Unit 2: MIS and Enterprise Applications PDF

Management Information System – LLC 3215 UNIT 2 MIS AND ENTERPRISE APPLICATIONS Unit Structure 2.0 Overview 2.1 Learning Outcomes 2.2 Introduction 2.3 Management Levels in an Organisation 2.3.1 Strategic Level 2.3.2 Management Level 2.3.3 Kn...

Management Information System – LLC 3215 UNIT 2 MIS AND ENTERPRISE APPLICATIONS Unit Structure 2.0 Overview 2.1 Learning Outcomes 2.2 Introduction 2.3 Management Levels in an Organisation 2.3.1 Strategic Level 2.3.2 Management Level 2.3.3 Knowledge Level 2.3.4 Operational Level 2.4 Types of Information Systems 2.4.1 Transaction Processing Systems (TPS) 2.4.2 Office Automation Systems (OAS) 2.4.3 Knowledge Work Systems (KWS) 2.4.4 Management Information Systems (MIS) 2.4.5 Decision Support Systems (DSS) 2.4.6 Executive Support Systems (ESS) 2.5 Comparing and Relating Information Systems 2.6 Enterprise Applications 2.7 Enterprise Resource Planning (ERP) 2.7.1 System Thinking 2.7.2 Core Business Processes 2.7.3 Enterprise Systems 2.7.4 Benefits and Challenges of ERP 2.7.5 ERP Standards and Bolt-ons 2.8 Supply Chain Management 2.9 Customer Relationship Management 2.10 Knowledge Management 2.11 Activities Unit 2 1  Management Information System – LLC 3215 2.12 Discussion Questions 2.13 Summary 2.0 OVERVIEW Unit 1 has introduced the basics of information systems. In this unit, we will elaborate on the different types of information systems and examine their use at the different levels of management. We will also examine how Supply Chain Management Systems, Customer Relationship Management Systems, Knowledge Management Systems and Enterprise Systems can help businesses to grow, to be efficient and to achieve competitive advantage. 2.1 LEARNING OUTCOMES By the end of this unit, you should be able to do the following: 1. Identify business challenges related to the use of information systems. 2. Explain the different management levels. 3. List the different types of Management Information Systems. 4. Indicate how these MIS can be used at the different levels of Management. 5. Define Enterprise application and identify the different types. 6. Explain the characteristics and use of each type of Enterprise application. 7. Evaluate the suitability of Enterprise applications in business scenarios. Unit 2 2  Management Information System – LLC 3215 2.2 INTRODUCTION Managers need to make decisions at different levels of management. To help them in better planning and decision-making, different types of information systems are used at the various management levels. It should be noted that information systems only assist managers in their decision. The final decision is usually made by the manager(s). Apart from the management and control of information, an organisation also needs to have good relationships with its suppliers and customers. Knowledge management has also become a crucial part in organisations. Moreover, in some cases, we need one application which can integrate all the different information systems and which can support management at the different levels. This unit will go into the details of each of these different types of information systems. 2.3 MANAGEMENT LEVELS IN AN ORGANISATION Management is an integral part of any organisation which consists of personnel responsible for control and decision-making. These decisions may be simple and short-term as well as complex, risky and long-term. In fact, in every family, there is usually the head who makes different types of decisions – e.g, the decision of buying a new TV set, going for a trip abroad etc. Similarly, in an enterprise, we usually have different types of managers who make different types of decisions. These managers are usually set at different levels in the management hierarchy. Usually, we expect a large enterprise to have different levels of management to ensure proper coordination between workers and different plants, that transactions are carried out efficiently and that the goals of the organisation are met. Unit 2 3  Management Information System – LLC 3215 Basically, experts define three main levels of management:- 1. The Strategic level where the top-level managers set up goals of the enterprise; 2. The Management level where mid-level managers ensure that the objectives set up by the executives are met; 3. The Operational level where supervisors or managers ensure that the day-to-day or short- term activities of the company are met. In new information-based economies, we also define a forth level of management known as the knowledge level. 4. In the Knowledge level, we have data and knowledge workers; data workers who ensure knowledge is properly managed, organised and distributed, and knowledge workers who create new knowledge. Unit 2 4  Management Information System – LLC 3215 Figure 2.1 depicts the four main levels of management and the following subsections elaborate on each level. TYPE OF DECISION-MAKING PEOPLE AT EACH LEVEL Directors, Executives, CEOs Unstructured Strategic Level Managers Semi-Structured Management Level Knowledge workers Data workers Knowledge Level Supervisors, Structured Operational Level Foremen Figure 2.1: Management Levels in an Organisation To explain the different management levels in the following sections, we will take the example of a fictitious enterprise making garments (Garmentz Ltd) in Mauritius which has several plants in different regions. 