¢ By the end of this chapter you should be able to: management information system > What 90 'a management information system? ape Herrera Management information systems define an MIS; understand how the business sector uses MIS; explain the benefits that firms obtain from MI explain the challenges that firms face from MIS; understand how computers affect our world, Concept map) Management information systems aed _ a seep ee olaton | ifr — Fs Fx decsion- | mg comusse Jal I tornaion records ole U What is an MIS? MIS stands for management information system and may be defined as a system that allows managers to make decisions for the successful operation of businesses. It involves the collection, collation and analysis of information. Thi information is in a form that managers can easily interpret and use. An MIS may be a computer-based or a manual system that transforms data into infor- mation useful in the support of decision-making. Management information systems began with simple manual systems such as customer databases on index cards. In the modern business arena, management information systems will make full use of information technology or any computer-based system, including the use of telecommunications technology, to significantly improve every aspect of a business enterprise so that it may be managed with ease, convenience, efficiency and reliability, and most importantly to lower the cost of production and increase profit mai To appreciate the role of MIS in a business enterprise properly, consider the role the brain plays in the human body. Many body functions take place all at once and in harmony as long as the person is healthy. The Brain is the command centre for the storage, retrieval, distribution and communication of information, and indeed for decision-making. A firm is very similar to the human body in the ways described above. The very basic activities of management information systems include: + accepting instructions; + receiving information/data; + processing information/data; + sending information to devices that display it on a screen or to other instruments which in turn control other equipment, e.g. a printer; + storing informationoperational areas of a firm — personnel, finance, production, marketing and so on, All information must be collected, stored, distributed and made available to everyone at the same time, hence the use of personal computer which are linked or networked together. Information, therefore, is the lifeblood that feeds every nerve of a business enterprise. As we have already seen in Chapter 5, there are many different departments that function together in a firm, such as: + personnel; + advertising: + sales; + purchasing; + finance: + distribution; + research and development; + quality control; + production. Inall of these departments managers direct, control, assign duties (delegate), motivate, organise, coordinate (harmonise) and regulate. ll these departments and functions require information to carry out their duties efficiently. With a paper-based office, there was no structure where everyone had access to each other's information, because this was in a filing cabinet or cupboard stored away in each department. Looking for information took up valuable time, especially where firms were widely spread locally or internationally. To organise information effectively, many organisations have therefore developed management information systems (MIS), which allow for accurate, timely, and complete management of information. MIS is made up of components, activities and information flows. The com- ponents are managers, their information requirements, data sources, the data bank, information and decisions. The activities are the determination of require- ments for data and the subsequent collection organisation, transformation and analysis of data (see Figure 8.1) Design of the MIS In designing an MIS, management must set objectives, identify constraints, determine information needs and sources, and put the system together. The Mis knowedae vnunicated in ‘order to inform aking deceone 2 group ofparts penning which ae intencated organising tp achive some | stating purpose | eectng cowvoling Figure 8.1 The management information system system will allow managers to be more effective decision-makers as it will provide them with: + carly warning signals of trouble ahead; ‘+ information to assist in decision-making: a1management by exception > + automatic decision-making that does not require management inputs; + routine and automated clerical operations. Use of MIS in commerce and industry ‘There are five main areas of MIS use in business, These are: 1 Asan aid to management: Computers allow very large volumes of data to be processed very quickly. This information can speedily be made available to management, allowing rapid decisions to be made. Computers are also very accurate, given the right information. This helps managemen to make correct decisions and allows management by exception to occur. ‘The latter process needs fast reporting to be effective and can be practised with a high degree of success with the aid of a computer. Management by exception requires that only matters involving exceptional circumstances need be reported to management for attention. 2 Control by MIS: Management information systems are used to supervise the operations of controlling devices in large-scale continuous production, such as oil, chemical or textile production. Computers are also used to control space flights and monitor patients in hospital: 3 Computerised research and design: Computers can be used by the research and development sector of business to test new designs and applications, for example aspects can be altered and the computer can quickly predict the effect of the various alterations (see the section on computer-aided design below). It can also be used in the standardisation, procedures. 