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Information Systems

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Information Systems

• An information system can be defined technically as a set of

interrelated components that collect (or retrieve), process, store,
and distribute information to support decision making and
control in an organization.
• In addition to supporting decision making, coordination, and
control, information systems may also help managers and
workers analyze problems, visualize complex subjects, and
create new products.

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Management Levels in a Firm

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Management Levels of the Organization

Organizations have a structure that is composed of different
levels and specialties:
• Senior management makes long-range strategic
decisions about products and services as well as ensures
financial performance of the firm.
• Middle management carries out the programs and plans
of senior management
• Operational management is responsible for monitoring
the daily activities of the business

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Employees of the Organization

• Knowledge workers such as engineers, scientists, or
architects, design products or services and create new
knowledge for the firm, whereas
• Data workers such as secretaries or clerks, assist with
scheduling and communications at all levels of the firm.

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Systems for Different Management Groups

• In organizations there are different interests, specialties, and
levels. Hence, there are different kinds of systems. No single
system can provide all the information an organization needs.
• Typical firm also has different systems supporting the decision-
making needs of each of the main management groups.
Operational management, middle management, and senior
management each use systems to support the decisions they must
make to run the company.
In the following section we will look at these systems and the
types of decisions they support.

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Transaction processing systems (TPS)

– Serve operational managers and staff
– Perform and record daily routine transactions necessary to
conduct business
 Examples: sales order entry, payroll, shipping
– Allow managers to monitor status of operations
– Serve predefined, structured goals and decision making
– Provide information for other systems

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For example, fulfilling a customer order involves a complex set of steps that requires the
close coordination of the sales, accounting, and manufacturing functions.

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Figure 2.2 A Payroll TP S

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Management Information Systems

• Serve middle management
• Provide reports on firm’s current performance, based on data
from TP S
• Provide answers to routine questions with predefined procedure
for answering them
• Typically have little analytic capability

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Figure 2.3 How Management Information

Systems Obtain Their Data from the
Organization’s TP S

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Sample MI S Report
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Decision Support Systems

• Serve middle management and business analysts
• Support non-routine decision making
• Perform advanced analysis:
– Goal Seeking Analysis
– What if Analysis
• May use external information as well TP S / MI S data
• They focus on problems that are unique

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Executive Information Systems (EIS)

• Also called Executive Support Systems (ESS)
• Support top-level senior management
• Address non-routine decisions
– Requiring judgment, evaluation, and insight
• Incorporate data about external events (e.g., new tax laws or
competitors) as well as summarized information from internal
MIS and DSS
• Example: Digital dashboard with real-time view of firm’s
financial performance

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Digital Dashboard

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Summary

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Comparison

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Systems for Different Management Levels

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Enterprise Resource Planning (E R P)

• Enterprise Resource Planning (ERP): a set of integrated
programs that manage a company’s vital business operations for
an entire multisite, global organization.
• At the core of the ERP system is a database that is shared by all
users.
• Integrate data from key business processes into a single system.

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Enterprise Resource Planning System

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Production and Supply Chain Management
• ERP production plan process
– Detailed scheduling: schedules production run for each product
and from one product to the next
– Materials requirement planning: determines amount and timing
of raw material orders with suppliers
– Manage relationships with suppliers, purchasing firms,
distributors, and logistics companies.
– Purchasing: purchases raw materials and transmits to qualified
suppliers
– Production: plans details of running and staffing production
operation

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Customer Relationship Management (CR
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M)
• Help manage relationship with customers.
• Coordinate business processes that deal with customers in sales,
marketing, and customer service
• Goals:
– Improve customer satisfaction
– Increase customer retention
– Identify and retain most profitable customers
– Increase sales

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Financial and Managerial Accounting

• General ledger: main accounting record of a business

– Assets, liabilities, revenue, expenses, and equity

– Captures transactions entered by workers in all functional

areas of the business

– Creates associated general ledger record to track the

financial impact of the transaction

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References
• Management Information Systems, Managing the Digital
Firm, 13 Edition (2014), Laudon and Laudon.

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