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UNIT 1: INFORMATION SYSTEMS

An Information System is a collection of people, procedures, software, hardware and data. This work together to provide information essential to running an organisation. This is information that will successfully produce a product or service and for profit-oriented enterprises, derive a profit.

People: often people are overlooked as one of the part of an information system. Yet microcomputers are all about making people, end-user more productive.

Procedures: are rules or guidelines to follow when using a software, hardware and data. Typically these procedures are documented in manuals written by computer specialists for particular organisations. Software and hardware manufactures also provide manuals with their products.

Software: is another name for a program or programs. A program is the step-by-step instructions that tell the computer how to do its work. The purpose of software is to convert data (unprocessed fact) into information (processed fact).

Hardware: consists of equipment, such as keyboard, monitor, printer, the computer itself and other devices.

Data: consists of the raw, unprocessed facts

The Information Revolution

Situations in workplaces are rapidly changing. Technology has made microcomputer so powerful that the word micro is almost no longer meaningful. If you have access to newer microcomputer, you practically have the power of a mainframe sitting at your desk. As the result new term has come into the language “downsizing”

Downsizing means moving applications from larger computers to smaller ones, usually from mainframes and minicomputers to microcomputers. This trend corresponds to another significant development, the downsizing of management staffs.

In recent years, many companies have scaled down their staffs, in the process reducing the number of middle-level managers. Since much of the company’s work still remains, the microcomputer has become more important, it allows one person, typically a manager, to perform more of these tasks.

The key technology advances that support downsizing:

  1. Faster processing and more memory: many older microcomputers have only 640K or even just 256K of memory. Their processing capacities are limited, and their speeds are relatively slow. The most recent microcomputer generation has enormous power. Processing speeds and memory capacities approach and often exceed those previously reserved for minicomputers and mainframes. As a result, microcomputers can run not only such DBMS programs, they can also run some even powerful programs. These include not only more sophisticated operating systems but also high-powered applications, such as multimedia.
  2. More powerful secondary storage: in large organisations, db have always required storage devices that can hold a lot of data. This meant that company db required disk packs in order to create and retrieve large amounts of data. Only mainframes and minicomputers could handle the cost and processing speeds of these disk packs. Today two changes are taking place. (1) High volume storage such as optical disks is available for micro users. (2) In addition, when linked to communications networks, micro users have access to databases stored on disk packs.
  3. Microcomputers offer easier access to large databases: before in many large organisations, only people who could use terminals connected to a mainframe could get access to large database. Now, however, terminals are being replaced by microcomputers connected to local are networks or other communications networks to mainframes and databases.

ORGANISATION FUNCTIONS

Depending on the services or products they provide, most organisations have departments that perform five basic functions. These are accounting, production, marketing, human resources and research.

Their purposes are as follows:

Accounting department: keeps track of all financial activities. It pays bills, record payment, issue paychecks and compiles periodic financial statements.

Production department: makes the product. It takes in raw materials and puts people to work to turn out finished product/goods (services). The department may be a manufacturing activity or in the case retail store, for example, an operations activity. It manages purchases, inventories and flows of goods and services.

Marketing department: advertising, promotion and sales are handles by this department. The people in this department plan, price, promote, sell and distribute goods and services to customers.

Human resource department: this department finds and hires people and handles matters such as sick leave and retirement benefits. In addition, it is concerned with evaluation, compensation and professional development.

Research department: has two tasks (1) It does product research. That is, it does basic research and relates new discoveries to firm’s current or new products. (2) It does product development. That is, it develops and tests new products created by research people. It also monitors and troubleshoots new products as they are being produced.

MANAGEMENT LEVELS

Most people who work in an organisation are not managers, of course. At the base of the organisational pyramid are the secretaries, clerks, welders, drivers and so on. These people produce goods and services. Above them however, are various levels of managers, people with titles such as supervisor, director, regional manager and vice president. These are the people who do the planning, organising and controlling necessary to see work gets done. In smaller organisations, these titles are often combined.

Management in many organisations is divided into three levels: supervisors, middles-level managers and top-level managers.

  • Supervisors: manage and monitor the employees or workers, those who actually produce the goods and services. Thus, these managers have the responsibility relating to operational matters. They monitor day-to-day events and immediately take corrective action.
  • Middle-level Managers (middle management): deal with control and planning (also called tactical planning). They implement the long- term goals of the organisation.
  • Top-level Managers (top management): are concerned with long-range planning (also called strategic planning). They need information that will help them to plan the future growth and direction of the organisation.

