Management Information System

Meaning, Evolution, Scope, Advantages, Disadvantages, Features

1. MANAGEMENT INFORMATION SYSTEM

2. MANAGEMENT INFORMATION SYSTEM Mrs.RACHANA PRADEEP Assistant Professor

3. What is MIS? MIS  is the use of information technology, people, and business processes to record, store and process data to produce information that decision makers can use to make day to day decisions. The full form of MIS is  Management Information Systems . The purpose of MIS is to extract data from varied sources and derive insights that drive business growth.

4. In this chapter, we will learn, Concept of MIS Evolution of MIS Significance and need of MIS Objectives and Features of MIS Subsystems of MIS MIS & other academic disciplines Operating elements of MIS Structure of MIS based in Management Activity-based on organizational functions.

5. The need for MIS Decision makers need information to make effective decisions.  Management Information Systems (MIS) make this possible. MIS systems facilitate communication within and outside the organization  – employees within the organization are able to easily access the required information for the day to day operations. Facilitates such as Short Message Service (SMS) & Email make it possible to communicate with customers and suppliers from within the MIS system that an organization is using. Record keeping  – management information systems record all business transactions of an organization and provide a reference point for the transactions.

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

7. Evolution of MIS

8. 1950 – 1960: Electronic Data Processing, Transaction Processing System During this period, the role of IS was mostly to perform activities like transaction processing, recordkeeping and accounting. IS was mainly used for electronic data processing (EDP). EDP is described as the use of computers in recording, classifying, manipulating, and summarizing data. It is also called information processing or automatic data processing.

9. 1960 to 1970: Management Information Systems During this era, the role of IS evolved from TPS to Management Information Systems (MIS). MIS process data into useful informative reports and provide managers with the tools to organize evaluate and efficiently manage departments within an organization. MIS delivers information in the form of displays and pre-specified reports to support business decision-making. Examples of output from MIS are cost trend, sales analysis and production performance reporting systems. Usually, MIS generates three basic types of information which are: Detailed information reports typically confirm transaction-processing activities. A detailed Order Report is an example of a detailed report. Summary information establishes data into a format that an individual can review quickly and easily. Exception information report information by filtering data that is an exception inventory report. Exception reports help managers save time because they do not have to search through a detailed report for exceptions.  

10. 1970 to 1980: Decision Support Systems In this era, a major advancement was an introduction of the personal computers (PC). With the introduction of PCs, there was the distribution of computing or processing power across the organization. IS function associated strongly with management rather than a technical approach in an organisation . The role focused on “interactive computer-based system” to aid decision-makers in solving problems. This new role of information systems to provide interactive ad-hoc support for the decision-making process to managers and other business professionals is called Decision Support Systems (DSS). DSS serve the planning, management and operations level of an organization usually senior management. DSS uses data from both internal and/or external sources. Internal sources of data might include inventory, sales, manufacturing or financial data from an organization’s database. External sources could include pricing, interest rates, population or trends. Managers use DSS to manipulate the data to help with decisions. Examples of DSS are projected revenue figures based on new product sales assumptions, product pricing and risk analysis systems.

11. 1980 to 1990: Executive Information Systems This period gave rise to departmental computing due to many organisations purchasing their own hardware and software to suit their departmental needs. Instead of waiting for indirect support of centralized corporate service department, employees could use their own resources to support their job requirements. This trend led to new challenges of data incompatibility, integrity and connectivity across different departments. Further, top executives were neither using DSS nor MIS hence executive information systems (EIS) or executive support systems (ESS) were developed. EIS offers decision making facilities to executives through providing both internal and external information relevant to meeting the strategic goals of the organization. These are sometimes considered as a specific form of DSS. Examples of the EIS are systems for easy access to actions of all competitors, economic developments to support strategic planning and analysis of business performance.

12. 1990 to 2000: Knowledge Management Systems During this era, the rapid growth of the intranets, extranets, internet and other interconnected global networks dramatically changed the capabilities of IS in business. It became possible to circulate knowledge to different parts of the world irrespective of time and space. This period also saw an emergence of enterprise resource planning (ERP) systems. ERP is an organization-specific form of a strategic information system that incorporates all components of an organisation including manufacturing, sales, resource management, human resource planning and marketing. Moreover, there was a breakthrough in the development and application of artificial intelligence (AI) techniques to business information systems. Expert systems (ES) and knowledge management systems (KMS) interconnected to each other. Expert systems (ES) are a computer system that mimics the decision-making ability of human experts. For example, systems making financial forecasts, diagnosing human illnesses and scheduling routes for delivery vehicles. Knowledge management system (KMS) is an IT system that stores and retrieves knowledge to support creation, organization and dissemination of business knowledge within the enterprise. Examples of KMS are feedback database and helpdesk systems. ES uses data from Knowledge Management Systems to generate desirable information system’s output for example loan application approval system.

