as
they ensure discipline and efficiency in the organization. The duty of inspiration
and encouragement falls to them, as they strengthened the workforce. They also
organize the essential machines, tools and other materials required by the
employees to get their job done.

Briefed below are the primary functions of the lower-level management:

• To allocate tasks and responsibilities to the operative employees.

• To ensure quality and be responsible for the production quantity.

• To communicate the goals and objective of the firm laid down by the higher
level

• managers to the employees and also the suggestions, recommendations,

appeals and information concerning employee problems to the higher
level managers.

• To give instruction and guided direction to workers on their day to day jobs.

27
 • To give periodic reports of the workers to the higher level managers.

NATURE OF REPORT AT DIFFERENT LEVELS OF MANAGEMENT

Reports and Its Need at Different Levels of Management

Types of Reports:

External Reports:
These reports are meant for external parties such as government, shareholders,
bankers, financial institutions, etc., for example, published financial statements of
companies. Copies of such reports are also to be filed with the Registrar of Joint
Stock companies and with the stock exchange.

In the interest of general understanding, these reports are expected to conform

to certain minimum standards of disclosure and disclose certain basic details
under the Companies Act, 1956.

Internal Reports:
These reports are meant for internal uses of different levels of management such
as top level, middle level, and junior level of managements. Hence, the approach
to the reporting problem would vary according to the reporting level. These
reports do not have to conform to any statutory standards. While the reports
meant for top management have to be comprehensive and concise, the reports to
operating supervisors should be specific and detailed.

Routine Reports:
These reports cover routine matters and are submitted at periodical intervals on
regular basis. Example, variance analysis, financial statements, budgetary control
statements are routine reports. They are submitted to different levels of

28
management as per a fixed time schedule. Routine reports are usually printed or
cyclostyled forms with blank spaces to be filled in. most of the internal reports are
of the nature of the routine reports.

Special Reports:
Reports, which are submitted on particular occasions on specific requests or
instructions, are special reports. When problems arise in a business, they are to
be investigative. The results of investigations and the recommendations are
submitted by way of special reports.

The form and contents of special reports will vary according to the nature of
problem investigated. Usually a special report contains the terms of reference i.e.,
the problem to be studied, investigations made, findings and observations and
finally conclusions and recommendations.

Examples of some of the special reports are:

1. Reports of information about competitive products,

2. Reports by the Cost Accountants on the implication of price changes on the

cost of products,

3. Reports regarding choice of products or selection of a production method, etc.

Operating Reports:
These reports may be classified into Control report and Information Report.

Control Report:
It is an important ingredient of control process and helps in controlling different
activities of an enterprise. It provides information properly collected and analyzed

29
to different levels of management. The framework of this report is determined by
the needs of the undertaking.

It is based on the company’s developed budgets and standards. It is related to

responsibility centers and it observes decision needs. This report may be prepared
on weekly, fortnightly, monthly, or yearly basis depending upon the urgency of
the matter reported. Most of the internal reports are examples of control reports.
They are also sort of routine reports.

Information Report:
These reports provide information, which are very much useful for future
planning and policy formulation. They may take the form of trend reports or
analytical reports. Trend reports provide information in a comparative form over
a period of time. On the other hand, analytical reports provide information n a
classified manner.

Sometimes these reports provide information in a summarized form the results of

operation of a specific venture or of the organization as a whole for a specific
period. In such cases they may be called as venture measurement reports.

Financial Reports:
These reports contain information about the financial position of the business.
They may be classified into Static Reports and Dynamic Reports. Static report
reveals the financial position on a particular date e.g., balance sheet of a
company.

On the other hand, the dynamic report reveals the movement of funds during a
specified period, e.g., funds flow statement, cash flow statement.

Informational Needs of Different Levels of Management:

30
Generally the reporting levels in the internal management fall into three broad
categories. They are top level, middle level, and junior level managements. They
need different kinds of reports depending upon the nature of functions they do.

Top Management Level:

The top management is primarily concerned with the policy formulation, planning
and organizing. Hence, their function is to evolve proper plans, to carry out
proper delegation of authority to subordinates with a view to obtain an effective
and efficient utilization of resources and to promote appropriate development
schemes.

For the purpose they should rather be supplied with information in summary
form covering all aspects of operating performance together with a comparison of
actual with budgeted performance.

Generally, the top management should receive the following reports at

different intervals:

Board of Directors:
Quarterly statements on production costs, machine and labour utilization,
quarterly cash flow statements, and quarterly income statement and balance
sheet

Finance Director:
Monthly abstract of receipts and payments and monthly cash flow statements.

Production Director:

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Production cost statement, department-wise machine and labour utilization
statements, and material scrap statements, overhead cost and production
statements. All these statements are to be presented to him on a monthly basis.

Sales Director:
He is to receive the following reports on monthly basis: Reports on orders
received, orders executed, and orders kept pending – division-wise; Reports on
selling and distribution cost – division-wise; Reports on credit collections,
balances, and bad debts – division wise.”

Middle Management Level:

The departmental managers such as production, sales etc., are concerned with
the execution of plans formulated by top management. They act mainly as coordi-
nating executives to administer policies, direct operating supervisors, and
evaluate their performance. Hence the reports submitted to them should enable
to exercise these functions more effectively.

They may require reports at shorter intervals, say weekly, fortnightly basis. For
example, the works manager requires weekly reports on idle time, idle capacity,
scrap production costs, quantity produced, etc. The sales manager needs
fortnightly reports on budgeted and actual sales, credit collection, orders booked,
executed and pending, and stock position-product-wise and area-wise.

Junior Management:
Foremen, Supervisors, etc., constitute this level of management. They are
interested in reports, which will apprise them of progress of jobs under their
control. Some of these reports are almost in the form of scrap of paper having no
proper format. They may need reports on daily or weekly basis.

32
For Example:
the shop foreman requires daily report of idle time and machine utilization, daily
scrap reports and daily report of production – actual and budgeted. Sales area
supervisor needs weekly reports on sales – salesman-wise, orders booked,
executed and outstanding, credit collections and outstanding, etc

The following points highlight the top three reports for different levels of
management. They are: 1. Reports for Top Level Management 2. Reports for
Middle Level Management 3. Reports for Lower Level Management.
Management Report # 1. Reports for Top Level Management:
Top management which consists of Owners, Board of Directors, Managing
Director, Chief Executive and General Manager establishes policies, plans and
objectives. It requires more of conceptual innovative decision making and human
skills as compared to the technical skills. Top management, is concerned with
policy formulation and laying down of objectives has different reporting needs.

The goals are set for the organisation and policies are framed to achieve these
goals. Top management is also involved in exercising effective control and
providing overall leadership. The work of executing policies is left to the middle
level management.

(i) Periodic Report about Profit and Loss Account and Balance Sheet:
Top management needs periodic report about Income statement so as to have a
look upon results of operations made during the period under report. Top
management has to review its business policies in light of the periodic report on
income statement.

33
Top management on the other hand is also interested to have periodic report of
balance sheet which will make them to understand financial condition of the
entity. Top management is also interested to have information about liquidity and
solvency position of the Entity. Thus periodic reports on profit and loss account
and balance sheet help the management in taking such decisions.

(ii) Statement of Fund Flow and Cash Flows at Regular Intervals:

Top management is also interested to look upon movement of working capital
and cash between two dates of balance sheets. Sometimes a Balance Sheet does
not help the management in taking certain decision regarding movement of
funds, an additional report on movement of working capital is required for proper
management of working capital. On the other hand, cash being absolute liquid
also plays a dominant role in assessing the liquidity position of the entity. A
statement of cash flow helps the management to have a detailed view on the
movement of cash during stated intervals.

(iii) Reports on Production Trends and Utilization of Capacity:

Top management of manufacturing organisation may need regular reports on
production trends and utilization of capacity for devising production policies and
programmes for future periods.

(iv) Reports about Cost of Production:

Board of directors of top level management is also interested in cost information
related to production. They are interested to know cost per unit and total cost.
Top level management is also interested to know cost of each element involved.

(a) Raw material consumed

(b) Direct labour cost

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(c) Direct expenses.

(d) Prime cost

(e) Factory cost

(f) Net factory cost.

(g) Cost of production

(h) Cost of goods sold.

(i) Cost of sales.

(v) Reports on sales, credit collection period and selling and distribution expenses.
Top management is also interested in having a regular look upon sales trend,
debtors schedule along with credit collection period and details of selling and
distribution expenses.

Management Report # 2. Reports for Middle Level Management:

The middle level management is assigned the work for executing various policies
framed by top management. The objects or goals are set by Board of Directors.
The requisite authority is delegated to middle level management so that
organisational goals may be achieved.

The reports submitted to middle level management are detailed so that a

corrective view of performance of different departments is undertaken. The work
of coordinating activities of different departments is also undertaken by middle
level management. The reports submitted to middle level management may be
classified as follows.

35
(a) Reports for Production Manager:
(i) Actual production figures along with budgeted figures. These reports can be
sent daily, weekly or monthly.

(ii) Report showing actual output made against the standard output along with
report on variance.

(iii) Capacity utilization reports.

(iv) Labour turnover reports.

(v) Absenteeism reports

(vi) Material usage report.

(vii) Machine and labour utilization report.

(viii) Report on analysis of idle time.

(ix) Report on cost variances

(x) Cost of each process or product duly analyzed by component of cost.

(xi) Scrap report.

(xii) Machine hours lost report.

(xiii) Report on stock position

(xiv) Analysis of power consumption.

(xv) Analysis of maintenance cost.

36
(xvi) Report on work in progress

(xvii) Report on abnormal loss

(xviii) Report on spoilage and defectives.

(xix) Reports on overtime and shift working.

(xx) Report on pending orders.

(b) Reports for Sales Manager:

(i) Reports on actual and budgeted sales.

(ii) Weekly reports on orders booked; orders executed, and pending orders.

(iii) Report on credit collection, and bad debts.

(iv) Report on product wise and area wise sales.

(v) Market survey reports.

(vi) Reports on stock position of finished goods.

(vii) Analysis of selling and distribution expenses.

(viii) Reports on customer’s complaints.

(ix) Report on effectiveness of sales promotion programmes.

(x) Analysis of gross profit carried in each area.

(xi) Report on credit worthiness of customers.

37
(xii) Report on selling a distribution overheads and cost of sales ratio.

(xiii) Dealers report.

(xiv) Aging schedules.

(c) Reports for Purchase Manager:

(i) Report on raw material purchased, actual materials received and pending.

(ii) Report on raw material consumed.

(iii) Report on material turnover ratio and material conversion period.

(iv) Report on minimum stock level and maximum stock level and re-order level.

(v) Analysis of purchase expenses.

(vi) Budgeted cost of purchases and actual cost of purchases.

(vii) Report on suppliers list.

(viii) Material quality reports.

(ix) Report on economic order quantity

(x) Report on suppliers.

(d) Reports to Cost Manager:

(i) Inventory reports.

(ii) Report on scrap.

(iii) Report on product cost estimate.

38
(iv) Report on carrying cost and ordering cost of materials.

(v) Report on labour efficiency and productivity.

(vi) Report on idle capacity.

(vii) Report on number of accidents

(viii) Report on overhead cost variance.

(ix) Report on under and over absorption of overheads.

(x) Report on research and development cost.

(xi) Comparative income statement product wise.

(xii) Report on idle time costs.

(e) Reports for Financial Manager:

(i) Report on cash and bank balances.

(ii) Periodic fund flow and cash flow statements.

(iii) Debtor collection reports.

(iv) Report on average payment period.

(v) Analysis of working capital.

(vi) Report on profit variance.

(vii) Statement of financial position.

39
(viii) Capital expenditure reports.

(ix) Expansion project report.

Management Report # 3. Reports for Lower Level Management:

Junior level management usually consists of foremen or sectional in charges. They
are responsible for execution of policies. They are in touch with day to day
performance of their sections. They get daily reports from their juniors. Junior
level management prepares and sends regular reports to middle level
management.

These reports may include the following:

(i) Labour utilization reports and causes of lost time.

(ii) Workers efficiency report.

(iii) Confidential reports.

(iv) Scrap report.

(v) Actual expenses of shop along with budgeted expenses.

(vi) Maintenance cost reports.

Guiding Principles for Reporting to Different Levels of Management:

(1) The lower the level of management the more detailed will be the report and
higher the level of the management the shorter or summarized will be the
reports. The lower level management consisting of foremen, section in charges,
supervisors etc. need more detailed reports because they are concerned with
actual execution of work. On the other land, top management has limited time

40
and needs summarized reports. Sometimes only exceptional matters are reported
to this level.

(2) The frequency of reports is also connected with the level of management, the
lower the level of management, the higher will be the frequency of reporting. The
middle level and junior levels of management need the reports more frequently
because they deal with day to day operations of business. The top level
management will ask for the reports when some decision is to be taken or some
policy has to be decided.

(3) The number of reports to be sent is also concerned with the levels of
management. The top level management will get maximum number of reports
and lower levels will get lesser number of reports. The top level management is to
get reports about every activity in the business while lower level management is
concerned with a particulars department or section so it will get information
about this area only. The Board of Directors will receive a large number of reports
because it controls every function in the organisation.

MIS STRUCTURE

A management information system (MIS) is an organized combination of people,

hardware, communication networks and data sources that collects, transforms
and distributes information in an organization. An MIS helps decision making by
providing timely, relevant and accurate information to managers

41
Physical Structure of Management Information Systems

A MIS is an organized system which consists of people, hardware, and

communication networks and data sources that collects, transforms and
distributes information in an organization. It is a tool which helps mangers in
making decisions by providing regular flow of accurate information in an
organization. (Sarkissian, 2009)

The physical components of an MIS include hardware, software, database,

personnel and procedures.

Hardware

42
Hardware consists of all physical components of a computer system like central
processing unit (CPU), input devices, output devices, storage and communication
devices.

Software

Software is an interface between the information system and users of information

system. Software can be of two types’ system software and applications. The
system software includes the operating system and special purposes programs.
Application is developed to achieve a specific task. Software plays an important
part in MIS.

Database

A database is a centrally managed and organized collection of data. Database

helps to store data in an organized manner and to make available to those who
need that data. Database helps to reduce duplication of data as it is centrally
managed data one data can be store at one place avoiding redundancy and
duplication of data.

Procedures

Procedures are essential for effective use of information system. Procedures

consist of various instructions like user instructions, instructions for input
preparation and operating instructions. These instructions help in using
information system effectively.

Personnel

Number of personnel is required for implementation of MIS like computer

operators, programmers, systems analysts and managers. Human beings are key
requirements for implementation of MIS. In MIS both technical and managerial
level people are required for proper implementation of MIS.

MIS CLASSIFICATION

The discipline of MIS can be categorized in the following 6 classes:

43
Transaction Processing System
TPS processes transaction and produces reports. It represents the automation of
the fundamental, routine processing used to support business operations. It does
not provide any information to the user to his/her decision-making. TPS uses data
and produces data as shown in the following diagram.

Previously, TPS was known as Management Information System. Prior to

computers, data processing was performed manually or with simple machines. The
domain of TPS is at the lowest level of the management hierarchy of an
organization.
Management Information System (MIS)
MIS is an information system, which processes data and converts it into
information. A management information system uses TPS for its data inputs. The
information generated by the information system may be used for control of
operations, strategic and long-range planning. Short-range planning, management
control, and other managerial problem solving. It encompasses processing in
support of a wide range of organizational functions & management processes. MIS
is capable of providing analysis, planning & decision making support. The functional
areas of a business may be marketing, production, human resource, finance and
accounting.
Decision Support System (DSS)
A decision support system (DSS) is an information system application that assists
decision-making. DSS tends to be used in planning, analyzing alternatives, and trial
and error search for solution. The elements of the decision support system include
a database, model base & software. The main application areas of DSS are
Production, finance and marketing.

44
DSS can be differentiated from MIS on the basis of processing the information. MIS
processes data to convert it into information. DSS processes information to support
the decision making process of a manager.
Executive Support System (ESS)
Executive Support System (ESS) is an extension of the management information
system, which is a special kind of DSS; An ESS is specially tailored for the use of chief
executive of an organization to support his decision-making. It includes various
types of decision-making but it is more specific and person oriented.
Office Automation Systems (OAS)
Office automation refers to the application of computes and communication
technology to office functions. Office automation systems are meant to improve
the productivity of managers at various levels of management of providing
secretarial assistance and better communication facilities.
Office activities may be grouped under two classes, namely
i) Activities performed by clerical personnel (clerks, secretaries, typist, etc.,) and
ii) Activities performed by the executives (managers, engineers or other
professionals like economist, researches etc.)
In the first category, the following is a list of activities.
a) Typing
b) Mailing

45
c) Scheduling of meetings and conferences,
d) Calendar keeping, and
e) Retrieving documents
The following is a list of activities in the second category (managerial category)
a) Conferencing.
b) Production of information (messages, memos, reports, etc.) and controlling
performance
Business Expert Systems: These systems are one of the main types of knowledge-
based information systems. These systems are based on artificial intelligence, and
are advanced information systems. A business expert system is a knowledge based
information system that uses its knowledge about a specific, complex application
area to act as an expert. The main components of an expert system are:
a. Knowledge Base
b. Interface Engine
c. User Interface

46
Information can be classified in a number of ways and in this chapter, you will learn
two of the most important ways to classify information.