Need highly summarizedLong range planning

informationResponsible for strategic planning

need less summarizedControl and planning

informationResponsible for tactical planning

Responsible for operational matters

Need day-to-day

information

(Figure 1.1: An Organisational Pyramid)

HOW INFORMATION FLOWS IN AN ORGANISATION

Each level of management has different information needs, top-level managers need information that is summarized in capsule form to reveal the overall condition of the business. They also need information from outside the organisation, because top-level managers need forecast and plan for long-range events. Middle-level managers need summarized information, weekly or monthly reports. They need to develop budget projections as well as to evaluate the performance of supervisors. Supervisors need detailed, very current day-to-day information on their units so that they can keep operations running smoothly.

(Figure 1.2: The Flow of Information within an organisation)

Top-level managers, such as the chief executive officer (CEO), need information not only from below but also from all departments. They also need information from outside the organisation.

Middle-level managers, the information flow is both horizontal and vertical across functional lines within the organisation.

Supervisors, information flow is primarily vertical. That is, they communicate mainly with their middle managers and with the workers beneath them.

THE LEVELS OF COMPUTER-BASED INFORMATION SYSTEMS

Computer based information system has three level

  1. Transaction processing System: records day-to-day transactions such as customer orders, bills, inventory levels and production output. The transaction processing system generates the database that acts as the foundation for other two information systems.
  2. Management information system (MIS): summarizes the detailed data of the transaction processing system in standard reports. Such reports might include production schedules and budget summaries.
  3. Decision support system (DSS): provides a flexible tool for analysis. The DSS helps managers make decisions about unstructured problems, such as the effect of events and trends outside the organisation. Like MIS, the DSS draws on the detailed data of the transaction processing system.

InputsOutputs

Some summarized reports, flexible, on-demand reports

some processed transactionto make decisions about

data, other internal plusunstructured problems: possible

external dataeffects of strikes, rising interest

rates, etc

processed transactionsummarized, structured reports:

data, other internalbudget summaries, production

dataschedules, etc

transaction dataprocessed transaction bills, paychecks

orders, etc

(Figure 1.3: The three levels of Information Systems)

TRANSACTION PROCESSING SYSTEM

The purpose of a transaction processing system is to help an organisation keep track of routine operations and to record these events in a database. The data from operations makes up a database that records the transactions of the company. This database of transaction is used to support a MIS and a DSS.

One of the most essential transaction processing systems for any organisation is in accounting area. Every accounting department handles six basic activities. Five of these are sales order processing, accounts receivable, inventory and purchasing, accounts payable and payroll. All these are recorded in the general ledger, the sixth activity.

(Figure 1.4: Transaction processing system for accounting)

  • The sales order processing activity records the customer requests for the company’s product or service. When an order comes in, a request for any product the warehouse is alerted to ship the product.
  • The accounts receivable activity records money received from or owed by the customer.
  • The parts and finished goods that the company has in stock are called inventory. An inventory control system keeps records of the number of each kind of part or finished good in the warehouse. Purchasing is buying of materials and services. Often a purchase order is used. This is a from that shows the name of the company supplying the materials or service and what is being purchased.
  • Accounts payable refers to money the company owes its suppliers for materials and services it has received.
  • The payroll activity is concerned with calculating employee paychecks. Amounts are generally determined by the kind of job, hours worked, and kinds of deductions (such as taxes, social security, and medical insurance). Paychecks may be calculated from the employee time card or in some case, supervisor’s time sheets.
  • The general ledger keeps track of all summaries of all the foregoing transactions. A typical general ledger system can produce income statements and balance sheets. Income statements show a company’s financial performance, income, expenses and the difference between them for a specific time period. Balance sheets list the overall financial condition of an organization. They include assets (for example, buildings and property owned), liabilities (debts), and how much of the organization (the equity) is owned by the owners.

MANAGEMENT INFORMATION SYSTEM (MIS)

A management information system (MIS) is a computer-based information system that produces standardized reports in summarized, structured form. It is used to support middle managers. An MIS differ from transaction processing system in a significant way. A transaction processing system creates databases whereas an MIS uses databases. An MIS can draw from databases of several departments. Thus, an MIS requires a database management system that integrates the databases of the different departments. Middle managers need summary data often drawn from across different functional areas.

