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Part - 2 | MIS - Introduction to Management Information Systems ?

Hence, due regard is often not
given for its planned development and use. Many organizations have spent financial
resources on computers purely to expedite the activity of data collection and processing.
Many organizations have purchased computers data processing and for meeting
the statutory requirement of filing the return and reports to the Government. Computers
are used mainly for computing and accounting the business transactions and have not
been considered as a tool for information processing.
The organizations have invested in computers and expanded its use by adding
more or bigger computers to take care of the numerous transactions in the business. In
this approach, the information processing function of the computers in the organization
never got its due regard as an important asset to the organization. In fact, this function is
misinterpreted as data processing for expeditious generation of reports and returns, and
not as information processing for management actions and decisions.
However, the scene has been changing since late eighties when the computers
became more versatile, in the function of Storage, Communications, Intelligence and
Language. The computer technology is so advanced that the barriers of storage, distance,
understanding of language and speed are broken.
The computers have become user-friendly. They can communicate to any distance
and share data, information and physical resources of other computers. Computers can
now be used as a tool for information processing and communication. It can be used for
storing large database or knowledge base. It can be used for knowing the current status of
any aspect of the business due to its on-line real time processing capability.
With the advancement of computer technology, it is now possible to recognize
information as a valuable resource like money and capacity. It is necessary to link its
acquisition, storage, use, and disposal as per the business needs for meeting the business
objectives. Such a broad-based activity can be executed only when it is conceived as a
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system. This system should deal with management information and not with data
processing alone. It should provide support for management planning, decision making
and action. It should support the needs of the lower management as well as that of the top
management. It should satisfy the needs of different people in the organization at
different levels having varying managerial capabilities. It should provide support to the
changing needs of business management.
In short, we need a Management Information System flexible enough to deal with
the changing information needs of the organization. It should be conceived as an open
system continuously interacting with the business environment with a built-in mechanism
to provide the desired information as per the new requirements of the management. The
designing of such an open system is a complex task. It can be achieved only if the MIS is
planned, keeping in view, the plan of the business management of the organization.
The plan of MIS is concurrent to the business plan of the organization. The
information needs for the implementation of the business plan should find place in the
MIS. To ensure such an alignment possibility, it is necessary that the business planstrategic
or otherwise, states the information needs. The information needs are then traced
to the source data and the systems in the organization which generate such a data. The
plan of development of the MIS is linked with the steps of the implementation in a
business development plan. The system of information generation is so planned that
strategic information is provided for the strategic planning, control information is
provided for a short term planning and execution. The details of information are provided
to the operations management to assess the status of an activity and to find ways to make
up, if necessary. Once the management needs are translated into information needs, it is
left for the designer to evolve a plan of development and implementation.
Contents of the MIS Plan
A long range MIS plan provides direction for the development of the systems, and
provides a basis for achieving the specific targets or tasks against a time frame. The plan
would have the following contents which will be dealt by the designer under a support
from the top management. Table 10.1 shows equivalence of Business Plan and MIS plan.
MIS Plan is linked to the Business Plan
MIS goals and objectives
It is necessary to develop the goals and objectives for the MIS which will support the
business goals. The MIS goals and objectives will consider management philosophy,
policy constraints, business risks, internal and external environment of the organization
and the business.
The goals and the objectives of the MIS would be so stated the they can be measured.
The typical statements of the goals are as under.
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 Provide online information on the stocks, markets and the accounts balances.
 The query processing should not exceed more than three seconds.
 The focus of the system will be on the end user computing and access facilities.
 Information support will be the first in the strategic areas of management such as
marketing or service or technology.
Table 8.1 Business Plan Versus MIS Plan
Business plan MIS plan
Business goals and objectives.
Business plan and strategy.
Strategy planning and decisions.
Management plan for execution and control.
Operation plan for the execution.
Management information system, objectives,
consistent to the business goals and objectives.
Information strategy for the business plan
implementation playing a supportive role.
Architecture of the Management Information System
to support decisions.
System development schedule, matching the plan
execution.
Hardware and software plan for the procurement and
the implementation.
Such statements of the goals and objectives enable the designer to set the direction
and design implementation strategies for the MIS plan.
Strategy for the plan achievement.
The designer has to take a number of strategic decisions for the achievement of the MIS
goals and objectives. They are:
(a) Development strategy: An online, a batch, a real time.
(b) System development strategy: Any approach to the system development –
Operational versus Functional; Accounting versus Analysis; Database versus
Conventional approach; Distributed versus Decentralized processing; one
Database versus Multiple databases SSAD vs OOT.
(c) Resource for system development: In-house versus external, customized
Development versus the use of packages.
(d) Manpower composition: Analyst, programmer skills and know-how.
The architecture of the MIS
The architecture of the MIS plan provides a system structure and their input, output and
linkages. It also provides a way to handle the systems or subsystems by way of
simplification, coupling and decoupling of subsystems by way of simplification, coupling
and decoupling of subsystems. It spells out in detail the subsystems from the data entry to
processing, analysis to modeling, and storage to printing.
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The system development schedule
A schedule is made for the development of the system. While preparing the schedule due
consideration is given to the importance of the system in the overall information
requirement. Due regard is also given to logical system development. For example, it is
necessary to develop the accounting system first and then the analysis.
Further, unless the systems are fully developed their integration is not possible.
This development schedule is to be weighed against the time scale for achieving a certain
information requirement linked to a business plan. If these are not fully met, it is
necessary to revise the time schedule and also the development schedule, whenever
necessary.
Hardware and software plan
Giving due regard to the technical and operational feasibility, the economics of
investment is worked out. Then the plan of procurement is made after selecting the
hardware and software. One can take the phased approach of investment starting from the
lower configuration of hardware going over to higher as development takes place. The
process is to match the technical decision with the financial decision. The system
development schedule is linked with the information requirement which in turn, is linked
with the goals and objectives of the business.
The selection of the architecture, the approach to the information system
development and the choice of hardware and software are the strategic decision in the
design and development of the MIS in the organization. The organizations which do not
care to take proper decisions in these areas suffer from over-investment, under-utilization
and are not able to meet the critical information requirement.
It is important to note the following points:
1. The organization’s strategic plan should be the basis for the MIS strategic plan
2. The information system development schedule should match with the
implementation schedule of the business plan.
3. The choice of information technology is a strategic business decision and not a
financial decision.
A model of MIS plan is giving in table 10.2
Table 8.2 A Model of the MIS Plan
Contents Particulars Focus
Corporate information
Corporate philosophy
Corporate mission/goals/objectives
Business risk and rewards
Business environment and current
operation.
Policy, guidelines, culture.
Current and new mission/goals/objectives.
Clear quantitative statements on these
factors showing a trade off between the risk
and rewards.
Where are we ?
What is the foundation of
business ?
Where do we want to reach ?
What is the risk ? is it worth
the risk ?
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Business policy and strategy
Information needs
Architecture of the plan
Schedule of development
Organisation of the plan
Budge
Details of the strategic and policy decisions
affecting the business.
Strategic/planning, operational.
Information Technology details.
Details of the systems and subsystems and
their linkages charted against the time
scales.
Manpower and delegation details. Internal
and external resources.
Details on the investment schedule and
benefits.
How do we achieve the goals
and objectives ?
What is the key in formation ?
What are the tools for
achievement ?
When and how will it be
achieved ?
Who will achieve it ?
How much will it cost ?
8.2 ASCERTAINING THE CLASS OF INFORMATION
Ascertaining the information needs of the management for the business execution is
a complex task. The complexity can be handled if the information is classified on the
basis of its application and the user, which becomes the basis for the ascertainment.
The classification could be as shown in Table 10.3.
The design of the MIS should consider the class of information as a whole and
provide suitable information system architecture to generate the information for
various users in the organization. Let us now proceed to ascertain to the information
needs of each class.
Organizational Information
One can define the organizational information as a whole and provide suitable
information system architecture to generate the information for various users in the
organization. Such information can be determined by constructing a matrix of
information versus as shown in Table 10.4
It can be observed from the table that the information entity is one, but its usages are
different. For example, the employee attendance information would be used by the personnel
Table 8.3 Classes of information
Information Class Example of information User
Organizational
Functional
Knowledge
Decision support
The number of employees, products, services.
Locations, the type of business, turnover and variety of
the details of each one of these entities.
Purchases, sales, production, stocks receivables,
payables, outstanding, budgets, statutory information.
The trends in sales, production technology. The
deviations from the budgets, targets, norms etc.
competitors’ information, industry and target; and its
analysis.
Status information on a particular aspect, such as
utilization, profitability standard. requirement versus
availability. Information for problem solving and
modeling. Quantitative information on the business
status. Non-moving inventory, overdue payments and
Many users at all the levels.
Functional heads.
Middle and the Top
Management.
Middle management and
operations management.
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Operational
receivables.
Information on the production, sales, purchase,
dispatches consumptions, etc. in the form of planned
versus actual. The information for monitoring of
execution schedules.
Operational and management
Supervisor, Section Officers.
Table 8.4 Matrix of of information versus User for a Personnel Function
Information Manager Manager Manager Manager
Entity (Personnel) (Production) (Administration) (Accounts)
Employees X X X
Attendance
Salary wages X X X X
And overtime
Human resources X X X
Information
Department for legal compliance of maintaining the muster recommended by the
Factory Inspector. The production manager would use it for scheduling, rescheduling
and loading of the jobs on the shop floor depending upon the persons present. The
corporate planning and administration will use it for manpower assessment and
control and manpower forecasting.
The organizational information requirement needs to be studied thoroughly and
critically as it is used across the organization. It is necessary, therefore, to map the
information in terms of the data source, generation and usage, so that the designer can
provide a path from the acquisition to the generation and the storage.
Since the usage of the organizational information is at different levels for different
purposes, it is advisable to store the data in the form of the database which will be
used by the users for generating their respective information needs. The determination
of the information can be done by taking each business function, such as Personnel,
Sales, Marketing, Production, Commercial, etc. and develop the information versus
the user matrix.
Functional Information
The functional information is defined as a set of information required by the
functional head in conducting the administration and management of the function.
This information is purely local to that function and by definition, does not have a use
elsewhere. This information is used by a manager to plan and control his function.
Functional information is largely factual, statistical and detailed in multidimensions
of the function. For example, if you take the sales information, it can be
processed in seven ways, viz. the product, the product groups, the market segment,
the geographic zones, the locations, the customer, and the sales organization
structure.
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The functional information is normally generated at equal time intervals; say
monthly, quarterly, etc. for understanding the trend and making comparisons against
the time scale. Such information is used for planning, budgeting and controlling the
operations of the function.
Functional information is also used for assessing particular aspects of the
business. For example, the stocks of finished goods, receivables, and orders on hand
throw a light on marketing function of the organization. The raw material stocks,
WIP, orders pending and payable throw light on the purchase function. These
information sets have a functional utility and required in detail revolving around
several dimensions.
The functional information can be assessed on the following three parameters-the
work design, the responsibility and functional objectives.
Work design
For example, for the customer order scrutiny the available stock, the price, the terms
of payment and the probable delivery is an information set evolved out of the work
design of customer order processing. The procedure of the order processing requires
this information.
Responsibility
The managers in the functional areas of management are responsible for achieving the
targets and accomplishing the goals and objectives. It is, therefore, necessary to
inform and update the information on targets at regular intervals to enable him to
make or change decisions in his domain of operations. Most of these targets are
business targets such as the turnover, production, utilization, stocks and so on.
For example, the marketing manager has a monthly targets of Rs 1 million order
booking, half a million invoicing, and not more than two months receivables. Since,
he is responsible for achieving the targets, it would be necessary to inform him on
these aspects at regular intervals. This information is used for the responsibility
accounting and decision making for achieving the targets. The manager would be
assessed on the basis of responsibility he discharges in conducting the business.
Functional objectives
Each function has its own objectives which are derived out of the corporate goals.
For example, the overall business plan objectives give rise to the objectives for
each business function. Some of the business plan objectives are given below based
on which each function in the organization derives its objectives.
■ The total sales per month is Rs 10 million.
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■ The finished goods inventory, not to exceed Rs 1 million.
■ The outstanding more than six months not to exceed Rs 0.2 million.
■ The capacity utilization should be minimum 85 per cent.
■ The employee attendance per month should be 99 per cent.
The functional goals and objectives are necessary to achieve overall corporate
achievements. Most of such goals and objectives are potentially achievable within the
managerial and physical resources that the manager has at his disposal. It is,
therefore, necessary to inform the manager on the achievements of these targets on a
continuous basis.
In summary, the functional information would emanate from the work design and
procedures, the managerial responsibility accounting, and with reference to the
functional goals and objectives. It would be determined by studying the work design
and procedures and the responsibility accounting, and with reference to the functional
goals and objectives. It would be determined by studying the work design and
procedures and the responsibility which the manager holds for the business
performance. That information, which measures the business activity and evaluates
the performance on the key target areas, is the functional information. The source of
such information is the managers and their functional heads who together execute the
business activity.
Knowledge Information
The knowledge information creates an awareness of those aspects of business where
the manager is forced to think, decided and act. Such information shows the trend of
the activity or a result against the time scale.
For example, whether the sales are declining and the trend is likely to continue in
the next quarter. The product is failing continuously on one aspect and the reason of
failure is the process of manufacturing. Such information pin-points the area or entity
and forces the manager to act. It highlights the deviations from the norm or standard
and also any abnormal development which are not in congruence with the forecasts or
expectations. Such information gives rise to business decisions, which will affect the
process of business significantly. In some situations the strategic decisions may be
necessary to solve the problem.
The knowledge information may cut across the functional boundaries of the
organization. The action or decision may fall in other functional areas of business
operations. The decision may fall in the domain of top management or the middle
management. The knowledge information is required by the middle and top
management as they are the ones who have conceived, planned and implemented the
business plan. Hence, the knowledge information supports the functions of the middle
and the top management. Knowledge information is tracked continuously and
reported in a fixed format, for consistency and at fixed intervals for updating the
knowledge base. The nature of this information is analytical and relates to the past,
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the current and the future. The knowledge information is reported in graphic formats
for a quick grasp and managerial response. It contains business result and
comparative analysis of the performance.
Decision Support Information
Most of the information required by the middle and the top management is for
decision making. The information does not act as a direct input to the decision
making procedure or formula but supports the manager in the efforts of decision
marking.
Information is used in a decision support system for model building and problem
solving. The support may act in two ways, in two ways, one for justifying the need of
a decision, and the other as an aid to decision making.
For example, the information on the non-moving inventory justifies the decision
of its disposal at throwaway prices. The demand forecasts information aids in the
decision on determining the economic order quantity for production or a sale.
The decision support information can be determined for the company at the entity
level leaving its use to the decision makers in a suitable manner. The source of this
information could be internal or external to the organization. It can be determined by
identifying the tools, techniques, models and procedures, used by the managers in the
decision making.
Operational Information
This information is required by the operational and the lower level of the
management. The main purpose of this information is fact finding and taking such
actions or decisions which will affect the operations at a micro level. The decisions
may be to stay on overtime, draw additional material, change the job from one
machine to the other, and send a reminder to the supplier for the supply of material.
These decisions are such that they make the routine administration of the business
smooth and efficient. These decisions do not fall in the category of the managerial
decisions.
The sources of operational information are largely internal through transaction
processing and the information relates to a small time span and is mostly current.
8.3 DETERMNING THE INFORMATION REQUIREMENT
The sole purpose of the MIS is to produce such information which will reduce
uncertainty in a given situation. The moment what is unknown becomes known, the
decision maker’s problem simple. Methods have been evolved to handle the degree of
uncertainty the management is expected to deal with.
The difficulty to determine a correct and complete set of information is on
account of the factors given below:
1. The capability constraint of the human being as an information processor, a
problem solver and a decision maker.
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2. The nature and the variety of information.
3. Reluctance of decision makers to spell out the information for the political and the
behavioral reasons.
4. The ability of the decision makers to specify the information.
In spite of these difficulties, methods are evolved based on the uncertainty scale,
starting from the low to the high level of uncertainty. If the uncertainty is low,
seeking information requirement or needs is easy as against a very high level of
uncertainty. Based on the uncertainty scale the following methods, shown in
Table 10.5, have been suggested.
Table 8.5 Methods of Handing Uncertainty
Leval of uncertainty Level of management Method
Low (Near certainty)
Precise probabilistic
knowledge (A risk situation)
Not able to determine in
probabilistic terms precisely
(Very risky)
High (Total uncertainty)
Operations management.
Middle management
Middle and top management.
Top management.
Ask Questions such as, what do
you need ?
Determine from the existing
systems and methods of decision
making and problem solving.
Determine through the critical
success factors, decision
parameters and decision
methodology.
Determine through
experimentation, modeling and
sensitivity analysis.
There are four methods of determining the information requirements. They are:
1. Asking or interviewing
2. Determining from the existing system
3. Analysing the critical success factors
4. Experimentation and modeling.
Asking or Interviewing
In this method a designer of the MIS puts questions or converses with the user of
information and determines the information requirements. Putting the questions is an art
and it should be used properly to seek information.
When the user has to select one answer from finite set of answer a closed question
should be asked. For example, “Which are the raw materials used for making a product?”
But an open question is put, when the user has no precise knowledge but has an ability to
determine all answer and to select one out of them? For example, “Which are the raw
materials which can be used in a product?” In open questions, the answers may not be
immediate but can be obtained by surveying the domain of knowledge of the user.
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When multiple users or several decision makers in similar functions or positions
are involved, a brain storming session is performed to cover all possible answer to the
questions. When several users are involved, group consensus can be sought to get the
most feasible set of answer.
The experts or experienced users are asked to give their best answer- this
approach is called the Delphi method. In all these methods, the systems designer has to
test the validity of all the answer independently. An experienced designer is able to
analyze critically the answers given to the questions and to determine the correct
information requirement.
Determining from the Existing System
In a number of cases the existing system, which has been evolved after a number of
years, and has been designed out of experience given straightaway the requirement of
information. In many situations, system from other companies can give additional
information requirements.
The fund of knowledge is available from the textbooks, handbooks, research
studies which can determine the information requirement. For example, systems such as
the accounts receivables, the accounts payables, the pay roll, the inventory control, the
financial accounting, etc., have well determined information requirements.
Irrespective of the type of organization and business, ninety per cent of the
information requirement is common and the balance ten per cent may be typical to the
organization or the business, which needs to be determined separately. The managers in
the operations and the middle management use the existing system as a reference for
determining the information requirement.
This method is adopted when the rules and decision methods are outside the
purview of the decision maker. They are determined or imposed by external sources such
as the Government, the Authority, the principles, etc. for example, the information
required to manager shares of the company are determined through the rules and
regulations laid down by the Company Law Board. The manager of the shares
department has very little additional information need.
In all such functions, the manager determines the information needs and the
designer of the MIS can always fall back on the prescribed law books, manuals, theory
and textbooks, hand books, etc. to confirm the informational needs
Analyzing the Critical Factors
Every business organization performs successfully on the basis of certain critical factors.
Other factors are important and play a support role in the functioning of the organization.
Many times a function is singularly critical to the successful functioning of a business
organization.
For example, in a high technology business, the management of the technology
becomes the critical function. Or in a service organization, the management of service
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becomes a critical factor. In a consumer industry, marketing and service become the
critical functions. The information requirements of such organizations largely relate to
these critical factors. The analysis of these functions or factors will determine the
information requirements.
Experimentation and Modelling
When there is total uncertainty, the designer and the user of the information resort to this
method for determining the information requirement. The experimentation would decide
the methodology for handling the complex situation. If the method is finalized, the
information needs are determined as they have been evolved through the
experimentation. Test marketing of a product is an approach of the experimentation to
decide the correct marketing strategy.
Sometimes models are used for deciding the initial information needs and they are
modified during the implementation stage. The information requirements determined
through such methods undergo a qualitative change as the users get the benefit of
learning and experience and the needs may undergo a change or get replaced completely.
