Mis Quick Guide
Mis Quick Guide
Mis Quick Guide
It becomes a very useful information - the address of New York office of Human Rights Watch, a
non-profit, non-governmental human rights organization.
So, from a system analyst's point of view, information is a sequence of symbols that can be
construed to a useful message.
An Information System is a system that gathers data and disseminates information with the sole
purpose of providing information to its users.
The main object of an information system is to provide information to its users. Information
systems vary according to the type of users who use the system.
Information Definition
According to Wikipedia:
Information Vs Data
Data can be described as unprocessed facts and figures. Plain collected data as raw facts cannot
help in decision-making. However, data is the raw material that is organized, structured, and
interpreted to create useful information systems.
Data is defined as 'groups of non-random symbols in the form of text, images, voice representing
quantities, action and objects'.
Information is interpreted data; created from organized, structured, and processed data in a
particular context.
"Information is a data that has been processed into a form that is meaningful
to recipient and is of real or perceived value in the current or the prospective
action or decision of recipient."
Information, Knowledge and Business Intelligence
Professor Ray R. Larson of the School of Information at the University of California, Berkeley,
provides an Information Hierarchy, which is:
Secondary data sources or archival data: Data is collected through old records, magazines,
company website etc.
Objective measures or tests: An experimental test is conducted on the subject and the data is
collected.
Interviews: Data is collected by the system analyst by following a rigid procedure and
collecting the answers to a set of pre-conceived questions through personal interviews.
CLASSIFICATION OF INFORMATION
Information can be classified in a number of ways and in this chapter, you will learn two of the
most important ways to classify information.
Classification by Characteristic
Based on Anthony's classification of Management, information used in business for decision-
making is generally categorized into three types:
Strategic Information: Strategic information is concerned with long term policy decisions
that defines the objectives of a business and checks how well these objectives are met. For
example, acquiring a new plant, a new product, diversification of business etc, comes under
strategic information.
Classification by Application
In terms of applications, information can be categorized as:
Planning Information: These are the information needed for establishing standard norms
and specifications in an organization. This information is used in strategic, tactical, and
operation planning of any activity. Examples of such information are time standards, design
standards.
Control Information: This information is needed for establishing control over all business
activities through feedback mechanism. This information is used for controlling attainment,
nature and utilization of important processes in a system. When such information reflects a
deviation from the established standards, the system should induce a decision or an action
leading to control.
QUALITY OF INFORMATION
Information is a vital resource for the success of any organization. Future of an organization lies in
using and disseminating information wisely. Good quality information placed in right context in
right time tells us about opportunities and problems well in advance.
Good quality information: Quality is a value that would vary according to the users and uses of the
information.
According to Wang and Strong, following are the dimensions or elements of Information Quality:
Various authors propose various lists of metrics for assessing the quality of information. Let us
generate a list of the most essential characteristic features for information quality:
Timely - It must be current and it must reach the users well in time, so that important
decisions can be made in time.
Relevant - It should be current and valid information and it should reduce uncertainties.
Accurate - It should be free of errors and mistakes, true, and not deceptive.
Sufficient - It should be adequate in quantity, so that decisions can be made on its basis.
Unbiased - It should be impartial, free from any bias. In other words, it should have integrity.
Reproducible - It could be used by documented methods on the same data set to achieve a
consistent result.
Changing employment scene world over, shifting base from manual agricultural to machine-
based manufacturing and other industry related jobs.
Strong growth of information services fuelled by increasing competition and reduced product
life cycle.
In a nutshell:
Information is needed to create strong information systems and keep these systems up to
date.
Transform these data into business information useful for decision making.
The following list summarizes the five main uses of information by businesses and other
organizations:
Planning - At the planning stage, information is the most important ingredient in decision
making. Information at planning stage includes that of business resources, assets, liabilities,
plants and machineries, properties, suppliers, customers, competitors, market and market
dynamics, fiscal policy changes of the Government, emerging technologies, etc.
Recording - Business processing these days involves recording information about each
transaction or event. This information collected, stored and updated regularly at the
operational level.