2.3.1 Strategic Level Decisions at the strategic level are made by top-level management which includes board of directors, managing directors and executives of the company. The objectives and policies of the organisation will be set up at this level. This involves long-term planning, decisions which have high elements of risks and uncertainty and decisions which do not necessarily recur. The Unit 2 5  Management Information System – LLC 3215 executives have to ensure that goals are accomplished in the most effective way and they are also responsible for recruiting members who will occupy management positions at the next level. Some decisions which would be taken by Garmentz Ltd at this level could be:  Do we have to set up a new plant to ensure that we can meet market demands?  Should we launch a new brand of garment to satisfy demand and to be more profitable?  Should we invest more in technology for market research? 2.3.2 Management Level Decisions made at the strategic level need to be carried out in the most optimal manner. Mid- level management or tactical managers must ensure that the goals set at the strategic level are being met. Apart from sending recommendations to top-level managers, mid-level level managers also have to take medium-term decisions. Moreover, they have to ensure that proper resources are made available to the group(s) of people who are under their responsibility and they have to motivate the employees to boost productivity. Tactical managers would typically be managers for Sales, Manufacturing, Human Resource, etc. Some examples of decisions taken by tactical managers at Garmentz Ltd are:  What should be the manufacturing level at each plant?  How can we maximise on sales in each region?  What should be our re-order level? 2.3.3 Knowledge Level In new information-based economies, enterprises also define the knowledge level where knowledge is properly used, retained, distributed and created. At this level, we have data workers who ensure office automation tools are used efficiently and that information is properly organised and distributed. Unit 2 6  Management Information System – LLC 3215 Sample jobs for data workers at Garmentz Ltd would be:  Send memos for departmental meetings to all staff and managers.  Provide necessary assistance for managers to make presentations. Knowledge workers at this level may consist of specialists, doctors, engineers, etc. The job of knowledge workers is to provide specialised services and also to help in the creation of new knowledge for the company. For example, at Garmentz Ltd, we may have designers who will model new garments using latest technologies. 2.3.4 Operational Level Decisions should also be taken at the lowest level of management to ensure that day-to-day and short-term activities of the enterprise are carried out efficiently. This is the job of supervisors, foremen, etc. Even though this is the lowest level of management, its functions cannot be ignored. The smooth flow of transactions and operations at this level would be the first step towards ensuring the goals of the enterprise. Sample decisions at Garmentz Ltd at this level would be:  Which items need re-ordering to maintain our re-order level?  Which employees should be given reminders about their time of arrival?  Reminder to employees to fill in their time-sheets. Unit 2 7  Management Information System – LLC 3215 2.4 TYPES OF INFORMATION SYSTEMS Let us now look at the different types of information systems used at each level of management to help in better planning and decision-making, and then identify the characteristics of each of them. To give examples of information systems used at each level, we will use the fictitious company, Garmentz Ltd (see section 2.3). Figure 2.2 illustrates the different types of information systems which will be used at each level and the following sub-sections provide a description of each information system. a) Transaction Processing Systems (TPS) b) Office Automation Systems (OAS) c) Knowledge Work Systems (KWS) d) Management Information Systems (MIS) e) Decision Support Systems (DSS) f) Executive Support Systems (ESS) SOURCES OF TYPE OF INFORMATION OUTPUT Strategic Highly summarised Mostly external Level Graphical -ESS Management Level - MIS - DSS Summarised, Internal & External graphical, models Knowledge Level - KWS - OAS Operational Level Internal Highly - TPS Detailed Figure 2.2: Types of IS at each Level of Management Unit 2 8  Management Information System – LLC 3215 2.4.1 Transaction Processing Systems (TPS) At the lowest level of management, we need information systems which enable the day-to-day and routine transactions of the enterprise. This is the task carried out by Transaction Processing Systems (TPS). For example, at Garmentz Ltd, we may have payroll, manufacturing, sales order entry, human resource, etc, to record the daily routine transactions of the business. The types of decisions made at this level are very structured and depend on pre-defined criteria. For example, if an employee is sick for one day at Garmentz Ltd, there will be a check on the eligibility of that employee for sick leaves. If he/she is entitled to sick leave, then there will be no deduction in his/her salary. Moreover, the TPS may produce highly detailed as well as summarised information which have been obtained solely from internal sources. One type of summarised information produced at Garment Ltd could be payslips produced for each employee. 2.4.2 Office Automation Systems (OAS) Office Automation Systems (OAS) will basically be used by data workers at the knowledge level. The job of data workers consists more of retrieval and manipulation of information rather than the creation of new knowledge. Garmentz Ltd could be employing clerical staff for filing, sending memos to different branch managers, organising for presentations, etc. Examples of Office Automation tools include wordprocessing, spreadsheet and presentation software. 