Management information system

UNIT-1

INFORMATION SYSTEM:-

Information is a term with many meanings depending on the context, but is

an a rule closely related to such concepts as meaning, knowledge,
instruction, communication, representation, & mental stimulus. Information
is the result of processing, manipulating & organizing the data in a way that
adds to the knowledge of the person receiving it. A message received &
understood. Data a collection of facts from which conclusion may be
drawn,” statistical data” knowledge acquired through study or experience
or instruction.

In order to work as an effective unit the business has to make use of the
information system, often regarded an another sub- system is
superimposed over & implanted in all sub- systems. The information
system is concerned with procedure with storage control & flow of
information, while passes between the functional sub-systems.

The information system provides for decisions & control, & acts as a
linking mechanism between the functional sub-system since the advent of
computers information provision has become an organizational function in
its own right.

The major information systems are: -

 Formal
 Informal
 Computer based

Formal information system:-

A Formal information system is based on the structure of the organization

as represented by the organization chart. The chart represented the
relationship between the positions & their authority an indicated by the
boxes, which are connected by straight lines. It is concerned with the
pattern of authority, communication, & workflow. Information is formally
disseminated by instructions, memos, or report from top management to
the intended user in the organization. This structure also allows feedback
to the chain of command for the follow-up. Input from the environment
provides implies for policy decision by top management.

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Management information system

Policies are generalization which specify what an organization ought to do.

Policies are translated into directives, rules & regulations & transmitted to
lower level management for implementation. The output represents the
employees performance.

Informal information system:-

The Informal information system is a power structure designed to achieve

company goals. An organization’s emphasis on control to ensure
performation, tends to restrict the communication flow among the
employees. As a result, an informal information system develops. An
Informal information system is employee based system designed to
meet personnel & vocational needs & to help solve work related
problems. It also funnels information upwards through indirect
channels. In this respect, it is a useful system because it works with
in the framework of the business & its stated policies.

Computer based information system:-

A third class of information system relies on the computer for handling

business application. The computer is a required source of information.
The various type of
Computer based information system are: -
• Transaction processing system.
• Management information system.
• Decision support system

MIS Definition:-

The MIS is defined as a system, which provides information support for

decision-making in the organization.

1. The MIS is defined as an integrated system of man & machine

for providing the information to support the operations, the
management & the decision-making function in the
organization.

2. The MIS is defined as a system based on the database of the

organization evolved for the purpose of providing information
to the people in the organization.

3. The MIS is defined as a computer based information system.

A computerized information-processing system designed to

support the activities & functions of company management.

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Management information system

A computer system designed to help managers plan & direct

business & organizational operations.

Management information system (MIS) is a subset of the overall

internal controls of a business covering the application of people,
documents, technologies, & procedures by management
accountants to solving business problems such as costing a
product, service or a business-wide strategy. MIS are distinct
from regular information system in that they are used to analyze
other information systems applied in operational activities in the
organization. Academically, the term is commonly used to refer to
the group of information management. methods tied to the
automation or support of human decision making.

A computer system, usually based on a mainframe or minicomputer,

designed to provide management personnel with up to date
information on an organization’s performance, e.g., inventory &
scales. These systems output information is a form that is useable by
managers at all levels of the organization strategic, lactical &
operational. A good example of an MIS report is an annual report for a
stockholder a scheduled report.

PURPOSE OF MIS: -

The purpose of MIS management information systems can be defined as “

The combination of human & computer based resources that results in the
collection, storage, retrieval, communication & use of data for the Purpose
of efficient management of operations & for business planning. Sources:
Kelly MIS are primarily concerned with the delivery of information to
organizational members from the shop floor workers to the management.
The purpose of MIS is to help the smooth running information on the firms
data employees from different levels will then evaluate this information so
that decisions can be made to ensure that the business remains
competitive & successful. MIS have been created to support the whole
range of business’s administration & regulatory activities & can be seen ib
all parts of the worlds.

Objectives of MIS: -

MIS system let you:

 Capture information & store it.

 Control flow of information into, around & out of your system.

 Work within legislation such as the Data Protection act.
 And a host of the other information related function.

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Management information system

 Manage resources
 Produce report for yourselves & outside organization, such as
funders.
Records & track outcomes
 Maintain records needed for quality control.
 Manage marketing information.

Management function, objectives

Function Objectives

• Finance Cash control for profitability ledge accounting cash

& capital budgeting fulfill statutory financial
requirement such as sales & excise tax, income &
wealth tax, interest on debentures etc. raise fund for
business expansion from equity / debt marks etc.