13. 2000 – Present: 21 st Century- E-Business The Internet and related technologies and applications changed the way businesses operate and people work. Information systems functions in this period are still the same just like 50 years ago doing records keeping, reporting management, transactions processing, support management and managing processes of the organization. It is used to support business process, decision making and competitive advantage. The difference is greater connectivity across similar and dissimilar system components. There is great network infrastructure, higher level of integration of functions across applications and powerful machines with higher storage capacity. Many businesses use Internet technologies and web-enable business processes to create innovative e-business applications.  E-business  is simply conducting business process using the internet.

14. Why MIS? A manager has to take decisions with two main challenges: First, a manager has to take quick decisions, or else there’s a chance of the business being taken over by his competitors. The liberalization and globalization, in which organizations are required to compete globally, has further enhanced the necessity for such a system. Second, information is doubling up every two or three years, a manager has to process a large voluminous data; failing which he may end up taking a strong decision that may prove to be very costly to the company. Hence, Management Information System has proved to be the one of the most important in today’s business environment.

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

16. Objectives of MIS Data Storage  - it is important to store information or processed data for future use. Data Retrieval  - the data should be smoothly retrieved from storage devices whenever needed by different users. Data Propagation  - data should be distributed periodically through the organizational network to its users. A system of efficient and effective planning  - MIS controls functions of management to provide quick and timely information to the management. The process is very effective to make decisions. An MIS's goals are to incorporate the company's organizational structure and processes in order to better control the enterprise and maximize the information system's potential for competitive advantage. Graphical reports  - give an idea about the performance of different resources employed in the organization. Controlling the organization  - MIS helps control the organization to provide the latest information as well as historical data whenever required. Standard and budgeted performance  - Through matching actual performance with standard and budgeted performance, MIS brings variances to management attention that can be resolved by taking remedial action. MIS provides the notification of the organization's management power to take advantage of available opportunities. MIS reports on re-production statistics which helps management people to take fruitful decisions

17. Key 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 an inclusive view at sub-systems to operate within an organization. Management-oriented: The management-oriented characteristic of MIS implies that top-down approach needs to be followed for designing MIS. A top-down method says the initiation of system development determines management requirements as well as business goals. MIS implies the management dynamically to the system development towards the completion of management decision.

18. As per requirements: The design and development of MIS should be as per the information required by the managers. The required design and development information is at different levels, viz., strategic planning, management control and operational control. It means MIS should cater to the specific needs of managers in the hierarchy of an organization. Future-oriented: The design and development of MIS should also be future purpose so that the system is not restricted to provide only the past information. Integrated: A complete MIS is a combination of its multiple sub-components to provide the relevant information to take out a useful decision. An integrated system, which blends information from several operational areas, is a necessary characteristic of MIS.

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

20. MANAGEMENT OF MIS Management should try to design the MIS for their enterprise with utmost care. If they allow the MIS to develop without any formal planning, the MIS will almost certainly be inefficient because data will be obtained and processed in a random and disorganised way and the communication of information will also be random and hit and miss. Whether a MIS is formally or informally constructed, it should have certain essential characteristics: (a) The functions of the individuals and their areas of responsibility in achieving company objectives should be well defined. (b) Areas of control within the company should also be clearly defined. (c) Information required for an area of control should flow to the manager responsible for it

21. MIS on organisational behavior

22. Functional Subsystems

23. . Production Subsystem Production information system supports the production function which includes all activities concerned with the planning and control of the processes that produce goods or service. In the production subsystem, there are transaction processing, operation control, managerial control– 1 strategic planning. The typical information required at the transaction processing level is production order. The production order is generally based on the sales orders required by the company. At the same time operational control level requires detailed reports comparing actual performance with the production schedule and identifies the weak areas. However, management control requires a summary report which compares the overall performance to actual performance. Strategic planning is concerned with simplifying, automating, integrating many of the activities needed to produce goods.

24. Marketing Subsystem Marketing is another important function of an organisation . The success of an organisation depends on the efficiency of marketing. The marketing function of an organisation is concerned with the planning, promotion and sale of existing products in existing markets and the development of new products and new markets to satisfy existing and potential customers. Thus marketing performs a vital function in the operation of the business enterprise. MIS helps to analyse demand for different products in different regions. It is mainly concerned with the marketing right product to target customers. Marketing information system provides information for planning, control and transaction processing in the marketing function. Strategic and operational information system assists marketing managers in product planning, pricing decisions, advertising and sales promotion strategies. MIS provides information that helps management to decide the number of sales executives to assign specific products in specific geographical areas. The basic transaction is to be processed at transaction processing level is customer’s orders and prepares invoice and bills. The operational control activity includes the day-to-day scheduling of sales and promotional activities. Managerial control level is concerned with comparison of overall performance with the marketing plan. They require information relating to customers, competitors, etc. Consideration of new markets and new product marketing strategies are the issues dealt at the strategic planning level.

25. Human Resource Subsystem The HRM function is concerned with the recruitment, placement, compensation and development of employees in an organisation . It mainly helps in record keeping and employee evaluation. Every organisation must maintain correct record of its employees. Produce pay cheques and pay reports, maintain personal records and analyse the use of personnel in business operation are the important activities done at the transaction processing level. Management control level conducts budget analysis, turnover analysis, etc., and showing the variances resulting from planned and actual performance. Strategic planning of personnel involved with the planning of alternative strategies for recruiting, training and compensating employees. In this regard, they have to collect different types of information from external sources.

