Management Information Systems

The objective of an MIS is to provide information for decision making on planning, initiating, organizing and controlling the operations of subsystems of the firm and to provide a synergistic organization in the process.

A system is a group of interrelated or interacting elements forming a unified whole, and working together towards a common goal by accepting inputs and producing outputs in an organized transformation process.

Such a system has three basic (it can become more useful by including others) interacting components or functions namely:

Inputs Processing Output

It could also include: Feedback / Storage as the case may be Control (monitoring and evaluating feedback or information) to maintain performance

An open system interacts with other systems, whereas a closed system does not interact with other systems. A system that has the ability to change itself or its environment in order to survive is an adaptive system e.g. organization as a system.

Terms used in the system’s concept.1. A system’s purpose is the reason for its existence and the reference point for measuring its

success e.g. the purpose of Dell’s order fulfillment system is to efficiently produce and deliver what the customer ordered.

2. A system’s boundary defines what is inside the system and what is outside e.g. ordering system might consider delivering outside its boundary.

3. A system’s environment is everything pertinent to the system that is outside of its boundaries.4. A system’s inputs are the physical objects and information that cross the boundary to enter it

from its environment.5. A system’s outputs are physical objects and information that go from the system into its

environment. Work systems in businesses need to change frequently to accommodate to changing conditions in their

environments and changing customer needs.

System Analysis aims at studying the present and/or proposed information flows in order to find the ways of meeting the objectives of the organization, in the best way possible. These ways may include methods of information collection and provisions at various organizational levels, improvements in information formats and procedures being adopted by the organization, etc. The information should be at the right time, in the right format, through the right medium, with the right contents and no redundancies.

System Design must be implementable within the given resources and must be maintainable easily. The design process should consider that resources spent on them should be minimal, maintainability should be made easy with less complex design, the benefit derived should be more than the cost, flexibility to adapt to changes and the organization should be integrated.

An Information System can be any organized combination of people, hardware, software, communications networks, and data resources that collects, transforms, and disseminates information in an organization.

An Information System model consists of the following:- Resources such as people, data, hardware, software and networks are used by Information Systems. Information Processing consists of system activities of input, processing, output, storage and control.

The major roles of Information Systems are:-1. Support Business Processes2. Support Decision Making3. Support Competitive Advantage

Types of Information Systems1. Operations support systems produce a variety of information products for internal and external use,

which process data used by business operations. These have three further categories:-a. Transaction processing systems record and process data resulting from business transactions.

Transactions are processed in two basic ways:i. Batch, where transactions are accumulated over a period of time. A group of entries are

made at a time; which are accepted by the information system, on a command by the user, for updating the records.

ii. Real-time or on-line, where processing is done immediately. Whenever an activity takes place in the organization, an entry is made in the information system in the form of a record and the computer automatically updates it’s all other records affected by the entry

b. Process control system monitors and controls physical processc. Enterprise collaboration systems enhance team and workgroup communication and productivity

and are also called office automation systems.

2. Management support Systems provide information and support for effective decision-making. These are of following types

a. Management Information Systems provide information in the form of reports and displays to managers and many business professionals

b. Decision support systems give direct support to managers during the decision-making process. It provides some indications to a user on the basis of information stored in the system and the parameters provided by the user.

c. Executive information systems provide critical information from a wide variety of internal and external sources, in easy-to-use displays, to executives and managers.

3. Expert systems provide expert advice from operational chores like equipment diagnostics or decisions for loan portfolio management.

4. Knowledge management systems support the creation, organization and dissemination of business knowledge to employees and managers throughout the company.

5. Functional business systems focus on operational and managerial applications in support of basic business functions such as accounting or marketing.

6. Strategic information systems apply IT to firm’s products, services, or business processes to help it gain a strategic advantage over its competitors.

7. Cross functional Information Systems interact with several types of Information Systems that provide a variety of functions.

The success of an Information System is measured not only by its efficiency in terms of minimizing costs, time and the use of information resources, but also by the effectiveness of Information Technology in supporting an organization’s business strategies, enabling its business processes, enhancing its organizational structures and culture, and increasing the customer and business value of the enterprise.

Information systems can be classified on the following basis1. By function

a. Operations (Resources, processes, products)b. Administrative (support functions)c. Planning and control (management use)d. Environmental (e.g. competition)

2. By type of processing a. Batchb. Online, real-timec. Distributed

3. By usage a. Transaction processing b. Management Informationc. Decision supportd. Expert system

4. By application a. Manufacturingb. Warehousingc. Distributiond. Marketinge. Retailingf. Servicesg. Bankingh. Insurancei. Transportationj. Governmentalk. Defensel. GIS

5. By levels of management a. For operational controlb. For management controlc. For strategic control

6. By resources a. Financial information resourceb. Marketing information resource c. Personnel information resource

Management Information System (Definition)

Management comprises the process or activities that describe what managers do in the operation of their organization: plan, organize, initiate and control operations.

Because decision making is a fundamental pre-requisite to each of the forgoing processes, the job of an MIS becomes that of facilitating decisions necessary for planning, organizing and controlling the work and functions of the business,

Information is different from data. Data is the plural of ‘datum’. Data are raw facts and figures or observations, typically about physical phenomena or business transactions e.g. the sale transaction. Data may not currently be used in a decision process and usually takes the form of historical records that are recorded and filed without immediate intent to retrieve for decision making.

Information is data that has been converted into a meaningful and useful context for specific end users. It consists of data that have been retrieved, processed, or otherwise used for informative or inference purposes, argument, or as a basis for forecasting or decision making. It is placed in a context that gives its value for specific end users. The value added process for data is where

(i) Its form is aggregated, manipulated, and organized(ii) Its content is analyzed and evaluated(iii) It is placed in a proper context for human user

Processing of data into information can involve anything from calculating, comparing, sorting, classifying, and summarizing to updating existing data. The input for processing is data the output is information

System is a set of elements joined together for a common objective. A subsystem is part of a larger system with which we are concerned.

The system concept of MIS is therefore one of optimizing the output of the organization by connecting the operating systems through the medium of information exchange.

The objective of an MIS is to provide information for decision making on planning, initiating, organizing and controlling the operations of subsystems of the firm and to provide a synergistic organization in the process.

MIS is the automating of routine and structured tasks to support decision making. MIS support decision making in both structured and un-structured problem environments MIS support decision making at all levels of the organization MIS are intended to be woven into the fabric of the organization, not standing alone MIS support all aspects of the decision making process. MIS are made of people, computers, procedures, databases, interactive query facilities, and so on. They

are intended to be evolutionary / adaptive and easy for people to use.

The need for synergy in organization calls for the systems approach in management. It has been accelerated by two major reasons:

The increased complexity of business The increased complexity of management

The increased complexity of business can be attributed to four primary causes(i) Technological revolution(ii) Research and development(iii) Product changes(iv) Information explosion

The increased complexity of management can be met by following four breakthroughs or developments:(i) The theory of information feedback systems(ii) A better understanding of the decision making process

(iii) Operations research or management science techniques that permit an experimental or simulation approach to complex problems

(iv) The electronic computer

Management Information System consists of a group of people, a set of manuals, and data processing equipment (a set of elements) select, store, process and retrieve data (operate on data and matter) to reduce the uncertainty in decision-making (seek a common goal) by yielding information for managers at the time they can most efficiently use it (yield information in a time reference).

A business process is a related group of steps or activities in which people use information and other resources to create value for internal or external customers. These steps are related in time and place, having a beginning and end, and have inputs and outputs.

A process’s value added is the amount of value it creates for its internal or external customer.There are three different types of business processes.(i) Processes that cross functional area(ii) Processes related to a specific functional area(iii) Activities and sub processes occurring in every functional area.

The set of processes a firm uses to create value for its customers is often called its value chain.

The Managers of tomorrowChanges in behavior of people and our understanding of how to motivate people in the work environment

have progressed quite slowly despite many promised gimmicks.Changes in physical systems such as the factory production system, the physical distribution system, the

data processing system or the engineering development and test system are occurring rapidly with the accelerating progress in technology.

Management has existed since people first realized that a co-operative society was necessary to accomplish their goals. There are many different ways to do any particular type of work. A crucial management responsibility is to identify ways to do work more efficiently and to produce better products and services. Many organizations and manager make the basic mistake of believing that a management information system can be designed or made operational without the backup of an adequate management system. Given an adequate management system, an information system can be designed upon its foundation.An information system provides the manager with the information needed in the form, place and time to perform the job according to the specifications of the management system.A new system (such as Information system) when introduced, provides newly emerging behavioral patterns. This change has two facets: technological and social. The social change gains resistance. Three positive steps for effecting change based on our knowledge of organizational behavior are:

1. Create a climate for change2. Develop effective agents of change3. Modify the required organizational system in the light of anticipated emergent behavior.

The management process and information needs

Environmental information consists of:

(1) Political and governmental considerations(2) Demographic and social trends(3) Economic trends(4) Technological environment(5) Factors of production such as source, cost, location, availability, accessibility, and productivity of the

major production factors of labor, materials and parts and capitalCompetitive information considers:

(1) Industry demand(2) Firm demand(3) The competition:-

a. Past performanceb. Present activity (price strategy, advertising, campaigns etc)c. Future plan (new products)

Internal Information such as(1) Sales Forecast(2) Financial Plan(3) Supply factors (labor, capital, plant and equipment, organization etc)(4) Policies

“Management is the art of getting things done”. In the process of, a manager uses human skills, material resources and scientific methods to perform all activities leading to the achievement of goals.

The advantage of viewing management as a system is that it enables us to see the critical variables, constraints and their interaction with one another. It forces the manager to look at the situation in such a way that due regard is given to the consequences arising out of interaction with the related elements or subjects.

Approaches to management1. Fredrick W Taylor, recognized as the father of scientific management states his rules as follows:

a. Replace the rules of thumb with scientific rulesb. Obtain a harmony in group actionc. Achieve cooperation of human beings, rather than chaotic individualism.d. Work for a maximum outpute. Develop all workers to the fullest possible potential for their own highest possible prosperity

2. Henry Fayol states his principles of operational management as:a. Division of workb. Authority and responsibilityc. Disciplined. Unity of commande. Unity of directionf. Subordination of individual to corporate interestg. Remunerationh. Centralizationi. Scalar chainj. Orderk. Equityl. Stability of tenurem. Initiative

Functions of the Manager1. Planning is a process of determining the goals and objectives and evolving strategies, policies, programs

and procedures for the achievement of these goals. The essence of the process is decision making. The planning process consists of three steps (i) Forecasting (ii) Determining the alternative course of action (iii) Evaluating the best course of action.

2. Organization involves evolving the structure of the people working in the organization and their roles. Building a meaningful effective structure of authority and the relationship is known as organizing. It should consider the span of control, the centralization and decentralization methods, delegation of authority, formal and informal setup.

3. Staffing involves manning the positions in the organization structure. It requires appropriate selection of the person or persons ensuring that they together will achieve the goals and objectives of the organization. Ensuring that the right person is at the right place, and has a good job environment. The WBS helps in determining the job specifications. The schedules for projects play an important role in determining number of employees.