Forecast materiel requirement, labor requirements

• Production & control pending orders material explanation of
manufacturing assemblies requirement planning. Production
schedule for cost effective & optimum production .
reduction in clerical & labour costs costing.

• Marketing Market research monitor sales records & decipher

sales trends viz; customer tastes & preferences.
Schedule sales plans monitor sales personnel
performance pricing.

MIS Functions:-

 To support management decision making by helping managers to

establish & communicate aims & objectives, define standards, set &

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Management information system

measure performance & operational targets, check compliance &

report outcomes.
 MIS supports the key functions of management which are grouped
into five key areas: planning, decision making organization
coordination, leadership, motivation & control.
 Planning & decision-making are the primary management tasks. MIS
enables managers to establish plans which are predetermined
courses of action to reflect organizational objectives.
 MIS provides a means of communication for the organizations aims,
objectives, plans & targets.
 In computer operating conditions, management are faced by an
accelerating rate of change & at higher levels, considerable
uncertainty. Managers use MIS to help reduce uncertainty. MIS can
help managers communicate & simplify the organization’s
undertaking of problems & situations, so these are more
manageable.
 Effective MIS are fundamental to the management of change.

Reports are one of the main function of the MIS. Following reports are
required:

Periodic – Produced at a predetermined time interval.

Summarised – Aggregate information in same way.
Exception – Show only a subset of available information.
Comparative – Show two or more sets of similar information.

Role Of MIS And Importance:-

Role, characteristics & goal of an efficient MIS in an organization can be

summarized in the following statements:

 Information primarily geared to assist managerial decisional

process & control.
 Information communication based on relevancy with respect to
devise needs o management different levels.
 Timeliness of information.
 Information flow based on system approach linking diverse
activities of diverse departments within an organization to
exchange information. This approach obliterates data redundancy
& inculcates efficient & cost effective usage of data storage.

 Flexibility in information system to incorporate future

requirements of management on need basis. The need for
computerized MIS assumes significance due to the following
factors:

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Management information system

 In the absence of a computerized MIS, an organization fails to

meet its commitments persistently because of inappropriate &
delayed information that results in inappropriate decisions.
 Manual information deter the organization to accurate itself for
the current/future competition, diversification & / or expansion
strategic plans because the management is engrossed in finding
solution to ever increasing operational problems.
 Major advantage of MIS in an organization is improvement in
management process with decisions based on facts rather than
subjective approach or bureaucratic procedures. Benefits of MIS
may not be quantified in terms of monetary gains but be explored
radically. An efficient MIS obliterates the over dependency or
indispensability of expertise in an organization.

MIS Characteristics:-

An management information system is comprised of all the

components that collects, manipulate & disseminate data or
information. It usually includes hardware, software, people,
communicate systems such as telephone lines, & the data itself. The
activities involved include inputting data, processing of data into
information, storage of data & information, & the production of
outputs such as management reports. Following are the
characteristics of MIS.
MIS usually serve managers interested in weekly, monthly, & yearly
results not day-to-day activities- & generally address structured
questions that are known well in advance. These system are
generally not flexible & have little analytical capability. Most of these
systems are simple routines such as summarized & comparisons, as
opposed to sophisticated mathematical models or statistical
techniques.

Users of MIS

Management Control

Operational
6 Control
Management information system

Historical Development / MIS Growth and Development

The concept of MIS changed substantially over the years. In the 50’s and
60’s the management saw the potential of computers to process
large amounts of data speedily & accurately.
The departments that were involved with such activities were known as
Electronic Data Processing (EDP) departments. The focus of EDP was
record keeping e.g accounting data – payroll data.
In the 70’s there was a discernible shift from the data to information. The
focus was not on data but on the analysis of organization. There was a shift
in the philosophy. Such a concept came to be widely known as ‘MIS’.

Right information in right time to right people.

In the 70’s the top management relied on the staff of EDP & MIS to supply
the necessary information. The 80’s saw the personal computer (pc)
revolution. The personal computer & the desktop metaphore changed the
picture completely. The biggest pay-off for such direct use was the “ what –
if” analysis capability.
This led to the emerge of decision support system (DSS).
The information & decision hungry managers of 80’s saw a huge potential I

In the expert systems as a result of spectacular growth in the satisficial

intelligence area.
Combined with DSS philosophy the expert systems could supply a
superior class of managerial information support, known as knowledge
Based systems ( KBS).

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Management information system

The EDP targeted the operational level of management. The MIS/DSS/KBS

target the middle management.
Attempts were made to provide information to top management as well ,
known as Executive Information System (EIS).

