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Introduction to Management Information Systems Rafael Lapiedra alcamí Carlos Devece Carañana Damentartep D’a Dministració D’e mpreses i m àrqueting Codis d’assignatura: ae1010 fC1010 eC1010 tU0930 Rafael Lapiedra / Carlos Devece - ISBN: 978-84-695-1639-0 Introduction to Management Information Systems - UJI -http://dx.doi.org/10.6035/Sapientia63Edita: Publicacions de la Universitat Jaume I. Servei de Comunicació i Publicacions Campus del Riu Sec. Edifici Rectorat i Serveis Centrals. 12071 Castelló de la Plana http://www.tenda.uji.es e-mail: publicacionsuji.es Col·lecció Sapientia, 63 Primera edició, 2012 www.sapientia.uji.es ISBN: 978-84-695-1639-0 Aquest text està subjecte a una llicència Reconeixement-NoComercial-CompartirIgual de Creative Commons, que permet copiar, distribuir i comunicar públicament l’obra sempre que especifique l’autor i el nom de la publicació i sense objectius comercials, i també permet crear obres derivades, sempre que siguen distribuïdes amb aquesta mateixa llicència. http://creativecommons.org/licenses/by-nc-sa/2.5/es/deed.ca Rafael Lapiedra / Carlos Devece - ISBN: 978-84-695-1639-0 Introduction to Management Information Systems - UJI -http://dx.doi.org/10.6035/Sapientia63INDEX Chapter 1. Information of the company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.1. The concept of information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.2. Characteristics of information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.2.1. Relevance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.2.2. Accuracy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.2.3. Completeness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1.2.4. Source trustworthiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1.2.5. Communication with the right person . . . . . . . . . . . . . . . . . . . . 8 1.2.6. Punctuality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1.2.7. Detail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1.2.8. Comprehension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1.3. Information needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1.4. Sources of information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Chapter 2. Essential aspects of information system in the company . . . . . . . 12 2.1. The concept of the information system . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.2. Information system components . . . . . . . . . . . . . . . . . . . . . . . . . 14 2.2.1. Hardware . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2.2.2. Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2.2.3. Databases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2.2.4. Telecommunications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2.2.5. Human resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2.2.6. Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2.3. Functions of the information system . . . . . . . . . . . . . . . . . . . . . . . . 16 2.3.1. Data capture and collection . . . . . . . . . . . . . . . . . . . . . . . . . 16 2.3.2. Storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 2.3.3. Information processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.3.4. Distribution and dissemination of information . . . . . . . . . . . 17 2.4. The information system and the value chain . . . . . . . . . . . . . . . . . 17 2.5. The information system and the company infraestructure . . . . . . . . 22 Chapter 3. Information system categories . . . . . . . . . . . . . . . . . . . . . . . . 26 3.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 3.2. Transaction Processing Systems (tps ) . . . . . . . . . . . . . . . . . . . . . . . . 27 3.3. Management Information Systems (mis ) . . . . . . . . . . . . . . . . . . . . . . 28 3.4. Decision Support Systems (dss ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 3.4.1. Problem resolution with dss . . . . . . . . . . . . . . . . . . . . . . . . . . 33 3.4.2. Possibilities of Decision Support Systems . . . . . . . . . . . . . . . 33 Rafael Lapiedra / Carlos Devece - ISBN: 978-84-695-1639-0 3 Introduction to Management Information Systems - UJI -http://dx.doi.org/10.6035/Sapientia63 3.4.3. Using a spreadsheet as a decision-making support system . . . 34 3.4.4. Using a dss in the decision-making process . . . . . . . . . . . . . . . 34 3.5. Executive Information Systems (eis ) . . . . . . . . . . . . . . . . . . . . . . . . . 35 3.5.1. The evolution of information systems . . . . . . . . . . . . . . . . . . . 35 3.5.2. Executive Information Systems (eis ): concept and characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Rafael Lapiedra / Carlos Devece - ISBN: 978-84-695-1639-0 4 Introduction to Management Information Systems - UJI -http://dx.doi.org/10.6035/Sapientia63Chapter 1. Information in the company 1.1. The concept of information All individuals, companies and, in general, all organisations are continuously capturing data, many of which are of no significance to them at all. However, other data are available that would afford them a better understanding of their own environment and of themselves. These data – what we know as information – enable them to make more accurate decisions. For this reason, the right amount of information at the right time is a key factor for every organisation. Company managers take decisions, prepare plans and control their company’s activities using information that they can obtain either from formal sources or through informal channels such as face-to-face conversations, telephone calls, social contacts, etc. Managers are challenged by an increasingly complex and uncertain environment. In these circumstances, managers should theoretically be able to define and obtain the type of information they require. However, this is not what happens in practice; rather, the way managers perform their work depends on the available information that they have access