Basic Concepts of MIS, MRP

Introduction: An information system contains information about an organization and its

surrounding environment. Information systems can be either computer based or manual.
Manual systems use paper and pencil technology. Computer based information systems
rely on computer hardware and software technology to process and disseminate
information.

Types of Information System:

The three major information systems are
1) Transaction Processing Systems
2) Decision Support Systems
3) Management Information Systems

1) Transaction Processing Systems: Transaction processing systems provide speed and

accuracy and can be programmed to follow routine functions of the organization.

2) Decision Support Systems: If is the system which helps to the management to take
several less structured decisions.

3) Management Information Systems: MIS refers broadly to a computer-based system

that provides managers with the tools for organizing, evaluating and efficiently running
their department. It is the responsibility of MIS.

Characteristics of MIS:
• It is management oriented
• Management directed
• Integrated system (5M’s- man, money, methods, material and machine)
• Common data flow
• Avoids redundancy and duplication in data storage
• Heavy planning element
• Subsystem concept
• Common database
• Flexibility and ease of use
• Computerization
Process/functions of MIS/Information Systems:
MIS-A support to Management: As can be seen from fig management process is
executed through a variety of decisions taken at each step of planning, organizing,
staffing, directing, coordinating and control. The objective of MIS is to provide
information for a decision support in the process of management. MIS is a tool for
effective execution of the management process.
1) MRP (Material Requirement Planning):

Introduction: Material Requirement Planning (MRP)is a production planning and control

technique in which the master production schedule is used to create production and
purchase orders for dependent demand items. And It is an Internal Production process
designed to ensure that the materials, components, parts, subassemblies are available as and
when required.

Meaning: MRP is a software-based production planning and Inventory Control system used
to manage manufacturing process.

Objectives:

1) To ensure the availability of materials and products for production and delivery to
customers.
2) To maintain the lowest possible level of Inventory.
3) To plan manufacturing activities, delivery schedules and purchasing activities.
Under MRP method company can calculate Material requirement by simple arithmetical
calculations. In order to make these MRP calculations, one needs to know (Requirements for
Installation of MRP).
1) The product structure showing how the end product is made up of certain assemblies,
subassemblies, down to the components.
2) The lead time to produce the different items at the various levels.
3) The demand or the delivery schedule of the end products.
4) The current on hand stock of the various items.

Benefits of MRP systems are:

• Customer service is improved.
• Reduction in lead time
• Reduction in work-in-process
• Reduction in past-due orders
• Elimination of annual inventory
• Reduction in finished goods inventory, raw material, components and parts and safety
stock
• Increase in productivity
• Capacity constraints are better understood
• Inventory turn-over increases
 • All the above benefits are due to correct tracking of inventory and accurate estimation
of planned order for each time horizon
Drawbacks/Limitations of MRP:
The greatest advantages of MRP are its straight forwardness and established procedure.
However, the simplicity in MRP calculations often leads to many problems in real life.
1) Incorrectness in Supplier’s Lead Time
2) Incorrectness in Inventory Data
3) Inaccuracy in Manufacturing Lead Time
4) Inaccuracy in BOM Structure
Conclusion: Now-a-days MRP is very essential to know the Calculations of the Material
Requirements

