MANAGEMENT

INFORMATION SYSTEMS
 MANAGEMENT
INFORMATION SYSTEMS
BCA - 302
 CAREER OPPORTUNITIES

MIS is crucial to the progress and growth of business. It helps the

management at all levels in various business processes and decisions.
Students who excel in MIS will find attractive opportunities in the
whole range of business enterprises, ranging from trade,
manufacturing, services and consulting.
Section-I
Introduction to Systems and Basic Systems Concepts, Types of Systems, The Unit 1: Information and System Concepts
Systems Approach, Information Systems: Definition and Characteristics, Types (Pages 3-20)
of Information, Role of Information in Decision-Making, Sub-Systems of an Unit 2: Decision-Making and MIS
Information System: EDP and MIS, Management Levels, EDP/MIS/DSS. (Pages 21-34)

Section-II
An Overview of Management Information System: Definition and Unit 2: Decision-Making and MIS
Characteristics, Components of MIS, Framework for Understanding MIS: (Pages 21-34)
Robert Anthony's Hierarchy of Management Activity, Information Requirements Unit 3: MIS: A Framework
and Levels of Management, Simon’s Model of Decision-Making, Structured (Pages 35-45)
vs Un-structured Decisions, Formal vs. Informal Systems.

Section-III
Developing Information Systems: Analysis and Design of Information Systems: Unit 4: System Analysis
Implementation and Evaluation, Pitfalls in MIS Development. (Pages 46-56)
Unit 5: System Design
(Pages 57-71)
Unit 6: Implementation and
Evaluation of MIS (Pages 72-85)

Functional MIS: A Study of Marketing, Personnel, Financial and Production Unit 7: Application of MIS in
MIS. Manufacturing Sector
(Pages 86-101)
 CONTENTS

INTRODUCTION 1-2

UNIT 1 INFORMATION AND SYSTEM CONCEPTS 3-20

1.0 Introduction; 1.1 Unit Objectives; 1.2 Information; 1.3 Types of Information;
1.4 Quality of Information; 1.5 Dimensions of Information; 1.6 Sub-System of
Information; 1.7 System; 1.8 Types of Systems; 1.9 Concepts Related to Systems;
1.10 Elements of a System; 1.11 Human as an Information Processing System;
1.12 Summary; 1.13 Answers to ‘Check Your Progress’; 1.14 Exercises and Questions;
1.15 Further Reading

UNIT 2 DECISION-MAKING AND MIS 21-34

2.0 Introduction; 2.1 Unit Objectives; 2.2 Decision-Making; 2.3 Simon’s Model of
Decision-Making; 2.4 Decision Types; 2.5 Methods for Choosing Alternatives;
2.6 Summary; 2.7 Answers to ‘Check Your Progress’; 2.8 Exercises and Questions;
2.9 Further Reading

UNIT 3 MANAGEMENT INFORMATION SYSTEMS: A FRAMEWORK 35-45

3.0 Introduction; 3.1 Unit Objectives; 3.2 Significance of MIS; 3.3 Understanding MIS;
3.4 Definition of MIS; 3.5 Nature and Scope of MIS; 3.6 Components of MIS;
3.7 Robert Anthony’s Hierarchy of Management Activity; 3.8 Summary; 3.9 Answers to
‘Check Your Progress’; 3.10 Exercises and Questions; 3.11 Further Reading

UNIT 4 SYSTEM ANALYSIS 46-56

4.0 Introduction; 4.1 Unit Objectives; 4.2 System Analysis: An Overview;
4.3 Determination of Requirements; 4.4 Strategies for Requirement Determination;
4.5 Structured Analysis Tools; 4.6 Summary; 4.7 Answers to ‘Check Your Progress’;
4.8 Exercises and Questions; 4.9 Further Reading

UNIT 5 SYSTEM DESIGN 57-71

5.0 Introduction; 5.1 Unit Objectives; 5.2 Objectives of System Design; 5.3 Conceptual
Design; 5.4 Design Methods; 5.5 Detailed Design of a System; 5.6 Summary;
5.7 Answers to ‘Check Your Progress’; 5.8 Exercises and Questions; 5.9 Further Reading

UNIT 6 IMPLEMENTATION AND EVALUATION OF MIS 72-85

6.0 Introduction; 6.1 Unit Objectives; 6.2 The Implementation Process; 6.3 Selection of
Hardware and Software; 6.4 Evaluation of MIS; 6.5 System Maintenance;
6.6 Pitfalls in MIS Development; 6.7 Summary; 6.8 Answers to ‘Check Your Progress’;
6.9 Exercises and Questions; 6.10 Further Reading

UNIT 7 APPLICATION OF MIS IN MANUFACTURING SECTOR 86-101

7.0 Introduction; 7.1 Unit Objectives; 7.2 Information Processing System; 7.3 Personnel
Management; 7.4 Financial Management; 7.5 Production Management; 7.6 Marketing
Management; 7.7 Summary; 7.8 Answers to ‘Check Your Progress’; 7.9 Exercises and
Questions; 7.10 Further Reading
 Introduction

INTRODUCTION

The globalisation of business, competitive market and continuous innovations are the
factors that forced the business world to change their strategies for managing business.
Now, the need for developing and managing an information system is beingfelt by the NOTES
business world. This is because an information system is the most important resource
for the management in decision-making.
Management information system (MIS) is an information system that is used within an
organisation to achieve its desired objectives. A MIS collects and processes information
and then provides the information to the management of an organisation. The
management of an organisation uses this processed information for decision- making,
planning and controlling. An information system consists of all the resources, such as
hardware, software, people and communication systems, that collect information,
evaluate and disseminate it.

Objective
The objective of this book is to impart knowledge to the readers about the various
aspects such as planning structure and implementation process, related to the
information system. This book also discusses the functioning of the information system
and how it helps an organisation to achieve the desired objective. In addition, this book
also throws light on the decision-making process, which is also an important part to
be considered for managing an information system.

How This Book Is Organized

This book is divided into seven units.

Unit 1
This unit describes the concept of information as a vital input for performing operations
and producing desired output. This unit describes various types of information such as
strategic and tactical. This unit also describes various types of systems such as abstract
and physical systems, and open and closed systems.
It introduces the importance of MIS and explains MIS in details. In addition, the unit
introduces various characteristics and functions of MIS. The unit also throws light on
the comparison of Information Technology (IT) and MIS.

Unit 2
This unit describes the concept of decision-making and explains three different phases
of decision-making process: intelligence, design and choice, respectively. It also
introduces the concept of decision theory, decision analysis and decision tree. In
addition, this unit also discusses the various methods for choosing the optimum
alternative among the different available alternatives.

Unit 3
This unit explains the structure of MIS and various systems such as transaction
processing and decision support on the basis of which MIS is classified. In addition,
the unit introduces the financial information system and human resource information
system that are a part of functional information system. Apart from these systems, the
unit also introduces the human resource information system.

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Management Information Systems Unit 4
This unit introduces the system analysis stage of the system development process. It
also determines the various requirements for system analysis such as identification of
data used and generation of information during system development. In this unit, the
NOTES concept of decision table is discussed in addition to the structured analysis tools such
as data flow diagram and data flow dictionary.

Unit 5
This unit introduces the objectives of system design and the design methods for
designing the information system. It also introduces the conceptual design state for a
system that includes various steps such as problem definition and setting system
objectives. This unit also explains detailed system design that consists of a number of
phases such as project planning and design documentation.

Unit 6
This unit describes the implementation process of MIS, which includes planning,
acquisition of facilities and user training, etc. This unit introduces the hardware and
software requirements for installing MIS. This unit also discusses evaluation of MIS
that helps an organisation to know about the performance of the newly installed MIS.
In addition to this, it also discusses the system maintenance and the different types of
the system maintenance.

Unit 7
This unit introduces the application of the management information system. It explains
the role of management in various sectors such as production, marketing, finance and
personnel.

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 Information and
System Concepts
UNIT 1 INFORMATION AND SYSTEM
CONCEPTS
NOTES
Structure
1.0 Introduction
1.1 Unit Objectives
1.2 Information
1.3 Types of Information
1.4 Quality of Information
1.5 Dimensions of Information
1.6 Sub-System of Information
1.7 System
1.8 Types of Systems
1.9 Concepts Related to Systems
1.10 Elements of a System
1.11 Human as an Information Processing System
1.12 Summary
1.13 Answers to ‘Check Your Progress’
1.14 Exercises and Questions
1.15 Further Reading

1.0 INTRODUCTION
Information is defined as the processed form of data that is used for decision-making.
There are various types of information such as strategic and tactical. The quality of
information is determined on the basis of various factors such as completeness and
accuracy. A system is defined as a collection of elements integrated to achieve the
organisational goals. There are various types of systems such as physical and abstract
and open and closed.

1.1 UNIT OBJECTIVES

 Explaining how information helps in the decision-making and planning
process
 Identifying the types of information used by the personnel at various levels
of management
 Describing the various aspects of information in terms of cost, business and
technical issues
 Describing the evolution of information systems in organisations
 Defining system and its various types
 Comparing a human with information processing system

1.2 INFORMATION
Information is the processed form of data that is used in the process of decision-
making in an organisation. The organisation collects raw data from various sources 3
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Management Information Systems and processes them to form structured data known as information. Figure 1.1 shows
how processing of data generates information.

NOTES

Figure 1.1: Processing of Data

Data is a by-product of transactions that occur during the processing of operations in
an organisation. The data present in an organisation represents information in the raw
form. On the other hand, information is the processed form of data that has very less
uncertainty as compared to data and represents more accurate and precise information.
Davis & Olson have defined information in their own terms as “data that has been
processed into a form that is meaningful to the recipient and is of rail or perceived value
in current or prospective actions or decisions”.

1.3 TYPES OF INFORMATION

Information obtained from processing of data is vital for an organisation in terms of
long term and short term planning. Based on the use and purpose of information, it is
broadly categorised into three main categories as follows:
 Strategic information
 Tactical information
 Operational information
Figure 1.2 shows the various types of information.

Figure 1.2: Various Types of Information

1.3.1 Strategic Information

Strategic information is used by higher-level management to devise strategies that need
to be implemented in an organisation. The strategic information is vital for decision-
making in an organisation and is generally used for long term planning.

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 Information and
Consider an example, where an organisation needs to plan for adopting new System Concepts
technologies or launching a new plant as a whole for performing the operations in an
organisation. Planning for adopting new technologies involves long term planning that
requires strategic information. Management takes decision based on this strategic
information. NOTES

1.3.2 Tactical Information

Tactic information is used by middle-level management to devise strategies that need
to be implemented in an organisation. The tactic information is vital for making control
decisions in an organisation and is used for middle term planning.
Consider an example of an enterprise, where the regional sales manager needs to
forecast the sales of the products in future based on previous sales records of past three-
four years. Tactical information is generally obtained from the records of the day-to-
day activities in an organisation. The processing of the daily records maintained in an
organisation leads to tactical information. Information obtained from external sources
such as competitor records also has deep impact on the tactical information.

1.3.3 Operational Information

Operational information is used by lower-level management to devise strategies that
need to be implemented in an organisation. The operation information is vital for
making decisions required on day-to-day basis and is used for short term planning. This
information is used at operational level to make immediate actions in daily operations.
Operational information is generally used to represent information such as work status,
customer orders and stocks in hands.

1.4 QUALITY OF INFORMATION

Quality of information is measured in terms of its various attributes such as:

 Timeliness
 Accuracy
 Relevance
 Adequacy
 Completeness
 Explicitness
 Exception based

1.4.1 Timeliness
Timeliness is one of the major attributes of information. Timeliness determines that
the information reaches the required recipients within the pre-specified period of time.
Timeliness plays a vital role in the decision-making process of management in an
organisation as well. B.K. Chatterjee gave a statement in 1974 that information delayed
is information denied.
Consider an example, where the accounts officer requires financial report on 1st of
every month. Any delay in the information results in delay in the decision-making
process by the accounts officer. Timeliness ensures that the information intended for
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Management Information Systems a recipient should be accurate and contemporary to the most current readings and
reaches the recipient on time.

1.4.2 Accuracy
NOTES John G. Burch and Gary Grudnitski gave a statement in 1986 for accuracy. According
to them, “The information that is free from mistakes and errors is clear, and accurately
reflects the meaning of data on which it is based”. The accurate information should be
able to deliver clear picture of the information to the intended recipient be it in tabular
form or graphical form. Accurate information is also free from any kind of biasing.
H.C. Advani in 1975 determined the importance of accuracy by stating that wrong
information given to management would result in wrong decisions. At the same time,
he advocated that accuracy should be within limits or as desired and should not be
achieved by sacrificing promptitude.
Delivery of accurate information also helps the management to gain the confidence of the
employees. Representation of accurate information aids the management to take right
decisions on right time leading to the success of an organisation.

1.4.3 Relevance
Relevance is another key attribute of management information systems that determines
the need and requirement of the information. A piece of information is said to be
relevant if it is able to solve problems of what, when and why for the intended recipient.
Relevance of information depends on the intended recipient of the information. For
example, the sales report information is relevant only to the sales engineer. The work
status of the employees is vital to the production manager. The financial reports of the
company are relevant only to the accounts officer in an organisation.

1.4.4 Adequacy
Adequacy of information is used to determine that the information presented to the
Management Information System (MIS) is adequate as per the information required by
an organisation. Lack of information leads to the crisis of information and overload of
information create chaos in the Information System. Adequacy of information also
ensures that a report generated in an organisation represents complete picture of the
operational processes in execution.

1.4.5 Completeness
Completeness and accuracy go hand in hand with each other. The information that is
adequate may or may not be complete in all respects. The completeness of the
information ensures that the information report covers all the details required by the
management of an organisation. In case, where the complete information cannot be
delivered to the management, the concerned authority must be reported immediately
for the lack of information.

1.4.6 Explicitness
This attribute ensures that the information presented to the management does not
require further analysis of the information on the part of management. The explicit
information is able to depict the meaning and purpose of the report clearly without any
further scrutiny of the information.
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 Information and
1.4.7 Exception-based System Concepts

The most contemporary concept of representing the information is the one that is based
on exception. Exception-based information ensures that only the information that is
required by the management is delivered to the client. Exception-based information NOTES
helps the management in saving time, cost and efforts required to evaluate the
information. Whenever an exception-based report is send to the management, it
directly focuses on the target piece of information.

1.5 DIMENSIONS OF INFORMATION

Information presented to the management is estimated to have its dimension in terms

of cost, business and technical issues involved. Various dimensions of information
systems are.
 Economic
 Business
 Technical

1.5.1 Economic Dimension

Economic dimension of information determines the cost involved in obtaining the
information and the benefits that are derived from the information. Based on the cost
and benefits analysis and economic dimensions are evaluated as.

1.5.1.1 Cost of information

Cost of information determines the cost involved in obtaining the information, which
includes.
 Cost of acquiring the data
 Cost of maintaining the data
 Cost of generating the information
 Cost of communicating the information
The cost is estimated from the point the information is generated to the point the
information is retrieved by MIS. The cost of obtaining the accurate and complete
information is more as compared to the cost generally retrieved from the system.

1.5.1.2 Value of information

Value of information is determined on the basis of benefits that are derived from the
information. Consider an example where two products A and B are developed. The
benefits derived from product A evaluates to 20 and the benefits derived from product
B evaluates to 30. The difference between the benefits of the two products is 10 units.
If you add some information, the benefits derived from product A increases by 20
points from 20 to 40. The actual value of information needs to be calculated from
simple mathematics. The cost of information increases by 20 units. You need to
subtract the cost involved in obtaining the information to determine the actual value
of the information.

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Management Information Systems 1.5.2 Business Dimension
The business dimension of the information is used to determine the relevance of
information at various levels of management. The business dimension of information
at top-level management is totally different from the business dimension of
NOTES information at lower level management. The difference in business dimension arises
from the difference in the level and nature of work performed at various levels of
management.

1.5.3 Technical Dimension

The technical dimension of information covers the technical aspects of information
such as the volume of information to be stored in the database. It also undertakes the
type of database that is used to store information in the database. The technical
dimension covers the capacity of the database and the time required to retrieve
information from the database.

1.6 SUB-SYSTEM OF INFORMATION

Information plays a vital role in the transaction processing and decision-making
process of organisations. Without proper and accurate information, it is not possible
to make any decision or process any transactions. Earlier information processing
system used to be a very hectic task, as everything involved in information processing
Check Your Progress was a manual task. To collect a small piece of information, a lot of time was consumed
1. Match the following: and hence the work of decision-making and transaction processing used to get delayed.
Following are the sub-systems of information:
Type of Management
information Electronic data processing: In 1960s, a new system was introduced that was fast in
information processing called the electronic data processing (EDP). EDP is an
Strategic Middle
information Management
automated system that is used for processing data and information. The EDP systems
were used for transaction processing and accounting in an organisation. Today, instead
Tactical High level of EDP the term MIS is more commonly used for information processing system.
information Management
Decision support system: Decision support system (DSS) is evolved from MIS. MIS
Operational Low level
has not proved to be efficient in providing relevant information to the top management
information Management for making long-term decisions. DSS enhances the capabilities of MIS by providing
assistance to the top management in decision-making. DSS is an ongoing evolutionary
Determine whether the system based on operations research.
following statement is true or
false: The term Decision Support System was first introduced by Gorry and Morton. The
Completeness of information term Decision Support System is a combination of three words, which are as follows:
also determines that the
information is adequate.  Decision, which concentrates on the decision making to solve a particular
True
problem rather than emphasising on information processing, retrieval, and
reporting.
False
3 The economic dimension of  Support, which means computer support is required for making decisions.
the information system  System, which signifies the integrated nature of problem solving. This means
includes:
that for solving a particular business problem, man, machine and decision
Cost of acquiring the data
environment are required.
Cost of maintaining the
data Concisely, you can say that DSS is a computer-based system that helps end users to
Cost of generating the data use data and models for solving unstructured problems in an organisation.
All of these

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 Information and
Management information system: The computers have played an important role in System Concepts
making the management tasks faster as compared to the manual system. To perform a
particular task, the managers also require relevant information. The type of information
required by a manger to perform a particular task depends upon the level of the
manager. The low-level managers need to perform daily routine tasks so they require NOTES
detailed information about the related activity. However, a high-level manager has to
obtain long-range objectives and take structured control decisions so they require
summarised information from different reliable sources to take long- term decisions.
In both the cases, the management requires accurate, concise, timely, and relevant
information for proper functioning of the organisation. For this, the organisations use
management information system (MIS).
MIS is a person-machine system, which involves highly integrated combination of
information processing functions. Effective management information system is that
which provides relevant information to the right person at right time. MIS also include
proper file definition, maintenance and updating of information to maintain
consistency in the information used by different levels of managers for taking business
decisions. MIS should also ensure that information stored in the information system is
not redundant. This helps in making efficient utilisation of available memory space.

1.7 SYSTEM

A system is defined as the collection of elements that are integrated to achieve the
required goals. Consider an example of an organisation where various departments
such as Production, Sales, Marketing and Finance are integrated to achieve thecommon
objectives of an organisation. In general, the word system has different meanings in
different situations.

1.7.1 Multiple Meaning of System

The word system implies different meaning for different people. For example, the word
system in terms of sports has a different meaning from the word system in terms of
organisation. The use of word system in context of computer relates to monitor,
processor and printer that are integrated to perform various operations. The use of word
system in MIS relates to the input, processing and output of data. Depending on the
requirements, MIS may involve single or multiple processes.