4 Computerised information systems: This is one of the main uses of th computer today, for example airlines use computers for bookings (see als the section on the Internet below). 5 Computerised clerical operations: There are several applications of computerised clerical operations, for example wage and salary administration in large firms, and credit and debit transfer in banks. How the firm benefits from MIS ‘ MIS provides a data bank, which is vital to every aspect of the firm's operations. «It facilitates decision-making and effective communication among the firm departments, thereby generating significant savings in time, money and labour. « It contributes to productivity in the firm, helping to reduce the cost of production and increasing profit margins. « Tt allows immediate communication throughout the firm. « Irincreases the firm’s competitive advantage. «It provides information that is up to date, accurate and easy to access. Commercial data processing Within the firm, various activities or functions involve the use of specialis information, for example the different types of goods stocked, number of ho worked or payroll information. Information such as this needs to be prope organised so that it is meaningful to the company's operations. Such organi tion of information is called data processing. As we have seen, compu systems designed to provide management with specialised information . called management information systems.Office automation Office automation simply speeds up many tasks that were done manvally in the office, for example word processing replacing the typewriter. Errors can be corrected and information stored, retrieved or printed. In addition, soft- ware packages are specifically designed to carry out certain functions such as accounting spreadsheets, stock control or the keeping of personal records Electronic mail Since communication in business is vital, electronic mail has proven to be invaluable in that communication between parties near or far can take place cheaply and speedily. Messages (e-mail) can also be stored until the recipient is ready to receive or reply to them, Systems analysis systems analysis consists of studying existing systems in a firm and determining how they should be improved. There are four stages in system analysis 1 investigation; 2 analysis; 3° design; 4 implementation. Challenges of an MIS ‘The challenges include: + Acquiring and implementing a system that is affordable to the business. * The need to provide training and skilled staff to implement, run and manage the database. + Because of the fast pace of change in technology, systems may become antiquated within a relatively short space of time. Financial constraints may prevent firms, particularly those in the developing world, from keeping pace, and so they may continue to lag behind the competitive frontier. + The user-designer communication gap. Users are concerned with how the information can be manipulated and used, while designers are focused on finding answers to technology-oriented questions pertaining to hardware and software configurations. ‘Table 8.1 lists some advantages and disadvantages of an MIS Table 8.1 Advantages and disadvantages of an MIS Advantages Disadvantages * Reduced operational costs “= The process used in collection, input and processing can = More efficient use of resources compromise quality of information. * Increased revenues or profits | = The validity and reliabibty of information may be affected by the = Increased competitiveness ‘process of collection. += Increased control of costs + Tpaccurate information may be supplied. += Better planning, budgeting and organisation * Tithe storage and retrieval system snot secured, the data could = Secure storage of relevant information be tampered with. = Better decision-making + Different individuals can imterpret the same data differently. = speedy retrieval of information + Human error can be made in inputting the data. + High costs may be incurred and much time needed to establish the system initially + There may be a lack of trained personnel to maintain the system. + There isa possibility of system shutdown, 93Figure 8.2 An automated ‘manufacturing process, Use of computers in business The retail trade (stores and supermarkets) Computers play a major role in processing the sale of goods. For example supermarket’s cash register can send information on goods purchased to central base which can then assist stock control, Sometimes a bar code is use or a wand érawn over the sales information which transfers the information 1 a central computer. Industry Most payroll and personnel records and stock control are undertaken b computer. In addition, machine tools are driven by computers in a branch o computing known as robotics. This is in widespread use in auto manufactur in Japan and other industrialised countries. Manufacturing functions carrie out by computer control are assembly operations (Figure 8.2), spray painting welding, casting, finishing, loading and unloading as in any Singapore dock packing inspection, or glassmaking. Optical systems are currently being usec to guide mechanical hands in a new development to revolutionise industria output. i Process control Process control is used in some industries to minimise human intervention: it involves the control of a process that may include anything from oll refining, Paper processing, rolling and cutting steel according to specification, to the load control of electricity power stations. Productivity of capital is significandly boosted in this way. Computer-aided design (CAD) The computer has become very useful to industries requiring design-oriemted Products. Using programmed information stored in a system, a design could be created on the screen and viewed in many dimensions, ie. height, depth, length, ‘width. In this way the design could be altered to the required specification, e.g. in the building of aeroplanes, bridges or buildings (see Figure 8.3).