4. Directing is a complex task of implementing the process of management. In the process, the manager is required to guide, clarify and solve the problems of the people and their activities. It is necessary to motivate the people to work for the goals with an interest and a confidence. Different methods of leadership are present. Autocrative leader decides what should be done. Supportive leader encourages initiatives by employees.

5. Coordinating is the function which brings a harmony and smoothness in the various group activities and individual effort directed towards the accomplishment of goals. It is a process of synchronizing individual actions and the efforts which may differ because of the differences in the personal goals and the common goals, the difference in the interpretation of methods and directions.

6. Controlling is a process of measurement of an output, comparing it with the goals, the objectives and the target, and taking corrective actions, if the output is falling short of the stated norms. Controlling ensures the achievement of the plan. Controlling has following three functions (i) establish standards (ii) measure performance (iii) correct deviations if they occur.

Managers and the Environment1. Economic environment consists of capital, labor, price changes, productivity, fiscal and monetary policy

and customers.2. Technological environment3. Social environment is built around the attitudes, the desires, the expectations, the degree of intelligence

and education, the beliefs and customs, the religion, the caste and creed of the people.4. Political environment5. Ethical environment consists of laws and business ethics which emerge from the professional conduct,

the business norms and codes on confidentiality, the payment and documentation, the adherence to generally accepted accounting standards.

Management by ExceptionWhen the management operates under time constraint, each manager has to allocate specific time for the several demands made on his time. An efficient manager tries for selective attention to manage within the available time resource. The principle evolved, therefore, is of the management by exception.

The organization system consists of:(1) The formal organizational system as described in the charts, policies and procedures.(2) The informal organization(3) The individual as a system(4) The Management Information System

(5) The organizational communication system(6) The power system(7) The functional system(8) The management process system(9) Material logistics system

Delegation of authority in an organization depends upon the following factors(1) Cost: The more costly the decision, the more likely it is to be centralized(2) Uniformity of policy: The more uniform and centralized a policy (the less need there is to delegate

authority)(3) Complexity of the organization: the more complex the organization, the greater the need for

coordination and centralization of authority.(4) Custom of the business: The authority determines authority delegation.(5) Availability of good managers encourages delegation.

Information and OrganizingThe system’s view of the organization takes into account the interaction and flow of information. The organization should be designed according to the information flow and other factors of information chosen to plan and control performance.

Diagram showing methods of departmentalization

Transaction Processing

When a transaction is recorded manually, a copy of the document is usually used for data preparation. Special data preparation methods are keydisk (i.e. through a keyboard), optical character recognition (OCR) or magnetic ink character recognition (MICR)The data is validated to determine its correctness and completeness. Subsequently the machine-readable stored data (master file) related to or affected by the transaction is updated and outputs are prepared in the form of documents and reports.Reasons for preparing transaction documents are:-

(1) Informational: To report, confirm, or explain proposed or completed action(2) Action: To direct a transaction to take place (e.g. shipping orders etc)(3) Investigational: for background information or reference by recipient

A single document or different copies of it may serve both action and informational purposes. E.g. one copy of the sales order confirmation may be sent to the customer to confirm the order; a second copy may be used as an action document to initiate filling of the order.

Transaction records are distributed to other departments to respond to queries, can be saved on terminal for authorized reference, or scanned by managers for unusual occurrences. However reports and analyses solve the managerial purpose better.

Transaction can be processed in batch or in real-time. One advantage of real-time processing is that the error checking or validation is done immediately, causing early detection and tracing or error. The time delay in case of batch processing can make tracing of error difficult.

The processing trial is needed by external auditors and certain tax regulators. It should meet following three requirements

(1) Any transaction can be traced from the source document through processing to outputs and to totals(2) Any output or summary data can be traced back to the transactions or computations used to arrive at the

output or summary.

Information

Information as a SystemThe information system receives inputs of data and instructions, processes the data according to the

instructions, and outputs and results. The information system can be divided into five major subsystems, each of which can be further divided.

1. Hardware and system software: The computer hardware and the system software necessary for hardware operation.

2. Management and administration3. Operations4. Application system development and maintenance5. Application systems

Information is efficient if it is correct, complete, unambiguous, validated, timely and organized. Information is effective if it serves the purpose of decision correctly.

The value of information may be theoretically determined by the value of a change in decision-making behavior.

Utility of information1. Form utility: As the form closely matches decision maker, its value increases2. Time utility: Information has greater value to the decision maker if it is available when needed.3. Place utility: Information has greater value if it can be accessed or delivered easily.4. Possession utility: If the dissemination of information to others is controlled.

There are two aspects to information. The first is to derive information from the data, through data processing, and the second is to communicate it properly to the concerned people. Methods of improving communication are massage summarizing (to reduce the amount of data to be transmitted) and message routing (sending information only to the people concerned). The information distribution can be controlled to improve communication. In message delay, transmission is delayed to avoid overload, to distort, inhibit, or suppress transmission. In message modification or filtering summarizes data or blocks certain data by filtering. In uncertainty absorption, inferences are drawn for the data, and inferences,

instead of the data are transmitted. In presentation bias, the information is presented in a way to convey the desired message.

Value of information in decision making: The value of information is the value of the change in decision behavior caused by the information less the cost of obtaining the information. Value of information other than in decision: The information can be used for motivation, background building and model building.

Information resource management is an approach to management based on the concept that information is an organized resource. The scope if IRM includes data communication, word processing, personal computers and traditional data processing. It emphasizes the organizational effectiveness of the information system resource rather than the technical sophistication or efficiency of the hardware and software.

Component activities that make up the overall information resources function are:1. Data processing2. Telecommunications 3. Office automation

Information Resource Executive (Chief Information officer (CIO))His responsibility includes the following

1. responsibility for central data processing and data communication systems2. Coordination of organization wide information system planning3. Maintaining infrastructure for technical services4. Acquisition and dissemination of knowledge and expertise regarding new technology

Structure of MIS

Operating Elements of an Information System• Physical Components

– Hardware relates to physical computer equipment for input, output, storage, processing and communication

– Software– Database– Procedures such as User instructions, data preparation for input and operating the instructions– Operations personnel such as computer operators, system analysts, programmers, data

administrators etc. • Processing Functions

– Process transactions such as purchase or sale– Maintain master files– Produce reports– Process inquiries– Process interactive support applications

• Outputs for the user– Transaction documents– Preplanned reports– Preplanned inquiry responses– User-machine dialog results

Reports can be used for information, action description or for investigational purposes

Management activities • Strategic planning: Definition of goals, policies, and general guidelines charting course for organization.

Determination of organizational objectives. (Long term)• Management control and tactical planning: Acquisition tactics, plant location, new products,

establishment and monitoring of budgets. (medium tenure)• Operational planning and control: Effective and efficient use of existing facilities and resources to carry

out activities with budget constraints. (Short term)

Decisions making in management comprises of Structured and unstructured decisions. Structured decisions have a pattern and logic. Unstructured decisions are made by intuition and human judgment is involved

Two approaches exist to defining the subsystems of an MIS.• According to the organizational functions such as marketing, production, logistics, personnel, finance

and accounting, information processing, top management• According to managerial activities such as transaction processing, operational control, management

control, strategic planning

Quality in Information Systems

An application has quality relative to its primary and secondary users, operations personnel, control personnel, maintenance personnel, and so forth.Quality in information systems has a number of characteristics. The importance of each depends on the application and its context. The following are some of the characteristics included in the concept of quality in information systems:Complete Data All data items are captured and stored for use. Data items are

properly identified with time periods.Accurate data The correct data values are recordedPrecise data Measurement of variables meets user needs for precisionUnderstandable output The output of the system is understandableTimely output The output of the application is available in time for actions

and decisionsRelevant output The outputs are relevant to the actions and decisions to be

takenMeaningful output The format, labeling, data provided, and context in which data

is presented makes the output meaningful for actions and decisions

User friendly operation The system provides user interfaces that are understandable and designed to confirm to human capabilities

Error resistant operations

Suitable error prevention and detection procedures are in place. There are procedures for reporting and correcting errors. Various audit procedures are applied.

Authorized use Only authorized personnel have access to facilities, applications and data

Protection system and operations

The system and its operations are protected from various environmental and operational risks. There are provisions for recovery in the event of failure or destruction of part or all of the system.

The role of top management in information system quality control is to establish the overall organization structure, select the information system executive, approve the information system plan and budget, and evaluate performance.

The information system executive has the responsibility for organizing and supervising the various control and quality assurance activities in information systems.

There are certain control and quality assurance functions that need to be performed in information system operations. The major functions are:

1. Librarian2. Processing control3. Access control4. Database administration5. Backup and recovery6. Application development quality assurance

Architecture of MIS

Structure of MIS in Business

Marketing System

• Product pricing

• Interactive marketing

• Targeted marketing includes five components namely community, content, context, Online behavior, demographic

• Sales force automation

• Market research

• Order processing

• Sales planning

• Inventory management

• Warehouse management

Inputs to Marketing MIS

• Strategic plan and corporate policies

• The TPS

• External sources: – The competition– The market

Manufacturing Information Systems

• Quality control and testing

• Just-in-time inventory and manufacturing

• Computer integrated Manufacturing simplifies, automates and integrates all production and support processes. It also uses CAD, MES

• Process control

• Machine control using PLCs

Inputs to the Manufacturing MIS

• Strategic plan or corporate policies.

• The TPS:– Order processing– Inventory data– Receiving and inspecting data– Personnel data– Production process

• External sources

Human Resource System

• Corporate Intranet

• Staffing

• Training and development

Inputs to the Human Resource MIS

• Strategic plan or corporate policies

• The TPS:– Payroll data– Order processing data– Personnel data

• External sources

Financial Management Systems

• Profit planning/ Profit Centre Accounting

• Cash management

• Online investment management

• Capital budgeting, Funds management

• Enterpise controlling

• Financial Forecasting and planning

Inputs to the Financial Information System

• Strategic plan or corporate policies– Contains major financial objectives and often projects financial needs.

• Transaction processing system (TPS)– Important financial information collected from almost every TPS - payroll, inventory control, order

processing, accounts payable, accounts receivable, general ledger.– External sources– Annual reports and financial statements of competitors and general news items.

Accounting Information System

• Cost accounting, activity based costing, product cost controlling, overhead cost controlling

• Online accounting System

• Order processing

• Inventory control

• Accounts receivable/payable

• Payroll

• General Ledger

Review of Hardware and Software Technologies

PeripheralsPeripherals is the generic name given to all input, output and secondary storage devices that are part of a computer system. Peripherals depend on direct connections or telecommunications links to the central processing unit of a computer system.

Input technologies1. Keyboard2. Pointing devices

1. Electronic mouse2. Trackball 3. Touchpad 4. Pointing stick5. Touch screens use infrared beam, sound waves, or a slight electric current that is broken when

the screen is touched3. Handwriting recognition through pen-based computing. PDAs have a pressure sensitive layer like a

graphics pad under their slate like liquid crystal display screen.4. Speech recognition systems digitize, analyze, and classify your speech and its sound patterns. The

software compares your speech patterns to a database of sound patterns in its vocabulary and passes recognized words to your application software.