1.7.1.1 Single process MIS

In a single process MIS, the system receives input from a single source, processes the
input and produces an output. The output obtained during the single process MIS is
sent to a single system.
Figure 1.3 shows the single process MIS.

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Management Information Systems

NOTES

Figure 1.3: The Single Input-Output Process

1.7.1.2 Multiple processes MIS

In the multiple processes MIS, the system obtains input from a multiple source,
processes the input and produces an output. The output obtained during multiple
processes MIS is sent to multiple systems.
Figure 1.4 shows the multiple processes MIS.

Figure 1.4: Multiple Input-Output Processes

1.8 TYPES OF SYSTEMS

To avoid any ambiguity of the use of the word ‘system’ in various circumstances, a
system has been categorised into various types. Consider an example, where one person
talks about system as collection of concepts and ideas. The listener perceives the
system as an integrated operational unit of person, machines and equipment. The
various types of systems in MIS are:
 Abstract and physical
 Deterministic and probabilistic
 Open and closed
 User machine
 Formal and informal

1.8.1 Abstract and Physical Systems

An abstract system is the collection of interdependent ideas, which may or may not be
present physically in the world. Consider an example of a system, which illustrates
ideas about the Indian history. This abstract system has no physical presence in the
world.

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 Information and
On the contrary, physical systems are defined as a collection of concrete operational System Concepts
systems that are physically present in the world. The concrete operational systems
consist of people, materials, machines, energy and other physical things. Physical
systems display some activity or behaviour in contrast to the abstract system in the
world. Consider an example of the computer system that includes monitor, processor, NOTES
printer and UPS. These elements constitute together to achieve the common objective.

1.8.2 Deterministic and Probabilistic Systems

A deterministic system is defined as a system in which the output of a system can be
predicted with great certainty for a given set of input instructions. Consider anexample
of a computer program, which is defined in terms of certain machine instructions. For
a particular set of input conditions and given program instructions, programmer can
easily determine the output of the computer program. Any deviations from the standard
output will be reported as error in MIS.
A probabilistic system is defined as a system in which the output of a system is
influenced by the behaviour of the system. Under ideal conditions, the probabilistic
system generates the same output as the deterministic system. The introduction of
behavioural influence leads to the probability of errors in the system.
Consider an example where a job has been assigned to an employee. Under ideal
conditions, the employee is expected to complete the job within 10 days. If the human
factors such as behaviour and emotions are taken into due consideration, the number
of days required to complete the job may be extended. Moreover, there is probability
of error as well.

1.8.3 Open and Closed Systems

An open system is defined as the system that depends on its surrounding environment
for inputs. The exchange of information with the surrounding environment may take
place in the form of information, material or energy. Open systems are flexible in
nature and tend to adopt themselves to any change in the environmental conditions.
For example, humans are open systems. Human systems perform homeostasis to
maintain equilibrium with the surrounding environment. Human beings also react to
the change in the surrounding climatic conditions such as summer, winter or spring.
Any MIS that is influenced by customer tastes and preferences is said to be an open
system.
A closed system is defined as the one, which is not influenced by any change in the
surrounding environment. Ideally, closed information system is rare in nature. The
systems that are not ideally closed and are less influenced by the surrounding
environment are called relatively closed systems. Computer programs that produce
outputs as per the given set of instructions best exemplify relatively closed systems.

1.8.4 User-Machine Systems

User-machine systems are defined as the systems where people work in close
proximity with machines. In the present era of advanced technology, you will hardly
find any system that works without the use of machines. In these kinds of systems, both
man and machines work hand in hand to achieve the common objectives of an
organization. The machine systems produce deterministic results and the systems
where people are involved produce probabilistic results. Computer and the operator
that perform the required operations on the computers can best exemplify the User-
machine system. The computer system produces the deterministic results and the
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Management Information Systems operators simply monitor the functioning of the computer systems to produce
probabilistic results.

1.8.5 Formal and Informal Systems

NOTES A formal system is the one, which is based on the organisation represented by the
organisation chart. The organisation chart represents relationships among the various
levels of managements where the levels are mentioned in boxes and the relationships
shown by boxes connected by straight lines. It is concerned with the pattern of
authority, communication and workflow.
Informal system is an employee-based system that is designed to meet the personal and
vocational needs of employees. It also helps in identifying the work related problems
of employees and helping them to solve those problems.

1.9 CONCEPTS RELATED TO SYSTEMS

There are various concepts related to a system that helps perform the operations of a
system at a great comfort. These concepts also help in demarcating one system from
another. Various types of system concepts are:
 Boundary
 Interface
 Black box
 Decomposition
 Integration

1.9.1 Boundary
Each system whether open or closed, probabilistic or deterministic needs to be defined
within the constraints of a boundary. The boundary is used to identify and isolate
similar types of systems in an organisation. The boundary represents a hypothetical
concept, which may or may not exist physically. The concept of boundary varies from
one system to another. Consider an example of a production system where the
boundary excludes raw materials and finished goods from the system. The other system
in the same organisation may define its boundary that includes raw materials and
finished goods in the system. The surroundings outside the boundary of a system are
defined as its environment. Figure 1.5 shows the System and its boundary.

Figure 1.5: System and Boundary

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 Information and
The boundary of a system demarcates the system from its environment. The input is System Concepts
provided to the system from the outside environment. The system then processes the
input and passes the output to the outside environment. Figure 1.5 shows the system
and its environment.
NOTES
1.9.2 Interface
Interface helps the users to interact with the system. Consider an example, where
multiple sub systems integrate with each other to form a perfect system. In systems
where multiple systems are involved, it is essential to determine the sub system that
accepts the input from the environment. At the same time, it is essential to determine
the sub system that produces the output and returns it to the outside environment.
Figure 1.6 shows the integration of sub systems demarcated with an interface.

Figure 1.6: Integration of Sub Systems

1.9.3 Black Box

Black box is the term that is used in information systems to define the system whose
transformations at the processing level are not defined by the system. In black box
systems, the system is initialised with a predefined set of inputs and a certain output
is determined on the basis of ideal behaviour of the system. Any transformation that
takes place at the sub system level is not defined by the black box system. Figure 1.7
shows the black box system.

Figure 1.7: Black Box System

1.9.4 Decomposition

Decomposition of system defines the division of system into its various sub systems.
The decomposition of system into its various sub systems allows you to perform
complex tasks with greater ease. Moreover, the division of system into various sub
systems lead to the hierarchical arrangement of the operation processed at the system
level. A system is divided into smaller units until the smallest unit of the system
becomes manageable at the system level. It is easier to construct a system from its
smaller units rather than creating a complex system as a whole. Figure 1.8 shows the
decomposition of a system.

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Management Information Systems

NOTES

Figure 1.8: Decomposition of a System

The decomposition of a system can be best exemplified by hierarchical arrangement of

various departments in an organisation. Consider the example of an organisation where
multiple units integrate with each other to achieve a common objective. In such
organisations, the system is decomposed into various departments such as Production,
Sales, Marketing and Finance. The Production department is further categorised into
various departments such as Production Manager, Team Leader and Workers.

1.9.5 Integration
A system is decomposed into smaller systems for better management at the operational
level. However, to achieve the common objective of an organisation, there is a need
to integrate all the sub systems of an organisation. The collation of output from all the
sub systems to produce the desired output is called integration of sub systems. The
integration of various sub systems allows you to treat the whole organisation as a single
unit dedicated to perform an operation. Figure 1.9 shows the integration.

Figure 1.9: Integration of a System

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 Information and
System Concepts

1.10 ELEMENTS OF A SYSTEM

Elements of a system define the components that are vital for the functioning of an NOTES
information system. Various elements of a system are:

1.10.1 Input
Input is defined as the component on which the system operates to produce the desired
output. The input component may be presented in the form of data, which is processed
to produce the desired output. The data may be present in the form of raw facts and
figures on which the system operates.

1.10.2 Process
Process is defined as the component that performs the necessary transformation on
input to produce the desired output. Processing involves one or multiple activities
depending on the processing requirement of the input operations. Processing of an
activity may involve various machines, tools and equipments. If the transformations
performed by various sub systems to process the input are not transparent to the user
then the processing is called black box processing. The processing of input can be
performed with ease when the system boundary and interfaces have been defined
clearly. The processing of input involve various operations such as:
 Classification
 Sorting
 Calculation
 Summarising
Figure 1.10 shows the processing of input to perform operations.

Figure 1.10: Processing of Input

Classification of input data allows the processor to perform complex operations easily.
It helps in proper arrangement of data in the memory according to their data types.
Sorting of data allows the processor to arrange data in the order of operations to be
performed on the data. It helps in faster processing of the input as per the operations
required.
Calculations are performed on the data to produce the desired results. The calculations
to be performed on the data may be simple or complex depending on the output
requirements.
Summarising of data allows the processor to make the data available to the user. The
output of the processing can either be displayed or delivered in the form of print out
to the user.

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Management Information Systems 1.10.3 Output
Output is defined as a component, which is produced as a result of processing on data.
Consider an example where raw data is processed to produce the information. The
information obtained after processing the data is termed as output of the system. The
NOTES output of a system helps in decision-making of a system.

1.10.4 Feedback
The feedback from output to input of a system ensures that the system remains in the
state of equilibrium. Adequate feedback helps the user to control the system. The output
generated by the system is compared with the standard output under ideal conditions.
Any deviation from the standard output is sent as feedback to the input of the system.
The feedback to the system initiates the control mechanism that takes appropriate
actions to correct the deviations found in a system. Figure 1.11 shows thefeedback and
control mechanism for a system.

Figure 1.11: Feedback and Control Mechanism

1.11 HUMAN AS AN INFORMATION PROCESSING

SYSTEM
Human body is also a perfect example of information processing system. Human
being as information processing system consists of the following components:
 Sensory receptors
 Brain processing
 Response
Human body includes various sensory receptors such as eyes, ears and skin. These
sensory receptors accept input from the surrounding environment and transmit data to
the human body processor known as brain.
The brain accepts input signal from the sensors, processes them and respond to the
input stimuli by performing actions or tasks. The brain processes the input based on
the data provided by the input signals and the information stored in the memory. Figure
1.12 shows the brain processing inside the human body.

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 Information and
System Concepts

NOTES

Figure 1.12: The Human Brain as Information System

The human brain consists of two types of memory to perform the processing of
information:
 Short-term memory (STM): This memory is comparatively small and stores
information that needs to be retrieved in shorter span of time. It can store up to
five to seven chunks of information at a time.
 Long-term memory (LTM): It is very large and used to store large amount
of information in the human brain. It stores information in the compressed
form that can easily be retrieved from the human brain. It can store up to
hundred chunks of information in the memory at a time and have unlimited
storage capacity.

Note: Chunks is the basic unit to store the information in the human brain.

The human brain after processing the information summarises the information and
produces output either in the form of action or tasks. The action generated by the human
is returned as action to the environment.

1.11.1 Information filtering

Information filtering refers to the filtering of data as per the brain capacity to accept
input from the environment. The sensory receptors accept input from the environment
but they can only store a limited amount of information. Thus in order to store and
process the relevant piece of information, the human brain performs the filtering of
information. The information filtering helps human brain to neglect irrelevant piece of
information. The information filtering is performed based on the number of factors that
may be inherited. Figure 1.13 shows the information filtering performed prior to the
processing of information.

Figure 1.13: Information Filtering

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Management Information Systems 1.11.1.1 Selective frameworks
Human beings use selective frameworks to identify a process among various processes.
To perform information filtering, humans develop frames of reference or intuitive
patterns of information. Selective frameworks allow humans to store relevant piece of
NOTES information by comparing it with the existing or previous information in memory. The
selection of various frameworks is also influenced by decision rules.

1.11.1.2 Cognitive biases and limitations

Information filtering is also influenced by cognitive biases and limitations of humans.
For example, Miller (1956) has suggested that short-term memory in humans cannot
effectively process more than nine units of information (seven plus or minus two 7 ±
2). Humans tend to be more biased towards the input that likely influences their output.

1.11.2 Human Differences in Information Processing

The processing of information is also influenced by differences in human behaviour.
Different people in the world may have different perception for the same matter of
tasks. The differences in information processing due to differences in their attributes
are referred to as cognitive style. McKenney and Keen (1974) have suggested a model
of cognitive style, which categorises human styles along two continuums.
Figure 1.14 shows the cognitive style of a person.

Check Your Progress Figure 1.14: Cognitive Style

4. List down various kind of
systems. In the above figure, the horizontal dimension (x-axis), represents the scale how humans
5. The systems whose evaluate information. On the basis of information evaluated by people, they are
transactions are not
determined at the processing
categorized as:
level are called …………..  Systematic humans: They try to deal with a problem by structuring all the
6. Determine the element of a relevant information and facts about the problem.
system that is used to control
the Information systems  Intuitive humans: They try to deal with a problem by trial and error methods.
A. Input
They are able to solve the ill-structured problems more efficiently and act
B. Processing
spontaneously to the problems.
C. Output The vertical dimension (y-axis) represents the scale how humans perceive a problem
D. Feedback in different circumstances. On the basis of information gathered by people, they are
categorized as:

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 Information and
 Perceptive humans: These humans focus on relationships between various System Concepts
pieces of information that are gathered during the analysis of a problem.
 Receptive humans: These humans get deeply immersed in the problems and
try to find out solutions by scrutinizing all the relevant details of the problem.
NOTES
Another explanation of human differences in information processing is due to
biological processing of information. This theory explains that brain has two parts,
which processes information differently. Humans that use their left part for information
processing are more planned, logical, analytical and realistic in their nature. Humans
that use their right part for information processing are more impulsive, insight, intuitive
and imaginative in their decisions.

1.11.3 Implications for Information Systems

Better understanding of the human processing system helps designers for better
designing of the information systems. Human decisions are influenced because of
selective frameworks, cognitive limitations and other biases in humans. A brief
description of the impact of human biases can be explained as:

1.11.3.1 Information filtering

This is one of the most significant factors that contribute to the processing of
information systems. Information filtering must ensure that brain should be able to
store only the relevant piece of information out of vivid types of information provided
to the humans by the environment. Information system should also be able to neglect
all irrelevant piece of information.

1.11.3.2 Human differences in information processing

The information system should be designed in such a manner that it helps the people
in better understanding and analysis of the problem. The information system should
provide the humans with the most accurate and precise amount of information. The
information system should take into due consideration the nature of the humans. For
example, the intuitive people require significantly less amount of information to take
decisions while people that follow systematic approach to solve a problem require
more information.

1.12 SUMMARY

Information and systems help management in decision-making and planning.

Information can be determined in its constraints of economic dimension and business
dimension. There are various kinds of systems such as deterministic and probabilistic
systems and open and closed systems. Systems are defined using various concepts such
as boundary and interface.

1.13 ANSWERS TO ‘CHECK YOUR PROGRESS’

1. Match the following:

Type of information Management

Strategic information High level Management
Tactical information Middle Management
Operational information Low level Management
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Management Information Systems 2. False
3. All of these
4. Various kind of systems are:
NOTES A. Abstract and physical systems
B. Deterministic and probabilistic systems
C. Open and closed systems
D. User machine systems
5. Black box
6. Feedback

1.14 EXERCISES AND QUESTIONS

Short-Answer Questions
1. Describe various factors that are used to describe the quality of information.
2. Describe single process and multiple process management information
systems.
3. Explain the difference between probabilistic and deterministic systems.
4. Explain the black box system.

Long-Answer Questions
1. Explain EDP and DSS in detail.
2. Describe how humans act as an Information Processing system.
3. Explain how information plays a vital role in decision-making process.
4. Explain the role of system in MIS in detail.

1.15 FURTHER READING

Davis, Gordon B., and Margrethe H. Olson, Management Information Systems.

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 Decision-Making and MIS

UNIT 2 DECISION-MAKING AND MIS

Structure NOTES
2.0 Introduction
2.1 Unit Objectives
2.2 Decision-Making
2.3 Simon’s Model of Decision-Making
2.4 Decision Types
2.5 Methods for Choosing Alternatives
2.6 Summary
2.7 Answers to ‘Check Your Progress’
2.8 Exercises and Questions
2.9 Further Reading

2.0 INTRODUCTION

Decision-making is the process of choosing the best alternative from a given set of
available alternatives. The process of decision-making is carried out by a decision-
maker, who is a manager or any other official at the managerial post in an organisation.
The process of decision-making involves three phases, namely intelligence, design and
choice. There are various methods for choosing the optimum alternative among the
different available alternatives.

2.1 UNIT OBJECTIVES

 Introducing the concept of decision-making and Simon’s model of decision-
making
 Describing the various types of decision for carrying out decision-making
 Explaining the concept of utility, decision tree and optimisation techniques
 Comparing decision-making and management information system (MIS)

2.2 DECISION-MAKING
Decision-making means making a choice among the given choices by a manager or a
decision-maker. The decision-making process lets a manager come to a conclusion
about a given situation. Therefore, decision-making may be defined as a process of
selecting an optimum and best alternative from a couple of given alternatives to
accomplish a particular task. Decision-making process is the core of managerial
functions in MIS. It is said that the decision-making process considers two or more
alternatives from which a final decision could be made. But if only one alternative is
available, then no decision could be made. A decision-making process involves the
entire process of establishing goals, defining activities, searching for alternatives and
finally the development of plans. In addition, the decision-making process includes all
the activities of problem-solving, co-ordinating, information processing and evaluating
of alternatives that usually precede a decision.

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Management Information Systems A decision is an end or the final product of the decision-making process that represents
a behaviour selected from a number of possible alternatives.

2.3 SIMON’S MODEL OF DECISION-MAKING

NOTES
In organisations, the decision-making process is considered as a rational process. It
means the decision-making process is based on the following three phases as given
by Herbert A. Simon in his model of decision-making:
1. Intelligence phase
2. Design phase
3. Choice phase
Figure 2.1 shows the decision-making process model.

Figure 2.1: Decision-Making Process Model

1. Intelligence phase: A decision-maker studies the environment and identifies

the problem or opportunity. The scanning of environment may be continuous
or intermittent. For example,
A. Reviewing of daily scrap report by a production manager to check the
problems related to quality control. This is an example for continuous
scanning.
B. Periodic visiting of a sales executive to the key customers to review
possible problems and to identify new customer needs. This is an
example for intermittent scanning.
The intelligence phase of the decision-making process involves:
 Problem searching refers to the difference between the expected and
real result obtained after making a decision, which is given by the
following formula:
(Desired/Expected) – (Actual/Reality) =
Difference/Problem
For example, a sales manager sets a sales target of certain amount say
five lakhs in a particular month as his expected target, which is
expected but he could achieve only four lakhs worth of sales for that
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particular month, which is a reality. Therefore, the difference between
the expected and reality value of the target, that is, one lakh is the
problem. This difference worries the sales manager.
In actual practice, the reality or actual value is compared to some
standard desired model. Then the differences are measured and are NOTES
evaluated to determine the problem or difference. Various types of
models that are used to compare reality are:
 Historical models based on estimated information
 Planning model
 Extra organisational models in which expectations are derived
from customers, consultants and competition
 Models used by employees in an organisation
 Problem formulation refers to the proper identification of the
problem to avoid the risk of solving the wrong problem. To avoid such
a risk, it is very important to understand the problem well and state it
clearly. Sometimes, the process of clearly defining the problem is
sufficient; but in other cases, we have to simplify the problem by
determining its boundaries. Boundaries are simplified by breaking the
problem into smaller manageable sub-problems. In problem
formulation, establishing relations with some problems that are solved
earlier prove quite useful.
2. Design phase includes inventing or developing various alternatives in order to
get the best possible alternative. Developing alternatives is a time- consuming
and crucial activity, as the decision-maker has to explore all the possible
alternatives. Decision-maker should not take the risk of missing any alternative
since the missed-out alternative might be the best one from the given
alternatives. Developing alternatives is a creative activity, which can be
enhanced by various aids such as brainstorming, checklists and analogies.
3. Choice phase refers to the selection of an alternative developed in the design
phase as the decision by the decision-maker. A decision-maker makes a
detailed analysis of each and every alternative for performing this selection.
After making a decision, the decision is implemented. However, at any phase,
the decision-maker may return to the previous phase. For example, the
decision-maker in the choice phase may reject all alternatives and return to the
design phase for developing more alternatives.