TQM and six sigma

2) TQM (Total Quality Management):
Introduction: Total Quality Management involves effective decisions making, problem
solving and integration of Quality planning, Quality implementation and Quality
improvement Strategies of all the departments of an organization, committed and
involved employees, lower Costs, higher revenue and high profits for the Organization.
Meaning: TQM means Quality of output of every department and by every employee,
cleanliness, orderliness, punctuality, Customer service, standardization of works and
continuous efforts for their improvement.
Customer satisfaction is the most important aspect of TQM. The customer may be
external to the organization or may be inside the organization. Effective TQM results in
greater customer satisfaction, fewer defects, less waste, reduced costs, improved
profitability and Increased productivity.
Elements of TQM:
1) Customers satisfaction.
2) Employees, involvement and empowerment.
3) Morale of employees.
4) High revenue.
5) Lower cost.
6) Quality of production.
7) Control of production.
8) Quality planning.
9) Quality Improvement.
10) Quality implementation.
11) Quality assurance system.
12) Vendor control and quality in procurement.
13) Customer relationship management.
14) Total organization involvement.
15) Quality education and Training.
16) Strategic Quality management.
17) Leadership.
Methods of TQM:
1) ISO 9000
2) Cost-benefit Analysis.
3) Bench Marking.
4) Acceptable Quality Level
5) Objective Ranking.
1. ISO 9000 (International Organization for Standard): This certificate speaks about the
Quality of its products and services globally. It is a well-designed, well implemented and
carefully managed quality system so, it provides Confidence that the output of the
process will meet customer expectations and requirements.
2. Cost-Benefits Analysis: This is a simple technique which involves evaluating all the costs
associated with implementing a particular project and comparing them with the expected
benefit. The evaluation usually covers a three or five-year period.
3. Bench-Marking: It is a method for continuous improvement that involves an ongoing and
systematic evaluation and incorporation of external products and services and processes
recognized as representing best practice.
4. Acceptable Quality: It ensure the quality which is designed by the company is more
adequate to meet Consumers Satisfaction.
5. Objective Ranking: This is method which will helps to give Ranking according to the
achievements of the objectives of the company.
Benefits of TQM:
1) Customer satisfaction-oriented benefits
2) Economic improvement-oriented benefits
Customer satisfaction-oriented benefits:
• Improvement in product quality
• Improvement in product design
• Improvement in production flow
• Improvement in employee morale
• Improvement in quality consciousness
• Improvement in market place acceptance
• Improvement in product service
• Improved quality and productivity
Economic improvement-oriented benefits:
• Reduction in operating costs
• Reduction in operating losses
• Reduction in field service costs
• Reduction in liability exposure
• Reduction in rejection, scrap and wastage, reworking.
Four Cs of TQM: These are:
1) Commitment
2) Competence
3) Communication
4) Continuous improvement.
Conclusion: Effective TQM results in greater customer satisfaction, fewer defects, less waste,
reduced costs, improved profitability and increased productivity

SIX SIGMA
Introduction: Six Sigma was implemented at GE in 1988 in the form of an initiative called
the “work out” programmed. The company realized that employees constituted an
important source of intellectual power for new and creative ideas. The “workout”
program gave each employee an opportunity to influence and improve GE’s operation
through continuous interaction. Later this program laid foundation to Six Sigma.
Six Sigma: It is the ability of highly capable processes to produce output within
Specification.
Six Sigma can be defined in both statistical and business terms.
In Business terms: Six Sigma is a Business improvement strategy used to Improve
Profitability, to drive out waste, to reduce Quality costs and Improve the effectiveness and
efficiency of all operations that meet or even exceed customers’ needs and expectations.
In Statistical terms: Six sigma is a term that refers to 3.4 defects per million opportunities,
where sigma is a term used to represent the variation about the average of any process.
Methodologies used in Six Sigma:
Six Sigma methodology aims at the implementation of a measurement-based strategy
that focuses on process improvement and variation reduction through the application of
six sigma improvement projects. This is achieved through the use of two six sigma
methodologies. Those are
1) DMAIC
2) DMADV
Key Roles for successful Implementation of Six Sigma:
1) Executive leadership/Top Management
2) Champions
3) Master black belts
4) Experts
5) Black Belts
6) Green Belts
7) Yellow Belts
1) Executive leadership: They are responsible for setting up a vision for six sigma
implementations.
2) Champions: are responsible for the Six Sigma Implementation across the organization
across the organization in an Integrated way. Those are also called mentors to black belts.
3) Master black belts: These are act as in-house expert coaches for the organization on Six
Sigma. They assist champions and Guide black and yellow belts.
 4) Experts: Experts work across company boundaries, improving services, processes, and
products for their suppliers, their entire campuses and for their customers.
5) Black belts: Black belts operate under master black belts to apply six sigma methodologies
to specific projects.
6) Green belts: They operate under the guidance of black belts and support them in
achieving the overall results.
7) Yellow belts: Yellow belts are employees who have been trained in six sigma techniques
as a part of a corporate wide initiative but have not completed a six-sigma project and are
not expected to actively engage in Quality Improvement Activities.
Conclusion: Six Sigma is a registered service mark and trademark of Motorola. In addition to
Motorola some companies follow this methodology those are Bank of America, Caterpillar,
Honey Well International, Raytheon, Merrill Lynch and General Electric.

