-

UNIT 9 INFORMATION SYSTEMS AND

CTIONAL ARlEA APPLICATIONS
Structure

Introduction
0b.jectives
Infor~iiationfsom Data
Types of Information
Information in Managerial Functions
Information Source: Internet
Information Systems ill Management
System De\/elopment: A Strategic I.'l;~~ilii~~g
P~.ocess
Progra~nmedancl Non-P~.ogrammecIDecisio~is
Environmental a11dCompetitive Information S!'stem
Infol-mationSystems in Functional Arerts ancl Ilccision
9.1 1.1 Marlteting
9.1 1.2 Operations Mana,ilement
9.1 1.3 Financial Management . 1*

9.11.4 Human Resource Management

Summary
Unit End Exercises
References and Suggested Further Reacliligs

9.1 INTRODUCTION
The world is passing through an important era in wliicli k~iowledgeis co~isideredto be
a supreme source for all other activities. Well-appreciated strategic decisions are the
outco~iieof good knowledge. Acquirement of k~iowledgeat one point oftime and
coiiti~iuousupdating keeps ;perso~i fit for business survival in tlie competitive
environ~i~ent. Learning froni persdhal experience is one way of gaining k~iowledge.
But as we know. it takes lot of tinie and some times it niay become impracticable.
K~iowledgegained t h o ~ ~ otlier
g h s o ~ ~ r clike
e s educntio~i,interaction witli others and
otlier means is comparatively faster. Information enriches tlie k~iowledge.Role of
informati011and knowledge in managerial decision-making is inevitable ill nature. In
managerial fi~nctio~is, knowledge integrates the activities of different departments and
enables tlie decisioli maker to take riglit decisions. Fitrtlier i~~formation enriclies the
nianqgel-s about tlie latest sce~ia'~.io
on tlie vital areas of functional ~lianage~iient like
Finalice, Marketing, Hunian Resource arid Operatiolis, Inforniatio~iis not only tlie
fou~idationfor any business: it tilso plays tlie role of bricks ill builclilig up tlie busi~iess
decisio~is.The generation and dissi~iiiltltionot'information should be a co~itinuous
process ill tlie orga~iization.

i unit you will pet an overview of basic i~ifoniiationsystems with focus 011
111this
I fi~nctio~ial
areas, 'l'lie co~iiirigtwo i~liltswill den1 witli HR and M~rketing
i ' M~~ingeme~it
and Opertitio~ismid Financiiil Mr!ringc~ne~~t respectively,
,
I
 Infi,~.rns
tion Systems - IT
I --.- .--
9.2 OBJECTIVES
After reading this unit: you should be able to:
@ Describe the importance of inforniation in managerial fi~~ictions:
@ Identifi the role of iilfoniiation:'
@ Identifi. and appreciate
. -
tlie basic infonliation s!.stcms.
@ Diagnose tllc situatio~lfor de~~clopmcnt of infonilation s!,stem: and
Attribute tlie role of i~~foniiation s!~stc~iisin fi~nctio~ial
rircns of maliagcmcnt.

9.3 INFORMATION FROM DATA

In siniple teniis. ilifor~iiatio~i
is defined as tllc processed for111of statistical data It 1s
i~iiporta~ltto note tliat i~lfoniiation2nd data arc different to connote. But the! arc
intcrrclatcd, Tlie raly dntn collected about an!. plicno~llcnonma!. be iiscd to iplcrntc
tlic required infor~i~atio~l
While processing the data for tlie information: one iiecds'to keep
tlie fo!lo\vilig i i mind.
0 Data sliould be accurate ,
Data should be rele~~ant
Data sliould be tinie sclisitive
Infoniiatioli processilig fro111the ran1data cat1 be represented as information fi~iincl.
Procurement of correct i~ifon~iation in right time is onc of thc importa~itaspects for
busi~iessdecisions. Having tlic riglit itifoniiatio~iin hand, business organization call be
proactive in its activities to tllasiliiize tlic business profits. Tlic follov ing schcli~ntic
chart i~idicatcsthe positioli of the infomintion among other relevant clinrnctcristics
like data. kilorvledge. and wisdom. .
LVistlorn

1
9.1: Position of the Infomation
Fig~rc

Thc classiticatio~is l i o ~ ~belo\~.'portrnys

n tlie idea of generation of iiifor~nati~n
fro111
data. The different stages in tlie process could be statcd as:
Sumniarizing
I
" *. Data trimming /mining
0 Presentation and
II @ Indosi~~g
1 .--
Summarizing Information Systenis a n d ,
Fonctionnl Area Applications
.Data col lecred for want of information usually available in tlie form of questionnaire,
note. or the official unclassified formats. 'l'he first step towards the
analysis is bringing tlie data into tlie required for111of tables or arrays so that further
treaLment of data is possible. Grouping of the data under different category will
cnahle the analyst to identify a specific tool for analysis. 'rlie manual process of
summariziiig may leacl to the delay in tlie process. The computerized data processing
for summarizing tlie data through selected software espedites ;he process. For
e\amplc the sales data obtainccl from different sales ccnters may be required to
classiFy on the basis of various parameters lilce u~.ban,sub-urban, rural and other
bacl,ward areas to study in detail about tlie factors affecting the sales. The data
collected from an organization to understand tlie organizntio~isllbehavior towards the
employees welfare need to be classified on the basis of different categories of
employees.

@ Su~ntnnrisntion
0 Dntn Trimming
Pre3cnt:;tion

I
Irrclcvatit
Iirformiition
Fncts I
I lafornintion . &

i=]> Data base

Discard

lnvestiga te
Sources (Inside or
Outside the Net) ,

Figure 9.2: Data and Information

-. . .-+--.'.-""
I , . -. , * . . . . "--

,
Soul.ce: h//p '/vi.rioiic/i:vilr(~~~I,>
Data Trimming
Data trimming is the condensation or consolidation of statistical data for retrieving I

information. Tliere are specific statistical data reduction tools fortrimming the data.
Depending L I P O ~the
I nature ofthe data and tlie objectives of the study, tlle tools are
decided. I n practical situation we come across a huge volume of data for retrieval of
inforination and the application of co~nputersand the statistical software are used at a
large scale to draw conclusions. Suppose that the production department in a
man~~facturing company has the data on the number of units demanded i n a year, the
n111nher of times ordered, the quantity supplied etc., about its product. The company I
may be interested to find out various parameters associated with the productioi~like
tlie opti~numqiia~~tity to be produced, the lead time for the order etc., Wit11 the
application of statistical packages related to tl~einve~itoryproble~ns,it is possible to
derive tlle required information. I

Presen tntion
Tlie outcome of the data triniming is the uninterpreted statistical results. The results
obtained need to be related to the objectives for the meaningful representation. Tlie
process of depicting the statistical results in the desired form (charts, diagrams,
schematic representation etc.,) is called presentation. The presented results will
reveal tlie information in a better way. Information, as an object could be derived
from tlie presented results.
Indexing
Indexing or codification oftlie resil Its is required for fi~rtllerprocessing of information
like storage and retrieval, modification, converting into electronic mode for
commi~~iication etc., The codification is the base for presenting the information on
web pages. In the Internet searcll the codes are recognized by tlie computer at a
greater speed to retrieve them from the data dictionary or catalog. The big con-lpi~ter
databases are designed and used for data retrieval through proper indexing of the
data. p i 7 iraw
~ ~ data
~ collected from the field beconies infor~nationin the final forrn.
This has been depicted in a schematic representation given above.