5. Optical scanning devices read text or graphics and convert them into digital input for your computer. Another technology is optical character recognition.

6. Magnetic stripe7. Smart cards8. Digital cameras9. Magnetic ink character recognition detects iron oxide-based ink

Output Technologies1. Video output

1. Video monitors use a cathode ray tube technology 2. Liquid crystal displays (LCDs)

2. Printed output1. Inkjet printers spray ink onto a page one line at a time.2. Laser printers use an electrostatic process similar to a photocopying machine.

Storage

1. Magnetic tape records data in the form of magnetized spots on the iron oxide coating of the plastic tape. 2. Magnetic disks contain metal disks that are coated on both sides with an iron oxide recording material.

Several disks are mounted together on which data is stored in the form of tiny magnetized spots to form the binary digits

1. Floppy disks2. Hard disk drives3. RAID (redundant arrays of independent disks)

3. Optical disks are used by business for image processing1. CD-ROM use a laser device to read the binary codes created by burning microscopic pits in a

spiral track by laser2. CD-R records permanently3. CD-RW use magneto optical technology4. DVD5. DVD-ROM6. DVD-RAM

SoftwareTypes of programming languages

1. Machine language/ Ist generation language: It is a series of 0s and 1s2. Assembler language/ IInd generation language: It uses mnemonic names for operations3. High level language/ IIIrd level language: Instructions are in the form of statements which are

compiled or interpreted before being executed4. Fourth level languages are more non-procedural with simpler syntax5. Object oriented language

Classification of software1. Application software which performs processing for end user2. System software that supports operations of computer networks and systems

Types of software1. Software suites are two or more packages bundled together e.g. Microsoft office, Lotus notes suite2. Software packages are a combination of some functions of several programs e.g. Microsoft works3. Web browsers enable easy use of internet4. E-mail is a way of communicating with people5. Word processors e.g. Microsoft word6. Electronic spreadsheets e.g. Microsoft excel7. Presentation graphics e.g. Microsoft PowerPoint8. Database management systems (DBMS)9. Technologies for multimedia10. Personal information managers e.g. lotus notes11. Operating systems12. Model generators facilitate the development of models and DSS. It includes programming language,

spreadsheets, and statistical packages. A good model generator should have easy usability, access t o wide variety of data and analysis capability.

13. Model Base Management Systems (MBMS) manage models and analysis programs in much the same way as the DBMS manages data.

Decision Support Systems

Business decisions are those, which are made in the process of conducting business to achieve its objectives in a given environment. Their major characteristics are:

• Sequential in nature• Exceedingly complex due to risks and trade offs• Influenced by personal values• Made in institutional settings and business environment

Problems in making rational Decisions• Ascertaining knowledge• Insufficient knowledge• Not enough time to be rational• The environment may not cooperate• Other limitations

Decision Process

• Intelligence: Searching the environment for conditions calling for decisions• Design: Inventing, developing, and analyzing possible courses of action.• Choice: Selecting an alternative or course of action from those available.

Important aspects of these phases• Problem finding is conceptually defined as finding a difference between some existing situation and

some desired state. Expectations can be based on historical models, planning models, models of other people such as superiors, extra organizational models.

• Problem formulation clarifies the problem, so that design and choice activities operate on the right problem. Strategies of reducing complexity are determining boundaries, factoring problem into smaller problems, focusing on controllable elements.

• Developing alternatives involves creativity which can be enhanced by aids such as scenarios, analogies, brainstorming, checklists, templates etc.

• Decision making involves consideration of certainty, risk and uncertainty of occurrence

Nature of decisionsProgrammed verses non-programmed decisions

• Non-programmed decisions have no pre-established decision rules or procedures• Programmed decisions can be pre-specified by a set of rules or decision procedures. They imply

decision making under certainty because all outcomes are known.

Users of DSS1. Subscription mode: Regular reports received by user2. Terminal user: Online access through system3. Clerk mode: Direct use but like batch processing4. Intermediary mode: Intermediaries perform analysis and interpret the report

The primary requirement of DSS for intelligence is the ability to search the database for opportunities and problems. These searches can be summarized as:

1. Structured, continuous search (On regular basis)2. Structured ad hoc search (Once in a while)3. Unstructured search (through trial and error)

Report elements that assist in problem finding1. Summarization (Totals and ordering)2. Comparison (with plans or competitors)3. Prediction (forecast)4. Confirmation (for audit or validation)

Types of business decisions

Decision Structure

Operational Management

Tactical Management Strategic Management

Unstructured Cash management Business Process Reengineering, Workgroup Process Analysis

New e-business initiatives, Company reorganization

Semi structured

Credit management, Production scheduling, Daily work assignment

Employee performance appraisal, Capital budgeting, Program budgeting

Product planning, Mergers and acquisitions, Site location

Structured Inventory control Program control

• Decision making at the operation level is a situation of certainty. Decision making at the middle level is of the risk type because of difficulty in forecasting. At the top level it a situation of total uncertainty on account of insufficient knowledge of the external environment.

Types of Models• Behavioral Models are useful in understanding the behavior amongst the business variables. Examples

are – Regression models (Y=C+R.X)– Time series analysis– Market research methods– Ratio analysis for financial assessment e.g. current ratio=current assets/current liabilities

• Management science models– Budgeting models– Break even analysis model (revenue=fixed cost + variable cost)– Return on investment analysis model– Cash budgeting– Procedural models (Economic order quantity/minimum inventory)

• Operation research models– Linear programming– Inventory control models– Material requirement planning

Methods for selection of decision alternatives• Optimization Technique such as linear programming. These methods are used in cases where decision

making situation is closed, deterministic and requires to optimize the use of resources under conditions of constraints.

• Payoff Analysis is used when the alternatives and outcomes are not known. A matrix is prepared to evaluate the decisions. (probabilities are set for occurrence)

• Utility and indifference curve considers non monetary benefits of decision also and evaluates using the matrix of Payoff Analysis.

• Decision Tree Analysis is used when a sequence of decisions are to be made.• Uncertainty avoidance. Example: Choosing to earn $10 with 90% probability than choosing to earn

$100 with 12% probability• Organizational learning helps in influencing decision making• Game Theory• Statistical inference such as regression and correlation, testing of hypothesis.

Decision Support SystemsDecision Support Systems are computer-based information systems that provide interactive information support to managers and business professionals during decision making process. Decision support systems use analytical models, specialized databases, a decision maker’s own insights and judgments and an interactive, computer based modeling process to support the making of semi structured and unstructured business decisions.

DSS Components

Decision Support Analytical Modeling

Type of Modeling

Example

What-if analysis

What if we cut advertising by 10% what would happen to sales?

Sensitivity analysis

Let’s cut advertising by 1% repeatedly so we can see its relationship to sales

Goal-seeking analysis

Let’s try increasing advertising until sales reach $1 million

Optimization analysis

What level of advertising maximizes our overall profit?

Typical MIS Reporting• Periodic Scheduled Reports

– Example: Monthly Financial Statements• Exception Reports

– Example: List of items out of stock• These reports contain information but they might not directly help you determine the best decision to

make.• Demand Reports and Responses

– Available whenever a manager needs them, updated in real-time.• Push Reporting

– Information is pushed to a managers computer– Example: Report is pushed every time a supplier is late with a shipment

• MIS Reporting is all about giving managers feedback and doesn’t necessarily help directly with decision making.

DSS and concepts in decision making

Decision concept Application of decision support systemProgrammed Vs Non-programmed decisions

Both programmed and non-programmed decisions are supported by DSS

Satisfying factor Expansion of search beyond satisfying level can be providedBehavioral model Stimulates analysis and stimulates recognition of effects of changing goalsDecision making under stress

Interactive decision making during tough times is easy

Alternative approaches Provides alternatives and guidance in selectionQuality of decision making

It can provide checklists to assessing quality

DSS Vs. MIS

MIS DSS

Support Info about performance Info and modeling to analyze problems

Report Form

Periodic reportsor On Demand

Interactive Inquiries

Format Pre-specifiedFixed format

Flexible and Adaptable

Processing Extract and manipulate data Analytical modeling of data

Artificial Intelligence Technologies in Business

Artificial Intelligence is a field of science and technology based on disciplines such as computer science, biology, psychology, linguistics, mathematics, and engineering.The goal of IT is to develop computers that can think, as well as see, hear, walk, talk and feel.

Attributes of Intelligent Behavior• Think and reason• Use reason to solve problems• Learn or understand from experience• Acquire and apply knowledge• Exhibit creativity and imagination• Deal with complex or perplexing situations• Respond quickly and successfully to new situations• Recognize the relative importance of elements in a situation• Handle ambiguous, incomplete, or erroneous information

End User ComputingEnd-User Development (EUD)

Specifically, the practice of users developing their own information systems, is often but not always with the support of professional systems developers. The practical involvement of end-users in application development necessitates the easy access to computing facilities. This may be • Timesharing on a centralized mainframe • The use of standalone personal computers • The use of personal computers which are connected to local area networks and mainframes. In addition to being provided with hardware and software, extra facilities are a necessary condition of successful End user applications development. In particular: • Education and training on the use of software tools • Assistance in the technical aspects of writing, testing, and debugging applications • Availability of reference material • Aid in accessing the corporate database

Applications Suitable for End-user DevelopmentApplications suitable for end-user development can be grouped into the following 5 categories: • One time enquiries • Simple Reports • Minor Changes to Reports or Enquiries • Presentation of Data in Alternate Forms • 'What if' Analyses

Applications not suitable for end-user development:• data entry involving organization files and databases (where the data must be validated for accuracy and

reliability) • high volumes of transactions, requiring processing efficiency and multiple processing steps • use of 'traditional' computer languages designed for use by professional programmers, requiring detailed statement of processing procedures and controls • changing of data values in existing databases and files • applications spanning several departments or divisions in the organization • applications requiring formal documentation • applications requiring a long development process • applications requiring detailed formal specifications.

Who Are The End Users?In general an end-user is anyone who has to interface to a computer who is not employed specifically to do so (ie is not a data entry clerk or an operator). This includes executives interfacing to EIS facilities, middle managers or technicians who use a PC or a terminal to an on-line system, clerks accessing a central database to download data for local processing, individuals using a PC in stand alone mode for their own work, individuals using a PC in stand alone mode for an activity which the corporate management has decided shall be done by computer (eg office automation), clerks interfacing to a computer system which has replaced their manual system (without their having any input) and clerks writing data preparation documents. Web integration is, however, creating a new class of end-user. (S)he is an end-user in one organization who, through integration (3-tier client / server), has suddenly become a user of a system in another organization. A further complication is that now a system may have to cope with two different kinds of end-user at the same time. For example the parcel tracking system at FEDEX could be accessed by both a company employee and an external customer, both trying to track a parcel (though not necessarily the same parcel). We may group them into the following categories: • Non programming • Command level • End-user programmers (including senior management professionals) • Functional support personnel • End user computing support personnel • DP Programmers This list covers a very wide range of personnel carrying out a wide range of tasks throughout organization - and the list continues to grow.

