BLOCK INTRODUCTION

This block on Business Applications has highlighted the use of computers in factories, business, electronic data
interchange, and office applications.

This block consists of 4 units viz.,

Unit 1: Computer Applications in Business

Unit 2: Electronic Data Interchange
Unit 3: Computer Applications in Factories
Unit 4: Other Applications in Computer.

Unit 1, in which the nature of computer applications and the impact of computer on the organisation structure has
been discussed with good number of examples.

Unit 2 discusses EDI which is nothing but the exchange of information between the two trading companies through
an electronic exchange. It has discussed the need for EDI, its advantages, standards and the mode of information
transmission between the business partners.

Unit 3 discusses the computer applications in factories which has further sections like computer applications in
Materials Management, Production Planning and Control and Computer Applications in Purchasing.

In Unit 4, various kinds of the information systems have been discussed. The need for computerised MIS and how it
helps in efficient decision making has also been elaborated.

Each of these units is equipped with a good number of examples and self-test questions to check your progress as
you proceed.

UNIT 1 COMPUTER APPLICATIONS IN

BUSINESS
Structure
1.0 Introduction
1.1 Objectives
1.2 Nature of Computer Applications

1.2.1 Inventory Control

1.2.2 Sales Order Processing
1.2.3 Payroll
1.2.4 Banking

1.3 Implications of Computer Applications

1.3.1 Computer's Impact On Planning

1.3.2 Computer's Impact On Organisational Structure

1.4 Review Questions

1.5 Summary
1.6 Model Answers
1.0 INTRODUCTION
Computer applications to business and commerce date from the middle of the 1950s, a decade of vigorous recovery
from World War II which led to economic expansion and rapid technological development throughout the
industrialised World. Today, most large and medium-sized companies are almost totally dependent on their
computers for numerous administrative functions. Increasing number of smaller concerns are pursuing computing
for themselves whereas previously they made use of the services of computer bureaux or had no involvement with
computers at all. It has been found out that commercial data processing accounts for 80 per cent of all computer
usage.

At a general office level, word processing systems and personal computers are already changing office practice and
organisation. Word processors are particularly useful for preparing reports that may need to go through one or more
revisions and for producing standard letters and documents. No matter how many revisions are required the full text
is only typed in once i.e., the initial draft.

There are also special purpose business systems tailored to meet business requirements and handle business
applications. Integral part of a business system may be highly developed software packages which handle payrol and
personnel, office accounts, invoicing, record keeping, stock control, sales analysis, financial forecasting and even
word processing. Specific hardware features may include specially designed terminals, personal computers or work
stations.

1.1 OBJECTIVES
After going through this unit you will be able to:
• list the nature of computer applications in Business
• describe the use of computers in major activities of business
• discuss the impact of computers in organisational planning.

1.2 NATURE OF COMPUTER APPLICATIONS

The computer is used for at least three basic corporate purposes:

Preparation of transaction documents

Control of operations
Decision-making

Preparation of transaction documents such as payslips, invoices and receipts is the simplest task that the computer
can be put to, the only requirement being that the process of preparation be standard, unchanging and easily
specified.

A great deal of routine business activity consists of effectively controlling various functions, plans and operations.
The computer can assist in this process by automatically contrasting actual performance with planned performance,
highlighting only the areas of discrepancy for reward or censure.

It is said that management is decision-making and the manager spends his time making decisions. Decision making
generally follows four basic steps:

1. Perception of decision need or opportunity.

2. Formulation or design of alternative courses of action.
3. Evaluation of alternative courses of action.
4. Choice of one or more alternatives for implementation.
It must be realised that the computer is incapable of perceiving the need for a decision on its own. It has to be
programmed in advance to react to a certain set of criteria that indicate the need for a decision.

Formulation of alternative courses of action is again beyond the capability of the computer and it has to be
programmed in advance with the various courses of action that may be taken when the need for a certain decision
arises.

The evaluation phase is where the computer scores over man. It can perform computations of the value of each
alternative with such speed and precision as would take a human being many years. However, it will consider only
those factors in the evaluation that it has been told to consider, it cannot determine what is important.

The choice of alternatives involves assigning "figures of merit" to each alternative and choosing the greatest or the
least. The Computer Applications in a few business areas is explained in the following subsections.