to. Most decisions are therefore made in the absence of absolute knowledge, either because the information is not available or because access to it would be very costly. Despite the difficulties in obtaining information, managers need relevant information on which to base their planning, control and decision-making functions. Although the terms data and information are sometimes used indiscriminately, they do have different meanings. Data are non-random symbols that represent the values of attributes or events. Hence, data are facts, events and transactions stored according to an agreed code. Data are facts obtained through reading, observation, calculation, measurement, etc. The amounts and other details on an organisation’s invoices, cheques or pay slips, etc, are referred to as data, for example. Data are obtained automatically, the result of a routine procedure such as invoicing or measurement processes. Transformation Data Information →→ Process Fig. 1.1. Transformation of data into information Information is a set of data transformed in such a way that it helps to reduce future uncertainty and, therefore, contributes to the decision-making process. Information is data transformed in a way that makes sense to the person who receives it; in Rafael Lapiedra / Carlos Devece - ISBN: 978-84-695-1639-0 5 Introduction to Management Information Systems - UJI -http://dx.doi.org/10.6035/Sapientia63other words, it has a real or perceived value for that person when he or she acts or takes decisions. Information, moreover, is data that have been interpreted and understood by the recipient of the message. The relationship between data and information is similar to that of raw materials and the finished product. Information will be meaningful insofar as it provides useful raw material for taking a specific decision. Information Decision Decision-making Action process Fig. 1.2. Decision making: transformation of information into action The process of reflecting on and understanding information is what allows the message to have different meanings for different people. This process also implies that the data analysed, summarised or processed to produce messages will only become information if its recipient understands its meaning. For data to be transformed into information, there must be an awareness of what the person receiving the message will use it for, his or her training, position in the organisation and familiarity with the language and calculations used in the message. While all managers need information, they do not all need the same type of information. The kind of information required will depend on a range of factors: their level in the hierarchy, the work they are carrying out, confidentiality, urgency, etc. Indeed, the usefulness of information is a debatable point, and what for one person is information, for another is data. In an organisation, for example, when information is transferred from one organisational level to another its meaning may change significantly, such that at one hierarchical level it is regarded as significant information, whereas at another level it is simply data (Menguzzato and Renau, 1991). Information is the recipient’s knowledge and comprehension of data. Information reduces uncertainty and affords the recipient something he or she did not know previously. Information is one of many company resources, alongside capital, raw materials and labour, since no company is viable without information. Regarding information as a scarce resource obliges us to consider the issue of information economics, in other words, how to establish the necessary relationship between the value of information and its cost. According to Menguzzato and Renau (1991), information costs can be estimated by taking the following into account: – The information content required. – How urgently the information is needed. Rafael Lapiedra / Carlos Devece - ISBN: 978-84-695-1639-0 6 Introduction to Management Information Systems - UJI -http://dx.doi.org/10.6035/Sapientia63– The amount of information needed. – How accessible the information is. In contrast, information value is more difficult to determine. The concept of expected value of perfect information (evpi ) can be used to estimate information value. This concept may be defined as the difference between the average expected result with perfect information and the average expected result with the available information. The cost and the value of the information must be compared in order to find out how to use this scarce resource, in what amount, and what benefits might be expected from using it. Information is an essential factor for the company in that the possession or otherwise of opportune information will be a determining factor in the quality of the decisions it adopts, and as a result, of the strategy that it might design and put into practice at any given moment. Well-prepared information can go a long way to avoid problems stemming from environmental uncertainty, either because of lack of clarity in certain aspects, or due to the huge amount of accumulated data when a decision has to be taken urgently. 1.2. Characteristics of information Good information provides value. Experience shows that good information should present the following qualities: 1.2.1. Relevance Relevance is a decisive quality. Relevant information is what increases knowledge and reduces uncertainty surrounding the problem under consideration. Reports and messages frequently contain irrelevant sections that lead to difficulties and cause frustration. Many erroneous managerial decisions are a result of data overload. The right information is not taken from an excessive accumulation of data, which tends to cause a general feeling of impotence vis-à-vis the problem, but rather it depends on getting hold of the relevant data. This characteristic is heavily influenced by the qualities explained below. 