Classification by Characteristic

Based on Anthony's classification of Management, information used in business

for decision-making is generally categorized into three types −

47
 • Strategic Information − Strategic information is concerned with long term
policy decisions that defines the objectives of a business and checks how
well these objectives are met. For example, acquiring a new plant, a new
product, diversification of business etc, comes under strategic information.
• Tactical Information − Tactical information is concerned with the
information needed for exercising control over business resources, like
budgeting, quality control, service level, inventory level, productivity level
etc.
• Operational Information − Operational information is concerned with
plant/business level information and is used to ensure proper conduction of
specific operational tasks as planned/intended. Various operator specific,
machine specific and shift specific jobs for quality control checks comes
under this category.

Classification by Application

In terms of applications, information can be categorized as −

• Planning Information − These are the information needed for establishing
standard norms and specifications in an organization. This information is
used in strategic, tactical, and operation planning of any activity. Examples
of such information are time standards, design standards.
• Control Information − This information is needed for establishing control
over all business activities through feedback mechanism. This information
is used for controlling attainment, nature and utilization of important
processes in a system. When such information reflects a deviation from the
established standards, the system should induce a decision or an action
leading to control.
• Knowledge Information − Knowledge is defined as "information about
information". Knowledge information is acquired through experience and
learning, and collected from archival data and research studies.
• Organizational Information − Organizational information deals with an
organization's environment, culture in the light of its objectives. Karl
Weick's Organizational Information Theory emphasizes that an organization

48
 reduces its equivocality or uncertainty by collecting, managing and using
these information prudently. This information is used by everybody in the
organization; examples of such information are employee and payroll
information.
• Functional/Operational Information − This is operation specific
information. For example, daily schedules in a manufacturing plant that
refers to the detailed assignment of jobs to machines or machines to
operators. In a service oriented business, it would be the duty roster of
various personnel. This information is mostly internal to the organization.
• Database Information − Database information construes large quantities of
information that has multiple usage and application. Such information is
stored, retrieved and managed to create databases. For example, material
specification or supplier information is stored for multiple users

MIS AND DECISION MAKING

Effective decision making demands accurate, timely and relevant

information. MIS provides accurate and timely information necessary to facilitate
the decision-making process and enable the organizations planning, control, and
operational functions to be carried out effectively.

Concept of Decision-Making

Decision-making is a cognitive process that results in the selection of a course of

action among several alternative scenarios.
Decision-making is a daily activity for any human being. There is no exception
about that. When it comes to business organizations, decision-making is a habit
and a process as well.

49
Effective and successful decisions result in profits, while unsuccessful ones cause
losses. Therefore, corporate decision-making is the most critical process in any
organization.
In a decision-making process, we choose one course of action from a few possible
alternatives. In the process of decision-making, we may use many tools,
techniques, and perceptions.
In addition, we may make our own private decisions or may prefer a collective
decision.
Usually, decision-making is hard. Majority of corporate decisions involve some
level of dissatisfaction or conflict with another party.
Let's have a look at the decision-making process in detail.

Decision-Making Process

Following are the important steps of the decision-making process. Each step may
be supported by different tools and techniques.

50
Step 1 − Identification of the Purpose of the Decision

In this step, the problem is thoroughly analyzed. There are a couple of questions
one should ask when it comes to identifying the purpose of the decision.

• What exactly is the problem?

• Why the problem should be solved?
• Who are the affected parties of the problem?
• Does the problem have a deadline or a specific time-line?

Step 2 − Information Gathering

A problem of an organization will have many stakeholders. In addition, there can

be dozens of factors involved and affected by the problem.

51
In the process of solving the problem, you will have to gather as much as
information related to the factors and stakeholders involved in the problem. For
the process of information gathering, tools such as 'Check Sheets' can be
effectively used.

Step 3 − Principles for Judging the Alternatives

In this step, the baseline criteria for judging the alternatives should be set up.
When it comes to defining the criteria, organizational goals as well as the
corporate culture should be taken into consideration.
As an example, profit is one of the main concerns in every decision making process.
Companies usually do not make decisions that reduce profits, unless it is an
exceptional case. Likewise, baseline principles should be identified related to the
problem in hand.

Step 4 − Brainstorm and Analyze the Choices

For this step, brainstorming to list down all the ideas is the best option. Before the
idea generation step, it is vital to understand the causes of the problem and
prioritization of causes.
For this, you can make use of Cause-and-Effect diagrams and Pareto Chart tool.
Cause-and-Effect diagram helps you to identify all possible causes of the problem
and Pareto chart helps you to prioritize and identify the causes with the highest
effect.
Then, you can move on generating all possible solutions (alternatives) for the
problem in hand.

Step 5 − Evaluation of Alternatives

Use your judgment principles and decision-making criteria to evaluate each

alternative. In this step, experience and effectiveness of the judgment principles
come into play. You need to compare each alternative for their positives and
negatives.

Step 6 − Select the Best Alternative

52
Once you go through from Step 1 to Step 5, this step is easy. In addition, the
selection of the best alternative is an informed decision since you have already
followed a methodology to derive and select the best alternative.

Step 7 − Execute the decision

Convert your decision into a plan or a sequence of activities. Execute your plan by
yourself or with the help of subordinates.

Step 8 − Evaluate the Results

Evaluate the outcome of your decision. See whether there is anything you should
learn and then correct in future decision making. This is one of the best practices
that will improve your decision-making skills.

Process and Modeling in Decision-Making

There are two basic models in decision-making −

• Rational models
• Normative model
The rational models are based on cognitive judgments and help in selecting the
most logical and sensible alternative. Examples of such models include - decision
matrix analysis, Pugh matrix, SWOT analysis, Pareto analysis and decision trees,
selection matrix, etc.
A rational decision making model takes the following steps −
• Identifying the problem,
• Identifying the important criteria for the process and the result,
• Considering all possible solutions,
• Calculating the consequences of all solutions and comparing the probability
of satisfying the criteria,
• Selecting the best option.
The normative model of decision-making considers constraints that may arise in
making decisions, such as time, complexity, uncertainty, and inadequacy of
resources.

53
According to this model, decision-making is characterized by −
• Limited information processing - A person can manage only a limited
amount of information.
• Judgmental heuristics - A person may use shortcuts to simplify the decision
making process.
• Satisfying - A person may choose a solution that is just "good enough".

Dynamic Decision-Making

Dynamic decision-making (DDM) is synergetic decision-making involving

interdependent systems, in an environment that changes over time either due to
the previous actions of the decision-maker or due to events that are outside of the
control of the decision-maker.
These decision-makings are more complex and real-time.
Dynamic decision-making involves observing how people used their experience to
control the system's dynamics and noting down the best decisions taken thereon.

Sensitivity Analysis

Sensitivity analysis is a technique used for distributing the uncertainty in the

output of a mathematical model or a system to different sources of uncertainty in
its inputs.
From business decision perspective, the sensitivity analysis helps an analyst to
identify cost drivers as well as other quantities to make an informed decision. If a
particular quantity has no bearing on a decision or prediction, then the conditions
relating to quantity could be eliminated, thus simplifying the decision making
process.
Sensitivity analysis also helps in some other situations, like −

• Resource optimization
• Future data collections
• Identifying critical assumptions
• To optimize the tolerance of manufactured parts

Static and Dynamic Models

54
Static models:

• Show the value of various attributes in a balanced system.

• Work best in static systems.
• Do not take into consideration the time-based variances.
• Do not work well in real-time systems however, it may work in a dynamic
system being in equilibrium
• Involve less data.
• Are easy to analyze.
• Produce faster results.
Dynamic models −

• Consider the change in data values over time.

• Consider effect of system behavior over time.
• Re-calculate equations as time changes.
• Can be applied only in dynamic systems.

Simulation Techniques

Simulation is a technique that imitates the operation of a real-world process or

system over time. Simulation techniques can be used to assist management
decision making, where analytical methods are either not available or cannot be
applied.
Some of the typical business problem areas where simulation techniques are used
are −

• Inventory control
• Queuing problem
• Production planning

Operations Research Techniques

55
Operational Research (OR) includes a wide range of problem-solving techniques
involving various advanced analytical models and methods applied. It helps in
efficient and improved decision-making.
It encompasses techniques such as simulation, mathematical optimization,
queuing theory, stochastic-process models, econometric methods, data
envelopment analysis, neural networks, expert systems, decision analysis, and the
analytic hierarchy process.
OR techniques describe a system by constructing its mathematical models.

Heuristic Programming

Heuristic programming refers to a branch of artificial intelligence. It consists of

programs that are self-learning in nature.
However, these programs are not optimal in nature, as they are experience-based
techniques for problem solving.
Most basic heuristic programs would be based on pure 'trial-error' methods.
Heuristics take a 'guess' approach to problem solving, yielding a 'good enough'
answer, rather than finding a 'best possible' solution.

Group Decision-Making

In group decision-making, various individuals in a group take part in collaborative

decision-making.
Group Decision Support System (GDSS) is a decision support system that provides
support in decision making by a group of people. It facilitates the free flow and
exchange of ideas and information among the group members. Decisions are
made with a higher degree of consensus and agreement resulting in a dramatically
higher likelihood of implementation.
Following are the available types of computer based GDSSs −
• Decision Network − This type helps the participants to communicate with
each other through a network or through a central database. Application
software may use commonly shared models to provide support.

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 • Decision Room − Participants are located at one place, i.e. the decision
room. The purpose of this is to enhance participant's interactions and
decision-making within a fixed period of time using a facilitator.
• Teleconferencing − Groups are composed of members or sub groups that
are geographically dispersed; teleconferencing provides interactive
connection between two or more decision rooms. This interaction will
involve transmission of computerized and audio visual information.

The Role of Management Information Systems in Decision Making

Management information systems combine hardware, software and network

products in an integrated solution that provides managers with data in a format
suitable for analysis, monitoring, decision-making and reporting. The system
collects data, stores it in a database and makes it available to users over a secure
network.
Rapid Access to Information
Managers need rapid access to information to make decisions about strategic,
financial, marketing and operational issues. Companies collect vast amounts of
information, including customer records, sales data, market research, financial
records, manufacturing and inventory data and human resource records.
However, much of that information is held in separate departmental databases,
making it difficult for decision-makers to access data quickly.
A management information system simplifies and speeds up information retrieval
by storing data in a central location that is accessible via a network. The result is
decisions that are quicker and more accurate.
Decisions Based on Latest Information
Management information systems bring together data from inside and outside
the organization. By setting up a network that links a central database to retail
outlets, distributors and members of a supply chain, companies can collect sales
and production data daily, or more frequently, and make decisions based on the
latest information.
Teams Can Collaborate
In situations where decision-making involves groups, as well as individuals,
management information systems make it easy for teams to make collaborative

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 decisions. In a project team, for example, management information systems
enable all members to access the same essential data, even if they are working in
different locations.
Interpret Results Efficiently
Management information systems help decision-makers understand the
implications of their decisions. The systems collate raw data into reports in a
format that enables decision-makers to quickly identify patterns and trends that
would not have been obvious in the raw data.
Decision-makers can also use management information systems to understand
the potential effect of change. A sales manager, for example, can make
predictions about the effect of a price change on sales by running simulations
within the system and asking a number of “what if the price was” questions.
Ease of Presentation
The reporting tools within management information systems enable decision-
makers to tailor reports to the information needs of other parties. If a decision
requires approval by a senior executive, the decision-maker can create a brief
executive summary for review. If managers want to share the detailed findings of
a report with colleagues, they can create full reports and provide different levels
of supplementary data.

Each step may be supported by different tools and techniques.

1. Step 1 − Identification of the Purpose of the Decision. ...
2. Step 2 − Information Gathering. ...
3. Step 3 − Principles for Judging the Alternatives. ...
4. Step 4 − Brainstorm and Analyze the Choices. ...
5. Step 5 − Evaluation of Alternatives. ...
6. Step 6 − Select the Best Alternative.

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Advantage & Disadvantages of MIS

Modern businesses have been leveraging management information systems (MIS)

to manage, order, organize and manipulate the gigabytes and masses of
information generated for various purposes. MIS helps businesses optimize
business processes, address information needs of employees and various
stakeholders and take informed strategic decisions. However, budget allocation
and monitoring issues can affect the efficacy of MIS. It has its advantages and
disadvantages depending on organizational deployment and usage.

ADVANTAGES

An MIS provides the following advantages:

1. It Facilitates planning: MIS improves the quality of plants by providing relevant

information for sound decision - making. Due to increase in the size and
complexity of organizations, managers have lost personal contact with the scene
of operations.

2. In Minimizes information overload: MIS change the larger amount of data in to

summarize form and there by avoids the confusion which may arise when
managers are flooded with detailed facts.

3. MIS Encourages Decentralization: Decentralization of authority is possibly when

there is a system for monitoring operations at lower levels. MIS is successfully
used for measuring performance and making necessary change in the
organizational plans and procedures.

4. It brings Co-ordination: MIS facilities integration of specialized activities by

keeping each department aware of the problem and requirements of other
departments. It connects all decision centers in the organization.

5. It makes control easier: MIS serves as a link between managerial planning and
control. It improves the ability of management to evaluate and improve
performance. The used computers has increased the data processing and storage
capabilities and reduced the cost.

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6. MIS assembles, process, stores, Retrieves, evaluates and disseminates the
information.

DISADVANTAGES:

1. Highly sensitive requires constant monitoring.

2. Budgeting of MIS extremely difficult.
3. Quality of outputs governed by quality of inputs.
4. Lack of flexibility to update itself.
5. Effectiveness decreases due to frequent changes in top management

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MANAGEMENT INFORMATION SYSTEM

UNIT 2

NOTES AS PER SYLLABUS

FOC BHU

MBA FT SEM 1

PREPARED BY –

AKASH KUSHWAHA

&

CHANDAN PANDEY

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 MIS SYSTEM

In the Management Information Systems, the concept of the ‘Systems’ play a very
essential and a defining role and it can be surely referred to as the backbone of the
management Information Systems. The major concept of the systems involves
basically the pattern or a way in which one thinks about managing optimally. In
management Information Systems, it acts as the framework for the visualization
and the analysation of the internal as well as the external environments and the
factors affect these particular environments in a very integrated way or pattern.

The word systems refer to as the arrangement or the way of organizing some
specific things in a particular way. So now a system can be defined as the regularly
interacting interdependent group of the items ultimately leading to the formation
of a united whole. Particularly for the management Information Systems, a system
consists of certain specific set of elements that can be identified as the belonging
together because of the common purpose, goal or the objective.

The features defining the system usually act as its boundaries, so it can be said that
the system is inside the boundary and the environment is outside the boundary.

Each system is further made of the sub systems, which further consist of the other
subsystems and one very important point to be kept in mind here is that all of these
subsystems are defined specifically by its boundaries. Each subsystem itself actually
acts as the system. The Interconnections and the various interactions that generally
take place between the various subsystems are referred to as the interfaces.

These interfaces are generally known to occur at the boundary and usually take the
form of the inputs and the outputs. A system is not at all arranged randomly but is
arranged with the help of certain logic, which are governed by the rules, the
regulations, the principles, the policies etc. Such an arrangement of a system is
generally influenced by the objective which the system always desires to achieve.

In the management Information Systems, the concept of the system is very much
important and one should have an in depth knowledge of it as with the help of this,
one can easily have a look at the individual elements, subsystems in the larger
perspective of the whole system leading to the optimal solutions and the synergy.

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There are different types of the system and are generally found to be present in all
the fields of the endeavor. There are systems like the social system, political
system, economic system etc.
All the Systems must possess the following –
1.Goals
2.Components
3.Subsystems
4.Behavior
5.Boundaries
6. Life cycle
What are the Characteristics of the System
A System must be having or possessing the following characteristics –

1. System receives inputs with the help of the information, energy or the materials.
2.System processes inputs and also produces outputs or the results.
3.System has a particular structure.
4.System is very much interdependent in the nature.
5. System has an objective orientation

TYPES OF SYSTEM

Types of the System in the Management Information Systems

1. Conceptual Systems

a. Are theoretical and explanatory in the nature.

b. Provide the much needed clarification.
c. Provide theoretical framework for which there may or may not be any real

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life counterpart.
d. E.g. of such systems can be philosophy, theology etc.

2. Empirical Systems

a. Are very practical, specific and also very operational in the nature.
b. Can be based on the conceptual system.
c. Examination system, surgery act as very good examples of the empirical
systems.

3. Open Systems

a. Involve continuous interaction with the environment.

b. So exchanges the information, material, energy with the environment.
c. Is open and also self organizing in the nature.
d. Is also adoptive or adaptive to the changing environment as it is flexible.

4. Closed Systems

a. Shuns any kind of the exchange with the environment.

b. Is rigid in nature.
c. Is not at all amenable to the change.
d. Is also self contained.
e. Is somewhat isolated in the nature.
f. Is having a well defined boundary.
g. Is not at all adaptive in the nature.

5. Natural Systems

a. Such Systems exist and also abound in the nature.

b. Are also not at all the results of the human endeavors.
c. Rivers, mountains, minerals etc. are the major examples of the natural
Systems

6. Artificial Systems

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 a. Are manufactured (man made).
b. Examples of such Systems are dams, canals, roads, machines, factories etc.

7. Probabilistic Systems
a. Based on the predictability of the behavior or the outcome.

8. Deterministic Systems
a. In such Systems, the interaction of the elements is known.
b. As the behavior of the elements is pre determined, it becomes possible to work
upon the reaction well in the advance.

PRINCIPLE OF SYSTEM & SUBSYSTEM

MIS is a collection of systems, hardware, procedures and people that all work
together to process, store, and produce information that is useful to the
organization. The need for MIS.