Advantages of User-developed systems• Relieves shortage of system development personnel• Eliminates the problem of information requirements determination by information systems personnel• Transfers the information system implementation process to users• Enhanced productivity of professional and white-collar workers.• Provision of user-friendly and responsive systems.

ProblemsIt became clear very quickly that the managers had bought something that they didn't understand and either had to discard the machine (as happened in many schools who were encouraged by government to acquire computers) or had to be supported to get the most out of their purchases. The particular problems which were posed for the organizations into which these PCs had been introduced were: (a) Lack of standardization between the various purchases leading to: (i) inability to share data; (ii) no economy of scale in purchasing; (iii) a variety of requirements for maintenance, in the few cases where the problem had actually been considered. (b) Lack of control over the requirements of legislation, such as software copyright, data protection, health and safety and the specific legal constraints covering the organization. (c) Demands for assistance with: (i) systems analysis and design; (ii) programming; (iii) software procurement; (iv) sizing - machines which have been purchased but are too small for the job; (v) maintenance; (vi) fall-back; (vii) lack of documentation; (viii) data security; (ix) environmental control; (x) file conversion and data acquisition; (xi) data organization.

Issues requiring training• Testing• Documentation• Validation of data• Audit trials• Operating control• Backup and recovery

Software tools for development• Interactive programming software• Programming language• Application generators• Report generator / Query language for query jobs• Online documentation software• Data dictionary • Graphics languages• Statistical analysis tools

Planning

Concept of Planning in Organization• A plan is a predetermined course of action to be taken in future. It identifies the goal to be achieved and

the steps to be taken to achieve the desired results.• Planning is the function that determines in advance what should be done. It consists of selecting the

enterprise objectives, policies, programs, procedures and other means of achieving these objectives Characteristics of planning

1. Planning is goal oriented2. Planning is a primary function3. Planning is all-pervasive4. Planning is an intellectual or rational process5. Planning is continuous6. Planning is forward looking7. Planning involves choice8. Planning is an integrated process9. Planning is directed towards efficiency

Importance of planning1. Focuses attention on objectives and results2. Reduces uncertainty and risk3. Provides sense of direction4. Encourages innovation and creativity5. Helps in coordination6. Guides decision making7. Provides a basis for decentralization8. Provides efficiency in operations9. Facilitates control

Limitations of planning1. Lack of accurate information2. Time and cost3. Inflexibility4. Resistance to change5. Lack of commitment to planning6. False sense of security7. Environmental constraints

Essentials of a good plan1. It should be based on clearly defined objectives2. It must be simple and easily understandable3. It should be flexible and adaptable to changing conditions4. It should be balanced in all respects and should be reasonably comprehendible5. It should provide standards for the evaluation of performance and actions6. It should be economical, i.e. permit optimum use of available resources before creating new authorities

and new resources.7. It should be practicable or action-oriented8. It should be prepared with the consultation of concerned persons9. Different plans must be properly integrated and harmonized with one another

Principles of planning1. Principle of contribution to objectives2. Principle of efficiency of plans3. Principle of primacy of planning4. Principle of planning premises ( The assumptions about future derived from forecasting and used in

planning are known as planning premises)

5. Principle of policy framework6. Principle of timing7. Principle of alternatives8. Principle of limiting factor9. Principle of commitment10. Principle of flexibility11. Principle of navigational change12. Principle of competitive strategies

Steps in planning process1. Identify goals2. Develop planning premises3. Determine alternative courses of action4. Evaluate the alternatives5. Select a course of action6. Formulate Derivative plans

Planning premisesCorrect assessment of planning premises is helpful in the preparation of reliable plans, because when the assumptions about the future environment are accurate, the plans based on such assumptions will be dependable. Planning premises may be classified as under

1. External and Internal premises2. Tangible and Intangible3. Controllable and Uncontrollable

Types of planningOn the basis of time period

1. Long-range planning2. Medium-term planning3. Short-range planning

2. On the basis of level of formulation1. Corporate planning2. Divisional or Business planning3. Functional or Unit planning

3. Strategic planning4. Operational planning

Comparison between Strategic planning and operational planning Point of comparison Strategic planning Operational planningScope For the enterprise as a whole For particular department or

functional areasRange of choice Wide-broad directions for

planned allocation of resourcesNarrow-specific ways and means

Type of environment External environment Internal environmentTime span Long-range Short-rangeQuestion answered Where should we go How will we get therePrimacy Precedes operational planning Succeeds strategic planningLevel of formulation Top-level management Operating and middle levelResources Acquisition of new resources Within the framework of existing

resourcesEnd result Objectives and strategies Detailed program

Types of policies1. Originate policy2. Appealed policy’3. Imposed policy

Difference between Policy and StrategyS. No Policies Strategies1. Guides to thinking and actions Provides direction in which human

and physical resources will be deployed

2. Guidelines for decision making in repetitive situations

Contingent decisions

3. Taken for problems about which facts are known. Only time of occurrence is not specific

Taken for problems where alternatives cannot be analyzed in advance

4. Implementation of policy can be delegated Implementation of strategy cannot be delegated as it requires last minute executive decision

5. Standing plan or long lasting Non-repetitive plans, may need frequent revision

6. Not based specifically on the moves of competitors

Formulated in the light of competitor’s moves

Difference between Strategies and TacticsS. No Strategies Tactics1. Long-lasting but flexible time perspective Short-term and definite time

perspective2. Formulated at the top level of management Formulated at lower level of

management3. Continuous process but irregular timing of

the decisionContinuous process and periodic decision e.g. budget preparation

4. Based on information generated outside about the external environment

Based on information generated within the organization, particularly from accounting records

5. Affected by personal values of strategy makers

Taken within the control of strategic decisions

6. Critical importance for the future of the organization, concerned with the total organization

Less important as concerned with specific parts of the organization

Summary of various plansName of Plan Definition Nature ExampleObjective Goal or target to be

achievedBasis of all plans Increase sales by 10

%Policy General statement or

understanding to guide thinking

Boundary within which decisions are to be made

Employees are to be promoted on the basis of seniority

Strategy Action plan to face Relates the organization Combative

environmental uncertainties

to its environment advertising to face price cuts by competitors

Procedure Manner in which activities are to be performed

Sequence of steps Purchase procedure

Rule State what should or should not be done in a situation

Rigid plan, no scope of discretion

No smoking in the factory

Programme Combination plan for goal achievement, non repetitive

States activities and resources to be undertaken

Installation of a computer

Schedule Time-table for activities Specifies priority of work and time for each activity

Complete installation of computer within 3 months

Budget Statement of expected results and resources to be used

Quantitative and time bound plan of action

Produce 10,000 tones of sugar

Project Cluster of interrelated activities-a separate unit

Scheme for deployment of resources

Construction of a flyover

Information System Plan

Process of Information System Plan Development• Planning is the process of deciding what will be done, who will do it, when they will do it, how it will be

done, and what are the desired results.Challenges in IS planning

• Difficulty foreseeing and assessing Opportunities• Difficulty Assuring consistency with organizational plans and objectives• Difficulty building systems• Difficulty maintaining Information System performance• Difficulty collaborating with IT professionals

Principles for Information Systems Planning• Support the firm’s Business strategy with appropriate technical architecture• Evaluate technology as a component of a larger system• Reorganize life cycle costs, not just acquisition costs• Design information systems to be maintained• Recognize the human side of technological use• Support and control the technical system

Planning role of IS and User departments• Multiple role for

– CIO– Users

Allocating resources between new and old information systems • User support projects• Enhancements• Bug fixes

New developments

• Major new applications• IT infrastructure project• Research projects

Strategic alignment of business and IT• Consistency with business priorities• Reengineering and downsizing (BPR)• Enterprise-wide and inter-organizational systems • Information system architecture• Centralization Vs Decentralization• Outsourcing• International issues

Advantages of planning Support Systems1. Reduced information overload2. Information selection3. Economic solutions4. Fast turnaround5. Interrelation of operations and planning system6. Communication aid7. Direct involvement as can be used directly by decision makers

Planning for Information System• The complexity of the information resources environment suggests that planning is vital to success.• The plan describes the structure and content of the information system and how it is to be developed.• The organization’s strategic plan should be the basis for the MIS strategic plan.• The overall responsibility of IS planning is the responsibility of Chief Information Officer (CIO)

Approaches to organizing and supervising the information system planning effort• Planning staff within information systems functions (planning specialists)• Ad hoc planning groups within information systems• Planning group with representatives from various functions

Review of plan• Master plan is reviewed by the steering committee which comprises of executives from major functional

areas and is executives.• The committee also periodically reviews progress against the plan.• The master plan is integrated in the organizational plan by top management after review and approval.• Information system policies and procedures are defined.

Content of Master development plan/ Information System plan/ Information Resource plan• The master plan has two components:- a long-range plan and a short-range plan. The long-range plan

provides general guidelines for direction and the short-range plan provides a basis for specific accountability as to operational and financial performance. It consists of the following subheadings:-

– Information system goals, objectives, and architecture– Inventory of current capabilities– Forecast of developments against the plan– The specific plan

Information system goals, Objectives, and architecture– Organizational goals, objectives, and strategies– External environment (industry, government regulations, customers, and suppliers)– Internal organizational constraints such as management philosophy– Assumptions about business risks and potential consequences– Overall goals, objectives, and strategy for the information system

– Architecture of the information system – Current capabilities

– Inventory of– Hardware– Software (System software, DBMS, etc)– Application systems (classified on the basis of functional systems, organizational

strategy, maintenance need)– Analysis of

– Expense– Hardware utilization– Software utilization– Personnel utilization (further classification such as job, skill, functional area)

– Status of projects in progress– Assessment of strengths and weaknesses

• Forecast of developments Affecting plan – Hardware and software technological availabilities should be forecasted with expected impact on

existing IS– Methodology changes should be forecasted– Environmental developments such as government regulations, tax laws and competitors affecting

IS should be stated • Specific plan

– Hardware acquisition schedule– Purchased software schedule

• System Software• Applications software

– Application development schedule– Software maintenance and conversion schedule– Personnel resources required and schedule of hiring and training– Financial resources required by object of expenditure

The master plan is prepared from the CIO’s point of view and focuses on the planning strategy e.g. if the planning strategy for consideration is the end-user computing, then the plan will highlight the end users in the IS.Maintenance of master plan

• IS plan requires updating – Changing organizational setup– Changes in technology– Changing needs of system– Internal events– Progress of new systems– External events

Information system growth modelsAssumptions of NOLAN model

• Organizational learning• Stages cannot be skipped• Other than the natural process, these processes can be planned, coordinated, and managed to move

through the stages effectively and efficiently

• The NOLAN stage modelThe organization must go through each stage of growth before it can progress to the next one, thus giving an insight to planning regarding the stage of an IS

Stages of Information system growth

Stages of growth Description

Initiation Early use

Expansion Experimentation, rising cost

Formalization Organizational controls

Maturity Integration of applications

Stages

NOLAN six stage model

Stage Level of control or slack

I Low control. Some slack. No planning

II Greater slack due to encouraged use, integration and lack of planning

III High controls, planning given importance

IV Use of databases for integration

V Slack due to focus on strategically important systems

VI Application portfolio complete and matches organizational objectives

NOLAN alternative modelDue to technological changes the growth curve shifts as follows

Advantages and disadvantages of NOLAN model• Advantages

– Evolutionist model as it focuses on development• Disadvantages

– Lack of specificity as it does not define the mechanism for change

Three stage model of the planning process• It clarifies the generic planning activities, the order of activities, and the alternative techniques and

methodologies that apply

Strategic planning stage• McFarlan-McKenney Strategic Grid

Position in grid Organization and management of IS planning

Strategic Significant general management guidance. Integration of corporate planning and IS planning

Turnaround Same as strategic

Factory Less involvement from top management. Guidance from corporate plan to maintain IS alignmentDetailed operational and capacity planning by IS function

Support Little top management involvementLittle or no guidance from corporate plan

Strategic fit• Each organization has a culture which reinforces values, norms, and beliefs about the organization.