1.2.1 Inventory Control

Inventory control system processes data reflecting changes to items in inventory. Once data about customer orders is
received from any order processing system, a computer-based inventory control system records changes to inventory
levels and prepares appropriate shipping documents. Then it may notify managers about items that need reordering
and provide them with a variety of inventory status reports. Computer-based inventory control systems thus help a
business, provide high-quality service to customers while minimising investment in inventory and inventory
carrying costs.

The transactions possible in an inventory control system are:

1. Receipts/Purchases of an item.

2. Issue of an item.
3. Purchase Returns - Return of an item already purchased or received on finding it to be defective,
sub-standard or for any other reason.
4. Issue Returns - Return of an item already issued for reasons of defect, unsuitability, or on account
of indents of a suspected requirement.

Then for each of the above transactions, we need Add, Modify, Delete and list programs with appropriate screen
layouts and validation of data to maintain the transaction file.

Next is the File Maintenance and Query stage under which the following files are maintained:

1. Item Master File: Contains a description of all the items along with a Unique item code.

2. Purchase Requisition File: The file contains purchase requisition forms which are sent to the Purchase
department for procurement of the items in time. The most important task in computerising the stock
system is to allot a code number to each item that is likely to be held in stock. There are many methods of
coding the items, but the most commonly accepted. One is to classify the items into various categories
within which different manufacturers and specifications of the items are incorporated. The primary
requirement of computerising the Inventory Control System is to create and maintain an Item Master File
which contains the following fields:

1. Item Code 2. Category Code

3. Sub Category Code 4. Class of item
5. Item Name 6. Unit of Measure
7. Rate per Unit 8. Quantity on Hand
9. Maximum Level 10. Minimum Level
11. Danger Level 12. Economic Order Level
13. Expire Date 14. Quantity on Order
15. Last Issue Date 16. Local Status
17. Bin Location

3. YTD Balance File:This file stores for every item, the opening stock for the beginning of the year and
cumulative transaction details (quantity and value) of all types of transactions.

4. Adjustment Files

Again, we need Add, Modify, Delete, List and Query programs to update and maintain these files.

REPORTS
No planning and control would every be possible without information. In a computerised system, information is
provided in the form of reports either printed on paper or displayed on screen if one has access to a computer
terminal.

Pending Purchase Order Report

It helps in monitoring the progress of receipts of items ordered.

PENDING PURCHASE ORDERS

31 st August, 94

Item Code Description From whom Qty. Date Ordered Remarks

order Recd.
AB/CD/001 Nuts and Bolt 11/2" 10 5 Kg. 31.07.94 30 days Over
CD/AB/1234 Rubber Oil Seal 14 150 10.08.94 Received 100 Nos.
on 28.08.94 50

Binwise List of Items for Checking

A report of items in stock is printed in the bin location order to facilitate checking. The bin location code identifies
the exact location of the item and when the report is prepared in bin location order, it is easy for the checking
personnel to carry out the physical verification of the items in stock. The format of the report for Binwise list of
items for stock checking is as follows:

BINWISE LIST OF ITEMS FOR STOCK CHECKING

Date : [ ] Page No. : [ ]
From item code Number / category / Bin location : [ ]
To item code Number / category / Bin location : [ ]

Bin Location Item No. Description Quantity on Quantity physically Remarks

Hand Present

Purchase Register
All purchases made during a specified period are printed and a hard copy maintained for management analysis. The
input data for preparing this report is the Transaction file.
 Page no : [ ]
Date : [ ]
PURCHASE REGISTER
From Date : [ ] To Date : [ ]

Date Item Code Description Voucher Ref. No. Quantity Purchased Value
1.8.94 AB/CD/001 - - 6 400.00
1.8.94 AC/BX/006 - - 12 3600.00
1.8.94 AD/XY/007 - - 5 120.00
Total 4120.00
2.8.94 XY/AB/003 -
: -
: -
: Grand Total 38,625.00

Excess Stock Report

As a by product of the above program a file containing items that are kept in stock in excess of the maximum level is
created and a separate report format printed out as below.

EXCESS STOCK REPORT

Date : [ ] Page no : [ ]

Item Code Description Qty. on Maximu Excess Stock Value of the Last Issue Date
hand m Excess Stock
Level

This report is a useful management information and suitable action can be avoid recurrence of such overstocking.