2.4.3 Knowledge Work Systems (KWS) At the knowledge level, knowledge workers will create new knowledge and ensure that it is properly integrated into the enterprise. Knowledge workers may use Office Automation tools to assist them in their work. However, the main tools that they will be using are specialised software like CAD/CAM tools, 3D modelling tools, etc. Garmentz Ltd could have a designer who makes use of specialised 3D software to model new garments or to design new fashion wear. Unit 2 9  Management Information System – LLC 3215 2.4.4 Management Information Systems (MIS) The term Management Information System (MIS) can be used in two ways. “Academically, the term is commonly used to refer to the group of information management methods tied to the automation or support of human decision making, e.g. Decision Support Systems, Expert Systems, and Executive Information Systems”. MIS can also be used to designate a type of information system used at the management level of an enterprise. In this section, we will focus on the second definition. MIS are used to help in structured and semi-structured decisions by providing details, summary and exception reports used for medium-term planning. The sources of information for an MIS are usually internal sources and are obtained mostly from TPS. Basic transactions performed by TPS are basically compressed and sent as input to MIS for processing different types of reports. Some examples of reports produced by an MIS for Garmentz Ltd could be:  Sales report for previous months.  Profitability of each plant.  Stock levels at each plant. 2.4.5 Decision Support Systems (DSS) MIS are used to help in routine decisions by providing reports which are not flexible. Moreover, an MIS can only do simple calculations. When complex modelling and statistical analysis is required to answer unstructured decisions at the management level, then we have to use Decision Support Systems (DSS). DSS can also be used in situations where managers have to make decisions in a very short delay and can be used for answering “what-if” situations, for “goal seeking” and for “sensitivity analysis”. Unit 2 10  Management Information System – LLC 3215 At Garmentz Ltd, a DSS could be used to answer questions like:  How do we minimise cost for each department?  What should be the production level for each branch to satisfy demand and have minimum inventory?  What type of garments should we produce to be in line with customer needs? In Unit 8, we will describe DSS in more details and identify the different types. 2.4.6 Executive Support Systems (ESS) We can define an Executive Support System as being an information system which combines the functionalities of both MIS and DSS. Thus, an ESS can solve both structured and unstructured problems. The type of information provided by an ESS is highly summarised though we have the possibility to drill-down whenever there is a need. For example, if there is a decrease in the overall profitability of Garmentz Ltd, the executives may use the drill-down feature to get into more details and to find the root cause of the problem. Summarised reports and graphical information in the form of charts are mostly used to provide quick methods for top-level management to see trends and to help in better decision-making. Moreover, the sources of information for an ESS are both internal and external, depending on the type of decision which has to be made. For example, if the executives of Garmentz Ltd want to launch a new product, then they have to check the current state of the enterprise with respect to the resources available; but it should also analyse the current market trends. Unit 2 11  Management Information System – LLC 3215 2.5 COMPARING AND RELATING INFORMATION SYSTEMS The information systems defined in Section 2.4 have certain similarities as well as differences between them. TPS, MIS and ESS are common in the sense that they can be used to provide reports though the type or report produced will be different. TPS will produce reports for short- term decisions, MIS for medium-term decisions and ESS for long-term decisions. The data used will be more summarised as we move up. An ESS is a type of DSS which also makes use of modelling and analysis to provide graphical output for comparison based on different factors. Moreover, the output of one information system may be the input for another one. MIS primarily receives its data from a TPS; an ESS receives its internal data from an MIS and DSS. KMS and OAS are however loosely coupled from the other information systems. 2.6 ENTERPRISE APPLICATIONS Now, you know the different types of information systems which can be used at the different levels of management. A company needs to be able:-  to manage its transaction and coordinate its activities across different branches in a smooth manner;  to better understand the needs and wants of its customers to provide products which are more appealing to them;  to maintain, manage and generate knowledge. Suppliers are also a key concern for the enterprise; it should be able to locate the best suppliers and maintain good relationship to ensure a smooth flow in its supply chain. Unit 2 12  Management Information System – LLC 3215 We shall now elaborate on other types of information systems which cater for the above. In fact, these different aspects can be englobed into the following enterprise applications:-  Enterprise Resource Planning (ERP)  Supply Chain Management(SCM)  Customer Relationship Management (CRM)  Knowledge Management (KM) 2.7 ENTERPRISE RESOURCE PLANNING (ERP) 2.7.1 System Thinking An organisation consists of a set of different departments and branches which should have a common goal. If each department operates independently or if each focuses on independent business processes and not the company as a whole, the organisation may fail to achieve its goal. “Systems thinking is a way of thinking about, and understanding, the forces and interrelationships existing between the different functional areas within an organisation.” 