Goals, objectives, and strategy for information systems should fit with the culture in order to avoid high resistance and high risk of failure.

Strategy Set Transformation• Explicate the organization’s strategy set

– Delineate the organization structure for users– Identify goals of claimants– Identify organizational goals and strategies for each claimant group

• Validate the organizational goals from management• Transform organizational strategy set into the information system strategy set

– Identify IS objectives for each organizational strategy– Identify IS constraints from organizational strategy– Identify IS design strategy based on organizational attributes

Analysis of Organizational information requirements• Information requirements are required at the organizational level for information system planning,

identifying applications, and planning an information architecture. • More detailed information requirements are required for detailed design of applications.

Strategy approach to the determination of Information requirements• Constraints

– Humans as information processors– Variety and complexity– Complex patterns of interaction– Unwillingness of some users

• Levels of requirements– Organizational level– Database level– Detailed requirements for an application

Steps:• Identify those characteristics of the four elements in the development process that affect uncertainty in

the determination of information requirements– Utilizing system– Information system or application– Users– Analysis

• Evaluate the effect of the characteristics of the four elements in the development process on three process uncertainties:

– Existence and availability of a set of usable requirements– Ability of users to specify requirements– Ability of analysis to elicit and evaluate requirements

• Evaluate the combined effect of the process uncertainties on overall requirements uncertainty• Select a primary strategy for requirements determination based on the overall requirements uncertainty.

– Asking• Closed questions• Open questions• Brainstorming• Guided brainstorming• Group consensus

– Deriving from an existing information system• Existing system being replaced by the new system• Existing system in another , similar organization• Proprietary system or package• Descriptions in textbooks, handbooks, industry studies etc.

– Synthesizing from characteristics of the utilizing system• Normative analysis• Strategy set transformation• Critical factors analysis approach (critical success factors CSFs)

• Process analysis (Business systems planning BSP)• Ends-means analysis• Decision analysis• Socio-technical analysis• Input-process-output analysis

– Discovering from experimentation with an evolving information system • Select one or more methods from the set of methods to implement the primary strategy

Organizing for development of MIS

Major issues are:• Centralization and Decentralization• Allocation of hardware and software• Maintenance of the service level• Fitting the organization of the MIS in corporate organization, its culture and management philosophy

Organization and management of the Information resource function• The management of IS in many organizations is experiencing a transition from computers and data-

based information processing to information as a strategic resource and to an expanded role for Information technology termed as information resource management.

• Reasons for such shifts are the stage of development, and technology. In the six-stage NOLAN model, the maturity stage replicates organizational processes and there is a joint information-systems-user accountability for information resources. There is also a match between organizational and IS structure. The technology is highly integrated with organizational processes and thus should be managed by single authority.

Information Resource functions• Data processing• Telecommunications• Office Automation

Information resource executiveHis responsibilities include:

• Operational responsibility for central data processing• Coordination of information wide information system planning• Maintaining infrastructure for technical services• Acquisition and dissemination of knowledge• Establishment and enforcement of standards and guidelines for all major IS applications• Aiding of adequate placement of information systems expertise and responsibilities

Organization of the information resource functionThere are three alternatives, centralization, decentralization or combined forms such as function and matrix. Pressures for decentralized control  

• Availability of low cost technology• Backlog of development work• User-control over operations• Organizational Behaviour

– Psychological value of unused information– Persuasion– Symbol of commitment to rational choice

Pressures for centralized control

 • Staff professionalism• Corporate Database control• Technical competence and control• Comparative cost advantage

Centralization and decentralization of System operations(Factors affecting location)

• Economies of scale for computer equipment• Integration of processing• Data communications cost• Technological expertise to support computer operations• Hardware installation risks

Centralization Vs Decentralization of system Development (Role of user liaison) : The development work can be performed at one location or can be distributed along various locations of the organization. But getting the user and developer together helps achieve effectiveness.

Centralization Vs decentralization of Allocation of Scarce Information ResourcesAdvantages of centralization are that it facilitates integration and overall balance of development of IS applications. It also facilitates close adherence to an overall MIS master plan.Decentralization is implemented using a chargeback system. A chargeback system provides a cost recovery. A good chargeback method should have the following characteristics:

• Understand ability• Control ability• Accountability• Cost/Benefit incidence

Thus it should be based on a standard rate per unit processed, such as transactions, inquiries, or reports. Fixed prices are appropriate for development.

Information costInformation cost scan be handled as per the following:

• Overhead• Allocation of expense• Standard resource rates• Standard rate per unit processed• Fixed price• Charges are based on CPU utilization and disk storage costs.

Management of IS personnel

• Information Analyst helps gather relevant information• System Designer designs and models the system• Application programmer develops the application• Maintenance programmer helps keep the application in good form• Program librarian takes care of all the documentation associated with the application• Systems programmer help in system level programming• Data communications specialist helps in communication data correctly• Data administrator takes care of the data kept in the DBMS• User liaison interacts with the user• Office automation coordinator ensures tools work correctly

• Information centre analyst handles all the information• Operator uses the application• Data control clerk validates the data• Data entry clerk enters the data• Security coordinator ensure security features

Concept and process of control

Managerial control implies the measurement of accomplishment against the standard and the correction of deviations to assure attainment of objectives according to plans.It is a continuous process of verifying whether actions are being taken as planned and taking corrective action to ensure that events conform to plans as closely as possible.

Nature of control1. Control process is universal2. Control is a continuous process3. Control is forward looking4. Control involves measurement5. Control is an influence process6. Management control is a system7. Control is best aimed at results8. Control is goal oriented

Elements of control1. Planning2. Information feedback3. Delegation of authority4. Remedial action

Interrelationship between planning and controlPlanning is meaningless without control and control is aimless without planning. Control helps understand the need for revision of plans if required.

Benefits of control1. Guide to operations2. Policy verification3. Managerial accountability4. Employee morale5. Psychological pressure6. Coordination in action

Types of control1. Historical or feedback control2. Concurrent control3. Feedforward control

Information feedback systemsOpen and closed loop

Information feedback is essential to an understanding of the self regulating nature of systems in general and how this attribute can be applied in a MIS to aid in decision making

Control and feedback

Feed-forward control

Steps in control process1. Establishment of standards

a. Quantitative standards

b. Qualitative standards2. Measurement of Performance3. Comparing Performance with Standards4. Analysis of deviations5. Taking corrective action

Essentials of an effective Control system1. Focus on Objectives and needs2. Forward looking3. Prompt4. Critical Point Control5. Flexibility6. Objectivity7. Economical8. Motivating9. Suggestive10. Simple

Techniques of managerial control1. Traditional Techniques

a. Personal observationb. Good organization structurec. Unity of objectivesd. Statistical reports and analysise. Breakeven analysisf. Budgetary control

2. Modern Techniquesa. Management Auditb. Return on investmentc. Responsibility accountingd. PERT and CPM

Steps in System Analysis and Design1. Need for information (Nature of information)2. Define the system (Nature of system)3. Feasibility study (Technical, Economic, Operational)4. Detailing the requirements (Precise requirements)5. Conceptual System Design (Input, Process, Output)6. Detailing the System design (DFDs, Data flows)7. Structuring the system design (Hierarchy)8. Conceptual model of computer system (processes) 9. Break the system in programmable modules10. Develop the test data for checking the system ability11. Install the system12. Implementation13. Review and maintenance

The Strategic Planning Process

In today's highly competitive business environment, budget-oriented planning or forecast-based planning methods are insufficient for a large corporation to survive and prosper. The firm must engage in strategic planning that clearly defines objectives and assesses both the internal and external situation to formulate strategy, implement the strategy, evaluate the progress, and make adjustments as necessary to stay on track.

A simplified view of the strategic planning process is shown by the following diagram:

The Strategic Planning Process

Mission &      Objectives      

  Environmental  Scanning

Strategy    Formulation     

Strategy Implementation  

      Evaluation      & Control

Mission and Objectives

The mission statement describes the company's business vision, including the unchanging values and purpose of the firm and forward-looking visionary goals that guide the pursuit of future opportunities.

Guided by the business vision, the firm's leaders can define measurable financial and strategic objectives. Financial objectives involve measures such as sales targets and earnings growth. Strategic objectives are related to the firm's business position, and may include measures such as market share and reputation.

Environmental Scan

The environmental scan includes the following components:

Internal analysis of the firm Analysis of the firm's industry (task environment) External macro environment (PEST analysis)

The internal analysis can identify the firm's strengths and weaknesses and the external analysis reveals opportunities and threats. A profile of the strengths, weaknesses, opportunities, and threats is generated by means of a SWOT analysis

An industry analysis can be performed using a framework developed by Michael Porter known as Porter's five forces. This framework evaluates entry barriers, suppliers, customers, substitute products, and industry rivalry.

Strategy Formulation

Given the information from the environmental scan, the firm should match its strengths to the opportunities that it has identified, while addressing its weaknesses and external threats.

To attain superior profitability, the firm seeks to develop a competitive advantage over its rivals. A competitive advantage can be based on cost or differentiation. Michael Porter identified three industry-independent generic strategies from which the firm can choose.

Strategy Implementation

The selected strategy is implemented by means of programs, budgets, and procedures. Implementation involves organization of the firm's resources and motivation of the staff to achieve objectives.

The way in which the strategy is implemented can have a significant impact on whether it will be successful. In a large company, those who implement the strategy likely will be different people from those who formulated it. For this reason, care must be taken to communicate the strategy and the reasoning behind it. Otherwise, the implementation might not succeed if the strategy is misunderstood or if lower-level managers resist its implementation because they do not understand why the particular strategy was selected.

Evaluation & Control

The implementation of the strategy must be monitored and adjustments made as needed.

Evaluation and control consists of the following steps:

1. Define parameters to be measured2. Define target values for those parameters3. Perform measurements4. Compare measured results to the pre-defined standard5. Make necessary changes

Hierarchical Levels of Strategy

Strategy can be formulated on three different levels:

corporate level business unit level functional or departmental level.