Issue Register
Similar to the purchase register, issue register is also printed periodically using the transaction file and the item
master file. The format for Issue Register would be as follows :

Page no : [ ]
Date : [ ]
ISSUE REGISTER
From Date : [ ] To Date : [ ]

Date Item Code Description Voucher Ref No. Qty. Issued Value

Datewise subtotals of Value of items issued and grand total at the end of the report, should be printed.

Under Stock Reports

As a by product of the above program, a file is created containing items that have fallen below the minimum stock
level and a format of understock report is printed as below :

Date : [ ] Page no : [ ]
UNDER STOCK REPORT

Item Description Qty. on Order Minimum Danger LevelQty. on Order Last Issue Date
Code Level

The above report is a very important management tool to make immediate action to replenish the items below
minimum level. Sometimes an automatic purchase requisition can be generated to supply items below danger level
and consequent 'Quantity on Order' field updating in the item master file.

Adjustment Report
Adjustment done to quantity on hand contained in the item master file due to discrepancies in stock on physical
verification are monitored through the report. A typical print out of the format of Adjustment Report is given in the
following page:

Page no : [ ]
Date : [ ]
ADJUSTMENT REPORT
From Date : [ ] To Date : [ ]

Date Item Description ADJ.Voucher Qty. Adjusted Reason for Adjustment

Code No.

12.7.94 MN/PQ/00Deisel AD/007 -5 Evaporation

1

16.7.94 RP/08/A1 Oxygen AD/173 +2 Expansion due to increase in temperature

2
-
-
-
-

This management control report could highlight storage deficiency of items, possible thefts, pilferage and wrong
measurements while issuing of items etc. and suitable remedial measures taken.

Categorywise Consumption Analysis Report

Issue transactions from the transaction file and category, subcategory information from the master file are extracted
and a separate file created for printing the above analysis. This file is sorted on category, subcategory codes and a
summarised total of values and count of issues are printed.

Date : [ ] Page no : [ ]
CATEGORYWISE CONSUMPTION
ANALYSIS
From Date : [ ] To Date : [ ]
Category Subcategory Code Description of Category Value of Items Issued Issue Count

EM FN Electrical Fans 6200.00 8

BB Electrical Bulbs 800.00 103
SW Electrical Switches 320.00 8
- TOTAL 7320.00 119
- -
-
Grand Total 68,750.00,
Account Headwise Consumption Analysis Report
In the issue transactions, there is a field titled 'To Whom Issued'.The department/cost Center code is usually entered
here.

Sometimes, the charging account head is given here instead. Items issued are analysed in this report based on this
field and the total value of issues to this head are debited to the user department or the account head. The issue
transactions are sorted on the above field to produce the report.

Page no : [ ]
Date : [ ]
ACCOUNT HEAD WISE CONSUMPTION
ANALYSIS
From Date : [ ] To Date : [ ]

To whom Description of Item Code Qty. Issued Value of Item Description

issued code Account Issues

10 Weaving Department AB/CD/001 8 1230.00 spindles

CD/AB/003 2 600 shuttle

xy/08/007 1 30.00 Tube Light
Total 18600.00
12 Spinning Department BM/01/002 4 1500.00 Sheets
Total 2350.00
Grand Total 68725.00

This report is prepared monthly for incorporation into the monthly accounts. A copy of this report is given to the
individual departments for costing purposes.

Slow/Fast Moving Items Report

An item is considered to be slow moving if within a quarter there has been issues of say less than ten units of the
item and an item could be considered to be a fast moving one, if there are issues of say one hundred units of the item
in a quarter. These criteria could vary from organisation to organisation. A demonstration of this report is shown
below:

Page no :1
Quarter Ending : June 94
SLOW MOVING ITEMS REPORT

Item Code Description of Last issue Date No of days Count of issues Qty on Hand
Item not moved
AB/CD/001 Steering Wheel Of 10.3.93 476 0 1
Leyland Truck

CD/EF/004 Pen Knives 1.5.94 61 2 3

- - - - - -
- - - - - -
- - - - - -
- - - - - -

Page no :1
Quarter Ending : June 94
FAST MOVING ITEMS REPORT

Item Code Description Count of Issues Qty. Issued Value Average

Issues/Day
or week

PQ/AB/003 Paracetamol 128 340 675.00 29

- - - - - -
- - - - - -
- - - - - -
- - - - - -

- - - - - -

ABC Analysis Report

Under this report, items with a higher investment value are grouped under class A, items of medium value
investment grouped under class B and items of lower investment grouped under class C. A report is then printed as
below.

