Management Information Systems

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Management Information Systems

• Information Systems in Global Business Today
• Lecture 1

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The Organization

• An organization is a person or group of people
  united for some purpose
• to deliver a product, a service, information...
• Many organizations are established for trade to
  generate profit, but not necessarily. They may be
  charities or government departments. They still
  need management and information systems!

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Organizations

• Organizations process and use information in
  order to produce outputs for an environment.
• Most organizations are not designed primarily for
  processing information - they deliver services or
  products. Examples
• a newspaper delivers news and opinions,
• The Department of Social and Family Affairs
  deliver pension and unemployment services.

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Organizations

• The previous definition of an organization
  implies that introducing new technology changes
  the way inputs are combined into outputs,
• i.e. a technical rearrangement of machines or
  workers.
• This has the effect of changing procedures and a
  lot of information ( information systems).

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Organizations
Organization
StructureHierarchyDivision of Labour Rules,
procedures Process Rights/obligations privileges/
responsibilities Values, Norms, People
Environmental outputs
Environmental resources
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Organizations

• Appropriate information systems need to be
  developed to support the activities of an
  organization
• day to day activities,
• longer term goals and objectives,
• strategic management.
• An organization needs information about
• its own internal activities and operations,
• the markets and industry within which it operates.

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Types of Organizations

• There are four commonly recognized structures for
  organizations that are sometimes defined as
  types
• Functional
• Product (sometimes referred to as Project as an
  alternative)
• Bureaucratic
• Matrix

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Types of Organizations

• Functional - aligned with the basic managerial
  functions, such as Purchasing, Sales,
  Personnel(i.e. structured with Departments)
• These are often hierarchical. It may be difficult
  to produce systems that span several functions
  (information) systems may overlap departments but
  may need to be different.
• Product - activities are grouped by output or
  products.
• These often deliver specific expertise but also
  duplication of activities if individuals are
  working independently.

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Types of Organizations

• Bureaucratic having many detailed rules and
  procedures
• These are often hierarchical, mechanistic and
  impersonal.
• Matrix a hybrid of Functional and Product.

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Types of Organizations

• Functional diagram

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Types of Organizations

• Product diagram

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Types of Organizations

• Matrix diagram

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Differences in Organizations

• Organizations may have (usually do have)
  different structures or shapes.
• They have
• Different goals
• Benefit different groups
• Different leadership styles

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Differences in Organizations

• Different goals
• coercive (military, prison), utilitarian
  (businesses) normative (religious groups,
  universities).
• Benefit different groups
• members (credit union), clients (welfare agency),
  owners (business).
• Different leadership styles
• democratic, laissez-faire (leadership absent),
  technocratic (technology based), bureaucratic
  (rule based), authoritarian.

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Differences in Organizations

• Organizations exist in different environments
• turbulence (rapid technology change), complexity
  (multiple competitors).
• Perform different tasks
• programmed routine tasks (inventory reorder),
  semi programmed (production scheduling),
  unprogrammed (selecting strategy, e.g.
  consulting).
• Use different techniques technology.
• craft (woodworker), batch routine (assembly
  line), continuous process (oil refinery).

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Types of Organizations

• Example- entrepreneurial structure
• A simple structure
• Young, small entrepreneurial firms in fast
  changing environments.
• Dominated by entrepreneur and managed by single
  CEO (Chief Executive Officer).
• Information systems are sometimes poorly planned
  and significantly behind fast-breaking production
  developments. (Usually because there is no
  information Systems professional at work
  continually.)

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Entrepreneurial Structure
The focus is on sales, rather than innovation
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Types of Organizations

• Machine bureaucracy
• A large classic bureaucracy.
• It exists in slow changing environment, producing
  standardized products.
• It is dominated by strategic senior management
  that centralized information flow and decision
  authority.
• It is likely to be kept in functional divisions
  (manufacturing, finance, marketing, human
  resources - departments.)
• Information systems tend to be large-scale, well
  planned but limited to such functions as
  accounting, finance, simple planning and
  administration.