8.4 DEVELOPMENT AND IMPLEMENTATION OF THE MIS
Having made the plan of the MIS, the development of the MIS calls for determining the
strategy of development. As discussed earlier the plan consists of various systems and
subsystems. The development strategy determines where to begin and in what sequence
the development can take place with the sole objective of assuring the information
support.
The choice of the system or the subsystem depends on its position in the total MIS
plan, the size of the system, the user understands of the system and the complexity and its
interface with other systems. The designer first develops systems independently and starts
integrating them with other systems, enlarging the system scope and meeting the varying
information needs.
Determining the position of the system in the MIS is easy. The real problem is the
degree of structure, and formalization in the system and procedures which determine the
timing and duration of development of the system. Higher the degree of structured ness
and formalization, greater is the stabilization of the rules, the procedures, decision
making and the understanding of the overall business activity. Here, it is observed that
the user’s and the designer’s interaction is smooth, and each other’s needs are clearly
understood and respected mutually. The development becomes approach with certainty in
inputs process and outputs.
Prototype Approach
When the system is complex, the development strategy is Prototyping of the system.
Prototyping is a process of progressively ascertaining the information needs, developing
methodology, trying it out on a smaller scale with respect to the data and the complexity,
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ensuring that it satisfies the needs of the users, and assess the problems of development
and implementation.
This process, therefore, identifies the problem areas, inadequacies in the prototype vis-à-
vis fulfillment of the information needs. The designer then takes steps to remove the
inadequacies. This may call upon changing the prototype of the system, questioning the
information needs, streamlining the operational systems and procedures and more user
interaction. A typical process of the system development through prototyping is given in
fig. 8.1.
MISSION,
GOALS
IDENTIFY
INFORMATION
NEEDS
REFINE
THE NEEDS
MODIFY
PROTOTYPE
SPECIFICATION
REVIEW
DEFINE SYSTEM
BOUNDARIES
ANDSCOPE
DEVELOP AND
TEST
DEVELOP
REVISED
PROTOTYPE
IMPLEMENT
INPARALLEL
DEFINE SYSTEM
OBJECTIVE
INITIAL
RPOTOTYPE
IS
THE USER
SATISFIED?
TRAINING
EXAMINE
FEASIBILITY
DEVELOP INITIAL
PROTOTYPE
SPECIFICATIONS
DEVELOP
APPLICATION
WITHFINAL
SPECIFICATIONS
DOCUMENTATION
NO
YES
Fig. 8.1 Information System Development Model; Prototyping Approach.
In the prototyping approach, the designer’s task becomes difficult, when there are
multiple users of the same system and the inputs they use are used by some other users
well. For example, a lot of input data comes from the purchase department, which is used
in accounts and inventory management.
The attitudes of the various users and their role as the originators of the data needs to be
developed with a high degree of positivism. It requires, of all the personnel, to appreciate
that the information is a corporate resource, and all have to contribute as per the
designated role by the designer to fulfill the corporate information needs. When it comes
to information the functional, the departmental, the personal boundaries do not exist.
These calls upon each individual to comply with the design needs and provide without
fail the necessary data inputs whenever required as per the specification discussed and
finalized by the designer.
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Brining the multiple users on the same platform and changing their attitudes
towards information, as a corporate resource, is the managerial task of the system
designer. The qualification, experience, knowledge, the state of art, and an understanding
of the corporate business, helps considerably, in overcoming the problem of changing the
attitudes of the multiple users and the originators of the data.
Life Cycle Approach
There are many systems or subsystems in the MIS which have a life cycle, that is, they
have birth and death. Their emergence may be a sudden or may be a part of the business
need, and they are very much structured and rule-based. They have hundred per cent
clarity of inputs and their sources, a definite set of outputs in terms of the contents and
formats. These details more or less remain static from the day the system emerges and
remains in that static mode for a long time. Minor modifications or changes do occur but
they are not significant in terms of handling either by the designer or the users of the
system. Such system, therefore, have a life and they can be developed in a systematic
manner, and can be reviewed after a year or two, for significant modification, if any.
Examples of such systems are pay roll, share accounting, basis financial
accounting, finished goods accounting and dispatching, order processing, and so on.
These systems have a fairly long duration of survival and they contribute in a big way as
sources of data to the Corporate MIS. Therefore, their role is important and needs to be
designed from the view point as an interface to the Corporate MIS. The life cycle
approach, therefore, has a method of its own as explained in the fig. 10.2.
Apart from the core systems, some decision support systems can be developed
through the life cycle approach. The choice of system design in the prototype and Life
Cycle approach is decided on the basis of the nature of the system or application. For
example, you have a choice of the database approach versus the conventional system
approach, the online real time versus the batch processing approach. You may also have
choice of hardware and software. All these technical decisions are more situation
dependent, requiring judicious application of and information technology.
SYSTEM
APPLICATION
ASSESS
FEASIBILITY
INFORMATION
REQ.ANALYSIS
CONCEPTUAL
DESIGN
PHYSICAL
DESIGN
SYSTEM
SPECIFICATIONS
PROGRAM
SPECIFICATION
DEVELOP
THE SYSTEM
INSTALL
THE SYSTEM
CONDUCT AWARENESS
AND TRAINING
OPERATE THE
SYSTEM
REVIEW
AND AUDIT
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Fig. 8.2 Life Cycle Approach to the Development of MIS
Table 8.6 shows the difference between the two approaches helping the designer select an
approach.
Table 8.6 Comparison of Approaches
Prototyping approach Life cycle approach
Open system with a high degree of uncertainty about
the information needs.
Necessary to try out the ideas, application and
efficiency of the information as a decision support.
Necessary to control the cost of the design and
development before the scope of the system and its
application is fully determined. Experimentation is
necessary.
User of the system wants to tryout the system before he
commits the specification and the information
requirements.
The system and application is highly custom oriented.
Closed systems with little or no uncertainty about the
information needs. The system remains valid for a long
time with no significant change. The design would
remain stable.
No need to try out the application of the information as it
is already proven.
Scope of the design and the application is fully
determined with clarity and experimentation is not
necessary.
The user is confident and confirms the specifications and
the information needs.
The system and application is universal and governed by
the principles and practices.
Implementation of the management information system
The implementation of the system is a management process. It bring about organizational
changes, it affects people and change their work style. The process evokes a behavior
Response which could be either favorable or unfavorable depending upon the strategy of
the system implementation.
In the process of implementation, the system designer acts as a change agent or a
catalyst. For a successful implementation he has to handle the human factors carefully.
The user of the system has a certain fear complex when a certain cultural work
change is occurring. The first system has foremost fear is about the security to the
change-over form the old to new is not a smooth one. Care has to be taken to assure the
user that such fears are baseless and the responsibility, therefore, rests with the designer.
The second fear is about the role played by the person in person in the
organization and how the change affects him. On many occasions, the role may reduce
his importance in the organization, the work design may make the new job impersonal,
and a fear complex may get reinforced that the career prospects may be affected.
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There are certain guidelines for the systems designer for successful
implementation of the system. The system designer should;
1. Not question beyond a limit the information need of the user.
2. Not forget that his role is to offer a service and not to demand terms.
3. Remember that the system design is for the use of the user and it is not the
designer’s prerogative to dictate the design features. In short, the designer
should respect the demands of the user.
4. Not mix up technical needs with the information needs. He should try to
develop suitable design with appropriate technology to meet the information
needs. The designer should not recommend modifications of the needs, unless
technically infeasible.
5. Impress upon the user the global nature of the system design which is required
to meet the current and prospective information need.
6. Not challenge the application of the information in decision making. It is the
sole right of the user to use the information the way he thinks proper.
7. Impress upon the user that the quality of information depends on the quality of
input which he provides.
8. Impress upon the user that he is one of the users in the organization and that
the information is a corporate resource and he is expected to contribute to the
development of the MIS.
9. Ensure that the user makes commitment to all the requirements of the system
design specifications. Ensure that he appreciates that his commitments
contribute largely to the quality of the information and successful
implementation of the system.
10. Ensure that the overall system effort has the management’s acceptance.
11. Enlist the user’s participation from time to time, so that he is emotionally
involved in the process of development.
12. Realize that through serving the user, he is his best guide on the complex path
of development.
13. Not expect perfect understanding and knowledge from the user as he may the
user of a non-computerized system. Hence, the designer should be prepared to
change the system specifications or even the design during the course of
development.
14. Impress upon the user that the change, which is easily possible in manual
system, is not that easy in the computer system as it calls for changes in the
programs.
15. Impress upon the user that perfect information is non-existent; his role
therefore still has an importance in the organization.
16. Ensure that the problems in the organization are resolved first before the
system is taken for development.
17. Conduct a periodical user meeting on systems where you get the opportunity
to know the ongoing difficulties of the users.
18. Train the user in computer appreciation and systems analysis as his perception
of the computerized information system will fall short of the designer’s
expectation.
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Implementation of the MIS in an organization is a process where organizational
transformation takes place. This change can occur in a number of ways.
The Lewin’s model suggests three steps in this process. The first step is
unfreezing the organization to make the people more receptive and interested in the
change. The second step is Choosing a course of action where the process begins and
reaches the desired level, and the third step is Refreezing, where the change is
consolidated and equilibrium is reinforced. Many a times, this process is implemented
through an external change agent, such as a consultant, playing the role of a catalyst.
The significant problem in this task is the resistance to change. The resistance can
occur due to three reasons, viz., the factors internal to the user of information, the factors
inherent in the design of the system and the factors arising out of the interaction between
the system and its users. The problem of resistance can be handled through education,
persuasion, and participation. This itself can be achieved by improving the human
factors, and providing incentives to the users, and eliminating the organizational
problems before implementing the system.
8.5 MANAGEMENT OF QUALITY IN THE MIS
Information is a corporate resource, as important as the capital, labour, know-how, etc.
and is being used for decision making. Its quality information would adversely affect the
organizational performance as it affects decision making. The quality of information is
the result of the quality of the input data, processing design, system design, system and
procedures which generate such a data, and the management of the data processing
function. Quality, unlike any other product, is not an absolute concept. Its level is
determined with reference to the context and its use, and the user. Perfect quality just as
perfect information is non-achievable and has cost-benefit implications.
However, it is possible to measure the quality of information on certain
parameters. All these parameter need not have a very high value in terms of the unit of
measure. Some parameters may have lesser importance in the total value on account of
their relevance in the information and its use. The parameters which are generally
considered are as shown in Table 8.7.
Table 8.7 Quality Parame
ters
Parameter of Quality Example Comments
Complete data of all the
transaction
Valid transacation and
input data
Accuracy and precision
All invoices of the month. All vouchers of
the month.
Only correct transaction types are permitted
in the system. Only that data which meet the
design specifications can be used.
Correct use of the formula or procedure and
relevant data.
This achieves integrity of data with
respect to the time period.
Ensures the validity of the data and in
turn, assures valid information.
Assures that the results are accurate and
precisely correct based on rule, act or
law using complete data.
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Relevance to the user
Timely information
Meaningful and complete
information.
It should be relevant to the user for a
decision making.
Information on the sales dispatch, pending
position.
Production information should be reported
in terms of quantity, quality and groups, or
family, and refection and reasons. It should
be given in a proper format, with references.
If the relevance is appropriate, the
quality required is high.
If the information is received late it
becomes useless from a point of view
of decision making.
Incomplete information forces the user
to infer or interpret erroneously leading
to a wrong decision.
The quality of this important parameter is ensured by conducting a proper
systems analysis, designing a suitable computer system and ensuring its maintenance
from time to time, and also subjecting it to audit checks to ensure the system integrity.
The quality of the parameters is assured if following steps are taken.
1. All the input is processed and controlled.
2. All updating and corrections are completed before the data processing begins.
3. Inputs (transactions, documents, fields and records) are subjected to validity
checks.
4. The access to the data files is protected and secured through an authorization
scheme.
5. Intermediate processing checks are introduced to ensure that the complete data is
processed right through, i.e., run to run controls.
6. Due attention is given to the proper file selection in terms of data, periods and so on.
7. Back-up of the data and files are taken to safeguard corruption or loss of data.
8. The system audit is conducted from time to time to ensure that the computer system
specifications are not violated.
9. The system modifications are approved by following a set procedure which begins
with authorization of a change to its implementation followed by an audit.
10. Systems are developed with a standard specification of design and development.
11. Computer system processing is controlled through programme control, process
control and access control.
The assurance of quality is a continuing function and needs to be evolved over a
period and requires to be monitored properly. It cannot be assessed in physical units of
measure. The user of the information is the best judge of the quality. Utility of information
and its relevance are the two other measures of quality.
8.6 ORGANISATION FOR DEVELOPMENT OF THE MIS
Proper people organization is basic to the management of any activity or function. The
same thing is true for the development of the MIS. The principles of the organization and
structuring the organization to the specific needs of the function are a prime necessity.
When we talk with reference to the MIS a number of issues come up and they are not the
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same in all the organizations. Hence, the organization structure of the MIS would differ
from one organization to the other.
The type, the size and the structure of corporate organization becomes the basis
for the MIS organization for handling the MIS function and management alternatives.
The major is sues involved are:
1. Whether the function should be handled as a centralized or decentralized activity.
2. The allocation of the hardware and software resources.
3. The maintenance of the service level at an appropriate level.
4. Fitting the organization of the MIS in the corporate organization, its culture and
the management philosophy.
The question of centralization versus decentralization is resolved by assessing the
status of information resource in the organization, i.e., whether the status is the
information systems management or the information resource management. When it is a
case of information systems management then the organization of the MIS would be
centralized, but if it is a case of information resource management, it will be
decentralized organization.
In a centralized set, the responsibility of acquisition of the data, of providing the
information to the users, becomes the centralized function. The centralized organization
is also recommended when the information needs are more or less static. In such cases,
the user of the information is free from the responsibility of designing the systems and
also from deciding the hardware and the software. However, if the information needs are
varying and is more strategic in nature, the reliance on the centralized set-up becomes a
difficult workable proposition. When such a situation exists, a decentralized organization
is more effective.
Depending upon the situation, hardware and software solutions are available. In a
decentralized set-up the allocation of hardware is a centralized decision but the collection
of data and its processing becomes the user’s responsibility. Training, problem solving
and system development, however, is a centralized function. In all such situations, the
information processing is based on the database management system. Therefore, the
management of the database becomes the centralized responsibility and its use becomes
the responsibility of users.
In a real life situation, the variations of these two approaches are found, mainly on
account of the variety of hardware, software solutions. One can develop two models of
the MIS organization (as shown in Fig. 8.3 and Fig. 8.4), and its variations can be further
developed suitable to the corporate culture, the management style and philosophy of the
management.
The MIS functions in any organization would vary on account of the issues
mentioned earlier and to that extent the variations of these two models would be the
organization of the MIS.
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8.7MIS: THE FACTORS OF SUCCESS AND FAILURE
Many organizations use MIS successfully, others do not. Though the hardware and the
software is the latest and has appropriate technology, its use is more for the collection and
storage of data and its elementary processing. There are some factors which make the
MIS a success and some others, which make it a failure. These factors can be
summarized as follow.
Factors Contributing to Success
If a MIS is to be a success then it should have all the features listed as follows.
 The MIS is integrated into the managerial functions. It sets clear objectives to
ensure that the MIS focuses on the major issues of the business. Also adequate
development resources are provided and the human and organizational barriers to
progress are removed.
 An appropriate information processing technology required to meet the data
processing and analysis needs of the users of the MIS is selected.
 The MIS is oriented, defined and designed in terms of the user’s requirements and
its operational viability is ensured.
 The MIS is kept under continuous surveillance, so that its open system design is
modified according to the changing information needs.
 MIS focuses on the results and goals, and highlights the factors and reasons for
non-achievement.
 MIS is not allowed to end up into an information generation mill avoiding the
noise in the information and the communication system.
 The MIS recognizes that a manager is a human being and therefore, the systems
must consider all the human behavioral factors in the process of the management.
 The MIS recognizes that the different information needs for different objectives
must be met with. The globalization of information in isolation from the different
objectives leads to too much information and its non-use.
 The MIS is easy to operate and, therefore, the design of the MIS has such features
which make up a user-friendly design.
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MANAGING
DIRECTOR
HEAD OF
MIS
HARDWARE AND
SOFTWARE
CENTRALISED SYSTEM
DEVELOPMENT
OPERATIONS,
MAINTENANCE
SELECTION, UPGRADE,
EXPANSION DECISIONS
TECHNOLOGY
UPGRADE DECISIONS
INFORMATION SYSTEM
PLANNING
TRAINING
MANAGEMENT AND
DEVELOPMENT
RUNNING DAY TO DAY
OPERATIONS, BACK UP
SYSTEM MAINTENANCE,
SOFTWARE MAINTENANCE
Fig. 8.3 Centralized Organizations of MIS. *
* Supplier of hardware, software and applications, and solution.
Note Information is considered as corporate resource and hence generated centrally by the head of the
MIS and made available to all the users on conditions and needs. The function of the head of the
MIS is to manage the information centrally as a corporate resource from the data to the
Information and its technology requirement.
MANAGING
DIRECTOR
HEAD OF
MIS
MANAGEMENT OF
HARDWARE
ADVISE ON HARDWARE
AND SOFTWARE
TECHNOLOGY
TRAINING AND
SUPPORT
DISTRIBUTED OR
DECENTRALISED DECISION
MAINTENANCE OF
HARDWARE AND SOFTWARE
SELECTION OF
HARDWARE SOLUTION
SELECTION OF
LANGUAGE, OS.
ASSIST USERS IN SYSTEM
DEVELOPMENT
TRAINING AND
PROBLEM SOLVING
CORPORATE
DBMS
Fig. 8.4 Decentralized Organisation of MIS *
Note Information is considered as a resource for a department, group of individuals or
In other words, it is considered specific to the business function. The head of the
MIS provides support to the users of the information in their task of
Development. The major responsibility is the data management and the
technology.
 MIS recognizes that the information needs become obsolete and new needs
emerge. The MIS design, therefore, has a basic potential capability to quickly
meet new needs of information.
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 The MIS concentrates on developing the information support to manager critical
success factors. It concentrates on the mission critical applications serving the
needs of top management.
Factors Contributing to Failures
Many a times MIS is a failure. The common factors which are responsible for this are
listed as follows.
 The MIS is conceived as a data processing and not as an information processing
The MIS does not provide that information which is needed by the managers but
it tends to provide the information generally the function calls for. The MIS then
becomes an impersonal system.
 Underestimating the complexity in the business systems and not recognizing it in
the MIS design leads to problems in the successful implementation.
 Adequate attention is not given to the quality control aspects of the inputs, the
process and the outputs leading to insufficient checks and controls in the MIS.
 The MIS is developed without streamlining the transaction processing systems in
the organization.
 Lack of training and appreciation that the users of the information and the
generators of the data are different, and they have to play an important responsible
role in the MIS.
 The MIS does not meet certain critical and key factors of its users such as a
response to the query on the database, an inability to get the processing done in a
particular manner, lack of user-friendly system and the dependence on the system
personnel.
 A belief that the computerized MIS can solve all the management problems of
planning and control of the business.
 Lack of administrative discipline in following the standardized systems and
procedures, wrong codings and deviating from the system specifications result in
incomplete and incorrect information.
 The MIS does not give perfect information to all the users in the organization.
Any attempt towards such a goal will be unsuccessful because every user has a
human ingenuity, bias, certain assumption not known to the designer. The MIS
cannot up these by providing perfect information.
__________REVIEWQUESTIONS
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1. Why is a long range plan of MIS necessary? How it linked with the business plan
of the organization?
2. What are the content of the MIS plan? What is the purpose of each of them?
3. Draw a matrix of the class of information versus users, and explain the nature of
use in each case.
4. What problems does the system analyst face in ascertaining the information
requirement at the various levels of management? How are these problems
tackled?
5. When should the analyst resort to prototype experimentation for judging the
requirement? How is modeling used in this approach?
6. When would you resort to prototype approach and when would you resort to the
life cycle approach in the development of the MIS?
7. In the guideline given for implementation identify the guidelines where user is
involved.
8. Before a full scale MIS development plan is undertaken, it is better to study and
improve rules, policies, procedures and practices. Explain.