Controlling - A business need to set up an information filter, so that only filtered data is
presented to the middle and top management. This ensures efficiency at the operational
level and effectiveness at the tactical and strategic level.
Measuring - A business measures its performance metrics by collecting and analyzing sales
data, cost of manufacturing, and profit earned.
In short, this multi-dimensional information evolves from the following logical foundations:
Computer science:
Computer networking
Information theory
MIS is an information system that provides information in the form of standardized reports and
displays for the managers. MIS is a broad class of information systems designed to provide
information needed for effective decision making.
Data and information created from an accounting information system and the reports generated
thereon are used to provide accurate, timely and relevant information needed for effective
decision making by managers.
It emphasizes on the management decision making, not only processing of data generated
by business operations.
It emphasizes on the systems framework that should be used for organizing information
systems applications.
Basically these applications intend to model the business processes, i.e., how the entire
organization works. These tools work by displaying, manipulating and storing large amounts of
data and automating the business processes with these data.
The three components of MIS provide a more complete and focused definition, where System
suggests integration and holistic view, Information stands for processed data, and Management
is the ultimate user, the decision makers.
Management
Management covers the planning, control, and administration of the operations of a concern. The
top management handles planning; the middle management concentrates on controlling; and the
lower management is concerned with actual administration.
Information
Information, in MIS, means the processed data that helps the management in planning, controlling
and operations. Data means all the facts arising out of the operations of the concern. Data is
processed i.e. recorded, summarized, compared and finally presented to the management in the
form of MIS report.
System
Data is processed into information with the help of a system. A system is made up of inputs,
processing, output and feedback or control.
Thus MIS means a system for processing data in order to give proper information to the
management for performing its functions.
Definition
Management Information System or 'MIS' is a planned system of collecting,
storing, and disseminating data in the form of information needed to carry
out the functions of management.
Objectives of MIS
The goals of an MIS are to implement the organizational structure and dynamics of the enterprise
for the purpose of managing the organization in a better way and capturing the potential of the
information system for competitive advantage.
Capturing Data: Capturing contextual data, or operational information that will contribute
in decision making from various internal and external sources of organization.
Processing Data: The captured data is processed into information needed for planning,
organizing, coordinating, directing and controlling functionalities at strategic, tactical and
operational level. Processing data means:
sorting data
summarizing data
Information Storage: Information or processed data need to be stored for future use.
Information Retrieval: The system should be able to retrieve this information from the
storage as and when required by various users.
Characteristics of MIS
Following are the characteristics of an MIS:
It should provide a holistic view of the dynamics and the structure of the organization.
It should work as a complete and comprehensive system covering all interconnecting sub-
systems within the organization.
It should be planned in a top-down way, as the decision makers or the management should
actively take part and provide clear direction at the development stage of the MIS.
It should be able to make forecasts and estimates, and generate advanced information, thus
providing a competitive advantage. Decision makers can take actions on the basis of such
predictions.
It should create linkage between all sub-systems within the organization, so that the decision
makers can take the right decision based on an integrated view.
It should allow easy flow of information through various sub-systems, thus avoiding
redundancy and duplicity of data. It should simplify the operations with as much practicability
as possible.
Although the MIS is an integrated, complete system, it should be made in such a flexible way
that it could be easily split into smaller sub-systems as and when required.
It should be able to process data accurately and with high speed, using various techniques
like operations research, simulation, heuristics, etc.
It should be able to collect, organize, manipulate, and update large amount of raw data of
both related and unrelated nature, coming from various internal and external sources at
different periods of time.
It should provide real time information on ongoing events without any delay.
It should support various output formats and follow latest rules and regulations in practice.
It should provide organized and relevant information for all levels of management: strategic,
operational, and tactical.
It supports all core business processes such as sales order processing, inventory management and
control, production and distribution planning, and finance.
Why of ERP?
ERP is very helpful in the follwoing areas:
Linkage between all core business processes and easy flow of integration
Critical decision-making
Competitive advantage
Features of ERP
The following diagram illustrates the features of ERP:
Scope of ERP
Finance: Financial accounting, Managerial accounting, treasury management, asset
management, budget control, costing, and enterprise control.