TYPES OF INFORMATION
lnfor~nationretrieved from raw datacould be classified in different categories as:
1) Facts
2) Assumptions
3) Collateral i~ifor~nation
4) Fragmentary infor~natio~~
5) Irrelevant information
Facts are the accurate inforination. The infor~nationgenerated with the assumption of
~natliernaticalmodels is called reliable inforlnatio~iwithout any uncertainty. In some
statistical analysis certain amount of probability is used to predict the required results. !
Si~chinfor~liationmay not be 100% true. This type of information is called
informati011based OII assu~nptions.The other type of information is called collateral
and fragmentary infonnation. Tl~istype of i~ifor~nation cannot be directly retrieved but
is a parallel source of information. It is not considered to be highly reliable. Such
sources need to be investigated for acceptance.. ,

Before going illto details about fu~ictiolialarea applications of illformation, let us take
sonie situations that higliliglit the information requirement and its typology. The I

fol lowi~igare some of the managerial situations wliere the information requirement is
evident ill businesp situations.
-!
 Table 9.1: Infornlation Requirelnent in Managerial Situations Information Systems and
Functional Area Applic :I t'Ions

Situation Data Availability Tools for Analysis

A manufacturing company. which is Sales Data Statistical Forecasting

. interested to decide about the number
of units to be produced in the next
month to meet the market dernand.

Financial institution wants to decide Financial repoi-tsl Internal rate of return

about the better optioiis available balance sheets of (IRR) and Yield to
Ibr the investment different companies maturity (YTM)

The personal department in an Data available with Replacemelit problems

organization, which is interested personnel department for personnel
in deciding about the n ~ ~ ~ n b e r recruitment.
of nlarlicting executives to be
recruited for the next quarter.

Service branch of a nationi~lized Yearly Data on the Waiting Line Models

bank would like to determine the number of customers
number of counters to be kept visit the bank during
open during the peak hours to different seasons
serve tlie customer with the most
satisfaction.

In each of tliese above situations tlie manager responsible for taking decisions
requires sufficient infortnation from the relevant records available with the
'
organization. Tlie term information means collectio~iof facts fro111which business
decisioris can be drawn. Facts and figures collected in this connection will enable tlie
company to go for a valid decision.

9.5 INFORMATlON IN MANAGERIAL FUNCTIONS

-
With tlie representation oi' Antony's structure, tlie data available at different '

fi~nctionalareas of management could be presented as follows:

Figure 9.3: Data Available at Different Functional Areas

I C

At operational level, organization gets in contact with public for i~iforlnatio~i I

r
procurement ancl dissemination. All types of inputs available from various so~ircesare i
gathered at tliis level. The routine office work like maintaining inward register,
2
maintainingof public relations, ~l~iderstatiding tlie exter~ialrequiretilent etc. are ~nostly 1
done at this level. T l i o ~ ~ g110h decision making process is carried out, proper
accumulation of data has to be done at this level for fl~rtherprocessing.
Hence it is suflicient to have a trained manpower that can act as per the computer-
assisted instnlctio~ls.At middle level of management, the input obtained fioin internal
and external sources of iufonnation will be processed for strategic decisioi~s.This
lcvel consists of ~lliddlclevel managers ~ 1 1 0can contribute significa~itlyfor the
de\fclopmentof organization. Different options available for each of the objectives
are evaluated carefiilly using the scientific tools of analysis and outconles are
reported. Thc role of middle level decision process is collsidered to be very crucial
beca~~se the output reccived froin this level is taken as input for tactical decision-
making. The highest'level in this hierarchy is the tactical decisions. This is the
decision-making group \vhich should ultimately be supported by the online
i~lfonnation.

To lligllligllt the infonllation needs of the organizatioi~;the sources are classified as

internal and external. We may co~lsiderthe followiilg classification to understaild the
types of elenle~~ts providing information in general for any organizatio~lirrespective of
its nat~11.e.

I I SBudgets
P ~ ~ Ii~nd

Sales FOI-ecituting
Labout-01-iented

c Cl;lssifici~ttion
F i y ~ r 9.4: of Info~mittiollNeeds

Educating the managers of the companies to understai~dthe inforination generation,

treatnlent of ~nfonnationand applicatiolls in real decisio~l-makingis very essential.
The task of iilfonliatioll gel~eration:process of i l ~ f o r ~ n a tmanagement
h~, of
infotllfation and timely cot~u~~unication or dissimilation is interrelated and hence a
systen~aticapproach is required. As the important a11d risky business decisions are
based on the available infomiation, adequate care should be taken to have tbe right
infon~~ation. P

The infonl~ationperspective in an orga~~ization is viewed categorically for managers

as well as for the organization. The managers use the informatioil as an object for
managerial decisions, as a co~~stnlct to build up the orga~lizatioiland tools to gain
explicit and tacit lulowledge. But for the point of view of the mat1agelnent, .
infonllation should be treated as a resource, as perception pattern for the
de\lelopmeilt, as a cotrullodity to be appreciated and as constituent force to meet the
internal and external changes.
 /

i711c
llllks alllorlg tllc ~~crspccti\/cs
on infonnatio~i111an organization and as a manager Infortn;~tionSystems i111d
Functitrnr~lArea Applications
a1.c sho\ln belo\\,.

INFORMATION SOURCE : XNTEIWFT

In lllodenl days. Illtenlet is used as a base.for illfornlatioll rctriev. One can have
access to m y kind of infonnation alnounting to ally quantity throw I Internet. Most o
the biisiness enterprises have got their own web pages as it is being uscd lnainly to
pronlote the business. The advancelnent in co~lu~lunications and illfornlation
tcclinology made it feasible to use the computer to access any website for the
infonnation throug11 tlie search engines available. Search engines on the net have
indccd become an ullnlatchcd feedstock of infonnation. It has conle as a boon for
infort~~ation scekcrs. T I I C S ~ are two ways of finding infonnation on the net. Thcse are
tllc \vcb directories and search engines. While web-directories hold predefined list of
\\ebsitcs and are compilcd by human editors, search engines elnploy techlology that
basically looks througl~n database of indexed web sites and find the infonnation for
!oil. Thc search cngincs llnvc a huge database that is built up by the 'spiders' which
, arc nothing but prograllls that search the web for new pages. links on thc pages to
~nntclltlie indesed words \\lit11 tile URL of the page. The familiar soarc11 engines,
\ \ lllch are available on net for search, are google search, jal7tlo ~sea,ch,msn

.lst'c~r~h. .sffjl . I ' ~ o Y C ~nncl

, wehc/zlnin etc.

Intenlet conununication has becolne a global lnodc of co~municationfor most of the

activities of marketing. The collunu~licationor deal of business between the
custon?$rs and suppliers is done through the web sites, The prospective customers 11
I '
 Infortnation Systems - If access the websites of the si~ppliercompany available on Web and browse tl~roi~gl~
the web pages for the info]-~iiationabout the product and submit the query or order
the product directly from the remote computer. The prospective customer-using Web
may surf different websites of tlie companies dealing in tlie same products and strilte
the best bargain not ~novingfrom his premises. The customer may make the payment
through credit card on the Internet for his purchases. The concept of doing business
transactions through Internet is called electronic commerce, wliich is gaining
familiarity nowadays.