Just-in –time system

3) JIT (Just in Time):
Introduction: It is an Inventory Strategy implemented to improve the return on
Investment of a business by reducing in process inventory and its associated Costs. This
Technique was first used by the Ford Motor Company as described explicitly by Henry
Ford’s “My Life and My Work (1922).
Meaning: It is a “Philosophy that focuses on eliminating waste by
Purchasing/Manufacturing Just enough of the right items Just in Time”.
Characteristics of JIT System:
• Zero Inventories
• Emphasis on Customer Service and Timing
• Less lead times
• Flexibility of operations
• Efficient flow
• Use of Korban and visibility
Note: Korban is a signal or message or communication used to control the flow of items through
the Production Process.
Advantages of JIT:
1) Reduce inventories and work-in-progress
2) Reduce space requirement and setup-time
3) Reduce process time
4) Great employee’s participation and motivation
5) Increase in productivity
6) Improved products and Services Quality
7) Improved Customer service and Commitment
8) More standard procedures for loading and unloading facilities
Disadvantages/Limitations:
• Cultural differences.
• Loss of individual autonomy.
 • Success of JIT depends upon co-operation between employees.
• There is no flexibility.
• There is no safety stock to offset inaccurate demand forecast.
• JIT production is effective only when the daily demands are fairly stable.
Classification of material wastes in the Production Process: This approach classified the material
wastes in the production process as follows:
1) Excess production.
2) Waiting time spent at the machines.
3) Waste in transportation.
4) Waste in process.
5) Waste in motion.
6) Waste in the form of defective units.

Capability Maturity Model (CMM)

6. Capability Maturity Model(CMM):
Introduction: CMM is a way to develop and refine an organization process. The first CMM
was for the purpose of developing and refining software development processes. A
maturity model is a structured collection of elements that describe characteristics of
effective processes.
The CMM has been used extensively worldwide in government offices, commerce, and
industry and software and software development organizations. The Capability Maturity
Model Integration(CMMI) is a new Version of CMM.
Meaning: Capability Maturity Model is a collection of Instructions an organization can
follow with the purpose to gain better control over its software development process.
Maturity Model: A maturity model is a structured collection of elements that describe
characteristics of effective process.
The Capability Maturity Model Integration (CMMI)is a new version of Capability
Maturity Model(CMM).
Levels of CMM: The CMM ranks software development organizations in a hierarchy of
five levels. Each level is described as a level of maturity. Those five levels are equipped
with different number of instructions to follow.
Level 1-Initial: At this process are usually ado and the organization usually does not
provide a stable Environment.
Level 2-Repeatable: At this maturity level, software development success is repeatable.
The organization may use some basic project management to track cost and schedule.
Level 3-Defined: At this maturity level, Processes are well characterized and understood,
and are described in standards, procedures, tools and methods.
Level 4-Managed: Using precise measurements, the management can effectively manage
and control the software development effort.
Level 5-Optimizing: This maturity level focus on continually improving process
performance through both incremental and innovative technological improvements.
Structure of CMM: The structure of Capability Maturity Model involves the following
aspects
 • Maturity levels: There are Five Maturity levels those are
1) Initial
2) Repeatable
3) Defined
4) Managed
5) Optimizing
• Key Process Areas: A key process area(KPA) identifies a cluster of related activities
that, when performed together, achieve a set of goals considered important.
• Goals: The goals signify the scope, boundaries, and intent of each key Process
area.
• Common Features: There are five types of common features: Commitment to
perform, ability to perform, activities performed, measurement and analysis, and
verifying implementation.
• Key Practices: The key practices describe the elements of infrastructure and
practice that contribute most effectively to implementation and
institutionalization of the KPAs.
Conclusion: Within each of these maturity levels are key process area(KPAs)which
characterize that level, and for each KPA the five definitions
identified are goals, commitment, ability, measurement and verification.