2.4 DECISION TYPES

The decisions taken by an organisation are different in many ways, which ultimately
affect the development of alternatives and the choice available among the alternatives.
These different decisions also affect the support provided by the design of an
information system for carrying out decision activities. The following bases are
important to classify decisions.

2.4.1 Purpose of Decision-Making

On the basis of the purpose of the decision-making activities, the organisational
decisions are divided into the following three different categories:
1. Strategic planning are the decisions in which a decision-maker develops
objectives and allocates resources to achieve these objectives. Decisions in
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Management Information Systems this category are of long-time period and involve a large investment and effort.
Such decisions are taken by strategic planning level managers, which are the
top-level of the management hierarchy in an organisation. Examples of such
decisions may include introduction of a new product and acquisition of another
firm.
NOTES
2. Management control comprises the decisions taken by management control
level managers, who are the middle-level of the management hierarchy in an
organisation. These managers deal with the use of resources in the
organisation. Analysis of variance, product mix and planning decisions fall in
this category of decisions.
3. Operational control comprises the decisions dealing with the day-to-day
problems that affect the operation of an organisation. For example, decisions
such as production scheduling and inventory control fall in this category. In
these decisions, the product to be produced for the day or the items and their
quantities to be ordered are operational control decisions. Such types of
decisions are normally taken by the operational level managers, who are at the
bottom-level of the management hierarchy in an organisation.

Note: Due to the overlapping nature of some decisions, the boundaries for classifying decisions
in these categories are not very concrete and therefore, these decision types should not be taken
as discrete ones.

2.4.2 Programmability Levels of a Decision

On the basis of the levels of programmability of a decision, the decisions are of the
following two types:
1. Programmed or structured refers to the decisions that are well defined and
require application and implementation of some specified procedure or
decision rule in order to reach a decision. Such decisions require little time for
developing alternatives in the design phase. Programmed decisions are made
by operating procedures or by using other accepted tools. More modern
techniques for making such decisions involve operations research (OR),
mathematical analysis, modelling and simulation.
2. Non-programmed or unstructured refers to the decisions, which are not well
defined and have no pre-specified procedure or decision rule. These decisions
may range from one-time decisions relating to a crisis to decisions relating to
the recurring problems. The unstructured decisions consume sufficient time in
the design phase of the decision-making process. These decisions could be
solved using judgement and intuition. Modern approaches to such decisions
include special data analysis on computers and heuristic techniques. Decisions
of this kind are usually handled by strategic planning level managers. Because
of unstructured nature, these decisions cannot be used as representatives for
lower level decisions and are difficult to automate. For example, planning for
R&D is unstructured decision.
3. Semi-structured are the decisions that are neither structured nor unstructured.
These decisions are supposed to fall somewhere between the structured and
unstructured decisions. For example, introduction of a new product is semi-
structured decision.

Note: There is no distinct line of difference or boundaries between the two types of decisions;
rather they exhibit a continuum for the classification of decisions.

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2.4.3 Knowledge of Outcomes
Knowledge of outcomes is another approach for classifying decisions. An outcome
defines what is going to happen if the decision is taken or the course of action is taken.
The knowledge of outcome plays an important role when you have more than one NOTES
alternative. On the basis of the level of knowledge of outcomes, decision-makingcan
be classified into three categories.
1. Decision-making under certainty takes place when the outcome of each
alternative is fully known and there is only one outcome for each alternative.
In such a situation, a decision-maker is required to compute the optimal
alternative or outcome.
2. Decision-making under risk occurs when there is a possibility of multiple
outcomes of each alternative, and a probability of occurrence can be attached
to each outcome. Such a decision-making is also similar to decision-making
under certainty where instead of optimising outcomes, the general rule is
applied to optimise the expected outcome. A decision-maker is assumed tobe
reasonable for choosing a particular decision. For example, a decision- maker
has to choose from the given two options, one offering a 2 percent probability
of a profit of Rs 1,00,000 and the other an 80 percent probability of a profit of
Rs 10,000. The decision-maker chooses the second alternative because it gives
a higher expected value. This is explained as follows using the formula:

Outcome x Probability = Expected Value

1,00,000 x 0.02 = 2,000
10,000 x 0.80 = 8,000
3. Decision-making under uncertainty takes place when there are a number of
outcomes for each alternative and the probabilities of occurrence of the
alternatives are not known. Optimisation criteria cannot be applied for making
these types of decisions because there is no knowledge of these probabilities.
The decision-making under uncertainty arises when different people in an
organisation take decisions by applying different decision rules. For example,
some may assign equal probabilities to all the outcomes for each alternative,
so as to treat the decision-making as a decision-making under risk whereas
others may adopt different criteria such as maximax and maximin criteria to
minimise regret.

2.5 METHODS FOR CHOOSING ALTERNATIVES

A decision-maker uses various methods for choosing the best alternative among the
available alternatives. The methods that are used for choosing alternatives, generally
Check Your Progress
assume that all the alternatives are known.
1. What do you mean by
decision-making?
2.5.1 Decision Theory and Decision Analysis 2. Name the three different
The decision theory and decision analysis refers to the techniques for analysing phases involved in the
Simon’s model of decision-
decisions under risk and uncertainty. In the process of decision-making, a decision- making.
maker wants to achieve his goal, purpose or objective. The decision-maker chooses 3. List different categories of
one particular alternative from various alternatives, which is termed as ‘Strategy’ of decisions that are used to
the decision-maker. All alternatives and outcomes are assumed to be known to the divide the organisational
decision-maker. There are certain factors termed as ‘States of Nature’, which affect the decisions.
outcome for different strategies. The strategy or alternative along with the state of
nature determines the degree to which the goal is actually achieved. This measure of
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Management Information Systems achievement of the goal is termed as ‘Pay-Off’. The pay-off matrix is used as a method
of presenting data in decision-analysis. A pay-off matrix is a good representation of a
decision-problem because the alternatives available to the decision-maker are
represented by rows, and states of nature by columns. Each cell of the matrix, which is
an intersection of a strategy and a state of nature, contains the pay-off. If the state of
NOTES
nature is known with certainty, then the decision-maker is required to select only the
strategy that provides him the highest pay-off. Figure 2.2 shows the pay-off matrix.

Figure 2.2: Pay-off matrix

For example, assume that a marketing manager of a computer manufacturer chooses

from the following three alternatives:
1. Launch a new PC having latest technology
2. Leave the PC as it is and do nothing
3. Modify the existing PC to improve its design and processing power
There are three states of nature that affect the pay-off from each of the alternative
strategies. These states of nature are:
Conditions remain the same as they are:
 A competitor may launch a new PC with the latest technology
 The government may impose high excise duty on manufacture of PCs and
reduce excise on laptops to encourage the use of laptops.
Figure 2.3 shows the various pay-offs from the combination of a strategy and a state
of nature.

Figure 2.3: Pay-off Matrix

Each cell, which is an intersection of a strategy and a state of nature, contains the
probabilities of occurrence of each state of nature, either based on historical data or on
personal judgement of the decision-maker. It could be seen that there are three states
of nature with known occurrence probabilities. This problem situation is called
decision under risk. Now to make a decision under such a situation, a decision-maker
should compute the expected value of each alternative. The expected value is
determined by multiplying each pay-off by the probability of occurrence of the state
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of nature (given in columns) and adding these values across all states of nature (across
the rows). In the above example, the expected value (EV) of each strategy, S2, is:
EV of S3 = (-5)(0.20) + (5)(0.40) + (7)(0.40)
= -1 + 2.0+2.8 = 3.8
NOTES
The maximum expected value that is 3.8 lakhs is found to be of the strategy S3, which
is to modify the PC. In addition, if the decision is made based on the expected value
objective function, the strategy S3 will be selected.
In decision-making under risk, the decision-maker knows the probabilities of various
states of nature. However, in the case of decision-making under uncertainty, the
decision-maker does not know the probabilities of the various states of nature.
Figure 2.4 shows the pay-off matrix for which the decision-maker does not know have
the knowledge of probability of occurrence of the states of nature.

Figure 2.4: The Pay-off Matrix Where Probabilities of Nature Are Not Known

Therefore, a decision-maker could not apply the maximisation/minimisation of

expected value criteria as in the case of decision under risk. In such decision problems,
the following decision rules or decision criteria may be applied:
1. Criterion of minimise regret refers to the selection of strategy that minimises
the maximum regret for each decision taken by a decision-maker. The
decision-maker might regret if he is not able to select the appropriate strategy
in terms of particular states of nature. The regret of the decision- maker is the
difference between the highest pay-off for a state of nature and the pay-off for
the other strategies for the same state of nature regret matrix. Table 2.1
showing the regret matrix displaying minimum of maximum requests for the
strategy S3, which includes modification of a PC. The regret of the decision-
maker is computed by subtracting the value in each entry in the column from
the highest value in the column. The decision-maker needs to select the
strategy that is going to give him the minimum of such maximum regrets.
Figure 2.5 shows the pay-off matrix displaying the differences between highest
pay-off for a state of nature and the other pay-offfor the same state of nature.

Figure 2.5: The Pay-Off Matrix Showing the Differences between Highest Pay-Off for a State
of Nature and the Other Pay-Off for the Same State of Nature.

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Management Information Systems Table 2.1: The Regret Matrix

NOTES

In the present case, the minimum regret is 3 lakhs. The decision-maker should
select the strategy S3, which modifies the product. This is the minimum regret,
if all the other strategies available to a decision-maker are taken into
consideration. But at the same time, 3 lakhs is the maximum regret, which the
decision-maker experiences for the strategy S3.
2. Maximax rule or criterion of optimism refers to the optimistic attitude of a
decision-maker that enables him to select the strategy that is able to provide
him the maximum pay-off under the most favourable condition. In this
example, the decision-maker selects the strategy S1, which gives him a
maximum pay-off of 10 lakhs for launching a new PC. Table 2.2 shows the
maximum pay-off to the decision-maker by implementing the strategy S1.
Table 2.2: The Maximum Pay-off Matrix

3. Criterion of rationality assumes equal probabilities of various states of nature

and as a result, is considered as a rational approach of decision- making. This
criterion is also termed as Laplace Criterion. This criterion becomes the
decision problem under risk after attaching the possibilities to the states of
nature. After attaching the possibilities, the expected pay-off for each strategy
is calculated and the strategy holding the highest expected pay- off is selected.
In the example that we have been discussing, the expected pay-off for each
strategy is given in Table 2.3. The probability of each table is assumed to be
equal to 1/3 since there are three states of nature.
Table 2.3: The Expected pay-off Matrix

Therefore, as per the discussed criterion, the strategy S3 should be selected

because of the highest expected pay-off.
4. Maximum rule or criterion of pessimism indicates that a decision-maker is
of pessimistic attitude and therefore, selects the strategy, which gives him the
maximum pay-off even if the worst condition occurs. Here, the decision-
maker does not like to take any risk and as a result, thinks about the safest
position in the worst situation. Therefore, the decision-maker selects the
strategy S3, since in the worst situation, which is the case of government ban,
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 Decision-Making and MIS
the decision-maker sustains the minimum loss of Rs 2 lakhs due to this
decision. Table 2.4 shows the matrix for the minimum pay-off.
Table 2.4: The Minimum Pay-off Matrix
NOTES

2.5.2 Utility
The utility measure is used in the organisations to cover some organisational factors
such as image and goodwill of an organisation, which are qualitative in nature. The
utility measure is required because these organisational factors could not be measured
in terms of monetary values as compared to the pay-offs in the decision-analysis and
decision-making process. The utility concept finds various applications in decision-
making of an organisation as it helps a decision-maker to decide about the non-
monetary factors.

2.5.3 Decision Tree

Decision tree is an important method for presenting the analysis of a project. It helps
in displaying the graphical representation of a sequence of decisions and actions. The
analysis of the project presented by a decision tree resembles to the branches of a tree
with the root of the tree as the starting point of the decision sequence. Figure 2.6 shows
the decision tree sequence.

Figure 2.6: Decision Tree Sequence

The function of a decision tree that helps in structuring the problem is composed of the
following two options:

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Management Information Systems 1. Problem structuring includes understanding the logical processing of a
problem. Consider the case of a computer firm that offers the following
discount policy to its customers.
If the payment is made within a week,
NOTES 4% discount is allowed on orders above Rs 1,10,000
3% on orders up to Rs 6,001 to Rs 1,10,000
2% on orders up to Rs 6,000
However, if the payment is made after a week, only 1% discount is allowed.
The above discount policy can be presented with the help of the following
decision tree as shown in figure 2.7.

Figure 2.7: Decision Tree for Discount Policy

2. Problem analysis includes the analysis of a problem. Suppose a company

named ABC wants to take decisions for the distribution channel for marketing
of its products. The available alternatives with the company are:
A. Selling agent
B. Direct sales
The company may have high or low market penetration and market share. The
probabilities and net gains are as shown in figure 2.8.

Figure 2.8: The Probabilities and Net Gain Table

Figure 2.9 shows the decision for the example as discussed above.

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NOTES

Figure 2.9: The Decision Tree

Here, LP means low penetration and HP means high penetration:

Expected Pay-off for Selling Agent = (0.80)(45) + (0.20)(20) = 40 lakhs
Expected Pay-off for Direct Sales= (0.60)(40) + (0.40)(30) = 36 lakhs
Therefore, the decision taken by the decision-maker is as follows:
As the channel option selling through agent would give a higher pay-off, which is equal
to 40 lakhs, therefore, the company selects this channel for marketing its products.
However, when large numbers of decisions need to be taken and each decision affects
the subsequent decision, the rollback procedure is adopted. In this procedure, a
decision-maker starts at the end of the branches and works from backward to the front
till the decision point of the decision tree is reached. This is done to calculate the
selected pay-off for all the branches of all the nodes of a tree. The choice of maximising
the expected pay-off on the whole is found by analysing the possible outcomes at each
decision point.

2.5.4 Optimisation Techniques

A number of optimisation techniques such as linear and dynamic programming are
available for taking decisions during a decision-making process. Various other
techniques in this category are integer programming, queuing models and inventory
models. These optimisation techniques assume that the decision-maker knows all the
alternatives and the outcomes of the alternatives. All these optimisation techniques are
used by a decision-maker to reach an optimal decision to complete the objective of the
function.

2.5.5 Decision-Making and MIS

The role of management information system is important to understand the concept of
decision-making. Decision-making concept is also used for designing an information
system. The support that the management information system provides to decision-
making process in various ways is discussed as follows:
 Support for Decision-making process: MIS plays its role in all the three
stages of the decision-making process, already discussed in the earlier part of
the unit. The role of MIS in the three stages of the decision-making process is
discussed as follows:

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Management Information Systems o Intelligence stage: Management information systems may provide
information about internal as well as external environments. Internal
information is generated from the functional areas but the external
information is collected from various sources such as newspapers and
personal contacts. Availability of a large amount of information in this
NOTES
stage makes it necessary to scan the data sources to get the relevant
information. As a result, information system is used to scan the
business environment of an organisation.
In order to get the required information in the intelligence phase of the
decision-making process, MIS must be designed so as to answer pre-
specified and ad hoc queries made by a decision-maker. In other
words, information system design have models such as historical
planning along with a query language capability that provides decision
support capability for the system.
o Design stage: Management information systems provide support by
quantifying and automating a decision-making process during the
design stage while considering structured decisions. At this stage,
various alternatives are developed and evaluated. On the other hand,
for semi-structured and unstructured decisions, the support of
management information system provides the following abilities:
 To reach a decision in an interactive process, which includes
decision support system capability.
 To make ad hoc queries for information in the organisational
databases.
Therefore, information systems should be designed to incorporate
various models of business operations and advanced statistical and
optimisation techniques. It is because these techniques can be used to
manipulate information that is already collected in the intelligence
stage to develop and evaluate various alternatives.
o Choice stage: Management information systems could provide
summarised and organised information to the decision-makers at this
stage of the decision-making process. It is the stage in which a course
of action is selected and feedback is collected on the implemented
decision. MIS also provides the feedback support to a decision-maker
in case he/she wants to return to the preceding stages of the decision-
making process in order to gather more information. Models such as
optimisation and suggestion should be used to select the most
appropriate alternative, which helps the decision-makers in selecting
the best course of action.

Check Your Progress

4. Name the various criteria that
2.6 SUMMARY
are used during the process of
decision-analysis. Decision-making is one of the main activities of an organisation. There are various
5. Write down the functions decision types and methods for choosing the best alternative among the given
performed by the decision alternatives. Simon’s model of decision-making is a decision-making process that
tree. consists of three phases such as intelligence, design and choice. The organisational
6. Name a few optimisation decisions can be divided as: Strategic planning, management control and operational
techniques used for taking
control.
decisions during decision-
making process.

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 Decision-Making and MIS
2.7 ANSWERS TO ‘CHECK YOUR PROGRESS’
1. Decision-making may be defined as a process of selecting an optimum and
best alternative from a couple of given alternatives to accomplish a particular NOTES
task.
2. Three different phases involved in the decision-making process are as
follows:
A. Intelligence phase
B. Design phase
C. Choice phase
3. Three different categories of decisions that divide the organisational
decisions are as follows:
A. Strategic planning
B. Management control
C. Operational control
4. The various criteria that are used during the process of decision-analysis are
as follows:
A. Criterion of minimise regret
B. Maximax rule or criterion of optimism
C. Criterion of rationality
D. Maximin rule or criterion of pessimism
5. The function of decision tree that helps in structuring the problem is
composed of the following two options:
A. Problem structuring
B. Problem analysis
6. Various optimisation techniques used for taking decisions during decision-
making process are as follows:
A. Linear programming
B. Dynamic programming
C. Integer programming
D. Queuing models
E. Inventory models

2.8 EXERCISES AND QUESTIONS

Short-Answer Questions
1. What do you mean by decision-making?
2. What are the stages involved in Simon’s model?
3. List the various techniques of optimisation.
4. What do you mean by decision tree and decision analysis?

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Management Information Systems Long-Answer Questions
1. Discuss in detail Simon’s model of decision-making.
2. Discuss in detail the various levels of programming a decision.
NOTES 3. What do you mean by utility measures and decision tree?

2.9 FURTHER READING

Davis, G.B. and M.H. Olson, Management Information Systems.

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 Management Information
Systems: A Framework
UNIT 3 MANAGEMENT INFORMATION
SYSTEMS: A FRAMEWORK
NOTES
Structure
3.0 Introduction
3.1 Unit Objectives
3.2 Significance of MIS
3.3 Understanding MIS
3.4 Definition of MIS
3.5 Nature and Scope of MIS
3.6 Components of MIS
3.7 Robert Anthony’s Hierarchy of Management Activity
3.8 Summary
3.9 Answers to ‘Check Your Progress’
3.10 Exercises and Questions
3.11 Further Reading

3.0 INTRODUCTION
Management Information System (MIS) is a combination of principles, theories and
practices of management, which play an important role in business organisation in the
planning and decision-making process. It provides information for the personnel at
various levels of management for performing their respective jobs. The management
information system can be compared with information technology (IT). IT can be
considered as a sub-system of MIS.