Activity A
You are working in an FMCG company as a manager. Your company wants to
launch a new product. Search the web to fi~ldout tlie similar products by different
companies arid make a coniparative chart of the critical information that will help the
cause of your company.

9.7 INFORMATION SYSTEMS IN MANAGEMENT

Information t~andlin~in an organizatiolishould be a systematic process. Generally
systems are created to solve proble~ns.One can think of the systems approach as an
organized way of dealing with a proble~n.A collectio~iof components that work
together to realize some objective fonns a system. Basically there are three major
compone~itsin every syste~ii,rramely input, processing, and output.

Processing output .

In a system the different components are con~lectedwith each other and they are
intel-dependent. For example, Human body represents a complete natural system. We
are also bound by many national systems such as poIitical system, economic system,
educational system, and so forth. The objective of the system demand that some
output is produced as a result of processing the suitable inputs.
I

In business information processing system, it receives input as data and instructions,

process them under the defined instructions and gives output. The inputs to the
system [nay be from a data file, Internet source, or manual feed. Further the system
interacts with human or computers to support the operational and rna~mgerialdecision
makine:of an organization.
Tlie lnariagers sliould be we1 I aware of information systems because: Information Systerns and
Functional Area ~pplications
a The aniount to be spent on tlie information system should have positive effect on
profit making
e It increases business awareness, promotes biisitiess re-engineering and enables
total quality ~nanagernentto tlie managers
e lfthe managers are not acquainted witli tlie information systems, significant
amount will be wasted on automating ineffective process- or at tlie extreme,
companies call fail as a result of poor management.
The organization expands in the direction of information expansion. Flexibilities in
information handling lielp tlie managers to take advantage of all business opportunities
irrespective of small or large-scale enterprises. Some of tlie important i~iiplications
about the system development atid ~iianagernenton inforriiation are as follows:
1') Infortnation system wi I I contribute substantially to the managers in tlieir effective
decision-maki~igto achieve the organizational objectives;
2) Information system wi I I e~~ricli
the orga~iizationto meet the competitive
challenges;
3) Adequate knowledge from tlie past experience will lielp tlie Managers to
integrate tlie business strategy;
4) Information system will provide sufficient awareness about the external
components to react accordingly;
5) Information system is required to take right decisions in right time.
The effectiveness of information management can be ~iieasuredby the extent of
knowledge creation or innovation in organizations. 'The process approach to
information ~nanagernetitsupports !lie integration of business strategy and
informatioll. Some of the important implications about infor~nationmanagement
are as follows:
1) If information is coriceptualized as a process it can be integrated into strategy
fonnation
2) I~ifor~i~ation
management sliould account tlie infonnation as an object and as a
construct
3) It has a role in enhancing tlie infonnation capabilities of individuals in
organizations
4) Almost all managerial activities have an information component and'so
infol-niatio~imanagenient practice sliould be respolisive to the needs of managers
as information users and as infonnation producers or knowledge creators.
Tlie importance of inforniation in management is filrther empliasized by tlie fact that
much of management is primarily decisio~imaking. While there are several views of
what constitute management, the genel.ally accepted planning, organizing,
coordinating, directing, and control are all concerned with decision-making. Several '

filnctional areas of managenient viz, Persolinel, Marketing, Production, Finance and

Services will be significantly influenced by tlie information systems that are to be
impleme~itedin an orga~iizatio~i. Information once acquired need to be communicated
promptly to various clepat-tments as per tlieir requil.ement. The free exchange of
informatio~iill an organization is called information flow. Information flow integrates
various levels of management discussed earlier. Operatic!:ol decisions deals with a
large volume of interrial data. The middle management :i ioncerned witli medium
1.ange or tactical decisions requil.ed for ~nucliless inforriiation. The top management
being concerned with long tertii or strategic decisions requires for just a few vital
internal infortilation but a lot of extertial inforniation. Tlie successfuI infortnation system
sl~ouldtake itit0 acco~llitS U C a~ pattern of information needs by tlie management.
 LzI
/
Information System

a - A Decision

(Stratagical)
pl e v l a

Transaction
Middle level pro.cessing
(Tactical)

/ Bottom level
(Operalional)
\
Onice
automalion

Figul-e9.6: The Infolmr~tionSystems and Management Levels

Typical exalnple of the three levels of information among the hnctional areas of
illanageil~eiltcan be represented wit11 the help of a pyramid structure as follow$:
All the four major areas of management are inter-related. Creating a master
r l ~ l t ~ h ~ rl ncaen n r ; c i n n nf tl-P o r t ; x ~ ; t i e c n f t h c r n r c t g n ; ~ c l + ; r r , t ; r r a c n p ~ t ; ~ , prtf tl-,= cnp~;fir

to
area, it is possible retrieve the data for any Lrther informahon. This kind of
approach is called integrated data approach and the development of system is called
integrated system. The master database created here should be flexible to have the
following features:
I) Distribute and share the data on network,
2) Nonnalized to accept che unique characteristics,
3) Capable of automatic updating,
4) Quick query.
The followiilg diagram depicts the creation of centralized database for application to
various fwnctional areas of management.

Financial Plan
Cost & Asset

Accounts Received

Inven t o ~ yCosting
Cnpncity Planning
Joh-pe~~fu~mnncc
Requirement Plnn

1 -I
Pipre 9.7: Creation of Centldized Database for Various Functional Areas Application
A typical example of role o f information systems for the iniportat~tareas of functional Information Systems ~ n t l
~hanagenientat different level of decisio~i-makingis shown below: Functional Area Applications

Table 9.2: A 'Qpical Example of Role of Information Systems

Production -
Finance -
Personnel -
Marketing
Strategic New Plant Alternative Welfare Competitor
Location Financing Policy Survey
Tactical , Production Variance Performance Advertising
Bottleneck Analysis Appraisal
Operational Daily Payroll Leave Sales
Scheduling. Records Analysis

9.8 SYSTEM DEVELOPMENT:

A STTCATEGIC PLANNING PROCESS
Development o f an infor~nationsystem requires adequate planning. T h e purpose of
system development needs to be analyzed and understood. As it involves cost
component, feasibility of the system development need to be discussed at a length.
The planning process consists of strategic planning which provides general guidance
on long-term ob-jectives and operating plans dea,!s with short-term objectives. Each of
tlie business orgaliization is expected to have its ow11 planning process. The 11 ierarchy
oftlie steps for strategic planning for the system developn~entis as follows:
Table 9.3: Strategic Planning for the System Development
-
Step Activity Implication
-
I initiation Begins when a sponsor identifies a need or an opportunity,
Concept Proposal is created.
System Concept Defines the scope or boundary of the concept. Includes
Development Systems Boundary Document, Cost Benefit Analysis, Risk
Managetnellt Plan and Feasibility Study.
Planning Planning: Develops a Project Management Plat1 and other
planning documents. Provides the basis for acquiring the
resources needed to achieve a solution.
4 Requirement Analysis Analyzes user needs and develops user requirenienrs,
1 / creates a detailed Functional ~ e ~ u i ~ . e m e n t s ~ o c u m e n t . 1