Systems may consists of numerous sub-systems, each of which has elements,

interactions, and objectives. Subsystems perform specialized tasks related to the
overall objectives of the total system. A system exist on more than one level and
can be composed of subsystems or element parts

SYSTEM---

MIS is a collection of systems, hardware, procedures and people that all work
together to process, store, and produce information that is useful to the
organization.

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A management information system (MIS) is a computer system consisting of
hardware and software that serves as the backbone of an organization's
operations. An MIS gathers data from multiple online systems, analyzes the
information, and reports data to aid in management decision-making.

The word system is derived from the Greek word “system” which means a
organized relationship among the following unit or component. "A system is an
orderly grouping of interdependent components linked together according to a
plan to achieve a specific goal".
The word component may refer to physical parts (engine, wheels of cars),
management steps (planning, organizing, controlling) or a sub subsystem in a multi
level structure. It is to be noted that a system is not a randomly arranged set. It is
arranged with some logic governed by rules, regulation, principles and policies.
In MIS we are usually concerned with man-made system involving input, process
and output, as represented in figure. A system may have multiple inputs and
multiple outputs.
All systems operate in an environment. The environment may influence the system
in its design and performance. When a system is designed to achieve certain
objective, it automatically sets the boundaries for itself. The understanding of
boundaries of the system is essential to bring clarity in explaining the system
components and their arrangement.

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 A typical system
Characteristics of System :

Following characteristics are present in all systems :

a) Organization
b) Interaction
c) Interdependence
d) Integration
e) Central Objective

Organization : Organization implies structure and order. It is the arrangement of

components that helps to achieve objectives. Hierarchical relationship starting with

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the president on top and leading down ward to the blue collar worker represent
the organization structure
Interaction : Interaction refers to the procedure in which each component interact
with other components of the system. In an organization, for example purchasing
must interact with product, advertising with sales and payroll with personnel.
Interdependence : Independence is concerned with how a system is tied together;
it is more than sharing a physical part or location. It means that parts of the system
part or location with in the system, even through each part performance. A unique
function successful integration will typically produce a better request as whole
rather than if each component works independently.
Central Objective : Objective may be real or stated. Objective is determined by
higher management and user must be aware about the central objective well in
advance

MIS SUBSYSTEMS—

Subsystems of MIS
Systems may consists of numerous sub-systems, each of which has elements,
interactions, and objectives. Subsystems perform specialized tasks related to the
overall objectives of the total system.
A system exist on more than one level and can be composed of subsystems or
element parts.

Following are the subsystems of Management Information System:

1. Transaction Processing System

2. Management Reporting System
3. Decision Support System
4. Office Information System
5. Business Expert System

Transaction Processing System - A transaction is defined as an exchange between

two or more business entities. Overall transaction processing, also known as data

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processing, reflects the principal business activities of a firm like - sales, production,
inventory, shipping, receiving, billing, accounts payable, accounts receivables,
payroll, general ledger, etc. .Transactions are important events for an organization,
and collecting data about them is called transaction processing. Transaction
Processing System's primary purpose is to record, process, validate, and store
transactions that take place in the various functional areas of a business for future
retrieval and use.Transaction processing systems are cross-functional information
systems that process data resulting from the occurrence of business transactions.

• A TPS records internal and external transactions for a company.

• A TPS performs routine and repetitive tasks. It is mostly used by lower level
managers to make operational decisions.
• Transactions can be recorded in batch mode or online. In batch mode files
are updated periodically; and in online mode, each transaction is recorded
as it occurs.
• TPS is a six step process - Data entry, Data capture, Data validation,
Processing and re-validation, Storage, Output generation, and Query
support.

Management Reporting System - Management Reporting Systems are the most

elaborate of management oriented MIS components. Its main objective is to
provide lower and middle management with printed reports and inquiry
capabilities to help maintain operational and management control of enterprise.

• MRSs are usually developed by information system professionals, rather

than by end users.
• MRSs are oriented towards reporting on the past and the present, rather
than projecting the future.
• MRSs largely report on internal company operations.
• MRSs generally have limited analytical capabilities.
• MRSs do not directly support the decision-making process
• MRSs provide Scheduled or Periodic Reports, Exception Reports, and
Demand or Ad-hoc Report.

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Decision Support System - Decision Support Systems are a class of computerized
information systems that support decision-making activities. DSS are interactive
computer-based systems and subsystems intended to help decision makers. A DSS
may present information graphically and may include an expert system or artificial
intelligence. DSS tend to be designed primarily to serve management control level
and strategic planning level managers.

• DSSs support for decision-makers in semi-structured and unstructured

problems.
• DSSs are more focused on specific decision rather than routine flows of
information.
• DSS present information graphically and may include an expert system or
artificial intelligence.
• DSSs are adaptive over time.

Office Information System - Office Information System is an information system

that uses hardware, software, and networks to enhance work flow and better
communication between employees. Office automation refers to the application of
computer and communication technology to office functions. Office automation
systems are meant to improve the productivity of managers at various level of
management by providing secretarial assistance and better communication
facilities. Office automation systems are the combination of hardware, software
and people in information systems, that process office transactions and support
office activities at all levels of the organization.These systems include a wide range
of support facilities, which include word processing, electronic filing, electronic
mail, message switching, data storage, data and voice communication etc.

Business Expert System - Business expert system is a knowledge based information

system that uses its knowledge about a specific, complex application area to act as
an expert. This system is one of the knowledge based information system. Expert
system provides decision support to managers in the form of advice from an expert
in a specific problem area. Expert systems find application in diverse areas, ranging
from medical, engineering and business.

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A typical organization is divided into operational, middle, and upper level. The
information requirements for users at each level differ. Towards that end, there
are number of information systems that support each level in an organization.

This tutorial will explore the different types of information systems, the
organizational level that uses them and the characteristics of the particular
information system.

Pyramid Diagram of Organizational levels and information requirements

Understanding the various levels of an organization is essential to understand the

information required by the users who operate at their respective levels.

The following diagram illustrates the various levels of a typical organization.

Operational management level

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The operational level is concerned with performing day to day business
transactions of the organization.

Examples of users at this level of management include cashiers at a point of sale,

bank tellers, nurses in a hospital, customer care staff, etc.

Users at this level use make structured decisions. This means that they have
defined rules that guides them while making decisions.

For example, if a store sells items on credit and they have a credit policy that has
some set limit on the borrowing. All the sales person needs to decide whether to
give credit to a customer or not is based on the current credit information from
the system.

Tactical Management Level

This organization level is dominated by middle-level managers, heads of

departments, supervisors, etc. The users at this level usually oversee the activities
of the users at the operational management level.

Tactical users make semi-structured decisions. The decisions are partly based on
set guidelines and judgmental calls. As an example, a tactical manager can check
the credit limit and payments history of a customer and decide to make an
exception to raise the credit limit for a particular customer. The decision is partly
structured in the sense that the tactical manager has to use existing information
to identify a payments history that benefits the organization and an allowed
increase percentage.

Strategic Management Level

This is the most senior level in an organization. The users at this level make
unstructured decisions. Senior level managers are concerned with the long-term
planning of the organization. They use information from tactical managers and
external data to guide them when making unstructured decisions.

Transaction Processing System (TPS)

Transaction processing systems are used to record day to day business

transactions of the organization. They are used by users at the operational

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management level. The main objective of a transaction processing system is to
answer routine questions such as;

• How printers were sold today?

• How much inventory do we have at hand?
• What is the outstanding due for John Doe?

By recording the day to day business transactions, TPS system provides answers
to the above questions in a timely manner.

• The decisions made by operational managers are routine and highly

structured.
• The information produced from the transaction processing system is very
detailed.

For example, banks that give out loans require that the company that a person
works for should have a memorandum of understanding (MoU) with the bank. If a
person whose employer has a MoU with the bank applies for a loan, all that the
operational staff has to do is verify the submitted documents. If they meet the
requirements, then the loan application documents are processed. If they do not
meet the requirements, then the client is advised to see tactical management
staff to see the possibility of signing a MoU.

Examples of transaction processing systems include;

• Point of Sale Systems – records daily sales

• Payroll systems – processing employees salary, loans management, etc.
• Stock Control systems – keeping track of inventory levels
• Airline booking systems – flights booking management

Management Information System (MIS)

Management Information Systems (MIS) are used by tactical managers to monitor

the organization's current performance status. The output from a transaction
processing system is used as input to a management information system.

The MIS system analyzes the input with routine algorithms i.e. aggregate,
compare and summarizes the results to produced reports that tactical managers
use to monitor, control and predict future performance.

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For example, input from a point of sale system can be used to analyze trends of
products that are performing well and those that are not performing well. This
information can be used to make future inventory orders i.e. increasing orders for
well-performing products and reduce the orders of products that are not
performing well.

Examples of management information systems include;

• Sales management systems – they get input from the point of sale system
• Budgeting systems – gives an overview of how much money is spent within
the organization for the short and long terms.
• Human resource management system – overall welfare of the employees,
staff turnover, etc.

Tactical managers are responsible for the semi-structured decision. MIS systems
provide the information needed to make the structured decision and based on
the experience of the tactical managers, they make judgement calls i.e. predict
how much of goods or inventory should be ordered for the second quarter based
on the sales of the first quarter.

Decision Support System (DSS)

Decision support systems are used by senior management to make non-routine

decisions. Decision support systems use input from internal systems (transaction
processing systems and management information systems) and external systems.

The main objective of decision support systems is to provide solutions to

problems that are unique and change frequently. Decision support systems
answer questions such as;

• What would be the impact of employees' performance if we double the

production lot at the factory?
• What would happen to our sales if a new competitor entered the market?

Decision support systems use sophisticated mathematical models, and statistical

techniques (probability, predictive modeling, etc.) to provide solutions, and they
are very interactive.

Examples of decision support systems include;

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 • Financial planning systems – it enables managers to evaluate alternative
ways of achieving goals. The objective is to find the optimal way of
achieving the goal. For example, the net profit for a business is calculated
using the formula Total Sales less (Cost of Goods + Expenses). A financial
planning system will enable senior executives to ask what if questions and
adjust the values for total sales, the cost of goods, etc. to see the effect of
the decision and on the net profit and find the most optimal way.
• Bank loan management systems – it is used to verify the credit of the loan
applicant and predict the likelihood of the loan being recovered.

Artificial intelligence techniques in business

Artificial intelligence systems mimic human expertise to identify patterns in large

data sets. Companies such as Amazon, Facebook, and Google, etc. use artificial
intelligence techniques to identify data that is most relevant to you.

Let's use Facebook as an example, Facebook usually makes very accurate

predictions of people that you might know or went with to school. They use the
data that you provide to them, the data that your friends provide and based on
this information make predictions of people that you might know.

Amazon uses artificial intelligence techniques too to suggest products that you
should buy also based on what you are currently getting.

Google also uses artificial intelligence to give you the most relevant search results
based on your interactions with Google and your location.

These techniques have greatly contributed in making these companies very

successful because they are able to provide value to their customers.

Online Analytical Processing (OLAP)

Online analytical processing (OLAP) is used to query and analyze multi-

dimensional data and produce information that can be viewed in different ways
using multiple dimensions.

Let's say a company sells laptops, desktops, and Mobile device. They have four (4)
branches A, B, C and D. OLAP can be used to view the total sales of each product
in all regions and compare the actual sales with the projected sales.

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Each piece of information such as product, number of sales, sales value
represents a different dimension

The main objective of OLAP systems is to provide answers to ad hoc queries

within the shortest possible time regardless of the size of the datasets being used

PRINCIPLES ----

ORGANISATION AS SYSTEM

An organizational system is the structure of how an organization is set up. That

structure defines how each division of a business is set up, the hierarchy of who
reports to whom and how communication flows throughout the organization.

Systems theory was not originally a business theory. Indeed, systems

theory was proposed in the 1940s by biologist Ludwig von Bertalanffy, say Francis
Heylighen and Cliff Joslyn in their article, "What Is Systems Theory," published on
Principia Cybernetica

Organizations as Systems

Organizations and their members are usefully conceptualized as systems designed

to accomplish predetermined goals and objectives through people and other
resources that they employ. Organizations are composed of smaller, interrelated
systems (departments, units, divisions, etc.) serving specialized functions. Typical

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functions include accounting, marketing, production, data processing, and
management. Specialized functions (smaller systems) are eventually reintegrated
through various ways to form an effective organizational whole.

The significance of conceptualizing organizations as complex systems is that

systems principles allow insight into how organizations work. To ascertain
information requirements properly and to design appropriate information
systems, it is of primary importance to understand the organization as a whole.
All systems are composed of subsystems (which include information systems);
therefore, when studying an organization, we also examine how smaller systems
are involved and how they function.

Interrelatedness and Interdependence of Systems

All systems and subsystems are interrelated and interdependent. This fact has
important implications both for organizations and for those systems analysts who
seek to help them better achieve their goals. When any element of a system is
changed or eliminated, the rest of the system’s elements and subsystems are also
significantly affected.

For example, suppose that the managers of an organization decide not to hire
administrative assistants any longer and to replace their functions with
networked PCs. This decision has the potential to significantly affect not only the
administrative assistants and the managers but also all the organizational
members who built up communications networks with the now departed
assistants. All systems process inputs from their environments. By definition,
processes change or transform inputs into outputs. Whenever you examine a
system, check to see what is being changed or processed. If nothing is changed,
you may not be identifying a process. Typical processes in systems include
verifying, updating, and printing.

Another aspect of organizations as systems is that all systems are contained by

boundaries separating them from their environments. Organizational boundaries
exist on a continuum ranging from extremely permeable to almost impermeable.
To continue to adapt and survive, organizations must be able first to import
people, raw materials, and information through their boundaries (inputs), and

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then to exchange their finished products, services, or information with the
outside world (outputs).

Feedback is one form of system control. As systems, all organizations use planning
and control to manage their resources effectively. Figure below shows how
system outputs are used as feedback that compares performance with goals. This
comparison in turn helps managers formulate more specific goals as inputs. An
example is a U.S. manufacturing company that produces red-white-and-blue
weight-training sets as well as gun-metal gray sets. The company finds that one
year after the Olympics, very few red-white-and-blue sets are purchased.
Production managers use that information as feedback to make decisions about
what quantities of each color to produce. Feedback in this instance is useful for
planning and control.

System outputs serve as feedback that compares performance with goals.

The ideal system, however, is one that self-corrects or self-regulates in such a way
that decisions on typical occurrences are not required. An example is a supply
chain system for production planning that takes into account current and
projected demand and formulates a proposed solution as output. An Italian
knitwear manufacturer that markets its clothing in the United States has just such
a system. This company produces most of its sweaters in white, uses its
computerized inventory information system to find out what colors are selling
best, and then dyes sweaters in hot-selling colors immediately before shipping
them.

Feedback is received from within the organization and from the outside
environments around it. Anything external to an organization’s boundaries is
considered to be an environment. Numerous environments, with varying degrees
of stability, constitute the milieu in which organizations exist.

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Among these environments are:

1. The environment of the community in which the organization is physically

located, which is shaped by the size of its population and its demographic

profile, including factors such as education and average income;

2. The economic environment, influenced by market factors, including

competition;

3. The political environment, controlled through state and local governments;

and

4. The legal environment, issuing federal, state, regional, and local laws and

guidelines. Although changes in environmental status can be planned for,

they often cannot be directly controlled by the organization.

Related and similar to the concept of external boundary permeability is the

concept of internal openness or closedness of organizations. Openness and
closedness also exist on a continuum, because there is no such thing as an
absolutely open or completely closed organization. Openness refers to the free
flow of information within the organization. Subsystems such as creative or art
departments often are characterized as open, with a free flow of ideas among
participants and very few restrictions on who gets what information at what time
when a creative project is in its infancy.

At the opposite end of the continuum might be a defense department unit

assigned to work on top-secret defense planning affecting national security. Each
person needs to receive clearance, timely information is a necessity, and access to
information is only on a “need to know” basis. This sort of unit is constrained by
numerous rules.

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Using a systems overlay to understand organizations allows us to acknowledge
the idea of systems composed of subsystems; their interrelatedness and their
interdependence; the existence of boundaries that allow or prevent interaction
between various departments and elements of other subsystems and
environments; and the existence of internal environments characterized by
degrees of openness and closed ness, which might differ across departments,
units, or even systems projects

An organizational system is, quite simply, how a company is set up. A good
organizational structure lays out both a hierarchy and the flow of
communication in a company. It is important for every business, no matter its
size, to implement an organizational system. There are many benefits to having
a well-defined organizational structure, including improved efficiency,
productivity and decision-making. Each structure has its strengths and
weaknesses. Ultimately, these pros and cons depend on the type of business you
run, your industry, the size of your organization and other factors. It is important
to consider every kind of organizational system before deciding which is right for
your company.

What Are Organizational Systems?

An organizational system is the structure of how an organization is set up. That

structure defines how each division of a business is set up, the hierarchy of who
reports to whom and how communication flows throughout the organization.
Broken down even further, an organizational structure defines how each role in
an organization functions. With a well-defined organizational structure in place,
all employees know what is expected of them and to whom they report.
Business owners should think long and hard about which system to choose, as
each organization has unique needs. An organizational structure that is right for
one company will not be right for another.