1.2.2. Accuracy Information must be sufficiently accurate for managers’ purposes. No information is totally accurate, and spending more on information in pursuit of greater accuracy does not always result in more valuable information. Rafael Lapiedra / Carlos Devece - ISBN: 978-84-695-1639-0 7 Introduction to Management Information Systems - UJI -http://dx.doi.org/10.6035/Sapientia63The degree of accuracy should be coherent with the importance of the decision to be taken and will vary according to the decision-maker’s level in the hierarchy. The degree of information accuracy required will depend on the hierarchical level in question. 1.2.3. Completeness In an ideal world, all the information required to take a decision would be available; however in reality this is not possible. Information is considered to be completed if it informs us on the key points of the problem we are analysing. 1.2.4. Source trustworthiness Trust in the information source increases when it has a proven track record. To increase the trustworthiness of the message, managers use reports from various sources, particularly where strategic decisions are concerned. 1.2.5. Communication with the right person Each manager in the company is assigned a specific area of activity and responsibility and must receive information to undertake the tasks he or she is responsible for. However, this process does not always function as well as it should, and information may not reach the right level in the organisation. For instance, a superior might not provide all the information to the person who needs it, and vice versa; a subordinate may hold back information in an attempt to make him or herself indispensable. Information providers must be aware of information needs in order to ensure it goes straight to where it is required. 1.2.6. Punctuality Good information is that which is delivered just when it is needed. To a certain extent, the need to obtain information quickly can jeopardise its accuracy, although today’s data processing methods can produce accurate information very rapidly. Vital information for the company may become worthless if it takes too long to obtain, or delays occur in processing and communicating the information. Although the punctuality of regularly produced information is important, how often information is produced should be related to the type of decision or activity it is required for. Often, companies routinely produce reports at fairly arbitrary intervals (daily, weekly or monthly) following traditions or calendar conventions without taking into account the time cycle of the activity involved. Rafael Lapiedra / Carlos Devece - ISBN: 978-84-695-1639-0 8 Introduction to Management Information Systems - UJI -http://dx.doi.org/10.6035/Sapientia631.2.7. Detail Information should contain the minimum number of details for effective decision making. Every superfluous character or data entails extra storage efforts, more processing, more assimilation of difficulties and probably inferior decisions. The level of detail should vary with the level in the organisation: the higher the level in an organisation, the greater the degree of aggregation and synthesis. At times, particularly as lower levels, information must necessarily contain a lot of detail if it is to be useful, although the general rule of minimum possible detail for coherence with efficient information use should be followed. Given the need to be concise and to direct attention to where it is required, reports often purposely highlight items whose performance deviates significantly from a fixed standard or budget. An example of this type of report is seen in the accounting technique of budgetary control in which actual expenditure, measured item by item, is compared with the budgeted or desired expenditure. Small variations in these reports may be accepted, but differences exceeding tolerance levels are highlighted. These exceptions are presented to managers, thus enabling them to carry out their control function more quickly. 1.2.8. Comprehension Comprehension is what transforms data into information. If the information is not understood it cannot be used and therefore it cannot add value. Many factors intervene in understanding information: – User preferences. Some people prefer information in graphs or charts, while others prefer a narrative description. Some prefer presentations with statistics and figures, while others do not understand them. Research has shown that some people assimilate specific facts in detail, whereas others evaluate the overall picture without paying attention to the finer points. Inevitably, these variations mean that the same message can be interpreted in different ways. – Previous knowledge. Comprehension is the result of memory in association with the received message. – Environmental factors. Group pressure, available time and trust in the information system all influence comprehension. – Language. Information is codified in signs or messages. 1.3. Information needs We live in a world of information. Every day potential readers are presented with a multitude of books, journals and newspapers. However, human capacity is limited and we can absorb only a tiny amount of all this information. There are no clear procedures to help us to identify all information of interest quickly. Information needs refer to the information required to take decisions correctly and to carry out the tasks deriving from them. Rafael Lapiedra / Carlos Devece - ISBN: 978-84-695-1639-0 9 Introduction to Management Information Systems - UJI -http://dx.doi.org/10.6035/Sapientia63Three large sets of information needs are associated with the three stages in the strategic management process: – A strategic diagnosis should be undertaken when a strategy is drawn up; in other words, an internal analysis and an environmental analysis – both general and specific – must be carried out. Information is an essential element in this strategic diagnosis stage. Information is needed on the main strategic environmental factors: cultural, financial, political, competition, technological. This information should attend to the evolution of these factors, as well as their present state. An internal analysis requires information generated by the company itself as a result of its activity. This information can be classified according to the company’s functions, namely, marketing, production, finance, human resources, R&D and management. – Each member of the company involved in implementing the strategy must be aware of his or her particular responsibility, and must receive information on the tasks he or she has to perform – and how to perform them – in order for the strategy and its component plans to be effectuated. In other words, those responsible for accomplishing these actions need information about what they have to do and how to do it. This information is usually passed down from higher to lower levels. – Strategy control; efficient control requires knowledge on the outcomes of the actions undertaken to effectuate the plans, and how the different environmental components are evolving, in order to verify whether the strategy is developing appropriately and whether any changes are influencing its viability . Some of the information used to draw up the strategy will also be required in the control stage in order to compare the strategy targets with the results being obtained. Information on the results of implementing the plans will also be needed at this stage. This information must be delivered at the right time so that when any deviations are detected in the control, opportune measures can be taken to correct them and achieve the target sets. We can therefore consider three sets of information needs in the management process, each one of which will require different information and will be obtained in different ways. It is extremely important to restrict the information to what is actually needed, as there is a risk of information excess, and everything that goes beyond the strictly necessity impoverishes rather than enriches the system, since it affects the cost of obtaining information. Information economics aims to determine the optimum amount of information for a specific problem, based on comparing the marginal cost of the information and the value of the sample or additional information. We Rafael Lapiedra / Carlos Devece - ISBN: 978-84-695-1639-0 10 Introduction to Management Information Systems - UJI -http://dx.doi.org/10.6035/Sapientia63know what type of information we want to obtain; we now examine the sources of information that can be used to obtain it. 1.4. Sources of information Information is an essential, strategic resource that can be obtained from numerous sources. In this section, we distinguish between internal information relating to the environment within the company, and information about its external environment. Many of the data captured by information systems refer to the functioning of the organisation and are used to produce internal information. This internal information provides management with knowledge about how the company is functioning and whether or not it is achieving its objectives. Most internal information comes from the accounting system and statistical analyses (sales, production, etc.). Other internal information sources such as surveys and interviews with company members provide quantitative information on, for instance, workers’ motivation levels or other indicators that are not easily quantified. Company managers also need information on the environment: sales volume of their most direct competitors, potential client segments for the company’s product lines, geographical distribution of its shareholders, etc. A company can only be successful if it adapts to the demands of its external environment. The environment is represented by a number of groups that vary in their capacity to influence the company’s fulfilment of its objectives. Below, we identify these interest groups and the different types of information about them that the company requires: – Customers: marketing, sales, levels of satisfaction. – Distributors: marketing and logistics (distribution). – Competitors: market penetration, innovations, product quality. – Suppliers: transaction conditions. – Trade unions: salaries and employment stability. – Shareholders: company performance. – Financial institutions: financial conditions and investment opportunities. – Government: legal and political developments. The company must be informed constantly about each of these external groups and, at the same time, some of these groups (e.g., shareholders and the government) must also receive information from the company. Information on the environment can be obtained from the following sources: – Personal information sources, which provide information through contact with sales staff, customers, suppliers, distributors, bankers, etc. – Impersonal information sources, which range from general publications (e.g., reports on the current situation, bank and official entity reports, specialised journals) to specific studies (e.g., market research, opinion studies, consultants’ reports). Rafael Lapiedra / Carlos Devece - ISBN: 978-84-695-1639-0 11 Introduction to Management Information Systems - UJI -http://dx.doi.org/10.6035/Sapientia63Chapter 2. Essential aspects of information systems in the company 2.1. The concept of the information system All systems can be divided into subsystems. Because the company behaves as a system, its different elements can be broken down into subsystems. According to the organisation theory literature, the company can be divided into the following systems: commercial, operations, financial, personnel, and information. The information system is related to all the other systems and the environment. The purpose of the company’s information system is to gather the information it needs and, following necessary transformations, ensure that it reaches the members of the company who require