Supply Chain: Inventory control, purchase and order control, supplier scheduling, planning,
etc.
Work flow: Integrate the entire organization with the flexible assignment of tasks and
responsibility to locations, position, jobs, etc.
Advantages of ERP
Reduction of lead time
Reduction of cycle time
Better customer satisfaction
Increased flexibility, quality, and efficiency
Improved information accuracy and decision making capability
Onetime shipment
Improved resource utilization
Improve supplier performance
Reduced quality costs
Quick decision-making
Forecasting and optimization
Better transparency
Disadvantage of ERP
Expense and time in implementation
Difficulty in integration with other system
Risk of implementation failure
Difficulty in implementation change
Risk in using one vendor
Atul Parvatiyar and Jagdish N. Sheth provide an excellent definition for customer relationship
management in their work titled - 'Customer Relationship Management: Emerging Practice,
Process, and Discipline':
Why CRM?
To keep track of all present and future customers.
To let the customers know about the existing as well as the new products and services.
To provide real-time and personalized services based on the needs and habits of the existing
customers.
Scope of CRM
Advantages of CRM
Provides better customer service and increases customer revenues.
Disadvantages of CRM
Some times record loss is a major problem.
Overhead costs.
Decision support systems DSS are interactive software-based systems intended to help managers
in decision-making by accessing large volumes of information generated from various related
information systems involved in organizational business processes, such as office automation
system, transaction processing system, etc.
DSS uses the summary information, exceptions, patterns, and trends using the analytical models.
A decision support system helps in decision-making but does not necessarily give a decision itself.
The decision makers compile useful information from raw data, documents, personal knowledge,
and/or business models to identify and solve problems and make decisions.
Programmed decisions are basically automated processes, general routine work, where:
These decisions are based on the manger's discretion, instinct, perception and judgment.
Attributes of a DSS
Adaptability and flexibility
High level of Interactivity
Ease of use
Efficiency and effectiveness
Complete control by decision-makers
Ease of development
Extendibility
Support for modeling and analysis
Support for data access
Standalone, integrated, and Web-based
Characteristics of a DSS
Support for decision-makers in semi-structured and unstructured problems.
Support for managers at various managerial levels, ranging from top executive to line
managers.
Support for individuals and groups. Less structured problems often requires the involvement
of several individuals from different departments and organization level.
Benefits of DSS
Improves efficiency and speed of decision-making activities.
Since it is mostly used in non-programmed decisions, it reveals new approaches and sets up
new evidences for an unusual decision.
Components of a DSS
Following are the components of the Decision Support System:
Database Management System DBMS: To solve a problem the necessary data may come
from internal or external database. In an organization, internal data are generated by a
system such as TPS and MIS. External data come from a variety of sources such as
newspapers, online data services, databases financial, marketing, humanresources.
Model Management System: It stores and accesses models that managers use to make
decisions. Such models are used for designing manufacturing facility, analyzing the financial
health of an organization, forecasting demand of a product or service, etc.
Support Tools: Support tools like online help; pulls down menus, user interfaces, graphical
analysis, error correction mechanism, facilitates the user interactions with the system.
Classification of DSS
There are several ways to classify DSS. Hoi Apple and Whinstone classifies DSS as follows:
Text Oriented DSS: It contains textually represented information that could have a bearing
on decision. It allows documents to be electronically created, revised and viewed as needed.
Database Oriented DSS: Database plays a major role here; it contains organized and
highly structured data.
Spreadsheet Oriented DSS: It contains information in spread sheets that allows create,
view, modify procedural knowledge and also instructs the system to execute self-contained
instructions. The most popular tool is Excel and Lotus 1-2-3.
Solver Oriented DSS: It is based on a solver, which is an algorithm or procedure written for
performing certain calculations and particular program type.
Rules Oriented DSS: Procedures are adopted in rules oriented DSS. Export system is the
example.
Compound DSS: It is built by using two or more of the five structures explained above.
Types of DSS
Following are some typical DSSs:
Status Inquiry System: It helps in taking operational, management level, or middle level
management decisions, for example daily schedules of jobs to machines or machines to
operators.
