1.

0 Introduction

In today’s information and communication age, there is a constant reference to

information systems and management of information systems. In the digital age
data, storage and retrieval are done through various systems and interfaces. An
information system (IS) is an organized system for the collection, organization,
storage and communication of information. More specifically, it is the study of
complementary networks that people and organizations use to collect, filter, process,
create and distribute data.

An information system, therefore, can be defined as set of coordinated network of

components which act together towards producing, distributing and or processing
information.Information technology is an extremely important and increasingly
complex component of business and professional organizations. Decisions related to
information technology and the related information systems can be a major factor
influencing an organization's survival.

Managers at all levels must make decisions about which systems are best for
specific situations. The personnel within organizations today must have an
understanding of the role of information systems, as well as appropriate methods for
using the technology effectively.

As information systems enabled more diverse human activities, they exerted a

profound influence over society. These systems quickened the pace of daily
activities, enabled people to develop and maintain new and often more-rewarding
relationships, affected the structure and mix of organizations, changed the type of
products bought, and influenced the nature of work. Information and knowledge
became vital economic resources. Yet, along with new opportunities, the
dependence on information systems brought new threats. Intensive industry
innovation and academic research continually develop new opportunities while
aiming to contain the threats.

2.0 Types of Information System

The type of information system that a user uses depends on their level in an
organization.Towards that end, there are number of information systems that support
each level in an organization.

In any given organization information system can be classified based on the usage
of the information. Therefore, an information system in an organization can be
divided into operations support system and management support system.

Businesses tend to have several "information systems" operating at the same time.
This study note highlights the main categories of information system and provides
some examples to help you distinguish between them.

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Information systems differ in their business needs. Also depending upon different
levels in organization information systems differ.

The following diagram shows the three major levels of users in an organization and
the type of information system that they use and the characteristics of the particular
information system.

Three major information systems are :-

1. Transaction processing systems ( TPS)

2. Management information systems (MIS)

3. Decision support systems ( DSS)

Figure 1.1 Tpye of information systems

a) Operational management level

The operational level is concerned with performing day to day business transactions
of the organization.Examples of users at this level of management include cashiers
at a point of sale, bank tellers, nurses in a hospital, customer care staff, etc.

Users at this level use make structured decisions. This means that they have defined
rules that guides them while making decisions.

For example, if a store sells items on credit and they have a credit policy that has
some set limit on the borrowing. All the sales person needs to decide whether to give

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credit to a customer or not is based on the current credit information from the
system.

b) Tactical Management Level

This organization level is dominated by middle-level managers, heads of

departments, supervisors, etc. The users at this level usually oversee the activities of
the users at the operational management level.

Tactical users make semi-structured decisions. The decisions are partly based on
set guidelines and judgmental calls. As an example, a tactical manager can check
the credit limit and payments history of a customer and decide to make an exception
to raise the credit limit for a particular customer. The decision is partly structured in
the sense that the tactical manager has to use existing information to identify a
payments history that benefits the organization and an allowed increase percentage

c) Strategic Management Level

This is the most senior level in an organization. The users at this level make
unstructured decisions. Senior level managers are concerned with the long-term
planning of the organization. They use information from tactical managers and
external data to guide them when making unstructured decisions.

2.1 Transaction Process System (TPS)

A transaction is an elementary activity conducted during business operations.A

transaction process system (TPS) is an information processing system for business
transactions involving the collection, modification and retrieval of all transaction
data.TPS is also known as transaction processing or real-time processing.

Transaction processing systems are used to record day to day business transactions
of the organization. They are used by users at the operational management level.An
example of a Transaction Processing System is a Point of Sale (POS) system. A
POS system is used to record the daily sales. By recording the day to day business
transactions, the information produced from the transaction processing system is
very detailed.

TPS are necessary to conduct business in almost any organization today. TPSs
bring data into the organizational databases, these systems are also a foundation on
which management oriented information systems rest.