2.7.2 Core Business Processes Every enterprise will have its own core business processes which refers to the main operations of the business. The core business processes that are generally common to most enterprises are Sales, Manufacturing, Accounting, Finance and Human Resource. This list is not exhaustive. Each enterprise may have unique business processes which allow it to be distinct and to have competitive advantage. Unit 2 13  Management Information System – LLC 3215 2.7.3 Enterprise Systems If we can have one application which can support the main business processes of a company under one platform, it would be easier to have links between cross-functional areas. This is exactly how Enterprise Resource Planning (ERP) systems help businesses by allowing them to go for one system having interrelationships with its different functional areas. ERPs offer enterprises the possibility to automate certain processes as interrelationships exist among different functional areas. ERPs can be used to automate processes which are limited. For example, as soon as a sales is made to a customer, the inventory is automatically updated and corresponding entries are added in the general ledger. ERPs also offer facilities for automating routing as well as creating bills of materials. Some ERP solutions include SAP, Peoplesoft, JDEdwards, Siebel etc. The packages are very costly. It should be noted that we also have a wide variety of open source ERPs now. Many of these open source ERPs however are still under development and there is very little provision for support. Some open source ERPs include Tiny ERP, compiere and open ERP amongst others. “ERP systems must be viewed as a group of interrelated processes, all managed by people. Understanding ERP requires an understanding of how ERP is developed, managed, and maintained by people within the organisation.” 2.7.4 Benefits and Challenges of ERP “Understanding that an organisation is a system will help in understanding that different organisations can have different levels of success with an ERP system. Two different companies can buy the same ERP system but achieve dramatically different results because of how each chooses to utilise the ERP system. One could simply use it to collect data while the other could use the ERP system to aid in strategic decision-making. The difference is where the organisation lies on the ERP maturity model.” Unit 2 14  Management Information System – LLC 3215 ERP implementations are not easy and straightforward. Businesses should do careful analysis before embarking on ERP implementation and should aim at using most of the services offered by ERPs. Some organisations might use the Vanilla Implementation where all the standard functionalities of the ERP are used and there is no customisation. Other implementations involve using standard functionality and customising certain modules to increase customer satisfaction. Studies have found that less customisation will ensure the ERP implementation is completed on time and within budget. However, the study also indicated that more customisation will increase customer satisfaction. Benefits of ERPs  Provides one platform which links different business processes together enabling information to move smoothly.  Allows standardisation of processes at it provides a single system across the different departments or branches of the enterprise.  Maintains a single database allowing easier retrieval and manipulation of data.  Allows the possibility to automate certain processes due to the interrelationship that exists among different functional areas.  Provides a platform which can support the different levels of management. Challenges of ERPs  ERP implementations are very difficult and costly to implement.  They require fundamental changes in the way the business operates.  ERP implementation relies a lot on powerful infrastructure.  The pay-back for ERP implementation can be noticed in the long-term only. Unit 2 15  Management Information System – LLC 3215  It is difficult to make changes in one business process without affecting the others as interrelationships exist among different functional areas.  Companies may fail to achieve strategic advantage if the ERP implementation prevents them from applying their unique business processes. 2.7.5 ERP Standards and Bolt-ons It is important to note that an ERP comes with standard modules built in accordance with the basic business operations of a company. While going towards an ERP implementation, it is however possible to customise certain modules. By standard, we mean all components existing in the original ERP software. Depending on the requirements of the company and the existing business processes, some degree of customisation may be required. If customisation is required, as far as possible, it is better to avoid changing the standard objects. Instead, it is better to build some bolt-on module(s) on top of them. By bolt-on, we mean new objects/modules that can be added to the ERP. This principle should be adopted to minimise the amount of changes required when there are upgrades in versions. Since the belt-on objects would be independent, after the version upgrade has been done, these objects would be implemented again and the proper links recreated. This process will lead towards a smoother and more timely version upgrade. 