Data Analysis System: It needs comparative analysis and makes use of formula or an
algorithm, for example cash flow analysis, inventory analysis etc.
Information Analysis System: In this system data is analyzed and the information report is
generated. For example, sales analysis, accounts receivable systems, market analysis etc.
Accounting System: It keeps track of accounting and finance related information, for
example, final account, accounts receivables, accounts payables, etc. that keep track of the
major aspects of the business.
Model Based System: Simulation models or optimization models used for decision-making
are used infrequently and creates general guidelines for operation or management.
As we have seen, data is raw facts, information is processed and/or interpreted data, and
knowledge is personalized information.
What is Knowledge?
Personalized information
State of knowing and understanding
An object to be stored and manipulated
A process of applying expertise
A condition of access to information
Potential to influence action
Definition of KMS
A knowledge management system comprises a range of practices used in an
organization to identify, create, represent, distribute, and enable adoption
to insight and experience. Such insights and experience comprise knowledge,
either embodied in individual or embedded in organizational processes and
practices.
Purpose of KMS
Improved performance
Competitive advantage
Innovation
Sharing of knowledge
Integration
Continuous improvement by:
Driving strategy
Starting new lines of business
Solving problems faster
Developing professional skills
Recruit and retain talent
Identify what kind of strategy to pursue to deliver this value and address the KM problem.
Think about the system required from a people and process point of view.
Finally, think about what kind of technical infrastructure are required to support the people
and processes.
Implement system and processes with appropriate change management and iterative staged
release.
A CMS may serve as a central repository for content, which could be, textual data, documents,
movies, pictures, phone numbers, and/or scientific data.
Creating content blocks, for example, a web administrator adds empower CMS tags called
"content blocks" to webpage template using CMS.
Positioning content blocks on the document, for example, web administrator positions
content blocks in webpage.
Advantages of CMS
Content management system helps to secure privacy and currency of the content and enhances
performance by:
Ensuring integrity and accuracy of content by ensuring only one user modifies the content at
a time.
Recording information and meta-data related to the content, like author and title of content,
version of content, date and time of creating the content etc.
These information are often external, unstructured and even uncertain. Exact scope and context
of such information is often not known beforehand.
Market intelligence
Investment intelligence
Technology intelligence
External databases
Technology reports like patent records etc.
Technical reports from consultants
Market reports
Confidential information about competitors
Speculative information like market conditions
Government policies
Financial reports and information
Disadvantage of ESS
Functions are limited
Hard to quantify benefits
Executive may encounter information overload
System may become slow
Difficult to keep current data
May lead to less reliable and insecure data
Excessive cost for small company
Business Intelligence System is basically a system used for finding patterns from existing data
from operations.
Characteristics of BIS
It is created by procuring data and information for use in decision-making.
It provides business insights that lead to better, faster, more relevant decisions.
Benefits of BIS
Improved Management Processes.
Planning, controlling, measuring and/or applying changes that results in increased revenues
and reduced costs.
Fraud detection, order processing, purchasing that results in increased revenues and
reduced costs.
Approaches of BIS
For most companies, it is not possible to implement a proactive business intelligence system at
one go. The following techniques and methodologies could be taken as approaches to BIS:
Capabilities of BIS
Data Storage and Management:
Data ware house
Ad hoc analysis
Data quality
Data mining
Information Delivery
Dashboard
Collaboration /search
Managed reporting
Visualization
Scorecard
Query, Reporting and Analysis
Ad hoc Analysis
Production reporting
OLAP analysis
Supply Chain Management: For managing suppliers, inventory and shipping, etc.
Human Resource Management: For managing personnel, training and recruiting talents;
Employee Health Care: For managing medical records and insurance details of employees;
Business Intelligence Applications: For finding the patterns from existing data from business
operations.
All these systems work as individual islands of automation. Most often these systems are
standalone and do not communicate with each other due to incompatibility issues such as:
Characteristics of EAI
EAI is defined as "the unrestricted sharing of data and business processes among any
connected applications and data sources in the enterprise."
EAI, when used effectively allows integration without any major changes to current
infrastructure.