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Machine Bureaucracy
Board of Directors
CEO
Vice President (VP)
Administration
Exec VP
Operations
Engineering
Personnel
Financial
Marketing
RD
Facilities Planning
RD Research and Development
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Types of Organizations

• Divisionalized bureaucracy
• A combination of many machine bureaucracies, each
  producing a different product or service, topped
  by a central headquarters.
• Suited to slow changing environments and
  standarised products.
• Organizations are divisionalized so tend to
  operate in different environments (i.e. for each
  product or service).
• Information systems are elaborate and complex to
  support central headquarters financial planning,
  reporting requirements and operational
  requirements of the divisions.

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Divisionalized Bureaucracy
President
Planning
Legal
Finance
Division 1
Division 2
Division 3
Purchasing
Purchasing
Purchasing
Engineering
Engineering
Engineering
Manufacturing
Manufacturing
Manufacturing
Marketing
Marketing
Marketing
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Types of Organizations

• Professional bureaucracy
• Example a knowledge-based organization selling
  professional service.
• Suitable for slow changing environments and skill
  sets.
• Dominated by Department Heads with weak
  centralized authority.
• Professional members create product or service.
  (Consider systems analysts and programmers of a
  software company.)
• Example problem poor central administration
  system while working with sophisticated
  knowledge-work support systems.

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Professional Bureaucracy The Hospital Example
Board of Trustees
Executive Committee
Council of Physicians
Exec Director
Director of Admin Services
Director of Hosp Services
Director of Nursing
Director of Prof Services
Medicine
Surgery
Radiology
Pediatrics

• Other examples law firms, accounting firms,
  schools.

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Types of Organizations

• Adhocracy the structure is arbitrary
• Example a task force organization.
• Characterized by large groups of specialists
  organized into short-lived, multidisciplinary
  task forces focusing on new products.
• High tech firm that must respond to rapidly
  changing environments or markets (or derive money
  from government contracts).
• Innovative and flexible but with weak central
  management.
• Information systems might be poorly developed at
  the central level, but often advanced within task
  force.

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Adhocracy The Oil Refinery Example
Board of Directors
Resource Development
Chemicals Materials Petroleum
Products
Exploration
New Resources
Chemicals
Logisitics
Marketing
Production
Artic Pipelines
Transportatn
Coordination
Administration Services
Corp Affairs
Empl Relations
Treasurer
IT services
Purchasing
Comptroller
Medical
Build Admin
Law
Research
Travel Arrang
Env Protection
Tax
Bus Dev

• Other examples research orgs, aerospace
  companies, medical, electronic, biomedical orgs.

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Business Organizations

• Business organizations vary in size from huge
  international companies to private individuals,
  including
• manufacturing and commercial companies,
• central and local government departments,
• financial institutions,
• administrative organizations,
• service agencies,

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Business Organizations

• Product flow is the flow of raw materials to
  finished goods.
• Information flow is the creation and movement of
  the administrative and operational documentation
  necessary for product flow and for providing a
  service.
• Business Information Systems support information
  flow and provide information to companies to
  assist in achieving their aims.

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Processes within an organization

• A Business Cycle example

Supplier
materials
order
Purchasing
order
materials
Customer
Production
Sales
delivery
product
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Organization Functional Areas/Processes

• Main work areas inherent in most companies are
• Accounts (including billing, collection, payment,
  payroll)
• Personnel (including recruitment, professional
  development, etcetera.)
• Sales (and Marketing)
• Purchasing
• Inventory / stock control
• Production

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Example - Payroll

• Payroll accounting
• Dealing with payment of employees.
• Requires a personnel administration system which
  provides information on employees personal
  details and terms of employment.
• Requires a payroll system
• computation of gross earnings
• computation of deductions and net earnings
• accounting (distribution and updating of ledgers)

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Example - Payroll

• Typical documents (electronic or otherwise)
• Time reports/time cards
• Payslip
• Bank direct credit list - Electronic Funds
  Transfer (EFT)
• Cheques
• Accounting reports - deduction and cost analyses
• End of year documents
• Audit and control
• Employee wage history

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Example - Sales

• Order Control ensures that customer orders are
  received, processed and fulfilled efficiently and
  in organised way.
• Sales Accounting deals with monetary side of
  customers orders, invoicing, payment etc.
• Typical functions
• Dealing with enquiries re price, availability
• Checking credit ratings,
• Validating orders,
• Handling customer complaints,
• Checking the status of orders.

