Chapter 5

MANAGEMENT INFORMATION
SYSTEM

Bikash Adhikari
[email protected]
Acknowledgement: Khem Gyawali
Mechanical Engineer
 Management Information System – course outline

• Data and Information

• Need, function and
Importance of MIS
• Evolution of MIS
• Organizational Structure
and MIS
• Computers and MIS
• Classification of
Information Systems
• Information Support for
functional areas of
management
• Organizing Information
Systems

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Management Information System
Management: The direction of enterprises toward the
achievement of a predetermined objectives. It is carried out
by managers.
Information: An aggregate of facts so organized as to
provide knowledge. It is an output obtained by processing
data as input.
System: An assembly of procedure, processes, methods or
techniques united by some form of regulated interaction to
form an organized whole.
Management Information System (MIS) can be defined as
“a system of obtaining, abstracting, storing and analyzing
data (new facts) to produce information for use in planning,
controlling, and decision making by yielding information for
managers, at the time they can most effectively use it”.

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1. Data and Information
Data:
 Un interpreted raw statement of facts.
 Group of non-random symbols (works, valves, figures)
which represent things that have happened .
 Obtained by research or observation.
 Eg. Payroll, bank statement etc.

Information:
 Aggregate of facts so organized as to provide the desired
knowledge.
 Data that have been interpreted and understand by the
recipient of the message.
 Can have different meaning to different people.

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1. Data and Information

Difference between Data & Information

Data Information
Processing
(Input) (Output)

Feedback/
Control

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 1. Data and Information

Qualities of Good Information

1. Accuracy
2. Timeliness
3. Completeness
4. Conciseness
5. Relevancy
6. Frequency
7. Understandable

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 2. Need, Function and Importance of MIS

Needs:
Production managers: production costs, labor
costs, machine costs, overhead costs.

Marketing managers: new product development,

new product sales trend, selling costs, market
research.

Personnel managers: work forces turnover,

absenteeism, employ skill level, labor markets,
wage level.

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 2. Need, Function and Importance of MIS

Functions:
1. Determination of information needs. (How
much? How, when and by whom? What?)
2. Evaluation. ( How much confidence?)
3. Abstraction. ( Editing and reducing incoming
information)
4. Dissemination. ( Getting the right
information to the right manager at the right
time)
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2. Need, Function and Importance of MIS

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 2. Need, Function and Importance of MIS

Importance:
1. Provides relevant information available in the right form
at the right time.
2. Bring the new facts to the knowledge of the management.
3. Supply the desired information at a reasonable cost.
4. Keep the information up to date.
5. Store the important and confidential information properly
for utilizing it for decision-making whenever required.
6. Focus on those decisions where benefit/cost ratio is
attractive.
7. Supply reliable and logical data.
8. Provide data for carrying out the major management
functions.

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3. Evolution of MIS

 Digital computers 1959,

 Electronic data processing (EDP)
 Focus on record keeping
 Card punching machine
 Computer languages
 Personal computers
 Direct end user involvement
 Steady performance
 User friendly and graphical user interface.
 Design support system (DSS)
 Operation research
 Executive information system (EIS)

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4. Organizational Structure and MIS

The nature of organizations determines their

activities, the information support they need, and
the type of information systems they use
 profit-making business versus not-for-profit
organizations exist
 manufacture goods versus services are delivered
 can be located in one place or in several places, some
are global or multinational organizations

MIS has been described as a pyramidal structure, with

four levels of information resources. The levels of
information would depend upon the organizational
structure.
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 4. Organizational Structure and MIS

The top level supports strategic planning and policy making at the
highest level of management.
The second level of information resources aid tactical planning and
decision making for management control.
The third level supports day-to-day operations and control.
The bottom level consists of information for transaction processing.
It then follows that since decision making is specific to hierarchical
levels in an organization, the information requirements at each
level vary accordingly.

Thus, MIS as a support system draws upon:

• concepts of organization;
• organizational theories, principles, structure, behavior and
processes such as communication, power and decision making; and
• motivation and leadership behavior.

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4. Organizational Structure and MIS

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 5. Computers and MIS
Computers are means of management information system. With
the use of computers MIS will be efficient and effective. But, the
mere fact of using a computer does not itself mean that work is
done more efficiently. It is also not necessary that better
information is produced. Very often computers are introduced in an
attempt to solve technical problem when the real problem is one
concerned with management or other things. It is therefore
essential that problems are clearly identified before a computer
system is used.
For clarity, the use of computers will be outlined in two broad
categories:
1. The routine processing of day-to-day transactions, known as data
processing or transaction processing.
2. The use of computers by the end-users themselves. The end users
include mangers, accountants, office staff, sales people, executive
and others.