it, whether for decision making, strategic control, or for implementing decisions adopted by the company (Menguzzato and Renau, 1991). A manager’s performance therefore depends on his or her skills in exploiting the information system’s capacities in order to obtain positive business outcomes. For the purposes of this chapter we adopt the definition of an information system given by Andreu, Ricart and Valor (1991). According to these authors the information system is a formal set of processes that, working from a collection of data structured depending to the company’s needs, gathers, processes and distributes the information necessary for the company’s operations and for its corresponding management and control activities, thereby supporting, at least in part, the decision-making processes necessary for the company to perform its business functions in line with its strategy. This definition, therefore, only includes the formal information system, which is the part of the information system that all the company’s members are familiar with and know how to use. This does not mean that informal information systems are not important, but simply recognises the limitation that they are, by their very nature, more difficult to study, plan and manage, at least from a cohesive and holistic point of view. Informal information systems are not the result of a designed process; rather they provide chance information. We must not, however, ignore the existence of informal information channels, and the speed and efficiency with which they can operate, on occasions spreading rumours through the organisation more quickly than information that follows the standard channels. The above definition refers to the functions and strategies of the company; by this, we aim to transmit the idea that a company’s information system must serve its business approach. In the end, the information system is only one of the many elements that the company designs and uses to achieve its objectives, and as such, it must be explicitly coordinated in line with these objectives. Rafael Lapiedra / Carlos Devece - ISBN: 978-84-695-1639-0 12 Introduction to Management Information Systems - UJI -http://dx.doi.org/10.6035/Sapientia63To complete this definition of an information system, we now attempt to clear up any confusion between information system and computer system. The computer system consists of a complex interconnection of numerous hardware and software components, which are essentially determinist, formal systems in that specific input always gives the same output. Information systems are social systems whose behaviour is largely influenced by the objectives, values and beliefs of individuals and groups and by the performance of technology. The way an information system behaves is not determinist and does not follow the representation of any formal algorithmic model. COMPUTER SYSTEM INFORMATION SYSTEM Fig. 2.1. Computer system-information system Today’s company information systems have to deal with a huge quantity of data and provide information structured in different ways to multiple decision- makers in the company. The role of the computer system is therefore vital to the company’s information system. Given the major role of information systems, we believe that today’s organisations cannot be efficiently and effectively managed without information systems that incorporate a series of information technologies. Information technology has therefore become a fundamental aspect in managing both small and large companies and enables them to seek out competitive advantages. But an information system is more than just a computer system. It is inseparable from the organisation-environment system, and in the decision-making process we Rafael Lapiedra / Carlos Devece - ISBN: 978-84-695-1639-0 13 Introduction to Management Information Systems - UJI -http://dx.doi.org/10.6035/Sapientia63cannot expect that all the necessary information will be predetermined, formalised and computerised. Information circulates throughout the whole organisation like a current flowing through formal and informal channels and both horizontally and vertically. The information system is the organisational structure that has to manage these information flows with the maximum efficiency and effectiveness in order for the company to carry out its functions in accordance with its business plan or strategy. The essence of every information system is that it provides the means by which the necessary information is delivered at the right moment and with the right structure to the members of the company who require it, whether for taking decisions, for strategic control or for implementing decisions that have been adopted. Most of the problems that arise within business information systems are related to organisational, social or human factors rather than technical problems, which are quite scarce. Managers should therefore focus on the appropriate strategic and tactical application of their information systems. 2.2. Information system components Information systems comprise hardware and software, telecommunications, databases, human resources and procedures (García Bravo, 2000). 2.2.1. Hardware Nowadays all companies use computers, usually personal computers (pc s). Large organisations employ diverse computer systems including mainframes, minicomputers and most commonly, pc s. However, recent advances in the technical specifications of pc s now means that they perform many of the tasks initially done by minicomputers, and the difference between these two categories is becoming increasingly blurred. The three computer types have a similar arrangement. The component controlling all the system’s units is the central processor, which carries out the instructions given by a program. Other devices are used to introduce data (keyboard and mouse) and produce the system’s output (printers). 