While strategy may be about competing and surviving as a firm, one can argue that products, not corporations compete, and products are developed by business units. The role of the corporation then is to manage its business units and products so that each is competitive and so that each contributes to corporate purposes.

While the corporation must manage its portfolio of businesses to grow and survive, the success of a diversified firm depends upon its ability to manage each of its product lines. While there is no single competitor to Textron, we can talk about the competitors and strategy of each of its business units. In the finance business segment, for example, the chief rivals are major banks providing commercial financing. Many managers consider the business level to be the proper focus for strategic planning.

Corporate Level Strategy

Corporate level strategy fundamentally is concerned with the selection of businesses in which the company should compete and with the development and coordination of that portfolio of businesses.

Corporate level strategy is concerned with:

Reach - defining the issues that are corporate responsibilities; these might include identifying the overall goals of the corporation, the types of businesses in which the corporation should be involved, and the way in which businesses will be integrated and managed.

Competitive Contact - defining where in the corporation competition is to be localized. Take the case of insurance: In the mid-1990's, Aetna as a corporation was clearly identified with its commercial and property casualty insurance products. The conglomerate Textron was not. For Textron, competition in the insurance markets took place specifically at the business unit level, through its subsidiary, Paul Revere. (Textron divested itself of The Paul Revere Corporation in 1997.)

Managing Activities and Business Interrelationships - Corporate strategy seeks to develop synergies by sharing and coordinating staff and other resources across business units, investing financial resources across business units, and using business units to complement other corporate business activities. Igor Ansoff introduced the concept of synergy to corporate strategy.

Management Practices - Corporations decide how business units are to be governed: through direct corporate intervention (centralization) or through more or less autonomous government (decentralization) that relies on persuasion and rewards.

Corporations are responsible for creating value through their businesses. They do so by managing their portfolio of businesses, ensuring that the businesses are successful over the long-term, developing business units, and sometimes ensuring that each business is compatible with others in the portfolio.

Business Unit Level Strategy

A strategic business unit may be a division, product line, or other profit center that can be planned independently from the other business units of the firm.

At the business unit level, the strategic issues are less about the coordination of operating units and more about developing and sustaining a competitive advantage for the goods and services that are produced. At the business level, the strategy formulation phase deals with:

positioning the business against rivals anticipating changes in demand and technologies and adjusting the strategy to accommodate them Influencing the nature of competition through strategic actions such as vertical integration and through

political actions such as lobbying.

Michael Porter identified three generic strategies (cost leadership, differentiation, and focus) that can be implemented at the business unit level to create a competitive advantage and defend against the adverse effects of the five forces.

Functional Level Strategy

The functional level of the organization is the level of the operating divisions and departments. The strategic issues at the functional level are related to business processes and the value chain. Functional level strategies in marketing, finance, operations, human resources, and R&D involve the development and coordination of resources through which business unit level strategies can be executed efficiently and effectively.

Functional units of an organization are involved in higher level strategies by providing input into the business unit level and corporate level strategy, such as providing information on resources and capabilities on which the higher level strategies can be based. Once the higher-level strategy is developed, the functional units translate it into discrete action-plans that each department or division must accomplish for the strategy to succeed.

PEST Analysis

A scan of the external macro-environment in which the firm operates can be expressed in terms of the following factors:

Political Economic Social Technological

The acronym PEST (or sometimes rearranged as "STEP") is used to describe a framework for the analysis of these macro environmental factors. A PEST analysis fits into an overall environmental scan as shown in the following diagram:

    Environmental Scan

          /   \

External Analysis     Internal Analysis    

/                       \  

Macro environment  Microenvironment     

|  P.E.S.T. 

     

Political Factors

Political factors include government regulations and legal issues and define both formal and informal rules under which the firm must operate. Some examples include:

tax policy employment laws environmental regulations trade restrictions and tariffs political stability

Economic Factors

Economic factors affect the purchasing power of potential customers and the firm's cost of capital. The following are examples of factors in the macroeconomy:

economic growth interest rates exchange rates inflation rate

Social Factors

Social factors include the demographic and cultural aspects of the external macroenvironment. These factors affect customer needs and the size of potential markets. Some social factors include:

health consciousness population growth rate age distribution career attitudes emphasis on safety

Technological Factors

Technological factors can lower barriers to entry, reduce minimum efficient production levels, and influence outsourcing decisions. Some technological factors include:

R&D activity automation technology incentives rate of technological change

External Opportunities and Threats

The PEST factors combined with external micro environmental factors can be classified as opportunities and threats in a SWOT analysis.

SWOT Analysis

A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis.

The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection. The following diagram shows how a SWOT analysis fits into an environmental scan:

SWOT Analysis Framework

Environmental Scan          / \           

Internal Analysis       External Analysis/ \                  / \

Strengths   Weaknesses       Opportunities   Threats|

SWOT Matrix

Strengths

A firm's strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage. Examples of such strengths include:

patents strong brand names good reputation among customers cost advantages from proprietary know-how exclusive access to high grade natural resources favorable access to distribution networks

Weaknesses

The absence of certain strengths may be viewed as a weakness. For example, each of the following may be considered weaknesses:

lack of patent protection a weak brand name poor reputation among customers high cost structure lack of access to the best natural resources lack of access to key distribution channels

In some cases, a weakness may be the flip side of strength. Take the case in which a firm has a large amount of manufacturing capacity. While this capacity may be considered a strength that competitors do not share, it also may be a considered a weakness if the large investment in manufacturing capacity prevents the firm from reacting quickly to changes in the strategic environment.

Opportunities

The external environmental analysis may reveal certain new opportunities for profit and growth. Some examples of such opportunities include:

an unfulfilled customer need arrival of new technologies loosening of regulations removal of international trade barriers

Threats

Changes in the external environmental also may present threats to the firm. Some examples of such threats include:

shifts in consumer tastes away from the firm's products emergence of substitute products new regulations increased trade barriers

The SWOT Matrix

A firm should not necessarily pursue the more lucrative opportunities. Rather, it may have a better chance at developing a competitive advantage by identifying a fit between the firm's strengths and upcoming opportunities. In some cases, the firm can overcome a weakness in order to prepare itself to pursue a compelling opportunity.

To develop strategies that take into account the SWOT profile, a matrix of these factors can be constructed. The SWOT matrix (also known as a TOWS Matrix) is shown below:

SWOT / TOWS Matrix

  Strengths Weaknesses

Opportunities S-O strategies W-O strategies

Threats S-T strategies W-T strategies

S-O strategies pursue opportunities that are a good fit to the company's strengths. W-O strategies overcome weaknesses to pursue opportunities. S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external

threats. W-T strategies establish a defensive plan to prevent the firm's weaknesses from making it highly

susceptible to external threats.

Competitive Advantage

When a firm sustains profits that exceed the average for its industry, the firm is said to possess a competitive advantage over its rivals. The goal of much of business strategy is to achieve a sustainable competitive advantage.

Michael Porter identified two basic types of competitive advantage:

cost advantage differentiation advantage

A competitive advantage exists when the firm is able to deliver the same benefits as competitors but at a lower cost (cost advantage), or deliver benefits that exceed those of competing products (differentiation advantage). Thus, a competitive advantage enables the firm to create superior value for its customers and superior profits for itself.

Cost and differentiation advantages are known as positional advantages since they describe the firm's position in the industry as a leader in either cost or differentiation.

A resource-based view emphasizes that a firm utilizes its resources and capabilities to create a competitive advantage that ultimately results in superior value creation. The following diagram combines the resource-based and positioning views to illustrate the concept of competitive advantage:

Resources and Capabilities

According to the resource-based view, in order to develop a competitive advantage the firm must have resources and capabilities that are superior to those of its competitors. Without this superiority, the competitors simply could replicate what the firm was doing and any advantage quickly would disappear.

Resources are the firm-specific assets useful for creating a cost or differentiation advantage and that few competitors can acquire easily. The following are some examples of such resources:

Patents and trademarks Proprietary know-how Installed customer base Reputation of the firm Brand equity

Capabilities refer to the firm's ability to utilize its resources effectively. An example of a capability is the ability to bring a product to market faster than competitors. Such capabilities are embedded in the routines of the organization and are not easily documented as procedures and thus are difficult for competitors to replicate.

The firm's resources and capabilities together form its distinctive competencies. These competencies enable innovation, efficiency, quality, and customer responsiveness, all of which can be leveraged to create a cost advantage or a differentiation advantage.

Cost Advantage and Differentiation Advantage

Competitive advantage is created by using resources and capabilities to achieve either a lower cost structure or a differentiated product. A firm positions itself in its industry through its choice of low cost or differentiation. This decision is a central component of the firm's competitive strategy.

Another important decision is how broad or narrow a market segment to target. Porter formed a matrix using cost advantage, differentiation advantage, and a broad or narrow focus to identify a set of generic strategies that the firm can pursue to create and sustain a competitive advantage.

Value Creation

The firm creates value by performing a series of activities that Porter identified as the value chain. In addition to the firm's own value-creating activities, the firm operates in a value system of vertical activities including those of upstream suppliers and downstream channel members.

To achieve a competitive advantage, the firm must perform one or more value creating activities in a way that creates more overall value than do competitors. Superior value is created through lower costs or superior benefits to the consumer (differentiation).

Porter's Five Forces

A MODEL FOR INDUSTRY ANALYSIS

The model of pure competition implies that risk-adjusted rates of return should be constant across firms and industries. However, numerous economic studies have affirmed that different industries can sustain different levels of profitability; part of this difference is explained by industry structure.

Michael Porter provided a framework that models an industry as being influenced by five forces. The strategic business manager seeking to develop an edge over rival firms can use this model to better understand the industry context in which the firm operates.

Diagram of Porter's 5 Forces

 

SUPPLIER POWER Supplier concentration

Importance of volume to supplier Differentiation of inputs

Impact of inputs on cost or differentiation Switching costs of firms in the industry

Presence of substitute inputs Threat of forward integration

Cost relative to total purchases in industry

 

BARRIERSTO ENTRY

Absolute cost advantages Proprietary learning curve

Access to inputs Government policy Economies of scale

Capital requirements Brand identity

Switching costs Access to distribution

Expected retaliation Proprietary products

THREAT OFSUBSTITUTES -Switching costs -Buyer inclination to substitute -Price-performance trade-off of substitutes

 

BUYER POWER Bargaining leverage

Buyer volume Buyer information

Brand identity Price sensitivity

Threat of backward integration Product differentiation

Buyer concentration vs. industry Substitutes available

Buyers' incentives

DEGREE OF RIVALRY -Exit barriers -Industry concentration -Fixed costs/Value added -Industry growth -Intermittent overcapacity -Product differences -Switching costs -Brand identity -Diversity of rivals -Corporate stakes

Porter's Generic Strategies

If the primary determinant of a firm's profitability is the attractiveness of the industry in which it operates, an important secondary determinant is its position within that industry. Even though an industry may have below-average profitability, a firm that is optimally positioned can generate superior returns.