Keeps track of information related to the operations of the enterprise e.g. Inventory, sales
ledger and execute the core processes that create and manipulate this information.
Need for Enterprise-wise Integration
Unrestricted sharing of data and business processes across an organization.
The linking of data, business processes and applications to automate business processes.
Reduce the on-going cost of maintenance and reduce the cost of rolling out new systems.
Challenges of EAI
Hub and spoke architecture concentrates all of the processing into a single server/cluster.
Lock-In: Often built using proprietary technology and required specialist skills.
Types of EAI
Data Level - Process, techniques and technology of moving data between data stores.
User Interface Level - Packaging applications by using their user interface as a common point
of integration.
It is defined as a plan that "identifies an organization's exposure to internal and external threats
and synthesizes hard and soft assets to provide effective prevention and recovery for the
organization, while maintaining competitive advantage and value system integrity."
Understandably, risk management and disaster management are major components in business
continuity planning.
Objectives of BCP
Following are the objectives of BCP:
Reducing the possibility of any interruption in regular business processes using proper risk
management.
Minimizing the impact of interruption, if any.
Teaching the staff their roles and responsibilities in such a situation to safeguard their own
security and other interests.
Handling any potential failure in supply chain system, to maintain the natural flow of
business.
Protecting the prevalent and prospective market and competitive advantage of the business.
Traditionally a business continuity plan would just protect the data center. With the advent of
technologies, the scope of a BCP includes all distributed operations, personnel, networks, power
and eventually all aspects of the IT environment.
Phases of BCP
The business continuity planning process involves recovery, continuation, and preservation of the
entire business operation, not just its technology component. It should include contingency plans
to protect all resources of the organization, e.g., human resource, financial resource and IT
infrastructure, against any mishap.
Recovery Phase
This phase involves creating recovery strategies are based on MTDs, predefined and
management-approved. These strategies should address recovery of:
Business operations
Facilities & supplies
Users workersandend users
Network
Data center technical
Data off sitebackupsofdataandapplications
Final Phase
The final phase is a continuously evolving process containing testing maintenance, and training.
The testing process generally follows procedures like structured walk-through, creating checklist,
simulation, parallel and full interruptions.
Maintenance involves:
It involves managing the network of interconnected smaller business units, networks of channels
that take part in producing a merchandise of a service package required by the end users or
customers.
With businesses crossing the barriers of local markets and reaching out to a global scenario, SCM
is now defined as:
operations management
logistics
procurement
information technology
Objectives of SCM
To decrease inventory cost by more accurately predicting demand and scheduling
production to match it.
Features of SCM
Scope of SCM
SCM Processes
Customer Relationship Management
Customer Service Management
Demand Management
Customer Order Fulfillment
Manufacturing Flow Management
Procurement Management
Product Development and Commercialization
Returns Management
Advantages of SCM
SCM have multi-dimensional advantages:
To the suppliers:
Help in giving clear-cut instruction
Online data transfer reduce paper work
Inventory Economy:
Low cost of handling inventory
Distribution Point:
Satisfied distributor and whole seller ensure that the right products reach the right
place at right time
Channel Management:
Financial management:
Low cost
Realistic analysis
Operational performance:
External customer:
Strategic planning sets targets for the workings and references for taking such long-term policy
decisions and transforms the business objectives into functional and operational units. Strategic
planning generally follows one of the four-way paths:
In this chapter, let us discuss the Strategic Business Objectives of MIS with regards to the following
aspects of a business:
Operational Excellence
New Products, Services and Business Models
Services and Business Models
Customer and Supplier Intimacy
Improved Decision-making
Competitive Advantage, and Survival
Operational Excellence
This relates to achieving excellence in business in operations to achieve higher profitability. For
example, a consumer goods manufacturer may decide upon using a wide distribution network to
get maximum reach to the customers and exposure.
A manufacturing company may pursue a strategy of aggressive marketing and mass production.
With the help of information technology, a company might even opt for an entirely new business
model, which will allow it to establish, consolidate and maintain a leadership in the existing market
as well as provide a competitive edge in the industry.