9. A good MIS is an integral part of the management system. Why so? What would
happen if it is not?
10. User acceptance and dependence on MIS is a test of a good MIS. How would you
ensure that the user related issues are taken care of while designing the system?
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CHAPTER-9
CHOICE OF INFORMATION TECHNOLOGY
11.1 NATURE OF IT DECISION
A business enterprise or an organization requires making a decision of choosing
appropriate information Technology (IT), as a vehicle, to handle the management
information system. The choice of IT is a strategic decision, making long-term impact
on the effectiveness of the MIS of the enterprise. The information technology affects
the people, the processes and the productivity of the organization. It is a strategic
business decision and not a financial decision to be taken on the least cost approach.
Just as the MIS handles the decision support applications, the choice of the
Information Technology makes a qualitative difference in the decision making
process. Hence, a wrong choice of the IT would kill a good MIS design as the
information technology would not support the user on the aspects and the
requirements such as speed, response, access, security, autonomy and integration of
the information processing on the different hardware software platforms.
A wrong choice of the information technology would also kill the MIS designer’s
ability to develop a user-friendly end user computer system, providing all capabilities
of the data and the information handling with flexibility and speed.
The choice of information technology can be compared to a decision of
constructing a house. Through the cost of construction is a major decision parameter,
many other factors such as the living comfort and convenience, accommodation of
the family members with their respective living styles, etc. are equally important.
Besides a house should have a privacy, should be aesthetic to look at, airy and well lit
and also the maintenance of facilities and utilities should be easy. A wrong choice of
house, therefore, affects the buyer for the lifetime, both, in terms of the cost and also
in terms of comfort. The decision is usually irreversible and very costly, and may not
satisfy all the needs of the members of the family.
The modern information technology offers a number of different system
configurations, each being a candidate, as a solution to satisfy the needs of the MIS.
The information technology decision, therefore, is a technical decision, where it is
required to decide between the various configuration alternatives made of a variety of
hardware and software option. The configurations are the LAN or the WAN, the Mini
or the Superman, and the front end and the Back Office Systems, Internet/Intranet,
OOT, Client Server Systems.
The configurations could be evolved on the basis of the approach to the
information processing. It could either be distributed or centralized, local processing
or centralized processing, etc. It could be a conventional data processing approach
versus the database management approach.
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Each configuration has certain technical merits and demerits, and, therefore, has
to be weighed on some other criteria for its selection. Each one of them covers a wide
cost spectrum. The wide cost spectrum results due to the different architecture options
in the hardware such as the RISC, the CISC and the different processing chips such as
the INTEL, the MOTOROLA or the PROPRIETARY Chip such as the ‘Alpha’ of the
Digital and the POWER PC of the IBM, etc.
The third reason is the different operating systems for the different platforms, i.e.,
the DOS, Windows NT, the UNIX, the OSF, the MOTIF, the OS2, the VMS and their
proprietary versions such as the Ultrix, the HP UNIX, and the ORG UNIX, etc.
Several probable configuration options are further influenced by the available
software running under each of the operating systems. The software options, an
important dimension to the choice of the information technology, demand a certain
operating system as a critical requirement. Some software option is efficient on one
hardware platform and not on the other, so if the software is critical, then many times
the hardware is critical, then many times the hardware becomes a no option decision.
Another important factor which influences the information technology decision is
the organization and its infrastructural arrangement of the offices, warehouses,
factories and the customers. Much organization would demand hardware typical to
that particular location and also be able to communicate with other hardware-software
platforms. In such situations, the communication requirement becomes a dominating
factor in choice of the information technology.
For example, the warehouse may need just a PC or a PCLAN, the nearby factory
may need a mini computer system and the corporate office would need a large
Superman computer with special software suitable for its functioning. Each of these
platforms may have different operating systems, and the MIS of such an organization
requires data and information sharing between all these resources at various locations.
The information technology decision must consider the communication problem and
the interface between the two hardware options so that the data sharing is
operationally feasible. Many a times, the operational feasibility problems are solved
by writing the system utilities, the drivers, and the programmers so that these two
platforms become ready to share each others resources effectively.
The information technology decision is also influenced by people-related factors.
The choice of the information technology is made on the basis of the ability of the
people in the organization to run the hardware-software system. The place like
warehouse may not have highly qualified computer literate personnel and, therefore,
at such a location, PC systems would be an automatic choice or a dumb terminal of
the main computer system. But at the factory location, since the personnel are of the
higher skills, grade and qualifications, a Network or a mini system, capable of
offering different software solutions, would be required. In such a place, hardware
and software support in also required.
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Though training the personnel to become computer literates is a solution to such
problems it may not be always possible and operationally feasible to solve such
problems and give a high-tech information technology solution which is uniform
across the organization. The work culture and the people culture become the critical
decision inputs for any information technology decision.
Finally the information technology choice is governed by the requirement of the
mission critical application(s) of the organization. The hardware choice and its
configuration in terms of memory, disk and communication are decided on the base
of processing needs of the mission critical applications. The other requirement of the
organization is to be fitted to this configuration.
For example, if the main business of an organization is service to the customer,
then the mission critical application is the inventory management of a variety of items
manufactured and distributed at different locations. Such an application would need
resource sharing at different locations-of hardware, software and database. It could be
a case of sharing between the UNIX DP network and the minis with different DBMS
systems. The sharing of each other’s resources may be for input acquisition and
processing for integrating the data on a higher plane and sending the result to
different locations, and for presenting on the different output devices such as the laser
printers and plotter, and also on the storage devices available at the different
locations.
The information technology decision is made for the current needs as well as for
the futuristic needs of the organization. Hence, the decision is influenced by the
technology forecast and the business forecast. It requires some valid assumptions
about the growth of the business, the manner in which it will be conducted and the
information needs of the organization to conduct the business. Such a probing in the
futuristic needs helps to size up the various options and to weigh them critically on
the various criteria.
The information technology decision, therefore, is a decision to be taken at a
particular point of time and implemented over a period of time considering the
various soft and hard options experienced from time to time. If the organization is
under a financial pressure as the budget is not adequate to implement the best
information technology opted for should be upgradeable, expandable and scalable.
Such organizations can start with a smaller configuration and migrate to a bigger one
with no risk of technological obsolescence no loss of development effort.
The nature of IT decision is complex and is governed by a number of factors as
shown in Fig. 11.1. Since, this decision has long-term business and financial
implications and affects the entire organization, it is a strategic decision.
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11.2 STRATEGIC DECISION
The information technology choice is a strategic decision and, therefore, it should be
taken after considering a number of factors. The information technology offers a
number of alternatives which have varying costs. The costs differ due to the
difference in the architecture of the hardware, capability of the software and different
configurations but achieving more or less the same results. Apart from the cost factor
there are other factors, such as data management, organization infrastructure and
satisfying its information needs which influence the information technology decision.
These factors are discussed at length in the following sections.
Management Process or Style
The information needs of the people in the organization arise from the process or the
style by which the management ‘runs’ the business. The quality of management
process depends on the people culture and the culture predominantly affects the
decision making process.
If the decision processes are centralized at a higher level and the delegation of
responsibilities and authorities is not proper, then the information technology choice
will weigh heavily in favor of the distributed data acquisition systems and the
centralized high end information processing systems for decision support.
If the decision processes are decentralized, the information technology choice will
weigh in favor of those systems, where the acquisition, processing, analysis and
decision making will be at distributed nodal points. The organization which operates
through a number of locations and on the basis of the Strategic Business Units (SBU)
will opt for such an option. In such cases the typical nature of the concerned SBU will
decide the hardware-software platform for the particular location.
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If the decisions in the organization are of the following types, then the
information technology option would differ. These types are:
(a) The decisions affecting the operations management.
(b) The decisions affecting the execution and control of the business.
(c) The strategic business decisions.
In such cases, the information technology choice would be the Front End Processing
System connected to the Bank Office Central System. Hotels, hospitals and large
corporate bodies are the examples, where such a choice is desirable. The front end
systems take care of the operations management, while the back office systems take
care of the strategic and the operations planning and control of the business.
There is other business situation where due to sensitive nature of the business,
decision making is concentrated at one business location or in one of the business
functions such as marketing, research and development, manufacturing, etc. The
information technology choice is largely governed by the information needs of that
particular location or function. In other words, every business has one or more
mission critical applications serving the information needs of the critical strategic
decision. The entire management process revolves around this application. The
organizations’ information technology choice is, therefore, based on the requirement
of these applications serving the critical business functions.
Due to the organizations’ infrastructure and also due to the nature of the business
it so happens that there are data centers, where a large umber of transactions take
place and these are the decision centers. In such cases the information technology
choice will be in favor of the distributed high end data processing systems and the
dedicated information processing system at the decision centre using the distributed
data bases. Many service oriented business like the banks, the insurance companies,
etc. fall into this category.
It is, therefore, important to note that the information technology choice considers
the management process, the business organization, the decision making style and the
mission critical applications as the important dominating factors. The choice of
hardware details and the software mix will be decided on these factors.
Business Operations
There are many organizations, where the business operations are typical, voluminous
and their information needs are largely transaction processed. The typical example is
that of the banks where the banking operations are uniformly standard at almost all
branch locations. The transactions are large in number and need to be processed very
fast. The decision making process is rule based governed by the policy and the
guidelines issued by the statutory bodies in the banking industry. The information
technology choice in such cases would be the one which satisfies this need the best.
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In a Hospital, where the transaction processing is very low, the decision making
need is satisfied by query type applications. The information needs here are largely
the patient and doctor-oriented. The information technology choice, in such case, will
be of the front end processing system supported by the back office mini or main
frame system with a strong database system which is very powerful in data
management and the query processing.
Suppose there is an organization the main business of which is marketing of a
variety of product through a nationwide distribution channel system. The business
here operates mainly on satisfying the needs of the buyers by providing them what
they want. Hence, inventory management is the main business function here. The
information technology choice in such case will be the one where the sales and the
receipts data is processed very fast, the inventory related decisions are taken, stocks
are adjusted and the procurement action is also taken quickly. The hardware details in
such case will be decided based on the data volume, the speed and the communication
systems.
There are certain business organizations the operations of which are such that if
the organization takes care of one or two major functions, most of the information
needs and the MIS needs would be satisfied. Many a times these functions are special
and would be demanding special hardware and software. If the organization requires
mix of such special hardware and software, then the information technology choice
will be based on the integration possibility of the different information technology
platforms satisfying the organizational information needs.
For example, in the high-tech engineering organizations, a lot of engineering and
design activities, such as drafting, designing, modeling and analysis take place. Such
a function would need special hardware such as work stations and special CAD/
CAM/ CAE software, etc. However the data processed by such hardware-software
system needs to be integrated in the business and commercial systems of the
organizations. The information technology choice in such cases would be based on
the feasibility of sharing the resources and data of the two locations and having
special application and information needs.
A number of such possibilities emerge and unless these factors are properly
considered, the information technology choice may go wrong. The information
technology choice therefore is strategic to the business performance.
In all the business twenty per cent information set is critical and eighty per cent is
not so critical. If the information technology choice does not satisfy the critical
twenty percent need, then it can be said that the information technology choice is a
strategic mistake with concurrent business and financial implications.
11.3 CONFIGURATION DESIGN
The details of the information technology, such as architecture, communication,
RDBMS, storage media, and operating system are also strategic to the success of the
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MIS. These details are carefully worked out for effective implementation of the
information technology. The details are worked out based on the following features:
Data type
Words, Numeric, Image and Voice. The hardware and software should be capable of
handling these data types.
Data volume
The online storage capacity would be decided based on the processing needs. It will
be further increased due to the disk mirroring.
I/O operations
These would decide the controllers and the speed of I/O processing.
Data sharing
If the data is to be shared across the databases, then the storage capacity will be
decided based on the size of the databases.
Process speed
The speed needed for processing will decide the CPU, memory and the processing
architecture.
RDBMS and 4GL
These will be chosen on the basis of the volume, special handling of the data, and the
level of security and the integrity required. All RDBMS are not same and are not
equally efficient on all the platforms.
Query processing
The decides the SQL or standard SQL and 4GL.
Communication protocols
If different platforms need to be connected, then the software such as the TCP/ IP
needs to be considered.
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Interface and gateways
These will be decided on the basis of data transfer needs between the locations and
between the hardware-software platforms.
Security and Integrity
The level of security and integrity required will decide the hardware, the software and
the operating system. All the hardware and software do not satisfy these needs fully.
Languages and packages
The requirement, often, is of a special language and packages besides the main
software. The hardware and operating system will be decided based on this need.
The information technology choice is translated into a variety of details based on
the above factors. When all these factors and the associated choices of the
information technology details are worked out, we can say that the configuration of
the computer system is designed. Several configurations are possible and they need to
be thoroughly evaluated before selection.
11.4 EVALUTION
As we develop different choices of information technology and its configurations, the
decision making enters into the evaluation phase for selection. The selection criteria for
evaluation would have different dimensions to be satisfied simultaneously. These
dimensions are as follows:
1. Technical Evaluation
2. Operational Feasibility
3. Financial Consideration
Technical Evaluation (TE)
Technical evolution deals with the testing parameters, such as data transfer needs, the
response level, the successful connectivity of the different hardware platforms, and the
degree of meeting the overall system performance standards.
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Technical evaluation can be carried out first by studying the literature of the
product in detail and then by conducting brain storming sessions with the vendors’
specialists. In this phase a number of doubts are clarified and the vendors’ claims in the
areas of the system performance are confirmed. Technical evaluation can then be planned
by scheduling the activities such as the bench marking for a couple of key parameters.
The bench marking studies could be at a ‘raw’ level where you test the vendors’
specifications. Once these are confirmed, the specifications are put to test on a live
platform, i.e., the technical specification are tested by running live data in a particular
format. Such an experiment would be a prototype model of your information processing
need related to the mission critical applications. You may develop a mini representative
processing application and run it on a model configuration of the system. Such
experiment would confirm the vendors’ claims and your expectations and needs. This
would develop certain norms which can be used to configure the hardware details and
building the architecture. The bill of material of hardware and software can be worked
out with the help of these norms.
Following hardware software details are configured and the quality of each item is
also decided using the norms developed in a live experiment. The decisions on the
following points would facilitate the system configuration for a given requirement.
■ Memory and Cache
■ Disk Capacity, Features, Controllers
■ CPU Speed, Processing Architecture and Capabilities
■ Servers
■ Terminals-PCs, X Terminals Work Station
■ Network and Cabling, Internet and Intranet
■ EDI, E-Mail
■ Network Hardware
■ Output Devices
■ Monitors
■ Operating System
■ Standard: ASCII, ANSI, GUI
■Hardware Architecture
■ System Software: OS, Gateways, Interfaces, Drivers, Utilities and Compilers
■ Media, Copying Devices
■ RDBMS, FEATURES
■ Packages
Technical evaluation and confirm the information technology approach to the
information processing needs of the organization. The issues like the centralized versus
distributed, the online versus the batch versus the real time, the network versus the mini
or the superman are also evaluated. Technical evaluation also helps in narrowing down
the hardware choices as all the vendors may not satisfy the requirement of the
organization.
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Having narrowed down the hardware configurations to two or three options, the
technical evaluation considers the performance related issues such as reliability,
dependability, performance on the volume scale, security, integrity and autonomy, etc.
All the option may not equally satisfy the evaluation standards set by the organization on
these factors. The performance related issues will help fine tune the configuration details
such as the memory, the number of ports, the specific input and output devices and the
hardware infrastructure. Technical evaluation also helps to break down the hardware on a
time scale, i.e., the minimum required in the initial stage and subsequent add-ons,
expansions and upgrades on a time scale.
In technical evaluation we are discussing information technology. The
information technology is constantly under development and the scale on which such
improvement takes place is phenomenal. Hence, it is necessary to select the latest
technology in all areas of information processing as it would take you a long way and
help you to protect the investment. The investment is protected, if the Information
Technology choice is scalable, upgradeable and also expandable with the growth of the
business.
Operational Feasibility
The options approved after the technical evaluation are tested on the operational
feasibility. What the technology offers may not be possible to operate at the practical
level and scale to obtain full benefits of the various inherent features. The operational
feasibility evaluation considers the people-related issues and whether the systems and the
procedures of the organization are complementary and conducive.
In a number of situations, the choice of technology determines automatically the
caliber, the competence, and the knowledge of the people in the organization. It is also
observed that the organization does not provide people support to implement technology
successfully. The shortcomings on peoples’ side would be the lack of requisite
qualification and the subject knowledge, the ability to absorb the technology, and use it
effectively. Many a times, the organization would require appointing a new set of
personnel to fulfill these needs.
Other areas affected would be the systems and the procedures currently operating
in the company. The shortcoming is observed right from the absence to the inefficient
systems and procedures. The modern information technology needs sophisticated back-up
of the data at a requisite point and time. If such a data support is not available then the
information technology would be underutilized or may not be worthwhile to implement.
For example, the information technology offers a solution of fast data transfer and
processing between the two platforms at two locations, i.e., the data source is at one
location and its need is at two other locations. Due to the systems and the procedures
prevailing at the source location, the arrival of the data at the required location is late and
hence not useful. Hence, the information technology solution is operationally infeasible
to obtain the best of the solution.
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Most of the issues in the operational feasibility evaluation are related to the
people and business processes (system and procedure). The environment must support
proper implementation of a new information technology.
If the environment does not support the new technology, it will be managerially
prudent to choose next best option by obtaining full benefits in its successful
implementation and further at a later date to switch over to the original best option.
Financial Evaluation
All the option can be evaluated in terms of the invested it calls for. It is always possible
to rank the option on the basis of the basis of the investment. All business investment is
evaluated in terms of return on the investment (ROI) or certain payback period. They are
also judged from budget considerations.
The information technology investments are difficult to judge on the ROI basis as some
aspect of the investment are intangible and are difficult to quantity in monetary terms.
The best approach in such cases is to judge the investment in terms of the value of
information it gives on an incremental scale. If the value of information in relation to its
investment is not significant, then it could be advisable the consider the next best lower
investment option.
In regard to the budget restrictions, it would be advisable to examine the
possibility of scaling the hardware and the software options. It is then possible to have a
solution implemented in terms of the budget provisions. The scaling can be done in terms
of the quality of hardware required in the option.
If may be possible to buy the requisite minimum in the first year and expand them
in the subsequent period. It may be possible to configure the hardware in terms of the
capabilities which are required now and which can be acquired later on. For example, one
can start on 32MB memory and over to 64MB. One need not buy all the software in the
first place. It can be phased out in terms of need, i.e., purchased the requisite software as
and when required.
The budget restrictions can handle by taking the benefit of the scalable and the
upgradeable technology. The scaling of the expansion can be done on two scales, viz.
horizontal and vertical expansion. The horizontal expansion relates to the quantity while
the vertical expansion relates to the quality and coverage.
Horizontal expansion
The memory, disk, terminals, peripheral equipment, etc. can be configured for the present
needs and then expanded as the coverage increased.
Vertical expansion
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The system integration, backward or forward, concentrates on the mission critical
applications, covering only the main key business functionalities.
However, in all these matters the total decision is to be taken first and then broken
down into components and in terms of the budget provisions for the next two years or
more.
In all these matters, a thought should be given to protect the information
technology investment. If certain technological advances are round the corner, then it is
better to defer the investment. The choice of hardware and software should be such that it
should facilitate the integration of new technology into the old one. The new version of
upgrades should be independent of the hardware. The application languages should be
such that any open system can absorb it without many changes. The software choices
should be independent of the hardware configurations such as the LAN, the WAN, the
MINI etc.
Many a times, the packages cannot run on all the platforms because of the chip
and the architecture of the hardware platform. The open system architecture is not always
that ‘open’ to accept all the software. These issues should be discussed squarely so that
the investment though good at a point of time is not wasted at a later date.