2.8 SUPPLY CHAIN MANAGEMENT Enterprises should maintain good relationships with suppliers and ensure that the product reaches its customers at the right place at the right time. Supply Chain Management (SCM) systems ensure the smooth flow of activities in the supply chain from source through consumption, i.e., starting from the point where the enterprise acquires its raw materials until the time the final product reaches the customer. Different vendors offer this type of solution, e.g., Oracle, Unit 2 16  Management Information System – LLC 3215 Peoplesoft, SAP, etc. An SCM system could offer options which allow you to choose the best supplier, to do automatic re-ordering with suppliers, to do just-in-time inventory and so on. One of the main objectives of the SCM is to be able to reduce costs related to inventory. 2.9 CUSTOMER RELATIONSHIP MANAGEMENT Customers are viewed as one of the most important assets of enterprises. If an enterprise cannot ensure it will have sufficient customers, the profitability of the business is not guaranteed. Businesses should continuously look for ways to provide products which satisfy the needs and wants of customers. Customer Relationship Management (CRM) systems play an important role in predicting the preferences of customers, in helping the business to acquire new customers, personalising products according to customer preferences and in providing on-going value to retain customers. Different types of techniques and complex analysis are applied to be able to achieve the above results. One of the tools used is data mining, on which we will elaborate in Unit 6. 2.10 KNOWLEDGE MANAGEMENT As already discussed in section 2.2, knowledge management forms an integral part of most organisations. Enterprises can adopt different approaches and tools for knowledge management. Sections 2.4.2 and 2.4.3 already give an introduction to two types of knowledge management systems, OAS and KWS. Expert systems (more details in Unit 7) are other types of knowledge management systems which businesses could use. Some businesses could also simply make use of intranets and portals using tools like Lotus notes or ITIL to manage the knowledge and expertise of their employees. The idea behind knowledge management is that a business should be able to use its knowledge in the most optimal manner to carry out its current operations and also to be able to use its knowledge to provide innovative ways of doing business. Companies rely a lot on best practices to provide quality products and attract more customers. Unit 2 17  Management Information System – LLC 3215 2.11 ACTIVITIES A. True/False Questions True False 1. A DSS retrieves input from an ESS only. 2. Examples of knowledge work systems are CAD/CAM. 3. Data from TPS are often used as input in MIS 4. DSS cannot support the “what-if” functionality. 5. ERP is mostly suited for small businesses with low level of transactions. Unit 2 18  Management Information System – LLC 3215 B. Sample Test/Exam Type Questions Question 1 i) Typically, information within an organisation can be classified into three levels. Using a typical manufacturing company as background, define the three management levels and give examples of the information which would be provided at each level. [[2+2]marks x 3] (ii) In what way does the destination level influence the presentation of information? [3 marks] Question 2 XYZ ltd is a small firm with around 20 employees producing and selling candies. The firm is having problems in terms of inventory management, order entry, invoicing and making payments to suppliers. All transactions are made manually and kept in filling cabinets. The manager has heard about the capabilities of ERP systems and is looking forward for an ERP implementation to solve its problems. As an IT specialist, advise the manager whether he should go forward with this implementation or not. [6 marks] 2.12 DISCUSSION QUESTIONS 1. Find out the different types of DSS available and identify their use. 2. How is an ERP different from traditional information systems like TPS, MIS, DSS, ESS etc? Can ERPs help to support organisations at the different levels of management? 3. Is it imperative for an enterprise to have all the enterprise systems in place – ERP, SCM, CRM and KM? 4. What is the link between Enterprise Resource Planning (ERP) and Business Process Reengineering (BPR)? Unit 2 19  Management Information System – LLC 3215 2.13 SUMMARY In this unit, we have seen the details of Management Information Systems. We started by addressing the major challenges faced by managers as a result of Information Technology advancing at a rapid speed. The aspects that have been discussed are business challenges, globalisation, costs incurred, technical aspects and so on. The organisational structure has then been examined in more details in terms of the levels and the type of people at each level. A detailed analysis of the types of Information Systems used at each level of management has then been discussed. The last part of this unit focused on Enterprise applications like SCM, CRM,KM & ERP with a main focus on ERPs. Unit 2 20