2.2.2. Software There are two types of computer programs: system software and application software. System software programs are used to manage the computer system’s resources and simplify programming. Applications, like spreadsheets or word processors, directly help the user to do his or her work. Rafael Lapiedra / Carlos Devece - ISBN: 978-84-695-1639-0 14 Introduction to Management Information Systems - UJI -http://dx.doi.org/10.6035/Sapientia632.2.3. Databases Many company information systems are used as a vehicle for delivering databases. A database is a collection of interrelated data, such as an organisation’s human resource or product databases. The customer database is extremely valuable to the company since it can be used to inform clients of new products or to develop new products that meet their needs. A database must be organised so it can be accessed according to its content; for example an order may be given to retrieve the names and addresses of customers that were invoiced for totals in excess of one million in the previous year. Databases are managed by software systems known as database management systems (dbms ). 2.2.4. Telecommunications Telecommunications are the means by which information is transmitted electronically over long distances. Nowadays, computer systems are generally connected by telecommunications networks. Various network connections are available to suit the needs of different companies. In a small company, cp s are connected by local area networks (nal ), enabling their users to communicate and share data, tasks and equipment. Wide area networks (anw ) are used to connect computers at greater distances, either within the company or in a different location. Internet, the ‘network of networks’, links up an immense variety of networks from diverse fields worldwide. These connections enable pc users to access the company’s databases and other computerised resources. 2.2.5. Human resources Two types of human resources can be distinguished: information systems specialists and end users. Information systems specialists include systems analysts, programmers and operators. End users are the people who use the information system or the output they generate, in other words, the large majority of an organisation’s members. 2.2.6. Procedures Procedures are the policies and methods that must be followed when using, operating and maintaining an information system. Procedures must be used, for example, to establish when to run the company’s payroll program, to determine how many times it should be run, who is authorised to do so and who has access to the reports it produces. Rafael Lapiedra / Carlos Devece - ISBN: 978-84-695-1639-0 15 Introduction to Management Information Systems - UJI -http://dx.doi.org/10.6035/Sapientia632.3. Functions of the information system Companies or organisations develop information systems to help to perform the tasks they are specifically designed to do. For instance, a hospital will have a medical records system, police departments will hold criminal records, all companies will have a payroll system, supermarkets will use inventory systems, offices will have office automation systems, etc. All information systems carry out a series of functions that may be classified as follows: – Data capture and collection. – Storage. – Information processing. – Distribution or dissemination of information. 2.3.1. Data capture and collection This function consists of capturing both external (related to the environment) and internal (generated within the company) information and sending it through the communication system to the entities within the information system responsible for organising it to avoid duplication and useless information (noise). The person or people who capture the information will depend on what type of company they work for. Sales staff, purchasers, managers at different levels in the hierarchy or members of the company in direct contact with organisations in the environment can all act as information gatherers. The data capture and collection process should be more intense in the areas or sectors of the environment and the company that are subject to the greatest changes. Once the information has been collected and filtered, and redundant information removed, it is stored. 2.3.2. Storage The following questions require an answer: 1. How should information be stored? By classifying it according to a particular criterion or at different points. 2. What type of system should be used to store information? The system can vary from the traditional filing system to a computer processed database. The use of one system or another will depend on the amount of data to be stored, how frequently it will be used, the number of users and whether or not access is restricted. Rafael Lapiedra / Carlos Devece - ISBN: 978-84-695-1639-0 16 Introduction to Management Information Systems - UJI -http://dx.doi.org/10.6035/Sapientia633. How should the user access to the stored information be managed? The information may be stored in different services and departments, or in a single location to which all users have access. The company will decide which of these two options is most appropriate, depending on how specific the information is. Access to or retrieval of the information can take many forms; for example passwords may be used to access a database, enabling only authorised personnel to access the information when required. 2.3.3. Information processing The purpose of information processing is to transform the stored information into useful information that will be meaningful to the person who requires it. This is a key function of all information systems. Information processing is essentially carried out by the computer subsystem. The spectacular development of computers has meant that on the one hand, the volume of stored and processed data is constantly increasing, and on the other hand, the falling cost of hardware has led to a generalised use of computers. 