6 1 Development I
System Design ~ocument.Focuses on how to deliver tlie
rea uired functionalitv.
Converts a design into a complete information system.
II
1 I lncludes acquiring and installing systerns environment: I
creating and testing databaseslprepari~lgtest case
proczdures: preparing test files: coding, colnpiling, refining
I I programs; performing test readiness review and procurement I
1 activities.
7 lntegration and Test Demonstrates that the devcloped system conforlns to
requirements as specified in the Functional Requirements
Document. Conductcd by the Quality Assurance staff and
users. Produces Test Analysis Reports.
8 Implementation Includes ilnplementation preparation, implementation ofthe
system into a production environment, and resolution of
'
problems identified in the lntegration and Test Phase.
9 Operational Describes tasks to operate and maintain information
Maintenance systems in a praductian environment, Includes Post-
l~nplementationand In-Process Reviews.
10 Disposition . Describes end-of-system activities. Emphasis is given to
, I proper preservation of data
SOUI'C~:
h l l l ~ : / / i ~z~~doj..q(l\:
~~~i(!
 ~nforrnationSystems - 11 In short tlie tasks pertaining to design isjistenl consists of defining the problem,
understanding the management objectives, identifying the system constraints,
understanding the need for information, searching for alternative designs and finally
docutnentingtheconcept. The following schematic presentation depicts the typical
planning process of a systeln development.

i
Figure 9.8: Qpical Planning Process ofsystem Development

Systertr life Cycle

System development life cycle means combination of various activities. In other @
words we can say that various activities put together are referred as systeln
develop~nentlife cycle. In the System Analysis and Design terlninology, the system
deveIopment life cycle means software development life cycle.
Following are the different pllases of software development cycle:
System study
Feasibility study
System analysis
System design
Coding
Testing
Implementation
Maintenance
life cycle is shown in the following
The different phases of software develop~nel~t
Figure.

77
Maintenance
systemstudy
Feasibility Study
t
implementation
4
System Analysis
t
Testing
Development
Life Cycle
4
System Design

IG
Coding
2
Figure 9.9: Different Phases of Software Dcveloplnent Lifc Cgclu
 lnformrtion Systems and
PROGRAMMED AND NON-PROGRAMMED Functional Area Applications

Managerial decisiolis are classified into programmed and lion-programmed

categories. There are some sit~latiorlsin which tlie analytical methods of decision-
l?lakingis possible and some other situations one need to apply the intuitive methods
of decision-making. Programmed decisio~lsare those tliat can easily be automated,
like tlie determination of optimal product ]nix, mini~numcost production scliedule,
opti~nalsequencing of ~nachinesto miniinize meal1 flow time ztc. Generally large data
and a few decision rules or algoritllms that use tlie data in an automated fasliioli to
arrive at an optimal plan cliaracterize such decisions. Techniques of Operations
Researcl~like Linear Programmilig represent a typical example of this category of
decisiolis Illat use formal data and algorithms. Naturally such decisions are easily
programmed. In other words they can be representecl as an algoritlilliic procedure
into u n a ~ n b i g ~ ~i~lstructions
o~ls wliose step- by-step execution will lead the optinial
result. Since these algorithms are likely to be codified in tlie forin of a computer
program and ruli on a digital co~nputel;they are programmable or programmed
decisions. Tlie key to such progranlmability is the ~~nclerlying stnlcture of these
decision situations that permit an algorithmic translation. Many oftlie prograliimed
decisions nlay need tlie most cllallenging algorith~nsinvolving tlie best brains available
at that lnolnellt for tlieir solutio~~.
Nevertheless they are trallslatable into algorithmic
procedrlres. Simon's predictions ofthe fifties llnve practically collie true in tlie
nineties. This is borne out by the large n ~ ~ l r ~ofb edecision
r support systelns that use
data and models to automate sucli decisio~ls- reorder levels in materials and
production control, control limits for process re-setting etc, Information support for
sucll programnied decisiolis can t)e designed ratlier easily.

Non-prograln~neddecisions 011the other hand do not lend themselves to eas),

aotomation. Tlie moclel support for such programmed decisions would need Inore of
heuristics rather than optimal algoritlims. Opti~nizatiollAlgorithms as mentioned '
earliel: are formalized procedures readily implemented as a finitely terminating,
computer programs with gualmteed outcome of optimal sol~ltions,whenever they
exist, Heuristics, on the contr~r>; gellerally yield near optimal if not thc opti~iial ,
solution but cannot guarantee optiniality. The lieuristics tliernselves may be
implemented in tlie form of a11algorithmic procedure and solved on a computer;
however the decisiotl situation may not have admitted any optillinl algoritlim, The
interesting developments in complesity tlicory of the theoretical colnp~lterscience
also led to an intel.estitlgobservation tliat for many interesting optimization proble~ns,
heuristics are necessary as no optimizatio~isalgoritlinis with reasonable estimates of
computational perfol.mancc are known to exist. Tliis idea led to the heuristic problem
solvi~lgapproach wltere one gets good sol~~tions arid even optimill solutiolis but
optimalits cannot be g~laranteed.Such heuristic procedures Tor tlie sol~ltionof lnariy
real-world problems in the area of sclied~llingand resource allocatioli have bee11
found to be extremely successfi~l.

Over tlie years tlie 13rogra1n1iiedand non-programmed decisions have also been
known as structured and unstructured tlecisions. While designing, information
systems one slio~~ld keep this vital difference between tlie two types of decisions in
mind Flexible access to data, user friencll iness, graphical Llser interSaces, natl~ral
lallgllage suppott, what-if ailalqsis, capability, etch.characterize information support
for non- programmed decisions.
 .
ihkrnntk)or Byst~tn!, I! Exaniple for Programmed Decisions: Consider tlie problem faced frequently b) a '
small and ~~rediurn sized e~iterprises(SMEs) in deciding about the size to be ordered
lo ~nasinlizetlre profit 011 consumable items (nu~nber. o f 1111its
o f food packets). The I

sl~inll-scalee~lterprisei s doing tlie busiliess o f trading between the wliolcsaler and

ratnile~'.Tlte pllrcliase price per unit i s p, und tlie selling price is p, where p, p, .
'I'he unsold itern for the seasonlhr the day will make a loss to tlie dealer and hence
tile dea!cr will be able to retul-nit a t the lower price p,(p, > p,) . The objective is to
cicc ide about the number o f units to be ordered to maximize the profit. The intuitive
i~pproachto this problem will lead to problem specific and callnot be conceptualized.
I1 is better to think of using stnrctured analysis or a~lalyticalapproacl~.Assutne that
I
I
I
tliu 111ssnberof units dernapded is D and tlie quantity ordered i s Q. Tlie logical flow of
this approach is
\

Get I)and Q
I
-

I
I

.
I
')"his is celled conccptuulization o f tile problem. Once tlie problem is conceptualized,
\t.c..ctlt~give the mathematical fitnctian to tlie problem,

'I'kc rtlatherniltical folmhlatio~~

to filld the profit to this problem with tlie above.
is:
~~olations

-.
nroclel defined above coc~ldbe wed for any available quantities o f D and Q.
.']'he
.
1 lic advantages o f this n~odelarc:
'
I) Tlie system is open to arlyorlc in tlie organi;rnt~onfor applicatron
2) Instrlnta~leousn ~ i daccurate ci~lculatianis pvssible
3) Entrblcs co~~ip~rterizntion