3.1 UNIT OBJECTIVES

 Understanding Management Information Systems and their importance in an
organisation
 Identifying the nature and scope of MIS in an organisation
 Comparing Information Technology (IT) and MIS

3.2 SIGNIFICANCE OF MIS

MIS is defined as the field of management where timely and reliable information plays
a very important role. This information is obtained through a logical and well-
structured method of collecting information and processing of the collected
information, which helps the decision-makers in carrying out the decisions. MIS is very
significant these days because the term information is considered equally important to
the three M’s related to the business industry namely money, materials, men and
machines.
The significance of a planned, analysed, designed and maintained MIS is as follows:
 Helps in progress and growth of the business and management infrastructure
in increasing business complexities by providing timely, useful and reliable
information. This information is provided to the management for takingquick,
rational and speedy decisions.
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35
Management Information Systems  Helps in globalisation and liberalisation of the organisations that need to
compete not only locally but globally too.
MIS assists decision-makers in organisations by providing Management Information
(MI) at various stages of decision-making. Whereas MIS if in case is not maintained
NOTES properly may provide inaccurate or irrelevant information that may prove costly to the
organisation.

3.3 UNDERSTANDING MIS

To understand MIS in detail, you need to understand the following three words in
detail:

3.3.1 Management
The term management is defined as the art of getting things done through people by
dividing the people into organized groups and assigning each group a different activity.
Later, the results or outcome of all the activities performed by each group are appended
together to accomplish the final goal. A manager in an organisation is responsible for
carrying out the functions in a systematic way. The manager plans about the project by
settings goals and objectives and implement, procedures, rules, programmes, budgets,
strategies and schedules to achieve the plan. The various functions performed by a
manger are as follows:
 Planning is defined as the process of preparing for the future in advance.
Planning of anything before hand helps bridge the gap between the current and
the final position of the project. While planning for a project, you need to
answer the following questions:
 What to do?
 When to do?
 Who is to do?
 How is it to be done?
 Why is it to be done?
 Where is it to be done?
 Organising is defined as a process of identifying the entire job that is needed
to complete a particular project and then dividing the job into the following
steps to carry out the job as planned:
 Dividing the job into convenient subjects or tasks
 Allocating subjobs to persons or groups
 Allotting authority to each group or each person
 Staffing is defined as the process of assigning the right person for the right
job. It means allocating a job to a person as per his/her skills or defining the
requirements for the job according to the people that are appointed to
accomplish the job.
 Directing is important to achieve the pre-determined goals and objectives. It
means that people who are involved in the project need to be guided and
motivated by the manager of the organisation. The directing process includes:
 Communication
 Motivation
 Leadership
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36
 Management Information
 Controlling ensures that the organisational activities are performed as Systems: A Framework
planned. Controlling a process involves the following actions:
 Setting standards for measuring work experience.
 Measuring the actual performance of the employees. NOTES
 Comparing the actual project with the standards and finding
deviations, if any.
 Taking corrective actions.
The work performance is controlled by the manager by setting the performance
standards and avoiding deviations from the standards. The manager performs all these
functions through decision-making that is a fundamental pre-requisite for each of the
preceding processes.

3.3.2 Information
Information is a very valuable resource that is required by the management of an
organization to run the business. Information is the processed data that is presented to
the decision-makers to aid them in their project. Figure 3.1 shows the relation of data
with the information.

Figure 3.1: Relation of Data with Information

It should be noted here that the concept of data and information is a relative one. The
information for one person may be data for another person and vice-versa. The type
of information utilized by each level of management is according to the nature of job
performed by the managers at their respective levels. The information is of four types:
 Structured: This information is well defined and thus the processing of the
structured information is not difficult. For example, the proper monthly
production schedule for a particular product.
 Unstructured: This information is not well defined and thus processing the
information becomes difficult. For example, determining the share of the
company’s product into the market.
 External: This is the information whose source is outside the operations of the
company. The top management of the organization requires the external
information to carry out their future plans and policies.
 Internal: This is the information that is the resultant or the left over product
of the normal operations of a business. The operation management of the
organization required the internal information to carry out their plans.

3.3.3 System
The system in MIS is defined as a set of elements that are joined together to achieve a
common objective. These elements are inter-related and interdependent. A system is
made up of various sub-systems, which in turn are composed of other sub-systems.
Figure 3.2 shows the various elements of a system.

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Management Information Systems

NOTES
Figure 3.2: Elements of a System

A system may consist of multiple inputs, which are processed through a transformation
process to convert these inputs into outputs.
A cybernetic system is the one in which the feedback and control elements are attached
to make it self-monitoring and self-regulating. For example, a thermostat controlled
heating device that automatically controls and regulates itself to maintain the desired
temperature.
Various types of systems are:
 Open system: Interacts with its environment and exchanges input and output
with the external environment.
 Closed system: Does not interact and exchange input and output with its
environment.

3.4 DEFINITION OF MIS

After studying the concept of management, information and system in detail, now you
need to define and understand the term MIS as a whole. So, MIS is defined as a system
that consists of people, machines, procedures, data models and databases as the
elements of the system. The system performs the following actions:
1. Gathers data from the internal and external sources of an organisation
2. Processes the data
3. Supplies the processed data or management information to the managers to
assist them in the procedure of decision-making.

3.4.1 Comparing IT and MIS

IT is referred to as that part of MIS that deals with the technology aspect of MIOS.
MIS is supposed to include hardware, software, networks and other devices. In other
words, we can say that MIS contains IT as its sub-system. But in broad sense, the term
IT can be used interchangeably with MIS taking into consideration all or many
information systems, users and management of the entire organisation.

3.5 NATURE AND SCOPE OF MIS

Check Your Progress
1. What is the abbreviated form
MIS is supposed to have borrowed the management concepts from various disciplines
of MIS? such as accounting, computing, organizations, management and operations. Because
2. List various functions of this interdisciplinary nature of MIS, it is considered both as an art and a science.
performed by a manager. Figure 3.3 shows the interdisciplinary nature of MIS.
3. Define the term management.
4. What do you mean by
information?

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 Management Information
Systems: A Framework

NOTES

Figure 3.3: Interdisciplinary Nature of MIS

3.5.1 Characteristics of MIS

Following are the characteristics of MIS:
 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 a comprehensive
view or a complete look at the interlocking sub-systems that operate within an
organisation.
 Management-oriented: The management-oriented characteristic of MIS
implies that top-down approach needs to be followed for designing MIS. The
top-down approach suggests that the system development starts with
determining management requirements and overall business objectives. In
addition, the development plan of MIS should be derived from the overall
business plan. This MIS characteristic also implies that the management
actively directs the system development efforts towards the completion of the
project.
 Need-based: 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 organisation.
 Exception-based: The development of MIS needs to be on the exception-
based reporting principle. This exception-based reporting principle means an
abnormal situation such as the situation in which maximum, minimum or
expected values vary beyond tolerance limits. In these abnormal situations, the
system needs to have exception reporting to the decision-maker at the required
level.
 Future-oriented: The design and development of MIS should also be future-
oriented so that the system is not restricted to provide only the past
information. It means that the system should provide such useful information
on the basis of the projections based on which actions may be initiated.

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Management Information Systems  Integrated: MIS has ability to produce meaningful information because of the
integration concept. It means taking a comprehensive view or looking at the
complete picture of the interlocking sub-systems that operate within the
company. For example, to develop an effective production scheduling system,
NOTES it is necessary to balance the following factors:
A. Set-up costs
B. Work force
C. Overtime rates
D. Production capacity
E. Inventory level
F. Capital requirements
G. Customer services
You can start developing an MIS by using a specific sub-system, but serious
shortcomings may result unless the identity of MIS is realized and properly
reflected in the total system. Thus, an integrated system, which blends
information from several operational areas, is a necessary characteristic of
MIS.
 Common data flows: Duplication and redundancy in data collection, storage
and dissemination could be avoided by using the integration concept of MIS.
The common data flow concept supports numerous basic views of system
analysis such as avoiding duplication, combining similar functions and
simplifying operations. The development of these common data flow concepts
is an economically sound and logical concept.
 Long-term planning: MIS cannot be developed in a short interval of time
because it involves heavy planning that could be done in relatively long
periods. While developing MIS, the designer has the future objectives and
needs of the company in mind. The designer should avoid the possibility of the
system going outdated before its time.
 Sub-system planning: The MIS development process is quite complex and
thus the system needs to be broken down into digestible sub-systems. These
digestible sub-systems of a single system are more meaningful at the planning
stage.
 Central database: A central database is the vessel that holds various different
functional systems together with each system requiring access to the master file
of data. This database covers information related to inventory, personnel,
vendors, customers, etc. If the data stored in the database is stored efficiently
and with common usage in mind, one master file can provide the data needed
by any of the functional systems. It is logical to gather data once, to properly
validate it and to place it on a central storage medium, which can be accessed
by any other sub-system.

3.5.2 Functions of MIS

The prime objective to set up MIS in an organisation is to use the management
information by its managers for decision-making. Thus, MIS needs to perform the
following functions to meet its objectives:
 Capturing data: MIS performs usage of data whether manual or through
computer terminals by using various internal and external sources of an
organisation. The data related to transactions that take place in the

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 Management Information
organisation is stored in some physical medium such as a paper form or Systems: A Framework
entering it directly into a computer system by the end users.
 Processing data: Processing data includes converting the captured data into
the required management information. To process the data, you need to
perform various activities such as calculating, comparing, sorting, classifying NOTES
and summarising the data. These data processing activities organise, analyse
and manipulate captured data by using various statistical, mathematical,
operations research and other business models.
 Information storage: MIS saves the less frequently used information as an
organisational record and thus stores the processed or unprocessed data for
future use. While performing this storage activity, data and information are
reserved and organised in the form of fields, records, files and databases for
future use.
 Information retrieval: Information retrieval includes retrieving the stored
information as per the requirements of the management users. In such cases,
the retrieved information is used as such or is processed again to meet the exact
Management Information (MI) demands.
 Disseminating management information: Disseminating Management
Information, which is a finished product of MIS is divided and distributed to
the users in an organisation. This information could be periodic, through
reports or online through computer terminals. Figure 3.4 shows various
functions performed by MIS.

Figure 3.4: Functions of MIS

3.6 COMPONENTS OF MIS

MIS is a system that takes data as input, processes it to generate information that can
help the management of an organisation in decision-making and strategic planning. Check Your Progress
Today, most organisations implement the MIS so as to achieve the organisational 5. Describe the various actions
goals. The MIS has various components, which are as follows: performed by a system.
6. List various types of systems.
Hardware: The hardware components of MIS include various input and output
7. What do you mean by the
devices that helps in feeding data as well as displaying the information when required.
cybernetic system?
The input devices include the keyboard, scanners and mouse. The output devices may
be the monitor, printer, network devices, and so on. The hardware
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Management Information Systems devices are the physical parts of MIS that helps in maintaining the data of an
organisation.
Software: The programs and applications that convert data into machine-readable
language are known as software. There are various types of software that are used for
NOTES processing the information of an organisation such as ERP and CRM. ERP is software
package that combines all data and processes of an organisation. It uses multiple
components of computer software and hardware to achieve the integration. The main
advantage of an ERP system is that it uses a single, unified database to store data for
the various systems. An ERP system helps in controlling all the functions of an
organisation. CRM is also a software package that includes the capabilities,
methodologies and technologies in order to support an organisation in managing the
customer relationships. The general purpose of CRM is to enable organisations to
manage their customers through the introduction of reliable systems, processes and
procedures.
Procedures: Procedures are sets of rules or guidelines that an organisation establishes
for the use of a computer-based information system. The procedures may vary from
one organisation to another. It may also vary from one department to another as per the
requirement. For example, the working of production department is different from the
working of sales department. The production department requires information
regarding the raw material or quantity of goods to be produced. So, the production
department sets its procedures in such a way that the MIS system helps in retrieving
the information required by the department. In the similar way, the sales department
requires information regarding the quantity of goods sold and the other expenses that
occurred during the sales of the product. Therefore, the sales department sets the
procedures in such a way that they get only that information which is required from the
MIS.
Personnel: Personnel of MIS are the computer experts, managers and users who utilise
the computer-based information system for achieving the organisational goals. The
various personnel of the organisation use the information stored in MIS for performing
different functions such as planning and decision-making.

3.7 ROBERT ANTHONY’S HIERARCHY OF

MANAGEMENT ACTIVITY
Robert N. Anthony has described three levels of management activities, which are
operational control, management control and strategic planning. Operational control
is the process of ensuring that specific tasks are carried out effectively and efficiently.
Management control is the process by which managers ensure that the resources are
obtained and used effectively and efficiently in order to achieve the organisational
goals. Strategic planning is the process of deciding the objectives of the organisation,
changes required in achieving these objectives, resources used to obtain these
objectives and the policies that are used in the acquisition, use and disposition of these
resources. These levels of management activities are described in detail as follows.
 Strategic Planning: Strategy consists of making choices among alternative
action programmes, commitment to specific product markets, competitive
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42
 Management Information
moves and business approaches, on the part of the managers to achieve Systems: A Framework
organisational goals. Strategic planning is necessary for the management at
all levels from top level to the bottom level. Strategic planning facilitates
smooth operational activities in the organisation. Top level needs strategic
NOTES
planning to define the objectives of the organisation. It helps the organisation
to forsee its future in the long run and thus helps the management to take steps
accordingly. It helps in policy formulation to clear the goals of organisation.
Middle level management is benefited from strategic planning through smooth
application of the policies formulated by the top management. It includes
setting of organisational goals, designing policies and plans so that the goals
set by the organisation can be easily achieved.
 Management Control: The management control activities are performed by
the people at middle management. Management control facilitates smooth
operational activities in the organisation. It is important for the management
to keep a check on the operations and people involved in operations to avoid
any wastage of resources and helps in utilising the resources efficiently and
effectively. It includes making plans that are required to control the various
activities required in the proper management of the organisation. It also
includes the management of various projects that the organization is handling.
 Operational Control: The operational control activities are performed by the
people at the low-level management. Operational control helps in full
utilization of the resources available without any wastage. It requires proper
handling of machines with reduced costs and depreciation. It also helps in
managing the workers involved in operations through proper supervision and
directions. It helps the organization to produce quality products in desirable
time. It includes administration of routine operations such as updating data and
handling user inquiries that belongs to the operational control level. Figure 3.5
shows the hierarchy of management activities.

Figure 3.5: Robert Anthony’s Hierarchy of Management Activities

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Management Information Systems
3.8 SUMMARY
MIS is an important part of an organisation as it helps in gathering information required
for planning and decision-making. It also helps in performing other functions of an
NOTES organisation such as staffing, directing and controlling. MIS performs various functions
in an organisation such as collection and processing data for information. It also helps
in storing information and retrieving it as and when required.

3.9 ANSWERS TO ‘CHECK YOUR PROGRESS’

1. Management information system.
2. Various functions performed by a manager are:
A. Planning
B. Organising
C. Staffing
D. Directing
E. Controlling
3. The term management is defined as the art of getting things done through
people by dividing the people into organized groups and assigning each group
a different activity.
4. Information is defined as a very valuable resource that is required by the
management of an organization to run the business. Information is the
processed data that is presented to the decision-makers to aid them in their
project.
5. The various actions performed by a system are as follows:
A. Gathering data from the internal and external sources of an
organisation
B. Processing the gathered data
C. Supplying the processed data or management information to the
managers to assist them in the procedure of decision-making
6. Various types of systems are:
A. Open system: interacts with its environment and exchanges inputs and
outputs with the environment.
B. Closed system: does not interact and exchange inputs and outputs
with its environment.
7. A cybernetic system is defined as the system in which the feedback and control
elements are attached to make it self-monitoring and self-regulating. For
example, a thermostat controlled heating device that automatically controls
and regulates itself to maintain the desired temperature.

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 Management Information
3.10 EXERCISES AND QUESTIONS Systems: A Framework

Short-Answer Questions
1. Explain the significance of MIS. NOTES
2. Explain all the functions performed by a manager.
3. How can you compare information technology and MIS?

Long-Answer Questions
1. Describe the various types of information used in MIS.
2. Discuss the various characteristics of MIS in detail.
3. Discuss the various functions of MIS.

3.11 FURTHER READING

Davis, G.B and M.H. Olson, Management Information Systems.

http://en.wikipedia.org/wiki/Management_information_systems

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Management Information Systems
UNIT 4 SYSTEM ANALYSIS
Structure
NOTES
4.0 Introduction
4.1 Unit Objectives
4.2 System Analysis: An Overview
4.3 Determination of Requirements
4.4 Strategies for Requirement Determination
4.5 Structured Analysis Tools
4.6 Summary
4.7 Answers to ‘Check Your Progress’
4.8 Exercises and Questions
4.9 Further Reading

4.0 INTRODUCTION
System analysis is the process of identifying the system requirements in order to solve
the problems of a system. The process includes collecting information so as to identify
and understand the problem and improve the system accordingly. There are various
tools that are used in the system analysis process such as decision tables and data flow
diagrams. These tools help the person who is analysing the system requirement in
collecting information required for the analysis process.

4.1 UNIT OBJECTIVES

 Explaining how system analysis helps in identifying the system requirements
 Introducing various strategies for requirement determination
 Identifying the various tools that help in the system analysis process

4.2 SYSTEM ANALYSIS: AN OVERVIEW

System analysis is a process in which data is collected and then interpreted to identify
the problems within the system. Therefore, the collected information can then be used
to recommend improvements in a system. In other words, system analysis includes
identification, understanding and examining a system so that the objectives of the
system can be achieved. The pre-determined objectives of the system analysis include:
 Knowledge of the system operation
 Identification of the user requirements in the proposed system
The system analysis stage investigates about the system operations and determines the
solutions to solve the problem. Therefore, the system analysis is considered as a logical
process.

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 System Analysis
System analysis is really vital in the completion of the development process of a
system. It may be possible that a user is aware of the problem but may not have the
solution with him. In such a scenario, a system analyst works with the user so that a
logical model of the system can be developed. A system analyst of technical
NOTES
background may move too quickly to the program design stage to make a system more
physical. This approach is not desirable and should be avoided because it can affect the
ultimate success of the system. A system analyst can work with a user to obtain the
complete knowledge of a system. For having the complete information about a system,
a logical model of the system is developed based on the detailed study of the system.
The detailed study should be done using various modern tools and techniques, which
include data flow diagrams, data dictionary and rough descriptions of the relevant
algorithms. A set of system requirements for a proposed information system is the final
product of the system analysis stage.

4.3 DETERMINATION OF REQUIREMENTS

It is quite essential determining the requirements of a system for system analysis
process. The requirement determination is the preliminary step of the system
development activity and is also known as software requirement specification (SRS).
The requirement determination activity is the most difficult activity involved in the
development of any system. Since there is a communication gap between a user and a
developer, this activity is more prone to errors. The communication gap arises because
the user usually does not understand the software of the organisation or may be the
developer does not understand the user’s problem and application area. To bridge the
communication gap between the user and the developer, the requirement determination
is introduced. This requirement determination process provides a means of translating
ideas given by a user into a formal document. The benefits provided by a good SRS
are as follows:
 It bridges the communication gap between a user and a developer.
 It reduces the development cost as it overcomes errors.
 It acts as a basis of reference for the system so that it can validate the final
product.
The requirement determination consists of the following activities:
1. Requirement anticipation: This activity includes the past experience of the
system analysis based on the study performed on the existing system. It also
predicts the possibility of certain problems and requirements for a new system.
2. Requirement investigation: This activity is central to the system analysis
process. In this activity, the existing system is studied and documented for
further analysis. For this purpose, various methods such as fact-finding
techniques are used.
3. Requirement specification: This activity involves the analysis of the data that
was produced during the fact-finding investigation in order to determine the
requirement specification.
We can conclude that the requirement determination involves the collection of
information regarding:

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Management Information Systems  The general process
 The data produced during the process
 Various constructs in terms of time and volume of work
 The performance controls applied in the system
NOTES
Let us discuss all these activities one by one.