AI Artificial
Intelligence

KS/ES Knowledge
8 Expert System
 Management information system

ESS Executive
Support System

DSS Decision
Support System

MIS Management
Information
System

OAS Office
Automation
System

TPS Transaction
Processing
System

• EDP = Focus on Data

• OAS = Focus on Communication
• MIS = Focus on Information
• DSS = Focus on Decision Support
• EIS = Focus on Decision Support for Top Management
• ES = Focus on consultation
• AI = Focus on Self-Learning / Thinking System

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Management information system

Stages Of Growth Of MIS:-

MIS development evolves from EDP systems. The EDP systems have
rudimentary technology to handle clerical and supervisory operations in an
organization. This is initiation stage. The advantages of computerization
are gradually realized by most of the people in the organization. This
realization leads to proliferation of computer networking technologies &
computer based system applications within an organization. This is
contagious stage. Next stage is typified by planning increases, a need is
realized for cost-benefit analysis. This is imperative to plan for future MIS
in a cost effective manner.
Next stage of MIS development is integration of subsystems. This comes
with realization of interdependence of inflow of data from various sources
for valid information. Management plan to leverage existing subsystem to a
unified system objective of a unified system is to obliterate data
redundancy and facilitate communication of information amongst various
departments. After creation of an integration system, management focuses
its attention to database administration. Here impetus is on regulatory data
for company wide communication. This stage is also referred to as a
architecture stage. Next to data administration stage an organization
reaches as stage of MIS maturity. This is the stage when MIS department is
geared up to plan future MIS needs for the organization. MIS department
future development plans emanate for feedback of the users of existing
MIS. At this stage, users are in complete control of MIS & become aware of
their system needs.

Transaction Processing System(TPS):-

TPS support the processing of an organization’s transactions which are

routine business Events & affect the financial health of an organization. All
TPS perform three rudimentary functions viz; Bookkeeping involves
keeping accurate record of company’s financial transactions. Issuance
involves the generation of business documents such as invoices, vouchers
& payables. Control reporting involves reports on transactions for control

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of accounts purposes. Computerized TP cycle consists of data entry,

transaction processing, file & database updating, reports & documents
preparation & inquiry processing. Data entry may involve off – line key to
media input, editing & data processing in batch processing system in
which data are accumulated & processed periodically or on line o real time
data processing system accepting input from source data automation
terminals with immediate processing & file updating. The examples of
important TPS are payroll processing, order entry systems, inventory
systems, invoicing systems, account receivable system, purchasing
systems, accounts payable systems, the general ledger systems etc .

Payroll Processing - Payroll processing generally a batch process, facilitate

generation of pay cheques, salary slips, deductions & provident funds summary.

Order Processing - An order entry system processes orders of the customers,

systems based on EDI ( Electronic Data Interchange) are being encouraged for
customers convenience, rapid delivery & faring ahead in this competition.

Inventory System - An inventory system monitors the stock maintenance by

setting in proper reorder level to order for EOQ Of raw materials, components,
good etc for the purpose of manufacturing or direct sales. These systems, based
recording the regular stock status & setting reorder levels for replenishment on
the basis of lead time also assist In determining size of regular purchase order
( EOQ) of materials based on trade off between order costs & estimated sales
with respect to inventory carrying costs & unit price of the material.

Invoicing System- Invoicing system generated invoices, challans & bills for the
received order for delivery.

Accounts Receivable System - Accounts receivable system manages customer

payments & their accounts balances. Accounts receivable system also generates
ageing reports on outstanding & facilitates adjustment entries for erroneous
billing by issuance of credit or debit notes.

Purchasing System: The purchasing system selects vendor from maintained

vendor information database, prepares a purchase order to be send to the vendor
& to be distributed amongst concerned office departments. The goods are
received, checked, accepted or rejected as these slipped by the vendor. The
records of goods accepted are properly added in the inventory maintained
through inventory system.

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Accounts Payable System: Accounts payable system handles payment to

supplier, managers vendors invoices, determines the optimum time to pay
invoices for efficient cash management & effects & records payments.

General Ledger System: The general ledger system integrates transaction data
from all other transaction processing subsystems. Major objectives of this
system is to formulate balance sheet of the company & prepare profit & loss
statement. This system also assists management in budget planning, cost
allocation income & profitability accounting.

TPS :

The most fundamental computer based system in an organization pertains to the

processing of business transaction. Transaction processing systems ( TPS)
are aimed at improving the routine business activities on which all organization
depend. A transaction is any event or activity affects the organization. Common
transactions include placing orders, billing customers, hiring employees &
deposing checks. This types of transactions that occur very from organization to
organization. TPS, that is, the set of procedures used for handling the
transactions often includes the following activities. Calculation, classification,
sorting, storage & retrieval, summarization. These occur at the operational level
in any organizations will show that similar characteristics exist in each firm:
1. There is a high volume of transactions.
2. Each transaction is similar.
3. The procedures for processing the transaction are well understood &
can be described in detail.
4. Few exceptions to the normal procedures occur.
These characteristics allow routines to be established for handling the
transaction.