Examples of Organizational Systems in Business

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There are four main types of organizational structures: functional, divisional,
matrix and flat. Each system has unique features.00:16

Functional organizational structure: A functional organizational structure is a

traditional hierarchy. Many companies, especially larger corporations, follow the
functional structure. This system features several specialized divisions such as
marketing, finance, sales, human resources and operations. Then a senior
manager oversees all the specialized divisions. The reporting flow is clear. Each
employee reports to their senior, including division heads, who report to the
senior management. Senior management oversees the entire structure. Because
the company remains split up into specialized divisions, employees tend to
become specialized as well. This causes a clear path for promotion and growth.
However, the divisions can have trouble communicating with one another.
Because all departments report upwards, there is little horizontal
communication between them, leaving little space for holistic, whole-company
thinking, except at the top management level. This makes the functional
organizational system slow to adapt to change.

Divisional organizational structure: A divisional organizational structure divides

the business up into teams based on the projects the employees are working on.
This system includes many different types of teams, including legal, public
relations, research and business development. Further, teams are created
around specific projects. For example, a pharmaceutical company might have
separate teams dedicated to each medication they manufacture. Each project
team has a director or vice president and exercises a certain level of autonomy
within the organization. The divisional structure allows employees to become
deeply familiar with their team’s work. However, divisions are often unaware of
what other teams are doing, and do not communicate with each other.
Employees may not be able to work effectively across divisions when necessary.
Ultimately, this system can be challenging to manage due to its spread-out
structure.

Matrix organizational structure: A matrix system is a cross between a functional

structure and a divisional structure. From a birds-eye perspective, the business
is set up in a functional structure, with a traditional hierarchy and specialized
divisions. However, when you look at those divisions up close, they are each set

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up in a divisional organizational structure. This means they are split up into
projects and smaller teams. The matrix type of organizational structure is quite
complex and requires a lot of planning, not to mention strong systems of
communication across the organization. However, when the matrix structure
works well, it eliminates a lot of the issues that pop up with divisional or
functional-only organizations. Communication can travel to the right people,
which increases productivity and holistic thinking. Further, employees are
exposed to other departments and projects, encouraging cross-collaboration. On
the downside, the matrix structure can quickly become confusing for employees
when there are too many managers, and it’s not clear who to report to.

Flat organizational structure: Flat organizational structure flattens much of the

hierarchy and allows employees more autonomy over their work. Often, flat
organizations are split up into temporary teams, although they usually do not
have formal structures. There are still some top-down dynamics in a flat system.
Often, there is at least some senior leadership steering the ship. However, this
system is predicated on disrupting the traditional hierarchical structures of
businesses. Many startups and tech companies tend towards a flat organization,
as it encourages innovation and employee input. The thinking is that when
employees are not tamped down by red tape, they will think freely and generate
fresh, profitable ideas. This increases communication across teams and
eliminates some of the communication issues that can happen when messages
travel up a top-down structure. Unfortunately, a flat system is difficult to
maintain as a company grows, and the need for more structured communication
systems comes into play. Further, employees in a flat organization can become
overwhelmed with doing too many different tasks, and do not have a lot of
room to grow or be promoted.

Why Businesses Need Organizational Systems

Organizational systems are important for businesses of every size. Having a

solid, well-defined structure in place erases confusion and lays out simple
processes for employees to follow. Each worker should know exactly who they
report to. Without some type of hierarchy or structure in place, a workplace can
become chaotic. Employees may not understand who is responsible for what,

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causing important things to fall through the cracks. A solid organizational
structure streamlines a company and keeps everyone on the same page.

An organizational system puts every person in their correct place, able to

contribute their part to the company. Having a system improves overall
efficiency, heightens productivity and provides clarity to everyone in the
organization. Every department can work better when roles are clearly defined
and objectives are shared. Further, the proper organizational system can
improve decision-making, as information flows throughout the organization.
Upper-level managers can collect information from all divisions, giving them
greater insight into the entirety of a company’s operations.

A solid organizational system eliminates many business problems, including the

duplication of work and conflicts between positions. If a business has been well-
thought-out, each employee has a distinct role, and roles do not overlap with
one another. There is no “runaround” where nobody is sure who is responsible
for a particular task or project. Because of this, cooperation is increased and
employees feel a sense of pride in their work. Workers avoid the frustration of
having ever-shifting roles and goal posts. They can focus on what they do best.

Choosing the proper organizational system can take your business to the next
level. For example, if your business is product-based, a matrix or divisional
structure will likely be ideal. These are project-based structures that focus on
specialized teams. Small startups, on the other hand, may consider a flat
structure to allow all employees to contribute their skills and expertise without
the hierarchy interfering.

Examples of Businesses with Organizational Systems

Examples of the functional system: Functional organizational systems have

historically been used by the military, universities and government entities. Over
the years, functional hierarchies have become less popular, and many
organizations have moved away from them. However, they are still in use by
certain businesses. One example of how this type of organizational system might
be used is in a traditional factory setting. The factory manager oversees the
different divisions of the factory, which are each specialized. Each division has its
own manager, all of which report directly to the overseeing factory manager.
Another example could be a retail store. A store manager oversees the

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operations from the top of the pyramid. Below are different departments.
Perhaps there is one for inventory, one for customer service and one for
marketing and promotions. Each has its own supervisor, and all report to the
general manager.

Examples of the divisional system: Divisional systems are popular with large,
multinational corporations. For example, Johnson & Johnson has a divisional
structure. Each of Johnson & Johnson’s brands operates as its own company,
with its own leadership and internal structure. All of those brands report to the
parent company. Another example of a divisional organizational structure is
General Electric. The CEO sits at the top, and beyond that, the company is split
up into different groups. There are some operational groups, such as those for
finance, legal, public relations and global research. Some teams are devoted to
specific projects, including aviation, energy, health care and more.

Examples of the matrix system: A matrix organizational system is complex, and

therefore mostly adopted by large, well-established companies. One famous
example of a matrix company is Starbucks. The world’s largest coffee company
uses a functional structure to split its business up into divisions, including HR,
financing and marketing. These departments are located at the brand’s
corporate headquarters and report to the upper levels of management. The HR
department, for example, creates policies that affect all Starbucks locations
across the board. Next, Starbucks has separate divisions for each geographic
region. These regions include the Americas, China and Asia-Pacific, Europe,
Middle East, Russia and Africa. The Americas region, being the most popular for
the company, is further split into four smaller divisions. Starbucks also has
product-based divisions. For example, there is one division for merchandise like
the Starbucks mugs and another for baked goods. At the lower levels of the
organization, Starbucks has teams of employees, especially at the store level.
This complex matrix structure serves the coffee giant well, allowing the company
to operate thousands of stores across the country successfully.

Examples of the flat system: Flat systems are popular among startups and tech
companies. One famous example of the flat system is Zappos. In 2013, the
massive shoe company's CEO announced a new management structure called
holacracy, a setup to encourage collaboration by eliminating workplace
hierarchy. The company banned manager titles. It would no longer have job
titles and there would be no bosses. Every employee would be in charge of their

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own work. The company hoped to spark innovation and creation by doing away
with the red tape involved in hierarchy and decision-making. However, Zappos
struggles to keep operations truly flat.

This is a struggle of many large companies that implement a flat structure. Many
startups have spoken about the difficulty of maintaining a flat organizational
structure when experiencing exponential growth. Studies find that employees
find hierarchical structures comforting and practical. So, a flat organizational
structure is perhaps a good option for a business that is in its early stages, to
spur innovation and growth. However, most larger companies move away from
a flat system as it can become cumbersome to manage over time.

SYSTEM APPROACH

system approach. A line of thought in the management field which stresses the
interactive nature and interdependence of external and internal factors in an
organization. A systems approach is commonly used to evaluate market elements
which affect the profitability of a business.

What are the types of system approach?

The idea of an engineered system (glossary) is expanded. Four specific types of
engineered system context are generally recognized in systems engineering:
product system, service system, enterprise system and system of systems

What are the characteristics of system approach?

Characteristics. Systems have structure, defined by parts and their
composition; Systems have behavior, which involves inputs, processing and
outputs of material, energy or information; Systems have interconnectivity : the
various parts of a system have functional as well as structural relationships
between each other.

What is system approach management?

The system's approach to management is a scenario that plays a very important
role in creating coordinative relations between all related business systems. ...
The entire system can be broken into three parts namely - input, process and
output. Input involves the raw materials, funds, technology, etc

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 What is Systems Approach?
The systems approach to management is a concept which views a company as an
interconnected purposive system that consists of several business sections. The
entire system can be broken into three parts namely - input, process and output.

• Input involves the raw materials, funds, technology, etc.

• The process refers to activities related to management, technology, operations,
etc.
• Output are the products, results, etc.
• The response or feedback in a system focuses on the information and data which
is utilized for executing certain operations. These inputs aid in correcting the
errors found in the processes.

It is a management approach which enables the leadership to see the company as

a unified part or a major section of the larger outside corporate environment.
Even a small activity in a section of a company has a substantial effect on other
sections of the company. Such a system may be biological, physical or social, and

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may enable the management to efficiently determine the long-term goals of the
company. The systems approach states that, for realizing the operations of an
entity, it is essential to see the entity as a whole system

Elements of a System
A system is made of different subsystems: internal and external. These
subsystems are interconnected and influence each other and the system as a
whole. Each of the subsystem interacts with the adjacent subsystem and they
work in synergy for the betterment of the entire system. The limits within which
the internal subsystems function, are determined by the system boundary. The
external subsystems, on the other hand, are those which lie outside the boundary
limits, but still influence the system.

For example: In a supermarket, the various subsystems are the marketing and
advertising, sales, admin and finance department. These are the internal

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subsystems that lie within the boundary. The external subsystem here are the
buyers or the customers who visit the store. Only when all these subsystems work
together, the system is said to function effectively.

Open and Closed System

The organization can act as an open or a closed system. An open system is the
one where the elements of the system can interact with the environment. This
interaction can involve the transfer of material, information or manpower. The
purchase department in any organization can be an example of open system. The
buyers have to interact with suppliers (environment) and other internal
departments to carry out the purchasing activity.

On the contrary, a closed system is the one which does not interact with the
environment at all. There is no exchange of information, material or manpower
between the system and environment. It is sometimes referred as an 'isolated
system'. An assembly line can be treated as a closed system if it does not interact
for supply of raw materials. A research department can also be an example of
closed system

The 7S Model
This is a rough illustration of the 7S model that is developed by McKinsey &
Company consulting firm. It exclusively concentrates on the seven key factors that
are responsible for enabling organizations to reach their desired goals. Only when
all these seven key areas work in a coordinated manner, will the company
progress.

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The key factors include:
♠ Organizational Strategy: The plan to maintain the competitive edge.
♠ Business Structure: The hierarchy of the organization.
♠ Efficient Systems: The day-to-day procedures and activities related to staff and
processes.
♠ Style: The management style that is adopted.
♠ Skills: The competence of the employees.
♠ Staff: The employees of the organization.
♠ Corporate Shared Values: The core values on which the company is built. It also
refers to the organization's working culture

SYSTEM ANALYSIS MEANING—

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The act, process, or profession of studying an activity (such as a procedure, a
business, or a physiological function) typically by mathematical means in order to
define its goals or purposes and to discover operations and procedures for
accomplishing them most efficiently

Systems development is systematic process which includes phases such as

planning, analysis, design, deployment, and maintenance. Here, in this tutorial, we
will primarily focus on −

• Systems analysis
• Systems design

Systems Analysis

It is a process of collecting and interpreting facts, identifying the problems, and

decomposition of a system into its components.
System analysis is conducted for the purpose of studying a system or its parts in
order to identify its objectives. It is a problem solving technique that improves the
system and ensures that all the components of the system work efficiently to
accomplish their purpose.
Analysis specifies what the system should do.

Systems Design

It is a process of planning a new business system or replacing an existing system

by defining its components or modules to satisfy the specific requirements. Before
planning, you need to understand the old system thoroughly and determine how
computers can best be used in order to operate efficiently.
System Design focuses on how to accomplish the objective of the system.
System Analysis and Design (SAD) mainly focuses on −

• Systems
• Processes
• Technology

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What is a System?

The word System is derived from Greek word Systema, which means an organized
relationship between any set of components to achieve some common cause or
objective.
A system is “an orderly grouping of interdependent components linked together
according to a plan to achieve a specific goal.”

Constraints of a System

A system must have three basic constraints −

• A system must have some structure and behavior which is designed to
achieve a predefined objective.
• Interconnectivity and interdependence must exist among the system
components.
• The objectives of the organization have a higher priority than the
objectives of its subsystems.
For example, traffic management system, payroll system, automatic library
system, human resources information system.

Properties of a System

A system has the following properties −

Organization

Organization implies structure and order. It is the arrangement of components

that helps to achieve predetermined objectives.

Interaction

It is defined by the manner in which the components operate with each other.
For example, in an organization, purchasing department must interact with
production department and payroll with personnel department.

Interdependence

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Interdependence means how the components of a system depend on one
another. For proper functioning, the components are coordinated and linked
together according to a specified plan. The output of one subsystem is the
required by other subsystem as input.

Integration

Integration is concerned with how a system components are connected together.

It means that the parts of the system work together within the system even if each
part performs a unique function.

Central Objective

The objective of system must be central. It may be real or stated. It is not

uncommon for an organization to state an objective and operate to achieve
another.
The users must know the main objective of a computer application early in the
analysis for a successful design and conversion.

Elements of a System

The following diagram shows the elements of a system −

Outputs and Inputs

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 • The main aim of a system is to produce an output which is useful for its user.
• Inputs are the information that enters into the system for processing.
• Output is the outcome of processing.

Processor(s)

• The processor is the element of a system that involves the actual

transformation of input into output.
• It is the operational component of a system. Processors may modify the
input either totally or partially, depending on the output specification.
• As the output specifications change, so does the processing. In some cases,
input is also modified to enable the processor for handling the
transformation.

Control

• The control element guides the system.

• It is the decision–making subsystem that controls the pattern of activities
governing input, processing, and output.
• The behavior of a computer System is controlled by the Operating System
and software. In order to keep system in balance, what and how much input
is needed is determined by Output Specifications.

Feedback

• Feedback provides the control in a dynamic system.

• Positive feedback is routine in nature that encourages the performance of
the system.
• Negative feedback is informational in nature that provides the controller
with information for action.

Environment

• The environment is the “supersystem” within which an organization

operates.

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 • It is the source of external elements that strike on the system.
• It determines how a system must function. For example, vendors and
competitors of organization’s environment, may provide constraints that
affect the actual performance of the business.

Boundaries and Interface

• A system should be defined by its boundaries. Boundaries are the limits that
identify its components, processes, and interrelationship when it interfaces
with another system.
• Each system has boundaries that determine its sphere of influence and
control.
• The knowledge of the boundaries of a given system is crucial in determining
the nature of its interface with other systems for successful design.

Types of Systems

The systems can be divided into the following types −

Physical or Abstract Systems

• Physical systems are tangible entities. We can touch and feel them.
• Physical System may be static or dynamic in nature. For example, desks and
chairs are the physical parts of computer center which are static. A
programmed computer is a dynamic system in which programs, data, and
applications can change according to the user's needs.
• Abstract systems are non-physical entities or conceptual that may be
formulas, representation or model of a real system.

Open or Closed Systems

• An open system must interact with its environment. It receives inputs from
and delivers outputs to the outside of the system. For example, an
information system which must adapt to the changing environmental
conditions.

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 • A closed system does not interact with its environment. It is isolated from
environmental influences. A completely closed system is rare in reality.

Adaptive and Non Adaptive System

• Adaptive System responds to the change in the environment in a way to

improve their performance and to survive. For example, human beings,
animals.
• Non Adaptive System is the system which does not respond to the
environment. For example, machines.

Permanent or Temporary System

• Permanent System persists for long time. For example, business policies.
• Temporary System is made for specified time and after that they are
demolished. For example, A DJ system is set up for a program and it is
dissembled after the program.

Natural and Manufactured System

• Natural systems are created by the nature. For example, Solar system,
seasonal system.
• Manufactured System is the man-made system. For example, Rockets,
dams, trains.

Deterministic or Probabilistic System

• Deterministic system operates in a predictable manner and the interaction

between system components is known with certainty. For example, two
molecules of hydrogen and one molecule of oxygen makes water.
• Probabilistic System shows uncertain behavior. The exact output is not
known. For example, Weather forecasting, mail delivery.

Social, Human-Machine, Machine System

• Social System is made up of people. For example, social clubs, societies.

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 • In Human-Machine System, both human and machines are involved to
perform a particular task. For example, Computer programming.
• Machine System is where human interference is neglected. All the tasks are
performed by the machine. For example, an autonomous robot.

Man–Made Information Systems

• It is an interconnected set of information resources to manage data for

particular organization, under Direct Management Control (DMC).
• This system includes hardware, software, communication, data, and
application for producing information according to the need of an
organization.
Man-made information systems are divided into three types −
• Formal Information System − It is based on the flow of information in the
form of memos, instructions, etc., from top level to lower levels of
management.
• Informal Information System − This is employee based system which solves
the day to day work related problems.
• Computer Based System − This system is directly dependent on the
computer for managing business applications. For example, automatic
library system, railway reservation system, banking system, etc.

Systems Models

Schematic Models

• A schematic model is a 2-D chart that shows system elements and their
linkages.
• Different arrows are used to show information flow, material flow, and
information feedback.

Flow System Models

• A flow system model shows the orderly flow of the material, energy, and
information that hold the system together.

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 • Program Evaluation and Review Technique (PERT), for example, is used to
abstract a real world system in model form.