4.3.1 Understanding the Process

The basic step in the requirement determination activity is the knowledge of the
process. The process can be well understood if the information collected in the process
understanding step are the information regarding:
 The purpose of the business activity
 The steps involved in the activity
 The persons performing those activities
 Other information such as the frequency, time and user of the resulting
information.

4.3.2 Identify the Data Used and Information Generated

After understanding the process, the system analyst should look for the data that is
required to perform each activity discussed in the understanding process. For example,
in an inventory system, a buyer may require data describing the quantity of an item,
supplier name, item cost and demand for the item.

4.3.3 Determine Frequency, Timing and Volume

Next to identification of data, information should also be collected so that it can be
easily identified that how often an activity is repeated. It also determines the number
of items that can be handled in each activity. Similarly, time is also one of the
constraints for evaluating certain steps in performing an activity.

4.3.4 Know the Performance Controls

The determination of performance control is important in the requirement
determination activity, as it enables the system analyst to understand how the business
functions can be maintained. It allows the system analyst to gather information during
system investigation. The information in this phase can gathered mainly from the
personnel and the written documents of the organisation. The written documents
include financial reports, personnel documents and various other documents such as
transaction documents and manuals.
It should be always kept in mind that the personal managerial attributes of an individual
manager and an organisational environment affect the information requirements for the
proposed system. The personal attributes may include the manager’s knowledge of
information systems, managerial style and his perception of information needs. On the
other hand, the organisational environment factors may include nature of the company,
level of management and structure of the organisation.

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4.4 STRATEGIES FOR REQUIREMENT
DETERMINATION
There are certain strategies for the requirement determination that allows a system NOTES
analyst to understand the existing system and also to determine the information
requirement. Various strategies that solve the purpose are described below:

4.4.1 Interview
This strategy follows a method in which a user and a developer interact with each other
to collect the required data. In this method, the developer asks questions to the user and
based on the response given by the user, the developer finds some solutions. The
interview can be formal or informal and the questions asked may be structured or
unstructured. This method is helpful for gathering information from individuals, who
do not communicate effectively in writing or who may not have the time to answer
questionnaires.
This strategy is the oldest and the most often used device for gathering information
about an existing system. Though, it is one of the preferred techniques, but this is not
always the best source of application data. This is because the users are sometimes
unable to explain the system in detail. Also, interviewing process is time-consuming
and hence other methods are used to gather information.
It is important that the system analyst must be trained in interviewing the personnel.
It is important because the success of an interview depends on the skills of the
interviewer and on his or her preparation for the interview. Hence, it is important for
system analyst to plan the interview and must know the following in advance:
 The person to be interviewed
 The time of interview
 The questions to be asked
 The venue of the interview
 The initiation point of the interview
 The termination point of the interview

4.4.2 Questionnaire
A questionnaire is a method that involves a set of questions to which an individual
needs to respond. This strategy allows a system analyst to gather information regarding
different aspects of a system among a large number of persons. This strategy provides
more reliable data in comparison to the other fact-finding techniques. In addition, it
saves time, as conducting interviews is much more time- consuming. The difference
between the interview and the questionnaire strategies lies in the expressions or
reactions of the respondents. In other words, you can view the reactions and
expressions of the respondents while interviewing them, whereas in the questionnaire
survey it cannot be done. Questionnaires must be tested and modified based on the
experience of the respondents.

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Management Information Systems 4.4.3 Record Review
The record review strategy is also known as review of documentation strategy. The
main purpose of this strategy is to find the quantitative information regarding
constraints such as volumes, frequencies and ratios. A system analyst examines the
NOTES
information that has been recorded about a system and its users in various records. The
records include manuals, regulations and standard operating procedures of an
organisation. The records act as a guide to the managers and other employees. To study
and understand the existing system, records prove to be helpful for the system analyst.
The limitation of this approach is that the records may not be completed or we can say
that they may not be updated. An existing system can be viewed in two different views.
One such view that favours the study of the existing system states that the shortcomings
associated with an existing system can be learnt. The knowledge of shortcomings of
the existing system is then further be used and therefore, the common mistakes can be
avoided.
Another view argues that new ideas cannot be generated and the developer must follow
the logic associated with the old system. Both the views seem valid and therefore, it is
difficult to comment upon each view.

4.4.5 Observation
Observation is also one of the strategies used for gathering information. This is the
process in which people, object and occurrences are recognised and noticed in order
to collect information from the sources. The information collected using this strategy
is useful when a system analyst needs to observe the way in which the records are
handled, processes are carried out and whether the specified steps are actually
followed. The drawback of this strategy is that an observer may not be able to gather
all the required information. Moreover, the method used in this strategy is time-
consuming and costly. Electronic observation and monitoring methods are widely used
as information gathering tools because of their speed and efficiency.
A system analyst uses a combination of all the approaches to study an existing system
because one approach may not be sufficient for gathering required information of the
system.

4.5 STRUCTURED ANALYSIS TOOLS

The above-discussed fact-finding strategies represent only one aspect of the system
Check Your Progress analysis. The discussed strategies do not provide any mechanism that can help
1. Interview, Questionnaire, organising the details collected in each phase of the system analysis process. The
Record Review and information collected needs to be organised in some manner. Various tools that can
Observations are strategies
for………………….. be used for organising the collected details are known as the structured analysis tools.
2.bridges the These tools help a system analyst to document the system specifications of a system.
communication gap between a These tools are:
user and a developer.
 Data Flow Diagram (DFD)
3. What are the two pre-
determined objectives of the  Data Dictionary
system analysis?
 Structured English
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 System Analysis
 Decision Trees
 Decision Tables
We will discuss all these tools in detail one by one.
NOTES
4.5.1 Data Flow Diagram
Data flow diagram is a tool that helps in expressing the system requirements in a simple
form. It provides a graphical representation of the logical flow of data. This tool is also
known as bubble chart. The purpose of data flow diagram is to simplify the system
requirements. DFD is responsible to decompose the requirement specification in each
stage of the system analysis process. Lines that represent data flow in a system can join
the information or data. The main symbols that are used in DFD are as follows:
 Square: This symbol is used to represent the source or destination of system
data.
 Arrow: This symbol is used to identify the data flow. The arrow specifies a
pipeline through which the data flows.
 Circle/Bubble: These symbols are used to represent a process that transforms
incoming data flow into outgoing data flow. A process can be represented by
a circle or an oval bubble.
 Open rectangle: This symbol is used to represent a data store.
There are certain rules that need to be followed while drawing a DFD. These rules are
as follows:
1. The processes must have a name and number associated with it. The name of
the process represents the process.
2. The direction in which the data flow is represented should be from top to
bottom and from left to right.
3. A proper numbering of processes must be maintained. This means when a
process is exploded into lower levels, the exploded processes can be easily
identified. For example, process 1 is exploded to further processes, which
should be numbered as 1.1, 1.2 and so on.
4. The name of the data stores, sources and destinations should be written in
capital letters. The name of the process and data flow must have first letter
capitalised.
It is important to note that a DFD can contain 10–12 processes. The DFD is just a
graphical representation of data flow and therefore, it should have minimum content
of a data store. This tool is very effective when the required design is not clear and the
user and analyst require some symbolic representation for communication.
The concept of DFD can be explained with the help of an example. Consider the
example of a library management system to issue books to each student of an
institution. Figure 4.1 represents the data flow for the library management system.

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Management Information Systems

NOTES

Figure 4.1: A DFD for Library Management System.

The student data originates from the library database and acts as a source. The data is
then processed and the students receive the information regarding books. The updated
data on students is stored in an intermediate file known as data store and is required for
processing in the subsequent months.
The drawback of this approach is that it requires a large number of iterations to arrive
at an accurate and complete solution.

4.5.2 Data Dictionary

A data dictionary is a structured repository of data that defines the basic organisation
of a database. The data dictionary contains a set of precise and accurate definitions of
all the DFDs, data elements and data structures.
A data dictionary makes accessing of data more simple, as it supports documentation
in a better way. The data dictionary does not contain any actual data from the database.
It only provides precise and consistent definitions for various data elements, terms
and procedures. It also helps in improving communication between a user and a system
analyst. It serves as a common database for programmers and can also be used for
control purposes. The data dictionary is a desirable feature for most of the databases.
The data items present in a data dictionary include:
 Data Element: The smallest unit of data that cannot be further decomposed.
 Data Structures: A group of data elements that are handled as a single unit. It
contains a number of data elements as its fields.

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 System Analysis
 Data Flows and Data Stores: Data flows are the data structures in motion and
data stores are the data structures in rest. Data stores are the locations where
the data structures are temporarily stored.

Table 4.1 explains the different symbols used in the data dictionary. NOTES

Table 4.1: Symbols used in Data Dictionary

Symbol Meaning
= Is equivalent to

+ Add

[Option 1 Only one of the options is used at a given time

Option 2]

Max {Component} Highest possible number of iterations. Component

is optional

Min{Component} Lowest possible number of iterations. Component

is optional

* Comment * Words included within asterisks are considered as

comments

You need to follow certain rules while constructing a data dictionary. The rules are:
 The terms used to describe the data structures should always be in capital
letters.
 Multiple word names must be hyphenated.
 Assigned names should be straight forward and user-oriented.
 Every data flow, data store, data structure and data element must have a
name associated with them.
 Consistency check should be performed.
 The processes must have their identification numbers and names that must be
mentioned in the data dictionary.
 Assumed names of the processes must be discouraged.
It is important to note that the data dictionary and DFD are correlated and the data
should be presented in a specification. A data dictionary does not provide functional
details and therefore, is not much acceptable among the non-technical users.

4.5.3 Decision Tree and Structured English

A process can be represented using decision tree also. Similar to DFDs, a tree is formed
in this graphic representation. The logic of the process that is not understood by data
dictionary can be made clear using decision tree. A decision tree has as many branches
as many logical alternatives are there. It is easy to construct, read and update. Figure
4.2 shows the decision tree.

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Management Information Systems

NOTES

Figure 4.2: The Decision Tree

The logic can also be represented using structured English. The structured English uses
logical construction and imperative sentences that are designed to carry out instructions
for actions. In structured English, decisions are made using if-then-else statements.
Structured English consists of:
 Sequences of instructions (action statements)
 Decisions (if-else)
 Loops (repeat-until)
 Case
 Groups of instructions
Decision trees can be used to verify logic in problems that involve few complex
decisions. However, its biggest limitation is the lack of information due to its structure.

4.5.4 Decision Table

Decision table is a compact way to represent complicated logic. It is a matrix that
contains rows and columns representing conditions and actions. The decision tables are
used in situations where complex branching routines are required.

Check Your Progress Decision tables are divided into four quadrants. Table 4.2 lists a decision table.
4. What does max {Component}
Table 4.2: Decision Table
signifies?
5. Which symbol is used to Conditions Condition alternatives
specify the source or
destination of system data?
Actions Action entries
6. Condition alternatives are
used to answer the questions
that were asked in the The table above shown describes the decision table in which the following quadrants
………… column of the are included:
decision table.

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1. 1. Conditions: These are at the upper left corner in the table. Questionnaire
is listed in the conditions.
2. Condition alternatives: This section is at upper right corner and contains NOTES
answers to the questions that were asked in the conditions column.
3. Actions: This section is at lower left corner in the table and it outlines the
action that is required to perform in order to meet each condition.
4. Action entries: This section is at lower right corner in the table. It indicates
the appropriate action resulting from the answers to the conditions in the
condition quadrant.
There are certain rules that must be followed for constructing a decision table. These
rules are:
 A name should be given to each decision that has to be written at top left of
the table.
 The logic should be independent of the sequence in which the condition rules
were written, but the actions take place in the order in which the events occur.
 There should be a proper usage of consistent and standardised language.
 Duplication of terms should be avoided to the maximum extent.

4.6 SUMMARY

The system analysis process helps in identifying the problem of a system and
improving it. There are various types of system requirements that need to be
determined while developing a system process. The person analysing the system uses
several strategies in order to collect information regarding the system problem. The
tools for system analysis such as data flow diagram, decision tables and trees help in
the process of analysis.

4.7 ANSWERS TO ‘CHECK YOUR PROGRESS’

1. Requirement Determination
2. Software Requirement Specification
3. The pre-determined objectives of the system analysis includes:
A. Knowledge of the system operation
B. Identification of the user requirements in a proposed system

4. 4. Highest possible number of iterations

5. Square
6. Conditions

4.8 EXERCISES AND QUESTIONS

1. What are the benefits provided by a good Software Requirement
Specification?
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Management Information Systems 2. Describe the data items that are required in a data dictionary.
3. List the rules that must be followed while constructing a decision table.

NOTES
4.9 FURTHER READING

Davis, W.S., Systems Analysis and Design: A Structured Approach.

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UNIT 5 SYSTEM DESIGN

Structure NOTES
5.0 Introduction
5.1 Unit Objectives
5.2 Objectives of System Design
5.3 Conceptual Design
5.4 Design Methods
5.5 Detailed Design of a System
5.6 Summary
5.7 Answers to ‘Check your Progress’
5.8 Exercises and Questions
5.9 Further Reading

5.0 INTRODUCTION

Software design is an important phase in the process of software development. The

design phase follows the analysis phase of the software development life cycle. Design
is the process of converting the software requirements of an end user mentioned in the
Software Requirement Specification (SRS) document in a format that can be
implemented. To develop a good design for a software product, it is important for the
software designers to understand the goals and objectives of developing the software.
A critical aspect of systems design is creating the user interface to enable the end users
to communicate with the new software system. The input and output design focuses on
the content of that interface. It focuses on the specific fields, which should be included
in screens and reports that are viewed by theend users.

5.1 UNIT OBJECTIVES

 Explaining the system design process
 Describing how conceptual design helps in finding out the feasibility of
management objective
 Explaining how various types of design methods help in preparing the design
document

5.2 OBJECTIVES OF SYSTEM DESIGN

System design is an important step in the system development process. This phase
comes into existence after the system analysis is completed. This means the output of
the system analysis phase provides an input to the system design phase. In other words,
the requirement specifications provided by the system analysis is used in the system
design phase of the system development process. The identification of data
requirements include:

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Management Information Systems  Identifying data sources
 The nature and type of available data
 Data gaps

NOTES The design of a system must adhere to the following objectives:

 Practicality: This objective notifies that the design of a system should be user-
oriented. This means the users of the system can easily learn and operate the
system.
 Flexibility: The flexibility of a system design describes the dynamic nature of
a system. In other words, a system must be designed in such a way that the
system may respond to the changes requested by the users.
 Efficiency: Efficiency is highly important while designing a system. A system
must perform its jobs within a specified time period. The efficiencyof a
system can be measured on the following features:
o Throughput is the rate at which a system performs its jobs per unit
time.
o Response time is the time taken by a system to react to a given
input.
o Run time is the ability to undertake the complete job within a
specified time limit.
 Security: The security of a system includes:
o The hardware reliability of the system
o Physical security of data
o Detection and prevention of exploited data
The system design phase is carried out at two levels:
 Conceptual level or conceptual design
 Physical level or physical design
We will discuss these levels one by one in the following discussion.

5.3 CONCEPTUAL DESIGN

The conceptual design stage allows a system analyst to choose an effective information
system among different management information system designs. This design stage
determines the feasibility of the management objectives that are accomplished. The
conceptual design is also known as external design or high-level design. This high-
level design becomes a basis for the detailed design of the information system. In other
words, we can say that a conceptual design is a prerequisite for the detailed design. The
steps involved in the conceptual design are:
1. 1. Problem definition
2. Set system objectives
3. Constraints identification
4. Determination of information requirements
5. Determination of information sources
6. Development of various designs
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7. Conceptual design documentation
8. Preparation of report
A brief discussion of these steps will make the concept clear.
NOTES
5.3.1 Problem Definition
The first step in the conceptual design of an information system involves the problem
definition. It is important to understand the definition of the problem prior
implementing the information system. The function of information system is supposed
to solve the problems related to information requirements for the organisation. This is
important to note that in the problem definition step, not onlythe current problems
are considered, it also deals with the long-range planning for an organisation so that
future problems also get resolved. The problems resolved in this stage can include
problems related to information requirements for a business organisation. The
information requirements of an organisation are identified and then determined by
understanding the objectives and strategic plans of the organisation.

5.3.2 Set System Objectives

After the problem definition step, a system analyst must set the system objectives. The
system objectives are always set with the help of the users. This is because the value
of an information system lies in the benefits of the users. The stage of setting the system
objectives is not straightforward and hence, a system analyst needs to consider the
specific objectives. Once the specific objectives are set, they help an organisation in
improving the efficiency of the information system. However, it is quite difficult to set
the real objectives of an information system. The circumstances should be avoided in
which the objectives of an information system are set in vague terms. In other words,
the objectives such as keeping accurate records, maximum efficiency, reduced costs
and quality information should not be considered as the specific objectives.
It is also important that the system objectives must be defined in such a way that they
can be easily achieved by the system. In addition, the system provides a measure of
performance. In other words, the system objectives should be stated, as far as possible,
in quantitative rather than qualitative terms.

5.3.3 Constraint Identification

System constraints, also known as problem boundaries, are essential for the conceptual
design of a system because the identification of constraints helps the system designer
in considering the limitations that restrict the design of the system. These constraints
help in designing the system that meets the specified objectives. In addition, the
constant review of the objectives is necessary. System constraints can beclassified as:
 External constraints: These constraints are external to an organisation. This
category includes constraints posed by the customers, government and
suppliers.
 Internal constraints: The constraints that are internal to an organisation are
known as the internal constraints. The constraints within the organisation
include:
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Management Information Systems o Non-cooperation and lack of support from top management
o Organisational policy
o Resource constraints such as manpower, time, money, etc.

NOTES 5.3.4 Determination of Information Requirements

For an effective design of an information system, it is important to understand the
information requirements of the users. This step focuses on the identification of the
information requirement that helps the management of an organisation in performing
their functions. A user must specify the following requirements:
 What are the expectations of the user from an information system?
 The information required in achieving the pre-determined objectives.
It is the responsibility of the system analyst to adopt an approach that can help in
achieving the information requirements of the system. There are two approaches for
extracting information requirements: direct and indirect.
The direct approach allows a system analyst to ask various responsibilities of the users.
This is followed by certain information that is required to carry out each of the specified
responsibility. On the other hand, the indirect approach avoids the direct questions. A
system analyst in the indirect approach asks a user to describe the decision-making
process that helps in the system development process. An indirect approach is
considered to be simpler, as the user is familiar with his/her job and can easily describe
the decision-making process.
Similar to the system analysis process, several approaches to system design also
include interviewing the users, using questionnaire, record review and observations.
Also, it is required for the system analyst to take a thoughtful decision for adopting the
best approach.

