Lecture 3

To be covered

• What are the types of Information System (IS) within an organization

• The role of each types of IS in organization

• DSS

Classification of Information Systems

A common approach to examine the types of Information System used

within Organizations is

to categorize Information System applications by the roles they play at

various level

This is known as vertical approach, where the organization is seen as management pyramid with four

levels:

Classification of Information Systems

Attend to routine daily business transactions

e.g. selling goods & issuing receipts for payment

Responsible for monitoring the transactions that are occurring, and dealing with any problems

that may arise

Decide on budgets, set targets, identify trends and develop short

term plans for the business.

Responsible for defining the longterm goals of the company, and how it intends to position itself

within its particular industry.

Transaction Processing Systems (TPS)

Function

• support the day-to-day and routine activities such as invoicing and issuing of stock.

• Support simple processing of large amount of structured data

• These data are of internal origin (resulting from numerous routine transactions)

User

•Used by clerical staff

•Following well defined business procedures.•Work at the lowest level of detail

Activities

• Staff process or query one transaction at a time,

• Using computer systems to capture the raw data

• Those data reflects the business processes of the organization

For example, The itemized till slip (receipt) from the supermarket is produced by the

TPS, and details of each individual item sold will be recorded in the store’s database.

TPS Five Common Modules

Order Processing: orders for goods or services can enter the system from

customers,salespeople, or other

internal departments.

General ledger: details of all transactions affecting the

accounts of the company arerecorded to simplify bookkeeping and

reporting

Accounts payable and receivable: data generated from sales journals or

purchase orders can be used to improve debt collection and cash flow.

Inventory management:

along with updating of stock levels, IS is commonly used for

tracking of materials and for linking the

organization to suppliers and

purchasers

Payroll: employee details,

earnings, deductions, leave accrual etc.

Management Information Systems (MIS)

Function

• Systems that use the data generated by the TPS to help lower and middle managers in their decision making

• It assist operational management in monitoring and controlling the transaction processing activities

• Use historical data• The main focus is to avoid

wading through huge volumes of detailed data, instead using control totals and exception reports to identify problems.

User

• low level and middle level managers and supervisors

• Different MIS based on business functions e.g. HR MIS, Marketing MIS

Activities

• Use a variety of techniques to process, summarize and present the information in the form of useful reports: tables, statistics, graphics, etc.

• Many MIS can easily be customized and new reports are readily created on demand.

• Output reports generally contain summarized totals of the TPS data,

• Reports produced either on a cyclical basis (weekly or monthly) or on request

For example, An exception report for a bank manager might be the list of all transactions exceeding one million rand; or those bank departments who have exceeded their budget by more than 10%.

MIS Continue

Exception Report

• Report on unusual transactions

• Report on those fall outside the normal pattern instead of many pages of detailed data

• Manager can look at items that need special attention and corrective action

Examples of Organizational Support Provided for

Managers

• Financial planning & budgeting

• Financial Controls• Investment Management• Marketing Management• The provision of customer

services

Decision Support System(DSS)

Function

• Systems that assist managers with very specific types of decision-making situations

• They tend to focus not on the progress of individual transactions but on the bigger picture see e.g. below

• Allow the manager to see future impact of his decision

User

• Low & Middle-level managers

• These managers are responsible for ensuring that plans and targets set by senior management are achieved

Activities

• DSS use various mathematical and statistical models to help the manager generate alternative decision options and evaluate their outcomes.

• DSS allows the manager to see the future impact of his decision

For example, look at the relative sales performance of different sales areas in the organization.To achieve this, they need to receive regular reports from the MIS with summary totals and comparison between prior months and years. Where summary figures are of concern, these managers may request more detailed reports from the operations personnel.

DSS Special Requirements• In many cases problems arise and additional

‘ad hoc’ reports are needed, see example below:

Cape Town sales figures below

annual year-to-date forecast

Further analysis is needed to help the manager investigate

the causes

‘Ad hoc’ report for monthly sales information

may help the analysis

Causes may be:

1- Poor sales performance2- loss of major customer3- lack of demand for a product

DSS Continue• The nature of management decision making is

such that response time is often criticalIssue

In the past managers communicated their report requirements to programmers who coded the request and delivered the

required output, or send their request to be extracted from the DB.

• How to solve a problem of time critical nature, as one report may trigger the need for alternate investigations into other areas of the business???

In three Minutes and in a group of 4-5 people,

Find a solution for such a problem!!

DSS Continue

ANSWERS• User-driven DSS (allow managers to interact directly with the

system and request the needed reports)

DSS Steps • When information is required to support

management decision making:The user interact directly with the

computer via a GUI or control language to request the relevant

data,

Select and operate the appropriate decision model

Generate the output report in the format required

Components of DSS

DSS Model Base

This is a library of analytical tools that

can be used to evaluate and

represent data

E.g. Statistical functions (means,

standard deviation)

e.g. The ability to test possible scenarios through sensitivity analysis and goal

seeking

e.g. Retrieval tools to select, sort and

summarize

DSS DatabaseThis database contains current and historical data from all

the relevant business applications

DSS construct its own DB & does not use operational DB

It access the DB many times. This would impact the service the provided to online applications in areas where response times are

critical.

Operational database’s security and integrity is of great concern

and access is limited to a minimum. While DSS systems

normally download a copy of data for analysis and rarely update the

database

WHY!!

It makes good sense to maintain a

database specifically for DSS queries.

WHY!!!

Reasons to maintain a database specifically for DSS queries.

•Some data need be held only in summary form

•Historical records must be retained for a five year period to allow for trend analysis

Different saving formats:

•Data may come from different databases, hardware and software platforms, a

•transfer and reformatting of data to a common DSS database enables combination of data from these varied sources.

Different Data Sources

•With the demand for end-user access to current and historical information

•Many organization store large quantities of data obtained from different functional areas of the organization.

Data Warehouse

Executive Information System(EIS)

Function• An EIS will

continuously monitor selected key performance indicators that have been identified as critical to the success of the organization.

• It enable users to identify problems, opportunities and trends that may enhance or threaten their organization’s competitive position.

User

• Top-level managers

• These managers are charged with the task of setting the strategy for the organization.

Activities• It provide rapid access to both

internal and external information, often presented in graphical format, but with the ability to present more detailed underlying data if it is required

• The user will be alerted to any significant changes that occur, and “drill-down” capabilities will then provide further levels of detail underlying this information.

• Trend analysis can be done using forecasting models, usually through the integration of the EIS with a DSS system

Decisions made by top-level executives are often too unstructured to be adequately supported by a DSS.

In the past, much time was spent by top management wading through reports relating to the performance of strategic areas of the business.

In order to reduce time for finding and integrating a few critical numbers from many different reports; EIS was developed

Summary Characteristics of each level of management support

Summary Characteristics of each level of management support

Users of IS Application

How does IS support Business Objectives??

• Increasing the efficiency of business processes

• Cutting supply costs • Improving levels of customer service • Improving managerial decision-making

The Support that Different Types of IS Provide to Business Objectives

Record routine transactions within the different

departments of an

organization;

Draw from the TPS to monitor

and control business

performance;

Assist managers with

complex decision-

making tasks;

Make use of information

technology to gain

competitive advantage;

TPS MIS DSS EIS

Done!!

• Thank you for listening

• Any Questions???

• Refer to Book_1, Chapter (8), 8.3-(p.107-p.111)

• Refer to Book_1, Ch.(1), p.(14-16)