University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Major Systems used in an Organization
Organizations utilize different types of information systems to take their business decisions for their operations. The hierarchy levels of the organizations in general are operational, knowledge, management, and strategic. Accordingly, three main categories of information systems serve at different organizational levels on hierarchy are:
I. Operational-level systems
II. Management-level systems
III. Strategic-level systems
1. Operational-level systems: Information systems that monitors and support operational managers, keeping track of the elementary activities and business transactions of the organization.
E.g.Sales,receipts,cashdeposits, pay roll, credit decisions and flow of materials in a factory.
2. Management-level systems: Information systems that serves the monitoring, controlling, decision-making, and administrative activities of middle managers of the business organization
3. Strategic-level systems: Information systems that support the long-range planning activities of senior management and help senior management tackle and address strategic issues to keep the strategic growth of the business firm.
Major type’s information systems in organizations include
1. Transaction Processing Systems (TPS)
2. Management Information Systems (MIS)
3. Decision-Support Systems (DSS)
4. Executive Support Systems (ESS)
Transaction processing systems function at the operational level of organization. Knowledge work systems help create and integrate new knowledge within the organization. Management information systems provide managers with reports based primarily on data pulled from transaction processing systems, have an internal orientation, and have limited flexibility. . Decision-support systems function at the management level and provide analytical models and data analysis tools to provide support for semi structured and unstructured decision-making activities. Executive support systems function at the strategic level, support unstructured decision making, and use advanced graphics and communications. Major type’s information system in a typical organization is shown in below figure along with strategic levels and functional areas.
Transaction processing was one of the first business processes to be computerized and without information systems, recording and processing business transactions would consume huge amounts of an organizations resources. Transactions are events that occur as part of doing business, such as sales, purchases, deposits, withdrawals, refunds, and payments. TPS serve the operational level.
The transaction processing systems (TPS) is a computerized system that performs and records the daily routine transactions necessary to the conduct of the business. TPS also involve employees in business processes. Transaction Processing Systems are information systems that process data resulting from the occurrence of business transaction. Every organization has manual and automated transacting processing systems (TPSs), which process the detailed data necessary to update records about the fundamental business operations of the organization. These systems include order entry, inventory control, payrolls, accounts payable, accounts’ receivable, and general ledgers to name a few.
The input to these systems includes basic business transactions such as customer orders, purchase orders, receipts, time records, invoices and customer payments. The result of processing business transactions is that the organizations records are updated to reflect the status of the operation at the time of the last process transaction. Automated TPSs consist of all the components of Computer Based Information, including databases, telecommunications, people, procedure, software and hardware devices used to process transactions. The processing activities include data collection, data edit, data correction, data manipulation, data storage and document production.
The transaction processing systems (TPS) is a computerized system that performs and records the daily routine transactions necessary to the conduct of the business. TPS also involve employees in business processes. Transaction Processing Systems are information systems that process data resulting from the occurrence of business transaction. Every organization has manual and automated transacting processing systems (TPSs), which process the detailed data necessary to update records about the fundamental business operations of the organization. These systems include order entry, inventory control, payrolls, accounts payable, accounts’ receivable, and general ledgers to name a few. The input to these systems includes basic business transactions such as customer orders, purchase orders, receipts, time records, invoices and customer payments.
The result of processing business transactions is that the organizations records are updated to reflect the status of the operation at the time of the last process transaction. Automated TPSs consist of all the components of Computer Based Information, including databases, telecommunications, people, procedure, software and hardware devices used to process transactions. The processing activities include data collection, data edit, data correction, data manipulation, data storage and document production.
Management Information Systems (MIS)
Five resources are 1. Men 2. Machine 3.Materials 4. Money 5.Methods. Information is considered as sixth resources
Management information system (MIS) is an organized collection of people, procedures, software, databases and devices used to provide routine information to the managers and decision makers. The focus of an MIS is primarily an operational efficiency, marketing, production, finance and other functional areas are supported by MIS and linked through a common data base.
Management is a process consisting of planning, organizing, to achieve organizational objectives.
MIS is “vital” in any organization for two reasons:
1. It emphasizes the management orientation of IT in business (not merely the processing of data).
2. It emphasizes that a systems framework should be used for information systems applications.
Various functions of management are briefly defined as follows: 1. Planning – process of deciding in advance the cause of action 2. Organizing – forming formal group of people and activities to facilitate achieving its objectives
3. Controlling – checking the progress of plans and correcting any deviations 4. Directing – processing of activating the plans, structure and group efforts in the desired direction.
MIS supports the management level by providing routine summary reports and exception reports for various purposes of management control process, including planning, controlling, and decision making.
Examples are sales and profit per customer and per region, relocation summary and analysis, inventory control, capital investment analysis, and even a report on students who were here in the autumn but did not to return in the spring.
