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Process of Generation of Information It involves three activities: (a) Data Acquisition - Data is initially recorded and later verified for accuracy and authenticity. This is called dta capture. Data is captured by punching with keyboard or scanning with scanning devices, facts from documents on which they were recorded. Data captured is organized in data files. Each file contains records relating to various data elements (fields) expressed with the help of different symbols (characters). (b) Data Transformation It is done by performing any of the following operations: (i) Rearranging: also called sorting of data (ii) Classifying (iii) Calculating (iv) Summarizing (c) Management of Information The processed data maybe either communicated to end user or maybe stored for future reference. One decides the report format, appropriate channel of communication to provide information. If stored, one decides to store it on some mass storage.
System An assembly of inter-related elements comprising a unified whole. The components (elements) are connected together in order to facilitate the flow of information, matter or energy. It works towards a common goal by accepting inputs and producing outputs. Control System Feedback
Input
Process
Output
What is Information System? It is an organized combination of people, hardware, software, communications networks, and data resources that stores and retrieves, transforms, and disseminates information in an organization.
Strategic & End User Support (1980s/1990s) e.g. Expert System, etc.
Decision Support System (1970s/1980s)
Elements/Resources of IS
Computer Hardware Refers to computer systems and other associated equipment including the communication links that a modern IT installation may need. One needs to assess the nature of IT needs, the volume of data to be processed, sources of data, complexity of data analysis and impact of other related factors to determine the hardware resources. Computer Software It is the lifeline of the IT infrastructure and it makes the computer hardware function. It is set of interrelated computer programs. Data Collection of facts or events from both internal and external sources represented in the form of symbols, such as digits, alphabets, pictures, graphs, etc. Capturing, processing and storage of data are the essential functions. Human Resource They are the catalyst in process of generation of information and thus are very vital. Procedures It includes the operational and control procedures for the use of IT infrastructure. It contains instructions for users regarding the use of IT infrastructure for day to day activities and for also handling specific situations.
Roles of IS -Focuses on competitive priorities. - Supports Business Process and operations -Provide access to information -Enhance communications -Provide decision assistance -Supports strategies for competitive advantage - Summarizing the three major roles of the business applications of IS
Information Systems
Types of Information Systems Two categories depending upon their focus on the kind of activities in a business enterprise 1. 2. Operations Support Systems Management Support Systems
Operations Support Systems Focus on the operations of the enterprise Objective is to improve the operational efficiency Use internal data primarily For lower level of managers Classified into the following categories a) Transaction Processing System b) Process Control System c) Enterprise Collaboration System
a) Transaction Processing Systems -Focus on the recording and processing of economic events (transactions) -It processes transactions in two ways batch and real-time (or online) -It encompasses the entire gamut of daily routines of the enterprise including financial accounting, inventory control, payroll, sales order processing system. -TPS s were one of the earliest computerized systems that organizations used to capture valuable decision-making data and to conduct every day business. - Almost all organizations have manual or automated TPS. Examples of TPS Coffee shop Bank Doctor Nasdaq- the e-stock exchange handles up to 1000 stock transaction /second -TPS are considered the backbone of many organizations without it managers couldnt make basic decisions such as how many items to produce? - Transaction can be internal or external Internal: occurring inside the organization External: occurring outside the company, customer places an order from a company catalog
-Few years ago a separate transaction systems existed for each department in a company - Now many organizations are integrating the TPS systems of each department so that users can see how their decision affect other parts of the organization and the customers. -TPS are the data lifeline of a company for several reasons: If a company fails to capture a transaction it may lead not only to customer dissatisfaction and lost profit but also to serious penalties and lawsuits. TPS s become the source of data for other systems in the organization. If analyzed and integrated it will give business key information about new company plans. A better plan how to meet customer needs and preferences. TPS is a link between the organization and external entities, such as suppliers, customers & distributors.
Enter data
Validate data
Step 6
Step 5
Step 4
Generate output
(b) Batch Processing Processing that done on a daily, weekly, or monthly basis or any period of time. Disadvantages of batch processing The information in the files may not up-to-date.
Some errors may be detected only after the entire batch is processed in on-line processing errors can be detected right away.
Which type of processing is better?
6.
b) Process Control System Monitors & control physical process c) Enterprise Collaboration Systems -Enhance team and workgroup communication and productivity, and include applications that are sometimes called office automation system.