Static System Models

• They represent one pair of relationships such as activity–time or cost–

quantity.
• The Gantt chart, for example, gives a static picture of an activity-time
relationship.

Dynamic System Models

• Business organizations are dynamic systems. A dynamic model

approximates the type of organization or application that analysts deal with.
• It shows an ongoing, constantly changing status of the system. It consists of
−
o Inputs that enter the system
o The processor through which transformation takes place
o The program(s) required for processing
o The output(s) that result from processing.

Categories of Information

There are three categories of information related to managerial levels and the
decision managers make.

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Strategic Information

• This information is required by topmost management for long range

planning policies for next few years. For example, trends in revenues,
financial investment, and human resources, and population growth.
• This type of information is achieved with the aid of Decision Support System
(DSS).

Managerial Information

• This type of Information is required by middle management for short and

intermediate range planning which is in terms of months. For example, sales
analysis, cash flow projection, and annual financial statements.
• It is achieved with the aid of Management Information Systems (MIS).

Operational information

• This type of information is required by low management for daily and short
term planning to enforce day-to-day operational activities. For example,
keeping employee attendance records, overdue purchase orders, and
current stocks available.
• It is achieved with the aid of Data Processing Systems (DPS).
FUNCTION OF SYSTEM ANALYSIS

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 PRINCIPLE OF SYSTEM
The system analysis principles are to supply the best technical solution for
a system. The analysis firstly looks at the old system and looks at what can be
improved; this is the analysis doing a problem definition on the system

CONCEPT
System is defined as a set of elements arranged in an orderly manner to accomplish
an objective. System is not a randomly arranged set. It is arranged with some logic
governed by rules, regulations, principles and policies. Such an arrangement is also
influenced by the objective the system desires to achieve. Systems are created to
solve problems. One can think of the systems approach as an organized way of
dealing with a problem. In this dynamic world, the subject system analysis and
design (SAD) mainly deals with the software development activities.
For example, if a computer system is designed to perform commercial data
processing, then the elements will be data entry devices, a CPU, a disk, a memory,
application programs and a printer. If a computer is designed to achieve the
objective of design, engineering and drawing processing, then the elements will be
the graphic processor, and the languages suitable for engineering and design
applications, and plotters for drawing the output.
However, a clear statement of objectives brings a precision and an order into the
selection of elements and their arrangements in the system. Any disorder would
create a disturbance in the system, affecting the accomplishment of the objectives.
If a system in any field is analyzed. It will be observed that it has three basic parts,
which are organized in an orderly manner. These three parts can be represented in
a model as shown:-

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A system may have a single input and multiple outputs or may have several inputs
and outputs. All the systems operate in an environment. The environment may
influence the system in its design and performance. When a system is designed to
achieve certain objectives, it automatically sets the boundaries for itself. The
understanding of boundaries of the system is essential to bring clarity in explaining
the system components and their arrangements.
A collection of component that works together to realize some objectives forms a
system. In a system, the different components are connected with each other and
they are interdependent. For example, the human body represents a completely
natural system. We are also bound by many national systems such as political
system, economic system, educational system and so forth. The objective of the
system demands that some output is produced as a result of processing suitable
inputs. A well-designed system also includes an additional element referred to as
‘control’ that provides feedback to achieve the desired objectives of the system.
The system can be classified in different categories based on the predictability of
its output and the degree of information exchange with the environment. A system
is called deterministic when the inputs, the process, and outputs are known with
certainty. In a deterministic system, when the output can only be predicted in
probabilistic terms. The accounting system is a probabilistic one. A deterministic
system operates in a predictable manner while a probabilistic system behavior is
not predictable.
If a system is functioning is separated from the environment, then the system does
not have any exchange with the environment nor is it influenced by the
environmental changes then it is called an open system. All kinds of accounting
systems, for example, cash, stocks, attendance of employees, are closed systems.
Most of the systems based on rules and principles are closed systems.
The systems which are required to respond to changes in the environment such as
marketing, communication, and forecasting are open systems. All open systems

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 must have a self-organizing ability and a sensitivity to absorb and adjust to the
business organization systems of manufacturing are closed systems.
The information system is a combination of a person (the user of information), the
hardware-software system is a closed deterministic system but in combination with
the user, it is an open and a probabilistic system.
Generally, the deterministic systems are closed, and the probabilistic systems are
open. The deterministic and the closed systems are easy to computerize as they
are based on facts and their behavior can be predicted with certainty. A fixed
deposit accounting system, an invoicing system, and share accounting systems are
examples of a closed and deterministic system.
The probabilistic system and the open systems are complex in every aspect. Hence,
they call for a considerable amount of checks and controls so that the system
behavior on the performance can be controlled. All such systems must ideally have
self-organizing corrective system to keep the system going its desired path.
For example, the pricing systems are probabilistic and open. They are to be so
designed that the changes in the taxes and duties, the purchase price and the
supply positions are taken care of, in the sales price computation. Since the pricing
system operates under the influence of the environment, it has to be designed with
flexible computing routines to determine the price. The building of self-organizing
processing routines to respond to the environmental influences is a complex task
both in terms of design and operations of the system.
System analysis
System analysis may be understood as a process of collecting and interpreting facts,
identifying problems and using the information to recommend improvements in
the system. In other words system analysis means identification, understanding
and examine the system for achieving predetermined goals/objectives of the
system. System analysis is carried out with the following two objectives:-
1. To know how a system currently operates and
2. To identify the user's requirements in the proposed system
Basically, system analysis is a detailed study of all important business aspects under
consideration and the existing system, and thus, the study becomes a basis for the
proposed system (maybe a modified or an altogether new system). System analysis
is regarded as a logical process. The emphasis in this phase is an investigation to

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know how the system is currently operating and to determine what must be done
to solve the problem.
The system analysis phase is very important in the total development efforts of a
system. The user may be aware of the problem but may not know how to solve it.
During system analysis, the developer (system designer) works with the user to
develop a logical model of the system. A system analyst, because of his technical
background, may move too quickly to program design to make the system
prematurely physical, which is not desirable and may affect the ultimate success of
the system. In order to avoid this, the system analyst must involve the user at this
stage to get complex information about the system. This can be achieved if a logical
model of the system is developed on the basis of detailed study. Such a study
(analysis) should be done by using various modern tools and techniques, such as
data flow diagrams, data dictionary, and a rough description of the relevant
algorithm the final requirement of proposed information system.
System analysis is a process of collecting factual data, understanding the process
involved, identifying problems and recommending a feasible suggestion for
improving the system functioning. This involves studying the business processes,
gathering operational data, understand the information flow, finding out
bottlenecks and evolving solutions for overcoming the weakness of the system so
as to achieve the organizational goals. System analysis also includes subdividing of
a complex process involving the entire system, identification of data store and
manual process.
The major objectives of system analysis are to find answers for each business
process: what is being done how is it being done, who is doing it, when is he doing
it, why is it being done and how can it be improved? It is more of a thinking process
and involves the creative skills of the system analyst. It attempts to give birth to a
new efficient system that satisfies the current needs of the user and has scope for
future growth within the organizational constraints. The result of this process is
logical system design. System analysis is an interactive process that continues until
a preferred and acceptable solution emerges.

SYSTEM DESIGN
Based on the user requirements and the detailed analysis of the existing system,
the new system must be designed. This is the phase of system designing. It is the

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 most crucial phase in the development of a system. The logical system design
arrived at as a result of system analysis is converted into physical system design.
Normally, the design proceeds in two stages:
PRELIMINARY OR GENERAL DESIGN
In the preliminary or general design, the features of the new system are specified.
The costs of implementing these features and the benefits to be derived are
estimated. If the project is still considered to be feasible (possible), we move to the
detailed design stage.
STRUCTURED OR DETAILED DESIGN
In the detailed design stage, computer-oriented work begins in earnest. At this
stage, the design of the system becomes more structured. The structure design is
a blueprint of a computer system solution to a given problem having the same
components and inter-relationships among the same components as the original
problem. Input, output, databases, forms, codifications schemes and processing
specifications are drawn up in detail. In the design stage, the programming
language and the hardware and software platform in which the new system will
run are also decided.
The system design involves:-
I. Defining precisely the required system output
II. Determining the data required for producing the output
III. Determining the medium and format of files and databases
IV. Devising processing methods and use of software to produce output
V. Determine the methods of data capture data input
VI. Designing input forms
VII. Designing codification schemed
VIII. Detailed manual procedures
IX. Documenting the design
SYSTEM ANALYSIS AND DESIGN
SAD, as performed by the system analysts, seeks to understand what human need
to analyze data input or data flow systematically, process information in the
context of a particular business. Furthermore, system analysis and design are used
to analyze, design and implements in the support of users and the functioning of

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 business that can be accomplished through the use of a computerized information
system.
Installing a system without proper planning leads to great user dissatisfaction and
frequently causes the system to fall into disuse. System analysis and design lend
structure to the analysis and design of information systems, a costly endeavor that
might otherwise have been done in a haphazard way. It can be thought of as a
series of processes systematically undertaken to improve a business through the
use of a computerized information system. SAD involves working with current and
eventual users of an information system to support them in working with
technologies in an organizational setting.
REQUIREMENT DETERMINATION
It is also termed as a part of software requirement specification (SRS); it is the
starting point of the system development activity. This activity is considered as the
most difficult and also the most error-prone activity because of the communication
gap between the user and the developer. This may be because the user usually
does not understand the user's problem and application area. The requirement
determination is a means of translating the ideas given by the user, into a formal
document, and thus to bridge the communication gap. A good SRS provides the
following benefits:-
· It bridges the communication gap between the user and the developer by acting
as a basis of the agreement between the two parties.
· It reduces the development cost by overcoming errors and misunderstandings
early in the development.
· It becomes a basis of reference for validation of the final product and thus acts
as a benchmark.
Requirement determination consists of three activities namely requirement
anticipation, requirement investigation, and requirement specification. A
requirement anticipation activity includes the past experience of the analysis when
influencing the study. They may force the likelihood of certain problems or features
and requirements for a new system. Thus, the background of the analysts to know
what to ask or which aspects to investigate can be useful in at the system
investigation. Requirement investigation is at the center of system analysis. In this,
the existing system is studied and documented for further analysis. Various
methods like fact-finding techniques are used for the investigation are analyzed to

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 determine requirement specification, which is the description of the features for a
proposed system.
Requirement determination, in fact, is to learn and collect the information about:-
ü The basic process
ü The data which is used or produced during the process
ü The various constraints in terms of time and volume of work and
ü The performance controls used in the system.
UNDERSTAND THE PROCESS
Process understanding can be acquired, if the information is collected regarding:-
ü The purpose of the business activity
ü The steps which and where they are performed
ü The persons performing them, and
ü The frequency, time and user of the resulting information
Identify data used and information generated
Next to process understanding, an information analyst should find out what data is
used to perform each activity.
Determine the frequency, timing, and volume.
Information should also be collected to know how often the activity is repeated
and the volume of items to be handled. Similarly, timing does affect the way
analysts evaluate certain steps in carrying out an activity, in other words, timing,
frequency and volume of activities are important facts to collect.
Know the performance controls
System controls enable analysts to understand how business functions can be
maintained in an acceptable manner.
In order to understand the business operations of the organizations and thus to
know the existing system and information requirement for the new system and
information analyst collects the information and then makes an analysis of the
collected information by using certain analytics tools.
Strategies for requirement determination

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In order to collect information so as to study the existing system and to determine
information requirement, there are different strategies, which could be used for
the purpose. These strategies are discussed below:-
Interview: the interview is a face-to-face method used for collecting the required
data. In this method, a person (the interviewer) asks a question from the other
person being interviewed. The interview may be formal or informal and the
question asked may be structured or unstructured. The interview is the oldest and
the most often used device for gathering information about an existing system.
Because of the time required for interviewing and the inability of the users to
explain the system in detail, other methods are also used to gather information.
Interviewing is regarded as an art and it is important that analysts must be trained
in the art of successful interviewing. This is also important because of the fact that
the success of an interviewer and on his or her preparation for the interview.
Questionnaire: a questionnaire is a term used for almost any tool that has questions
to which individual respond. The use of questionnaires allows analysts to collect
information about various aspects of a system from a large number of persons. The
questionnaire may give more reliable data than other fact-finding techniques. Also,
the wide distribution ensures greater uncertainty for responses. The questionnaire
survey also helps in saving time as compared to interviews. The analysts should
know the advantages and disadvantages of structured as well as unstructured
questionnaires must be tested and modified as per the background and experience
of the respondents.
Record review: record review is also known as a review of documentation. Its main
purpose is to establish quantitative information regarding volumes, frequencies,
trends, ratios, etc. in record review; analysts examine information that has been
recorded about the system and its users. Records/documents may include written
policy manuals, regulations and standard operating procedures used by the
organization as a guide for managers and other employees. Procedures, manuals,
and forms are useful sources for the analysts to study the existing system.
Observation: another information gathering tool used in system studies is
observation. It is the process of recognizing and noticing people, objects, and
occurrences to obtain information. Observation allows analysis to get information.
This is difficult to obtain by any other fact-finding method. This approach is most
useful when analysts need to actually observe the way documents are handled,

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Processes are carried out and whether specific steps are actually followed. As an
observer, the analyst follows a set of rules. While making observations, he/she is
more likely to listen than talk.
The analysis usually uses a combination of all these approached to study an existing
system as anyone approach may not be sufficient for electing information
requirement of the system.

DATA FLOW GRAM

Also known as DFD, Data flow diagrams are used to graphically represent the flow
of data in a business information system. DFD describes the processes that are
involved in a system to transfer data from the input to the file storage and reports
generation.
Data flow diagrams can be divided into logical and physical. The logical data flow
diagram describes flow of data through a system to perform certain functionality
of a business. The physical data flow diagram describes the implementation of the
logical data flow.

Why DFD?
DFD graphically representing the functions, or processes, which capture,
manipulate, store, and distribute data between a system and its environment and
between components of a system. The visual representation makes it a good
communication tool between User and System designer. Structure of DFD allows
starting from a broad overview and expand it to a hierarchy of detailed diagrams.
DFD has often been used due to the following reasons:
• Logical information flow of the system
• Determination of physical system construction requirements
• Simplicity of notation
• Establishment of manual and automated systems requirements
DFD Symbols

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There are four basic symbols that are used to represent a data-flow diagram. All
data flow diagrams include four main elements: entity, process, data store and
data flow.
Data Flow Diagram symbols are standardized notations, like rectangles, circles,
arrows, and short-text labels, that describe a system or process' data
flow direction, data inputs, data outputs, data storage points, and its various sub-
processes.

Process

A process receives input data and produces output with a different content or
form. Processes can be as simple as collecting input data and saving in the
database, or it can be complex as producing a report containing monthly sales of
all retail stores in the northwest region.
Every process has a name that identifies the function it performs.
The name consists of a verb, followed by a singular noun.
Example:
• Apply Payment
• Calculate Commission
• Verify Order
Notation
• A rounded rectangle represents a process
• Processes are given IDs for easy referencing

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Process Example

Data Flow

A data-flow is a path for data to move from one part of the information system to
another. A data-flow may represent a single data element such the Customer ID
or it can represent a set of data element (or a data structure).
Example:
• Customer_info (LastName, FirstName, SS#, Tel #, etc.)
• Order_info (OrderId, Item#, OrderDate, CustomerID, etc.).
Data flow Example:

Notation
• Straight lines with incoming arrows are input data flow
• Straight lines with outgoing arrows are output data flows

Note that:
Because every process changes data from one form into another, at least one
data-flow must enter and one data-flow must exit each process symbol.
Rule of Data Flow
One of the rule for developing DFD is that all flow must begin with and end at a
processing step. This is quite logical, because data can't transform on its own with

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being process. By using the thumb rule, it is quite easily to identify the illegal data
flows and correct them in a DFD.
Wrong Right

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Other frequently-made mistakes in DFD
A second class of DFD mistakes arise when the outputs from one processing step
do not match its inputs and they can be classified as:
• Black holes - A processing step may have input flows but no output flows.
• Miracles - A processing step may have output flows but no input flows.
• Grey holes - A processing step may have outputs that are greater than the
sum of its inputs

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Data Store

A data store or data repository is used in a data-flow diagram to represent a

situation when the system must retain data because one or more processes need
to use the stored data in a later time.
Notation
• Data can be written into the data store, which is depicted by an outgoing
arrow
• Data can be read from a data store, which is depicted by an incoming
arrow.
• Examples are: inventory, Accounts receivables, Orders, and Daily Payments.

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Data Store Example

Note that:
• A data store must be connected to a process with a data-flow.
• Each data store must have at least one input data-flow and at least one
output data-flow (even if the output data-flow is a control or confirmation
message).

External Entity

An external entity is a person, department, outside organization, or other

information system that provides data to the system or receives outputs from the
system. External entities are components outside of the boundaries of the
information systems. They represent how the information system interacts with
the outside world.
• A rectangle represents an external entity
• They either supply data or receive data
• They do not process data
Notation
• A customer submitting an order and then receive a bill from the system
• A vendor issue an invoice

External Entity Example

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Note that:
• External entities also are called terminators because they are data origins
or final destinations.
• An external entity must be connected to a process through a data-flow.
Top-Down Decomposition Techniques
Top-down decomposition, also called leveling, is a technique used to show more
detail in lower-level DFDs. Leveling is done by drawing a series of increasingly
detailed diagrams until the desired degree of detail is reached. As shown in the
Figure, DFD Leveling is first displaying the targeted system as a single process, and
then showing more detail until all processes are functional primitives.