Decisions Support System (DSS):-

DSS are a class of computer based information systems including

knowledge-based systems that support decision-making activities.

Characteristics of DSS:-

The characteristics of DSS are that these are more flexible & adaptable to
rapidly changing decision-making requirements than other popular mgt.
Information & reporting system. The criterion of DSS is to provide
managers with a set of capabilities or alternatives, which they can sieve

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out, generate information to enable decisional processes. DSS advances

the capabilities of MIS. It assists the mgt. In making decision. All decision
are not of a recurring nature. DSS assist managers who must take decision,
which are not highly structured decisions. A decision is considered
unstructured if:
• There are no clear procedures for taking the decision.
• Not all the factors to be considered in the decision making process
can be readily identified in advance.

A key factor in the use of decision support system in determining what

information is needed. In an unstructured environment, it is difficult to
identify information needs in advance. As information is acquired, the
manage may realize the additional information is required, i.e. having
information may lead to the realization of the other requirements.
Consider the decision process followed by the banking officers who
must decide whether to begin offering cash management accounts or
installing automatic letter machines. Both completely new banking
services among the many question to be answered are the:
• What will each service cost?
• How many teller locations are needed.
• Who will the competition respond to this?
• What limits should be placed on withdrawn at anyone time?
• Can a charge be imposed for this service?
• Will this service result in additional deposits & thus, more cash
inflow for the bank?

In such cases, it is impossible to pre-design system report formats

& contexts. A DSS must therefore have greater flexibility than other
information systems. The user must be able to request report by
defining their context & even by specifying how information is to be
produced. The DSS supports but does not replace the managers
judgment.

Executive Information System (ESS):-

An ESS is a type of mgt. Information system intended to facilitate &

support the information & decision-making needs of senior
executives by providing easy access to both internal & external
information relevant to meeting the strategic goals of the
organization. It is commonly considered as a specialized from a

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Management information system

DSS. The emphasis of EIS is on graphical displays & easy-to-user

interfaces. They offer strong reporting & drill down capabilities. In
general, EIS are enterprise wide DSS that help top-level executives
analyze, compare, & highlight trends in important variables so that
they can monitor performance & identify opportunities & problems
EIS & data warehousing technologies are converging in the
marketplace.

EIS is a reporting application targeted for use by executives, the

information is small & concise but yet powerful for the executives to
understand. The information is meant for the board of directors or
chairpersons. They have relatively easy to use graphics &
presentational facilities so that senior executives can make
boardroom presentations. Proprietary software tools support these
system.

History:-

Traditionally, executives information systems were developed as

mainframe computer based programs. The purpose was to package a
company’s data & to provide sales performance or markers, as such
financial offers, marking directors, & chief executive offers, who were not
necessarily well acquainted with computers. The objective was to develop
computer applications that would highlight information to satisfy senor
executives needs. Typically, EIS provide data that would only need to
support executive level decisions instead of the data for all the company.
Today, the application of EIS is not only in typical corporate hierarchies,
but also at personal computers on a local area network. EIS now c cross
computer hardware platform & integrate information stored on
mainframes, personal computer system, & minicomputers. As some client
service companies adopt the latest enterprise information system,
employees can use their personal computer to get access to the
company’s data & decide which data are relevant for their decision-
makings. This arrangement makes all users able to customize their access
to the proper company’s data & provide relevant information to both upper
& lower in components.

Components:-

The components of an EIS can typically be classified as:

• Hardware
• Software
• Interface

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Management information system

• Telecommunication
• Application
• Manufacturing
• Marketing
• Financial

Advantages & Disadvantages:-

Advantages:-

• Easy for upper level executives to use extensive computer

experience is not required in operations.
• Provide timely delivery of company summery information.
• Information that is provided is better understood.
• Improves to taking information.
• Offers efficiency to decision makers.

Disadvantages:-

• Functions are limited, cannot perform complex calculations.

• Hard to quality benefits & to justify implementation of an EIS.
• Executives may encounter information overload.
• System may become slow, large, & hard to mange.
• Difficult to keep current data.
• May lead to less reliable & insecure data.
• Small companies may encounter excessive costs for
Implementation.