Management Support System - Information System application focus on providing information and support for effective decision making by managers. a) b) c) Classified into following categories Management Information System Decision Support System Executive Support System
a) Management Information Systems - Aims at meeting the information needs of managers, particularly with regard to the current and past operations of the enterprise. Offers summary and exception reports on the operations of the enterprise and are also called as operations support systems.
Summary Report :A report that accumulates data from several transactions and presents the results in a condensed form. Exception Report: A report that outlines any deviations between actual output and expected output. The main input to an MIS is usually the transaction processing system and other internal company sources
Benefits of MIS: 1. Provide middle managers with information to make semistructured decisions. 2. Information generated by an MIS helps managers understand the day-to-day operations of the company 3. Helps managers implement the tactical goals of the company. MIS is a group of general-purpose, well-integrated systems that monitor and control the internal operations of an organization. Features Summary and exception Information Operational Control Focus on Internal Information Structured and semi-structured Decision
- DSS:- A set of interactive software programs that provide managers with data, tools, and models to make semistructured decisions.
-Some activities that a DSS can perform: Selecting the best loan package to meet your needs. Identifying an ideal location for a store
Why People are excellent at applying intuition & judgment to solve problems (answering why questions)
DSS uses computer computations and put them into models that systemize decision processes
A DSS has five main characteristics: 1. DSS integrates data & models so that it is easier for managers to make good decisions. 2. DSS helps managers see how decision interrelate and the effects of one decision on others. 3. It supports a wide variety of decision-making styles. 4. It helps managers make decisions under dynamic or changing business conditions 5. DSS allows users to query the system for a specific answers.
3. Risk analysis: A DSS calculates the risk associated with each alternatives.
Decision-making Models
External Data
Decision Models
Statistical Models allow user to perform a wide range of statistical functions (average, standard deviation, graphic analysis.) Financial and Accounting Models to measure and assess the financial implications of different alternatives. (profit-or-lose analysis, cost-benefit analysis.) Production Models help to estimate number of machines to operate, amount of material required to meet the predetermined demand Marketing Models help marketing managers make a wide variety of decisions (product pricing, store location, advertising strategies..) Human Resource Models help managers to make decisions that involve in company personnel (assessing training needs estimating future personnel needs evaluating hiring & firing policies.
Benefits - evaluation of a larger number of alternatives - modeling and forecasting becomes easy - useful in intra group and inter group communication - in depth analysis of data and thus more effective use of data resource
The main difference between DSS & EIS is that EIS is used to deliver & display information (information delivery), while DSS is used to analyze a problem(problem solving) Today many systems are a combination of DSS & EIS, these systems are known as Executive Support System An EIS has many features that a DSS has, such as drilldown, which allows employees to obtain summary or detailed data with a few simple keystrokes.
Drill-down: the ability to provide information at the level of detail that the decision maker demands.
EIS: information system that analyzes and presents information to executive decision makers in a useful, friendly, and customized format.
Applications of EIS - Executive Briefing - Personalized Analysis - Exceptions Reporting - Model based analysis
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2. 3.
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Expert System
One of the AI fields is Expert System (ES) Expert systems are computer programs that capture the knowledge of a human expert and use it to solve complex problems. Knowledge appears in different forms in an organization such as an innovative ideas for a products, a new way to motivate employees, a new production method.. The main goal of ES is to capture knowledge of experts in all forms and use it to solve complex problems of an organization in a relatively narrow domain. ES then are versatile and can help with many kinds of problems. It attempts to represent knowledge of human experts in the form of heursitics.
User
Poses Problem
User Interface
Inference Engine
Knowledge Base
Knowledge Base
Human experts Journals Books others
Databases
2.Inference engine
The inference engine is similar to the reasoning of the human brain.two popular reasoning possesses that an expert system uses: 1. Forward chaining 2.backward chaining In forward chaining, the inference engine begins with a set of known facts, analyze the data and looks for solutions that match the data set. In backward chaining, the inference engine begins with a goal and search for data, facts, and other evidence that support this goal. Inference engine:a component of expert system that perform a reasoning function that results in advice to
forward chaining
Data start Rule 3 Rule 1 Rule 2 Rule 4 Goal End
Data
End
backward chaining
3.User interface
User interface combines the knowledge base & inference engine in a way that makes it easy for the user to interact with the system.
An expert system is a software program that captures the knowledge and problem-solving skills of a human expert. Expert systems are ideally suited for problems that require knowledge, intuition, and judgment. Expert systems, unlike DSS and EIS, can replace the decision maker. The three main components in an expert system are the knowledge base, the inference engine, and the user interface.