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Example - Sales

• Typical documents
• Customer orders
• Sales invoice
• Sales statements (for account customers)
• Sales analysis reports
• These may be used to forecast sales and plan
  marketing activities.

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Example - Marketing

• Marketing is the provision of goods and services
  to meet customer needs.
• Typical functions
• Monitoring competitors,
• Liaising with existing customers and clients,
• Market research,
• Identification and follow up of leads,
• Product or service promotion.

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Example - Purchasing

• Purchasing ensures that materials, equipment,
  tools, etc are available at the right time, right
  place and at the right price.
• Typical functions
• Obtaining quotations from prospective suppliers,
• Placing orders with suppliers and monitoring
  delivery,
• Checking and handling goods received,
• Passing details of goods received to accounts,
• Checking supplier invoices before payment,
• Maintaining supplier details re price, quality
  etc.

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Example - Purchasing

• Typical documents
• Purchase order (PO)
• Good Received Note (GRN)
• Delivery docket
• Purchase invoice
• Cheque or credit transfer (EFT)
• Purchase records (supplier records)
• Purchase analyses - measure supplier efficiency,
  costs per work area, job costing

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Example - Stock Control

• Stock (inventory) control is the monitoring and
  decisions regarding the items held in stock.
• Stock is the buffer between supply (production or
  external entities) and demand (customers or
  internal entities if the product is used
  on-site.)
• Stock costs money it is important to minimise
  the money held in stock and still meet demand
  this often leads to JIT inventory control.
• Just In Time - JIT - computer systems monitor
  supply and demand continuously and trigger rapid
  resupply when necessary. This requires close
  cooperation with suppliers.

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Example - Stock Control

• Typical functions
• Maintenance of stock level records
• Issue of stock
• Identifying and monitoring reorder levels
• Managing outstanding orders
• Stock valuation (stock check) and reconciliation
• Information systems complexity depends on the
  number of stock items, turnover rate and the
  number of dispersed stores.

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Example - Stores Control

• Stores control is the methods of operating the
  stores or warehouses, i.e. storage space,
  handling equipment, security, packaging,
  labelling.
• It is determined by
• size, weight and value of stock items
• flammability, stability (e.g. shelf-life) and
  identification.

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Example - Stores Control

• Typical documents
• Materials request,
• Purchase requisition
• Inventory transfer

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Example - Production

• Production designs and develops the product.
• Production planning covers what to make and how
  to make it.
• Production control ensures planning is achieved
  by monitoring and control of machines, processes
  and people involved in production.

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Example Production

• These areas generate a huge amount of raw data
  and require considerable amount of information to
  control.
• Production is an area subject to considerable
  automation
• CIM - Computer Integrated Manufacture
• CAD/CAM Computer Aided Design/Computer-Aided
  Manufacture

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Example Production

• Information required for production control
• Material requirements per time period (Man
  Hours or Unit Time).
• Quantities of components and subassemblies per
  period.
• Amounts of equipment, machines, tools required
  per stage.
• Amount of labour category required per stage.
• Progress of each job, reason for delays.

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Example Distribution

• Distribution receives the finished goods from
  production and ships the product to the customer.

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Information Flow
Customers
Employees
time cards
payment
customer invoice
sales orders
Accounts
payslip, P60
shipping notice
Sales
sales notice
supplier invoice
shipping order
supplier payment
Production
transfer notice
Purchasing
Distribution
MR
purchase requisition
Inventory
supplier invoice
goods received Notice (GRN)
PO
Purchase Order (PO)
inventory transfer
Typical Manufacturing organization Information
Flow
Receiving/Goods Inwards
Suppliers
delivery docket
MR manufacturing requisition
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Information Flow
Customers
Employees
timecards
customer invoice
payslips, P60
Payroll
Billing
payment
Payment
customer payment notice
sales notice
Collection
payment
GRN
supplier invoice
Sales
Suppliers
Purchasing
Receiving
Information Flow within Accounts
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Management of Organizations

• The traditional view models organizations as
  having three levels of management
• Strategic
• Tactical
• Operational