Balancing DFD

When performing top-down decomposition to a DFD to lower level DFDs, the

inputs and outputs must be conserved between levels of DFDs. For example, level
n & n+1 must have the same inputs and outputs

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Guideline for Developing Data-Flow Diagram

Context Diagram - Level 0

• The context diagram must fit in one page.

• The process name in the context diagram should be the name of the
information system.

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 • For example, Grading System, Order Processing System, Registration
System.
• The context level diagram gets the number 0 (level zero).

Unique Name for Levels

• Use unique names within each set of symbols.

• For example, there can be only one entity CUSTOMER in all levels of
the data-flow diagrams; or here can be only one process named
CALCULATE OVERTIME among all levels of data-flow diagrams.

No Cross Line in DFD

• One way to achieve this is to restrict the number of processes in a data-

flow diagram.

Right Complexity for Human Mind - 7 + / - 2 Symbols

• On lower-level data-flow diagrams with multiple processes, one should not

have more than nine process symbols.
• Another way to avoid crossing lines is to duplicate an external entity or data
store. Use a special notation such as an asterisk, to denote the duplicate
symbol.

Numbering Convention

• Use a unique reference number for each process symbol.

• Other process numbers are in the hierarchy of:
• (1, 2, 3,...);
• (1.1, 1.2, 1.3, ..., 2.1, 2.2, 2.3,...);
• (1.1.1, 1.1.2, 1.1.3,...).

Context-Level Diagram

A context diagram gives an overview and it is the highest level in a data flow
diagram, containing only one process representing the entire system. It should be
split into major processes which give greater detail and each major process may
further split to give more detail.

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 • All external entities are shown on the context diagram as well as major data
flow to and from them.
• The diagram does not contain any data storage.
• The single process in the context-level diagram, representing the entire
system, can be exploded to include the major processes of the system in
the next level diagram, which is termed as diagram 0.

Level 1 DFD

Processes in diagram 0 (with a whole number) can be exploded further to

represent details of the processing activities. Example below shows the next level
((Diagram 1) of process explosion.
Note that:
Although the following level 1 DFD only has three processes, there are quite a few
input and input from the processes to the external entities and that could end up
to be a few cross lines among them in the diagram; to avoid this problem, we
could use (master and auxiliary view) multiple views of the same external entity in
the DFD.

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Level 2 DFD

If a process with a lot of data flow linking between a few external entities, we
could first extract that particular process and the associated external entities into
a separate diagram similar to a context diagram, before you refine the process

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into a separate level of DFD; and by this way you can ensure the consistency
between them much easier.

Logical vs Physical Data Flow Diagrams

Data flow diagrams are categorized as either logical or physical. A logical data
flow diagram focuses on the business and how the business operates. It is not

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concerned with how the system will be constructed. We can ignore
implementation specifics such as, computer configuration, data storage
technology, communication or message passing methods by focusing on the
functions performed by the system, such as, data collection, data to information
transformation and information reporting.
A physical data flow diagram shows how the system will be implemented,
including the hardware, software, files, and people in the system. It is developed
such that the processes described in the logical data flow diagrams are
implemented correctly to achieve the goal of the business.

Benefits of Logical Data Flow Diagram

• A logical diagram is drawn present business information and centered on

business activities, which makes it an ideal communication tool when use in
communicating with project users.
• Logical DFD is based on business events and independent of particular
technology or physical arrangement, which makes the resulting system
more stable.
• Logical DFD allows analyst to understand the business being studied and to
identify the reason behind implementation plans.
• Systems implemented based on logical DFD will be easier to maintain
because business functions are not subject to frequent change.
• Very often, logical DFD does not contain data stores other than files or a
database, making less complex than physical DFD and is easier to develop.
• Physical DFD can be easily formed by modifying a logical DFD.

Benefits of Physical Data Flow Diagram

• Clarifying which processes are manual and which are automated: Manual
processes require detailed documentation and automated process require
computer programs to be developed.
• Describing processes in more detail than do logical DFDs: Describes all steps
for processing of data.

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 • Sequencing processes that have to be done in a particular order: Sequence
of activities that lead to a meaningful result are described. For example,
update must be performed before a producing a summary report.
• Identifying temporary data storage: Temporary storage such as a sales
transaction file for a customer receipt (report) in a grocery store, are
described.
• Specifying actual names of files and printouts: Logical data flow diagrams
describes actual filenames and reports, so that the programmers can relate
those with the data dictionary during the developmental phase of the
system.
• Adding controls to ensure the processes are done properly: These are
conditions or validations of data that are to be met during input, update,
delete, and other processing of data.

Refining Physical DFD for Logical DFD

The example below shows a logical DFD and a physical DFD for a grocery store
cashier:
• The CUSTOMER brings the ITEMS to the register;
• PRICES for all ITEMS are LOOKED UP, and then totaled;
• Next, PAYMENT is given to the cashier finally, the CUSTOMER is given a
receipt.

Logical DFD Example - Grocery Store

The logical DFD illustrates the processes involved without going into detail about
the physical implementation of activities.

Physical DFD Example - Grocery Store

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 • The physical DFD shows that a bar code-the UPC PRICE code found on most
grocery store items is used
• In addition, the physical DFD mentions manual processes such as scanning,
explains that a temporary file is used to keep a subtotal of items
• The PAYMENT could be made by CASH, CHECK, or DEBIT CARD
• Finally, it refers to the receipt by its name, CASH REGISTER RECEIPT

DATA DICTIONARY

A data dictionary contains metadata i.e data about the database. The data
dictionary is very important as it contains information such as what is in the
database, who is allowed to access it, where is the database physically stored etc.
The users of the database normally don't interact with the data dictionary, it is only
handled by the database administrators.
The data dictionary in general contains information about the following:

• Names of all the database tables and their schemas.

• Details about all the tables in the database, such as their owners, their
security constraints, when they were created etc.
• Physical information about the tables such as where they are stored and
how.
• Table constraints such as primary key attributes, foreign key information
etc.
• Information about the database views that are visible.

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This is a data dictionary describing a table that contains employee details.

Field Name Data Type Field Size for Description Example

display

Employee Integer 10 Unique ID of each 1645000001

Number employee

Name Text 20 Name of the employee David

Heston

Date of Birth Date/Time 10 DOB of Employee 08/03/1995

Phone Integer 10 Phone number of 6583648648

Number employee

The different types of data dictionary are:

Active Data Dictionary
If the structure of the database or its specifications change at any point of time, it
should be reflected in the data dictionary. This is the responsibility of the database
management system in which the data dictionary resides.
So, the data dictionary is automatically updated by the database management
system when any changes are made in the database. This is known as an active data
dictionary as it is self updating.
Passive Data Dictionary
This is not as useful or easy to handle as an active data dictionary. A passive data
dictionary is maintained separately to the database whose contents are stored in
the dictionary. That means that if the database is modified the database dictionary
is not automatically updated as in the case of Active Data Dictionary.

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So, the passive data dictionary has to be manually updated to match the database.
This needs careful handling or else the database and data dictionary are out of sync.
ANALYSIS OF MIS
A management information system (MIS) provides information from raw data
and helps executive management to determine strategies to implement as an
organization. This applied concept is based on decision support systems with
modules that interface with other information system technologies. MIS can
help with marketing strategies, organizational tasks and provide management
reports to increase productivity of employees within an organization.

MIS vs. Regular Information Systems

The difference between a MIS and a regular information system is MIS monitors
other information system processes to retrieve data to make corporate and
executive decisions while testing “what if” scenarios. An MIS also collects,
stores, processes and analyzes data needed for managerial functions. Regular
information systems are created to provide transaction processing of a certain
process such as, accounting, inventory management, and health and science
data experiments. MIS integrates with a regular information system to retrieve
strategic data.

Decision Support

Decision support modules are programmed into an MIS system for managerial
use. Decision support is used to assess corporate strategies at the executive
level. For example, an MIS decision support module is a worldwide report of
sales in various regions collected from a retail sales/inventory management
system. The sales database or catalog is taken by the decision support module
and formatted into various report details, such as sales by state, city, ZIP code
and consumer. This information is used by executive management could be used
by executive management for the purpose of expansion, sales and marketing.
Decision support modules in MIS can also provide scenarios of increased sales
and profitability.

Management by Objectives

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MIS supports the managerial theory of management by objectives (MBO). MBO
is a concept by which objectives between management, supervisors and
employees are sharing time-sensitive information compiled by an MIS. The
process involves an agreement to accomplish strategic managerial tasks in a set-
time frame based on data compiled and reviewed by executive management.
The tasks include project development, management and analysis which can be
cataloged and referenced within the MIS. herefore, MIS is also used as a tracking
system which monitors project deadlines, time lines and completion.

MIS Organizational Strategy

MIS designs are created for executive management to also adjust organizational
strategies based on data compiled through various sources. The “what if”
scenario answers questions involving a process or future process and assist in
corporate strategy. Those scenarios can only work if the organizational layout
created by management has adequate resources in human personnel, materials,
goods or logistical capability to support the desired objective. MIS includes
those variables in the decision support process.

Organizational Types

Large organizations depend on management information systems to review data

that impact daily operations. Small businesses have assessment tools but they
are more generic and are off-line (reviewing printed exception reports, audit
reports). Large organizations with big transactions must have an MIS to analyze
information that affects the organization.

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MANAGEMENT INFORMATION SYSTEM

UNIT 3

NOTES AS PER SYLLABUS

FOC BHU

MBA FT SEM 1

PREPARED BY –

AKASH KUSHWAHA

&

CHANDAN PANDEY

126
MANAGEMENT INFORMATION SYSTEM

UNIT 4

NOTES AS PER SYLLABUS

FOC BHU

MBA FT SEM 1

PREPARED BY –

AKASH KUSHWAHA

&

CHANDAN PANDEY

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accounting and financial information system

An accounting information system (AIS) is a structure that a business uses to

collect, store, manage, process, retrieve and report its financial data so it can be
used by accountants, consultants, business analysts, managers, chief financial
officers (CFOs), auditors, regulators, and tax agencies.

Specially trained accountants work in-depth with AIS to ensure the highest level
of accuracy in a company's financial transactions and record-keeping, as well
as make financial data easily available to those who legitimately need access to
it—all while keeping data intact and secure.

Accounting information systems generally consist of six primary components:

people, procedures and instructions, data, software, information technology
infrastructure, and internal controls. Let's look at each component in detail.

Introduction To Accounting Information Systems

1. AIS People

The people in an AIS are simply the system users. Professionals who may need to
use an organization's AIS include accountants, consultants, business analysts,
managers, chief financial officers, and auditors. An AIS helps the different
departments within a company work together.

For example, management can establish sales goals for which staff can then order
the appropriate amount of inventory. The inventory order notifies the accounting
department of a new payable. When sales are made, salespeople can enter
customer orders, accounting can invoice customers, the warehouse can assemble
the order, the shipping department can send it off, and the accounting
department gets notified of a new receivable. The customer service department
can then track customer shipments and the system can create sales reports for

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management. Managers can also see inventory costs, shipping costs,
manufacturing costs and so on.

With a well-designed AIS, everyone within an organization who is authorized to

do so can access the same system and get the same information. An AIS also
simplifies getting information to people outside of the organization, when
necessary.

For example, consultants might use the information in an AIS to analyze the
effectiveness of the company's pricing structure by looking at cost data, sales
data, and revenue. Also, auditors can use the data to assess a company's internal
controls, financial condition and compliance with the Sarbanes-Oxley Act (SOX).

The AIS should be designed to meet the needs of the people who will be using it.
The system should also be easy to use and should improve, not hinder efficiency.

2. Procedures and Instructions

The procedure and instructions of an AIS are the methods it uses for collecting,
storing, retrieving and processing data. These methods are both manual and
automated. The data can come from both internal sources (e.g., employees) and
external sources (e.g., customers' online orders). Procedures and instructions will
be coded into AIS software—they should also be "coded" into employees through
documentation and training. To be effective, procedures and instructions must be
followed consistently.

3. AIS Data

To store information, an AIS must have a database structure such as structured

query language (SQL), a computer language commonly used for databases. The
AIS will also need various input screens for the different types of system users
and data entry, as well as different output formats to meet the needs of different
users and various types of information.

The data contained in an AIS is all the financial information pertinent to the
organization's business practices. Any business data that impact the company's
finances should go into an AIS.

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The type of data included in an AIS will depend on the nature of the business, but
it may consist of the following:

• sales orders
• customer billing statements
• sales analysis reports
• purchase requisitions
• vendor invoices
• check registers
• general ledger
• inventory data
• payroll information
• timekeeping
• tax information

This data can then be used to prepare accounting statements and reports, such as
accounts receivable aging, depreciation/amortization schedules, trial balance,
profit and loss, and so on. Having all this data in one place—in the AIS—facilitates
a business's record-keeping, reporting, analysis, auditing, and decision-making
activities. For the data to be useful, it must be complete, correct and relevant.

On the other hand, examples of data that would not go into an AIS include
memos, correspondence, presentations, and manuals. These documents might
have a tangential relationship to the company's finances, but, excluding the
standard footnotes, they are not really part of the company's financial record-
keeping.

4. AIS Software

The software component of an AIS is the computer programs used to store,

retrieve, process, and analyze the company's financial data. Before there were
computers, an AIS was a manual, paper-based system, but today, most companies
are using computer software as the basis of the AIS. Small businesses might use
Intuit's Quickbooks or Sage's Sage 50 Accounting, but there are others. Small to
mid-sized businesses might use SAP's Business One. Mid-sized and large
businesses might use Microsoft's Dynamics GP, Sage Group's MAS 90 or MAS 200,
Oracle's PeopleSoft or Epicor Financial Management.

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Quality, reliability, and security are key components of effective AIS software.
Managers rely on the information it outputs to make decisions for the company,
and they need high-quality information to make sound decisions.

AIS software programs can be customized to meet the unique needs of different
types of businesses. If an existing program does not meet a company's needs, the
software can also be developed in-house with substantial input from end users or
can be developed by a third-party company specifically for the organization. The
system could even be outsourced to a specialized company.

For publicly-traded companies, no matter what software program and

customization options the business chooses, Sarbanes-Oxley regulations will
dictate the structure of the AIS to some extent. This is because SOX regulations
establish internal controls and auditing procedures with which public companies
must comply.

5. IT Infrastructure

Information technology infrastructure is just a fancy name for the hardware used
to operate the accounting information system. Most of these hardware items a
business would need to have anyway, including computers, mobile
devices, servers, printers, surge protectors, routers, storage media, and possibly
back-up power supply. In addition to cost, factors to consider in selecting
hardware include speed, storage capability and whether it can be expanded and
upgraded.

Perhaps most importantly, the hardware selected for an AIS must be compatible
with the intended software. Ideally, it would be not just compatible, but
optimal—a clunky system will be much less helpful than a speedy one. One way
businesses can easily meet hardware and software compatibility requirements is
by purchasing a turnkey system that includes both the hardware and the software
that the business needs. Purchasing a turnkey system means, theoretically, that
the business will get an optimal combination of hardware and software for its AIS.

A good AIS should also include a plan for maintaining, servicing, replacing and
upgrading components of the hardware system, as well as a plan for the disposal
of broken and outdated hardware so that sensitive data is completely destroyed.

6. Internal Controls

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The internal controls of an AIS are the security measures it contains to protect
sensitive data. These can be as simple as passwords or as complex as biometric
identification. An AIS must have internal controls to protect against unauthorized
computer access and to limit access to authorized users, which includes some
users inside the company. It must also prevent unauthorized file access by
individuals who are allowed to access only select parts of the system.

An AIS contains confidential information belonging not just to the company but
also to its employees and customers. This data may include Social Security
numbers, salary information, credit card numbers, and so on. All of the data in an
AIS should be encrypted, and access to the system should be logged and
surveilled. System activity should be traceable as well.

An AIS also needs internal controls that protect it from computer viruses, hackers
and other internal and external threats to network security. It must also be
protected from natural disasters and power surges that can cause data loss.

How an AIS Works In Real Life

We've seen how a well-designed AIS allows a business to run smoothly on a day-
to-day basis or hinders its operation if the system is poorly designed. The third
use for an AIS is that, when a business is in trouble, the data in its AIS can be used
to uncover the story of what went wrong.

The cases of WorldCom and Lehman Brothers provide two examples.

In 2002, WorldCom internal auditors Eugene Morse and Cynthia Cooper used the
company's AIS to uncover $4 billion in fraudulent expense allocations and other
accounting entries. Their investigation led to the termination of CFO Scott
Sullivan, as well as new legislation — section 404 of the Sarbanes-Oxley Act,
which regulates companies' internal financial controls and procedures.

When investigating the causes of Lehman's collapse, a review of its AIS and other
data systems was a key component, along with document collection and review,
plus witness interviews. The search for the causes of the company's failure
"required an extensive investigation and review of Lehman's operating,
trading, valuation, financial, accounting and other data systems," according to the
2,200-page, nine-volume examiner's report.

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Lehman's systems provide an example of how an AIS should not be structured.
Examiner Anton R. Valukas' report states, "At the time of its bankruptcy filing,
Lehman maintained a patchwork of over 2,600 software systems and
applications... Many of Lehman's systems were arcane, outdated or non-
standard."

The examiner decided to focus his efforts on the 96 systems that appeared most
relevant. This examination required training, study, and trial and error just to
learn how to use the systems.