2.6 Decision Support System
Decision-support systems provide material for analysis for the solution of semi-structured problems, which often are unique or rapidly changing. Typically, they provide the ability to do “what if” analysis. DSS will often use data from external sources, as well as data from TPS and MIS. DSS supports “right now” analysis rather than the long-term structured analysis of MIS. DSS are designed for analytical purposes and are flexible in nature. DSS provide sophisticated analytical models and data analysis tools to support semi-structured and unstructured decision-making activities. DSS use data from TPS, MIS, and external sources, provide more analytical power than other systems and interactive. The impact is on decisions in which there is sufficient structure for computer and analytic aids to be of value but where manager’s judgment is essential. A DSS is an organized collection of people, procedures, software databases and devices, used to support problem/specific decision making and lead to problem solving. The focus of a DSS is on decision making effectiveness when faced with unstructured or semi structured business problems.
2.61 Characteristics of decision support system
The main characteristics of DSS are
1. DSS help managers make decisions that are semi-structured, unique, or rapidly changing, and not easily specified in advance.
2. DSS are responsive enough to run several times a day in order to correspond to changing conditions. 3 DSS make use of both internal information (from TPS and MIS) and also from external sources, such as current stock prices or product prices of competitors. 4 DSS offer users flexibility, adaptability, and a quick response. 5 DSS allow users to initiate and control the input and output. 6 DSS operate with little or no assistance from professional programmers. 7 DSS provide support for decisions and problems whose solutions cannot be specified in advance. 8 DSS use sophisticated analysis and modelling tools.
9 DSS shall support the manager but not replace his/her judgment. It should therefore neither try to provide the answers nor impose a predetermined or predefined sequence of analysis. 10 DSS requires the decision maker’s insight and judgment to control the process and solution.
2.63 Examples of DSS Systems
Price and route selection, flight scheduling
Train Dispatching and Routing
Price, ad and promotional section
Evaluation of potential drilling sites
Executive support systems (ESS)/ Executive Information System (EIS) Senior managers use ESS to make decisions, ESS serve the strategic level of organization. They address non-routine decisions requiring judgment, evaluation and insight because there is no agreed on procedure for arriving at a solution. Executive support systems function at the strategic level, support unstructured decision making, and use advanced graphics and communications. Examples of executive support systems include sales trend forecasting, budget forecasting, and personnel planning. ESS is designed to incorporate data about external events such as new tax laws or competitors, but they also draw summarized information from internal MIS and DSS. They filter, compress and track critical data, emphasizing he reduction of time and effort required to obtain information useful to executives.
ESS employ most advanced graphics S/W and can deliver graphs and data from many sources immediately to a senior executive office. ESS combines many features of MIS and DSS and Provide top executives with immediate and easy access to information. ESS help to Identify factors that are critical to accomplishing strategic objectives (critical success factors) and hence provide a generalized computing and communications environment that help senior managers address strategic issues and identify long-term trends in the firm and its environment. ESS addresses non-routine decisions requiring judgment, evaluation, and insight because there is no agreed-on procedure for arriving at a solution. ESS present graphs and data from many internal and external sources through an interface that is easy for senior managers to use. Information presented in forms tailored to the preferences of the executives using the system. ESS provides out put as desired by the end-user in the forms like Customizable graphical user interfaces, Exception reports, Trend analysis etc.,
2.74 Features of ESS
1. Contemporary ESS bring together data from all parts of the firm and enable managers to select, access, and tailor them as needed using easy-to-use desktop analytical tools and online data displays. 2. Through their ESS, many managers have access to public data, such as news services, financial market databases, and economic information. 3. ESS has the ability to drill down, moving from a piece of summary data to lower and lower levels of detail. 4. Contemporary ESS includes tools for modeling and analysis. 5. Whereas DSS use such tools primarily for modeling and analysis in a fairly narrow range of decision situations, ESS use them primarily to provide status information about organizational performance. 6. Well-designed ESS also have some facility for environmental scanning. 7. A key information requirement of managers at the strategic level is the ability to detect signals of problems in the organizational environment that indicate strategic threats and opportunities. 8. Ability to analyze, compares, and highlight trends.
9. The easy use of graphics enables the user to look at more data in less time with greater clarity and insight than paper-based systems provide. 10. The timeliness and availability of the data result in needed actions being identified and carried out earlier than previously could have been done 11. Problems are handled before they become too damaging; opportunities are also identified earlier. 12. Immediate access to so much data also enables executives to better monitor activities of lower units reporting to them. That very monitoring ability enables decision making to be decentralized and to take place at lower operating levels.
2.76 Interrelationships among systems
In contemporary digital firms, the different types of systems are closely linked to one another. This is the ideal. In traditional firms these systems tend to be isolated from one another, and information does not flow seamlessly from one end of the organization to the other. Efficiency and business value tend to suffer greatly in these traditional firms. The interrelation ship between major kinds of system in an organization is depicted in below figure .
The various types of systems in the organization exchange data with one another. TPS are a major source of data for other systems, especially MIS and DSS. TPS are operational-level systems that collect transaction data. Examples of these are payroll or order processing that track the flow of the daily routine transactions that are necessary to conduct business. TPS provide data that are required by office systems, KWS, MIS and DSS, although these systems may also use other data. KWS and office systems not only use data from TPS but also from MIS. DSS not only use data from TPS but also from KWS, office systems, and MIS. MIS rely heavily on data from TPS but also use data from KWS and office systems. ESS obtains most of their internal data from MIS and DSS.