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Management of organizations

• Strategic level management is responsible for
  overall strategy and direction -
• typically, top level management.
• Tactical or middle level management ensure
  policies for achieving the strategic objectives
  are carried out -
• typically, heads of departments.
• Operational level management are responsible for
  the day to day activities -
• typically, foremen, supervisors, team leaders

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Business Information
Information types Strategic (trends,
patterns, decision making)
Information types Middle/Tactical
(summary, prediction and control)
Information types Operational (summary, short
term, real time)
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Information for Strategic Management

• Strategic information
• Answers questions like What markets should we be
  in? or Where do we locate the new factory?
• Is highly selective and summarised and usually in
  graphical form
• Likely to originate outside the organization
• Has value for a longer period
• Requires high degree of experience and judgement
  in its application

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Information for Strategic Management

• Decisions based on this information tend to be
  unstructured.
• Example - patterns of expenditure from market
  surveys or trade publications, market
  availability and penetration figures.

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Management Information

• Management Information for monitoring and
  control
• Answers questions like Of what (product/service)
  are we selling most? or Are the sales team
  meeting their targets?
• Needs to be condensed and summarised information
  in the form of reports, graphs and tables,
  forecasts.
• Is usually derived from information collected at
  operational level.

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Management Information

• Is shorter term information (months), concerned
  with the departmental level.
• Example - sales analyses, sales forecasts,
  production schedules.

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Operational Information

• Operational Data for enabling and recording
  routine business activity
• Answers questions like What is the stock level
  for a given product? or Can this customer be
  given credit?
• Is very detailed, highly specific and generated
  internally.
• Is short term (hourly, weekly), used for
  decisions concerned with immediate situation.

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Operational Information

• Structured decisions
• Examples - stock levels, customer order details,
  overdue purchase orders.

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Information Purpose and Example of Systems

• Strategic Management
• modelling and simulation for decision support,
• financial models and profit margin change
  simulations.
• Middle Management
• monitoring and control of current information,
• production planning, sales forecasting, market
  research.
• Operational Management
• transaction processing,
• Stock Control, Payroll, Accounting

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Characteristics of Information Required
Operational Middle StrategicManagement
Management Management
Time Scales Level of Detail Source Degree
of Uncertainty Frequency
Immediate Highly detailed Internal Certain
Frequent
Long Term Summarised External Uncertain In
frequent
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MIS, DSS, EIS Systems

• Management Information System (MIS) - computer
  system that provides management information
• A user will normally have to access one or more
  databases to get the information required.
• Decision Support System (DSS) supports decision
  making i.e. provides information on demand (ad
  hoc) and as simply as possible.

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MIS, DSS, EIS Systems

• Simple DSS systems provide information for
  manager to make decision - Sophisticated systems
  analyse data according to algorithms and produce
  recommendations.
• It is necessary for DSS to have access to a wide
  range of software and large corporate databases
  so that facilities needed to make decision can be
  accessible.

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MIS, DSS, EIS Systems

• MIS/DSS usually have graphical interface - need
  to provide information in simple and easily
  assimilated presentation
• graphs and histograms,
• drill down and hot spots features.
• Simulation DSS - allows interactive modelling
• values can be changed to see effect on business.
• What if scenarios.

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MIS, DSS, EIS Systems

• Executive Information Systems (EIS) are
  integrated systems to suit senior management
• senior management historically have been
  resistant to systems - but this has changed a lot
  in recent years out of necessity.

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MIS, DSS, EIS Systems

• Executive Information Systems provide
• decision support, (DSS)
• information retrieval from corporate databases,
  ad hoc reporting,
• powerful display and multimedia capabilities,
• presentation facilities, e.g. PowerPoint,
• communications, e.g. e-mail, fax,
• organizational support, electronic diary, etc.
• The user interface is important. (Executives do
  not hack.)

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Where to Next?

• The management of organizations often has several
  levels.
• Each level deals with somewhat different
  information and data so they have different
  information systems requirements.
• The structure of those systems can be identified
  and designed by the process of systems analysis.

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End of Lecture 1

• By the way
• What is information?
• What is a system?
• What are Management Information Systems?
• We will look at these topics next.