Valukas' report also noted, "Lehman's systems were highly interdependent, but
their relationships were difficult to decipher and not well-documented. It took
extraordinary effort to untangle these systems to obtain the necessary
information."

Management Information Systems (MIS) in Finance have been widely adopted

both by corporations as well as governments. They are information systems with
capacity to maintain large data bases enabling organizations to store, organize
and access financial information easily. These systems are primarily used for
accounting operations and generation of financial reports.. Increasingly they are
also used to support budgetary, planning and decision making processes.These

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systems are credited with increasing financial transparency, efficiency and
accountability. .

General Ledger

The main use of a management information System (MIS) in finance is that it

automatically updates all the transactions in the General Ledger. The General
Ledger is the core component of all financial information systems. Financial
transactions are simultaneously posted on the various accounts that comprise
the organization's "Chart of Accounts". Simultaneous updating of accounts such
as sales, inventory and accounts receivable, reduces errors. It also provides an
accurate and permanent record of all historical transactions.

Cash Management

Cash flow management is an important use of MIS in Finance. Cash

Management refers to the control, monitoring and forecasting of cash for
financing needs. Use of MIS in Finance helps companies track the flow of cash
through accounts receivable and accounts payable accurately. Accurate records
also help in monitoring cost of goods sold. This can help pin point areas that eat
up cash flow such as inventory costs, high raw material costs or unreliable sales.

Budget Planning

Financial budget planning uses proforma or projected financial statements that

serve as as formal documents of management's expectations regarding sales,
expenses and other financial transactions. Thus financial budgets are tools used
both for planning as well as control. MIS in finance helps organizations evaluate
"what if" scenarios. By modifying the financial ratios, management can foresee
the effects of various scenarios on the financial statements. MIS thus serves as a
decision making tool, helping in choosing appropriate financial goals.

Financial Reporting

The use of MIS systems in Finance enables companies to generate multiple

financial reports accurately and consistently. Generation of financial statements
both for internal reports as well as for shareholder information takes less effort

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 because of the automatic updating of the General Ledger. Compliance with
Government regulations as well as auditing requirements is also easier because
the records are accurate and provide a permanent historical map of transactions
that can be verified.

Financial Modeling

A financial model is a system that incorporates mathematics, logic and data in

the form of a large database. The model is used to manipulate the financial
variables that affect earnings thus enabling planners to view the implications of
their planning decisions. MIS in Finance enables organizations to store a large
amount of data. This helps managers develop accurate models of the external
environment and thus incorporate realistic "what if" scenarios into their long-
range planning goals.

production and operations information system

Production information systems

• E-construction and e-planning

• Visualisation / reporting
• Instrumentation and control
• Product influencing (amongst other things, control unit development)
• Test planning (including control units)

Production information systems enable the management of the business

processes and its related technological and commercial data. Our highly
specialised experts provide you with quality and production assurance processes
that reduce your manufacturing costs and sustainably increase the profitability of
your enterprise.

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Take advantage of our expertise! The monitoring of your production and the
consistent fault management allow us to minimize your down times and maximize
your output. Our engineers empower you to improve your productivity and to
gain a more flexible production.

MVI PROPLANT stands for top-quality services in production and logistics. Within
the MVI Group, which has been renowned for holistic projects in the mobility
industry since 1968, MVI PROPLANT provides precisely the positive customer
benefits you need to focus on in your development process.

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Operations Information System

Intelligent Information Management using Area Information Systems

To make sure that the right information is available at the right place and time,
Scheidt & Bachmann System Technik GmbH has developed an area information
system which provides up-to-date and comprehensive information for
infrastructure operators, railway and transport companies and passengers.

The operations information system LeiDis-FI collects operational information on

train runs (current positions, timetable data), train formation or routes. It
analyses and links this data and transmits it to the sites where it is needed. Thus,
passengers always have correct and full information at their disposal, connections
are correctly co-ordinated and resources (routes, traction vehicles, coaches etc.)
are available at the right time and in the right quantity. Data can be exchanged
throughout the entire company and even across international borders.

The LeiBIT system hitherto used at DB Netz AG is now being replaced by LeiDis-FI.
Almost all of the functionality of LeiBIT has been taken over by the LeiDis-FI
system which has been newly implemented with important alterations to the
system architecture. The new features are the use of an Enterprise Service Bus
(ESB) for integration of the application, the implementation of user interfaces as
web clients and a standardised user administration via Windows Active Directory.
Within the framework of the Integrated Technology Strategy (ITS) of DB Netz AG,

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the LeiDis-FI system is a first step towards a reduction in the diversity of
applications.

Making sure everything works hand in hand

The area information system provides a complete and up-to-date database as a

basis for decisions concerning operations control. The system is highly
automated, simple to operate and avoids multiple data collecting, thus relieving
the workload on personnel. Work processes are simplified and business processes
optimised. With the continuous supply of the right information to the right place
at the right time, the operational information system ensures that everything
works hand in hand.

The advantages of LeiDis-FI:

• comprehensive and continuously up-dated information about the

operational situation for all internal sections within the company
• up-to-date information for the company’s customers
• information transmitted to passenger information installations via
standardised interfaces
• based on international standards, thus enabling data exchange across
international borders
• future-oriented, advanced architecture

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marketing information system (MkIS)

A marketing information system (MkIS) is a set of procedures, frameworks and

technology for the continuous gathering of information that might affect the
promotion and selling of a product or service. Software tools allow marketers to
gather information around-the-clock and preserve, analyze, evaluate, update and
distribute information relevant to specific products, services or promotions.

The information, which can come from various sources both inside and outside
the organization, helps marketers keep up with changing customer
needs, customer feedback, industry trends and competitors’ plans. This, in turn,
helps the marketer to make data-driven decisions about such things as product
designs, service options, pricing, packaging, distribution and advertising channels.

MkIS challenges can include high initial time and labor costs due to the complexity
of setting up an information system capable of working with both structured
and unstructured data. Typically, the components of a marketing information
system include integration with:

Company data management systems - provides marketers with real-time

data about internal operations, including orders received, inventory
records and sales invoices. This helps ensure that sales and leads can be
traced back to the marketing effort that produced them, and positive and
negative feedback can be tracked to the source.

Marketing research systems - provides marketers with information

gathered by third-party syndicated research firms, custom marketing

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 research firms and speciality-line marketing research firms. This helps
marketers be more accurate when predicting consumer buying trends.

Marketing intelligence systems - provides marketers with information

about such things as market opportunity, competitor penetration
strategies and market growth metrics. Typically, this information is
gathered internally by marketing personnel and is less formal than
marketing research.

Marketing models - provides marketers with the ability to view data in

terms of traditional frameworks used when creating marketing plans. This
can help marketers gain a broad perspective on a product or service's
potential to be lucrative and help with cost-benefit analysis.

Arguably, the ultimate goal of installing an MkIS is to help managers gain better
insight into the return on investment (ROI) for specific marketing
initiatives. Information gleaned from MkISes will not only indicate how things are
going, but also why and where performance needs to be improved. An additional
benefit is that an MkIS allows marketers on geographically-distributed teams to
work together virtually and share the same view of data.

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personnel information system

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 the collection of information on its employees stored by an organization. At its m
ost basic such information will usually comprise employees' names and addresses,
length of service and attendance, and will be maintained by the PERSONNEL
MANAGEMENT department. It is common for this information to be kept separate
from pay records (which are usually maintained by the finance department). Until
the widespread adoption of computerized databases, many organizations found i
t difficult to analyse this information for MANPOWER
PLANNING purposes; it was instead used mainly to deal with problems relating to
individual employees. In addition such information was not readily available to ot
her management departments. Nor did it generally include information on, for ins
tance, skills and training which production departments, for instance, would find
useful. A sophisticated personnel information system will comprise an extensive d
atabase capable of retrieval and analysis by all management functions.

o known as transaction processing or real-time processing.

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Transaction process system

A transaction process system and transaction processing are often contrasted

with a batch process system and batch processing, where many requests are all
executed at one time. The former requires the interaction of a user, whereas
batch processing does not require user involvement. In batch processing the
results of each transaction are not immediately available. Additionally, there is a
delay while the many requests are being organized, stored and eventually
executed. In transaction processing there is no delay and the results of each
transaction are immediately available. During the delay time for batch processing,
errors can occur. Although errors can occur in transaction processing, they are
infrequent and tolerated, but do not warrant shutting down the entire system.

To achieve performance, reliability and consistency, data must be readily

accessible in a data warehouse, backup procedures must be in place and the
recovery process must be in place to deal with system failure, human failure,
computer viruses, software applications or natural disasters.

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145
 Enterprise resource planning (ERP) is business process management software that

allows an organization to use a system of integrated applications to manage the

business and automate many back office functions related to technology, services

and human resources.

ERP software typically integrates all facets of an operation — including product

planning, development, manufacturing, sales and marketing — in a single

database, application and user interface.

ERP is an Enterprise Application

Company Description Features

Market-leading clould EPR solution. Accounting, Inventory Management, Reporting &

Modern and scalable implementation Analytics, Functionality across enterprises

Netsuite ERP across all critical back office functions. of all sizes.

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 Accounting, Inventory & Warehouse

Trusted EPR provider with 40 years of Management, Purchasing, Reporting

market history and more than 50,000 & Analytics Functionality across

SAP ERP customers worldwide. enterprises of all sizes.

Financial Cloud, Accounting, Inventory

Fully-integrated, comprhensive suite & Warehouse Management, Procurement,

of EPR buisness tools and capacity Reporting & Analytics, Functionality across enterpris

Sage ERP across all back office functions. all functions.

ERP software is considered to be a type of enterprise application, that is software

designed to be used by larger businesses and often requires dedicated teams to

customize and analyze the data and to handle upgrades and deployment. In

contrast, Small business ERP applications are lightweight business management

software solutions, often customized for a specific business industry or vertical.

Today most organizations implement ERP systems to replace legacy software or

to incorporate ERP applications because no system currently exists. In fact, a 2016

study by Panorama Consulting Solutions, LLC., indicates that organizations

implement ERP for the following reasons:

• To replace out-of-date ERP software (49%)

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• To replace homegrown systems (16%)
• To replace accounting software (15%)
• To replace other non-ERP systems / had no system (20%)
Top ERP Systems

ERP Software Modules Explained

ERP software typically consists of multiple enterprise software modules that are

individually purchased, based on what best meets the specific needs and technical

capabilities of the organization. Each ERP module is focused on one area of

business processes, such as product development or marketing.

Some of the most common ERP modules include those for product planning,

material purchasing, inventory control, distribution, accounting, marketing,

finance and HR. A business will typically use a combination of different modules

to manage back-office activities and tasks including the following:

• Distribution process management
• Supply chain management
• Services knowledge base
• Configure prices
• Improve accuracy of financial data
• Facilitate better project planning
• Automate the employee life-cycle
• Standardize critical business procedures
• Reduce redundant tasks
• Assess business needs
• Accounting and financial applications
• Lower purchasing costs
• Manage human resources and payroll

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As the ERP methodology has become more popular, software applications have

emerged to help business managers implement ERP in to other business activities

and may incorporate modules for CRM and business intelligence, presenting it as

a single unified package.

The basic goal of using an enterprise resource planning system is to provide one

central repository for all information that is shared by all the various ERP facets to

improve the flow of data across the organization.

Enterprise ERP Trends

The ERP field can be slow to change, but the last couple of years have unleashed

new technology trends which are fundamentally shifting the entire area. The

following new and continuing computing trends have an impact on the growth of

enterprise ERP software:

Mobile ERP

Executives and employees want real-time access to information, regardless of

where they are. It is expected that businesses will embrace mobile ERP for the

reports, dashboards and to conduct key business processes.

Cloud ERP

The cloud has been advancing steadily into the enterprise for some time, but

many ERP users have been reluctant to place data in the cloud. Those

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reservations have gradually been evaporating, however, as the advantages of the

cloud become apparent.

Social ERP

There has been much hype around social media and how important —or not — it

is to add to ERP systems. Certainly, vendors have been quick to seize the initiative,

adding social media packages to their ERP systems with much fanfare. But some

wonder if there is really much gain to be had by integrating social media with ERP.

Two-tier ERP

Enterprises once attempted to build an all-encompassing ERP system to take care

of every aspect of organizational systems. But some expensive failures have

gradually brought about a change in strategy – adopting two tiers of ERP.

Depending on your organization's size and needs there are a number of

enterprise resource planning software vendors to choose from in the large

enterprise, mid-market and the small business ERP market. Gartner's annual

market share reports put SAP, Oracle, Sage, Microsoft and NetSuite among the

top vendors, but Capterra's data suggests that SAP and Oracle are easily the

biggest two, with Epicor, Infor and Microsoft on their heels in a shifting line-up.

The top small business ERP vendors includes names like NetSuite, Exact Max,

Epicor and Syspro. (Source; EnterpriseAppsToday - ERP Buying Guide: Top Tier

Vendors, ERP Buyer's Guide for Small Businesses; Drew Robb)

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other information system in mis

Information systems (IS) are formal, sociotechnical, organizational systems

designed to collect, process, store, and distribute information.In
a sociotechnical perspective, information systems are composed by four
components: task, people, structure (or roles), and technology.

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A computer information system is a system composed of people and computers
that processes or interprets information.The term is also sometimes used in more
restricted senses to refer to only the software used to run a computerized
database or to refer to only a computer system.
Information Systems is an academic study of systems with a specific reference to
information and the complementary networks of hardware and software that
people and organizations use to collect, filter, process, create and also
distribute data. An emphasis is placed on an information system having a
definitive boundary, users, processors, storage, inputs, outputs and the
aforementioned communication networks.
Any specific information system aims to support operations, management
and decision-making. An information system is the information and
communication technology (ICT) that an organization uses, and also the way in
which people interact with this technology in support of business processes.
Some authors make a clear distinction between information systems, computer
systems, and business processes. Information systems typically include an ICT
component but are not purely concerned with ICT, focusing instead on the end
use of information technology. Information systems are also different from
business processes. Information systems help to control the performance of
business processes.
Alter argues for advantages of viewing an information system as a special type
of work system. A work system is a system in which humans or machines perform
processes and activities using resources to produce specific products or services
for customers. An information system is a work system whose activities are
devoted to capturing, transmitting, storing, retrieving, manipulating and
displaying information.
As such, information systems inter-relate with data systems on the one hand and
activity systems on the other. An information system is a form
of communication system in which data represent and are processed as a form of
social memory. An information system can also be considered a semi-formal
language which supports human decision making and action.
Information systems are the primary focus of study for organizational informatics.

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153
MANAGEMENT INFORMATION SYSTEM

UNIT 5

NOTES AS PER SYLLABUS

FOC BHU

MBA FT SEM 1

PREPARED BY –

AKASH KUSHWAHA

&

CHANDAN PANDEY

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MIS evaluation-cost-benefit Analysis
In cost/benefit evaluation of the various expected costs, the benefits to be
expected from the system and expected savings is done. The cost/benefit analysis
determines the cost-effectiveness of the system. The various categories of costs
and benefits are measured and included in cost/benefit analysis.

i) Initial development cost : it is the cost of developing

an information system. The various elements of development cost
include project planning cost, feasibility study cost, testing costs,
implementation cost etc.

ii) Capital cost : It is also a one time cost. It is the cost of providing
facilities and equipments including hardware etc for the operation
of the system.

iii) Annual operating cost : It is the cost of operating the system. It

includes computer and equipment maintenance cost, personnel cost
overheads and supplies cost. Computers and equipment are to be
maintained and thus some cost is included, known as Annual
Maintenance Cost.
In cost/benefit evaluation, various expected beenfits from the system are
also studied. The first task is to identify each benefit and then assign a
monetary value to it. Benefits may be tangible or intangible, direct or
indirect.
The major benefits are improving performance and minimizing the cost
of processing. The performance part suggests improvement in accuracy,
timeliness, non-duplication, adequacy, usefulness in information and
easier access to the system

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Product based analysis

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Critical evaluation of mis

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MIS and Control system
Management as a control system

Planning, organizing, staffing, coordinating, directing and controlling are the

various steps in a management process. All the steps prior to a control are
necessary but are not necessarily self-assuring the results unless it is followed by
strong control mechanism. The management experts have viewed these steps as
`Management Control System'. They postulate the hypothesis that unless a
control is exercised on the process, the goals will not be achieved. They advocate
a system of effective control to ensure the achievement of the business
objectives.

Definition

A definition of control is the process through which managers assure that actual
activities conform to the planned activities, leading to the achievement of the
stated common goals. The control process measures a progress towards those
goals, and enables the manager to detect the deviations from the original plan in
time to take corrective actions before it is too late. Rober J Mockler defines and
points out the essential elements of the control process.

The management is a systematic effort to set the performance standards in line

with the performance objectives, to design the information feedback systems, to
compare the actual performance with these predetermined standards, to identify
the deviations from the standards, to measure its significance and to take
corrective actions in case of significant deviations. This systematic effort is
undertaken through the management control system.

The control system is essential to meet the environmental changes discussed

earlier, to meet the complexity of today's business, to correct this mistakes made
by the people, and to effectively monitor the delegation process. A reliable and
effective control system has the following features.

Early Warning Mechanism

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This is a mechanism of predicting the possibility of achieving the goals and the
standards before it is too late and allowing the manager to take corrective
actions.

