Lecture notes Management Information Systems

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MANAGEMENT INFORMATION SYSTEMS BCA - 302MANAGEMENT INFORMATION SYSTEMS BCA - 302 This SIM has been prepared exclusively under the guidance of Punjab Technical University (PTU) and reviewed by experts and approved by the concerned statutory Board of Studies (BOS). It conforms to the syllabi and contents as approved by the BOS of PTU.Reviewer Director-Academics with Institute of Dr. S. K. Jha Management Development & Research, New Delhi. Author: Paulie Jindal, IDEAS SYNDICATE Copyright © Reserved, 2006 Reprint 2008, 2010 All rights reserved. No part of this publication which is material protected by this copyright notice may be reproduced or transmitted or utilized or stored in any form or by any means now known or hereinafter invented, electronic, digital or mechanical, including photocopying, scanning, recording or by any information storage or retrieval system, without prior written permission from the Publisher. ® Information contained in this book has been published by VIKAS Publishing House Pvt. Ltd. and has been obtained by its Authors from sources believed to be reliable and are correct to the best of their knowledge. However, the Publisher and its Authors shall in no event be liable for any errors, omissions or damages arising out of use of this information and specifically disclaim any implied warranties or merchantability or fitness for any particular use. ® ® Vikas is the registered trademark of Vikas Publishing House Pvt. Ltd. ® VIKAS PUBLISHING HOUSE PVT LTD E-28, Sector-8, Noida - 201301 (UP) Phone: 0120-4078900 • Fax: 0120-4078999 Regd. Office: 576, Masjid Road, Jangpura, New Delhi 110 014 • Website: www.vikaspublishing.com • Email: helplinevikaspublishing.comCAREER 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.PTU DEP SYLLABI-BOOK MAPPING TABLE BCA - 302 Management Information Systems Syllabi Mapping in Book Section-I Introduction to Systems and Basic Systems Concepts, Types of Systems, The Unit 1: Information and System Concepts (Pages 3-20) Systems Approach, Information Systems: Definition and Characteristics, Types Unit 2: Decision-Making and MIS of Information, Role of Information in Decision-Making, Sub-Systems of an 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 (Pages 46-56) Implementation and Evaluation, Pitfalls in MIS Development. Unit 5: System Design (Pages 57-71) Unit 6: Implementation and Evaluation of MIS (Pages 72-85) Unit 7: Application of MIS in Functional MIS: A Study of Marketing, Personnel, Financial and Production Manufacturing Sector MIS. (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 NOTES business. Now, the need for developing and managing an information system is being felt by the 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. Self-Instructional Material Punjab Technical University 1 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. 2 Punjab Technical University Self-Instructional Material 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 Self-Instructional Material Punjab Technical University 3 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. 4 Punjab Technical University Self-Instructional Material 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 Self-Instructional Material Punjab Technical University 5 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. 6 Punjab Technical University Self-Instructional Material 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 NOTES information 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. 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. 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. Self-Instructional Material Punjab Technical University 7 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 was a manual task. To collect a small piece of information, a lot of time Check Your Progress was consumed and hence the work of decision-making and transaction processing 1. Match the following: used to get delayed. Following are the sub-systems of information: Type of Management Electronic data processing: In 1960s, a new system was introduced that was fast in information information processing called the electronic data processing (EDP). EDP is an Strategic Middle automated system that is used for processing data and information. The EDP systems information Management were used for transaction processing and accounting in an organisation. Today, instead of EDP the term MIS is more commonly used for information processing Tactical High level 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 information Management management for making long-term decisions. DSS enhances the capabilities of MIS 2. Determine whether the by providing assistance to the top management in decision-making. DSS is an following statement is true or ongoing evolutionary system based on operations research. false: Completeness of information The term Decision Support System was first introduced by Gorry and Morton. The also determines that the term Decision Support System is a combination of three words, which are as follows: information is adequate. • Decision, which concentrates on the decision making to solve a particular A. True problem rather than emphasising on information processing, retrieval, and B. False reporting. 3 The economic dimension of the information system • Support, which means computer support is required for making decisions. includes: • System, which signifies the integrated nature of problem solving. This means A. Cost of acquiring the data that for solving a particular business problem, man, machine and decision B. Cost of maintaining the environment are required. data C. Cost of generating the data Concisely, you can say that DSS is a computer-based system that helps end users to use data and models for solving unstructured problems in an organisation. D. All of these 8 Punjab Technical University Self-Instructional Material 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 NOTES require 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 the common 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. 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. Self-Instructional Material Punjab Technical University 9 Management Information Systems NOTES Figure 1.3: The Single Input-Output Process 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. 10 Punjab Technical University Self-Instructional Material

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