2.3.4. Distribution and dissemination of information Not only must the information system provide the information each user requires, but it must also disseminate information to other people within the company. Different members of the company need to be aware of certain information about the company and the environment in order to respond more quickly and efficiently to everyday situations that require problems to be solved or decisions to be taken. 2.4. The information system and the value chain In this section we contextualise and analyse the role of information systems within the value chain model. The value chain covers all the activities a company undertakes in order to offer a product or service. Value chain activities fall into two main categories: primary and support activities. Primary activities are more closely related to creating value. Support activities allow primary activities to take place by providing the necessary inputs and infrastructure. These activities link together to form the value chain. Rafael Lapiedra / Carlos Devece - ISBN: 978-84-695-1639-0 17 Introduction to Management Information Systems - UJI -http://dx.doi.org/10.6035/Sapientia63Figure 2.2. Value chain model The primary activities are shown in the bottom part of figure 2.2 and include: – Input logistics: the procurement of raw materials and supplies from suppliers. – Operations: the transformation of raw materials into finished products with the appropriate quality, time and cost conditions. – Output logistics: the transport of products to customers. – Marketing: to detect customers’ needs and procure orders. – Service: activities designed to maintain the conditions of use for the sold product. Support activities are presented at the top of figure 2.2 and include: – Company infrastructure: the organisational framework that impacts all primary activities in a generalised way. These include all managerial activities, such as drawing up strategies, planning and control. – Human resource management: all activities related to the selection, training and motivation of the company’s staff. – Technological development: all activities designed to procure and subsequently manage technologies. – Purchasing: procurement of the elements needed to carry out the production process. According to Andreu et al’s definition, the information system forms part of the support activity known as company infrastructure. This tells us that all the value chain activities need support based on the information system. Because all the support activities sustain each other, the information system’s role is to interact with all the company’s activities, whether basic or support. We now explore how information technologies can have a profound effect on each one of these activities, sometimes by simply improving efficiency, and at other times by changing the activity in a fundamental way: Rafael Lapiedra / Carlos Devece - ISBN: 978-84-695-1639-0 18 Introduction to Management Information Systems - UJI -http://dx.doi.org/10.6035/Sapientia63Supply logistics Information technology can have major repercussions on the supply of materials to manufacturing points. Some large chain stores are directly linked to several of their suppliers, particularly in the clothing industry. This link improves deliveries and reduces stock volumes, and affords greater flexibility to respond to changing demand almost immediately. Operations Many Spanish banks offer what is known as household or family accounts. Essentially, these accounts are traditional savings accounts with an added service: a regular summary of the account’s transactions arranged by concept (outgoings such as rent, electricity, telephone, school fees, courses and so on, and income, usually the monthly salary). The client receives the equivalent of a balance sheet for a given period. The more transactions the client makes through the bank, the greater the value of the service; if all transactions are made through the same account, the summary will give the client a thorough analysis of his or her income and expenditure. Preparing these reports is a relatively simple task for the bank: the only information needed is reliable data on the type of transactions made. Another example is that of cashpoint machines or tma s, which have changed radically in recent years. A cashpoint service was previously considered to give competitive advantage, but now it has become necessary in order to compete and remain in the sector and all banks offer the same type of service. Information technologies can also affect operations; one case is that of a cable news company which now offers a new line of financial services including instant financial information (foreign exchange rates, for example). Dispatch logistics Information technology has a major impact on the way in which products and services are delivered to customers, for example, connections to travel agency booking systems. Marketing and sales One agrochemical company has designed an on-line crop planning service for its main customers. With just a standard telephone line and their PC, farmers can consult agricultural databases with information on crop prices, the conditions necessary to grow the crop and the prices of fertilizers, pesticides, etc. They are then helped to reach a decision by a range of models and systems, which they can experiment with and adapt to their own growing conditions (climate, soil, etc.,) to study the implications of different crop rotations and planting programmes. The model helps the farmers to choose fertilisers, insecticides and other chemicals, and also to maximise discounts by grouping their purchases. Marketing and sales activity, somewhat forgotten during the initial decades of the IT revolution, is now the area where these technologies are having the greatest repercussions. Rafael Lapiedra / Carlos Devece - ISBN: 978-84-695-1639-0 19 Introduction to Management Information Systems - UJI -http://dx.doi.org/10.6035/Sapientia63

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