oi'tlie system
4) k'lcsiblc Sir rev icn~lmodification.
I

'I'his kind o f approucll is callecl syste~naricapproach or programmable decisions,

\ v I i i c ; l ~is thc base fur the system develop~iicritfor retrieval o f information,

Iisnmple for Null-programrncd D~cisioas

Illana&e~*s are quite efficieut to 11iaLebetter decisions as they have got a great deal of
c.\periencs, Sollie timcs decisions ]iced to be take11ill tlie light of tlie situations and
111.1 in general. Tlie persons who are ill tlie field for quite some time will ~l~iderstatld
v t i \ i I y n ~ ~the
c l ~ I c c i ~ ican i taken accordi~lgly,For exariiple, to comn~issiona
o ~ hc
~~cnc.i. plan\. ronrlucting an in llause survc) about rhc p ~ spt e r ~ o r ~ ~ ~the a ~plnrlt
i ~ Eis.~ ~ f
41lI'~~l~i~111
10 ~l,;iiri ; I ~ ~ L \ C I L iI ~ ~i l~iS) l ~ ~ ~ ~
- ! It ~ ~ of
i oS goi11g
i~ C I ~:enc~~alizecl~sti~dy.
O Cfo1vn1
IS
 :[II non-programmeddecisions, the conclusio~~s
could be arrived through the following, Information Systems and
P
Functional Area Applications
, simple steps (Dewey):

1) Identify tlie problem

2) Identify the alternatives
3) Select the best alternative
1 .

Though tlie programmed decisions are considered to be more accurate, tliere are
some situations in which the assumptions made under this category cannot be fully
practical and lielice tlie approacll of non-programmed decisions are used. If the
decision maker is we~l'ex~erienced, no doubt the accuracy could be maintained and
admit that tlie experience improves tlie problem solving,

9.10 ENVIRONMENTAL AND COMPETITIVE

INFORMATION SYSTEM

The informatio~isystem developed for business purposes should take into account all
tlie conditions,'which affect ihe business transactions. Usually the two major factors
I-esponsiblefor the business changes are the enviro~i~nental conditions (local and
global) and the co~iiparativefactors. Successful development of illfortnation systems
sli~~i~ldhave been based on tlie deep understanding of the organizatiatial structure and
dynamics of the enterprise also. For production department tlie assignment ofjobs to
~nachi~ies or machines to operators in a production eliviron~nentis very important. For.
a service organization like hospital itmay be a duty roster for nurses, doctors or other
paramedical staff: Such scl~edulesmust be detailed and unambiguo~isreports could
be produced in large number at relatively low cost. Most of the information contained , '
' in such reports is internal - to tlie special sliop or liospital. Some organization are
goal oriented, the analyst nus st be clear as to what information exactly need to be
collected, stored atid analyzed. Since every information must have acontext, only
operational inform,ationthat ulti~natelyhas some decision-making contribution must be
collected. Secondly, tlie information collected and processed must be co~isistentwitli
the level of tlie organization to wliicli it is to be presented. Organizations have not
only found out tlie i~n~riense utility of information systems to better Inallage tliejr
organizations but are also feeling the pote~itialof the competitive advantage provided
by, illformation as a resource. The classic example of ilre use of inforrnatio~ifor
conipetitive advantage is,SABRE Airline Reservation System of American Airlines
and tlie Frequent Filer Option introduced by Airlines tlie world'over. These are
esamples that illustrate tlie use of infor~nationnot just to run business effectively but
also to,open up new busi~iessvistas.

The payroll represents a typical operatio~ialsystem for tlie financial management.

Since such systems must execute accurately data pertaining to a large number of
staff in a timely manner, month after n~ontli,cost based efficiency and speed would
be a major consideration in tlie design of such a system.

Detailed Sales A~ialysisis a must for ally sales and marketing function. This might
i~ivolvea very detailed data collection and processing pertaining to every salesman,
every product over a loiig time span of an entire year or a quarter with even details
'of the region, market segment etc. Accuracy and timeliness of this effort would
decide the quality of tactical and strategic decisio~isthat may be based on summary
information generated out of this data. Accuracy and desegregation would be the
watcliword for such detailed data collectio~ieffort. ,
I
 !
lnformrtion Systems - I1 Natt~rallyinformation systems milst have suln~naryinformation, with provision for I

detailed information to provide such information. Comparative analysis shift wise, t

I
plant-wise, machine-wise, operator-wise etc. may be necessary. The watch word
would be insiglit and analysis and not Inere reporting of data Variance Analysis for
the finance function would call for systems tliat point out deficiencies, cost over runs,
budget excess by careft~llymatching goal or target information with summary
information generated by operational data. Once again the accuracy is important; but
what is Inore important is tlie clear recognition ancl liighligliting of patterns that can
IieIp tlie decision maker to initiate action and bring systems under control. Timeliness
is a must, as tlie systems must be reset before it is too late.

A tactical system under personnel fu~ictionis tlie Performance Appraisal, which

would take into account among several other th ings, tlie individual employee leave
records. The details may not be that important but patterns are. Whenever they are
clearly visible. Certain poticy conformance may also be checked through sucli
analysis. Since decisions based on such systerns are likely to have ~nediumto Iong-
term impact, accuracy slioi~ldnot be i~nderestirnated,while keepingthe priorityof
analysis.

Advertising Information System is another examples of tactical information system

for tlie marketing function of management. Needless to say pla~iningfor
advertisement would use ~nucliof tlie infor~nationgenerated by detailed sales
analysis (an operational MIS system). But to be able to decide on tlie levels of
advertisement, !nix of advertisement, budget for advertisement etc., cal Is for I
'
certain policy parameters as well as environmental (outside organization) information.
This point must be clearly borne in mind in designing MIS for tactical decision
situations, I

A strategic decision by the production function oftlie management is a New Plant

Location, This would use m~~cli of the internal information generated by tlie tactical
system designed to analyze tlie production bottleneck that is internal to the
organization. But a long term decision like location of a new plant is likely to be , I
I
influenced far more by environmental information like changing market, changing
tecl?nology,cliangingfiscal and governmental policy like deregulation, tax incentive I
for backward area etc. Obviously strategic information systems should liave a II
meclianis~nof scanning and assimilatingenvironnie~italinformation that are lilcely to I

infJuencestrategic decisions in a systematic way. For tlie finance discipline, 1

altcr~iativeFinancing is a strategic decision. It will use a summary status information
about tlie internal finances of the company i~~cludingpayroll, budget, overruns,
I
variance analysis etc. but will be primarily governed by lor~gterm policy, business
environment etc. that are strategically important to tlie survival and growth of the
organization. Information support for sucli strategic decision would call for sulxtantial
external information supplemented with internal financial Iiealtll indicators. L)er:isiu~i
concerning welfare policy of an organization is a strategic decision that,mi~stbe faced I
b y personnel (also kuown as human resource development) management. It will be I
tempered by internal information about staff size, tlieir quality, and tlie compensation