‘8 - Management information systems sone thane mod 42K a) Conaracion [feos He Procesing paris ) ae Se (power stators} cease oA eee hk ey Figure 8.3 Computer-aided design ‘Town planning Surveying ea Computers in financial and related industries Banks and insurance companies have significantly benefited from the use of computers in: * cheque handling and customer accounts; ~ * producing statements; q + calculating interest charges; + the use of online information systems such as those needed to calculate Interest or overdraft charges. The world money markets are linked in order to provide information to those in need of it. Communications Since efficient communication is the life-blood of business, computers have Played a major role in this area. Great importance has been placed on road, rail, sea and alr traffic communication. For example traffic signals are computer. ‘operated to allow efficient ow or traffic according to the volume of vehicles at certain peak hours. Timetabling and route planning are other aspects of industry @g— a= } Jn which computers have played a key role. Satellite communications are used List tree ways in which computers can be worldwide and operate with great flexibility over vast distances, For example an used ina business, aircraft or sea-going vessel can fix its position and bearing using satellite signals, How information technology contributes to society Computers and information technology (IT) in general contribute to an cffi- ciently run society in the following ways. IT and macro-economic management Macro-economic management is a complex, information-intensive activity. Accurate and tmely information is required on a broad array of variables including national accounting data, population tends, labour supply and distribution, skill levels and types, wage rates and trends, interest rates and tax revenues. Not only must data be available and up to date, the capacity must also exist for data to be analysed and its interrelatedness be understood. IT offers significant potential for improving the macro-economic process by: + improving the timeliness and cost-effectiveness of data-collection analysis; + making possible the use of complex economic modelling that can forecast. the effect of different policy options; + improving the efficiency and effectiveness of public-sector investment programmes,ee IT and trade ‘The revolution in IT Js opening up new opportunities for Caribbean counties. ‘The rapidly falling price of computer technologies can allow small- and medium- sized firms to automate production processes and produce competitively in much smaller volumes than in the past. Economies of scale in manufacturing and distribution are thus being achieved. Access to computers can also assist small firms to utilise sophisticated planning models in order to obtain inputs from the most competitive sources and to automate administrative tasks, significantly improving efficiency and competitiveness. IT and improving governance IV'provides the opportunities for improving public sector efficiency and incrcas- ing the effectiveness of government. For example: + Development of computerised labour market databases can help in manpower planning and placement, + IT can help to streamline courtroom procedures and improve the administration of justice + Computerisation of health records can be a major aid in diagnosis and ‘treatment services. + Computerisation of trading and customs systems, by increasing the speed with which transactions are handled, can lead to increased revenue generation at custom entry points. + TT applications in agricultural extension can lead to rapid communication of more pertinent information to a greater number of farmers and can thus facilitate relevant feedback to guide research and development activities IT and financial-sector operations Financial intermediation (banking) is an extremely information-intensive activity. Intemationally, banking is becoming an information business rather than merely a transaction-processing one. The introduction of automatic teller ‘machines (ATMs) and other computerised banking services has revolutionised banking. These IT applications have been introduced in order to differentiate banking services and provide a competitive edge to banks. IT and natural-resource assessments Assessnent of a country’s natural resources is very important. The government requires information on mineral base, agriculture, forestry and fisheries poten- tial, and water resources. Modem information technologies provide govern- ment with relevant information in these areas for planning. The collection of the information will also be more cost-effective. ‘Information is crucial for development. The application of IT has changed the role of information in the development process, transforming the nature o! industries, products, services, markets, jobs and organisations. IT in the field of medicine ‘The use of IT in the fleld of medicine is also very widespread but has been con- centrated in the following uses: + bed allocation; + maintaining drug and equipment inventories; + keeping patients’ admission information; + staff rostering. ‘The monitoring of patients is another example of computer-aided assistance in that scanning instruments attached to a patient enable continuous tracking of a patient's vital signs.Other areas of medical use include: + In the field of medical research, medical statistics and records can help to build models over a long or short period of time, * The training of medical students and related