For example, a company selling low priced detergent may opt for producing higher range
detergents for washing machines, washing soaps, and bath soaps.
It involves market strategies also that includes planning for distribution, advertisement, market
research and other related aspects.
Likewise with Suppliers, the more a Business engages its Suppliers, the better the Suppliers can
provide vital information. This will lower the cost and bring huge improvements in the supply-chain
management.
Well planned Information Systems and technologies make it possible for the decision makers to
use real-time data from the marketplace when making informed decisions.
Various policies that will dominate the course and movement of business.
Choosing a perfect product strategy that involves either expanding a family of products or an
associated product.
Strategies for choosing the market, distribution, pricing, advertising, packing, and other
market-oriented strategies.
The requirement analysis part involves understanding the goals, processes and the constraints of
the system for which the information system is being designed.
A preamble
A goal statement
A brief description of the present system
Proposed alternatives in details
The feasibility report and the proposed alternatives help in preparing the costs and benefits study.
Based on the costs and benefits, and considering all problems that may be encountered due to
human, organizational or technological bottlenecks, the best alternative is chosen by the end-
users of the system.
Detailed specification
Hardware/software plan
The final report prior to implementation phase includes procedural flowcharts, record layout,
report layout and plan for implementing the candidate system. Information on personnel, money,
hardware, facility and their estimated cost must also be available. At this point projected cost must
be close to actual cost of implementation.
The internal logic of the system/software, ensuring that all statements have been tested;
The external functions, by conducting tests to find errors and ensuring that the defined input
will actually produce the required results.
In some cases, a 'parallel run' of the new system is performed, where both the current and the
proposed system are run in parallel for a specified time period and the current system is used to
validate the proposed system.
Deployment of the System
At this stage, system is put into production to be used by the end users. Sometime, we put system
into a Beta stage where users' feedback is received and based on the feedback, the system is
corrected or improved before a final release or official release of the system.
This system should deal with the management information not with data processing alone.
It should provide support for the management planning, decision-making and action.
Quantity, content and context of information - how much information and exactly what
should it describe.
Accuracy of information.
Reliability of information.
There should be effective communication between the developers and users of the system.
Understanding of the information needs of managers from different functional areas and
combining these needs into a single integrated system.
Creating a unified MIS covering the entire organization will lead to a more economical, faster
and more integrated system, however it will increase in design complexity manifold.
The MIS has to be interacting with the complex environment comprising all other sub-
systems in the overall information system of the organization. So, it is extremely necessary to
understand and define the requirements of MIS in the context of the organization.
It should keep pace with changes in environment, changing demands of the customers and
growing competition.
It should take care of not only the users i.e., the managers but also other stakeholders like
employees, customers and suppliers.
Once the organizational planning stage is over, the designer of the system should take the
following strategic decisions for the achievement of MIS goals and objectives:
Resources for the Development: Designer has to select resources. Resources can be in-
house verses external, customized or use of package.
Determining the optimum architecture of IS for serving the top priority applications.
The following three methodologies can be adopted to determine the requirements in developing a
management information system for any organization:
It identifies the IS priorities of the organization and focuses on the way data is
maintained in the system.
It uses data architecture supporting multiple applications.
It defines data classes using different matrices to establish relationships among the
organization, its processes and data requirements.
Critical Success Factor CSF - this methodology is developed by John Rockart of MIT.
It identifies the key business goals and strategies of each manager as well as that of the
business.
Next, it looks for the critical success factors underlying these goals.
Measure of CSF effectiveness becomes an input for defining the information system
requirements.
It determines the effectiveness criteria for outputs and efficiency criteria for the
processes generating the outputs.
Then it describes the factors that make these outputs effective for the user.
Problem Definition
Feasibility Study
Systems Analysis
System Design
Detailed System Design
Implementation
Maintenance
Devices
Data center systems - It is the environment that provides processing, storage, networking,
management and the distribution of data within an enterprise.
Enterprise software - These are software system like ERP, SCM, Human Resource
Management, etc. that fulfill the needs and objectives of the organizations.