I
package etc. but tlie strategic decisio~i,willbe governed by tlie future vision for the
organization as seen by tlie top management as well as t:he labor marltet conditions of
the environment. Beirig a long-term decisioli with major impact on tlie corporate
health of the organization this strategic decisio~ineed to be supported by a halance
blend of extertial and internal infor~liatio~i. While we taka primarily tlie decision-
making role of tlie management in tlie design of the information systems, care ~tiust
be taken to take iiito account tlie stark realities of ~nanagerialwork-style. The
diversity of managel.ial work, tlie interpersotlal dynamics; politics of people,
resista~~ce to change,,etc. nus st also be taken illto account. These are i s s ~ ~ beyond
es
the
.. - scope of this text but must be taken into account in tlie actual implementation.
 ' A strategic decision for the ~narketingfunction is a survey of competition and the lnformntio~~
Systems and
I-esultingstrategy of gaining market share. While a detailed alialysis of ill-colnpaliy F"nctionn' A~~licntions
sales and advertising is a Ilecessary prerequisite, much will depend on the present and
f~ltllrestrategies of tlie colnpetitors who are external to the environment. Once again
t1li.s brings to the focus tlie importa~lceof external factors for strategic decision.
policy likes del-egulation, tax incentive for backwarcl area etc. Obvio~lslystrategic
information systems should have a mecliallism of scanning and assilnilating I

environmental information that are likely to influence strategic decisions in a

systematic way.

9.11 INFORMATION SYSTEMS IN FUNCTIONAL

AREAS AND DECISION-MAI(I[NG

Let LISdiscilss some of tlie infortnation systenis in functional areas and their
contribution to decision-making.

9.11.1 Marketing
The term marketing as per the American Marketing Association (AMA)
is defined as follows:
The process oT:
@ Planning and executing the conception,
' @ Pricing,
@ Promotion and
Distribution of ideas, goods, and services to create exclianges tliat satisfy
inclivid~laland organizational objectives.

Marketingfilnction facilitates tlie activities mostly related to

@ Forecasting and sales planning:
@ Market researell
@ Advertising
Operation and control of infolmation required for market

The management of information, whicli provides o~ltp~lt to the above-specif ed

activities. is one of the important aspects in the business. 'l'o f~~lfill the ob.jectives of
the marketing, periodic tasks pertaining to collectio~iof data, analysis and
presentation in tlie form ofrequired reports need to be performed. The integrated
approacli comprising the data'input, generation of mat-lceting inForliiation and supply
of oiltpiit i l l the requit-ecl fol.mat is called rnarlceting information system. It consists of
people. equipment, and p r o c e d ~ ~to~gatlier,
~ e sort, analyze, evaluate, and distribute
timely, and accurate infol.niation to decision-malting. Marketing information system
are expected to help the ~iianagementin decision processing for pricing the product,
packaging, new product development, prodilct mix analysis, advertisiug, product
~~romotion policy. sales strategy. invento~ycontrol and production schedule. The clata
available at one place coulcl be used centrally for tlie retrieval of required info~*tnation
and information generated by one department coi~ldbe shared for otliers to prepare
t1ie.1-eports.
 Information Systems - II 'I'he following table depicts the data availability, tools employed and output ex~ected
, - in marketing area.
I
Table9.4: Data Availability,Tools Employed, and Output Expected in Marketing Area
I
I
-
Data Available Tools Employed Output
Sales Forecasting Methods Expected Production
Advertisement Optimization Models Profit Maximization
Expenditure
Territorial Data Methods of Market Expansion
Market Penetration
Consumer Preference Brand Switching Tools . Market Segment
Price Comparative Analysis Pricing Strategy
Movement of Goods Inventory Tools ' Minimizing the Storage Cost

The develop~ne~it of marketing information system sl~ouldcoi~sistofvarious scb-

systems on marketing research, marketing planning, sales analysis and market
control. The inputs, processing, and outputs for tliese sub-systems are as follows:
Marketing Research:
Inputs
Based on external data collated from the industry primarily constituting sales
. performance a~ialysisof a variety of brands in various market segments of
various companies,
Industrial infrastructure, marketing, productiop strength and weakness,
Industrial advertising drive and impact,
Industrial pricing policy and consequences,
Ititer~ialdata compiled in the colilpany constitutii~gsales performance analysis of
various brands of tlie company in various market segments, i
&ategic marketing attribute and forecast data versus actual sales perforrna~ice
data,
Advertising budget and actual spending,
Infrastructure budgets,
'Prices of products and sales figure.

Outputs
Intensive reports on itidustry wide sales performances,
Inferences of results'c~rn~ared to forecasts with respect to past marketing
strategy, advertising and pricing
Review of marketing strategy, advertising and pricing policies, I

Market share of the company.

I

Marketing Planning:
, Inputs
0 Summarized data from market research.
Outputs .

0 Review of sales forecasts,

0 Product !nix strategic reports,
, 22 Market mix strategic reports.
I
 $ales ~nal'ysis: Informrrtlars Syfiten~aalldl
Funcllaalal As@#Applif~arons
Inputs . I

e sales data by regio~i/product/perso~i~ieI

in terms of value and quantity, , I

Projected sales data by regio~i/product/perso~i~iel

for comparison with tlie actual
sales.
e Sales data customer wise with tlie transaction data for illvoicing system.

e Sales repoiats I-egio~i/product/pe~-so~i~iel

in terms of value and quantity,
~ariance'analysison actual sales versus projected sales,

Marketing Control
Inputs
Sales data of various products o f a co~iipahy,
Marketi~ipexpelise datn.
i ~
sales performance d ~ t personnel/
Sumniarized output sales a~ialysisco~istit~~ting a
repion/p~.oductwise.
/ , Sales tl-ansactiondata from i~ivoicingand sales systems.

Outputs
a * Variance analysis.
It

Age analysis,
'e Tactical reports on desirab'le a~id
undesirable trends.

Tlie typical transactio~iin tlie ~narketiligsub-system is depicted through the following

diagram: '

:I r
Compny
Database
MARKETINGSUESYSTEM

.+ Sales Forecast
Md&l
'*
Dab .a
Profit Plsn
Pertaining to
Sales Plan, . -++
@ Planning
Brand Switching
'
' M~lcriPla
Bills, Profit Porceptionei
Q Snlw Anslyslls
Plan etc. Analysis

-nr
. - -
't

Figure 9.10: g p i c a l Transfietioh in the ~ a r k i t l n g

P
sub-~yslrm

t
27
11
4

- L
Inft~~.rn;)tion
Systems - 11 To integrate tlie activities of marketing, sub-systems are broadly classified on thc
followi~igtypes:
1) Control systems
2) Planning systenls
3) Market research systems
4) Sales systems.
Activity B
Prepare a brief report on tlie niarket pla~~i~iiig
and sales ailalysis of a cornpan!, of
your choice. What are the benefits derived out of: computers and MIS.

9.11.2 operations Management

The area of management, which deals \vith the operational activities like prod~~ction.
project scheduling is called Operations Managanent. Thc important objectives of
operations malageineut are

@ Project scheduling
Tr,msportation costs nlininlization
@ Assignillent of jobs
@ Sequellciilg of jobs

The probleills ill opcratioils management are well stn~ctured.The tools of opcratio~is
research need to be comp~~terized for better results because of the followi~lgreasons.
Easily structured tllrougll ii~atlleinaticalmodel

e Nu~uericaloriented . .,
The integrated system approach could be shown through the followiilg schelnatic
representation.

d Orders Received