personnel may involve computer-aided multidimensional models. ‘+ The diagnosis of a patient's ailment may be facilitated when computers are used to match a patient's condition against case studies with similar symptoms. Computers in government and public services The volume of detailed information in the public services and government- mun agencies with their many bureaucratic systems make computers ideal for processing information speedily and making the public service efficient. For example, paying rates and taxes, and licensing vehicles can all be expeditiously handled, saving thousands of person-hours. Computers in education The use of the computer In education has accelerated in recent times since computers are used as a source of information related to education in the manner of an encyclopaedia. Simple uses include searching the Internet for almost any kind of information, and using the computer itself for lengthy and complicated calculations, and in actual teaching ‘There are three methods of computer-assisted instruction: 1 Computer-aided instruction (CAN), also known as e-learning, involves interactive methods of learning where students respond to tasks presented on screen, and if they make the correct answer they move on to the next task, otherwise the procedure is repeated until the correct answer is given. 2 Computer-assisted learning (CAL) originates from CAL; it is an interactive student-centred learning method in which students can work at their own ace, and a progress record is maintained for the instructor. 3 Computer-managed learning (CML) is a method in which students can @— eee specify what they want to learn, the system sclects the most appropriate List three methods of computor-asisted tasks, and as the student works through them the system calculates their istucton. performance and progress. The Internet The Internet or worldwide web (WWW) is also known as the information superhighway because any kind of information worth knowing and in current storage, wherever it is located, can be accessed, mostly free of charge. A subscriber to ‘the Net’ can access all kinds of information, whether for business or leisure interests. The Internet originally began as a system for coordinating military information, but soon expanded to accommodate consumer needs. So you can travel to Los Angeles and still read your local newspapers on the Internet every day to keep up to date with events at home. For business enterprises, quick access to information saves money because, as the saying oOo — >? 808s, ‘time is money’. Most companies have a website, and prospective Whats the internet? customers may be able to buy goods and services from them online E-business Today through the use of the Intemet, e-business is fundamentally changing the way companies operate, going far beyond e-commerce - buying and selling over the Internet ~to the whole chain of enterprise from new materials through to satisfied customers. Many companies introduce their services to customers via the Internet; others have online stores or catalogues where customers can look over their 97B2B e-commerce > Figure 8.4 Charles Babbage 98 products and fill up virtual ‘shopping carts’ and pay by credit or debit card. Wholesalers have sites where both customers and suppliers can buy and sell products. Today these services have been combined into a new electronic marketplace. This new way of doing business assists companies by: + helping them to lower costs throughout their entire supply chain; + improving customer relationships; ‘redefining business relationships; + speeding up nearly every stage of doing business: + Keeping all interested parties fully informed of market needs and opportunities. The global marketplace has been transformed through the use of the Internet, and e-business is forecast to grow faster than any other form of business because e-business companies: + deal with much larger transactions; + have a known credit or payment arrangement with their affiliates; + are accustomed to ordering, selling and coordinating business using electronic media; + have already become familiar with the use of computers. It has been suggested that for companies to survive today they need to have an e-business strategy, make their business culture more transparent, put the right technological infrastructure in place, use adaptable and easy-to-use open systems, and to start doing that today. Related to e-business are e-commerce and B2B e-commerce: + E-commerce is a general term used for any type of business or commercial transaction that involves the transfer of information across the Internet. + 'B2B’ stands for ‘business to business’, so B2B e-commerce refers to electronic commerce between businesses rather than between a business and a customer. A brief history of computers The dawn of computing ‘The ancestor of the present-day computer was the abacus, which was used in China, India and Japan for thousands of years and is still in widespread use in some countries. However, it is only recently that computer-like mechanical devices have been invented. The first such device to be called a ‘computer’ was developed by a British mathematician, Charles Babbage (Figure 8.4), in 1812. ‘This machine computed tables of mathematical functions. Babbage’s principle of sequential control formed the basis for the development of Mark I, a machine developed by Dr Howard Aitken of Harvard University in 1944, This computer ‘used the technique of opening and closing electromagnetic relay switches to do its counting. Dr John von Neumann in 1945 developed the first computer with a memory and he further suggested the use of binary numbers instead of decimal numbers in order to achieve greater power at less expense, Then in 1946 the first computer using vacuum tubes in its internal