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5. Computers and MIS

Both data processing and end-user computing

produce management information. The key
difference is that data processing systems supply
pre determined outputs and reports so there is
less flexibility. This means that great care must be
taken in analyzing and determining
managements real information needs before the
system is designed.
On the other hand with end-user computing
there is more flexibility and interaction so that
the emphasis becomes one of supporting the end
user rather than the production of a specified
report.
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 6. Classification of Information Systems

An information system is a collection of hardware,

software, data, people and procedures that are
designed to generate information that supports the
day-to-day, short-range, and long-range activities of
users in an organization. Information systems generally
are classified into four categories:
• Transaction Processing Systems (TPS)

• Management Information Systems (MIS)

• Decision-Support Systems (DSS)

• Executive Support Systems (ESS)

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 6. Classification of Information Systems

Transaction Processing Systems

A transaction processing system (TPS) is an information
system that captures and processes data generated during
an organization’s day-to-day transactions. A transaction is
a business activity such as a deposit, payment, order or
reservation.
• Basic business systems that serve the operational level.
• A computerized system that performs and records the daily
routine transactions necessary to the conduct of the
business.
• Today, most transaction processing systems use online
transaction processing. Some routine processing tasks such
as calculating paychecks or printing invoices, however, are
performed more effectively on a batch basis. For these
activities, many organizations still use batch processing
techniques.
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 6. Classification of Information Systems

A Symbolic Representation for a Payroll TPS

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 6. Classification of Information Systems
Management Information Systems (MIS)
Management level
• Inputs: High volume transaction level data
• Processing: Simple models
• Outputs: Summary reports
• Users: Middle managers
Example: Annual budgeting
A management information system, or MIS (pronounced em-eye-ess), is
an information system that generates accurate, timely and organized
information so managers and other users can make decisions, solve
problems, supervise activities, and track progress. Because it generates
reports on a regular basis, a management information system sometimes
is called a management reporting system (MRS).
An MIS generates three basic types of information: detailed, summary and
exception. Detailed information typically confirms transaction processing
activities. A Detailed Order Report is an example of a detail
report. Summary information consolidates data into a format that an
individual can review quickly and easily. To help synopsize information, a
summary report typically contains totals, tables, or graphs. An Inventory
Summary Report is an example of a summary report

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6. Classification of Information Systems

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 6. Classification of Information Systems

Decision-Support Systems (DSS)

Management level
• Inputs: Transaction level data
• Processing: Interactive
• Outputs: Decision analysis
• Users: Professionals, staff
Example: Contract cost analysis

A decision support system (DSS) is an information system designed to help

users reach a decision when a decision-making situation arises. A variety
of DSSs exist to help with a range of decisions. A decision support system
uses data from internal and/or external sources.
Internal sources of data might include sales, manufacturing, inventory, or
financial data from an organization’s database. Data from external
sources could include interest rates, population trends, and costs of new
housing construction or raw material pricing. Users of a DSS, often
managers, can manipulate the data used in the DSS to help with decisions.

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 6. Classification of Information Systems

Voyage-estimating decision-support system

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 6. Classification of Information Systems

EXECUTIVE SUPPORT SYSTEMS (ESS)

Management level
• Inputs: Aggregate data
• Processing: Interactive
• Outputs: Projections
• Users: Senior managers
Example: 5 year operating plan

An expert system is an information system that captures and stores

the knowledge of human experts and then imitates human
reasoning and decision-making processes for those who have less
expertise. Expert systems are composed of two main components: a
knowledge base and inference rules. A knowledge base is the
combined subject knowledge and experiences of the human
experts. The inference rules are a set of logical judgments applied
to the knowledge base each time a user describes a situation to the
expert system.

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 6. Classification of Information Systems

Model of a Typical Executive Support System

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6. Classification of Information Systems
Integrated Information Systems
With today’s sophisticated hardware, software and
communications technologies, it often is difficult to
classify a system as belonging uniquely to one of the
five information system types discussed. Much of
today’s application software supports transaction
processing and generates management information.

Other applications provide transaction processing,

management information, and decision
support. Although expert systems still operate
primarily as separate systems, organizations
increasingly are consolidating their information needs
into a single, integrated information system.

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 6. Classification of Information Systems

Interrelationships among systems

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7. Information Support for functional areas of management

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8. Organizing Information Systems

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8. Organizing Information Systems

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