ABC ANALYSIS
Date : [ ] Page No.: [ ]

Item Class Item Class Description Quantity Value Count Issues

A AB/CD/001 Crank shaft 185 2134 170

Oil seal

A AB/XY/005 Washer 1600 840 200

: - - -
: - - -
Total 67428.00
B

B Total - -
C
C
: Total -
Stock Ledger Report
This is a monthly report where details of all transactions of every item are printed and the closing balance
ascertained as per the records maintained in the computer. The format for a stock ledger Report for a month is
illustrated as follows:

Page no :[
Date : [ ]
STOCK LEDGER FOR AUGUST' 94

OP . STOCK Purchases Issues CLO . Stock

Item Code Description Qty. Value Qty. Value Qty. Value Qty. Value
FN/AB/001 Table Fan 5 4500 2 1800 4 3600 3 2700
-
-
-
-
-
-
-
- Total 500000 200000 300000 400000

Year End Processing

The Item Master File is copied as backup to reflect the closing stock of the financial year and safely kept in custody
on the last day of the financial year after working hours. Similarly, the transaction file and the YTD balance files are
also backed up and preserved.

For the new financial year, we will create an empty transaction file with no records in it by copying the structure of
the file only. In the YTD balance file, except for the item code, all other fields are initialised to zero. Thereafter the
quantity on hand and the unit rate of the item are copied from the year end item master file which would be the
opening stock for the current financial year.

Periodic Housekeeping
The item master file, transaction files and the YTD balance files are the backbone of the inventory system when
computerised and any damage to these files can be catastrophic to the running of the organisation. These files get
updated whenever a transaction takes place and reflect the up to date information at any given point of time.

To safeguard from possible damages, periodic back up of the above files should be taken and kept in safe custody.
In the unfortunate event of any of the files getting corrupted, we can thus recreate the file from backup copies and
the transactions redone from the point of last backup.

The system structure chart for the Inventory Control is shown in figure 1 below
 Figure 1: Structure Chart for the Inventory Control System

1.2.2 Sales Order Processing

Sales order processing is an important transaction processing system which captures and processes customer orders
and produces invoices for customers and data needed for sales analysis and inventory control. In many firms, it also
keeps track of the status of customer orders until goods are delivered. Computer-based sales order processing
systems provide a fast, accurate, and efficient method of recording and screening customer orders and sales
transactions. They also provide inventory control systems with information on accepted orders so they can be filled
as quickly as possible.

1.2.3 Payroll
Payroll systems receive and maintain data from employee time cards and other work records. They produce
paychecks and other documents such as earning statement, payroll reports, and Labor analysis reports. Other reports
are also prepared for management and government agencies.

In a payroll system, there are two important modules:

1. Earnings calculation module

2. Deductions calculation module

The broad objectives of a payroll system are:

1. Preparation of wage slip giving details of all earnings and deductions of all employee’s wages
together with the net salary payable for the month.

2. Preparation of a coinage analysis to Facilitate distribution of salary by the employer

3. Reports generation-Monthly

4. Record keeping of salary, details for every month

5. Preparation of Annual summarises

6. Management information reports arising out of payroll data.

Let us now consider how we would achieve our first objective of preparing a wage slip to be given to each employee
when salary is being paid to him.

The nature and layout of a wage slip could be different in different organisations. Usually, the wage slips will be so
designed to accommodate the requirements of all types of employees in an organisation. We will now analyze the
data requirements of preparing a wage slip and design files needed for this purpose.
Input payroll data are of two types. Data that does not change and data which undergoes changes monthly. Name of
an employee, his employee number etc. never changes while attendance, and deduction data could change
periodically.

Data of a permanent nature (which does not frequently change) are stored in a Master File when data which are
changeable are kept in a transaction file.

The following programmes are needed to be written to maintain the payroll Master File:

1. A program to create this file

2. A program to print the records of the Master file

3. A program to modify the contents of the fields of records in the file

4. A program to delete records from the file.

In order to prepare a wage slip, apart form the information contained in Master, we need certain other information
which are usually stored in the transaction file. The transactions are also of two different types. Data which change
only infrequently and data which change frequently. For example, LIC premium, CTD installations, House Rent
Allowance, City Compensatory allowances etc. seldom change.while attendance and production details change from
month to month. The two files for this are:

1. Fixed transaction file

2. Variable transaction file

Further processing of payroll will be done by using the Monthly Salary File which contains the following fields.