operation was perfected. It was called the ENIAC ~ Electronic Numerical Integrator and Computer. It took a small army of technicians to operate it (see Figure 8.5). The first computer to be mass-produced was the UNIVAC, which was marketed by the Sperry Rand Corporation (1951). This machine employed a decimal and alphabetical system with magnetic tapes and a mercury-delay memory. In 1953 IBM introduced the IBM 701 (Figure 8.6), a machine with electro- static memory. At about the same time, magnetic memory cores were developed which led to faster processing and larger memories,Figure 8.6 The IBM 701 computer oe — Distinguish between megahertz and gigahertz Figure 8.7 A microprocessor chip Figure 8.5 The Electronic Numerical Integrator and Computer (ENIAC) The personal computer ‘The next great step in the development of computers came with the use of semiconductor transistors. These greatly reduced the size of computers while at the same time increasing operational speed and reliability. Magnetic tape and disk units were developed and used to store programs, The real breakthrough came with the invention of the integrated circuit developed by Fairchild in 1959. However, it was the large-scale integration (LS) circuit, a ‘chip’ developed in 1971, which really brought about the computer revolution. The chip or micro-processor (Figure 8.7) is the ‘brain’ of the modern computer. LSI chips have led to much smaller computers with tremendous storage capacities, speed and accuracy. Developments in computer technology during the 1980s and 1990s led to improvements in the following: + Speed of processing: At the end of the 1980s computers were processing, information at up to 33 megahertz, (MHz). In 1999 the speed of processing had increased to around 500 MHz. In 2008, computer processing speed was up to 2.2 gigahertz (GHz). The figure is stil rising, according to Moore's Law, which states that processing power doubles roughly every two years. Storage: During the decade of the 1970s, storage of information increased dramatically. Before 1970 computers performed mainly calculating and coordinating functions, The advent of the ‘hard drive’ enabled internal storage of information by all types of computer. The desktop computer is now capable of storing many millions of pieces of information, referred to as | lus gigabyte capacity. Portability: Laptop computers have been developed which enable computer users to carry their portable computer with them. This allows them to conduct their business on the spot without delay « Size: Whereas the first ‘mainframe’ computers were enormous, the post- 1990 computer became very much more compact while at the same time much more powerful 998» Management information systems: « Working at home: It is estimated that there are more computers in the home than in the workplace, because many individuals work from their own homes at their own convenience. In addition the home computer has the capacity for many non-work functions, such as games, providing, ‘entertainment and relaxation. + Access to information: The Internet represents an all-encompassing pool of information on literally any subject (see previous section, page 97) A computer world 1n general, it would be an accurate observation that at present the world is computer-driven. For the many uses of the computer outlined in this unit, and its myriad applications, it would also be safe to say that, given the pace of research now engaging the attention of computer researchers, the future may very well be driven by the information industries, rather than by oil and other primary products Management information systems reduce labour costs and paperwork, © ‘Human and machine’ become more productive, where a worker trained in MIS can function more efficiently, for example using a laptop on the road or in the air, Management information systems can assist in staff training, © Management information systems act as a monitoring device especially in automated systems, e.g. in soft-drink factories or bakeries. : © In marketing, eg. online buying, MIS enhances the distribution of the ‘goods or services. © Information bottlenecks are eliminated with the use of MIS ~ information is sent instantly and received quickly, using technologies such as e-mail, fax machines, scanning, charts. © MIS makes a firm more competitive by lowering costs and expanding its market share. © MIs provides a support system for senior executives in a company. ‘= Trade can be expanded via e-commerce, e-mail, the Internet, teleconferencing and fax machines. © The advent of the computer has revolutionised business activity. Computers assist in management, supervision of systems, research and design, information systems and clerical operations. © Computers have been successfully applied to many tasks because of their speed, accuracy, storage capacity and the automatic nature of the communication. Some of the more common areas of computer application are in medicine, the public services, process control in industry, the retail trade, education, engineering, designing, traffic regulation and communication, © The Intemet or ‘information super-highway’ enables rapid access to information and new ways of doing business in an electronic marketplace. © Developments in computing over the last 50 years have led to a vastly increased speed of processing, increased storage, portability and compact size Answers to(@) 1 A management information system is a means by which information is collected, collated, analysed and made available for decision-making. 2. Computers can be used for automated processes, computer-aided design and processing the sale of goods. 3. Three methods of computer-assisted instruction are computer-aided instraction (CAD), computer-assisted learning (CAL) and computer- managed learning (CML).