d Production Rules A
d Invoice Data
INPUTS d Shipping Note
d Sillcs Forecnst
D m A\~ilil:ihility OUTFJU'IS

PROCESSING Anticipiitetl Stoclis

@ Inventory
Paychecks
@ Price
ABC Ancllysis Purchase Orders
@ W i t ~ ~ h o uStocl;
se
Inventory Ul~ditte +. 0 Cash Position
Pending Orders ---)- 0
Shipment Routing
Routing and 0l)cmtions , Tribnsl)ortiltion
Joh Assignment Aclrno~vledgcme~it
Worlc in Progress f---.
Work Progress Analysis
Receipts
Output of PERTfCPM
Variance An;dysis
..

Outouts in the

24
Figulr: 9.11: The 1ntegl.itted System A j ) p r ~ i ~ ~ h
c.
Inventory Management lnfornlation Systems a n d
Functional Aren Applications
lliventory Management system allows you to
e Manage your stocks on a quantity and value basis
Plan, enter, and check ally goods lnove~nents
o Carry out physical inventory.
'The following are tlie important activities to be carried out for a better control over
the ~nanagementof inventory.

Managing Stocks by Quantity

in the Inventory Matlagelnetit system, the pliysical stocks reflect all transactions
resulting in a change in stock atid thus in updated invelitory levels. The user can
easily obtain an overview of the current stocks of any given material. For eacli
material, not only tlie stocks in tlie warehouse are sliown, but also the stocks ordered
but not yet delivered, reserved for production or for a customer, and tlie stocks in
qi~alityinspection can be ~nonitored.For example, If a fi~rtliersubdivisio~iby lots is
required for a malerial, one batcli per lot is possible. Tliese batches are then managcd
individually in tlie stock. Special stocks from tlie vendor or from tlie customer (for
example, consigli~nentstocks) are managed separately from your company's own
stock.

?Tanaging Stocks By Value

I'he stocks are managed not only on a quantity basis but also by value, a prerequisite
for cost accounting. With every goods movement, tlie following values are updated:
0 Tlie stock value for inventory management
@ Tlie account assignment for cost accounting
Tlie correspoliclilig GtL accounts for finalicial accounting via automatic account
assignment.
Both the quantity atid the value are updated automatically when entering a goods
movement.

Planning, Entry, and Proof of Goods Movements

Goods ~nove~ne~its include both "ext~rnal"~nove~nents (goods receipts fro111external
procurement, goods issued for sales orders) and "interlial" niovements (goods
receipts from production, witlidrawals of material for internal purposes, stock
transfers, and transfer pgstings). For each goods riiove~nenta document is created,
wliicli is used by tlie systelii to update quantities atid values atid serves as proof of
goods movemelits. Goods receipttissue slips are printed to facilitate physical
movements atid tlie lnonitorilig of tlie individual stocks in tlie warehouse.

Physical Inventory

Tlie adjusrment between tlie pliyslcal stocks and the book invetitories can be carried
out independently of tlie pliysical invelitory lnetliod selected. Tlie System supports tlie
following pliysical inventory methods:
0 Periodic inventory.
I~ivetitorysampling.
Q Cycle counting.
Information Systems - II 11ivoice Verification

Systern should be ~tiadeup of several cornpolients lii~kedtogether so that different

departments witllin a colnpany can cooperate with one another. The invoice
Verificatio~lcornpoilent is part of tlie Materials Management (MM) system.
It provides the link between the Materials Managetnent component and the Financial
Accounting, Controlling, and Asset Accoiinting components.

Illvoice Verification ill Materials Managetnent serves tlte following purposes:

6 -
'lt co~npletestlie materials procurement process which starts with the purchase
requisition, continues with purchasing and goods receipt and ends with the
invoice receipt,
* It allows invoices that do not origiliate in materials procurement (for example,
services, expenses, course costs, etc.) to be processed,
It allows credit mernos to be processed, either as invoice cancellations or
discounts.
Invoice Verification does not handle tlie payment or the analysis of invoices. The
infor~natio~i
required for these processes is passed on to ottter departments.

Invoice Verification tasks include:

* Eilterilig invoices and credit memos that have been received,
Claeckilrtg the accuracy of invoices with respect to contents, prices, and
arithmetic,
@ Executing the accoalllt postirlgs resulting from an invoice.
@ Updating certain data i n the sysrent, far example, open itelns and material prices,
@ Clleckit~ginvoices that were blocked because they varied too greatly from tile ,

purchase order.
Warehouse Management

Computer support of the orga~mizationand management of warehouses has become

imperative for efficierlt and effective processing of logistic requirements within a
company. Warelrouse Management (WM) systeni provides the flexible, eficient,
automwed support tliat enables you to:
@ Manage highly complex wanhouse stn~cturesand several different types of
warellausing facilities including auto~~iatic~aiehouses,custom-designed storage
areas, high rack storage, block storage, fixed bin storage and all other colnmonly
used storage areas,
6 Define and adapt a variety of storage bins for use in your specific warehousing
colnplex,
Process all relevant warehousing activities and movement tasks, such as goods
receipts, goods issues, i~lterrialand cxt~rna!stock transfers, automatic
replenisi~mentof fixed bills, material staging to production areas nnd stock
d iffererice handling,
@ Utilize ral~dornslotting for lnultiple owners ofgoocis,
Display summary evali~ationsof all goods movements in the warehouse,
6 laiiplement n variety of readily available put-away and picking strategies il~cluding
self-designed strategies,
@ Support the storage and retrieval of haztlrdous ~naterialsand all other goods that
require specid hitndlirig,
e Maintain LIP-to-the-minuteinventory records at tlie storage bin levei using real- I ~ ~ t o r ~ n a taysrclns
~on itlllt

Functioiial Area Applic~tions

time continuous inventory techniques,
o Support the use of automated barcode scanners and other technology for all
stoclc ~novements.
6 Intel-face to external warelio~~sing
systems,
o Fully integrate your Warehouse Management systeln for instantaneous
interaction with otli,er coniponents to include Materials Management (MM),
Inve~~tory Mariage~ne~it (1kI) Productiou Planning (PP), Quality Management
(QM) and Sales and Distribution (SD).
In addition to supporting tlie design of all typical storage areas, tlie WM system .

provides automated support for several advanced warehousing techniques, sucli as:
e and automatic assignment of goods to optimurn
The analysis of ~*zq\~ire~iients
locations in tlie warehouse ~ ~ s iput
~ i away
g strategies that can be easily defined to
match tlie characteristics of each storage area,
m Tlie configuration of areas for backorder staging and claoss-dockingof received
goods,
e 'The setup of "forward pick" areas and production s~lpplyareas with automatic
continuous repletlisliment from case or reserve storage wlieli a certain tliresliold
is reached.
Be~intii~ig with tlie planning phase, the WM systeln carries out stock availability
clieclcs ullencver trt~nsnctionsare iniliated in each of the respective systeln
components. Altliough it is possible to print material documents for each separate
transaction in the warehouse, tlie WM systeln facilitates automatic Row through
wareliousi~igtasks that are virt~~ally papel-less.

In tlie \Varehouse Management system, you create transfer orders bzsed on transfer
~~equirements. Transfer orders trigger and control the physical movement of goods
~litlii~ithe wa~.elio~~se.The WM systelii si~pportstlie processing of all relevant
riiovements. includi~lggoods receipts and goods issues initiated by the Inventory