A firm positions itself by leveraging its strengths. Michael Porter has argued that a firm's strengths ultimately fall into one of two headings: cost advantage and differentiation. By applying these strengths in either a broad or narrow scope, three generic strategies result: cost leadership, differentiation, and focus. These strategies are applied at the business unit level. They are called generic strategies because they are not firm or industry dependent. The following table illustrates Porter's generic strategies:

Porter's Generic Strategies

Target Scope

Advantage

Low Cost Product Uniqueness

Broad(Industry Wide)

Cost LeadershipStrategy

DifferentiationStrategy

Narrow(Market Segment)

FocusStrategy(low cost)

FocusStrategy

(differentiation)

Ansoff Matrix

To portray alternative corporate growth strategies, Igor Ansoff presented a matrix that focused on the firm's present and potential products and markets (customers). By considering ways to grow via existing products and new products, and in existing markets and new markets, there are four possible product-market combinations. Ansoff's matrix is shown below:

Ansoff Matrix

  Existing Products New Products

ExistingMarkets

Market Penetration     Product Development    

NewMarkets     Market Development     Diversification

Ansoff's matrix provides four different growth strategies:

Market Penetration - the firm seeks to achieve growth with existing products in their current market segments, aiming to increase its market share.

Market Development - the firm seeks growth by targeting its existing products to new market segments.

Product Development - the firms develops new products targeted to its existing market segments. Diversification - the firm grows by diversifying into new businesses by developing new products for

new markets.

Global Strategic Management

During the last half of the twentieth century, many barriers to international trade fell and a wave of firms began pursuing global strategies to gain a competitive advantage. However, some industries benefit more from globalization than do others, and some nations have a comparative advantage over other nations in certain industries. To create a successful global strategy, managers first must understand the nature of global industries and the dynamics of global competition.

Sources of Competitive Advantage from a Global Strategy

A well-designed global strategy can help a firm to gain a competitive advantage. This advantage can arise from the following sources:

Efficiencyo Economies of scale from access to more customers and marketso Exploit another country's resources - labor, raw materialso Extend the product life cycle - older products can be sold in lesser developed countrieso Operational flexibility - shift production as costs, exchange rates, etc. change over time

Strategico First mover advantage and only provider of a product to a marketo Cross subsidization between countries

o Transfer price

Risko Diversify macroeconomic risks (business cycles not perfectly correlated among countries)o Diversify operational risks (labor problems, earthquakes, wars)

Learningo Broaden learning opportunities due to diversity of operating environments

Reputationo Crossover customers between markets - reputation and brand identification

Sumantra Ghoshal of INSEAD proposed a framework comprising three categories of strategic objectives and three sources of advantage that can be used to achieve them. Assembling these into a matrix results in the following framework:

Strategic ObjectivesSources of Competitive Advantage

National Differences Scale Economies Scope Economies

Efficiency in Operations

Exploit factor cost differences Scale in each activitySharing investments and costs

Flexibility Market or policy-induced changes Balancing scale with strategic & operational risks

Portfolio diversification

Innovation and Learning

Societal differences in management and organization

Experience - cost reduction and innovation

Shared learning across activities

The Nature of Competitive Advantage in Global Industries

A global industry can be defined as:

An industry in which firms must compete in all world markets of that product in order to survive. An industry in which a firm's competitive advantage depends on economies of scale and economies of

scope gained across markets.

Some industries are more suited for globalization than are others. The following drivers determine an industry's globalization potential.

1. Cost Driverso Location of strategic resourceso Differences in country costso Potential for economies of scale (production, R&D, etc.) Flat experience curves in an industry

inhibits globalization. One reason that the facsimile industry had more global potential than the furniture industry is that for fax machines, the production costs drop 30%-40% with each doubling of volume; the curve is much flatter for the furniture industry and many service industries. Industries for which the larger expenses are in R&D, such as the aircraft industry, exhibit more economies of scale than those industries for which the larger expenses are rent and

labor, such as the dry cleaning industry. Industries in which costs drop by at least 20% for each doubling of volume tend to be good candidates for globalization.

o Transportation costs (value/bulk or value/weight ratio) => Diamonds and semiconductors are more global than ice.

2. Customer Driverso Common customer needs favor globalization. For example, the facsimile industry's customers

have more homogeneous needs than those of the furniture industry, whose needs are defined by local tastes, culture, etc.

o Global customers: if a firm's customers are other global businesses, globalization may be required to reach these customers in all their markets. Furthermore, global customers often require globally standardized products.

o Global channels require a globally coordinated marketing program. Strong established local distribution channels inhibits globalization.

o Transferable marketing: whether marketing elements such as brand names and advertising require little local adaptation. World brands with non-dictionary names may be developed in order to benefit from a single global advertising campaign.

3. Competitive Driverso Global competitors: The existence of many global competitors indicates that an industry is ripe

for globalization. Global competitors will have a cost advantage over local competitors.o When competitors begin leveraging their global positions through cross-subsidization, an

industry is ripe for globalization.4. Government Drivers

o Trade policieso Technical standardso Regulations

Modes of Foreign Market Entry

An important part of a global strategy is the method that the firm will use to enter the foreign market. There are four possible modes of foreign market entry:

Exporting Licensing (includes franchising) Joint Venture Foreign Direct Investment

These options vary in their degree of speed, control, and risk, as well as the required level of investment and market knowledge. The entry mode selection can have a significant impact on the firm's foreign market success.

Enterprise Resource planning

In order to manage information, in order to deliver high quality information to the decision-makers at the right time, in order to deliver high quality information to the decision-makers at the right time, in order to automate the process of data collection, collation and refinement, organizations have to make IT an ally, harness its full potential and use it in the best possible way. For any organization to succeed, all business units or departments should work towards this common goal. At the organizational level, IT should assist in specifying objectives and strategies of the organization. At the departmental level, IT must ensure a smooth flow of information across departments, and should guide organizations to adopt the most viable business practices.

As the departments are large, they remain closed except at the top level, unless a common system is implemented.

An Enterprise is a group of people with a common goal, which has certain resources at its disposal to achieve that goal. Resources included are money, material, man-power and all other things that are required to run the enterprise. Planning is done to ensure that nothing goes wrong. Thus Enterprise Resource planning is a method of effective planning of all the resources in an organization.

ERP is primarily an enterprise-wide system, which encompasses corporate mission, objectives, attitudes, beliefs, values, operating style, and people who make the organization.

ERP covers the techniques and concepts employed for the integrated management of businesses as a whole, from the viewpoint of the effective use of management resources, to improve the efficiency of an enterprise. It is a mirror image of the major business processes of an organization, such as customer order fulfillment and manufacturing. Its set of generic processes, produce the dramatic improvements they are capable of only, when used to connect parts of an organization and integrate its various processes seamlessly.

Reasons for the growth of the ERP market1. To enable improved business performance through reduces cycle time, increased business agility,

inventory reduction, order fulfillment improvement2. To support business growth requirements through new product lines, new customers, meeting global

requirements3. To provide flexibility, integrated, real-time decision support through improved responsiveness across

the organization4. To eliminate limitation in legacy systems of century dating , fragmentation of data, inflexibility to

change etc5. To take advantage of the untapped mid-market by increasing functionality at a reasonable cost, vertical

market solutions etc.The advantages of ERP

1. Business Integration through automatic data updations2. Flexibility to adapt to global differences3. Better analysis and Planning capabilities by utilizing many types of support systems4. Use of latest technology to sustain growth.

Why do many ERP implementations fail?1. Wrong product

2. Incompetent and hazardous implementation.3. Lack of training for employees

Integrated Management InformationAn information system is an open, purposive system that produces information using the ‘input-process-output’ cycle. The minimal information system consists of three elements-people, procedures and data. People follow procedures to manipulate data to produce information.

ERP Modules1. Finance

a. Financial Accounting e.g. General Ledger, Accounts receivable and payable, Asset accounting, legal consolidation, controlling, overhead cost controlling, cost centre accounting, overhead orders, activity based costing, product cost controlling, cost object controlling, profitability analysis

b. Investment Management e.g. Investment Planning c. Controlling e.g. Overhead cost Controld. Treasury e.g. Cash Management, treasury management, market risk management, funds

managemente. Enterprise Controlling e.g. EISf. Profit Centre Accounting

2. Manufacturinga. Material and Capacity Planningb. Shop Floor Controlc. Quality Managementd. JIT/ Repetitive Manufacturinge. Cost managementf. Engineering Data Managementg. Engineering Change Controlh. Configuration Managementi. Serialization/ Lot Controlj. Tooling

3. Sales and Distributiona. Master Data Managementb. Order management e.g. Sales Order Management, Purchase Order Management, c. Warehouse Management includes inventory planning, inventory handling, intelligent location,

inventory reporting, inventory analysis, lot control, distribution data collection, etc.d. Shippinge. Billingf. Pricingg. Sales Supporth. Transportationi. Foreign Trade

4. Plant Maintenancea. Preventive Maintenance Controlb. Equipment Trackingc. Component Trackingd. Plant Maintenance Calibration Trackinge. Plant Maintenance Warranty Claims Tracking

5. Quality Management

a. Quality planningb. Quality inspectionc. Quality control

6. Materials Managementa. Pre-purchase Activitiesb. Purchasingc. Vendor Evaluationd. Inventory managemente. Invoice verification and material inspection

7. Human Resourcesa. Personnel Management includes personnel administration, employee master data, recruitment

management, travel management, benefits administration, salary administrationb. Organizational Management includes payroll accountingc. Payroll Accountingd. Time Management includes shift planninge. Personnel Development includes training and event management

ERP Market consists of the big 5 vendors (Sap, Oracle, Peoplesoft, Baan, JD Edwards) and others. The big 5 account for 61% of the market share.

SAP (Systems, Applications and products in Data Processing)SAP ERP packages come in two versions: the mainframe version (SAP R/2) and the client/server version (SAP R/3)SAP products feature a sophistication and robustness unmatched by other business software solutions. SAP has developed an extensive library of more than 80 predefined business processes, spanning each functional software requirement.

R/3 OverviewThe 3-tier architecture separates a system into three functional layers, each structured to support the demands of its functions.

1. The database layer resides on central servers or mainframe host computers2. The application layer holds the processing logic of the system, preparing and formatting data for

individual offices or departments.3. The presentation layer typically on personal computers, handles all the tasks related to the presentation

of data, including user interfaces that enable easy access to complex applications and data.

SAP also incorporated And integrated the intranet and internet technologies into business solutions for its customers.Although designed as an integrated system, R/3’s modules can also be used individuallySAP has recently come out with BAPIs (Business application programming interface) which helps SAP interact with third party applications

BannThe Baan series-based product family includes Baan Enterprise Resource Planning (Baan ERP), Baan Front Office, Baan Corporate Office Solutions, Baan Supply Chain Solutions etc.Baan serves a number of industries like Aerospace & Defense and Automative.The Baan ERP modules include the following

Manufacturing Finance

Project Distribution

OracleOracle’s Warehouse Technology Initiative provides customers with a complete data warehousing solution.Oracle’s Integrated Business Intelligence Solutions deliver powerful capabilities to users anywhere in the enterprise, at any time. Products include Oracle Reports, Oracle’s Enterprise Reporting Tool, Oracle Discoverer, Oracle’s Query and Analysis tool etc.Oracle Applications is a leading provider of packaged and integrated front office and ERP solutions for the enterprise. It follows internet computing model.Oracle has 45+ modules divided into following categories

Oracle Financials Oracle Human Resource Oracle Projects Oracle Manufacturing Oracle Supply Chain Oracle Front Office

PeoplesoftIt provides industry specific enterprise solutions to customers in select markets, including communications, financial services, healthcare, manufacturing, higher education.Its applications can be implemented as a single application, or a complete enterprise-wide solutionPeoplesoft tools include several tools for reporting, customization and workflow. Peoplesoft implementation toolkit has a modular application structure, which lends itself to the use of phasing-an incremental process. It has four phasing strategies:

1. Geographical: Applicable when business practices and processes in various locations are independent to justify separate implementations.