IT services - It refers to the implementation and management of quality IT services by IT
service providers through people, process and information technology. It often includes
various process improvement frameworks and methodologies like six sigma, TQM, and so on.
Telecom services
Purpose
Definition
test inputs
detailed specification of test procedure
details of expected outputs
Each sub-system and all their components should be tested using various test procedures and data
to ensure that each component is working as it is intended.
The testing must include the users of the system to identify errors as well as get the feedback.
System Operation
Before the system is in operation, the following issues should be taken care of:
Systems control;
Testing of the system to ensure that it works bug-free in all expected business situations;
The hardware and software used should be able to deliver the expected processing;
Once the system is fully operational, it should be maintained throughout its working life to resolve
any glitches or difficulties faced in operation and minor modifications might be made to overcome
such situations.
The top management should be completely convinced, able and willing to such a system.
Ideally there should be a patron or a sponsor for the system in the top management.
All users including managers and other employees should be made an integral part of the
development, implementation, and use of the system.
The system should be simple, easy to understand without adding much complexity. It is a
best practice, not to add up an entity unless there is both a use and user for it.
All the users including the top management should be given proper training, so that they
have a good knowledge of the content and function of the system, and can use it fully for
various managerial activities such as reporting, budgeting, controlling, planning, monitoring,
etc.
The system should be well integrated into the management processes of planning, decision-
making, and monitoring.
MANAGERIAL DECISION-MAKING
Concept of Decision-Making
Decision-making is a cognitive process that results in the selection of a course of action among
several alternative scenarios.
Decision-making is a daily activity for any human being. There is no exception about that. When it
comes to business organizations, decision-making is a habit and a process as well.
Effective and successful decisions result in profits, while unsuccessful ones cause losses.
Therefore, corporate decision-making is the most critical process in any organization.
In a decision-making process, we choose one course of action from a few possible alternatives. In
the process of decision-making, we may use many tools, techniques, and perceptions.
In addition, we may make our own private decisions or may prefer a collective decision.
Decision-Making Process
Following are the important steps of the decision-making process. Each step may be supported by
different tools and techniques.
Step 1: Identification of the Purpose of the Decision
In this step, the problem is thoroughly analyzed. There are a couple of questions one should ask
when it comes to identifying the purpose of the decision.
In the process of solving the problem, you will have to gather as much as information related to
the factors and stakeholders involved in the problem. For the process of information gathering,
tools such as 'Check Sheets' can be effectively used.
As an example, profit is one of the main concerns in every decision making process. Companies
usually do not make decisions that reduce profits, unless it is an exceptional case. Likewise,
baseline principles should be identified related to the problem in hand.
For this, you can make use of Cause-and-Effect diagrams and Pareto Chart tool. Cause-and-Effect
diagram helps you to identify all possible causes of the problem and Pareto chart helps you to
prioritize and identify the causes with the highest effect.
Then, you can move on generating all possible solutions alternatives for the problem in hand.
Rational models
Normative model
The rational models are based on cognitive judgments and help in selecting the most logical and
sensible alternative. Examples of such models include: decision matrix analysis, Pugh matrix,
SWOT analysis, Pareto analysis and decision trees, selection matrix, etc.
Identifying the important criteria for the process and the result,
Calculating the consequences of all solutions and comparing the probability of satisfying the
criteria,
The normative model of decision-making considers constraints that may arise in making decisions,
such as time, complexity, uncertainty, and inadequacy of resources.
Limited information processing - A person can manage only a limited amount of information.
Judgmental heuristics - A person may use shortcuts to simplify the decision making process.
Dynamic Decision-Making
Dynamic decision-making DDM is synergetic decision-making involving interdependent systems, in
an environment that changes over time either due to the previous actions of the decision-maker or
due to events that are outside of the control of the decision-maker.
Dynamic decision-making involves observing how people used their experience to control the
system's dynamics and noting down the best decisions taken thereon.
Sensitivity Analysis
Sensitivity analysis is a technique used for distributing the uncertainty in the output of a
mathematical model or a system to different sources of uncertainty in its inputs.