1. Employee Number 13. Employee Name

2. Department Code 14. Attendance
3. Production Volume 15. Overtime hours
4. Basic Wages 16. Dearness Allowance
5. House Rent Allowance 17. City Compensatory Allowance
6. Special Allowance 18. Other Allowances
7. Overtime Wages 19. Piece Rated Wages
8. Incentive Wages 20. Total Earnings
9. PF Deduction 21. LIC premium
10. Income Tax Deducted 22. CTD contribution
11. Other Deductions 23. Total Deductions etc.
12. Net Salary etc.

Figure 2 : Block Diagram of wage slip processing

Coinage Analysis
Once the wage slips are printed, salary has to be distributed to the employees. For this, the accounts officer should
draw the money required from the bank. In order to do this, he should know how many currency notes of various
denominations should be collected for facilitating the distribution.

To calculate coinage analysis, the monthly salary files should be sorted or indexed on department code and
employee number.

Departmentwise Earnings and Deduction Summaries

These reports are also prepared from the monthly salary file to find the total amounts under each head of earnings or
deductions for every department, for various accounting purposes.

Management Information Reports

Some of the information contained in the monthly salary file provide very useful analysis for management such as
report on absenteeism of employees, employeewise production reports, a list of substandard employees and so on
given below are typical print layouts:

PRODUCTION AND ABSENTEEISM REPORT OF EMPLOYEES

Dept.Co T.Wkg.Ma Man Days % of Total Avg.Prod.Per No. of Substd. No. of Outstanding
de n Days Absent Absence Prod. Emp. Emp. Emp.

11 500 50 10 10000 500 17 2

 Total

A computerised analysis of the monthly salary file can give the total mandays worked in each department, and from
this we can calculate the percentage of absenteeism. If this figure is too high, investigation could be carried out as to
why this is so and suitable remedial measures taken.

Annual/Periodical Reports
Usually there are three different annual reports/Calculations done using the twelve months monthly salary files.
They are:

1. Bonus Calculations and preparation of Bonus reports

2. Provident Fund returns Form 3A and6A

3. Income Tax computations and preparation of tax statements form 16A.

The figure below illustrates the structure chart for the payroll system.

Figure 3 : Structure Chart (Payroll System)

Computer-based payroll systems help businesses make prompt and accurate payments to their employees, as well as
reports to management, employees and government agencies concerning earning, takes and other deductions. They
may also provide management with reports analysing labour costs and productivity.

1.2.4 Banking
Today, banking is almost totally dependent on the computer. A large amount of book-keeping is now handled very
efficiently and quickly with the help of computers.
In most instances, the computer is sited centrally. Branches are equipped with terminals, giving them an on-line
accounting facility and enabling them to interrogate the central system for information on such things as current
balances, deposits, overdrafts interest charges, shares and trustee records. Under computer control, customer
statements are prepared and printed out onto specially designed or preprinted stationary. Cheques are handled by
computers at the clearing banks. The cheques are sorted into branch, and then customer order are returned to the
branches the next day. The computer also provides each branch, and its customers, with prompt access to
information from a much wider financial world than would be possible under a manual, local system.

New developments , such as automatic cash dispenser, are making it even easier for customers to deal with banks.
Leading international banks and financial institutions are able to obtains up-to-date news on foreign currency rates
from the world's money markets using an on-line worldwide information retrieval service.