An MIS produces reports that are predetermined. That is, they follow a predetermined format and always show the same kinds of content. Although reports may differ from industry to another, there are three common categories of reports:

  1. Periodic reports are produced at regular intervals, weekly, monthly or quarterly. For example sales or production reports.
  2. Exception reports call attention to unusual events. An example is a sales report that shows that certain items are selling significantly above or below marketing department forecasts.
  3. Demand report is produced on request. An example is a report on the numbers of jobs held by women and minorities. Such report is not needed periodically, but it may be required when requested.

DECISION SUPPORT SYSTEMS (DSS)

Managers often must deal with unanticipated questions. For example, how would a strike affect production schedules. A decision support system (DSS) enables managers to get answers to unexpected and generally nonrecurring kinds of problems. They do this using interactive terminals (microcomputers) and software. Interactive means that there is immediate communication between the user and the computer system. That is, when input data is entered into the computer, it is processed immediately. The output results are promptly displayed on the screen.

A DSS is quite different from transaction processing system, which simply records data and different from MIS, which summarizes data in predetermined reports. A DDS is used to analyse data. Moreover, it produces reports that do not have fixed format. This makes the DSS a flexible tool for analysis.

Many DSSs are designed for large computer systems. However, microcomputer, with their increased power and sophisticated software, such as spreadsheet and database programs, are being used for DSS. Users of a DSS are mangers, not computer programmers. Thus a DSS must be easy to use, or most likely it will not be used at all. Commands need to be in language-like English: “SEARCH” or “FIND”, for instance.

HOW DOES A DECISION SUPPORT SYSTEM WORKS?

Essentially, it consists of four parts: the user, system software, data and decision models.

  • The user: the user could be you. In general, the user is someone who has to make decisions, a manager, often a top-level manager.
  • System software: the system software is essentially the operating system programs designed to work behind the scenes to handle detailed operating procedures. In order to give the user a good, comfortable interface, the software typically is menu or icon driven. That is, the screen presents easily understood lists of commands or icons, giving the user several options.
  • The data: the data in a DSS is stored in a database and consists of two kinds. (1) Internal data is data from within the organisation, consists principally of transactions from the transaction processing system. (2) External data is data gathered from outside the organisation. Examples are data provided by marketing research firms, trade associations.
  • The decision models: the decision models give the DSS its analytical capabilities. There are three basic types of models: (1) Strategic models assist top-level managers in long-range planning such as stating company objectives or planning plant locations. (2) Tactical models help middle-level mangers control the work of the organisation, such as financial planning and sales promotion planning. Such models help middle-level managers implement top managers’ long-range plans. (3) Operational model helps lower-level managers accomplish the day-to-day activities of the organisation, such as evaluating and maintaining quality control.

EXECUTIVE INFORMATION SYSTEMS (EISs)

Also known as Executive Support Systems (ESSs) consists of sophisticated software that, like an MIS and a DSS, can draw together data from an organisation’s databases in meaningful patterns. However, an EIS is specifically designed to be easy to use. This is so that a top executive with little spare time can obtain essential information without extensive training. Thus information is often displayed in very condensed form and in bold graphics.

EISs not only permits a firm’s top executive to gain more direct access to information about the company’s performance. Some of them also have electronic mail setups that allow mangers to communicate directly with other executives. Some systems even have structured forms to help mangers streamline their thoughts before sending electronic memos. In addition, EIS may be organised to retrieve information from database outside the company, such as business-news services. This enables a firm to watch for stories on competitors and stay current on relevant news events that could affect its business.

OTHER INFORMATION SYSTEM

Information workers use office automation system and knowledge work systems. Information workers create, distribute, and communicate information. They are the organisation’s secretaries, clerks, engineers and scientists to name few. Some are involved with distribution and communication of information (like secretaries and clerks). They are called data workers. Others involved with the creation of information (like engineers and scientists). They are called knowledge workers. Two systems to support information workers are:

Office automation systems (OASs): are designed primarily to support data workers. These systems focus on managing documents, communicating and scheduling. Documents are managed using word processing, desktop publishing and other technologies. Communications include e-mail, voice messaging and videoconferencing.

Knowledge work systems: knowledge workers use OAS systems. Additionally, they are specialized information systems called knowledge work systems (KWSs) to create information in their areas of expertise. For example, engineers involved in product design and manufacturing use computer-aided design/computer-aided manufacturing (CAD/CAM) systems. These KWSs consist of powerful microcomputers running special programs that integrate the design and manufacture activities. CAD/CAM is widely used in the manufacture of automobiles and other products.