2. Departmental: Your initial phase is focused on full implementation for a given department, additional departments incremented later.

3. Core and then support processes 4. No phasing required in some situations.

JD EdwardsJD Edwards WorldVision is a thin client bridge that provides the Graphical User Interface (GUI) with a look and feel common to the PC, while protecting your investment in WorldSoftware and the AS/400. The different product modules available from JD Edwards are:

Foundation Suite Financial Suite Logistics/Distribution Suite Services Suite Manufacturing Suite Architecture, Engineering, Construction, Mining and Real Estate Suite Energy and Chemical Suite Payroll Suite Human Resource Suite Customer Service Management Suite Government, Education, and Not-for-profit Solutions

Utility and Energy Solutions

ERP Implementation lifecycle

What is CRM?CRM stands for Customer Relationship Management. It is a process or methodology used to learn more about customers' needs and behaviors in order to develop stronger relationships with them. There are many technological components to CRM, but thinking about CRM in primarily technological terms is a mistake. The more useful way to think about CRM is as a process that will help bring together lots of pieces of information about customers, sales, marketing effectiveness, responsiveness and market trends.

CRM helps businesses use technology and human resources to gain insight into the behavior of customers and the value of those customers.

CRM SoftwareSales Force Automation

Contact managementContact management software stores, tracks and manages contacts, leads of an enterprise.

Lead managementEnterprise Lead management software enables an organization to manage, track and forecast sales leads. Also helps  understand and improve conversion rates.

eCRM or Web based CRM Self Service CRM

Self service CRM (eCRM) software Enables web based customer interaction, automation of email, call logs, web site analytics, campaign management.

Survey Management SoftwareSurvey Software automates an enterprise's Electronic Surveys, Polls, Questionnaires and enables understand customer preferences.

Pre-selection screening

Package Evaluation

Project Planning

Gap Analysis Reengineering Configuration

Implementation Team building Testing End-user Training

Going Live

Post-implementation Phase

Customer Service Call Center Software Help Desk Software

Partner Relationship Management Contract Management Software

Contract Management Software enables an enterprise to create, track and manage partnerships, contracts, agreements. Example: Upside Software, Accruent Software, diCarta, I-Many.

Distribution management  Software

Using CRM, a business can:

Provide better customer service Increase customer revenues Discover new customers Cross sell/Up Sell products more effectively Help sales staff close deals faster Make call centers more efficient Simplify marketing and sales processes

The types of data CRM projects collect Responses to campaigns Shipping and fulfillment dates Sales and purchase data Account information Web registration data Service and support records Demographic data Web sales data

The secret to an effective CRM package is not just in what data is collected but in the organizing and interpretation of that data. That's where computers come in handy (apart from the Solitaire you can play on them :-)) Computers can't, of course, transform the relationship you have with your customer. That does take a cross-department, top to bottom, corporate desire to build better relationships. But computers and a good computer based CRM solution can increase sales by as much as 40-50% - as some studies have shown.

One of the important activities of CRM is segmenting customers. To achieve this, important subsets of data, stored in central database by ERP, are copied into a separate repository, called data warehouse. Once the data warehouse is in place, companies can use data mining technique to help them if through transaction data in the data warehouse. Companies look for patterns in information to identify the customer relationship.

CRM also allows: One-to-one marketing: Once a customer is categorized, products, promotions, and pricing can be

tailored accordingly. Sales force automation: Customer contacts are logged in the company's database. The customer can be

understood using past transactions and the sales representative can know the customer before visiting. Sales Campaign Management Software: This software lets a company organize a marketing campaign

and compile its results. Marketing Encyclopedia: This software serves as a database of all promotional information required by

sales representatives or customers. Call centre automation: The representative can get assistance about products. CRM needs ERP as a base since an ERP contains all the common transactions of business, relevant for

CRM

Types of CRM systems1. Operational oriented CRM systems: It provides transactional level data on individual products,

transactions and customers2. Analytical CRM systems: It holds aggregate data and supports for strategic planning process3. Collaborative CRM systems: It is the use of web technologies to facilitate customer, staff and business

partner’s communications.

Stages of CRM1. Customer selection2. Customer acquisition3. Customer retention4. Customer extension

Procurement ManagementProcurement management system provides a solution to conduct centralized purchase based on the demands individually submitted and approved by competent authorities. It provides a way to businesses that how they purchase their inventories at a reasonable price.Procurement is often regarded as the narrow process of inviting bids and awarding contracts. The cycle approach to procurement ensures that the early steps in the process and the later steps are given the same emphasis

Procurement Process

The following may be involved in the procurement cycle as it depends upon individual implementation1. Those staff assuming project management roles: project owner, project manager, project board, project team

roles.2. The contract or relationship manager3. Trained procurement staff4. Stakeholders such as users, existing suppliers, finance section.5. Other professional advisors such as accountants, legal advisors, technical advisors

Critical Success Factors1. Do not apply the procurement process in a mechanistic manner. Good judgement, applied ethically and with a

transparent audit train2. Project management, contract management and a robust procurement process together offer a great chance of

success3. Procurement should be recognised as a profession and carried out by skilled staff4. The gateway process is an essential project management tool particularly for high medium risk procurements.

Procurement Risk Matrix

Ethical Procurement Behavior1. Disclosure of Interest should be disclosed for any transaction 2. Gifts and hospitality whether accepted or rejected, should be recorded, and under no circumstances

should the supplier be able to influence.3. Confidentiality of Information should be maintained4. Fair Competition5. Professionalism6. Responsibilities of setting an ideal behaviour, presenting an open image, ensuring that instructions are

understood, supervising staff, regularly rotating posts, etc.

Supply Chain Management

Supply Chain Management encompasses every effort involved in producing and delivering a final product or service, from the supplier’s supplier to the customer’s customer. Supply Chain Management includes managing

supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, and delivery to the customer.

Supply chain objective• Maximize overall value generated• Value strongly correlated to supply chain profitability – the difference between the revenue generated

from the customer and the overall cost across the supply chain• Example: A customer purchasing a computer from Dell pays $ 700 (the revenue)• Dell and other stages of the supply chain incur cost to convey information, produce the components,

store them, transport them, transfer funds, etc.

Why is SCM Important?• Strategic Advantage – It Can Drive Strategy

* Manufacturing is becoming more efficient* SCM offers opportunity for differentiation (Dell) or cost reduction (Wal-Mart or Big Bazaar)

• Globalization – It Covers The World* Requires greater coordination of production and distribution* Increased risk of supply chain interruption* Increases need for robust and flexible supply chains

• At the company level, supply chain management impacts* COST – For many products, 20% to 40% of total product costs are controllable

logistics costs. * SERVICE – For many products, performance factors such as inventory availability

and speed of delivery are critical to customer satisfaction.

Dynamics of Material Flow

Supplier Plant Warehouse Logistics Retailer

Supplier Plant Warehouse Logistics Retailer

Demand PlanningMaterial Requirement PlanningDemand Forecasting

Supplier Plant Warehouse Logistics Retailer

ProductionPlan

ComponentRequirement

Order Management

Pre-selection screening

Package Evaluation

Project Planning

Gap Analysis Reengineering Configuration

Implementation Team building

Testing End-user Training

Going Live

Post-implementation Phase

Dynamics of Order Flow

Supply Chain Planning Processes

Supplier Plant Warehouse Logistics Retailer

Demand PlanningMaterial Requirement PlanningDemand Forecasting

Supplier Plant Warehouse Logistics Retailer

ProductionPlan

ComponentRequirement

Order Management

Pre-selection screening

Package Evaluation

Project Planning

Gap Analysis Reengineering Configuration

Implementation Team building

Testing End-user Training

Going Live

Post-implementation Phase

Process View

Demand PlanningMaterial Requirement PlanningDemand Forecasting

Supplier Plant Warehouse Logistics Retailer

ProductionPlan

ComponentRequirement

Order Management

Pre-selection screening

Package Evaluation

Project Planning

Gap Analysis Reengineering Configuration

Implementation Team building

Testing End-user Training

Going Live

Post-implementation Phase

Customer order cycle• Customer arrival• Customer order entry• Customer order fulfillment• Customer order receiving

Replenishment cycle• Retail order trigger• Retail order entry• Retail order fulfillment• Retail order receiving

Manufacturing cycle• Order arrival from the distributor, retailer, or customer• Production scheduling• Manufacturing and shipping• Receiving at the distributor, retailer, or customer

Modeling for SCM• Forecasting Models

- These models allow prediction of demand based on past data or other parameters that are independently available. They enable better planning, given the lead-time necessary for response.

• Location Models- These models identify the optimal location of facilities such as plants and warehouses, considering the

inbound and outbound transportation costs as well as the fixed and variable costs of operation at the locations under consideration. These are usually formulated as Mixed Integer Programming Models

• Distribution Network Design Models- These models are usually comprehensive in nature, deciding between two, three and even four stages

of distribution network, location of warehouses and break-bulk points, and sometimes even the transportation.

• Allocation Models- These models help in optimally allocating commodities from sources to destinations in a multi-source,

multi-destination environment. The costs considered for optimisation are production costs and warehousing costs. The constraints considered can be due to demand, capacity, route restrictions, etc.

• Inventory Models- Inventory plays a major role in SCM. - Inventory can be of various types such as:

- Batching and shipment inventories- Buffer stocks to take care of uncertainties- Pipeline inventory ( primary and secondary transportation )

These models minimize the total relevant cost, based on trade-offs among, inter alia, inventory carrying cost, ordering cost, stock-out cost, transportation cost, taxes & duties, etc.

• Routing Models- These models allow optimal routing on a transportation network from a given source to a destination.

The models used are the Shortest Path Problem, the Traveling Salesman Problem and the Vehicle Routing Problem. Decision Support Systems that interactively use the expertise of the decision maker by providing

graphical support through a map (i.e., using a Geographical Information System) are also very useful in such decisions.

• Scheduling Models- These models enable allocation of resources to particular activities. Depending on the criteria of

interest and the number of resources, the models are of aid in evaluating appropriate rules for allocation.• Alternative Analysis

- This model simply proposes the identification of alternatives, criteria for decision making and analysis of the alternatives across the criteria to arrive at the best choice. Formal approaches such as simulation and analytic hierarchy process could be used in assessing the implications of the criteria.