Expert System:-

A computer program that follows a logical pathway or algorithm to a

conclusion in a manner that mimics what an expert in the field would
follow. An expert system is a computer program that contains some of the

Subjects- specific knowledge & contain the knowledge & analytical skill of
one or more human experts.
Expert System provides advice to decision maker, which is normally
received from human experts. The expert systems continue to dynamically
formulate & pose question to a decision maker who Reponses interactively.
It is geared to advice & recommend. For example an Expert System on
financial investment asks for investment makers preferences & current

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Management information system

investment portfolio held by him before recommending idle investment

plan by drawing requisite information from its knowledge base constituting
stock description & histories, economic scenarios, research reports,
industry V/S corporate plans & corporate vision, mission & future plans. for
instance a medical Expert Systems may use patient symptoms, medical
history & provide a diagnosis for recommendation or a medical expert
system may be goal driven to determine the patient disease by hypothesis
by posing questions to refute or confirm the diagnostics process examples
of the popular Expert Systems are MYCIN & CADECUCIUS for medical
diagnosis.

An expert system is a set of programs that manipulate encoded knowledge

to solve problems in a specialized domain that normally requires human
expertise. An expert system’s knowledge is obtained from expert sources
& coded in a form suited for the system to use in inference or reasoning
processes. The expert knowledge must be obtained from specialists or
other sources of expertise, such as texts, journal articles, & databases.
This type of knowledge usually requires much training & experience in
some specialized field such as medicine, geology, system configuration, or
engineering design. Once a sufficient body of expert knowledge has been
acquired, it must be encoded in some form, into a knowledge base, then
tested, & refined continually throughout the life of the system. Application
domain includes law, chemistry, biology engineering, manufacturing,
aerospace military operation, finance, banking, metrology, geology,
geophysics & more. The list goes on & on.

Characteristics features of Expert System:-

Expert system differs from conventional computer systems in several

important ways.

1. Expert systems use knowledge rather than data to control the

solution process. “in the knowledge lies the power” supported
through this book. Much of the knowledge used is heuristic in nature
rather than algorithmic.
2. The knowledge is encoded & maintained as an entity separate from

3. The control program. As such, it is not compiled together with the

control program itself. This permits the incremental addition &
modification of the knowledge base with recompilation of the control
programs.
4. Expert systems are capable of explaining how a particular
conclusion was reached, & why requested information is need
during a consultation. This is important as it give the user a chance

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to assess & understand the system’s reasoning ability, thereby

improving the user’s confidence in the system.
5. Expert systems use symbolic representations for knowledge &
perform their inference through symbolic computations that closely
resemble manipulation of natural language.

Application of Expert system:-

Expert systems are the designed & related to facilitate tasks in the fields of
accounting, medicine, process control, financial service, production,
human resources etc. indeed, the foundation of a successful Expert system
depends on a series of technical procedures & development that may be
designed by certain
Technicians & related Experts. When a corporation begins to develop &
implement an Expert system project, it will use self-sourcing, in sourcing
&/ or out sourcing techniques.

Advantages:-

• Provide consistent answers for repetitive decisions, process & tasks.

• Hold & maintain significant levels of information.
• Reduces creating entry barriers to competitors.
• Review transactions that human experts may overlook.

Disadvantages:-

• The lack of human common sense needed in some decision-

makings.
• The creative responses human experts can respond to in unusual
circumstances.
• Domain experts not always being able to explain their logic &
reasoning.
• The challenges of automating complex processes.

• Not being able to recognize when no answer is available.

Geographic Information System (GIS):-

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 Management information system

Geographic Information System (GIS) are the special purpose,

computer-based systems for the capture, storage, retrieval, analysis &
display of spatial data.

Recent Development In the Field Of MIS

AI

Artificial Intelligence

KS/ES

Knowledge /Expert
System

ESS

DSS Executive Support

System
Decision Support
System

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Management information system

DSS - Focus on Decision Support

 EIS - Focus on Decision Support for Top management
 ES - Focus on consultation.
 AI - Focus on self- learning/ thinking systems.

DSS:-

In the 70’s the top management relied on the staff of EDP & MIS to Supply
the necessary information.

The 80’s saw the personal computer (pc) revolution.

The personal computer & the desk –top metaphor changed the picture
completely.

The biggest pay off for such direct use was the “what – if” analysis
capability.
This led to the emerge of decision support systems (DSS)
The information & decision hungry managers of 80’s saw a huge potential
in the expert systems as a result of spectacular growth in the artificial
Intelligence area.
Combined with DSS philosophy the expert systems could supply a
superior class of managerial information support, known as knowledge
based system (KBS).
The EDP targeted the operational level of management.
The MIS/DSS/KBS target the middle management.
Attempts were made to provide information to top management as well,
known as Executive Information System.

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