1.3 IMPLICATIONS OF COMPUTER

APPLICATIONS
The computer implications for management planning and organisational structure is illustrated in the following
subsections:

1.3.1 Computer's Impact on Planning

Generally speaking, the use of computers can have an impact on planning activities by:

a) Causing faster awareness of problems and opportunities

Computers can quickly signal out-of-control conditions requiring corrective action when actual performance
deviates from what was planned. Masses of current and historical internal and external data can be analysed by the
use of statistical methods, including trend analyses and correlation techniques, in order to detect opportunities and
challenges. Planning data stored on-line may permit managers to probe and query files and receive quick replies to
their questions.

b) Enabling managers to devote more time to planning

Use of the computer can free the manager's clerical data-gathering tasks so that more attention may be given to
analytical and intellectual matters.

c) Permitting Managers to give timely consideration to more complex relationships

The computer gives the manager the ability to evaluate more possible alternatives. It makes it possible for managers
to do a better job of identifying and assessing the probable economic and social effects of different courses of action.
In short, computers can furnish managers with planning information that could not have been produced at all a few
years ago or that could not have been produced in time to be of any value.

d) Assisting in decision implementation

When decisions have been made, the computer can assist in the development of subordinate plans that will be
needed to implement these decisions. Computer-based-techniques to schedule project activities have been developed
and are now widely used.

Two general scheduling techniques are Gantt Charts and PERT charts. Gantt Charts are a project control technique
that can be used for several purposes, including scheduling, budgeting and resource planning. A Gantt Chart is a bar
chart, with each bar representing an activity. The bars are drawn against a time line. The length of each bar is
proportional to the length of time planned for the activity.
Let us draw a Gantt Chart for the tasks identified in the Work Breakdown structure of figure 4 shown as follows.

Figure 4 : Work Breakdown Structure

We estimate the number of days required for each of the six tasks as follows : initial design, 45; scanner, 20; code
generator, 180; integration and testing, 90; and writing the manual, 90. Using these estimates, we can draw Gantt
chart as follows :

Figure 5 : GANTT Chart for a single computer project

This example shows that the Gantt chart can be used for resource allocation and staff planning. For example, from
figure above, we can conclude that the same engineer can be assigned to do the scanner and the parser while another
engineer is working won the code generator. Even so, the first engineer will have some slack time that we may plan
to use to help the second engineer or to get a head start on the integration and testing activity.

Program Evaluation Review Techniques (PERT)

Unlike bar charts, PERT can both be a cost and a time management system. PERT is organised by events and
activities or tasks.

PERT controls time and costs during the project and also facilitates finding the right balance between completing a
project on time and completing it within the budget.

The figure below shows a PERT chart for the previous compiler project.
 Figure 6 : PERT Chart for a simple compiler project

The information from the work Breakdown Structure of figure 1 is used to decide what boxes we need. The arrows
show the new information that was not available in the work breakdown structure. The chart shows clearly that the
project consists of the activities of the initial design, building a scanner, building a parser, building a code generator,
integration and testing these, and writing a manual. Recall that the previous estimates for these six tasks were,
respectively, 45, 20, 60, 180, 190, and 90 days.

The figure assumes that the project will start on January 1, 1994. Taking holidays into account (January 1 and 2 are
holidays in 1994) the design work will start on January 3, 1994. Since, the design activity is estimated to take 45
days, any activity that follows the design may start on March 7, 1994 at the earliest. The dependency arrows help us
compute these earliest start dates based on our estimates of the duration of each activity. These dates are shown in
the figure 6. We could also compute the earliest finish dates or latest start dates or latest finish dates depending on
the kind of analysis we want to perform.

Through the use of such techniques, business resources can be utilised and controlled effectively.

1.3.2 Computer's Impact on Organisational Structure

When a computer is installed, it may take over a large part of the work of several departments. If there is then no
longer any valid reason for some units to continue to exist, changes are likely to be made in the organisational
structure to avoid duplication and waste. In other words, as computer-based management information systems are
designed and implemented, there is often a need to reconsider the answers to several important and interrelated
organising questions like (a) where will decision making occur? (b) Where will data be processed? (c) where will
data be stored? The following section illustrates the general implications of these issues.

a) Where will decision making occur?

The concept of centralisation of authority refers to a concentration of the important decision making powers in the
hands of a relatively few top executives. Decentralisation of authority, on the other hand, refers to the extent to
which significant decisions are made at lower levels. In very small organisations, all decision making power is likely
to be centralised in the hands of the owner- manager, in larger firms, the question of centralisation or
decentralisation is a matter of degree i.e. is a question of how much authority is held at different levels. The extent to
which authority is delegated to lower levels depends in pan, on such factors as:

1. The managerial philosophy of top executives;

2. The availability of good operating controls
3. The availability of qualified subordinates

Since all these factors may change, it is apparent that the degree of authority centralisation is subject to revision.