Performance Standard

The performance standard must be measurable and acceptable to all the

organization. The system should have meaningful standards relating to the work
areas, responsibility, and managerial functions and so on. For example, the top
management would have standards relating to the business performance, such as
production, sales, inventory, quality, etc. The operational management would
have standard relating to the shift production, rejection, down time, utilization of
resources, and sale in typical market segment and so on. The chain of standards,
when achieved, will ensure an achievement of the goals of the organization.

Strategic Controls

In every business there are strategic areas of control known as the critical success
factors. The system should recognize them and have controls instituted on them.

Feedback

The control system would be effective, if it continuously monitors the

performance and send the information to the control centre for action. It should
not only highlight the progress but also the deviations.

Accurate and Timely

The feedback should be accurate in terms of results and should be communicated

on time for corrective action.

Realistic

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The system should be realistic so that the cost of control is far less than the
benefits. The standards are realistic and are believed as achievable. Sufficient
incentive and rewards are to be provided to motivate the people.

The Information Flow

The system should have the information flow aligned with the organization
structure and the decision makers should ensure that the right people get the
right information for action and decision making.

Exception Principle

The system should selectively approve some significant deviations form the
performance standards on the principle of management by exception.

A standard is meaningful when it is achievable and provides a challenge to the

achiever. A management control system has a set of objectives, standards to
measure, a feedback mechanism and an action centre as elements of the system.
They need to be properly evolved and instituted in the organization with due
recognition to the internal and the external environment. The system as a whole
should be flexible to be changed with ease so that the impact of changed
environments is handled effectively.

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Effictiveness of MIS

An Effective Management Information System

Essential characteristics of an effective management information system are 1.

MIS is management oriented 2. MIS is developed under the direction of
management 3. MIS is an integrated system 4. common data flows 5. MIS is based
upon future needs of the business 6. MIS is composed of sub-systems 7. MIS
requires flexibility 8. distributed data processing and 9. MIS is mostly
computerized.

Management Information System is established in an organization to provide

relevant information to the managers to operate effectively and efficiently.

1. MIS is management oriented:

The design of MIS starts with an appraisal of the information needs of the
management. The system is usually designed from top to bottom. However, this
does not mean that MIS fulfils the information needs of top management only.

It only implies that information needs of the top management will serve as a basis
for assessment of information needs of lower level managers. In every case the
system should be designed to cater to the information needs of all levels of
management.

2. MIS is developed under the direction of management:

Because of management orientation of MIS, it is imperative that, management of
an organisation actively directs the development and establishment of the MIS in

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an organisation. It is rare to find an MIS where the manager himself, or a high
level representative of his department, is not spending a good deal of time in the
system design.

It is not a onetime involvement, because continued review and participation are

necessary to ensure that the implemented system meets the specifications of the
system that was designed. Therefore, management of the organisation should not
only take active part in the development of MIS but also play a major role in
effecting subsequent changes in the system so that it serves the information
needs of the management.

3. MIS is an integrated system:

MIS is an integrated system which blends information from several operational
areas to serve the information needs of the management more effectively. It
takes a comprehensive view of the interlocking sub-systems which operate within
an organisation.

For example, in order to develop an effective production scheduling system, the

management must balance such factors as (a) production capacity, (b) work force
(c) inventory levels (d) nature of the product (e) demand pattern of the product
(f) capital requirements and (g) marketing network. A system that ignores one of
these elements will not provide an efficient production schedule.

4. Common data flows:

MIS seeks to avoid duplication and redundancy in data collection, storage and
dissemination of information. The designers of MIS are aware that a few key

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source documents account for much of the information flow and affect many
functional areas.

The concept of common data flow requires building and using master files, for
recording and reporting information. This concept supports several of the basic
principles of system analysis avoiding duplication, combining similar functions and
simplifying operations wherever possible.

5. MIS is based upon future needs of the business:

MIS is designed to serve the objectives and needs of the business in an effective
manner. The MIS designer must avoid the possibility of system obsolescence
before the system gets into operation. If MIS is designed after taking care of
future information needs of the business, there remains little chance of its
becoming obsolete.

6. MIS is composed of sub-systems:

MIS although viewed as a single entity, must be broken down into sub-systems.
The breakdown of MIS into meaningful subsystems sets the stage for a prioritized
implementation. It also enables the MIS designer to focus on manageable entities
that can be assigned and computerised by selected systems and programming
teams.

7. MIS requires flexibility:

MIS is designed to fulfill the information needs of management for future decision
making. Despite a careful analysis of future information needs of the

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management, it is impossible to predict accurately all the events of three to five
years ahead.

This is true in most industries and especially in those industries with rapid
changing patterns. Therefore, the MIS should be designed in such a manner so as
to permit appropriate changes in future, if the MIS does not allow any
modification, it is bound to become obsolete very soon.

8. Distributed data processing:

In case of companies having geographical network of sales offices, distribution
points, manufacturing plants, divisions and subdivisions, some form of distributed
data processing is necessary, since some of these units may be operated in a
completely independent fashion.

The purpose of distributed data processing is to ensure that information is placed

in the hands of those who need it at the time when they need it. However, the
sub-systems designed for distributed data processing should be considered as the
integral parts of the MIS of the company.

9. MIS is mostly computerized:

Now-a-days, all activities of MIS viz., data collection, data processing and data
retrieval are accomplished through electronic media. The use of computer assures
accuracy and consistency in processing data and speeds up dissemination of
information.

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What is the ERP Implementation Process?

All Categories

At Acumatica, we recognize that selecting the right ERP system software for your
organization is an important decision that takes time and research. But, once
selected, implementing that software can be intimidating.
An ERP implementation involves installing the software, moving your financial
data over to the new system, configuring your users and processes, and training
your users on the software. Choosing the right partner for implementing your ERP
system is almost as important as selecting the right software in the first place.

As with any large project, it’s imperative that you to take things one step at a
time. Thankfully, successful and calm ERP implementations are not only feasible,
but actually quite common.

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Before we look at the implementation process in detail, your initial focus should
be on selecting the right ERP system software provider for your business. The
expected results of implementing the correct ERP technology should be
streamlined operations, easy-to-use functionality, a real-time view of your
business anytime and anywhere on any device, and an ERP platform that is not
only secure but adaptable to the ever-changing needs of your company. This is
something we know a bit about at Acumatica.

Once you have selected your ERP solution, the next step is implementing the ERP
system software.

What type of implementation project is it?

At Acumatica, we recognize that there are three implementation project types:

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• Express – Implementation is functional out-of-the-box (OOB); the customer is a
single entity without complex processes and no add-on solutions are required.
• Standard – Implementation is for Single or Multiple entities that require minimal
customizations and add-on solutions, and are single currency and language.
• Advanced – Implementation is for Single or Multiple entities with various
locations, multiple currencies, and languages. Their business processes and
integrations range from moderate to complex. A complex roll-out is involved with
multiple phases (Template or Pilot roll-out).
With Acumatica, your Partner will be responsible for recognizing what project
type your ERP implementation is and will then use the methodology and tools we
have established in our newly released Acumatica Solution Framework. It is
designed to guide our Partner organizations through the various project types and
emphasize that not every project should be treated the same due to their
dynamic nature. ERP implementations should concentrate on Project
Management as the key to success.

What is Project Management?

In the Acumatica Solution Delivery Framework, I define Project Management as

“application of knowledge, skills, tools, and techniques to manage activities to
meet the project objectives. Project management is all about comparing the
progress made against the original plan and thereby updating the plan.” To
accomplish this, assembling a Project Management Team to guide the project
from beginning to end is necessary.

Deciding to upgrade your existing ERP system software or implement a new ERP
system is a major undertaking. As such, the team you put together should consist
of people throughout the organization that will be the most affected by the ERP
technology – the users. A smooth transition from an old system to a new one is
never guaranteed, but the people who will gain the most from it are motivated by
anticipating the results they will achieve and getting the benefits of those results
as quickly as possible.
It’s also important to note that communicating exactly what is happening, why it’s
happening, and when it’s happening throughout the process will keep everyone in
the loop and mitigate the anxiety ERP implementations can engender. Surprises
can be both good and bad. If your employees – the end users – understand from

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 the beginning that adopting ERP technology is a business initiative and strategy
and not just a new software package or an IT project, then they are more likely to
support the entire process.

The Project Management Team includes an Executive Sponsor who oversees the
project in a part-time capacity. He or she provides the expectations for the project
along with the needed resources; he or she is available to help answer the
inevitable questions or alleviate any concerns that arise. The team also requires
a Project Leader who is knowledgeable about your business, has previous
management experience, and can communicate clearly. The leader represents the
team and the project to upper management and is responsible for achieving the
project objectives. The remaining Team Members will be assigned their detailed
tasks and responsibilities during the planning process; the team members should
be chosen based on their level of expertise and knowledge relating to the task, as
they will be the most affected and the most willing to see the ERP system
software implementation succeed.

What are the stages of implementation?

With your team assembled, the stages of implementation come into play. The
stages are as follows:
• Discovery – Consists of processes that help define the need, vision, scope of the
project, and obtain commitment from the customer to continue.
• Plan & Monitor – Consists of processes that involve developing a strategy to
complete the work, as well as measure the progress and take corrective action as
required. This occurs throughout the entire process.
• Analyze – This stage is a more detailed level of discovery and consists of processes
that involve gathering detailed requirements and analyzing the client’s business
needs.
• Build – Involve processes that carry out the tasks identified in the strategy.
• Stabilize – Consists of a set of processes to ensure a solution meets the client’s
requirements and is ready for full deployment to a live production environment.
This also includes a client’s readiness to use the solution.
• Deploy – Processes that will deploy the solution to a production environment.
• Post Go Live – Processes that are in place to support the client once they are live
on the solution, which lead to project closure.

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What Is an ERP Implementation Life Cycle?

The ERP implementation life cycle isn’t as complex as it seems. Just make sure to
prepare for these eight stages, and you can’t lose.

Get started now

Acumatica customer, PayWith, chose Acumatica’s ERP system software over SAP;
they desired a cloud-based platform that would scale with their as-yet
undetermined business model. Being agile and cost-effective were also factors in
their choice. Once they made the decision, their implementation took only five
months. The company – which creates and manages mobile loyalty, rewards, and
marketing programs for brick and mortar organizations – must settle thousands of
daily transactions efficiently and accurately. Utilizing Acumatica’s Financial
Management Suite and Inter-Company Accounting Module, PayWith has grown
50% year over year since their implementation.
Vice President of Finance, Andrew Black, says, “Our accountants started using it
right away and then our dev team integrated it in just a few weeks. We didn’t
need too much hand-holding because Acumatica is very intuitive. It follows
common protocols in databases and accounting, so no matter which background
you have, you can adapt to it very easily.”

The business’ smooth start and continuing growth is a great example of correctly
following Acumatica’s stages of ERP implementations. Find their complete
customer success story here.
“Acumatica allows us to grow without needing a team of accountants or data
entry people,” Black said. “It makes our whole business possible.”
Calculate the cost of replacing your ERP systemCalculate now

Your Acumatica Partner – who has trained on and passed an Acumatica exam
regarding ERP implementations – will be with you every step of the way. Whether
you have an Express, Standard, or Advanced project type, you will have the tools,
resources, and methodology needed to implement your ERP system software
successfully. The stages of implementing ERP technology ensure that your Partner
and your Project Management Team – all of whom desire functionality, usability,
and flexibility for the end users – expertly handle the implementation process.
I hope this gave you an overall picture of what the ERP implementation process
looks like and how peaceful it can be when done correctly. All ERP

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implementations vary in scope and ERP technology is constantly changing but we
know how to handle these changes with ease. Contact us and we’ll start the
rewarding process of implementing your ERP system software today

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Role of Management Information System in Banking Sector Industry

Definition of MIS:

‘A Management Information System is a set of combined procedures that gathers

and produces reliable, relevant, and properly organized data that supports the
decision making process of an organization. To sum up, it is a group of processes
through which data is obtained, sorted, and displayed in a useful way for decision-
making purposes.’

Management Information Systems are very useful tools for the purpose of
reviewing and controlling company’s operations. The main goal of these systems is
to organize all data collected from every level of the company, summarize it, and
present it in a way that facilitates and improve the quality of the decisions being
made to increase the company’s profitability and productivity.

These systems are typically are computer-based including either simple excel
sheets or more complex platforms. The information being collected and gathered
for the system normally comes from both inside and outside sources.

Role of MIS in Banking Industry

A bank is understood as a place where the financial services such as

checking/savings and providing credit to the customers are offered. The scope of
this service in today’s world is expanded to a “Financial Services Super Shoppe”
where the banks have become an instrument in providing financial assistance to
some activities as a policy or by regulation or for meeting sociology-economic
obligations. In banking also, the concept of the financial product has come in.

The customers choose a bank mainly on the following three factors:

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 I. The ease of doing business.

II. The quality of personnel and service.

III. The range of the financial services.

The factors outrank the factors such as the location, interest rates, layout, banking
hours, etc. The bank has a broad range of customers like individuals, institutions,
trusts, business organizations, Government, and local bodies. The banks deal with
some transactions, which also vary widely regarding length and complexity. The
bank customer, like any other service industry, is interested in getting final results
quickly. The unique service in banking mostly means solving the customers’
problems in the financial matters, and the single most widely used measure of quick
service is the elapsed time of transaction execution. For example, the time is taken
for crediting the amount, withdrawal of cash, the sanction of a loan or credit
facility, etc. are the norms of deciding an excellent service. The MIS in banking
industry revolves around this aspect. The customer of the bank would like to know
the status of the account very fast to make decisions on withdrawals or payments.
He is interested in obtaining the loan assistance for his particular need with a
reasonable rate of interest. Some customers would be interested in tax consulting
and tax planning. Mother group of customers would be interested in investment
guidance for investing in stocks and securities. To avoid the inconvenience of going
to some places for payment of small amounts, customers need service at the
counter to pay electricity bills, telephone bills, taxes and duties to the local bodies
and the Government. Hence, the MIS is to be designed to identify, decide and
develop a service strategy for offering a distinctive service to the broad range of
customers seeking a variety of service demands. The following points should be
taken care of while designing an MIS for a bank:

1) Customer database

• The service expectations and perceptions revolve around the following

factors:

• Customer — individuals, company, institutions, etc.

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• Operator — housewife, employee, the officer of the organization. The range of
service — savings, credit checking and payment, other financial services.
• Class of customers — income group, corporate bodies, etc.
• Working hours — morning, afternoon, evening, etc.

The management of the bank should create a customer database and analyze the
needs of the customers from time to time to create suitable service package.

2) Service to the account holders the customers (account holders) need constant
advice on the status and its operations. Most of the customers use their account
for routine payments affecting the balance. Many times the account holds a large
amount and it is not transacted for any purpose.

The MIS should give following reports to the management:

• The non-moving account.

• The account was having the balance of more than, say Rs.50, 000.
• The account was going down below minimum balance.
• The regular payments not made.
• The routine credits not arrived.
• The defaults on loan repayment.
• The delays on crediting cheque amounts.
• A sudden rise and fall in the account movement.
• The account holders were giving 80% business to take personal care of their
service expectations and perceptions (the CRM perspective).

Based on these reports, the management of the bank should alert or warn the
customer to act on his account to correct the situation. The personal and individual
account holders need such a service badly as they have to manage their domestic
or business activities in a tight money situation. The MIS built around such demands
would help not only the bank manager but also the account holder.

3) Service for business promotions The bank finances can be utilized in some ways
to increase the banking operations by offering credit to the right kind of customers.
It is, therefore, necessary to study the trend in the business industry and solicit the
customers from the upcoming and growing business sector. The MIS should
concentrate on data collection from various sources to analyze and conclude the

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future corporate strategy. Such information will help the banker to move out to
talk to the customer to obtain business for the bank. Such support will also reduce
the risk of the account going into the red and bad debt.

4) The index monitoring system One more feature of the MIS is to monitor the
variety of indices and ratios related to banking operations, which are internal to the
banking business. Some of these ratios fulfill the legal needs like the Cash Reserve
Ratio (CRR)/ Statutory Liquidity Ratio (SLR); some meet the policy needs like the
priority sector ratio to total advances and so on. It is necessary to build the MIS
applications to support the bank manager in making decisions to keep different
norms and ratios within the acceptable limits. He should also get support through
Decision Support Service to handle the problem of not meeting these legal
standards.

5) Human resource upgrade there is a lot of human aspect in the banking

operations. With computerization, the service may become faster or quicker, but
still, it requires a human touch and skill. It is, therefore, necessary to upgrade the
expertise and knowledge of the bank employees to offer proper service to the
customers. The financial world changes so fast that retaining a client base is a
challenge. The financial service business is becoming competitive and offering an
excellent, distinctive service is the only solution to improve the business prospects.
The service has to be more aggressive for particular problem solving of the
customers. The MIS should identify such needs and offer help to the management
in designing training courses for the employees to improve their knowledge about
banking and the financial world. In the banking industry, the traditional methods of
real performance are at odds with good service. An excellent financial performance
may not necessarily mean a good service quality. The customers of the bank expect
the service to be delivered in a smooth, problem-free, efficient and timely manner.
The managers in the bank have the service as well as the financial goals to achieve.
It is, therefore, necessary to set the internal standards, accuracy, responsiveness
and timeliness. The systems and the resources provided to meet these standards
need monitoring, and the MIS will provide feedback on these standards so they can
be regulated and controlled. For example, a multinational bank has set standards
on satisfying the queries in the first phone call, cheque clearance time, waiting
time, etc. It has set eighty-one separate ‘Quality Indicators’ for the Bank Card
business and so on. The MIS measures these standards and gives feedback on
achievement or non-achievement

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