Mariagernent (IM) system, deliveries from tlie Sales and Distribution (SD) system, as
well as movelnents that take place within the warehouse, such as internal stock
tra11sfer.s.With its illve~ltoryf~~nctions,tlie WM systelii clisures that boolc inventories
in tlie Inventory Ma~iage~iie~it systeln ln~tclitlie stock iu the ~~areliouse,at any time.
Because syste~iicomponents are fi~llyintegrated, you do not need separate interface
programs between tlie Inventory Management systeln and the Warehouse
Ma~iage~nent system.

INPUTS PROCESSIN C OUTPUTS

r PlantDsta 0 Updating lllventory Issue Slips

c Vnluation Datn 0 EOQ 4 Labels
r Storage Looatior~s 0 ABC Analysis J Route Sllps
rn Work Schedule 0 Goods Movement J Stock Report
r Goods Receipt 0 Stock Level 4 Order Status
r Goods lssue 0 Lead Time
0 De~nandForecast

+
Figure 9.12: The Activities and the Required Outputs for the Develop~nentof a System
 .......,..
.. .... .,,.7.Ln,,J - II Y. 11.3 Financial Management

Financial accounting deals with collection, recording, arid evaluation offinancial data.
Bttsiness enterprise requires systelnatic maintenance of their records that help for
preparing the financial statenlents like Profit and Loss Accounts and Balance sheet.
Accotulting is considered as an information system because it has inputs of financial
data, processing by evaiuation and outputs through financial reports. The importance
of financial information system for the different users in the managerial area can be
depicted as:
-
Nature of Information Ultimate User

Cost planning and cost control of operations Management

Profitability ofthe finn
Strategic and tactical decisions
Profitability ofthe firm Shareholders and Investors
Soundness of the irivestment
Growth prospects ofthe firm
Liquidity ofthe firm Creditors
Profitability and financial soundness
Statement of salar~es,wages and bonus E~nployees
.- -- - -- - -- - -

Manag~ngthe industrial economy of the ~ivemrnent

country, collection of sales, excise and
other taxes
Financial growth of the firm Consumers and public
Social role ofthe firm in different sectors

To fillfill the needs offinancial illformation the itiformation system used in most ofthe
co~npaniesmay be classified as under:

I ) Financial Accounting Systems: To provide information to Government,

investors, and other parties in the form of
reports

2) Managetnent Accounting System: To provide reports to mangers for strategic

and tactic decisions

3) Cost Accounting System To provide informatioti about cost planning and

control operations to the managers

. ,

Figure 9.13: Financial Information System

 The of implementing computerized financial accounting system include: Information Systems and
Functional Area Applications
Maintaining Account Books
e Preparation of Gelieral Ledger
r Generating Acco~~nts Receivable and Accounts Payable Statements
Generating profit & Loss Accou~~t and Bala~lceSheet
e Generating Updated Financial Data for other Systems.

laputs to the System

'rhe input data from the financial system are from:
@ Cash Voucliers
r Bank V~uchers
, a Sale Vouchers
r Purcllase Vouchers
@ Joyrlial Vauchers.

Outputs to the System

The outputs expected from the system are:
0 Account books like cash book, bank book sale book etc.
0 Trial Balance
Trading Account
@ Profit & Loss Accou~it
@ Balance Sheet
0 Accounts Receivable Statement
@ Account Payable Statement.
The Financial rnaliagerne~itis tlie nost importa~itaspect in inanagerial functions.
Managers quite often recluire the financial position of the organization for various
reasons like planning, monitoring, performance evalilation etc ofthe companies to
decide about further action. In traditional method of information retrieval different
kinds of books, ledgers and financial records have been kept to follow up the financial
position and by end of each month status used to be calculated. Computerization of
financial record not only simplifies tlie procedure but also is more accurate. With
comp~~terization on-line infortnation could be accessed. As most ofthe companies
have gone for the compi~te~.ized data record, creating a database with required entries
will facilitate the storage o informationand any kind of manipulation based on the
database. A few advanced applications in financial transactions are e-commerce, e-
business and on-line banking.

System development for financial management is not only to make the computerized
billing or providing the receipts for the transactions. The system integrates number of
financial transactions of the organization.

9.11.4 ~ u m a n
Resource Management
1-he manpower utilized in the organization is treated as a valued asset. Tlie
management of this asset is just like management of any other source in an
organizatio~l.Organizational, effectiveness and efficiency, growth of the business,
sustainability for the competitiveness can be seen through proper management of
hilman resources. HRD management emphasizes an optimum utilization of human
res9urces by formulating consiste~itand coherent policies aiined at promoting
 Int'c~tmationSystems - II commitment to the organizatioil. Tile infbrmation system 011 HRD is restricted to
persolme1 managenlent systems whose role is to assist in:
8 Recnlitment,
Placement,
0 Training and development,

The vital area covering the above activities is called Humall Resource Plai~~ling.
HRD syste~nbinds fi~nctionsof personnel management systems with other fi~nctions
of organization such as marketing, finance, production, and inventory.

I
0 Recruitment
OUTPUTS
PROCESSING
Alterni~teSources

e Woi-kAn;llysis
* Cnst4)cnctit

Figure 9.14: HR Information System

9.12 SUMMARY
In this unit. an attempt has been made to explain the importance of information.
informatioil generation as a system and role of infonllation in various areas of
Eunctioilal ina~lagemei~t,We have discussed some of the key points (environmc~~tal
m ~ dcompetitive) to be kept in mind while going for the development of infontlatiol~
systems. Steps in the process have been discussed to familiarize the learners to
practice for the developillent of the business system for the given enviromiellt.

Soine of the areas left out are project, medical and health care, township, training: firc
service, and energy etc. lllese all have similar needs to build up from the basic iriputs
a good quality database each and then to evaluate selective data, analyzed data, int(?r-
.
linked data and aggregated data to derive suitable MIS support to decisionmaki~lgax
the corporate level,

30
 Information Systems and
9.13 UNIT END EXERCISES Functional Area Appliiertians

1) Discuss tlie impo~tanceof i~ifor~natio~i

systeni for business decisiotis.

2) Disting~lislibetween data, ilifortnatioli and knowledge.

3) Explain the steps involved in tlie developnient of busitless systems.

4) Visit some of tlie 01-ganizationsto identify the information systems used for better
management. Suggest tlie ways and mealis for the improvement.

5 ) Identify arid rialne some of tlie computerized iliforrnatiorl systerns used in

pr~3ductionmanagement, HRD and marketing.

-
9.1 4 REFERENCES AND SUGGESTED FURTHER
READINGS
Clifton. 1-4. D.. 1986. Bu.sin~..ssDrr/aS"j'afenrs,Prentice-Hall: Englewood-Cliffs,

Murdick, and Thomas C. Fuller. "Subsysterns for MIS". Jouri~nlof Sy.~tems

Mo11ag~~117enl.
June 1979.

Murdick, Robert G. 1'141~C'onccpts

7: and Design. Eliglewood Cliffs, N.J.
P~.entice-Hall,1980

CS R (20021, M~~nugemenf
Pvtu~-tl~y fr~forn~ation Texl and Applicofion,~,
Sj/sten~,~:
Third Edition. Himalaya Publisliing House, Murnbai

Robert G. Murdick, Joel E. Ross and James R Claggett. Infunnation Syslems,for

Modern ~ n n a ~ e r n c nPrentice
t, Hall of India, 1997

Walker D. (1989), C,'unipufer Bused /1rforn7ation Systeti~s,Elsevier Science Pub Co;

2nd Edition.