With the introduction of quick-response computer systems, information may be processed and communicated to top
executives at electronic speeds; reaction time may be sharply reduced and thus the need for decentralisation of
authority may be lessened.
If an organisation implements the distributed processing concepts, the lower-level managers may have access to an
entire hierarchy of processors that can supply them with decision-making information. Thus, the degree to which
authority and decision-making powers are centralised or decentralised in an organisation is now often determined
more by managerial philosophy and judgement than by necessity. But the implications of the path selected for the
organisation structure and for middle-level managers may be great.

b) Where will data he processed?

Prior to the introduction of computers, data processing activities were generally handled by manufacturing,
marketing, and finance departments on a separate and thus decentralised basis. When computers first appeared,
however, the tendency was to maximise the use of the expensive hardware by establishing one or more central
processing centres to serve the company's needs. But in recent years, such developments are:

(1) the rapid reduction in hardware costs and

(2) the arrangement of intelligent terminals, mini- computers, and large processors into distributed processing
systems have made it feasible for businesses to use either a centralised or decentralised approach to data
processing.

Thus, many firms must now decide to what extent, they will centralise their data processing operations. Should
small computer be used by individual organisation units, or should these units furnish. input to (and receive output
from) one or more central computer centres which can process data originating at many points?

There is no general answer to the question of where should data be processed. Small organisations have usually
opted for central computers because their departments often do not have sufficient volume to justify separate
machines. Large organisations following the centralisation approach have generally not created single huge
installation. Rather, they have achieved a greater degree of centralisation by establishing several regional data
centres. Some executives who have chosen to follow the centralised processing route have retained a decentralised
decision-making structure by giving operating managers on line terminals with which to obtain the necessary
support information.

Firms with centralised hardware may also achieve greater interest and motivation at operating levels by maintaining
some system-analysis operations on a more decentralised basis. This can be a logical arrangement because (i)
divisional system analysts may have a better understanding of the information needs of the division and (ii) this
approach can effectively counter the argument from division managers that since system design is beyond their
control, they cannot be held accountable for design results.

Finally, other organisations are following a distributed processing compromise approach to the centralisation-
decentralisation issue by combining larger central computers with small processors, minicomputers and intelligent
terminals at operating levels. The central processors serve the local processors by managing large data bases and by
executing those jobs that require extensive computations.

c) Where will data be stored?

Before computers came along, data were typically stored at the using departments, although some summary facts
needed to prepare company wide reports were maintained at centralised sites in large organisations. When
computers first appeared, the tendency was to maximise the use of expensive hardware by setting up centralised
computer centers. Not surprisingly, the tendency was also to establish and store large centralised data bases at there
central sites on such media as magnetic tape and disks.

In fact, there is no general answer to the question of where should data be stored. Some organisations may find it
best to store and maintain data at a central site; some may prefer to use a partitioned approach to data storage; some
may choose to use a replicated approach in order to distribute data- base files; and many organisations may elect to
use a combination of these basic data storage approaches.
1.4 REVIEW QUESTIONS
1. What are the steps followed in decision making?

2. What are the important modules of a payroll system?

3. What is the ABC analysis of items in inventory?

4. What are the two main computer based techniques for scheduling the project activities?

5. Discuss the computer's impact on planning in an organisation.

1.5 SUMMARY
In this unit you have come across the kinds of computer applications and have also learnt how the computers have
revolutionised the various activities in Inventory Control, Banking, Payroll etc. Today, every major activity is totally
dependent upon computers. The impact of computers in organisation's planning and control can help in crucial
decision making by the management, which is the core of an organisation's survival.

Computer applications in Business are very diverse. Computer have helped in scheduling and monitoring the
business applications more efficiently. Computer-based management information systems have helped in better
decision making in an organisational structure.

1.6 MODEL ANSWERS

1. Decision-making follows four basic steps:

a) Perception of decision need or opportunity.

b) Formulation or design of alternative courses of action.

c) Evaluation of alternative courses of action.

d) Choice of one or more alternatives for implementation.

2. There are two important modules in a payroll system.

a) Earnings Calculation module

b) Deductions Calculation module

3. ABC Analysis of items

a) Class A: Items with a higher investment value

b) Class B: Items of medium value investment

c) Class C: Items of lower value investment

4. The two main computer-based techniques for scheduling the project activities are: a) Gantt Chart b) PERT
Chart