Bare Main points e Physical and Virtual System © General System Model (GSM) © Case Study: GSM of Supermarket ° Physical Resources e Management ° Information Processor e Standards e MISgees Physical and Virtual System © Physical System of the firm consists of tangible resources. *° Examples: materials, personnel, machines and money e Virtual system consists of the information resources that are used to represent the physical system e¢ Example: Computer-based file © An inventory storeroom containing inventory items is a physical system, and the computer-based inventory master file is a virtual system that represent the physical systemThe firm and its environment © The physical system of a firm is an open system in that it interfaces with its environment e Firms take resources from their environments, transforms these resources into products and services, and return the transformed resources to the environment e Figure 2.1 shows this flow of resources from the environment, through the firm, and back to the environment © The flow of physical resources is at the bottom and the flow of conceptual (virtual) resources is at the topFigure 2.1 The General System Model of the Firm fa Environment Standards Information | and Dex Information ae cisions Management ——_ |nformation | processor L Sunni SEREnEERERMEITT | | Data Physical —— Physical resources resources Input Trensormaton aay OUD ED ices cos roseureesGeneral System Model ¢ Figure 2.1 shows the following two flows: 1. The Physical Resource Flow: includes personnel, material, machines, and money 2. The Virtual Resource Flow: The arrows in the upper part of the figure show data, information, and decision-related information. At right, a 2- way flow of data and information that connects the firm to its environmentBare GSM The Firm's Control Mechanism: e The elements that enable the firm to operate as a closed-loop system are shown in the upper portion of the diagram The Feedback (close) Loop: © Data are gathered from the firm and from the environment and entered into the information processor, which transform it into information. The information is made available to managers to make decisions to affect necessary changes in the physical systemSoe GSM Standard: e Managers is guided in its decision making by the firm’s performance standard. These performance standards can also be used by the information processor to determine when the firm is not performing as planned.Soe GSM e Environmental elements are organizations or individuals that exist outside the firm and have a direct or indirect influence on it. Figure 2.2 Fight Environmental Elements ‘i eS & = S&SCase Study of GSM: SupermarketBare GSM of a supermarket e Explain the General System Model of a Supermarket including: © Physical resources ° Management ¢ Information Processor © Standard e MIS= Physical resources All of the physical resources flow through the physical system of a supermarket. Physical resources: Material, personnel, machines, money . Material: The primary flow is materials -- groceries and other items that are sold. . Personnel: The personnel flow consists of the store managers, the checkout clerks, stock clerks, and so on who are hired, work for a period of time, and eventually leave.= Cont. 3. Machines: A few machines are used in a supermarket. The bar code readers at the checkout counters are the most obvious, but there are others behind the scenes, such as computers, desk calculators, and telephones. ¢ Additionally, other resources in the machines category include the refrigerated coolers, display cases, and shelves that are used to store the merchandise awaiting sale. 4. Money: The flow of money into the supermarket is provided by customers, and the flow out is primarily in the form of payments to suppliers, employees, and owners.—— Cont. © The transformation process, It includes: 1. arranging the items on the shelves. 2. preparing fresh vegetables and fruits for display, cutting meat, and perhaps baking pastries and preparing deli items. 3. All activity that makes the products conveniently and attractively available for sale can be considered transformation.Management ©The management element in the conceptual system consists of the store manager and assistant managers.Bare Information processor © The information processor is the store computer, which controls the bar code readers and provides the prices of the various items. The computer also transmits data to the headquarters that specifies items to be ordered, provides sales statistics, and so on.Standard © The standards of performance for the supermarket are jointly established by headquarters and the store management. ¢ Standards in the form of sales quotas and operating budgets give managers guidelines concerning the level of performance that is to be achieved. Managers use observation and the information processor to monitor actual performance and compare it to the standards.Bare MIS ¢ Managers receive reports (information) from information processor that show: * which items are selling well and which are not ¢ the times during the day and the days during the week when sales are very high and very low. *¢ The managers respond to these reports by taking such decisions as adjusting order quantities, reallocating shelf space, putting items on sale, and adding promotional signs and displays.Bare Standard and Objectives © Standards © Objectives e Measure of acceptable © Overall goal that a system performance is to obtain e Usually stated in specific ° Systems have one or terms more objectives e Used to control physical system © Consists of: »« Management « Information processor « Standardsee ee = - Z A Comparison of Objectives and Standards Objectives Standards of Performance Satisfy Customer Achieve an annual sales volume of at least $25 million Needs Maintain a 20% share of the market Maintain an annual growth rate of 15% = ere Operate efficiently Realize an after-tax profit of 15% of sales Invest in the future Develop sources of supply Operate ethically Maintain a record of accident-free days Invest in a minimum of 15% of sales revenue in research and development Achieve stockout on no more than 2% of the items in inventory during the year Have no legal actions filed against the firm by customers, suppliers, and the government 621