From business decision perspective, the sensitivity analysis helps an analyst to identify cost drivers
as well as other quantities to make an informed decision. If a particular quantity has no bearing on
a decision or prediction, then the conditions relating to quantity could be eliminated, thus
simplifying the decision making process.
Resource optimization
Future data collections
Identifying critical assumptions
To optimize the tolerance of manufactured parts
Static models:
Show the value of various attributes in a balanced system.
Do not work well in real-time systems however, it may work in a dynamic system being in
equilibrium
Dynamic models:
Simulation Techniques
Simulation is a technique that imitates the operation of a real-world process or system over time.
Simulation techniques can be used to assist management decision making, where analytical
methods are either not available or cannot be applied.
Some of the typical business problem areas where simulation techniques are used are:
Inventory control
Queuing problem
Production planning
Heuristic Programming
Heuristic programming refers to a branch of artificial intelligence. It consists of programs that are
self-learning in nature.
However, these programs are not optimal in nature, as they are experience-based techniques for
problem solving.
Heuristics take a 'guess' approach to problem solving, yielding a 'good enough' answer, rather
than finding a 'best possible' solution.
Group Decision-Making
In group decision-making, various individuals in a group take part in collaborative decision-
making.
Group Decision Support System GDSS is a decision support system that provides support in decision
making by a group of people. It facilitates the free flow and exchange of ideas and information
among the group members. Decisions are made with a higher degree of consensus and
agreement resulting in a dramatically higher likelihood of implementation.
Decision Network: This type helps the participants to communicate with each other
through a network or through a central database. Application software may use commonly
shared models to provide support.
Decision Room: Participants are located at one place, i.e. the decision room. The purpose
of this is to enhance participant's interactions and decision-making within a fixed period of
time using a facilitator.
Security of the information technology used - securing the system from malicious cyber-
attacks that tend to break into the system and to access critical private information or gain
control of the internal systems.
Security of data - ensuring the integrity of data when critical issues, arise such as natural
disasters, computer/server malfunction, physical theft etc. Generally an off-site backup of
data is kept for such problems.
Maintaining and assuring the accuracy and consistency of data over its entire life-cycle.
Ensuring that the computing systems, the security controls used to protect it and the
communication channels used to access it, functioning correctly all the time, thus making
information available in all situations.
Ensuring the integrity of a transaction by validating that both parties involved are genuine,
by incorporating authentication features such as "digital signatures".
Ensuring that once a transaction takes place, none of the parties can deny it, either having
received a transaction, or having sent a transaction. This is called 'non-repudiation'.
Give comprehensive and thorough evaluations of computer systems and their impacts,
including analysis and possible risks.
To accept responsibility in making decisions consistent with the safety, health and welfare of
the public, and to disclose promptly factors that might endanger the public or the
environment;
To avoid real or perceived conflicts of interest whenever possible, and to disclose them to
affected parties when they do exist;
To maintain and improve our technical competence and to undertake technological tasks for
others only if qualified by training or experience, or after full disclosure of pertinent
limitations;
To seek, accept, and offer honest criticism of technical work, to acknowledge and correct
errors, and to credit properly the contributions of others;
To treat fairly all persons regardless of such factors as race, religion, gender, disability, age,
or national origin;
To assist colleagues and co-workers in their professional development and to support them
in following this code of ethics.
Nowadays, information system and information technology have become a vital part of any
successful business and is regarded as a major functional area like any other functional areas
such as marketing, finance, production and human resources, etc.
Thus, it is important to understand the functions of an information system just like any other
functional area in business. A well maintained management information system supports the
organization at different levels.
Many firms are using information system that cross the boundaries of traditional business
functions in order to re-engineer and improve vital business processes all across the enterprise.
This typical has involved installing:
The strategic role of Management Information System involves using it to develop products,
services, and capabilities that provides a company major advantages over competitive forces it
faces in the global marketplace.
We need an MIS flexible enough to deal with changing information needs of the organization. The
designing of such a system is a complex task. It can be achieved only if the MIS is planned. We
understand this planning and implementation in management development process.
Decision support system is a major segment of organizational information system, because of its
influential role in taking business decisions. It help all levels of managers to take various decisions.
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