11.5 INFORMATION TECHNOLOGY IMPLEMENTATION PLAN
The implementation of the information technology is a complex task and needs a detailed
and careful planning for successful implementation. It is necessary to prepare a plan of
implementation covering the following features. These features are:
1. Site preparation
2. System development plan
3. Information technology installation schedule
4. Recruitment and training of computer personnel
5. Training of the users
6. Investment plan
Site Preparation
This is a major activity, wherein you prepare the site for the physical installation of the
hardware i.e., the main computer system, the peripherals, the electrical and
communication cabling, the air conditioning system, the tape-disk consumable storage,
and the office layout for the professionals. The space allocation for each of these items is
based on present need with some allowance for the future.
The modern information technology needs site preparation at the user’s end as
well for the convenience and the ease of operations. Most of the information technology
installations need infrastructural facilities, such as a conference room, and training-cumpdfMachine
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demonstration room with the modern aids of training. This process of site preparation
takes away 10 to 12 per cent of investment. In all these matters, guidance is available
from the hardware vendors. A committee consisting of the vendors’ representatives,
architect and interior designer, and in-change of the information technology
implementation would be ideal for a planned site preparation activity.
System Development Plan
This is generally prepared while assessing the hardware and software needs. Such a plan
gives the indication of the various locations of hardware in terms of quality and time
when needed. System development plan priorities the various steps in the site
preparation. One can make a site preparation plan for an immediate need and also for a
later date. This would help to make a long-term financing plan.
A system development plan also helps you in planning the other activities such as
recruitment and training. It also helps in deciding the procurement plan of the hardware
and software. A broad system development plan would go a long way preparing the
operational and implementation plans of the information technology in the organization.
Information Technology Installation Schedule
This schedule gives the item-wise details of the hardware arrival and its installation,
testing and acceptance. It also needs to be linked with the information system
development plan to synchronise the installation with the user of the hardware and the
software.
Many times the schedule also considers key issues like data conversion,
switching over from an old system to a new system, rewriting programmer for new
software environment and so on. Such schedule also helps in the smooth transition from
old to the new. It may be from one information technology to another information
technology environment or from the manual system to the computerized system.
Recruitment and Training of Information Technology Personnel
The implementation of the information technology needs specific skills in the manpower
responsible for effective implementation. The skills may fall in the area of languages,
tools of development and also acquiring the precise know-how on the emerging
technologies and its application in the information systems.
The technology is changing at a very fast pace and it is necessary to upgrade the
skills of the existing manpower by providing a need-based training. There are occasions
where the skills are not available and a specific recruitment is called for. Such a
recruitment and training then calls for restructuring of the information technology
organization.
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Training of Users
The latest development in the information technology requires its users to be well trained
for its effective use. The training may range from awareness to learning of the specific
tools. The users should be trained to accept the concept of end user computing. The users
should be trained to use the various information technology facilities.
The users should be trained to blend the information support in their day-to-day
activities. It is a change in work culture and an appropriate attitude needs to be developed
for the absorption of the new information technology solutions. Many software packages
are available which need to be learnt for its appropriate use to become IT literate.
With the support of the information technology, the user is becoming a
knowledge worker. It is a qualitative cultural change and it is, therefore, necessary to
prepare the user for this transformation through a comprehensive ‘User Training
Programme’. Such training is imparted across the organization to the workers, officers,
executives and the managers.
Investment Plan
When all the facets of the information technology implementation are ready, it is possible
to work out the monetary implications such an implementation. Summarizing the
estimates on the time scale would generate an investment plan. One can fit the investment
in the budget provisions by suitable modifications in the implementation plan of the
information technology. Since, the investment in the information technology is strategic;
at the most it can be deferred but cannot be curtailed. It is important to note that the
intermediate information technology solution to save on the investment is not effective. If
there are any bud-getary limitations, it is better to postpone the implementation.
A carefully worked out investment plan should be submitted for approval with the
implementation plan of the information technology. A presentation of an hour and a half
to the top management highlighting the investment, the productivity gains and the
competitive edge that the business of the organization acquires through the information
technology, would help in obtaining the approval, its involvement and support in
implementation of the information technology.
11.5 CHOICE OF THE ‘INFORMATION TECHNOLOGY’
AND THE ‘MANAGEMENT INFORMATION SYSTEM’
The choice of the information technology is a backbone of the Management Information
System. It is a critical, strategic decision affecting the business operations and prospects.
It affects the people, the processes and productivity and helps organization emerge with a
new work culture. Since, it is a high investment decision; the management would look at
it from the return it yields in the business.
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The success of the MIS lies in how the information technology is implemented in
the organization. A lot depends on the people and their ability to accept the new work
style and the new work culture. All the implementation of the information technology
leads to organizational transformation in the content and structure.
If the human face of the organization is not properly aligned to the information
technology, the best information technology would fail in its implementation, adversely
affecting effective development of the MIS. There is a risk in manipulating the
information technology beyond a limit to suit the personnel of the organization or the
budget limitation. Hence, the implementation of the information technology could be
slow on the time scale to accommodate a certain critical constraint, but it should not be
allowed to adversely influence the information technology decision itself.
The information technology changes are very rapid. To protect the investment in
the information technology, the selection criteria should include features such as scalable
architecture, upgradeable software, an open system environment, communication
capability through gateways and interfaces and so on. A good management information
system design requires a matching support from the information technology.
__________REVIEWQUESTIONS
1. The selection of information technology is a strategic decision in MIS
development. Explain.
2. What are the technology decisions? And what is their relevance?
3. What is a configuration of IT platform when it comes to MIS? Why should the
configurations be determined?
4. Which are the three parameters used in the evaluation of the IT before decision is
made?
5. Why is the operational feasibility of the IT system important?
6. What methods are available to contain the investment in IT to the budget
availability without compromise on the plan or quality of the MIS?
7. MIS implementation is use of IT in business processes is a cultural change in the
organization. How would you handle it for smooth changes over from
conventional to technology-based management?
8. Technology obsolescence is a fact of life when it comes to IT. While deciding
configuration, what care should be taken so that the investment is protected for a
reasonable period of time; application development effort is not wasted and
organization is not required to learn a new technology again and again.
9. Top management always asks for return on investment (ROI) made in IT. How
would you calculate ROI in IT? What other measures would you suggest for
evaluating the investment in IT?
10. How does the work culture, management style and the organization’s learning
capability have a bearing on the IT or MIS decision?
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CHAPTER-10
Decision Support Systems-I
10.1 DECISION SUPPORT SYSTEM (DSS):
CONCEPT AND PHILOSOHY
Decision Support Systems are an application of Herbert Simon Model. As explained
earlier, the model has three phases, viz. Intelligence, Design and Choice. The decision
support system basically helps the information system in the intelligence phase where
the objective is to identify the problem and then go to the design phase for solution.
The choice of selection criterion varies from problem to problem. It is therefore,
required to go through these phases again and again till a satisfactory solution is
found. In the following three phase cycle, you may use inquiry, analysis, and models
or accounting system to come to a rational solution.
These systems are helpful where the decision maker calls for complex
manipulation of data and use of several methods to reach an acceptable solution using
different analysis approach.
The decision support system helps in making a decision and also in its
performance evaluation. These systems can be used to validate the decision by
performing sensitivity analysis on various parameter of the problem.
In decision making, we know that there are two types of decisions- Programmable
and Non-programmable. The programmable decision, because of its rule base
structure, can be computerized, as inputs, processing methodology; analysis and
choice of decision making are predetermined. Decision support system can be built
around the rule in case of programmable decision situation. While in Nonprogrammable
decisions, the rule are not fixed or predetermined, and requires every
time the user to go through the decision making cycle as indicated in the Herbert
Simon Model.
The decision support refers to a class of systems which support in the process of
decision making and does not always give a decision itself. The nature of the decision
is such that the decision makers need a variety of information, when same or similar
types of decisions are to be made. These needs are such that wider additional
demands on information would be made, the moment a piece of information is
received. The calls on the information are continuously made till the decision maker
is fully satisfied. The reason for changing the demands is also because the methods of
decision making undergo a change from time to time. The quantum and the scope of
information also changes depending upon the risk in decision making. The higher the
risk, more the information sought.
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Attributes of Decision Support System
1. flexibility
The systems are flexible so that any semi-structured or unstructured decision making
situation can be tackled with ease and speed.
2. Simple models
The systems use simple models of decision making. The only change is that a
different set of information is sought for the use of different models. The choice of a
model depends upon the complexity of decision making.
3. Database
The decision support system needs database(s). The system calls for several inputs
from database(s) for decision making. The use of information being common, input to
the system is from the database.
Types of Decision Support System
1. Status inquiry system
The number of decisions in the operational management and some at the middle
management are such that they are based on one or two aspects of a decision making
situation. It does not call any elaborate computations, analysis, choice etc. for
decision making. If the status is known, the decision is automatic, i.e., the status and
solution is unique relation.
2. Data analysis system
These decision systems are based on comparative analysis, and use of a formula or a
logarithm. But, these processes are not structured and, therefore, vary. The cash flow
analysis, the inventory analysis and the personal inventory systems are examples of
the analysis systems. The use of simple data processing tools and business rules are
required to develop this system.
3. Information analysis system
In this system, the data is analyzed and information reports are generated. The reports
might be having exceptions as a feature. The decision makers use these reports for
assessment of the situation for decision making. The sales analysis, the accounts
receivable systems, the market research analysis, the MRP systems are examples of
this system.
4. Accounting system
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These systems are not necessarily required for decision making but they are desirable
to keep track of the major aspects of the business or a function. The contents of these
systems are more data processing leading to formal reporting, with exceptions, if
necessary. These systems account items such as cash, inventory, and personnel and so
on and relate it to a norm or norms developed by the management, for control and
decision.
5. Model based systems
These systems are simulation models or optimization models for decision making.
These decisions, generally, are one time and infrequent and provide general
guidelines for operation or management. The product mix decision, the material mix,
the job scheduling rules, and the resources or asset or facilities planning systems are
the examples.
In order to illustrate these decision support systems, let us take the example of
Materials Management function and the variety of the decision and the type of
systems used therein to support and examine the decision
We can further analyze these systems in terms of the input source, the system, the
hardware and the type of user as shown in Table 10.1.
Some more facts about Decision Support Systems;
1. The decision support systems are developed by the users and System analysts
jointly.
2. The decision support system uses the principles of economics, science and
engineering, and also the tools and techniques of management.
3. The data used in the decision support system is drawn from the information
systems developed in the company.
4. The decision support systems are developed in isolation and from an independent
system subset of the management information system.
5. The most common use of the decision support system is to test the decision
alternatives and also to test the sensitivity of the result to the change in the system
and assumptions.
6. The data and information for the decision support system are used from the
internal sources such as the database and the conventional files, and from the
external sources.
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10.2 DSS: DETERMINISTIC SYSTEMS
There are a number of situations, where the management has to make a decision based
on the analysis of business statistic. Since, the organization would have the database
information, these decision situation draw data from the database(s). Most of these
decision situation are fairly structured and, therefore, can be put in the from of the
business models. A fair assumption is made that the model has business and decision
making validity.
If the management can design such models duly tested, they can be used by the
decision makers, whenever the need arises. All such tools and models act as the support
systems for decision making. The tools and the models are generally standard but have to
have a custom design to suit the organization’s specific needs in the specific situation.
The decision support systems based on such tools or models have found extensive use, as
a number of computer based software tools and packages are available at a very
reasonable price. These packages are hardware independent and have proven the
application areas. The range of packages is available from the PC main frame computer
systems. The packages are available on popular network systems, as well.
The origins of these tools and models lie in the Business Management, the
Management Science and the Operations Research. Some are universally known and
proven tools and have application in the Business Management. While designing the
models, a flexible approach is taken to solve varied decision making problems. They
undergo a change over a period of time. The most significant advantage of the decision
support system is its use in sensitizing the decision and assessing its implications on the
result or business performance. The second advantage of such system is in focusing on
the critical issues in business. The third advantage of the decision support system is that it
provides higher management ability to delegate decision making to the lower level once
the tools and the models are tested.
Type of Tools/Models
The decision support system can be based on the different types of tools and models.
They are as given in Fig. 10.1.
1. Behavioral models
These models are useful in understanding the behavior amongst the business variables.
The decision maker can then make decisions giving due regard to such behavioral
relationships.
The trend analysis, forecasting, and the statistical analysis models belong to this
category. The trend analysis indicates how different variable behave in trend setting in
the past and hence in the future. A regression models shows the correlation between one
or more variables. It also helps in identifying the influence of one variable on the other.
These types of models are largely used in process control, manufacturing, agricultural
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sciences, medicines, psychology and marketing. The behavioral analysis can be used to
set the points for alert, alarm and action for the decision maker.
2. Management science models
These models are developed on the principles of business management, accounting and
econometrics. In many areas of management, the proven methods of management control
are available which can be used for the management decision. There are also several
management systems, which can be converted into the decision support system models.
For example, the budgetary systems, the cost accounting systems, the system of
capital budgeting for better return on the investment, the ABC analysis, the control of
inventory through the maximum-minimum levels, the MRP system, etc., are the
examples of the use of the management science in the materials management. Production
planning and control scheduling and loading systems are the examples in Production
Management. Manpower planning and forecasting is the example in Personnel
Management.
Some of these models can be used straight away in the design of the decision
support system. While some others require the use of management principles and
practices, most of the procedure based decision making models belong to this category.
One can develop a model for selection of vendor for procurement of an item, based on
the complex logical information scrutiny. Such models take away the personal bias of the
decision maker.
2. Operations research (OR) models
The Operations Research (OR) models are mathematical models. These models.
These models represent a real life problem situation in terms of the variables,
constants and parameters expressed in algebraic equations. Since, the models are
mathematical; there is solution to these problems. In arriving the solution,
methods of calculus, matrix algebra, probability, and set theory are used. These
models have clarity to the extent that each of them has a set of assumptions which
must be true in real life. Further, if the assumptions are valid, the solutions offered
are realistic and practical; the model represents the real life problem situation.
The OR models address themselves to the resources usage optimization,
by balancing two or more aspects of the decision situation. The efforts are made
to find the optimum solution. In business and industry, there are a number of
situations where one type of cost is controlled, the other cost goes up. This play
between the two costs has to be balanced at a point, which is known as an
optimum point. The OR models generally try to find a solution which maximize
or minimize certain aspects of business, under the conditions of constraints.
In manufacturing business, the maximization of profit with an appropriate
product mix, within the capacity and the market constraint, is a common problem.
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The allocation of an inventory to the various destinations with the least
transportation costs is another well known problem. The minimization of capital
blocked in the inventory and simultaneously meeting the market demand or the
production requirement is also a problem constantly met with. The inventory
control models offer an optimum solution, where the cost of inventory and the
cost of ordering or set up are balanced.
In facility designing problem, the cost of facility, its running cost, the idel
time of the facility, and the waiting time of the customer are considered. These
problems are solved by application of the Queuing Theory. The theory considers
two costs, viz, the cost of waiting time of customer and the cost of idle time of the
facility and decide on the facility design with a predetermined service standard.
Some problem do not precisely fall in the category of the standard OR
models. In such cases, the problems are solved by using a simulation approach.
This approach uses a random occurrence of a large number of events, determines
the status of the system and evaluates its cost of operations. The simulation
techniques help to assess the quality of the facility design before the investment is
made in building such facility.
Examples of Behavioral Models
Forecasting: Regression models
In the regression models, we are trying to find the relational impact of one
variable on the other*. For example, bodyweight can be estimated with the helps
of food in-take, since they show a strong relationship. Or the sale of two wheelers
can be forecasted with the following regression models:
________
*A typical two variable regressions model is Y = C + R . X, where C is constant
and R is regression coefficient.
Y = 600 + 0.6 ÷
where
Y = Sale of two wheelers
X = Surplus disposable income
The statistical packages are available for variety of regression models which can
be used for developing and testing the regression model.
Forecasting: Time series analysis and exponential smoothing
It is possible a statistics for the next period demand with the help of a simple
average of two previous periods. However, the simple average of past two periods
to forecast the next period may not be correct. In such cases, exponential average
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is used; where more weight is given to the latest period and less weight to the
older period. If three period models are constructed, it would be as under:
Sales for period  t + 1 = S t + 1
S t + 1 = aDt + (1 – a)aDt - 1 + (1-a)2 aD + (1-a)3 a Dt - 3
‘a’ is weight expressed in a fraction and D is the actual demand at period t . The
larger value of ‘a’ means the new average will be more influenced by the demand
of the latest period and less by the old period.
The forecasting model is a Decision support Information System, and
there are many models to choose from. The most important decisions are based on
forecasts. A forecasting model needs continuous scrutiny and, built-up on the
accurate data the variable and the parameter to be derived from the other
information system developed in the organization.
Market research methods
Several methods are available, whereby you can forecast or judge the behavior of
the consumer in respect of their buying decisions. The questionnaires are designed
and computerized to assess these aspects of the buying behavior.
For example, through a survey, the Marketing Manager can forecast the
response rate, the recall rate on the various advertising campaigns and its
influence on the buying decision. The survey methods are used to find the
influencing factors in the buying decisions.
Ratio analysis for financial assessment
The ratio analysis is a standard method of assessing the financial status of the
organization. A model of these ratios can be computerized and be readily used to
assess the status, if certain changes are expected. There are some ratio norms
prescribed by the financial condition of the organization. They are also used while
decision making for advancing loans to the companies. There are more than a
dozen ratios which deal with all aspects of business. They are the current ratio, the
quick ratio, the assets to liabilities, and the inventory turnover and so on.
Management Science Models
Budgeting models
Controlling the business performance through the budget system is an accepted
management practice. In this approach, various budget are prepared, viz., the
Sales Budget, the Production Budget, the Capacity Budget, the Manpower
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Budget, the Expense Budget, and the Inventory Budget, etc. Using these budgets
the profits re estimated.
Budgets are also used for planning and control. The system is used to find
out whether the performance is under the budget or over the budget. This gives
the manager a self evaluation tools for these assessing the current status and also
provides some insight into the operations of the Company.
The use of Spread Sheet, Lotus-1-2-3, VisiCalc, Framework and many
others, are a standards tool for these applications, where the planning, budgeting
and analysis is required. All these systems are based on the worksheet which has
column totals. It not only provides the totals but also summaries at the sub-heads.
It has also a facility that if one row or column changes, it computes the changes in
the rest of the worksheet, where it is affected. For example, the spread sheet of
Sales-profit model is given in Table 10.2.
The spread sheet packages can handle hundreds of rows and columns and provide
the analysis on the percentage basis. Each manager can prepare, simple spread
sheet for his areas of operations, where the data is drawn from a computerized
Mini or Mainframe Systems. These packages provide a graphical presentation in
the form of line charts, Bar chart and Histogram, etc. for visual impact.
Break-even analysis model
This model is simple but very useful for determining the volume of business
activity at which there is no loss or profit. The model is used to decide the
alternatives based on the cost, volume and price. The break-even model, as
expressed in the mathematical form, is as under:
This model can be built for the company, for the product groups or for any
activity, where you can identify the fixed cost, the variable cast and the revenue at
each activity level in terms of the units demanded. The advantages of this model
are that it tells you as to what the break-even point for the given level of costs and
revenue is. If there are possibilities of altering the costs, it would tell its impact on
the break-even point, i.e., if the price is reduced, the revenue will come down and
the break-even point will further go up.
The costs are generally not linear over the entire range of activity. The cost would
go up after a certain range and would remain steady till some level and further
increase is then expected. A break-even model can be built for the multiple
activities and for the non-linear costs. The computerized model helps in assessing
the various parameters of business and its sensitivity towards the profit/loss. The
model is very popular where the costs are known and are controllable. It is a very
handy tool for a quick decision on the price, cost considerations, etc. and can used
very effectively for commercial negotiations.
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Return on investment analysis
The investment decisions are very common in the business organizations and they
are of two types. First, one has to invest in one among the several alternatives
which are competing with each other. For example, you want to buy a machine
for which three alternatives are available, and each alternative has a different
investment amount and a different flow of gains or savings. Then, the second
decision the management has to take is how to allocate the total funds to the
various investment projects. For example, the organization may have Rs 100
million and the investment projects are worth Rs 150 million. The management,
therefore, has to take a decision as to how to allocate Rs 100 million to these
projects?