Benefits of an Expert System - Coding of expertise - Enhanced understanding of business process - Timely availability of expertise - Easy replication - Strategic Application
Limitations - Limited Focus - Inability to learn - Maintenance problems and developmental costs - Limited domain of knowledge
Office Top
EIS
Automation
Systems
Middle
KMS Cycle
Knowledge Manage
Disseminate
Store
Knowledge information that is contextual, relevant and actionable. Knowledge is information in action and is exercised to solve a problem Knowledge is of two types Explicit knowledge- deals with more objective, rational and technical knowledge Implicit Knowledge- cumulative store of subjective or experiential learning MIS focus on explicit knowledge KMS refers to the use of modern technologies the internet, intranets, extranets. Benefits -Sharing of valuable organizational information - reducing redundant work - reducing training time for new employees
- To change the scope of competition by either enlarging the market or narrowing the market
At the business level the most common analytic tool is value chain analysis.
Value chain model: Model that highlights the primary or support activities that add a margin of value to a firms products or services where information systems can best be applied to achieve a competitive advantage. Primary activities are most directly related to the production and distribution of the firms products and services that create value for the customer Primary activities
include inbound logistics, operations, outbound logistics, sales and marketing, and service.
Support activities make the delivery of the primary activities of a firm possible and consist of organization infrastructure (administration and management), human resources (employee recruiting, hiring, and training), technology (improving products and the production process), and procurement (purchasing input).
Organizations have competitive advantage when they provide more value to their customers or when they provide the same value to customers at a lower price. Firms can use information systems to create unique new products and services that can be easily distinguished from those of competitors.
Data mining: Analysis of large pools of data to find patterns and rules that can be used to guide decision making and predict future behavior. The cost of acquiring a new customer has been estimated to be five times that of retaining an existing customer. By carefully examining transactions of customer purchases and activities, firms can identify profitable customers and win more of their business.
Supply chain management: Integration of supplier, distributor, and customer logistics requirements into one cohesive process. Supply chain: A collection of physical entities, such as manufacturing plants, distribution centers, conveyances, retail outlets, people, and information, which are linked together into processes supplying goods or services from source through consumption. To manage the supply chain, a company tries to eliminate delays and cut the amount of resources tied up along the way. Information systems make efficient supply chain management possible by integrating demand planning, forecasting, materials requisition, order processing, inventory allocation, order fulfillment, transportation services, receiving, invoicing, and payment.
SUPPLY-CHAIN MANAGEMENT
CUSTOMERS
ORDER PROCESSING PLANNING & FORECASTING
SUPPLIERS
PROCUREMENT ACCOUNTING
INTRANET
PRODUCTION
LOGISTICS SERVICES
SHIPPING
INVENTORY
DISTRIBUTORS
INDUSTRY LEVEL STRATEGY & IT How and when should we compete as opposed to cooperate with others in the industry? Firms can cooperate to develop industry standards in a number of areas; they can cooperate by working together to build customer awareness, and to work collectively with suppliers to lower costs. Information partnership: Cooperative alliance formed between two corporations for the purpose of sharing information to gain strategic advantage. Such partnerships help firms gain access to new customers, creating new opportunities for cross-selling and targeting products. They can share investments in computer hardware and software. At industry level, two analytic models are used: the competitive forces model and network economics. Competitive forces model: Model used to describe the interaction of external influences, specifically threats and opportunities, that affect an organizations strategy and ability to compete. Network economics: Model based on the concept of a network where adding another participant entails zero marginal costs but can create much larger marginal gain. Used as a model for strategic systems at the industry level.
Business can counter the threats of competitive forces by implementing five basic strategies1. 2. 3. 4. 5. Cost Leadership Strategy Differentiation Strategy Innovation Strategy Growth Strategy Alliance Strategy
Other Competitive Strategies 1. 2. 3. 4. 5. 6. 7. Improving Business Processes Promoting Business Innovation Lock-in Customers and Suppliers Creating Switching Costs Raising Barriers to Entry Leverage Investment in IT Developing a strategic information base
MARKET ANALYSIS
PRICING ANALYSIS
DETERMINE PRICES
MANAGEMENT
SALES TRENDS
STRATEGIC
KNOWLEDGE
FACILITIES LOCATION
STRATEGIC
PORTFOLIO ANALYSIS
KNOWLEDGE
BUDGETING
PROFIT PLANNING
STRATEGIC
CAREER PATHING
KNOWLEDGE
COMPENSATION ANALYSIS