Examples of transaction processing systems include :-

1. Point of Sale Systems – records daily sales

2. Payroll systems – processing employees salary, loans management, etc.

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 3. Stock Control systems – keeping track of inventory levels

4. Airline booking systems – flights booking management

2.2 Management Information Systems (MIS)

A management information system (MIS) is a set of systems and procedures that

gather data from a range of sources, compile it and present it in a readable format.
Managers use an MIS to create reports that provide them with a comprehensive
overview of all the information they need to make decisions ranging from daily
minutiae to top-level strategy.Today's management information systems rely largely
on technology to compile and present data, but the concept is older than modern
computing technologies.

2.2.1 Making Decisions

The main purpose of a management information system is to make managers'

decision-making more efficient and productive. By pooling information from a range
of sources into a single database and presenting the information in a logical format,
an MIS can provide managers with everything they need to make highly informed
decisions and perform in-depth analysis of operational issues.

2.2.2 Collecting Information

An MIS can be developed to collect nearly any type of information managers require.
They can view financial data such as daily revenues and expenses at a glance and
attribute them to specific departments or groups. Performance indicators such as the
timeliness of projects or the quality of products coming off an assembly line can help
managers pinpoint areas of needed improvement. Staff can manage schedules for
work shifts, incoming deliveries and outgoing shipments from any place linked to the
MIS.

A management information system can facilitate collaboration and communication as

well. Employees can edit and share documents and communicate relevant
information on anticipated developments and warnings across the organization.

2.2.3 Compiling Reports

One of the most valuable features of a management information system is its ability
to pull in internal and external data from a variety of sources and present it in an
easy to analyze format. Internal reports present information in a way that managers
can understand, by including all relevant data and grouping data in a logical manner.
For example, a report viewed by a corporate manager for a restaurant chain may
show revenue, expenses, labor-hours and volume of each outlet, allowing him to see

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which store makes the most money per employee on the floor and which stores have
higher expenses compared to revenue and volume--an indicator of waste or theft.

Non-profit organizations can use an MIS to automatically generate reports required

by the federal government. This allows employees and volunteers to focus their time
on more productive activities and can reduce errors and the costs associated with
resubmitting federal reports.

2.2.4 Front-Line Benefts

Front-line employees can use an MIS to perform their jobs more effectively as well.
For example, employees at all levels can consult an MIS to check on the status of
inventory items, view stats related to their specific department or group and request
internal transfers of materials.

2.2.5 Compiling Data

A management information system can be a costly investment. In addition to

purchasing an MIS software package, customizing the system and hiring extra IT
personnel to oversee and maintain the system, a company must train all employees
to use the system. Front-line employees often perform the first two steps in an MIS,
data collection and input, leaving them with less time to focus on productive
activities; this can increase overall salary expenses. Weigh the costs of an MIS
against the potential benefits before implementing this tool in your small business.

Decision Support Systems (DSS)

Decision support systems are used by top level managers to make semi-structured
decisions. The output from the Management Information System is used as input to
the decision support system.DSS systems also get data input from external sources
such as current market forces, competition, etc.

Using the four level pyramid model above, we can now compare how the information
systems in our model differ from each other.

Transaction Processing Systems

What is a Transaction Processing System?

Transaction Processing System are operational-level systems at the bottom of the

pyramid. They are usually operated directly by shop floor workers or front line staff,
which provide the key data required to support the management of operations. This
data is usually obtained through the automated or semi-automated tracking of low-
level activities and basic transactions.

Functions of a TPS

TPS are ultimately little more than simple data processing systems.

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Functions of a TPS in terms of data processing requirements Inputs Processing

Outputs Processing Outputs

Transactions Validation Lists
Events Sorting Detail reports
Listing Action reports
Merging Summary reports?
Updating
Calculation

Some examples of TPS

 Payroll systems
 Order processing systems
 Reservation systems
 Stock control systems
 Systems for payments and funds transfers

The role of TPS

 Produce information for other systems

 Cross boundaries (internal and external)
 Used by operational personnel + supervisory levels
 Efficiency oriented

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REFERENCE

Laudon, Kenneth C., and Jane Price Laudon. Management Information Systems:
Managing the Digital Firm. Prentice Hall, 2005.

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