Therefore, in the investment decisions, the investment are evaluated on the
basis of discounting the value of the money of the future cash flow to the current
period and the net gains are compared.
For example, you are going to receive one rupee next year. This flow of
money, if it is to be evaluated as on today and discount rate is say 10 per cent,
then this one rupee of the next year is worth Re 0.90 this year. The Re
0.90 is the net present value of one rupee expected in the year 1997.
In investment analysis, the Net Present Value (NPV) is calculated and
compared with all the investment alternatives.
NPV = (PV of future cash flow) - Investment =PV - I
The formula used for the present value (PV) is
Where T is a number of period, in which an amount S for each period is
going to be received and I is a discount rate.
If the system of cash inflow (savings or gains) are unequal each ‘S’ will be
evaluated separately to compute the NPV.
Let us consider the following problem of selecting an investment plan
Since Plan A has more NPV we should select plan A.
Using this concept of the present value of future cash flow a decision support
system model can be built considering the following factors.
■ the number of investment proposals.
■ Differential investments.
■ Different cash inflows savings.
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■ Different criterion for selection, i.e., the payback period, the rate of return and
the internal rate of return.
■ maximizing the return by allocating limited funds to the several investment
proposals.
Corporate model of return on investment
This model is popularly known as Du-Pont model where the composition and the
analysis of the Return on investment are shown. This model is better than the
above discussed individual ratio model and its analysis as this model provides an
insight into the relationships of the various factors affecting the return on
investment. Du-Pont Model is shown in Fig. 14.3.
Suppose, you have to make a decision on buying a business. In such an
event this model will be useful. This model also gives the decision alternatives to
improve the return on investment in the current business.
Model for cash budgeting
Cash budgeting is a continuous process. With careful cash planning, a company
should be able to maintain sufficient cash balance for its needs, yet not be in
position where it is holding excessive cash. This kind of planning will help to
raise the short-term loans and simultaneously focus on the issues which are
affecting the financial management. A typical statement of cash budgeting is
given in Table 10.3.
This shows that in the month of March and April, additional funds procurement
through external sources will be needed.
With the use of computer, a model can be built with all the details of cash inflows
and outflows as shown in Fig.10.4
Procedural models
There are a number of decisions which are made on the basis of well defined rules
and procedures. Unless certain conditions are satisfied the decision rules will not
be applied.
The use of rules, formula or mathematical expressions is the basis for the model.
For example, the reordering procedure for an inventory items is as under. If the
stock level ≤ the Recorder level, then draw a purchase order of the quantity equal
to the Economic Order Quantity (EOQ).
This ordering rule is developed on the model of the Economic Order Quantity
(EOQ) - Required Order Level (ROL) system as shown in Fig. 10.5.
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ROL
EOQ
PERIOD
Fig. 14.5 EOQ Model
It is possible to control the inventory of some items based on such models. These
models can be computerized and be made a part of the Decision Support System.
The decision models can be developed by using the non-mathematical expression
or a formula. If the conditions are satisfied the decision is automatic.
Let us take a decision problem of selecting a vendor by using the nonmathematical
expressions. The selecting of vendor is based on the following
conditions:
Vendor : Is he approved (AP) ?
: What is the performance rating (PR) ?
: How many orders are pending on him (ORD.PEN)
?
: What is the level of order quantity (OQ) ?
These conditions can be put in a model as shows Fig. 10. 6
AP
P R > 1
ORD.PND
OQ > 5N
VENDOR CODE
SELECT THE
VENDOR
NO
NO
NO
YES
YES
YES
YES
TAKE THE NEXT VENDOR.
TAKE THE NEXT VENDOR.
TAKE THE NEXT VENDOR.
TAKE THE NEXT VENDOR.
Fig. 14.6 Vendor Selection Process Model.
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CHAPTER-11
Decision Support Systems-II
Project Planning and Control Models
The PERT (Programme Evaluation and Review Technique) and the CPM(Critical
Path Method) techniques have emerged as very powerful tools for planning and
control of one time tasks or projects. Against the conventional systems of
GANTT charts, these techniques provide better facilities in terms of
understanding of the project as they show the inter-dependencies of each activity
in the project. Several computer software packages are available which can he
used effectively for planning, monitoring and controls of tasks and projects of the
large number used effectively for planning, monitoring and control of tasks and
projects of the large number of activities.
Apart from planning, the model also managers to help three aspects of the
project, i.e., the completion time, the cost and the resource. The techniques
provide a ready help in assessing the impact of the project completion time, if the
activities are delayed. It provides the facilities to schedule the resources for the
various activities. The most important advantage which these techniques provide
is the information on trade off, in each activity, for cutting down the activity
completion time. It helps the Project Manager to select an activity for resources
scheduling.
Management considerations of PERT/CPM
1. The project manager considers the sequencing of activities before
implementation of the project.
2. Inter-dependencies between the activities are described more clearly
showing the possible bottlenecks in future.
3. Attention is focused on selected activities which are critical for the project
completion.
4. It provides an easy method of planning the project in a different manner,
within available resources.
5. A running estimate is provided, of the most probable time in which a
project will be completed and also the probability of its being completed
in time.
6. Any activity which is entering into cost and time over-runs is quickly
identified.
Network drawing and PERT/CPM statistics
Figure 14.7 explains the rules of network drawing.
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Network drawing rules : Activity, O = Event
O
O
O
O
O
1
2
3
4
5
6
7
8
A B
A
B
C
A C
B D
X
Activity, A must be completed before B starts.
Activity, C can start when A and B are completed.
A and B are parallel activities,
C and D are parallel activities.
Activity X is a dummy, not requiring
any resource. The dummy activity X shows only
dependency and does not consume time or resource.
It is shown by a dotted line.
Activity D is not dependent on the activity X.
Activity C is dependent on the activity B.
Fig. 14.7 Network Drawing
Estimating activity time
When the network is completed, every event is assigned a number for reference and
identity. Then, the next step is to estimate the completion time of each activity. Two time
estimates are suggested.
(a) The most likely time of completion of the activity.
(b) The time estimate (te) based on “three” time estimates :
The optimistic, the most likely and the pessimistic.
to = The optimistic time estimate.
tm = the most likely time estimate.
tp = The pessimistic time estimate.
Then, the activity time estimate, te = to + tm + tp
Drawing the PERT network
The next step is to draw a network of the project from start to finish.
The critical path is that path which takes the longest time from start to end. Let us
take a sample project as under :
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Activity Most likely Immediate
Duration predecessors
(Days) to activity
A 5 -
B 8 D
C 6 A, D
D 11 -
E 7 A,C
1
3
4
2 5
A
B
D
C
E
X
Fig. 14.8 Critical Path.
Activity Early start Early finish Late start Late finish
(ES) (EF) (LS) (LF) SLACK
A 0 5 6 11 6
B 11 19 16 24 5
C 11 17 11 17 0
D 0 11 0 11 0
E 17 24 17 24 0
SLACK = LS - ES or LF - EF
Critical activities are those where the slack is zero. In the network D, X, C, E are
the critical activities : While A and B are non-critical. The slack is a time resource which
a project manager can use for manipulating the resource and start and finish of the
activity.
Project Completion Time = Sum of activity times on a critical path
= D + X + C + E
= 6 + 0 + 11 + 7 = 24 days.
Probability of completing the project
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Suppose this project is scheduled for completion in 24 days. We can estimate the
probability of completion in 24 days in the following manner.
Optimistic Dessimible tp - to
activity Time tot Time tp a = a2
6
A - - - -
B - - - -
C 3 8 0.83 0.69
D 7 20 2.16 4.66
E 4 10 1.0 1.00
6.35
Sum a2= 6.35, therefore, a = 2.35
25.0 – 24.0 1.0
Z = = = 0.43
2.35 2.35
A normal probability curve table indicates against 0.43, that is, the project will be
completed in 24 days with 67% probability. (See these tables in any textbook of
statistics).
Activity crashing for control of time
Activity Normal Cost for Crash Crash
duration normal duration cost
duration Rs.
A 5 500 3 1000
B 8 800 - -
C 6 900 - -
D 11 1200 7 1600
E 7 1000 5 2000
Activity B and C cannot be crashed. Activity A can be crashed to 3 days and it
will cost Rs. 1000 as against Rs. 500. If the project is to be controlled in time, it is
necessary to crash the activities which are on the critical path.
Critical Reduction Cost Cost
activity in duration increase slope .
C - - -
D 4 400 100
E 2 1000 500
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So if the project is to be completed in 20 days as against 24 days, it is economical
to crash the activity D and not E as the cost increase per day in case of D is Rs 100 and as
that of E is Rs. 500. MS Project and PRIMAVERA are the standard packages for Project
Management.
Cost Accounting Systems
The cost data is an important data which is used in many business decisions, such as
pricing, make or buy, purchasing, allocation of overtheads, etc. Most of the companies
which are in competitive business, rely on the formal cost accounting systems used for
business decisions and also for the cost control. There are three cost accounting systems :
 Job order cost system
 Process cost system
 Period cost system.
The companies install these systems as the case may be and build a cost database for
support in decision making.
1. Job order cost system
In this system the costs are assigned to the jobs passing through the plant and are
accumulated by recording the basic job statistics on the job card. The order is broken into
three section materials, labor and overhead.
The direct materials are accounted through the material issues and the direct labor
through labor booking on the card. Direct overheads are also booked through
transactions. The indirect overheads are allocated, on some agreed basis such as manhours
or machine- hours. All the costs are accumulated and the unit cost of the job is
computed.
These systems give due considerations to work in process (WIP) and the
rejections, etc. for costs for the three inputs mentioned above. Using these standards for
costs for the three inputs mentioned above are determined and the job cost is budgeted.
The costs are then used to find whether the actual cost is more than the budgeted cost. All
such over-runs are investigated with the purpose of cost control and in few cases the
standards may be modified.
2. Process cost system
In this system, the costs are accumulated by a department or an operation. In other words,
the emphasis is placed upon the department of manufacture. The number of units of
product completed in the department is used in the computation of a unit cost. The unit
costs are then applied to the number of units transferred in the manufacturing process and
ultimately identified with units completed and sold.
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3. Period cost system
In this system, no distinction is made between direct materials and indirect materials with
respect to product. Materials are not requisitioned for a particular order or a product.
Instead, the direct material and the indirect material are identified with the department or
the process. The material consumed is accounted over a period for cost considerations.
The labor costs are also accumulated by the department or process with no distinction
made between the direct and the indirect labor.
The wages paid to the employees in the department are fully accounted.
Manufacturing overheads are assigned to the department or the processes directly,
wherever possible, and if they cannot be directly identified with the department, they are
allocated by using the various methods of allocation. The costs so computed are then
transferred to the final product on unit basis giving due regard to the work in progress
(WIP).
The variation in the product cost is not caused by any basic change in the type of
product manufactured or by any change in the cost structure, it merely result from the
variations in the quantities produced at different times during the year and from the
variations in manufacturing overheads. When the product completion time is very large,
the application of the job costing or the process costing is not possible. In such cases the
cost data is accumulated on the basis of the period against the job and summed up to
arrive at the actual cost when the job is completed.
All the three systems can be computerized for cost control by using the cost
budgeting systems.
Operations Research Models
Mathematical programming techniques
Mathematical Programming Technique is a vast area of application. The programming
techniques are applicable when certain conditions are met and the problem can be
expressed in a mathematical form in terms of the decision variables. The programming
techniques are based on such mathematical models which give unique feasible solutions
satisfying the constraints on resource, capacity, demand, etc. The process of
mathematical programming is given in Fig.14.9.
ABSTRACTION
INTERPRETATION
REAL WORLD
PROBLEM
MATHEMATICAL
SYSTEM. (MODEL)
BUSINESS
RESULTS
MATHEMATICAL
ARGUMENT
(SOLUTION)
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Fig. 11.9 Mathematical Programming Model.
Linear programming model (LP)
Linear programming is a special mathematical model. This model is applicable where the
decision variables assume the values which are non-zero, and the relationship among the
various variables is linear. There are limitations, called constraints to use the variables or
the combination thereof.
Suppose a company makes two products P1 and P2 from two types of raw
materials R1 and R2. The product P1 requires 2 units of R1 and 1 unit of R2 and the
product P2 requires 1 unit of R1 and 2 units of R2. The company has 500 units of R1 and
750 units of R2. the products P1 and P2 are to be produced to maximize the profit. The
contribution to overhead and profit is Rs 5 for the product P1 and Rs 4 for the product P2.
Let us define the decision variables for the products P1 and P2 and X1 and X2,
i.e. X1 and X2 are the quantities to be produced of P1 and P2 respectively. Then decision
problem can be expressed in the form given below.
Z = Profit = 5X1 + 4X2 = Maximum
Within the raw material constraint.
2X1 + X2 < 500
X1 + 2X2 < 750
X1 > 0, X2 > 0
This problem has a solution which is optimum. The problem is solved by the
Simplex Technique. The solution to this problem is :
X1 = 83.1/3 and X2 = 333.1/3, Profit = 1750
Computer based LP software packages are available almost on all the computer
systems. Besides solving, solving linear programming problems, the solution provides a
variety of management information through sensitivity analysis. For example, in this
problem, it would provide the information on the following.
(a) If profit of P2 is increased to Rs 6 what be the product mix of P1 and P2.
(b) If raw material constraint of R1 is improved to 800 and of R2 to 1000,
what would be the product mix and profit?
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(c) If instead of 2 units of R2 in P2 and 1 unit of R2 in P1, we succeed in
reducing this use by 20 per cent, what would be the product mix and the
profit?
(d) Suppose if only P2 is to what action should be taken?
Quadratic programming, integer programming are all special cases of the
mathematical programming model. These models can be used as Decision
Support System in business decisions.
The typical mathematical programming problems which can be solved by
applying the optimization techniques are listed as follows:
1. The design of aircraft and aerospace structures for minimum weight.
2. The design of water resources system for maximum benefit.
3. The shortest route of travel.
4. The optimum product mix.
5. The minimization of cost by raw material mix.
6. Assigning jobs to workers.
7. The selection of site for an industry.
Inventory Control Models
Materials management is an important function in Business Management. Apart from the
commercial aspect of the Materials Management, its major objective is to control
inventory in such a manner that the capital blocked in the inventory is minimum and the
demand on the inventory is met without any time loss. The inventory control models are
developed for each kind of conceivable situation in business.
A-B-C analysis
The inventory items are analysed in a number of ways by some aspects of the inventory.
One of the classification is the A-B-C analysis based on the capital blocked in the
inventory.
It means that when the inventory, it will be observed that 10% items of the
inventory contribute to 60% inventory capital, 20% contributed to 30% inventory capital,
and 70% items contributed only to 10% capital. This immediately suggests the
management control focus on ‘10%A’ category items. Figure 14.10 shows A-B-C
analysis In graphical form.
The system of control for these items is normally as shown in Table 14.4.
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A
B
C
Zero 10% 20% 70% Items
100
90
60
%
Value
Fig. 14.10 A-B-C Analysis.
Table 11.4
Category of item Control system
A
B
C
ROL system or ordering in smaller quantities on review of the inventory.
Fixed period ordering system. Maximum-Minimum System.
Annual review and ordering system.
All these items can be brought under a computerized system. Such system will compute
the inventory control parameters for each item and make suitable decisions. In all three
systems, the cost of order or manufacture is balanced with the inventory carrying cost.
The inventory can be classified in other ways also. For example, the inventory is
classified from the manufacturing point of view taking ease of procurement as a basis.
The classification could be critical, semi-critical, and not critical from the production
point of view. The inventory control system recommended for this classification is as
shown in Table 14.5.
Table 11.5
Category of item System of control based on ease of procurement
Critical (A)
Semi-critical (B)
Not-critical (C)
Bulk procurement and control on stock variations
Periodic ordering
But very frequently, keep minimum stock.
The management control focus is on undisturbed supply of raw material to
manufacturing.
Each item in the inventory is planned, monitored and controlled through one
system or the other, based on the category of the item.
Periodically the parameter of the control change; but by and large the system of
control remains the same because the objective is to control the capital blocked in the
inventory. The main issue is how to allocate the capital amongst thousands of items
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without affecting the demand of the items. In such cases the ordering cost, the inventory
carrying cost, and the cost of stock- out are considered in the system of control mentioned
above.
Material requirement planning (MRP) System
When the Company is following a fixed period production programming to maximize the
use of production capacity, the Material Requirement Planning systems are used to
minimize the inventory and simultaneously ensure the availability of the material. The
MRP system is feasible only when the company produces standard products for which
the Bill of Material or the Part List enumerating the items which go into the products, is
available.
The bill of material is exploded and summarized for the items disregarding where
it is used. Then it is compared with the stock available, the order placed and due for
delivery in the production period. The comparison will show the shortage which would
be faced in the execution of the production programme.
MRP system is also used when the production requirement is fluctuating from
period to period and also where the changes in the production programme are frequent. It
provides an excellent tool for planning, procurement, monitoring and control of the
inventory as well as the production programme.
11.2 ARTIFICIAL INTELLIGENCE (AI) SYSTEM
All human beings have intelligence, which they use for problem solving. Intelligence
when supported by knowledge and reasoning abilities becomes an artificial intelligence.
When such an artificial intelligence is packed into a database as a system, then what we
have is AI system.
AI systems fall into three basic categories, viz., the Expert Systems (knowledge
based), the Natural Language (Native languages) Systems, and the Perception System
(vision, speech, touch). Figure 14.11 shows the structure of AI systems.
Artificial intelligence is a software technique applied to the non-numeric data
expressed in terms of symbols, statements and patterns. It uses the methods of symbolic
processing, social and scientific reasoning and conceptual modeling for solving the
problems. The AI systems are finding applications in configurations, design, diagnosis,
interpretation, analysis, planning, scheduling, training, testing and forecasting.
The AI systems do not replace people. They liberate experts from solving
common/simple problems, leaving the experts to solve complex problems. Artificial
intelligence systems help to avoid making same mistakes, and to respond quickly and
effectively to a new problem situation.
The knowledge-based Expert System is a special AI System. It has wide
applications in business and industry.
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NATURAL
LANGUAGE
NATIVE LANGUAGE
KNOWLEDGE
LANGUAGE
REASONING
USES
APPLIES
EXPERT
KNOWLEDGE
HUMAN-LIKE
REASONING
USES
APPLIES
PERCEPTION
SIZE, SHAPE,
IMAGE, VOICE
SENSING ABILITIES
FOR REASONING
USES
APPLIES
ARTIFICIAL INTELLIGENCE SYSTEM
Fig. 14.11 Categories of AI Systems.
11.3 KNOWLEDGE BASED EXPERT SYSTEM (KBES)
Decision making or problem solving is a unique situation riddled with uncertainty and
complexity, dominated by the resource constraints and a possibility of several goals. In
such cases, flexible systems (open systems) are required to solve the problems. Most of
such situations, termed as the unstructured situations, adopt two methods of problem
solving, generalized or the knowledge based expert system (KBES).
The generalized problem solving approach considers the generally applicable
constraints, examines all possible alternatives and selects one by trial and error method
with reference to a goal. The knowledge based problem solving approach considers the
specific constraints within a domain, examines the limited problem alternatives within a
knowledge domain and selects the one with knowledge based reasoning with reference to
a goal.
In a generalized approach, all alternatives are considered and the resolution of the
problem is by trial and error, with no assurance, whether it is the best or the optimum,
while, in the knowledge based approach, only limited alternatives are considered and
resolution is made by a logical reasoning with the assurance of the local optimum. The
generalized approach is dominated by a procedure or method, while the knowledge based
approach is dominated by the reasoning process based on the knowledge.
Since, the KBES considers knowledge as the base; the question arises whose
knowledge is to be considered as a basis. It is generally agreed that an expert has
knowledge, and therefore, he becomes the source of knowledge. An expert is difficult to
find and the difficulty of no-knowledge or limited knowledge on the subject is always
expressed. Knowledge is with experienced people and experience, is wide and
distributed. Hence, a system is required which will hold the knowledge of experienced
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people and provide an application path to solve the problem. Such a system eliminates
the knowledge bottleneck.
