Management Information Systems: Management Information Systems Information Systems in Global Business Today Lecture 1


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


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


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


Organizations: Organizations Structure Hierarchy Division of Labour Rules, procedures Process Rights/obligations privileges/responsibilities Values, Norms, People Environmental resources Environmental outputs Organization


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


Types of Organizations: Types of Organizations There are four commonly recognized structures for organizations that are sometimes defined as ‘types’: Functional Product (sometimes referred to as ‘Project’ as an alternative) Bureaucratic Matrix


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


Types of Organizations: Types of Organizations Bureaucratic – having many detailed rules and procedures; These are often hierarchical, mechanistic and impersonal. Matrix – a hybrid of ‘Functional’ and ‘Product’.


Types of Organizations: Types of Organizations Functional diagram


Types of Organizations: Types of Organizations Product diagram


Types of Organizations: Types of Organizations Matrix diagram


Differences in Organizations: Differences in Organizations Organizations may have (usually do have) different structures or shapes. They have; Different goals Benefit different groups Different leadership styles


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


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


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


Entrepreneurial Structure: Entrepreneurial Structure The focus is on sales, rather than innovation


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


Machine Bureaucracy: Machine Bureaucracy Board of Directors CEO Vice President (VP) Exec VP Administration Operations Engineering Personnel Financial Marketing R&D Facilities Planning R&D = Research and Development


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


Divisionalized Bureaucracy: Divisionalized Bureaucracy President Planning Legal Finance Division 1 Purchasing Engineering Manufacturing Marketing Division 2 Purchasing Engineering Manufacturing Marketing Division 3 Purchasing Engineering Manufacturing Marketing


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


Professional Bureaucracy – The Hospital Example: Professional Bureaucracy – The Hospital Example Other examples; law firms, accounting firms, schools. Board of Trustees Exec Director Director of Admin Services Director of Hosp Services Director of Nursing Director of Prof Services Medicine Surgery Radiology Pediatrics Executive Committee Council of Physicians


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


Adhocracy – The Oil Refinery Example: Adhocracy – The Oil Refinery Example Other examples; research orgs, aerospace companies, medical, electronic, biomedical orgs. Board of Directors Exploration Production New Resources Artic Pipelines Chemicals Logisitics Marketing Transportatn Coordination Corp Affairs Comptroller Empl Relations Medical Treasurer IT services Purchasing Build Admin Travel Arrang Env Protection Law Tax Research Bus Dev Administration & Services Resource Development Chemicals Materials Petroleum Products


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


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


Processes within an organization: Processes within an organization A Business Cycle example Purchasing Sales Production Customer Supplier order materials product delivery order materials


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


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


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


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


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


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


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


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


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


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


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


Example - Stores Control: Example - Stores Control Typical documents: Materials request, Purchase requisition Inventory transfer


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


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


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


Example – Distribution: Example – Distribution Distribution receives the finished goods from production and ships the product to the customer.


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


Information Flow: Information Flow Billing Customers Collection Payment Employees Payroll Suppliers payslips, P60 timecards customer invoice payment customer payment notice payment supplier invoice Purchasing Sales sales notice Receiving GRN Information Flow within Accounts


Management of Organizations: Management of Organizations The traditional view models organizations as having three levels of management; Strategic Tactical Operational


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


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


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


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


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


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


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


Operational Information: Operational Information Structured decisions Examples - stock levels, customer order details, overdue purchase orders.


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


Characteristics of Information Required: Characteristics of Information Required Time Scales Level of Detail Source Degree of Uncertainty Frequency Operational Middle Strategic Management Management Management Immediate Highly detailed Internal Certain Frequent Long Term Summarised External Uncertain Infrequent


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


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


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


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


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


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


End of Lecture 1: End of Lecture 1 By the way… What is information? What is a system? What are Management Information Systems? We will look at these topics next.