Supply Chain Management and ERP

7. Supply Chain Management:
Introduction: Supply chain encompasses all activities associated with the flow and
transformation of goods from the raw material stage to the end user as well as associated
information flow, material flows both up and down.
Meaning: SCM is defined as the “design, planning, execution, control, and monitoring of
supply chain activities with the objective of creating net value, building a competitive
infrastructure, leveraging worldwide logistics, synchronizing supply with demand and
measuring performance globally.”
Objectives of Supply Chain:
• To maximize the overall value generated.
• To achieve maximum supply chain profitability.
• To reduce supply chain costs to the minimum possible level.
Activities of Supply Chain:
• Strategic level
• Tactical level
• Operational level
Need for Supply Chain Management:
1) Improve operations
2) Increasing levels of outsourcing.
3) Increasing transportation costs
4) Competitive pressures.
 5) Increasing globalization.
6) Increasing importance of e-commerce.
7) Complexity of supply chains
8) Manage inventories.
Benefits of Supply Chain Management:
1) Lower inventories.
2) Higher productivity
3) Greater agility.
4) Shorter lead times
5) Higher profits
6) Greater Customer Loyalty
Problems addressed by Supply Chain Management: Supply chain management must
address the following problems:
1) Distribution Network Configuration: Number, location and network missions of
suppliers, production facilities, distribution centers, warehouses, cross-docks and
customers.
2) Distribution Strategy: Questions of operating control (Centralized, Decentralized or
shared); delivery scheme, e.g., direct shipment, pool point shipping, cross docking.
3) Trade-Offs in Logistical Activities: Trade-offs may increase the total cost if only one
of the activities is optimized. For example, full truckload(FTL) rates are more
economical on a cost per pallet basis than less than truckload(LTL) shipments. If,
however, a full truckload of a product is ordered to reduce transportation costs. But
there will be an increase in inventory holding costs which may increase total logistics
costs.
4) Information: Integration of processes through the supply chain to share valuable
information, including demand signals, forecasts, inventory, transportation, potential
collaboration, etc.
5) Inventory Management: Quantity and location of inventory, including raw materials,
work-in-progress (WIP) and finished goods.
6) Cash-Flow: Arranging the payment terms and methodologies for exchanging funds
across entities within the supply chain.
Conclusion: Thus, supply chain consists of the network of organization that connects
supplier and end users. It provides the route through which raw material is converted into
finished good/services into the hand of consumers. Supply chain management, in turn,
covers the “flow of goods from suppliers through manufacturing and distribution chains
to the end users”.
8. Enterprise Resource Planning (ERP):
Introduction: ERP is an integrated enterprise-wide information system. It integrates the
information system of an organization and automates most of the business functions.
Enterprise is the group of people with a common goal, which has certain resources at its
disposal to achieve this goal. In an Enterprise way, the entire organization is considered
as a system and all the departments are its subsystems. The Purpose of ERP systems is to
facilitate the flow of information between all business functions inside the boundaries of
the organization and manage the connections to outside stakeholders.
 Meaning: ERP refers to the techniques and concepts for integrated management of
business as a whole from the view point of the effective use of management resources to
improve the efficiency of enterprise management.

Elements of ERP: Ideally, ERP delivers a single database that contains all data for the
software modules, which would include:

Manufacturing: Engineering, Bills of Material, Scheduling, Capacity, Work flow

Management, Quality Control, Cost Management, Manufacturing process,
Manufacturing Projects, Manufacturing Flow.
Benefits/Advantages of ERP: Installing an ERP system has many advantages both direct
and indirect.
The Direct Advantages include
➢ Improved Efficiency.
➢ Information Integration for better decision making.
➢ Faster response time to customer queries etc.
The in Direct Advantages include
➢ Better Corporate Image.
➢ Improved customer goodwill.
➢ Customer satisfaction etc.

BPO, Business Process Re-engineering

Business Process Outsourcing(BPO):
Introduction: BPO is a source of outsourcing that involves the contracting of the
operations and responsibilities of specific business functions or processes to a third-party
service provider. Originally, this was associated with manufacturing firms, such as Coca
Cola that outsourced large segments of its supply chain. In the Contemporary Context, it
is primarily used to refer to the outsourcing of Services.
Meaning: Business Process Outsourcing means handling over the work of the company
to an outside company or agency for completion on contract basis.
Features of BPO:
1) Nature of Employment: BPO is the processing of the low end non-core business
functions which the people with minimum skills can do. Generally, or reasonably
experienced B. Com, B.A, B.Sc. graduates with good communication skills are
preferred by BPO companies.
2) Professional Approach: BPO works on the process expertise. The process of routine
work is managed by BPO more efficiently and effectively than the client companies if
they do it in-house.
3) Career Difference: Employment in BPO companies is still considered by people as job
and not as a career. Generally, graduates work in BPO in their initial working years to
earn good money and then they either try to go for higher education or to go for other
jobs.
 4) Working Hours: BPO industry mainly on the basis of 24*7*365. Especially in offshore
services provided to USA the vender has to work round the clock.
5) Employee Turnover: In case of BPO industry, employee turnover rate is very high.