To build a knowledge-based system certain prerequisites are required. The first
prerequisite is that a person with the ability to solve the problem with knowledge-based
reasoning should be available. The second prerequisite is that such an expert should be
able to articulate the knowledge to the specific problem characteristics.
Knowledge in the KBES is defined as a mix of theory of the subject, knowledge
of its application, organized information and the data of problems and its solution, and an
ability to generate new avenues to solve the problem.
The KBES has three basic components which are necessary to build the system as
shows in Fig. 11.12
USER CONTROL
MECHANISM
KNOWLEDGE
BASE
INFERENCE
MECHANISM
Fig. 14.12 KBSE Model.
Knowledge base
It is a database of knowledge consisting of the theoretical foundations, facts, judgments,
rules, formulae, intuition, and experience. It is a structural storage with facilities of easy
access.
Inference mechanism
It is a tool to interpret the knowledge available and to perform logical deductions in a
given situation
User control mechanism
Its is a tool applied to the inference mechanism to select, interpret and deduct or infer.
The user control mechanism user the knowledge base in guiding the inference process.
In the KBES, three components are independent of each other. This helps in modifying
the system without affecting all the components. Like in the database application, where
the data is independent of its application, in KBES, knowledge is independent from
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application, i.e., inference process. The KBES database, stores the data, the cause-andeffect
relation rules, and the probability information on event occurrences.
For example, the knowledge base of Health Care would have knowledge such as
“obesity leads to high blood pressure”; there are 60 per cent chances that smokers may
suffer from cancer”. The KBES, therefore, stores and uses knowledge, accepts
judgments, questions intelligently, draws inferences, provides explanation with reasons,
offers advice and prompts further queries for confirmation.
In the KBES, the knowledge data base uses certain methods of knowledge
representation. These methods are-Semantic Networks, Frames and Rules.
Semantic Networks
Knowledge is represented on the principle of predicate functions and the symbolic data
structures which have a meaning built into it are known as semantics. A semantic
network is a network of nodes and arcs connecting the nodes. The node represents and
entity and the arc represents association with a true and false meaning built into it. The
association and meaning uses the principle of inheritance. For example, all animals with
four legs have a tail and a dog has four legs, hence the dog has a tail. The system inherits
from the fact that the dog has four legs hence the dog is an animal and, therefore, a dog
has a tail or not.
A knowledge base on ‘Table’ is presented in a Semantic network in Fig. 14.13
KITCHEN
TABLE
DRAWING
ROOM
IN
BIG
SMALL
WRITING
TABLE
MADE
OF
APPLIES
STEEL
LAMINATED
WOOD
Fig. 14.13 Semantic Network of Knowledge Database on ‘Table’.
IN
MADE
OF
DINING TABLE
A knowledge database of the table is stored with the attributes like location,
function, size and shape. If a query is put on table through any of these attributes, one can
infer the specifications of table. The inference would be corret depending upon how the
knowledge is designed and structured into database. For example, if table in the room is
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big and made of wood with lamination and has elliptical shape, it would be inferred as
conference room table. This inference would be correct if the knowledge base has
elliptical shape as an attribute of the table.
The characteristics of a variety of tables are used to represent knowledge on table.
A table in a drawing room, inherits the characteristics of a table in a drawing room.
Frames
The second method of representing the knowledge is putting the same in frames (Fig.
14.14). The concept of frame is to put the related knowledge in one area called a frame.
The frame is an organized data structure of knowledge. The frames can be related to other
frames. A frame consists of the slots representing a part of the knowledge. Each slot has a
value which is expressed in the form of data, information, process and rules.
FRAME
ENGINE OVER HEATING
Fig. 11.14 Knowledge in ‘Frames’.
Rules
The third method of representing the knowledge is rule based. A rule is a conditional
statement of an action that is supposed to take place, under certain conditions. Some rules
can be constructed in the form of If Then statements. An example of If-Then
decision/action statement is given below:
IF AN ITEM IS MADE OF TUNGSTEN CARBIDE THEN THE ITEM IS EXCISABEL.
IF AN ITEM IS HIGH SPEED TOOL THEN THE EXISE DUTY IS 20%
IF AN ITEM IS NOT HIGH SPEED TOOL THEN THE EXCISE DUTY IS 5%
Inference Mechanism
Having created a knowledge database, it is necessary to create the inference mechanism.
The mechanism is based on the principle of reasoning. When reasoning is goal driven, it
SLOT : SYMPTOMS VALUE
(TEMPERATURE MORE THAN 80 DEGREES)
(WATER BOILING)
(SPEED RETARDATION)
SLOT : INSPECTION VALUE
( CHECK WATER LEVEL)
(CHECK OIL IN ENGINE)
(CHECK CARBURETTOR)
SLOT : TREATMENT VALUE
( STOP ENGINE & DRAIN WATER)
(START ENGINE & POUR COLD WATER)
(INCREASE OIL LEVEL)
(ADJUST CARBURETTOR)
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is called Backward Chaining to goal and when it is data driven it is called Forward
Chaining to goal.
For example, if there is a breakdown in the plant, then looking backward for the
symptoms and causes, based on the knowledge data base, is backward changing.
However, it the data which is being collected in the process of plant operations is
interpreted with the knowledge base, it can be predirect whether the plant will stop or
work at low efficiency. The data here is used to infer the performance of the plant and
this is called forward chaining.
The choice between backward or forward chaining really depends on the kind of
situation. To resolve a problem after the event, one has to go from goal (breakdown,
stoppage, etc) to data, i.e., it is a case of backward chaining. But if the question is of
preventing a breakdown, then the data would be monitored in such a way that if it is
directing towards a goal (breakdown, stoppage,) then it is a case of forward chaining.
The KBES uses both the methods of reasoning. The success of the knowledge
based expert system depends on a degree of knowledge, the confidence in the knowledge
and the quality of inference mechanism.
11.4MIS AND THE ROLE OF DSS
The Decision Support System (DSS) is a special class of system which is used as a
support in decision making. Many of the decision making situations, at all levels of
management, are such that its occurrence is infrequent but the methodology of decision
making is known. Some of the methods are proven and are widely used. Such
applications are separated and are packed in the DSS.
These systems use data from the general MIS and they are used by a manager or a
decision maker for decision support. The basic characteristic of the decision support
system is that it is based on some tool, technique or model. These systems are used
sometimes for resting new alternatives, training and learning. They are also used for
sensitizing the various parameters of the model.
The DSS could be an internal part of the MIS. When the decision making need is
in real time dynamic mode, all such systems are designed to read, measure, monitor,
evaluate, analyze and act as per the decision guidance embedded in the system. For
example, in a simple case of order processing, the embedded DSS will accept or reject
the order based on the CRISIL, credit rating, availability of stock and so on. If the order
is accepted, the order acceptance is generated and the dispatch is scheduled for the
ordered quantity. The DSS, in all such cases, uses the data already present in the system
and gets it activated for action as per the guidelines.
The MIS designer has to look for all such situations and design the DSS for
integration in the system. The MIS would become more useful if the decision making is
made person-independent and executed with well-designed DSS. All such embedded
systems cover the normal variety of decision situations. If anything outside the
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considered variety crops up, DSS will bring to the notice of the decision makers that
action is called for in the situation.
When the decision situation requires multidimensional analysis using the internal
and external data, then such decision support systems are kept out of the main MIS
design scope. Most of this situation calls for the use of models and the nature of decision
is strategic, calling for planned activity.
Decisions like a new product launch, price revision, appointing new dealers,
change of product design or change in the manufacturing process are strategic decisions
which require critical analysis of data, careful evaluation of various alternatives and
selecting one of them for implementation on the given criteria.
The decision support system plays a dominant role in the management
information system, as a support to decision making.
REVIEWQUESTIONS FOR CHAPTER10 AND CHAPTER11
1. What is the purpose of DSS in MIS?
2. What types of DSS can be embedded in the application?
3. High end DSS system need well conceived problem model and solution criteria to
solve the problem. Explain with example.
4. Business rule, formula, algorithm and heuristics are extensively used in DSS.
Explain these terms.
5. A good DSS needs a good abstractions process to construct a model of the
problem. Before a model is accepted for DSS, what tests should the model is put
to confirm that it is a valid model of the problem situation?
6. List the problems which most of the businesses have which need DSS and classify
the DSS in following types-Deterministic and Probabilistic, and further they can
be classified as OR models or quantitative models based on management science.
7. There are systems which use knowledge base extensively for problem solving.
Identify the applications where knowledge bases can be used for problem solving.
8. What is simulation? Why and when is it used in problem solving? What are the
assumptions and limitations of using the simulation model in DSS?
9. Which is the type of DSS that can be integrated in the MIS and which are types
not worthy of integration?
10. Executive Information System (EIS) is a kind of DSS, which sits above and uses
the data from MIS. What is the purpose of EIS and what kind of decisions EIS
would support?
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CHAPTER-12
Enterprise Management Systems
12.1 ENTERPRISE MANAGEMENT SYSTEM (EMS)
Computer, electronics, communication, and audio video technologies have converged
closely to produce a new style of operating business. The dynamic business environment
of today is full of challenge and opportunities. The dependence on the information, as
driving energy source, is increasing. Every business activity has additional dimensions,
viz., speed and time. The business needs of today are beyond the transaction processing.
It requires an instant real time response in every case, wherever it occurs.
The word enterprise is chosen to convey that it encompasses the larger business
community covering all the players and their participation in the business. The system is
extended beyond the Corporate boundaries. In such a scenario, the system which you are
designing is an enterprise wide. It must catch an event, interpret it and trigger the action,
and communicate it across to the enterprise. Since, business is information hungry, it
must have an ability to sense the situation and act accordingly. When the business
requires online information to make the informed, knowledge based decisions and have
them executed in the business operations in acoordinated manner, it has to take support of
many other systems.
Take a simple example of customer order received in the Company, which
requires instant processing. In the very beginning acceptance possibility needs to be
assessed and the customer should be informed immediately. Next step will be ordering
the material on the vendor, booking the order and scheduling the same on shop floor for
production, updating the business status and informing the marketing representative for
monitoring the activities. All this requires operations and management of a couple of
system besides the normal sales application. It needs the management of EDI systems to
get hooked to the customer and vendor for a quick information communication. It also
requires the management of interfaced system such as CAD/CAM,MRP etc. It also
requires event monitoring and updating system such as the Paging, Internet and the
Imaging Systems.
Take another simple example of employee management, where the arrival of the
persons or their absence raises a number of triggers in the Organisation. The well-known
attendance recording system monitors the employee movement from all anglesavailability,
assigning, security, permissions, and salary7 and wages.
In the business today, the demand is a paperless operation, a wireless
communication as, a result of fully transparent and automated operations at all centres in
an integrated and coordinated manner taking care of the business, actions and decision
needs. To support such demands of the business, systems of information processing and
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communication are needed. These systems may be automated or mechanized interfaced
with the other system for data communication and processing. There should also be audio
video and imaging systems for bring realism in information and remote sensing system
for security and communication.
Thought the tools, the technologies, and the well designed solution and system are
available to support all such needs of the business, what is needed is an integrated
solution out of these technologies and the system offering an enterprise wide
management support. Such an integrated solution is called as the Enterprise Management
System(EMS). Figure 15.1 shows the following systems, which, when implemented in an
integrated manner for coordinated and cooperative function of the business, give rise to
the Enterprise Management System, i.e., EMS.
■ ERP: Enterprise Resource Planning Systems.
■ EDI: Electronic Data Interchange System for commerce, communication
and action.
■ CAD/CAM/CAE: Computer Aided Design, Manufacturing and Engineering Systems
for Production Management
■ AMS: Attendance Management systems, i.e., employee attendance and
presence management for the role management or Data Capture
Systems on floors, in stores, at gates, etc.
■ DMS: Document Management Systems, viz., imaging, copying and text
management and dispatching document DBMS.
■ CMS: Communication Management Systems, such as, paging, cordless,
mobile telephone system and the audio video systems.
■ SMS: Security Management System such as the close circuit television,
alarm or warning systems, movement tracing systems, etc.
In the EMS, the Enterprise Resource Planning (ERP) system plays the role of
front running system. The major decision making and its execution takes place through
the ERP. It is a system of managing all functions of the business with information support
coming through the ERP. It handles the operational systems to run the business and
provides the required inputs to planning and control system handled by the middle
management. With the internal sources of information and the use of information from
the external sources, it provides a decision support information for strategic planning and
control to the top management.
The ERP is supported by various other support systems which manage,
independently, the specific requirements and simultaneously provide inputs to the ERP.
The Electronic Data Interchange (EDI) system assists the ERP in connecting two systems
electronically for E-Mail. Documents Transfer, Data Transfer, etc. it is designed to
handle the commercial functions of the business popularly known as the electronic
commerce. It also acts as a gateway to interact with the vendor, the customer, and the
other associated institutions of the organizations.
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DESIGN AND
ENGINEERING
CAD/CAM
CAE
EDI AMS
SMS DMS
CMS
COMMUNICATION
SECURITY
ELECTRONIC
COMMERCE
ATTENDANCE
DATA CAPTURE
DOCUMENT
MANAGEMENT
Fig. 151 Components of Enterprise Management Systems (EMS).
The CAD/CAM/CAE, I.E., the Computer Aided Design/Computer Aided
Manufacture/Compute Aided Engineering systems are the systems which handle design,
manufacturing and engineering functions. It will provides the drawings and design
engineering information to the ERP in its execution of manufacturing, purchase and
inspection functions. They are also equipped with the database management facilities and
there database act as a back up support to the ERP.
The AMS, i.e., Attendance Management System keeps track of the employee
related information for personnel planning, availability and scheduling. It provides static
information about an employee through the human resources management system and the
current dynamic information such as his or her presence, shift rotation, the kind of job
handled the cost and so on.
The DMS, i.e., the Document Management System is designed to keep important
documents in the database foe viewing, sending messaged, and for documenting support
in the transactions handled. The system provides text edit facility for document
manipulation for the purpose of transaction handling. In the ERP it is used for crosschecking
the key information and also to confirm the authenticity of the transaction. It
handles the document access, editing, copying and mixing the information and sending
the information to the various destinations for execution. It uses scanning, imaging, work
flow automation and Document Data Base Management System.
The CMS or the Communication Management Systems re used for tracking the
important resource for action. These resources are located, altered and advised to act
from the location where they are. Their attention is drawn to an event and advised to act
to handle the situation. The ERP uses the CMS, as a tool, for all its communication needs
of recording an event.
The SMS, i.e., Security Management System handles the security, entry access
requirement of the business operations. It may be a person, a vehicle, or material, its
movement, availability and access if tracked, monitored, and guarded for security and
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safety. It provides a support to the ERP by clearing the situation to act further. A truck
will not be allowed to enter unless it is an authorized one, and then it will be weighed and
its weight will be transferred to the ERP for processing further information. An employee
movement can be restricted or prohibited to select areas before his time is recorded and
sent to the ERP for further processing.
These six systems together act as the support systems to the ERP . All these
systems are extensively used for the main purpose for which they are installed. Each one
of them have a specific technology to handle the function and are equipped to capture,
store, process and transfer the data of the ERP. Each of these systems operate on their
native systems and are interfaced to the ERP through the gateway by using a specific
software. These systems are a part and parcel of the ERP System network.
The EMS therefore, can be defined as a Network System comprising the ERP, the
EDI, the CAD/ CAM/ CAE, the CMS, the SMS, and the DMS as shown in Fig. 15.2.
12.2 ENTERPRISE RESOURCE PLANING (ERP) SYSTEM
The ERP system deals with the planning and use of resources used in the business. The
resources are finance, materials, manufacturing capacity and human resource. The ERP
provides methodology of assessing the resource needs for a given business plan to
achieve certain business objectives. It also helps to execute the strategies, plan, decisions,
and actions in a time bound manner. The ERP provides a support system in the
transaction processing, updating, and reporting across the functions. The ERP is a
package encompassing all major functions of the business. The product is generic in
nature and is supposed to incorporate the best business practice, generally followed in
most of the companies.
The product philosophy is to implement the system as it is with some
customization which may be typical to the customer requirement. The system design of
the ERP is integrated with the features and functions providing an enterprise wide
solution to handle all the process functionalities. For example, it provides capability to
process the purchase order from ordering to bill processing, and also meets the
information needs of purchase, stores, manufacturing accounts and finance.
The ERP packages build information base and provide knowledge base for
planning and control of the business through the business function management. The
ERP is the main system,
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Interfaced or assisted by the other systems in the organization. These systems may stand
alone or from a part of the manufacturing or commercial processing systems.
These systems provide the database to the ERP or support the ERP by the basic
data input directly or through the data transfer, for example, the manufacturing system
module of the ERP is interfaced with the Drawing, Engineering database for query,
viewing and usage of the drawings and it accepts the data of work order by process
operations, for costing and for building the standards for the future.
The architecture is client/server and uses object oriented technology for design
and development of the system. These packages are RDBMS based with the front end
tools. The key benefit of the ERP is that it provides an integrated solution for all the
requirement of the business. It addresses the issue of data integrity, information
transparency, seamless integration and information communication. Simultaneously it
respects the organizational hierarchy of authority, while conducting the business
transactions through the system.
The implementation of most of the ERP packages begin with the enterprise
modeling which defines the enterprise structure, the authority function, the processes and
the business rules. The enterprise model is the platform the ERP system implementation.
The ERP solutions are available on the Unix Plstform and also on Windows NT.
The solution is structured in the modular fashion to cover the entire business operation. A
typical ERP package solution has following modules:
1. Sales, Marketing, Distribution
2. Manufacturing
3. Stores Management
4. Finance
5. Personnel
6. Maintenance
7. Purchase, Inventory
8. Planning and Control
These modules are designed for data capture, data transaction validation, it analysis,
accounting updating and reporting. All the ERP solutions provide report writer for the
use to create the reports. The standard reports like the trial balance, the stores ledger,
the employee attendance report, the income tax return, eyc. Are provided with the
solution at a generic level.
The ERP features are many. The important ones are security authorization,
referencing responsibility, and the implementation of the business rules. These are
provided to safeguard the business of the organization from illegal practice and also
to protect the valuable information from misuse. These features help to keep the
system, the information and the data integrity at the highest level. The ERP is
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activated by its users. The security is built for authorized usage and also for selective
access.
The ERP usage can be controlled at all levels, viz., the data, transaction,
information and analysis level. The security system of the ERP is built around the OS
security and the additional features are provided while designing the system. It
provides access and updating rights to the users as per the control requirement of the
management.
Authorisation is a feature provided for ensuring that the transaction is completed
with regards to the business rules set by the management. The system provides the
mapping capability to tie the data, information or process to the user. This means that
only the aothorised user sign, the transaction is not posted in the system for further
processing and usage. For example, in the purchase order transactions the price and
discount are confirmed by one user, the terms are decided by the other users and the
purchase order is signed by the third user. The system provides defined levels to the
users and the purchase order is signed by the third user. The system provides defined
levels to the users and these are no limitations on the number of levels.
Referencing is a feature, provided for tracking the chain of events for monitoring,
progress cheking and control. For example, if one wants to check the status of
customer order, the referring feature helps to link the customer order to work order to
delivery note to Excise gate pass to bill. It is possible to establish the link through
cross reference of the transaction number or code of the previous transactions. For
example, a work order will give a reference of customer order, a delivery note would
give a reference of work order, a bill would give a reference to a delivery note and
customer order. The feature does not allow the transaction to proceed unless such
references are established.
The business organization runs through the rules and the responsibility allocation.
A strict adherence to them is essential for creation of the controlled environment. The
ERP satisfies this need of the business. It provides a facility to ensure that the userlocation
(Department/Division) Transaction integrity is confirmed through check and
validation and then ERP allows to proceed. For example, a cash transaction is
allowed at the Finished Goods Store and in the Accounts Department by the
authorized users only. At any other place evolving cash transaction is prohibited.
The material indents are processable in the stores while the vouchers are
processable in the Account Department. The order entry is permissible in marketing.
The ERP provides such facilities to ensure that the business is operated on the rules
and the guidelines set by the management.