5.3.5 Determination of Information Sources

As the determination of information requirement is essential, in the same way the
determination of information source is also important. The determination of
information source identifies the input data along with the information such as timing
and format of the information source. The main information required by most of the
information systems can be managed within the organisation. The information that can
be managed within the organisation includes internal records, books, statistical and
accounting documents. The study of existing system is quite helpful in determining the
information source. The classification of information sources of a system includes:
 Internal and External Records: Internal records can be in written form such
as files, inputs and outputs, reports and documentation. On the other hand,
external resource may include trade publication and government statistics.
 Managers and Operating Personnel: This classification is an important
source for understanding input, output and data processing requirements of
an information requirement. The information in this classification can be
gathered by conducting interviews of the managers and the operating
personnel.

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 System Design
After the information sources and information requirements are determined, the next
step is to match the information requirements and sources. This can be done using a
matrix diagram, which is considered as a valuable means for integration of sub-
systems and for the remaining system design process. Figure 5.1 shows the information
NOTES
requirements and information sources matrix.

Figure 5.1: Information Requirements and Information Sources Matrix

5.3.6 Development of Various Designs

The next activity includes the development of various designs in the conceptual design
process. In this activity, a system analyst must know the overall structure of the
information system that has to be designed. This is important to note that a conceptual
design provides an overview or a sketch of the structure of an information system. The
conceptual design further guides and restricts the detailed design of an information
system. The development stage of the conceptual design process defines the following
areas:
 The decision points
 The flow of information
 The channels of information
 The roles of users
Based on these areas, the system analyst works on the combinations of input, storage,
processing and communication, and generates the output in terms of various conceptual
system designs. Different conceptual designs are developed and then compared in
order to select the optimum design. The selected design should be the one that meets
the requirements of the users and organisation and must be cost- effective.
The development of various conceptual designs can be evaluated on the basis of the
following criteria:
 Economic Basis: Each alternative based on this criterion provides the benefits
in terms of cost analysis.

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Management Information Systems  Performance Basis: Each alternative must be evaluated for the anticipated
performance in accordance to the system objectives.
 Operational Basis: Each alternative must determine the strong and weak
points in terms of quality of the databases, information and potential
NOTES breakdown points.

5.3.7 Conceptual Design Documentation

After the selection of the final conceptual design, this design is documented in
specific terms. The documentation of the conceptual design involves:
1. Overall system flow
2. System inputs
3. System outputs
4. Other documentations such as activity sheet and system description.

5.3.8 Preparation of Report

The next step to the documentation of the conceptual design is to get an approvalfrom
the management of an organisation. Once the approval is being given to the prepared
document, the detailed design activity can be introduced. We can say that a proposal,
which involves the cost incurred and probable organisational changes, is prepared in
this stage. The report prepared in this stage should contain the following specifications:
1. A brief statement of the problem
2. A brief statement of the objectives
3. An overall view of the system
4. A simple justification for selecting a particular design among different
designs
5. Other resources such as time required for developing and implementing the
system
The top management of the organisation then reviews the submitted report. If the
submitted report is approved, the detailed system design activity can be undertaken.

5.4 DESIGN METHODS

Various methods are used for designing the information systems. Following are the
methods involved in designing of an information system:
 Problem Partitioning
 Structured Design
 Top-Down Design
A brief description of various design methods is discussed in the following section.

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5.4.1 Problem Partitioning
In this method, a problem is partitioned into different modules. This method follows
the ‘divide and conquer’ strategy. A problem is divided into small manageablemodules
that can be solved separately. As the problem is separately resolved, therefore, it NOTES
reduces complexity.
This is because each module can be developed, a code can be added to it and tested
relatively independent of the others. In addition to complexity, maintenance can also
be minimised if each module can be modified separately.

5.4.2 Structured Design

In the structured design method, a structured chart is created. The implementation of
a system can be performed with the help of structured chart, as each module in the chart
depicts a specific function. The purpose of the structure design method is to prepare a
structure in which the different modules have minimum dependence on each other.
The process in which the modules can perform their function well with a minimum
interdependency is known as decoupling. This method also has a high level of cohesion,
which means that all the statements within a module are functionally related to each
other. The tools that can be used in structured design include flowcharts, data flow
diagrams, structured charts and structured English.

5.4.3 Top-Down Design

In the top-down design method, a system is considered to have further sub-systems,
which can have their own sub-systems. This means there is a hierarchy of sub- systems.
This method involves identification of the main components of the system. This
strategy is iterated and followed until the desired level of detail is achieved.
In this method, adequate attention is given at each stage. The top-down approach
allows the subsequent interfacing so that the system is easily expanded. Therefore,
more modules can be inserted in this design method. The top-down method smoothens
the path of system design by starting at the top and designing the broad modules first.

5.5 DETAILED DESIGN OF A SYSTEM

The system design process is not considered complete, once the conceptual design
process is terminated. The next step in the system design process involves the detailed Check Your Progress
design of a system. Conceptual design serves as a basis for the detailed design of an 1. is the rate at
information system. The performance requirement specified in theconceptual design which a system performs its
jobs per unit time.
phase acts as an input to the detailed design phase. The performance requirements are
2. Response time is the ability to
further refined, detailed and finalised in the detailed design of the system and are undertake the complete job
known as the system specifications. Following are the phases involved in the detailed within a specified time limit.
system design: A. True
B. False
1. Project planning and control
3. Files, inputs and outputs,
2. Involvement of the user reports and documentation are
the forms of………………..
3. Definition of detailed sub-system
4. Output/Input design
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Management Information Systems 5. Feedback from the user
6. Design of the database
7. Design of the procedure
NOTES 8. Design documentation
We will discuss each phase involved in the detailed system design one by one.

5.5.1 Project Planning and Control

An effective and efficient design of an information system can only be ensured when
the detailed design process is considered as a complete project. The introductory step
in the detailed design process includes planning and controlling of the project. The
various important stages in planning and controlling of a detailed design process are:
 Project Planning
The project planning stage of a detailed design involves the following
activities:
o Formulation of the project objectives
o Definition of the project tasks
o Creation of a network diagram of all events and activities in order to
specify sequential and parallel events
o Scheduling the job as per the requirements of a user
o Preparation of a budget for the project
 Project Control
The project control stage of a detailed design involves:
o A feedback of the actual performance is generated for the project in
terms of time, cost and work of the project. It is then followed by
comparisons with the schedules, budgets and technical plans.
o A proper action is to be performed, if required, in order to maintain
the proper functioning of the project control.

5.5.2 Involvement of the User

In the detailed design of a system, involvement of a user is also required because it is
important to obtain information from the user regarding the design of the system.
System designers must inform the users of an organisation about the new information
system that is being developed. The users are assured that the changes in the existing
system will always benefit them. Also, in case the new systems are developed, the users
still get benefit out of it. The involvement of the user ensures successful
implementation of the information system.

5.5.3 Definition of Detailed Sub-system

Every system in the detailed system design needs to be decomposed in order to
establish the required activities and their respective inputs and outputs. Generally, the
sub-systems are defined in the conceptual design phase but the sub-systems are
specifically defined at this stage so that every detail of the sub-systems can be
implemented. The decomposition of the systems to the operational activities,
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 System Design
performed at this stage, can be carried out one by one. Figure 5.2 shows the
decomposition of an information system into certain operational activities.

NOTES

Figure 5.2: Decomposition of the Information System

The integration of activities into a sub-system can also be performed. When the
integration of activities is required, it can be performed based on the following features:
 Common functions
 Common techniques or procedures
 Logical flow relationship
 Common outputs or inputs

5.5.4 Output/Input Design

The output/input design is one of the most important characteristics of an information
system because it solves the major purpose of the information system of providing
support to a user for the decision-making process. After the sub-systems are also
identified, the system designers define the specifications of outputs and inputs for each
sub-system. The programmers then use these specifications to develop programs so that
the output/input design can be produced. The important key points that needto be
considered while preparing output and input design are:
 Output design
 Input design

5.5.4.1 Output Design

The term output necessarily implies to information printed or displayed by an
information system. Following are the activities that are carried out in the output design
stage:
 Identification of the specific outputs required to meet the information
requirements.
 Selection of methods required for presenting information.
 Designing of reports, formats or other documents that acts as carrier of
information.

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Management Information Systems
Output Design Objectives
The output design of an information system must meet the following objectives:
NOTES 1. The output design should provide information about the past, present or future
events. The operational control level outputs provide information of the past
and present events. On the other hand, outputs required at the strategic
planning level provide information of the future events.
2. The output design should indicate the important events, opportunities and
problems.
3. The output design should be designed keeping in mind that an action must be
triggered in response to some event. A set of rules is pre-defined for such
trigger.
4. The output design should produce some action to the transaction. For example,
when the telephone bill is received, a receipt is printed.

Presentation of Output
The next consideration in the output design is the presentation involved with an
information system. The presentation of an output is regarded as an important feature
of output design. The presentation of an output can be represented either in tabular or
graphical form or in both forms. A tabular format is preferred in the following
conditions:
 When the details dominate the content of the output.
 When the contents of the output are classified in groups.
 When the output designs are to be compared.
A tabular format is also preferred for the detailed reports. Table 5.1 shows the tabular
format of output.
Table 5.1: Tabular Format of Output

Serial Number Item Code Quantity Ordered

Graphical representations are used to improve the effectiveness of the output because
some users prefer to view information in graphic form rather than in rows and columns
of the tables. Figures 5.3 and 5.4 show the two different graphical formats of output.

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 System Design

NOTES

Figure 5.3: Graphical Format of Output

Figure 5.4: Graphical Format of Output

The tabular and graphical formats may be combined together to enhance the
presentation of the output.

Output Design Specifications

The specifications for the output design should be considered first while designing any
output. The main points in the output design specifications are:
 Paper size: It is important for a system designer to specify the size of the paper
to be used for the output. The size of the paper can be A4 or A3 size. It can
also be 9.5 × 11 or 11 × 14.7/8 inches.
 Special forms: Outputs can be designed on the pre-printed form. The pre-
printed form requires the standard print headings or titles for the output design.
Let us say, an organisation wants to display the name and logo of an
organisation at the top of the output document produced by the information
system. Other organisations may require the address of an organisation should
also be displayed along with the name and logo of the organisation. The output
display depends on the choice of organisation and it varies in different
organisation. The different ideas can be helpful in enhancing the presentation
skills of the output document of that organisation.
 Multiple copies of output: At times, more than one copy of an output is
required and in such cases, multipart forms can be used to produce multiple
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Management Information Systems copies of the output. Multiple papers are available in carbon and carbonless
forms.
 Turnaround documents: The output can be produced as a turnaround
document. In this specification, the output can be used as an input document
NOTES also. The turnaround documents can be used in the organisations where the
optical scanners are used for reading data from the forms.
 Output layout: The output layout may be defined as the arrangement of items
on the output medium. The layout design guides a programmer in the
development of codes. The output layout should contain the following items:
o Headings and date
o Data and details
o Summaries and totals
o Page title, number and date
o Notes and comments
o Column headings and data type.
The designers usually use N [n] for numeric data type and X [n] for alpha data type,
where n specifies the width of the column.
A system designer may design multiple screens or special windowing capabilities such
as pop-up windows for designing screens. Such designs will enhance readabilityfor the
visual displays.

5.5.4.2 Input Design

Similar to the output design, input design is equally important for a system designer.
This is because output from a system is regarded as the foremost determinant for
defining the performance of a system. The output of the system greatly affects the input
design of the system.

Input Design Objectives

The input design of an information system must meet the following objectives:
 The input design of the system must attempt and try reducing the data
requirements. It should also avoid capturing unnecessary data such as constant
and system-computable data.
 The input design must avoid processing delays during data entry. Capturing
automatic data can reduce this kind of delay.
 The input design must avoid data entry errors. This can be achieved by
checking the errors in data entry program. This technique of checking data
entry programs for errors is known as input validation technique.
 The input design must keep the process simple and easy to use.

Input Layout
The layout of the input design must contain the following items.
 Headings and date of data entry
 Data heading and value
 Data type and width of the column
 Initials of data entry operator
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 System Design
5.5.5 Feedback from the User
All the sub-systems, outputs and inputs have been specified till now. The system
designer once again requires the involvement of a user in the detailed design of the
system. This time the involvement of the user is for providing feedback. The feedback NOTES
of the user on the system design will increase the acceptance of the information system
being designed.
The system analyst should demonstrate the proposed information system to the users
of the system. This step also assures that the detailed design project is progressing
according to the specifications being made.

5.5.6 Design of the Database

A database is an arrangement of all the records that are inter-related. The database
design serves as a data resource for the information system of an organisation. This
phase is considered as an important phase in order to achieve an optimum performance
and also for storage and fast retrieval of data.
A system designer must keep the following points in mind while designing a database:
 All the data tables and record types are identified.
 The fields, the key fields for each table and relations between various tables
are identified.
 The data type and width of each field of the tables are determined.
 The data tables are normalized.
 Data dictionary is properly documented.

5.5.7 Design of the Procedure

Procedures are the rules, standards or methods designed to increase the effectiveness
of an information system. The procedures specify the tasks require for implementing
the information system. The procedures help the designers as well as the users in
designing procedures. The procedures can be classified as follows:
 Data Entry Procedures: These procedures are designed for data entry such as
data entry sequence.
 Run-time Procedures: In this procedure, an action is to be performed by the
users to achieve the intended results. For example, a procedure may instruct a
user to load printer with a specific size of paper.
 Error-handling Procedures: These procedures help the users in detecting and
rectifying errors.
 Security and Backup Procedures: These procedures provide information
regarding actions performed in order to protect a system against any damage.
 Software Documenting Procedures: The programmers get instructions on
how to document the programs.
A system designer should keep the following points in mind while designing the
documents.
 He must understand the purpose and quality standard of each procedure.
 He must develop a step-by-step direction for each procedure.
 He must document all the procedures.
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Management Information Systems 5.5.8 Design Documentation
Detailed design starts with the performance specifications provided by the conceptual
design and ends with a set of design specifications for the construction of an
information system. A system analyst should document the detailed design very
NOTES
carefully. The design documents should consist of comprehensive details of all the
design phases. The design documentation stage of the detailed design report consists
of:
1. System objectives
2. Design constraints
3. Inputs/outputs
4. Data files
5. Procedures or manuals
6. Proposed system, which contains summary and detailed flow charts
7. Input/output specifications
8. Program specifications
9. Database specifications
10. Cost of installation and implementation
11. System test conditions
System documentation of a system should also include a user-manual and operator-
manual. A user-manual prepares the users and makes them understand the
implementation of the system. Therefore, the system documentation should be simple
and easy to understand. On the other hand, an operator-manual is written for the
computer operators. The operator-manual should include an operator's view of the
system, specifying start, stop and restart sequences. It should also contain various
procedures that guide the operators regarding security, privacy and integrity of data.

5.6 SUMMARY
Since specific organisational environments and general technologies change over time,
organisations need new systems or major revisions to existing systems, to continue to
meet their objectives. Therefore, system development is an ongoing process in all
Check Your Progress organisations that use it. The logical models form the basis for physical system design.
4. …………., ..................... and Various design methodologies are available that the system analyst can use to develop
…………. are the popular
methods for designing an the design of a software system, but the most difficult task in system design is to select
information system. the most appropriate tools and techniques from various available techniques for
5. The presentation of an output developing an application.
can be represented either in
…….or ............... form.
6. The input design must avoid
data entry errors.
A. True
B. False

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 System Design
5.7 ANSWERS TO ‘CHECK YOUR PROGRESS’
1. Throughput
2. False NOTES
3. Internal records
4. Problem partitioning, Structured design and Top-Down design
5. Tabular or graphical form
6. True

5.8 EXERCISES AND QUESTIONS

Short-Answer Questions
1. Discuss the different objectives of the system design process.
2. Write a short note on determination of information sources in the conceptual
design process.

Long-Answer Questions
1. List various design methods of system design.
2. Explain the detailed design phase of an information system.

5.9 FURTHER READING

Lucas, Henry, Jr., The Analysis, Design and Implementation of Information System.

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Management Information Systems
UNIT 6 IMPLEMENTATION AND
EVALUATION OF MIS
NOTES

Structure
6.0 Introduction
6.1 Unit Objectives
6.2 The Implementation Process
6.3 Selection of Hardware and Software
6.4 Evaluation of MIS
6.5 System Maintenance
6.6 Pitfalls in MIS Development
6.7 Summary
6.8 Answers to ‘Check Your Progress’
6.9 Exercises and Questions
6.10 Further Reading

6.0 INTRODUCTION
Implementation is the process of ensuring that the information system is operational
and allowing users to take over its operation for use and evaluation. This involves
training the users to handle the system. The analyst needs to plan for a smooth
conversion from the old system to the new one. Once the information system has been
developed and acceptance testing is completed, the implementation process starts.
Users must be trained on the use of the new system, focusing on its requirements and
its capabilities. Many organisations combine testing and training in the same stage.
This works well because users can become familiar with the new information system
as well as ensure that it can handle errors at the same time. Training, like testing and
documentation, is ultimately a management responsibility.

6.1 UNIT OBJECTIVES

 Describing the implementation process that helps in establishing a proper
MIS system in an organisation
 Explaining the ways for selecting proper hardware and software for an
organisation
 Evaluating the MIS process
 Introducing the system maintenance process

6.2 THE IMPLEMENTATION PROCESS

Implementation is a process of placing a newly developed MIS into operation or
functioning at the user's workstation. Steps to implement MIS are:
 Planning for implementation
 Acquisition of facilities and space planning
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 Implementation and
 Developing MIS organisation and procedure Evaluation of MIS
 User training
 Acquisition of hardware and software
 Creating forms and database NOTES
 Testing
 Change over

6.2.1 Planning for Implementation

Planning involves identifying various activities such as deciding the sequence for the
activities and estimating the time needed for each activity that is required to implement
MIS. All these activities vary according to the design specification of MIS, such as
input, output, equipments and processing. To specify and describe the planning,
various tools can be used such as Gantt Charts and Network Diagrams. Figure 6.1
shows a Gantt Chart.

Figure 6.1: A Gantt Chart

6.2.2 Acquisition of Facilities and Space Planning

To implement MIS at the user's workstation, various facilities such as office, computer
room and computer library are required. Therefore, the MIS manager also needs to do
space planning. The space planning is an activity that includes estimating the space
occupied by computers and its various peripherals such as terminals, printers, workers,
etc. The MIS manager also needs to decide the location of the computer room and its
safety and security factors.

6.2.3 MIS Organisation and Procedure Development

Now, the MIS manager starts recruiting other required human resources for the MIS.
The MIS manager also starts developing procedures for various other activities such
as evaluating and selecting hardware and buying or developing required software.

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Management Information Systems 6.2.4 User Training
For successfully implementing MIS, the MIS manager must arrange trainings for the
users according to the user’s requirement. For example, the training for the clerical
users must be about the processing and functioning of MIS and a manager must be
NOTES informed about how to make on-line inquiries.

6.2.5 Acquisition of Hardware and Software

Immediately after deciding the MIS design specifications, the process of purchasing or
developing the required hardware and software starts. Selecting hardware and software
is discussed later in this unit.
The MIS manager should ensure that the prerequisite such as computer room, electric
connections and communication lines, required to install the hardware are fulfilled.
The MIS manager should also ensure that other consumables such as papers and
floppies are available as required.

6.2.6 Creation of Forms and Database

Database is used to store data, and forms are used for transmitting data. Forms are used
to input data to MIS and receive the output data from the MIS. Therefore, the
implementation of MIS also requires forms and databases. Therefore, database and
forms must be generated for the MIS and these database and forms are generated in
context of the entire MIS.