Business Process Re-engineering(BPR):

Introduction: This is achieved by the overhaul of organizational structures, management
systems, job descriptions, performance measurements, skill development, training and most
importantly, the use of Information Technology.
Definition: According to Michael Hammer Business Process Reengineering is the fundamental
rethinking and radical re-design of business process to achieve dramatic improvements in critical,
contemporary measures of performance such as cost, quality service and Speed”.
Principles of Re-Engineering:
• Organize the process around outcomes, not tasks
• Eliminate non-value adding steps
• Link parallel activities instead of integrating their results at the end
• Involve key people early
• Put the decision point where the work is performed.
• Have those who own the output of the process, perform the process.
• Capture information at the source and avoid redundant data compliance at
different points.

Steps for Re-Engineering: Hammer and Champ (1993) suggested the following steps.
1) Develop business vision and Process Objectives: This step involves prioritizing objectives
and setting targets for the future. A BPR vision statement describes the ideal state of a
process.
2) Identify the Process to be Redesigned: This involves identifying critical or bottleneck
processes and envisioning the steps to avert shortcomings in them.
3) Understand and measure the Existing Processes: This involves identifying current
problems and setting a base line.
4) Identifying the Information Technology Levels: This involves bringing those involved in
the process to a brain-storming session to identify new approaches.
5) Design and build a prototype of the process: This includes implementing Organizational
and technical aspects.
The Three R’s: Janson states that every reengineering effort involves 3 basic phases.
1) Rethink: This phase requires examining the organizations current objectives and underlying
assumptions to determine how well they incorporate the renewed commitment to customer
satisfaction.
2) Redesign: This phase requires an analysis of the way the organization produces the products
and services it sells-how jobs are structured, who accomplishes what tasks and results of each
procedure.
Then, a determination must be made as to which elements should be redesigned to make jobs
more satisfying and acceptable to customers.
Retool: This phase requires a thorough evaluation of the current use of advanced technologies,
especially data processing systems, to identify opportunities for change that can improve services
and customer satisfaction

Bench Marking &Balanced Score Card

Bench Marking:
Introduction: Bench Marking is finding and implementing best practices that lead to superior
performances of an organization.
Meaning: It is the process of comparing an organization’s operations and internal processes
against those of other organizations within or outside its industry.
Types of Bench Marking: Bench Marking is classified on the basis of the type of partner selected
for the benchmarking. Based on the approaches the Bench Marking is classified as:
1) Internal Benchmarking
2) Competitive Benchmarking
3) Functional Benchmarking
4) Beat Practice(Generic) Benchmarking

Benchmarking Process: 1. Plan 2. Search 3. Observe 4. Analyze 5. Adopt

Balanced Scorecard:
Introduction: Balanced Scorecard is a new approach to strategic management develop in 1990’s
by Robert Kaplan and David Norton. This approach replaces the customary practice of
• Evaluating the performance of an organization or individual in the organization in terms of
profits made or market share gained etc.
• Designing the performance management systems around the annual budget and operating
plan. These promote short term, incremental tactical behavior.
Meaning: It is a strategic planning and management system that is used extensively in business
and industry, government, and nonprofit organizations worldwide to align business activities to
the vision and strategy of the organization, improve internal and external communications, and
monitor organization performance against strategic goals.

Balanced Scorecard-The four Perspectives:

1) Financial: Encourages the identification of a few relevant high-level financial measures. In

particular, designers were encouraged to choose measures that helped inform the answer to the
question “How do the Firm look to Shareholders?”
2) Customers: Encourages the identification of measures that answer the question “How do
customers see the Firm?”
3) Internal Business Processes: Encourages the identification of measures that answer the
question “How well does the firm manage its operational Processes?”
4) Learning and Growth: Encourages the identification of measures that answer the question
“Can the firm continue to improve and create value?”