The ERP system provides a variety of technology supports to implement the
solution very fast in execution mode. The solution provides the E-mail facility for
communication of memos, reminders, and text to the selected list. It also sends copies
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to the concerned person as stipulated. Through the EID connectivity, it can transact
directly to the vendor or the customer in its own format.
ERP system provides an aid to create the transaction by a cut and paste
mechanism. It can raise a purchase order on the vendor by picking up and choosing
the old purchase orders, which saves the generation time. The ERP solutions are built
for a user friendly flexible approach to manage the business with the changing needs.
This requires processing in a different manner to assess the impact. The solution
provides facilities like the trial posting, the end of chosen period processing, the
posting by choice, the flexible valuation procedures, and the hold transaction, etc.
Through these facilities the management can conduct an impact analysis to judge the
financial results and makes the business decisions.
The ERP also provides an intelligent support in business management. It allows
the user to define the events, alert and schedule them at his choice.
These events alerts are triggered by the database inserts or updates. Having raised
the alert, it also allows you to define the action to respond to the alert. The ERP sends
the electronic mail and executors the SQL statement. It is also capable of taking
multiple actions through the stored procedures.
Take an example of an item receipt in stores. The receipt would update the
database and the system will have an updated stock status. This database update is an
event for using the alert. The alert in this case can be defined as, on receipt of an item
send E-mail to the purchase Manager, the Production Planner and further, show the
work orders which are scheduled where this items is in use. If the receipt of this item
closes the Purchase Order then raise an automatic Purchase Order on the same vendor
with the same terms and conditions.
All the ERP solutions provide ‘Drill Down’ and ‘Context Sensitive’ helps to use
the system. The drill down helps to run through the system to locate the weak spot for
action and control. Suppose, the sales manager is viewing the sales by region by
product line. Then he wishes to see the sales revenue over a time, in order to better
understand the seasonality in the business. The drill down facility helps him to use the
information the way he wants, to form the judgments on the business happenings. The
drill down could be multi-dimensional to analyse the critical business information.
The context sensitive help provides an access to help library which can be used by
user by calling help. The help could be information, guidance and understanding of
the term or process or formats. The help facilities make the ERP user-friendly and
easy to learn.
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ERP Architecture
Any information system has three basic components, viz., the Data Management, the
Application Logic, and the Presentation. These components can be built with the
client server role definitions. The client is a user and the server provides the services
required by the user the to run the system. Since, the information needs are
dynamically changing, the architecture required is to separate the data and its
management from its application. The user requires the choice of using the data as it
suits him the most. Hence the application logic has to be separate from the data.
There is also a variability in the manner how the application logic is developed and
presented.
The architecture could be a two tier or three tier as shown in Fig. 12.3.
DATA SERVER
FUNCTION
APPLICATION
SERVER FUNCTION
CLIENT FUNCTION
(a) (b)
TWO TIER THREE TIER
Fig. 12.3 Client/Server Model – Architecture.
Since, the ERP is a generic solution for the business operations, in each case of
implementation, customization should suit the specifics of the business or customer.
The architecture choice is influenced by this requirement.
In a two tier system architecture, there is a rigid division of roles. The data
management is by the server and its processing is through the application logic by
client. In this architecture all the requirements are sent to the server by all the users in
the network. This affects the load on the server and the response time to the user
increase. However, there could be an application which deals with high volume and
complex data structure and this approach is more efficient, if response issue is taken
care of by the high end multiple CPU and the parallel processing hardware platforms.
There could be a case where the user is dumb and is required to use the system in
a guided manner with the ‘help’ assistance. Then the three tier architecture is suitable.
The client uses the GUI (Graphical User Interface) tools for simplicity while the
application logic is processed on another machine. In this architecture three distinct
roles are defined and three hardware platforms and made responsible to perform.
DATA MANAGEMENT DATA MANAGEMENT
APPLICATION LOGIC APPLICATION LOGIC
PRESENTATION
PRESENTATION
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The servers play two distinct roles of handling the data and the application logic.
This logic which deals with the data more is attached to the server platform, where
the data is being managed. The logic which deals with the presentation and the
specific needs of the user is left to the client platform as shown in Fig. 12.4.
SERVER
CLIENT
Fig. 12.4 Client/Server Model – Architecture.
It is very difficult to recommend one or the other architecture as the solution to
overcome a typical requirement problem. In the choice of architecture, what is
important is the user environment and the information needs and how the user
handles them? The best architecture, in a given environment, is the one which is userfriendly,
easy to understand and easy to maintain. The technology solution are
available to implement this philosophy.
The ERP solutions are multi-users which are distributed over the organization,
spread over to any length. Two main solutions are available to the designer and the
implementor of the ERP. One is the Graphical User Interface (GUI) and the Network
Management. The GUI is chosen since it allows the customization for a particular
business entity. The GUI screens are so developed that the process running across the
organization is mapped to the business flows instead of the discrete business
functions.
The network is typically the bottleneck in any client/server system. With the
application logic, appropriately divided between client and server, it creates a reduced
traffic intensity due to GUI interface. Accompanying the network efficiency and the
GUI, the ERP solution uses a scalable architecture and a parallel processing
technology by installing the suitable server at the required locations. This ensure good
performance with a continuous increased load conditions.
For most of the customers, the ERP offers a basic business functionality.
However, some users have particular needs for which they want an additional support
through the tools or other modules. Most of these requirements are extensions to the
basic business functions. These customer specific needs are met through a popular
and a widely used, client/ server tool set.
DATA NABAGENEBT
APPLICATION LOGIC
APPLICATION LOGIC
PRESENTATION
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The business being complex requires a variety of systems to run efficiently. The
presence of existing systems is not challenged or minimized by the ERP solution. In
fact, most of the ERP solutions use open application programme interfaces that
enable easy coexistence and integration with the legacy and the third party systems.
The solutions also provides the gateways to the popular database which are used in
business.
The ERP solution are designed to make the office of the business paperless. It
keeps all the business information online. Then, the users use the Work Flow
Technology to move the process in a screen format from person to person for the
changes, the approvals and the execution. With the multi-media technology, the
servers can be configured to keep the business information online in any format,
including the text, the spreadsheet, the image audio and the network video.
The solution offers support for the electronic notifications, through the EDI, the
E-mail, or the internet to the business partners. For example, you can create a
purchase order, get it justified and approved by the authorized person sitting at the
other location, attach the engineering drawing to the purchase order by accesses to the
CAD system, assemble the documents of the purchase order, and have it sent through
the EDI to a vendor located at a distant location without creating any the paper
documents.
ERP Solution structure
The Enterprise Resource Planning solution structure is built in three layers namely,
technology, business and implementation as shown in Fig. 12.5.
Business Operations
On the business side, it provides solution for the data entry, data capture, transaction
processing and data base updates. It then support an analysis of the processed result in
single or the multi-dimensions for one period or successive periods. It offers a support
on the comparative analysis,
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The budget versus the actual, the target versus the actual, the target versus the actual,
the standard versus the actual and so on. The analysis also throws light on the
exception conditions, for immediate attention and action.
The ERP solution provides the decision making capabilities either built-in or
through the decision support systems when it comes to implementation. It provides
the database functionalities for data and information management. It then has the
front end tools to develop the application in an exclusive manner.
The ERP solution then handles the interfacing requirement to the legancy or the
third party systems as a support to the main ERP solution. Using various information
technology tools and application development tools, the application logic is
developed to the business functionality. The tools are-report writers, interfacing tools,
query processing tools, application development tools, the object oriented tools, etc.
Technology
The technology side of the ERP solution is managed through the database
management technology for data acquisition to data base creation, updation, and
maintenance. The application development is done through the client/server
technology, where the servers handle the specific or the general functions as the case
may be and the client play the role of processing interactively and locally for meeting
the information needs. The client/server implementation could be two tier or three
tier, based on the design and the implementation strategy. To reduce the development
effort and for ease of maintenance, the development approach is an object-oriented
approach, where the class and the object libraries are built for reusability of the object
and its code.
Implementation
The ERP implementation is multi-user and calls for the network usage for the work
flow, communication and the access to the database (s) which may be at one location
or distributed. The successful implementation of the ERP calls for a strong
technology component appropriate to the environment.
ERP Model and Modules
The generic ERP package represents the commonly operated business model of the
organization. It is built with the function models like the Finance, Materials,
Marketing, Sales, and Personnel and their sub-modules. These modules are then
integrated to perform ensuring data and information consistency and concurrency.
The seamless integration of the modules allows the user at any level to take a
micro and a macro view of the function and process view of the transaction across the
function. A typical ERP solution has the following modules:
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■ Business forecasting, planning and control (Business)
■ Sales, distribution, invoicing (Sales)
■ Production planning and control (Production)
■ Material management (Material)
■ Finance and accounting (Finance)
■ Personnel management (Personnel)
Table 12.1 shows the sub-module details of each module.
Table 12.1 Sub Modules of ERP
Business Sales Production Materials Finance Personnel
Forecasting
Planning
Goals
Objectives
Targets
Starategy
Control
Forecasing
Planning
Sales Budget
Order
Processing
Order Execution
Delivery
Invoicing
Planning
Order
Control
WIP
Quality
Scheduling
Despatch
Purchase
Inventory
Stores
Valuation
Analysis
Control
Accounting
Funds Mgt.
Balance
Sheet
Processing
Schedules
Analysis
Control
Human
Resource
Payroll
Accounting
Skill Attendance
Inventory
Analysis
Control
12.3 ERP BASIC FEATURES
General features
■ Separation of the programme code and the data areas.
■ Command language.
■ Screen based flow control.
■ Application logic.
■ common service functions such as the currency, date, editing, and help.
■ Diagnostic functions.
■ Transaction flow control.
■ Help functions.
■ Central table system for management of parameters, text and master data, online
logical checks and validations.
■ Word processing, text editing.
■ Action messages.
■ Tuning.
■ Enterprise Modeling: Structure/Policy/Rules/Guidelines.
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Business system
■ Business forecasting for products, groups, markets.
■ Target fixing and allocation by the key parameters.
■ Business planning in terms of the resources to execute.
■ Strategy formulation and implantation.
■ MIS for strategy monitoring and control.
■ Business modeling for the strategy development and testing. DSS for resource
planning.
■ Information base management for management application.
Sales
■ Basic data (master) management
■ Order processing
■ Despatching and invoicing
■ Order analysis, forecasting
■ Sales analysis, budgets and controls
■ Finished goods stores management
■ Dealer, distributor management system
■ Receivable analysis
■ Market/ Customer / Product analysis
■ Market research information database
■ Marketing personnel management
■ Sales forecasting and budgeting.
Production
■ Basic master data management.
■ Bill of materials, classification.
■ Process sheet, routing.
■ Work order generation, scheduling and control.
■ Production Planning : BOM, MRP, MPS and capacity planning.
■ Interface of CAD/CAM/CAE systems.
■ Quality systems for data capture, analysis and control.
■ WIP tracking, valuation.
■ Work station/machine centre management.
■ Production-Materials interface.
■ Collection of unit data for valuation and costing.
Materials
■ Purchasing and procurement.
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■ Goods receipt and issue system.
■ Stock management and valuation.
■ Inventory analysis.
■ Stores ledger, valuation, analysis, disposal.
■ Excise/customer interface.
■ Data integration with production, accounts systems.
■ Quotation/Enquiry processing.
■ Subcontracting, material accounting and bill passing.
Finance
■ General accounting functions.
■ Ledger, payables and receivables.
■ Subsidiary ledgers.
■ Cash-flow management.
■ Loan management, funds management.
■ Working capital management.
■ Budgeting, planning and control.
■ Balance sheet processing.
■ Tax management status reporting.
■ Assets accounting.
■ Cost accounting: cost centre accounting, order accounting, product costing.
■ Bank reconciliation.
■ Letter of credit management.
■ Consolidation of accounts.
Personnel
■ Personnel data management.
■ Personnel attendance system, time management.
■ Payroll accounting: salary, wages, incentives, bonus, income tax and other
deductions, and contribution to various public and provident funds.
■ Human resources management: Planning, recruitment, training and upgradastion.
■ Personnel cost, projection and planning.
Fixed Assets
■ Fixed assets accounting: Inventory, register.
■ Depreciation accounting.
■ Capital work in progress.
■ Fixed assets retirement and disposal.
■Year end processing for balance sheet schedules.
Maintenance
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■ Plant maintenance planning.
■ Breakdown, preventive, conditional maintenance.
■ Maintenance management: Initiation, planning, execution, control, and cost
accounting.
■ Monitoring performances for maintenance action as all kinds of productive assets.
■ Contract management.
Quality Control
■ System of data gathering to assess quality and measure against standard.
■ Analysis of quality by process, material, work centre location.
■ Analysis of quality by reasons and action taken.
■ Building quality assurance data for equipment/ process/ technology selection.
■ Monitoring quality across the organization from input to output for operating
decisions and business decisions.
Consolidation of Business Operations
■ Accounting by units and divisions with local focus.
■ Consolidation by accounts in corporate functions.
■ Bringing out comprehensive reporting system for business decisions.
Characteristics of ERP Solution
■ Modular structure.
■ Scalable architecture.
■ Seamless integration of modules.
■ RDBMS independent.
■ Independence of hardware platform.
■ Interface capabilities.
■ PC download/ upload facility.
Most of the ERP solutions need some changes to suit changes to suit the
environment. The Commerce and Corporate Laws differ from country to country and
the ERP in such cases need customization to satisfy the local requirement of the
business.
The ERP solution has advantages of fast implementation as the design and
development is eliminated being a package. Due to object oriented technology and
the client server architecture, the changes are easy to make, which are less at the
server end and more at the client’s end.
Since, it has modular structure; one can implement the solution in a phased
manner module by module. It can be implemented first on a smaller scale and
expanded subsequently with more users, more locations and more modules as well.
Since the whole solution is a package product, the manufacturer of the package brings
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out newer versions of the product offering more facilities to the user to improve the
utility of the solution.
There are more than a dozen ERP solution available in the market each having its
own specialty. Though, they are characterized as described earlier, they differ in feel,
look presentation, processing efficiently and user-friendliness.
Some of these products are developed as an application in a particular
organization and then turned into a packaged solution. In view of this, some of ERP
solution is more useful and efficient in similar organization. The specific industry
features have been taken care of more efficiently as customized solutions. Since the
design / developer have a choice of RDBMS, front end tools, the interface tools, and
so on the package efficiency changes with the choice to tools. Some of these
packages run better, if installed on a particular hardware platform; and used by a
particular organization.
Though tools, technology and approach may be same or similar, the manner in
which they are used decides the efficiency of the solutions.
12.4 BENEFITS OF THE ERP
1. Better management of resources reducing the cost of operations.
2. Planning at function and process level. Simultaneous increase in the productivity
of the business possible.
3. Customer satisfaction increase due to shorter delivery cycle. Closer contact with
the customer.
4. Simultaneous atomization of the decision centers because of instant inducement
through triggers or updates.
5. Business operations transparency between business partners cutting down the
execution time of critical business operation.
6. Intelligent ERP download the decision making at lower level, releasing the burden
on the middle management.
7. Due to faster processing technology and SQL, management can see the
information in their perspective and take different view of the business.
8. Due to strong interface capabilities, the human resource can be utilized better due
to access to information across the databases distributed over the organization.
9. Since, the ERP design is proactive, it make the management alert at a number of
points demanding the decision or action.
10. The processes become faster due to work group technology and application of
work flow automation.
11. Due to the support technologies like EDI, E-mail, office automation, paperless
office is a newer possibility as communication is faster and systems get connected
directly.
12. The ERP still remain a valid solution with the expansion of business as it is a
scalable architecture.
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13. Due to the client/server architecture, the application of object technology and use
of the front end tools, the process changes can be easily carried out in a short
duration of time. Hence, the user service can be maintained at higher level.
14. The ERP implementation automatically leads to the usage of the best business
procedures bringing the consistency of operation in the world of business.
15. With the use of the data warehousing and data reverse engineering, management
becomes knowledge’s driven and the organization becomes a learned one.
16. The ERP scope can be enlarged through the Internet/Intranet access, making the
ERP sensitive to the latest events in the business, market and technology.
17. The quality of decision making improve as the user decision maker is made alert
and he is made knowledgeable and better informed dynamically.
18. The tools available to the decision maker are friendly whereby he is equipped to
make decision and execute it simultaneously.
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CHAPTER-13
Enterprise Management Systems
13.1 ERP SELECTION
Since, the market offer a number of ERP packages, the buyer has a choice to make. Each
product has its own USP and differs in a number of ways in content, scope, an ease of
implementation, etc. The selection can be made on three dimensions, viz, the vendor, the
technology, the solution scope, and architecture.
Vendor Evaluation
Factors
1. Business strength of the vendor.
2. Product share in total business of the vendor.
3. R. & D investment in the product.
4. Business philosophy of the vendor.
5. Future plans of the vendor.
6. Market reach and resource strength of the vendor.
7. Ability to execute the ERP solution.
8. Strength in the other technology knowledge and the ability to use them
9. Perspective plan of the ERP improvement with technology development.
10. Image in the business and in the information technology world.
11. Financial strength of the vendor to sustain and handle the business and
technology risk.
12. Organisation for product development and support.
13. The global experience of the vendor and commitment to the product for long
term.
Technology Evaluation
Factors
1. Client server architecture and its implementation-two tier or three tier.
2. Object orientation in development t and methodology.
3. Handling of server and client based data and application logic.
4. Application and use of standards in all the phases of development and in the
product.
5. Front end tools and back end data based management system tools for the
data, process presentation management.
6. Interface mechanism; Data transfer, real time access, OLE/ODBC
compliance.
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7. Use of case tool, screen generators, report writers, screen painter and batch
processor.
8. Support system technologies like bar coding, EDI, imaging, communication
network.
9. Down loading to PC based packagers, MS-Office, lotus notes, etc.
10. Operating system and its level of usage in the system.
11. Hardware-software configuration management.
ERP Solution Evaluation
Factor
1. ERP fit for the business of the organization in terms of the functions, features
and processes, business scope versus application scope and so on.
2. The degree of deviation from the standard ERP product.
3. Ease of use; Easy to learn, implement and train.
4. The ability to migrate to the ERP environment from present status.
5. Flexible design.
6. The level of intelligent usage of help error messages, dictionaries.
7. The ability for a quick start on implementation.
8. Versatility of the solution for implementation on a platform with the project of
saving the investment.
9. Rating on performance, response and integration.
10. Product quality in terms of security, reliability, and precision in results.
11. Documentation for system handling and administration.
12. Product rating in its class of products.
13. Solution architecture and technology.
The methodology of selection will begin first with the study of organization in
terms of the business focus, critical application, sensitive business process, etc. Since,
the ERP solution is a tool to change the style of business management; it requires
thorough understanding of the business, the business issues, the management
criticalities, and the socio-cultural factors. Such a study will help find out if the ERP
is fit for the organization. It is a very important to find out that the ERP is fit or not,
as it is the most important and critical success factor.
The price of the ERP package is difficult to judge and often it is a negotiable point
in favor of the buyer in competitive scenario. Since the ERP implementation is a two
three years’s project, the ERP solution will sustain and be adequate for the current
and the future business needs for a period of five to seven years. After that, it would
become a platform for the future expansions and growth.
It is advisable for the organization to form a committee for selection of the ERP
SOLUTION. IT SHOULD HAVE IMPORTANT FUNCTIONAL HEAD, A
STRONG Information Technology person and a person from corporate planning
function. The committee should be headed by a CEO or his designated authority. This
committee should prepare a requirement document spelling out the business goals,
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and objectives, the futuristic scenario of business, the critical functions, processes,
business focus and customer deliverables. A note on the management philosophy,
procedures, practices and style will be a valuable input.
When such a document is ready, the selected ERP vendors should be called for
seeking the ERP offer. The document should be given to the vendors, and they should
be allowed to study the organization and its business. All the vendors should be asked
to submit a technical proposal explaining the fit of the ERP to the organization. The
submission of the vendors should be scrutinized by the committee for short-listing.