6.2.7 Testing
Testing is a process that is performed to find out whether or not each and every element
of MIS such as equipments, programs and forms, are working according to their design
specifications. The testing also calculates accuracy, range of inputs, frequency of
inputs, operating conditions and reliability factors of the MIS.
Nowadays, the Computer Aided Software Engineering (CASE) tool is used to perform
testing of MIS.

6.2.8 Change Over

After performing the testing, the last step is to put the MIS at the user's workstation.
The process of placing the newly developed MIS at the workstation differs depending
on the following two situations:
 Placing only the new MIS system
 Replacing an existing MIS system by the new one
If an MIS system is not available at the user’s workstation, then you can directly install
MIS.
However, if an MIS system is available at the user’s workstation, then there are
following four policies to replace the existing MIS system with the new one:
 Direct uninstall or remove the existing MIS and install the newly developed
MIS in place of the old one. This policy is used when the existing MIS is
absolutely worthless.
 Parallel installs the newly developed MIS in parallel with the existing MIS
until the new MIS is not tested properly. In this policy, the output from both
the existing and the new MIS are compared and tested. If the new MIS is giving
the desired output, then the previously installed MIS can be removed.
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 Implementation and
 Modular installs the new MIS at the user's workstation on a module basis. In Evaluation of MIS
this policy, the user's workstation is divided into groups and the new MIS is
installed for each group.
 Phase-in is similar to the modular policy. However, in this policy the new MIS
is segmented instead of the user's workstation. In this policy, each MIS NOTES
segment in installed at the users workstation and performs a specific function.

6.3 SELECTION OF HARDWARE AND

SOFTWARE

You need to select hardware and software products for installing an MIS. For selecting
the hardware and software products, following steps are taken into consideration:
1. Requirement analysis
2. Preparing tender specifications
3. Inviting tenders
4. Technical scrutiny and short-listing
5. Detailed evaluation of short-listed vendors
6. Negotiations and procurement decision
7. Delivery and installation
8. Post-installation review

6.3.1 Requirement Analysis

In this step, the MIS configuration specifications are identified and on the basis of these
specifications, hardware and software requirements are identified.

6.3.2 Preparation of Tender Specifications

After identifying the specifications, tender documents are designed for vendors. The
tender document is a document that contains various information and specifications,
which are:

Purchasing Schedule Check Your Progress

1. Define the Implementation
The purchasing schedule contains the following information: process.
Date of tender submission 2. Write all the steps that are
taken into consideration for
 Evaluation criteria implementation of an MIS.
 Scope for negotiations, if any 3. To analyse and describe the
planning, various tools can be
Hardware and Software Specification used, such as Gantt Charts and
Network Diagrams.
It contains all the technical specifications of each hardware and software product. (True\False)
For example, the UNIX operating system and 32-bit CPU with in-built processor. 4. Immediately after deciding the
………….. the process of
purchasing or developing the
Quotation Format required hardware and
Quotation format specifies different formats for software starts.

 Technical details for each product

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Management Information Systems  Prices and levies such as duties and taxes
 Required validity of the quotation
 Earnest money deposit required, if any

NOTES Terms of Contract

It contains the following terms and conditions for a specific hardware or software
product:
 Expected delivery date
 Warranties
 Penalty, if any
 Mode of payment terms
 Arbitration
 Training needs

6.3.3 Inviting Tenders

After specifying the tender specifications, tenders are invited. Depending on the
quantity of purchase, tenders can be invited through one of the following procedures:
 Open tender is invited through an advertisement in newspaper.
 Limited tender is invited by simply sending queries to a few selected
vendors.
Different organisations follow different procedures for inviting tenders.

6.3.4 Technical Scrutiny and Short-listing

In this step, the technical specifications of the tendered bids are evaluated and all
tendered bids are compared. Depending on the compared results, the tendered bids are
short-listed. The technical scrutiny and short-listing involves:
 Opening all tendered bids on a specific date and time
 Specifying or marking deviations from the specified product specifications
in each bid
 Preparing a comparison list and short-listing the vendors according to the
comparison list.

6.3.5 Detailed Evaluation

Detailed evolution involves the following tasks:
 In-depth examining of the technical specifications of the vendor’s products
 Visiting the vender’s workplace for inspections
 Examining a specific product, if any specific performance of the product is
predetermined, through suitable benchmarks test

6.3.6 Negotiations and Procurement Decisions

Nowadays, there is extensive competition in the market. Therefore, the vendors may
offer considerable concessions on the products and also price negotiations are

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 Implementation and
held to maximise these concessions. For the price negotiations, committee members Evaluation of MIS
must have good price knowledge of the each product.
However, some vendors do not allow any negotiations. For the vendors that do not
allow negotiations, following steps can be taken into consideration for the procurement
NOTES
decision:
1. Short-list vendors according to the comparison list.
2. Arrange a meeting with the short-listed vendors.
3. Explain the final products configuration (including optional items, such
as RAM and additional disk).
4. Allow each vendor to offer his final price for the selected product
configuration.
5. Compare the entire final price list and select the lowest bid.

6.3.7 Delivery and Installation

In this step, the selected vendor delivers the hardware and software products to the
buyer's organisation. Now, the buyer organisation compares the delivered product’s
configurations with the specifications mentioned in the tender. If the entire
configuration matches, then MIS is installed in the buyer’s organisation.

6.3.8 Post-installation Review

After installing MIS, an evaluation is made to determine how closely the new system
confirms to the planning. For this, a post-installation review is made in which system
specifications and user requirements are examined.

6.4 EVALUATION OF MIS

Evaluation of MIS is a process in which the performance of an organisational MIS is

determined. According to the performance results, the organisation evaluates and
implements the necessary modifications in MIS. Various terms related to the
evaluation of MIS are:
 Evaluation approaches
 Evaluation classes
 Product-based MIS evaluation
 Cost/benefit-based evaluation

6.4.1 Evaluation Approaches

Various approaches are used to evaluate the organisational MIS performance. The most
common approaches are:
Check Your Progress
Write the information that a
Quality Assurance Review purchasing schedule contains.
The quality assurance review is also known as technical review. It determines the Hardware and software
technical quality performance of MIS. The quality assurance review determines the specifications contain all the
…………. of each hardware
data transmission rate, main or secondary storage and CPU capacity. The MIS and software product.
development personnel or a quality assurance group performs the quality assurance Detailed evolution involves
review. in-depth examining of
technical specifications of a
Compliance Audits product. (True\False)
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Management Information Systems The compliance audit is also known as application control review. It determines the
adequacy and completeness of MIS controls for the system inputs, outputs and
security, etc. A specific internal audit function is used to perform the compliance
audit.
NOTES
MIS Personnel Productivity Measurement
The MIS personnel productivity measurement determines the capacity of MIS
personnel. The capacity of the MIS personnel is evaluated in terms of productivity. For
example, lines of code per unit time determine the capacity of the programming
personnel.

Computer Performance Evaluation

The computer performance evaluation determines the production capacity of computer
hardware. The production capacity is calculated in terms of performance efficiencies
and bottlenecks such as actual throughput and I/O channel utilisation, which limits the
production.

User Attitude Survey

The user attitude survey determines the operational consideration evaluation. The
operational considerations refer whether or not the input data is adequately provided
to MIS and the output is usable.

Cost/Benefit Analysis
The cost/benefit analysis is also known as economic evaluation. It determines the MIS
effect on the organisational performance in terms of money. The cost/benefit
analysis is commonly used in capital budgeting to estimate the return on an
investment.

6.4.2 Evaluation Classes

To evaluate the performance of MIS, the following two classes are used:
 Effectiveness
 Efficiency

Effectiveness
The effectiveness class determines the quality of the MIS output. MIS is effective, if
the quality of its output is good and the process of producing output is right.

Efficiency
The efficiency class specifies the total amount of resources required by MIS to obtain
the output.
The relationship between effectiveness and efficiency can be defined as effectiveness
is a measure of quality of an MIS output, while efficiency is a measure of the resources
required to achieve the output.

6.4.3 Product-based MIS evaluation

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 Implementation and
The product-based MIS evaluation is also known as effectiveness evaluation. It Evaluation of MIS
determines the effectiveness of an MIS output. For assessing the effectiveness of an
MIS output, a model structure may be used.

Model Structure NOTES

A model structure is a structure that contains various information attributes such as
timeliness and relevance. To determine the MIS effectiveness in an organisation, you
need to determine the information attributes for the MIS output. The information
attributes are already discussed in detail in Unit 4 of this book. Some of the commonly
used attributes are:
 Timeliness
 Relevance
 Accuracy
 Completeness
 Adequacy
 Explicitness
 Exception-based

Model Implementation
The organisational MIS output can be evaluated for their effectiveness in terms of
information attributes. The information attributes are listed in the structure of the
model, as mentioned above. To implement this model, MIS users in an organisation
are asked to give response for every information attribute in terms of rating.
For example, to collect the response from the users, a five-point scale can be used. MIS
users rate on the scale for the effectiveness of the MIS in terms of the information
attributes. A numeric value 0 is assigned on the scale for the least rating, 1 is assigned
for the next rating and so on. Now, the following formula can be used to evaluate
effectiveness for each information attribute:

ESk =  sf/N
where
ESk = effectiveness score for an attribute
s= score assigned to the response
f= frequency of the score
N= number of respondents (users of MIS)
The following formula can be used to evaluate the effectiveness score for n
information attributes of MIS:
k =10

ESmis=  ESk / n
k =1

Effectiveness Norm
Ideally, the value of ESmis should be 4. However, because of uncertain environment
conditions, this value is not possible. Therefore, a tolerance limit is specifies, which
is known as effective norm. Now, against this effective norm an organisation

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Management Information Systems compares the effectiveness of the MIS output to determine deviation. The tolerance
limit is specified by the organisations concerned and it may vary from 5 to 20%.

NOTES
6.4.4 Cost/benefit-based Evaluation
The cost/benefit-based evaluation determines the cost effectiveness of MIS. The
cost/benefit-based evaluation involves a study of various expected costs, expected
benefits and savings from the MIS.
Various types of costs such as initial development cost and capital cost, and various
benefits such as efficiency and reduced costs, are measured and included in the
cost/benefit analysis. All these costs and benefits are briefly introduced below.

Initial Development Cost

The initial development cost is the cost that is incurred to develop MIS. The initial
development cost includes, planning cost, design cost and implementation cost.

Capital Cost
The capital cost is the cost that is incurred in various facilities such as wiring and
flooring and in purchasing various equipments, such as computers and peripherals,
while implementing MIS.

Annual Operating Cost

The annual operating cost is the cost that is incurred in operating MIS. The annual
operating cost involves computers and equipments maintenance cost, personnel cost,
overheads cost and supplies cost.

Improving Performance
Improving performance is a benefit that includes improvement in accuracy, timeless,
non-duplication, usefulness and adequacy.

Minimising Cost
Minimising cost is a benefit that is measured in terms of the error controls, reduced
labour and reduced inventory cost because of the newly installed MIS.

Classification of Costs and Benefits

The costs are classified into various categories to make the cost/benefit analysis easy.
These categories are:
 Tangible cost is the cost that incurred on a specific product or activity and
whose monetary value can be measured. For example, computer cost and
employee salary are tangible costs.
 Intangible cost is the cost whose monetary value cannot be determined. For
example, lowered employee morale because of the new MIS is intangible cost.
 Direct cost is the cost that directly associate to any of the product or activity.
For example, the purchase of a computer floppy for Rs. 20 is an example of
direct cost.
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 Implementation and
 Indirect cost is the cost that is not directly associated to any of the product Evaluation of MIS
or activity. For example, expenditure on safety or security of computer room
is an indirect cost.
 Fixed cost is the cost that does not change and remains fix. For example,
development cost and capital cost. NOTES
 Variable cost is the cost that always keeps on varying on regular basis.For
example, cost of supplies that depends on volume of reports or processing.
The benefits are also classified into various categories to make the cost/benefit analysis
easy. These categories are:
 Tangible benefit is the benefit that is incurred on a specific product or activity
and whose monetary value can be measured. For example, reduced employee
salaries and producing reports with no errors are tangible benefits.
 Intangible benefit is the benefit whose monetary value cannot be determined.
For example, improved organisation image and increased employee morale are
intangible benefits.
 Direct benefit is the benefit that directly associate to any of the product
or activity. For example, 5% reduction in the employee salary is an example
of direct benefit.
 Indirect benefit is the benefit that is not directly associated to any of the
product or activity. For example, a computerised salary system gives detail
of total amount required for payment and total deductions because of
insurance, provident fund and recovery from loan advances etc. In this
example, information about the amount recovered from loan advances is an
indirect benefit of the salary system.
 Fixed benefit is the benefit that does not change and remains fix. The 10%
reduction in the staff salary is an example of fixed benefit.
 Variable benefit is the benefit that always keeps on varying on regular basis.
The amount of daily time saved by a manager is an example of variable
benefit.
After identifying various costs and benefits, you need to create a table that contains
all the expected benefits, the expected costs and the expected savings from MIS.
Table 6.1 shows costs, benefits and savings form for MIS.
Table 6.1: MIS Evaluation

Name of the organisation Date

Address Ref. No.

(A) Estimated Initial Development Cost Rs

1. Project Planning
2. Feasibility Study
3. Design
4. Conversion
5. Implementation

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81
Management Information Systems
6. Miscellaneous
Total (A)

NOTES (B) Estimated Capital Cost Rs

1. Computer Room Equipment and H/W
2. Facilities
Total (B)

(C) Estimated Operating Cost Rs

1. Personnel
2. Computer/Equipment Rent
3. Overhead and Supplies
Total (C)

(D) Estimated Benefits Rs

1. Reduced Salary and Labour Cost
2. Reduced Inventory Cost
3. Better Decisions
4. Any Other Intangible Benefit
Total (D)

(E) Annual savings (D – C) Rs

(F) Rate of Return (rate at which present %

value of savings equals present value of one-
time costs)
(Pv of E=Pv of A + B)

6.5 SYSTEM MAINTENANCE

Check Your Progress
Write the various terms related The evaluation process helps an organisation to analyse whether or not MIS is effective
to the evaluation of MIS. and efficient. On the basis of the evaluation results, an organisation performs system
MIS personnel productivity maintenance. System maintenance is a process of monitoring, analysing and modifying
measurement determines the the existing MIS to make some desired or specific improvements. The system
capacity of ………………...
maintenance includes removing errors, which may be due to environment change,
Write the classes that are used
to evaluate performance of an organisation change or system design. In the system maintenance process, various tasks
installed MIS in an are performed that are categorised into the following categories:
organisation.
 Corrective maintenance
The evaluation process helps
an organisation to analyse  Adaptive maintenance
whether or not the MIS is
effective and efficient.
 Perfective maintenance
(True/False)
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 Implementation and
Evaluation of MIS

6.5.1 Corrective Maintenance NOTES

In the corrective maintenance, the processing or performance failures are repaired.
These failures are due to faulty design or wrong assumptions during the MIS design
and implementation process.

6.5.2 Adaptive Maintenance

In the adaptive maintenance, MIS is repaired according to some organisational
changes. The organisational changes include:
 Change in the organisational procedures
 Change in organisational objectives, goals and policies
 Change in forms
 Change in system controls and security needs

6.5.3 Perfective Maintenance

In the perfective maintenance, MIS is repaired to enhance its performance. The
perfective maintenance includes adding new program and modifying the existing
programs in an MIS system.

6.6 PITFALLS IN MIS DEVELOPMENT

There are fundamental weaknesses in any organisation, such as improper management

and unclear organisational functions. When the organisation decides an MIS, these
problems directly affect and limit an MIS. Various limitations of an MIS are:
 Organisational Framework: Some managers think that they can solve
company’s shortcomings using MIS. An MIS does not help to achieve this goal
without a good planning and control within the framework of an organizational
structure. The MIS must be built on top of a management system that includes
the organizational arrangements, the structure and procedures for adequate
planning and control.
 Generation of Information: The lack of managerial and operational
applications to the MIS makes a great impact because it implies that the process
of management is not being performed well to generate the information. The
information is the raw material of decision-making for MIS, and if
information is not being generated, disseminated, and used for management,
then no system-manual or computer is going to solve organisational problems.
 Managerial Participation: The most striking characteristic of a successful
company is that the MIS development has been viewed as a responsibility of
management. Their success is attributed directly to the fact that managers are
required to become involved in the design of their own systems. This includes
both top management and operating line management. Moreover, the
presidents need to take personal interest and participate directly in defining
what work the computer should do for the company.

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Management Information Systems  Communication Gap: In MIS, user cannot adequately express information
needs and the designer designs the flow chart and graphs according to the user
requirements. After designing, the programmer incorporates his own ideas and
interpretations, for developing the system. In these development
NOTES stages, one undefined requirement can develop an incorrect information
system.
 Bias in Information: The presentation of information may generate a bias and
may influence the user such as, if the information is presented in an alphabetic
order and if it lengthy, the first few information entries will get more attention.
 Delayed Delivery of Information: It reduces the immediate action or decision.
Thus, delayed information will only have knowledge value.
 Suppresion and Filtering of Information: This is done with the confidential and
sensitive data to achieve unrealistic goals.

6.7 SUMMARY
Maintenance is the term applied to those activities, which correct flaws or errors in
both systems design and implementation with respect to system requirements and
system specifications. System enhancement falls between system maintenance and
system development in that it also corrects flaws in requirements and specifications.
System enhancement adds to system capability by incorporating new or augmented
requirements.

6.8 ANSWERS TO ‘CHECK YOUR PROGRESS’

1. Implementation is a process of putting a newly developed MIS into operation
or functioning at the user's workstation.

2. For the implementation of an MIS, following steps are taken into

consideration:
A. Planning and implementation
B. Acquisition of facilities and space planning
C. MIS organisation and procedure development
D. User training
E. Acquisition of hardware and software
F. Creation of forms and database
G. Testing
H. Change over
3. True
4. MIS design specification
5. A purchasing schedule contains the following information:
A. Date of tender submission
B. Evaluation criteria
C. Scope for negotiations, if any
6. Technical specifications
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 Implementation and
7. True Evaluation of MIS

8. The various terms related to the evaluation of MIS are:

A. Evaluation approaches
B. Evaluation classes NOTES
C. Product-based MIS evaluation
D. Cost/benefit-based evaluation
9. MIS personnel
10. To evaluate performance of MIS, the following two classes are used:
A. Effectiveness
B. Efficiency
11. True

6.9 EXERCISES AND QUESTIONS

Short-Answer Questions
1. Explain the MIS implementation process? Also discuss various steps to
implement a newly developed MIS in an organisation.
2. Why do organisations need system maintenance? Explain the different
types of system maintenance.

Long-Answer Questions
1. Discuss various costs and benefits considered during the MIS evaluation
process.
2. What are the criteria for selection of hardware and software in MIS?

6.10 FURTHER READING

Davis, B. and M.H. Olson, Management Information Systems.

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Management Information Systems
UNIT 7 APPLICATION OF MIS IN
MANUFACTURING SECTOR
NOTES

Structure
7.0 Introduction
7.1 Unit Objectives
7.2 Information Processing System
7.3 Personnel Management
7.4 Financial Management
7.5 Production Management
7.6 Marketing Management
7.7 Summary
7.8 Answers to ‘Check Your Progress’
7.9 Exercises and Questions
7.10 Further Reading

7.0 INTRODUCTION
An information system is an organised collection, storage and presentation system of
data and other knowledge for decision-making, progress reporting and planning and
evaluation of programmes. The various applications of the information system include
accounting, query analysis, decision-making and report generation. A typical
information system provides these applications at various function levels, such as
personnel management, financial management, production management and marketing
management. For example, in personnel management, the accounting application
primarily focuses on attendance, manpower, salary, skill, etc., whereas in financial
management, the accounting system accounts for all direct and indirect money
transaction in the organisation.
The query system also varies in the different function levels. The production
management queries include production programmes, job schedules, status of
availability of materials, status of the job, etc. However, the marketing management
queries revolve around price, supplier and stocks. There are also various reports
generated in an information system that help take various decisions at different
function levels.