26. Finance and Accounting Subsystem Financial subsystem undertakes the function of arranging adequate finance to the business at minimum cost. This function includes granting credit to customers, cash management and financial arrangement. Accounting information system records and reports the flow of funds through the organisation on a historical basis and prepares important financial statements like profit and loss account and balance sheet. Transaction processing system engaged in the legal and historical record keeping and produces financial statements. They undertake activities like order processing, inventory control, payroll and general ledger systems. Management control level focuses on planning and control of business operations and they compare the actual cost of financial resources with the targeted cost. The strategic planning level for accounting and finance involves in the long-term strategies connected with financial and accounting matters.

27. Logistics Subsystem Logistics Subsystem The logistic subsystem includes activities like purchasing, receiving, inventory control and distribution. The transactions to be processed are purchase requisitions, manufacturing orders, receiving reports and shipping orders. The operational control function makes use of information contained in reports like out of stock items, over stocked items, inventory turnover reports, etc. Managerial control level compares the planned and actual inventory levels, cost of purchased items, stock outs, etc. Analysis of new distribution strategies, adoption of new policy towards the sellers are some of the common tasks dealt at the strategic planning level.

28. Information Processing Subsystem It is the responsibility of the information processing subsystem to provide the necessary information processing services and resources. Typical transactions for information processing are requests for processing, changes in data and programme . Managerial control over information processing requires data on planned and actual performance. Acquisition of hardware and software and automation of information processing, etc., are some of the strategic decision to be taken at the top level management

29. IMPACT of MIS in near future In near future, information management can substantially improve the quality of life in the Indian context in the following manner: (a) Better land record management leading to less litigation in the rural areas. (b) Better natural resource planning leading to optimum utilisation of water, oil, electricity, etc. (c) Better banking and financial services will lead to better money management and better service to the customers. (d) Improved legal delivery system will help common people by speedy disposal of cases. (e) Networked educational and health care institutions will lead to better sharing of resources among larger number of countrymen.

30. MIS & other DISCIPLINES

31. Discipline of MIS # 1. Managerial Accounting : This branch of accounting is concerned with cost analysis and its behaviour which is useful for managerial decisions. Cost analysis is used in managerial accounting to determine the most relevant cost for decision making. It employs techniques such as capital budgeting, break-even analysis, transfer pricing etc. It is mainly oriented towards internal management and control and is therefore closely identified with MIS. Managerial accounting knowledge is of great help in ascertaining the information requirements, carrying analysis, in designing forms for procuring and providing information. In fact, a managerial accountant has a clear-cut knowledge about the relevant and specific information requirement of executives for performing functions in different departments. For example, to determine the breakeven point the information required is about fixed cost, variable cost, and selling price of product. He also knows the sources of information availability. All these facts known to managerial accountants were utilized in the evolution of

32. Discipline of MIS # 2. Management Science : It means the application of scientific method and quantitative analysis techniques (or Operations Research Techniques) to management problems. The use of management science methods emphasize on the use of systematic approach to problem solving and application of scientific method to investigation. It utilizes mathematical and statistical procedures for analysing problems. Finally, it aims at achieving optimal decision. Management techniques were incorporated in the MIS design to make quantitative and analytical information available to the users of MIS. The information system so designed promoted quantitative information and procedures, to facilitate model building for future plans and activities and to simulate the real situations even before they occur.

33. Discipline of MIS # 3. Management Theory: There were several management theories- behavioural theory, empirical theory, decision theory, quantitative theory and management process theory. According to decision theory, the most important task of managers is to make decisions. The second theory known as ‘Management process’ is the most wide spread approach to management. Under this management is defined in terms of what managers do. According to this, management performs the functions of planning, organizing, staffing, directing and controlling. The knowledge of these management theories enabled the MIS designers to ascertain the type of decisions made and functions performed by executives in business organisations .

34. Discipline of MIS # 4. Computers/information technology: To provide accurate and speedy information to the managers. Covers topics like algorithms,computer software,data structure. Major development factor for MIS development.

35. LIMITATIONS OF MIS a) MIS cannot replace managerial judgements in decision making. It is merely an effective tool for the managers in decision making and problem-solving. (b) The quality of output of MIS is directly proportional to the quality of input processes. (c) MIS cannot provide tailor-made information packages. It is required to analyse the available information before decision making. (d) In a fast changing and complex environment, MIS may not have enough flexibility to update itself quickly. (e) MIS considers only quantitative factors into account. (f) MIS is less useful for making non-programmed decision. (g) MIS is less effective in organisations where information is not being shared with others. (h) MIS is less effective due to frequent changes in top management, organisational structure and operational staff

36. CONCLUSION Information Systems Management (ISM) is the application of information technology to support the major functions and activities of either a private sector business or public sector institution. In the past, organisations recognised the importance of managing resources such as labour , capital, and raw materials. Today, it is widely accepted that managing the information resource is very often equally important. ISM supports the process of collection, manipulation, storage, distribution and utilisation of resources.