The short-listed vendors then should be asked to give the product presentation to the
selected group of decision makers to seek their opinion on the product.
When the product presentation is oven, product demonstration should be
arranged, for a detailed security and evaluation. In this process, the committee should
confirm whether the critical requirement of business, in terms of information, process
handling facilities, features, etc. are available or not. If some of them are not available
then there is a possibility of work around to achieve the same result.
A second evaluation note should be made for a comparative analysis of the ERP
solutions and then a critical evaluation of this analysis should lead to the choice list.
Simultaneously, the committee should gather information on the experience of the
other organization where the ERP is implemented. This information should be on
how successful the vendor is, in the implementation of the ERP? The strengths and
the weaknesses of the vendor, the product and the post sales processes should be
ascertained. The choice list should be weighed by these points.
Though such an approach is appropriate, it is not always possible to bring out a
clear win in the evaluation, as many factors are intangible in nature. In such an event,
the committee should examine the trade off involvement in the selection. It should not
happen that organizational issue dominates the choice of the ERP and in the process
the best product is rejected. Ideally, the organization should be carrying out business
process engineering and reengineering study, restructure the organization, modify the
processes functionalities before the ERP decision is made.
Once the committee makes the decision, the vendor should be asked to resubmit
the technical and commercial proposal with price and the terms of offer. The proposal
should have the following details.
1. Scope of supply.
2. Objectives
3. Modules and deliverables
4. Implementation methodology.
5. Plan and schedules of hardware and software implementation.
6. Resource allocation
7. Responsibility division between the organization and the vendor.
8. Process of implementation
9. Organisation of implementation.
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10. Progress monitoring and control of the important events
11. Process of resolving the issue all levels
12. The official product literature
13. Association with the other vendor its purpose
14. Commercial submission.
 Price by module and number of users
 Payment terms.
15. Process of acceptance of the ERP by stages and linking with the payments.
Once the ERP decision is made, the vendor and organization enter into a legal
contract. Such legal contract should list the obligations, duties, responsibilities,
deliverables and the value components. It should also include the clauses on issues
arising out of unforeseen circumstances and how to resolve them with the legal remedy
available to both the parties. Since, the ERP is a product of several technologies, there
should be clauses relating to safeguarding the interests of each other to cover the risk
arising out of the technology failure.
The ERP is a tool to manage the enterprise resources to achieve the business
objective. It is a supporting system and does not solve all the problems of business
management. The success of the ERP lies in its implementation with commitment. It
requires full participation of the organization. It is to be appreciated as a managerial tool
and not as a labor saving device. Since, potentially the ERP is designed for productivity
rise, the management must exploit it to its advantage by adopting the best practices or
changing the practices through the business process reengineering.
13.2 ERP IMPLEMENTATION
The ERP implementation, generally, follows the waterfall mode approach. Once a firm
order is received the implementation begins with kick-off meeting between the vendor
and the organization. In such meeting the organizational issues are taken care of. Since it
is a long term activity a preliminary planning is done to start the implementation.
Requirement Definition and Description (RDD)
Though, initially, the study has been carried out by the vendor, more in-depth study is
taken up jointly by the vendor and the project in-charge of the organization.
In this phase of study the user are contacted for their requirement specifications.
These requirements may be of the data, information, function, features, processes or
reports. It is necessary to understand them to evaluate the ability of the ERP solution to
satisfy these requirements.
Since, the ERP is designed as a standard package, it after requires changes and
modifications to suit the requirements of the business.
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All the ERP packages provide standard features, functions lists of the package
used. These lists are examined vis-à-vis the requirements and new document is prepared
called as the deviation RDD.
Once the deviation RDD is made, it should be approved by the authorized person
in the organization. The purpose of such a document is to freeze any requirement to carry
out further changes in the package.
In the evaluation of standard RDD, two kinds of changes emerge, one major,
where the ERP design needs to be changed. Such changes are time consuming and the
vendor may charge additionally for such requirement fulfillment. Other changes may be
minor and may not affect the design of ERP. The minor changes are cosmetic and / or in
presentation, and they are generally at the lower end of the process. The changes are like
the field change, the report format modifications, and the computing process and so on.
The advantage of preparing the RDD and a deviation there from in that the users of the
ERP get committed to the solution as they have thought the standard requirement
provision of the ERP and the deviation required in the provision. In this process, the
resistance to change is eliminated, due to direct involvement of the users and the decision
makers.
The another distinct advantage of the RDD and the deviation from the RDD, is
that it provides the revised specifications clearly to the designer and the developer to
bring out the changes required in the design of the ERP. It also further helps to assess the
work load arising out of the changed requirement.
As soon as the new RDD is prepared, the process design starts implementing the
changes. The moment the changes are required the processes of design coding; testing,
etc. come into picture for execution. The changes of made, are then tested on a sample
data and other steps of unit testing, module testing and system testing for complete
integration are taken. After establishing the requirement definition and description (RDD)
and mapping it with the standard RDD of the ERP solution, the DRDD (Deviation RDD)
is prepared for changes in the solution and implementation. The implementation steps are
given as follows:
1. A user meeting is arranged to explain the ERP and process of implementation.
2. The RDD and the DRDD is explained for understanding and approval.
3. The resource to carry out the changes in the system, generally, known as
customization is provided. This could be business specific and customer
specific.
4. The DERP (Deviation ERP) solution is tested.
5. The solution on the recommended platform is loaded.
6. The solution is tested on a sample data of substantial nature.
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7. The solution is then demonstrated to the users for their understanding and
confirmation.
8. The users are trained to run the solution and resolve the difficulties in
operations of the system solution.
9. The change over from the manual system to the ERP solution are meticulously
planned, taking care of the cut off dates, the opening balances, the data
transfer etc.
10. A logbook of the system usage is kept to note down the problems, solutions
and modifications carried out to make the solution more efficient and
effective.
11. Standard reports like checklists, ledger, trial balance, and sales analysis are
taken to confirm the integrity of the ERP solution.
12. The standard documentation of the ERP solution is changed to the changed
version of the ERP.
13. The system performance is checked in terms of speed, response, etc. and the
ERP solution and / or the hardware is turned for improving the performance of
the solution.
14. After three to four months working, a review meeting with the user is
conducted, taking the support of the log system for the purpose of
improvement, confirmation and finalization of the ERP implementation.
The major hassles in the ERP implementation are due to:
1. The resistance of the users in the acceptance of standard ERP solution.
2. The limited awareness of the users and the appreciation of the Information
Technology applications.
3. The ability of the users to change over from the old conventional systems to the
technology based new systems.
4. The level of acceptance of the standard business processes incorporated in the
system. Lower the acceptance, longer the implementation time, resulting into a
loss of efficiency and effectiveness of the solution.
5. A lack of clarity on the business requirement, the customer focus and the strategy
of business and its impact on the ERP solution.
6. The ERP implementation is carried out without properly evaluating the business
processes and practices through business process reengineering and is preceded
by restructuring of the organization.
7. The choice of the ERP solution. Not all the ERP solutions are appropriate for the
organization. Each solution has its own peculiarities in terms of design,
architecture, and technology, coverage of business scope, functions and features.
Some solutions are good for certain type of business and industry and not for all
the businesses and industries.
Ideally, the choice should be based on the ERP fit for the organizations, functions
and features. Higher the fit, better is the solution from all angles. It the fit is higher,
the customization will be less and the user acceptance will be higher. In short, the
implementation cycle would be short.
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There is a qualitative change in the MIS design due to the complexity of the business
operations and the risk involved in handling the business.
The management focus is shifting from the function to the process, i.e., the
management requires the information support in the process management and not in
the function management.
The MIS is now required to maximize the process productivity and performance.
The decision making support is required for the process optimization. The decision
models are built across the business management functions. Besides the normal MIS
reports required for the top management, the Top Management also needs a set of the
additional reports, where the critical business processes and the critical success
factors are a focus area.
The ERP solution caters to this requirement very easily. The ERP solution is an
integrated solution. The solution operation is seamless, disregarding the hardware or
the software platform. The ERP solution takes care of data integrity and consistency
across the organization, which may have multiple locations.
In today’s competitive world, the shift of decision making is towards strategic
management of the business. The ERP solution, due to its scope and coverage, and
supported by a variety of tools, enables Strategic Management based on the strategic
information for decision making.
The management attention on the focused area is easily possible. The
conventional MIS design is more or less embedded in the ERP solution. They provide
all the routine reports at any time for the middle management of the organization. The
ERP, over and above this, provides executive information for the strategic
management of business. It further helps to formulate the strategies to achieve these
goals taking its implementation further.
The ERP design provides transparency to the users of information giving them an
access to the sensitive information to locate, define and resolve the problems. The
ERP enables the work group management efficiently and effectively. The effective
uses of the variety of tools, like the data replication, the work flow automation, the
EDI/D-mail, the data warehousing, the EIS, the bar coding, and the paging systems
are built in ERP. The effective use of these variety of tools also speeds up processing,
cuts down the operation cycle time and raises the ability of the management to take
decisions. Once the ERP is built in the organization, it takes care of the data, the
information and its storage and, therefore, provides the capability to modify the
Management Information System from time to time as per the changing information
needs.
All the solutions use the client-server architecture in the solution, where the data
processing, and the application level processing logic is taken care in the server level
giving freedom to the user, as a client, to define the problem and evolve the solution
using the front-end tools. The front-end hardware and the tools are so powerful that
an individual can develop his own MIS based on his decision making information
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needs beside the usual MIS like corporate, functional, etc. the decision maker can
operate as an individual in isolation from the others, if need be.
The ERP through such an MIS design improves the decision making skills of the
individuals very effectively. It provides autonomy in global system operations. With
the ERP, the MIS design is more flexible highly decision intensive and efficient.
ERP along with other systems becomes an EMS, MIS design uses ERP which in
turn uses other systems for inputs in terms of data capture, transaction processing and
data base creation, MIS in ERP environment is a sophisticated design serving the
needs of the organization.
REVIW QUESTIONS of chapter 12 and 13
1. What is the concept of Enterprise Resource Planning? Why is ERP solution now
possible? What role does technology play in ERP implementation?
2. Explain the terms – Seamless integration, MRP, Graphical User Interface,
Functionality, Features.
3. What is ERP architecture? What is solution architecture? What is the difference
between the two?
4. Study the literature of any one ERP package, SAP, ORACLE, MAMIS, J.D.
Edward, MFG-PRO, MARSHAL, and PRISM and match the offerings with your
concept of ERP.
5. ERP packages offer standard solutions for business operations. However, some
amount of customization is necessary to suit the solution to specific organizations.
Explain.
6. Make a small note on ERP package selection for management.
7. Why is implementation effort necessary even though ERP package is chosen?
8. What care should be taken while selecting ERP package?
9. Can you be sure that if ERP solution is implemented, the MIS is in place?
Discuss.
10. Can your say that if ERP is implemented, user needs on information are satisfied?
Discuss.
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1. Develop a system model for personnel situation, when Human Resource database
Is already available in the organization. The manager of the department should be
Able to select person(s) against a skill profile of his interest. He is also interested
In knowing the rejection of a number of persons against each skill factor in
Profile.
Assume that the Company maintains a human resource database in terms
Of the various skills, such as technical, mathematical, engineering, conceptual, etc.
and work experience of the candidated in each field.
2. Explain as to how you would use Bar Code Technology in the personnel function.
The organization has issued bar coded identity cards with photographs to every
employee.
Explain the use of this card in
(a) Shop floor control function.
(b) Work order control
(c) Personnel movement in the premises.
(d) Stores management.
3. The organization has a Credit Cooperative Society for the benefit of employees.
The society offers financial assistance by way of loan, towards housebuilding,
purchase of white goods, payment of education fees, and festival advances, etc.
The repayment of loan is through the salary paid to the employees every
month. Develop an application for loan management and build an interface to the
payroll system for loan installment deductions. In this regard, give a system
overview on the following lines:
(a) System scope
(b) System objectives
(c) Output of the system
(d) Inputs to bring out the outputs
(e) Process design.
(f) Interface mechanism.
What care would you take in both the systems, i.e., the loan management system
and the payroll system, so that the employee is not overburdened with the loan
obligation and every month after the instalment deduction seventy per cent of the
normal take home pay is maintained.
4. Develop an application for bank reconciliation. Assume that the bank gives a soft
EXERCISES
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copy of the bank statements, specifying the cheque clearances against the
accounts opened by the Company.
5. In large commercial transactions, the normal payment terms are through the Letter
of Credit (L/C). Study the L/C documents and its processing from opening of the
L/C to the closure of the L/C Develop a small L/C Application to keep a track of
the L/C transactions and the L/C monitoring and its interface to the finance system.
6. A company has for strategic business units (SBUs) responsible for the assigned
performance. At the end of the financial year, four balance sheets are consolidated
for the Company. Each SBU has a chart of account created for its business
management. The company has its own chart of account different than those of
the SBUs charts of account.
While designing the consolidated systems for the Company, what, design
steps would you take so that the consolidated results are available by the third of
the month ?
The company6 would also like to build the MIS reports around sensitive
accounts of the company, and also of those of the SBU.
7. A production manager would like to have at the end of every shift, a production
report indicating the performance of the production shop. Design a report format
and the input sources for the production of such a report. What kind of technology
support is necessary to capture the data, and process the same at the end of the shift ?
The production shop is of the shop is of the following types:
(a) Job shop manufacturing
(b) Assembly line.
(c) Continuous process with by-products.
(d) Packaging shop after manufacturing a variety of medicines, in the form of
tables, capsules, strips, etc.
8. A manufacturing process is built in with the counter to compute the number of
bottles filled. The shop manager would like to use the counter for management of
the process.
At the end of the shift, the data of filled bottles should be sent to the main
system for the shift production report. At the end of 1,00,000 bottles, the process
should stop for a shift, the number of bottles broken are 20, an exception report
should be sent to the shop manager for resetting the process of bottle filling.
Draw a system flow chart for this application.
9. A gift shop prepares gift boxes for sale at the time of New Year, Diwali Festival,
Christmas, and for marriages. The shop has over 1000 gift articles which are
uniquely identified by a bar code.
A customer places an order for a gift box packed with the assorted gift
articles. A box may contain one or more item but not exceeding four. Since, the
business is a seasonal one, a quick response to the enquiry and order processing is
necessary. An order of less than 100 boxes is not accepted.
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Draw an application system flow chart starting from enquiry processing to
the order processing, including packaging, delivery and billing. All the orders are
accepted with 70 per cent advance from the customers. The gift shop has a
standard price list and a standard list of the gift items. The shop has a small
packaging unit in the same town from where the delivery and billing takes place.
The warehouse and packaging is at the same location.
Identify in the system the following.
(a) Masters
(b) Transactions
(c) Relations
(d) Processes
(e) Outputs
(f) MIS reports
Design the system in such a way that a least paper work is necessary, the
communication is faster and the execution of the customer order is efficient.
Break the application in tow parts-front end and back end support.
10. A company resorts to the subcontracting as an alternative to manufacturing in
house. It has a list of the approved subcontractors. Some are on a contract basis
and some are chosen against the specific order requirement. Since, the
subcontracting was not a major activity so far, it was not brought under main
materials production management system.
Identify the system issues in the subcontracting functionality and discuss
its interfacing with the other application systems. The commercial aspect of the
subcontracting is decided by the Purchase Division while the approval, choice,
and job to be subcontracted is decided by the Central Planning. Draw a system
hierarchy to handle the subcontract function with a specific focus on:
(a) Material accounting
(b) Job accounting
(c) Purchase accounting
(d) Interface to production planning
11. A large pharmaceutical company has four factory locations and eight warehouses
for distribution of products to the wholesalers. The total number of items are over
10,000 stock keeping units.
Suggest the analysis of inventory, which would throw light on the
movement, aging, holding and disposal of the items. What methods you would
suggest in the materials management system os that it helps the warehouse
management, distribution management and production management
12. A Super Shoppee Departmental Store wants to design a system whereby the
proper procurement, inventory and billing management would take place. The
systems manger of the Shoppee wants two systems, a front end and a back end, to
handle this requirement. The front end system should handle customer billing and
the updation of inventory and the back end system should handle the procurement
and the inventory management with the MIS reports to the management.
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Write a system write-up explaining the objectives, scope, requirement,
transactions processes and the reports the system should provide. Also provide the
queries which are ofter raised by the customers, buyers, and the front end desk
operators and the procurement and inventory manager.
13. Enquiry processing and the order processing thereafter, are common application
systems in all the manufacturing and trading businesses. The main factor in these
systems is to provide quick response to the customer on his requirements.
Discuss the system parameters in the following business:
(a) Spare parts for Airlines.
(b) Manufacturing against the order.
(c) Distribution of the white goods for sales.
(d) Manufacture and sale from the stocks of a variety of products.
Also discuss the similarity and contrast in managing these applications.
14. A consumer goods manufacture maintains 10,000 household samples for
assessing the market trends, the buyer behavior, the response rate, and the
spending habits, etc.
Design a questionnaire to assess the product preference in various washing
soaps. The data collected should be useful to conceptualise a new washing soap
design and its specification
Design a questionnaire in such a way that the data processing would be
easy. Design a system for the questionnaire you have designed including the
output designs.
15. Marketing department of a company requires information on the following
entities :
(a) Market segment
(b) Product segment
(c) Zones
(d) Regions
(e) Product groups
(f) Stock keeping units
(g) Sales representatives
(h) Warehouses
(i) Customer and types of customers.
Design Sales Analysis requirements by suggesting the different analysis
reports and its probable user and usage.
16. A company wants about 20 management trainees from the 1st of January for
supporting their growth plans of expansion and diversification. The programme of
recruiting the management trainees includes releasing the company advertisement,
application scrutiny, shortlisting, interviewing and appointing them. After the
appointments, they would undergo a Company induction programme and the general
management programme followed by a specific function management programme.
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The function management programme is in Personnel, Production, Materials
and finance. These programmes would run parallel. At the end of these programmes,
a four week programme of Strategic Management of business would be conducted,
before they are posted in various positions.
Draw a PERT network model of the Management Trainee recruitment using
the MS project package. For each activity in the network, firm up subactivities which
should be completed.
17. An automobile manufacturer has eight distribution and service centers for four new
models it has just introduced in the market. These models differ from each other in
body and features; while the engine, chassis, transmission system, suspension
electrical, etc. are the same. The company wishes to create a knowledge database on
the Vendor-Complaint performance and reasons of the failure, and the other reliable
data for evaluation of the vendor performance, design performance and also for
designing a knowledge based expert system for repairs and service during the
warranty period of the vehicle.
Design the system scope in terms of subsystems and their relation and linkage
to each other. Suggest a data model for the knowledge database for using it to
improve the design and the manufacturing processes in the company.
18. Design a Decision Support System for the vendor selection on the following basis.
The factors and the point weightages are given to use them effectively in the DSS.
The factors to be considered as follows.
Factor Weightage Point scale of five
Technology 10 1 – 2 – 3 – 4 – 5
Quality 20 1 – 2 – 3 – 4 – 5
Reliability 20 1 – 2 – 3 – 4 – 5
Field performance 50 1 – 2 – 3 – 4 – 5
100
Lead time 20 1 – 2 – 3 – 4 – 5
Service 30 1 – 2 – 3 – 4 – 5
Price 20 1 – 2 – 3 – 4 – 5
Delivery 30 1 – 2 – 3 – 4 – 5
100
Evolve your own decision rules to design the DSS for selection of the
vendors. How would you collect the data on the various factors for using the same in the
DSS ?
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19. Map the following technologies against the application and state its use in the
application :
Technology Personnel Production Materials
Bar Code
Imaging
Hand held terminals.
Paging
EDI
20. In an ERP implementation, in a company having multi units operations, the
following characteristics assume importance when it comes to designing the MIS
for the corporate office. The corporate office is overlooking the performances of
these units and produces a consolidated balance sheet for the Company., The
important charactriristics are completeness, correctness, concurrency and
consistency in a all reporting under the MIS.
Discuss how would you achieve the highest level of satisfaction by
introducing methods, procedures and systems at the various unit locations. What
are the measures of controls to ascertain the success on all factors ?
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