7.1 UNIT OBJECTIVES

 Describing objectives behind applications of information system
 Understanding the applications of MIS at different function levels
 Explaining the reports generated in an MIS at different function levels
 Discussing how various reports help take decisions at various function levels

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7.2 INFORMATION PROCESSING SYSTEM Manufacturing Sector

An information processing system is the system that takes information in one form and
transforms that information into another form. Information system and MIS are similar NOTES
to each other, as the main aim of both the systems is to provide information for the
proper functioning of the organisational activities.
It is not necessary that every organisation follow the same system of information
processing or MIS. The application of MIS in organisations may vary depending on
the requirement and the flow of information. Generally, information is stored in
databases maintained in the organisation, the data for which is collected from the online
transaction processing (OLTP) system. A typical information processing system is
shown in the figure 7.1, which helps view various application of the information
system:

Figure 7.1: A Model of Information Processing System

For each application of an information processing system, OLTP provides the input
data. The objectives behind developing the different applications in an information
processing system are:
 To keep an account of the transaction results in the information system and
providing reports on them
 To provide a query system to assess the status of the system
 To provide a system of analysis of data that gives specific business trends or
results
 To provide control information that helps run the business as per the plan and
focus on progresses in a set direction to achieve business goals.

7.3 PERSONNEL MANAGEMENT

The main task of personnel management is to provide required and suitable human
resources that possess specific skills, knowledge and capability. It has to cater to the
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Management Information Systems demand of an organisation from time to time and its goal is to control personnel cost
through continuous increase in manpower productivity by adopting the following
techniques:
 Human Resource Development by means of training and upgrading of skills
NOTES and knowledge
 Motivation through leadership and job enrichment
 Promotion and rewards through performance appraisals
 Grievance handling
 Structuring the organisation

7.3.1 Input
The application of MIS for personnel department consists of several forms or
documents, which serve as inputs. These can be enlisted as follows:
 Personnel application form
 Appointment letter
 Attendance and leave record
 Biodata or CV
 Appraisal form
 Production/Productivity data on the jobs
 Wage/Salary agreement
 Record of complaints, grievances, accidents
 Industry data on wage/salary structure
 Industry data on manpower, skills, qualifications
 Record of sources of manpower—University, Institutions, Recruitment
agencies
 Record on manpower application trend in view of mechanisation,
automation, and computerisation.

7.3.2 Application
These documents form a database, which are then observed and used by personnel
managers, head of human resource development department and top management.
Accounting
Following entities are accounted for in the personnel management system
 Attendance
 Manpower
 Leave
 Salary/Wages, statutory deductions
 Loans and deductions
 Accidents
 Production data
 Skills
 Bio data
 Family data
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Query Manufacturing Sector

Personnel management has queries regarding the following topics

 Identification of each employee
 Strength of a section, department, division NOTES
 Number of persons with a particular skill
 Attendance, leave, and absenteeism record of all the employees
 Salary/Wages of employees
 Designation and number of persons holding these designations
 Personal records of the employees
The queries are processed with employee number, skill code, and depart-
ment/division code as keys.

Analysis
In view of personnel management, data analysis takes into consideration the
following factors:
 Analysis of attendance by a class of employees
 Leave analysis by a group of employees
 Trend in the leave record
 Analysis of accidents and types thereof
 Analysis of salary/wages structure
 Analysis of overtime

Control
In the view of personal management, control consigns the working criteria of a
person and the industry norms. Some of the considerations taken into control are:
 Probable absence versus workload
 Personal cost against manpower increase
 Assessment of accident records against safety measures taken
 Personnel cost versus industry cost and its projection
 Projection on manpower needs, evolving recruitment and training
programmes

7.3.3 Reports
The personal department and the top-level management use reports to analyse the
information of the industry. Following are the major categories of the reports.

Statutory reports
The personal department of the organization generally prepares statutory reports. A
statutory report consists of:
 Attendance record
 Category of employees—permanent, trainee and apprentices
 Information about funds, ESI Reports, Ledgers and Returns
 Accident Reports

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Management Information Systems  Income Tax Form 16, 24A
 Strength of employees to Director general of Technical Development
(DGTD)
Statutory reports are submitted to the Provident Fund Authorities, ESI Authorities,
NOTES Income Tax Department, Directorate of Industrial Safety and Health, and Labour
Department.

Knowledge Update Reports

These reports help to keep the data up to date and consist following information:
 Daily attendance report
 Employee strength
 New joining and leaving and transfer of the employees
 Personnel cost by department, job and product
 Evaluation of personnel cost by salary/wages and overtimes

Operational update reports

Operational reports determine and plan the following aspects for futures activities:
 Daily attendance to plan the workload
 Overtime versus work completed
 Projected absenteeism and distribution of workload
 Cost of personnel by jobs or work completed

Decision analysis reports

These reports analyse the data and help to decide the plans.
 Analysis of attendance for season, festival, and predetermined schedule
 Overtime analysis
 Analysis of accidents and deciding on safety measures and retraining
 Cost versus work analysis
 Job versus recruitment analysis

Action Reports
These reports are taken into consideration for some actions based on the analysis of
the reports. These reports include following actions:
 Recruitment and additional manpower or subcontracting of jobs
 Acceptance of orders on the basis of workload
 Reduce cost by reorganising or transferring workers
 Prepare training and development programmes according to the need

7.4 FINANCIAL MANAGEMENT

The function of the financial management is to meet the financial needs of an
organisation. It also helps in meeting the statutory compliance by way of declaring the
audited financial results, submit all reports and return to the Government and Tax

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 Application of MIS in
Authorities. There are various tools that help the financial management in meeting Manufacturing Sector
the required organisational goals. These tools are as follows:
 Break Even Analysis
 Cost Analysis NOTES
 Cash Flow Projections
 Ratio Analysis Capital Budgeting
 Management Accounting
 Financial Modelling, and so on.

7.4.1 Input
There are several documents and forms, which serve as inputs for financial
management. These documents and forms are prepared in specific formats according
to the need of different organisations. The various forms of inputs available in financial
management are:
 Payments
 Receipts
 Data from Stock Exchange

7.4.2 Applications
The financial accounting system is the primary application in financial management.
The financial accounting system is responsible for handling the financial transactions
and producing financial results for a company.

Accounting
In financial management, the financial accounting management system controls all the
applications related to accounting. This system handles all direct and indirect financial
transactions, which can affect various financial aspects of a company. Some of these
aspects are:
 Sales
 Purchase
 Capital purchase
 Inventory
 Fixed deposits
 Shareholder’s funds
 Income tax
 Salary/wages
 Budgets
 Fixed assets

Query
The query system in financial management provides the debit or credit balance of an
account that shows the transactions involved in producing the balance. The query
system involves the following queries:
 Main account
 Subsidiary account

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Management Information Systems  Location of Factory, Branch, etc.
 Documents, such as bills, credit notes, reciept, etc.

Decision Analysis
NOTES Based on the analysis of the financial status of a company, financial management has
to take several decisions. These decisions include borrowing short-term working
capital, analysing debtors and creditors, capital budgeting, selection of investment
alternatives, etc. The following applications support these decisions of the financial
management:
 Cash flow analysis
 Debtors analysis and aging
 Creditors analysis and aging
 Sources and uses of funds
 Budget analysis
 Capital budgeting and ranking of investment alternatives

Control
When a business does not progress as per planning, the cost to run the business
increases. In such situations, the control applications need to focus on the exceptions
that arise in the business operations. Some of these exceptions are:
 Accounts receivable, outstanding beyond the acceptable norms
 Advances to creditors and non-realisation of obligations
 Analysis of non-moving accounts and legal actions
 Shortage of funds in excess of planned and rescheduling of activities and
priorities
 Cost over-runs beyond the norm and action on alternatives
Based on these exceptions, the control applications take several decisions and bring
out revised business terms, which include:
 Choosing alternative source of financing
 Revising specific activities to cut down the expenses
 Relocating resources
 Revising schedules, plans and priorities

7.4.3 Reports
The information received from the financial management plays a pivotal role for
information management of a company. Because the information is received as basic
data and can be reliable as it is thoroughly checked, audited and validated using a
computer system. The top management primarily relies on the statutory compliance
and operations update from the financial management.

Statutory Compliance
 Tax returns
 Sales tax registers
 Excise registers

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 Periodical public declaration of financial results Manufacturing Sector
 Declaration of annual results to the board, share holders and public

Knowledge Updates
NOTES
 Monthly trial balance, balance sheet and profit and loss account
 Stock valuation
 Receivable accounts and aging
 Payable accounts and aging
 Expenses on major accounts
 Position of cash
 Overall business achievement in major business areas

Operations Update
 Filling of statutory retuns and reports
 Statutroy payments that include advance tax, sales tax, excise duty, etc.
 Reports on finished goods and dispatches
 Report on payment to the supliers
 Report on material receipts

Decision Analysis
 Break even analysis for cost and price decision
 Return on investment analysis to choose investment
 Trend analysis on price of selected comodities
 Analysis of current and fixed assets
 Analysis of current liabilities
 Analysis of overdue receivables

Action Update
The decision analysis specifies the areas where decision is to be made and actions to
be taken. However, actions are taken in exceptional cases. The reports of the actions
implemented and their impacts on the business include:
 Overdue receivables that can result in legal action and termination of
business association
 Non supply of goods and services after payment that can lead to legal action,
revision of terms and termination of business association
 Payments to creditors including penalties
 Poor usage of fixed assets

7.5 PRODUCTION MANAGEMENT

The function of production management is to provide manufacturing services, which
involve manufacturing products with specific quality, cost and time to fulfil the
customer needs. The function of production management is supported by the following
systems:

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Management Information Systems  Production planning and control
 Industrial engineering
 Maintenance and quality control
 Materials management
NOTES
The organisation of the production management of a company varies due to the type
of production and its production policies. The production policies can differ with
whether the production is made on customer order or for stock. It also depends on the
manufacturing technology adopted by the company.
There are several functional goals of the production management to provide the
manufacturing services. These include:
 Fuller utilisation of manufacturing capacity
 Minimal rejections
 Maximum uptime of plant and equipment
 Fulfiling the delivery promises

7.5.1 Input
The production management involves several transactions that are related to plan, issue
and control the various tasks during product manufacturing. The details of these
transactions are listed in the following documents:
 Production programme
 Production schedule
 Process planning sheet
 Job card
 Quality assurance rating form
 Material requirement
 Breakdown advice
 Material requisition
 Customer order

7.5.2 Applications
Production management involves various support systems, such as:
 Production planning and control
 Bill of material processing
 Drawings and process planning
 Scheduling and monitoring systems

Accounting
Production management requires several entities to perform the tasks and activities
involved in manufacturing process. These entities are:
 Quantity of production in a specific time-period
 Material requirement and usage
 Rejection of quantity at the intermediate stages and at the final stage
 Use of power and fuel

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 Application of MIS in
 Utilisation of machine and facilities Manufacturing Sector
 Labour hours

Query
NOTES
The queries in production management involve seeking job status or information on
fixed entities, such as machine or worker. These queries include:
 Job status or order in terms of stage and level of completion
 Job schedules and production programme
 Status of material availability
 Status of loads on machines
 Standard information on worker skills and their capacities
 Standard information on products and processes

Decision Analysis
Production management needs to make a number of decisions, both short-term and
long-term, to fulfil its objectives. These decisions are:
 Make or buy
 Make or subcontract
 Using alternative material
 Using alternative process
 Job planning and scheduling
 Job rescheduling and loading
 Selecting production facilites
 Selecting alternative maintenance policies
These decisions implies on:
 Cost
 Productivity
 Efficiency
 Utilisation of the manufacturing facility
 Utilisation of material and physical resources

Control
In production management, control applications help control production programme,
production capacity and quality of production. The control applications also need to
focus on utilisation of the production capacity and labour force. In production
management, the following exceptions need to be highlighted to perform the control
applications:
 Excessive product rejection due to material or process
 Hold up key job beyond a specific limit
 Continuous breakdown manufacturing facility beyond a specific period
 Continuous deviation from the norms and standards of production rate
 Below limit utilisation of key facilities
 Backlog of orders due to failure of delivery dates

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Management Information Systems 7.5.3 Reports

Statutory Compliance
In production management, information on statutory compliance is not of much
NOTES significance. Only a few companies need to submit the report on raw material and
finished good to the Government. Some companies classified under Director General
of Technical Development (DGTD) also need to provide information on production
and production hours to DGTD.

Knowledge Update
 Down-time of production facilites
 Output of various jobs versus machines
 Job completion time
 Breakdowns and causes of breakdowns

Operations Update
 Production per day
 Rejections by process or job
 Machine breakdowns
 Jobs completed and handed over for inspections
These reports can help take various decisions, such as:
 Extending production hours
 Going on second shift
 Job rescheduling
 Change of tools or process

Decision Analysis
The Decision Support System (DSS) helps the management take decisions, which are
supported by:
 Programming models
 Simulation techniques
 Material requirement planning systems
 Artifical interlligence and knowledge-based systems
 Planning and scheduling systems
The analysis of DSS also helps make the following decisions:
 Optimum product mix
 Alternative loading pattern
 Alternative assignment of jobs and machines
 Alternative material, tools and process

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 Application of MIS in
Action Update Manufacturing Sector

The action update reports help find out the post-implementation scenario of the
decisions taken by DSS. These reports inform whether the decisions result in expected
performance or not. NOTES
They also provide an early opportunity to the management to correct decisions that are
not proper in action. Such reports, which help correct a decision, are called exception
reports.

7.6 MARKETING MANAGEMENT

The prime objective of the marketing management is to satisfy the customer. This
involves:
 Identifying the need of the customer
 Developing product concept
 Designing the product
 Positioning the product in the market
 Pricing the product appropriately to sell in the market
The function of marketing management has strong relation with the financial and
production management. This is because marketing management needs to depend on
uninterrupted supply of goods, appropriate stock and inventory at different locations.
Marketing management controls the sales from the point of view of sales income. It
also has different responsibilities, which help in various tasks, such as retaining market
share, penetrating into new market and assessing consumer responses to a new market.
Some of the key responsibilities of marketing management are:
 Forecasting sales
 Evolving marketing strategies
 Pricng
 Designing products
 Launching products

7.6.1 Input
In marketing management, the following documents are used for input transactions:
 Customer order
 Order acceptance
 Delivery note
 Invoice
 Credit and debit note

7.6.2 Applications

Accounts
In marketing management, the following entities are involved in accounting
application:
 Product sale
 Product family
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Management Information Systems  Sales value
 Sales tax
 Dealer
 Customer
NOTES
 Excise duty
 Area
 Inventory
 Market segment
 Exports market
 Complaints

Query
The queries involved in marketing management are:
 Product specifications
 Price and discounts
 Product quality
 Customer names and addresses
 Dealers
 Distributors
 Sales
 Stock

Decision Analysis
Marketing management needs to take decisions on the following:
 Price increase or decrease
 Allocation of stock
 Acceptance of order
 Discounts and commision
 Deciding sales terms
 Deciding new products
 Packaging
 Distribution channels
 Product positioning
The applications that support these decisions are:
 Break even model
 Risk analysis model
 Distribution model
 Network model
 Product launch model

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 Application of MIS in
Control Manufacturing Sector

In marketing management, following factors need to be controlled in order to achieve

business goals:
 Sales versus budget NOTES
 Marketing cost versus budgeted cost
 Product sale verus target fixed for market segments
 Planned sales programme versus actual sales and sales of competitors

7.6.3 Reports

Statutory Compliance
In marketing management, statutory compliance involves taxes and duties and filing
the returns to the appropriate authorities of the government. The main statutory
compliance reports are sales tax register and returns and excise duty returns.

Knowledge Update
In marketing management, the knowledge update reports are based on various entities,
such as orders, value, sales, stocks and budgets. The various knowledge update reports
are:
 Product sales ledger
 Sales summaries
 Accounts receivables
 Received and accepted orders
 Sales analysis
 Market analysis
 Competition analysis
The knowledge update reports are presented in a summarised fashion with fixed format
to comply with the structure of the companies. The factors that help summarise these
reports are:
 Customer
 Class of customer
 Market segment
 Product
 Product family
 Sales representative
 Dealer
 Distributor
Check Your Progress
Operations Update 1. What do you mean by
information system?
The operations update reports in marketing management provide the various 2. What is the role of personnel
marketing operations, which involve: management?
 Orders receive 3. What is the main objective of
finance department?
 Orders processed 4. What are the responsibilities
 Orders accepted of marketing management?

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Management Information Systems  Orders despatched
 Orders billed
 Money recovered

NOTES The operations update reports provide facts on day-to-day operations, which help
prepare statistical summaries for quick update. Some of the operations update reports
are:
 Order book
 Despatch report
 Inventory
 Invoice
 Customer complaints

Decision Analysis
Decision analysis reports help provide information on whether the expected results
are realised or not in marketing management. Among the decision analysis reports,
market research analysis reports help in sales analysis with reference to price, choice
of market, design, packaging, etc. These reports also allow marketing management to
take correct decisions with the help of the following decision analysis models:
 Break even analysis
 Product market mix
 Marketing expense and market mix

Action Update
The action update reports help marketing management take decisions, such as price
reduction, withdrawal of product from the market, changing product position and
allocating more budgets. The various action update reports are:
 Sale versus budget
 Sales growth versus sales objective
 Stocks versus budgeted stock levels
 Number of complaints recieved versus number of complaints serviced

7.7 SUMMARY
Information system is the process of collecting data and information and storing the
collection so as to retrieve it when necessary. The information system is useful in
various areas of an organisation such as personnel, production, marketing and finance.
For example, in personnel management, the accounting application primarily focuses
on attendance, manpower, salary, skill, etc., whereas in financial management, the
accounting system accounts for all direct and indirect money transaction in the
organisation.

7.8 ANSWERS TO ‘CHECK YOUR PROGRESS’

1. An information processing system is the system that takes information in one
form and transforms that information into another form. Information system

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 Application of MIS in
and MIS are similar to each other, as the main aim of both the systems is to Manufacturing Sector
provide information for the proper functioning of the organisational activities.
2. The main task of personnel management is to provide required and suitable
human resources that possess specific skills, knowledge and capability. It has
NOTES
to cater to the demand of an organisation from time to time and its goal is to
control personnel cost through continuous increase in manpower productivity.
3. The main objective of finance department is to meet the financial needs of an
organisation by applying various tools such as break even analysis, cost
analysis and cash flow projections.
4. The responsibilities of marketing management are as follows:
A. Forecasting sales
B. Evolving marketing strategies
C. Pricing
D. Designing products
E. Launching products

7.9 EXERCISES AND QUESTIONS

Short-Answer Questions
1. What is an information processing system? Explain briefly the model of an
information processing system.
2. What are the objectives of the applications of an information system?
3. What are the various function levels of an information system? Mention the
types of inputs at the various function levels.

Long-Answer Questions
1. Explain the significance of a financial accounting system in financial
management.
2. Explain briefly the primary objective of marketing management.
3. What does production management emphasise most on?

7.10 FURTHER READING

Jawadekar, W.S., Management Information Systems, Second Edition.

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