Definition of Management Information System?

» Definition of Management Information System
» Purpose of Management Information System
» Advantages of Management Information System
» Objectives of Management Information System
» Characteristics Management Information System
» Models/ types of Management Information Systems
» Management Information System Planning, Controlling and Limitations

 

Definition of Management Information System

Management Information System can be defined as a formal method of collecting timely information in a presentable form. in order to facilitate effective decision making and implementation, in order to carry out organizational operations for the purpose of achieving the organizational goal. A management information system is a system design to provide selected decision –orientation information needed by management plan, control and evaluate the activities of the corporation. It is designed within the frame work that emphasizes profit, planning, performance planning and control at all levels. It complements the ultimate integration of required business information sub system both financial with in the company.

According to Philip kolter- A marketing information system consist of people, equipment and procedures together,sort,analyse,evaluate and distribute the needed timely and accurate information and marketing decision makers.

Professor Allen S. Lee states that research in the information system field examines more than the technological system,or just the social system or even the two side by side in addition it investigates the phenomena that emerge when the two interact.

An information system can be any organized combination of people, hardware, software, communication network and data resources that collects, transforms and disseminates information in an organization.

Purpose of Management Information System

Information processing is a major social activity. A significant part of an individual’s working and personal time is spent in recording, searching for, and absorbing information, as much as 80% of a typical executive’s time is spent on processing and communication information. Their duties involve the production and use of information outputs documents, reports, analysis, plans, etc.

The system provides information on past, present, and project future and on relevant events inside and outside the organization in the society. it may be define as planned and integrated system for gathering relevant data,coverting it in to right time. The main purpose of management information system is to provide the right and correct information to the right people at right time.

Another important purpose of management information system is that it is needed by all business organization because of increased complexity and rate of change of today’s business environment foe example marketing manager needs information about sales performance and trends financial manager needs information on returns, production manager needs information analyzing resources requirement and workers productivity and personnel manager needs information analyzing resources requirements and workers productivity and personnel manager needs information concerning employee compensation and professional development. thus effective managers with the specific marketing,financial,production and personnel information, and products they require to support their decision making responsibilities.

Management information system concept is a vital to effective computer use in business of two or major reason:

1- It serves as a system framework for organizing business computer applications. business application of computer should be viewed as interrelated and integrated computer based information system and not as independent data processing job.

2- It emphasized the management orientation of electronics information processing in business the primary goal of computer based information should be the processing of data generated by business operations.

Advantages of Management Information System

1. Management information system helps the managers to make planning and control decision.

2. Facilitated planning- management information system improves the quality of plants by providing relevant information for sound decision making due to increase in size and complexity of organization managers have lost personal contact with the scenes of operations.

3. Minimize information overload- management information system changes the larger amount of data into summarized form and thereby avoids the confusion which may arise when manager are flooded with detailed facts.

4. Bring coordination-management information system facilities integration of specialized activities by keeping each department aware of the problem and requirement of their department. it connect all decision centers in the organization.

5. Make control easier-it serves as a link between managerial planning and control. It improves the ability of management to evaluate and improve performance. The use of computers has increased the data processing and storage capability and reduces the cost.

6. Management information system assembles, processes.stores, retrie, evaluate, and disseminate the information.

7. It insure that appropriate data is collected from the various sources, processed, and sent further to all the needy destinations.

8. Management information system helps in strategic planning, management control, operational control and transaction processing.

9. It helps the clerical personnel in the transaction processing and answer their queries on the data pertaining to the transaction the status of a particular record and reference on a variety of documents.

Objectives of Management Information System

1. Management information system main objective is to attain the transaction processing of data of an organization effectively. Transaction processing is applied in conversion and analysis of raw data.

2. Management information system is the management of marketing, fiancé, production, and the personnel becomes better trained which result in his efficiency.

3. Management information system is in making the forecasting and long term prospective planning more effective.

4. It tries to create a structured database in knowledge base for all the people in the organization.

Characteristics of Management Information System

Management information system and top management - management information system is a comprehensive and coordinated set of information subsystems which are rationally integrated and which transform data information in a variety of a ways to enhance productivity in conformity with the manager’s style and characteristics on the basis of established quality.

1. Management oriented - the system is designed from top to bottom. This does not mean that the system will be geared to providing information directly to top management rather it means that the system development starts from an appraisal of management needs and overall business objectives it is possible that top management is the focus of the system such as their needs cornerstone on which the system is built for example- a marketing information system basic sales order processing the shipment of goods to the customers and the billing of the goods are fundamental operation control activities. however if the system is designed properly this transaction information can be traced by salesman, sales territory, size of order, geography and product line furthermore if designed with strategic management needs in mind external competition market and economic data can be created to give a picture of how well the company’s product are faring in their marketing environment and to serve as a basic of new product or marketplace introduction the initial application can be geared to the operational and management control areas but in such a way as not preclude its integration into a strategic planning subsystem for upper management.

2. Management directed - because of the management information system it is imperative that management actively directs the system development efforts to determine what information is necessary to improve its control of operation it is rare to find an management information system where the manager himself or a high level representative of his department is not spending a good deal of time in system design it it not a non time involvement for continued review and participation are necessary to ensure that the implemented system meets the specification of the system that designed therefore management is responsible for setting system specification and it must play a major role in subsequent trade off decision that inevitably occur in system development. An important element of effective system planning is the process for determining the priority of application development. Management must control this process if a management information system is the objectives. A company without a formal application approval cycle and a management steering to determine priorities will never develop an management information system.

3. Integrated - integration is significant because of the ability to produce more meaningful management information for example in order to develop an effective production scheduling system we must balance such factors as:

A. Set up cost.
B. Work force.
C. Overtime rates.
D. Production capacity.
E. Capital requirement
D. Customer service.

4. Common data flows - Because of the integration concept of management information system there is an opportunity to avoid duplication and redundancy in data gathering storage and dissemination for example customer orders are the basic for billing the customer for goods ordered setting up the accounts receivable initiating production activity sales analysis sales forecasting and so on it is prudent to capture this data closest to the source where the event occur and use it throughout the functional area it is also prudent to capture it once and thus avoid the duplicate entry of sources data into several system.

5. Heavy planning elements - Management information system do not occur overnight they take from three to five years and longer to get established firmly within a company a heavy planning element must be present in management information system development the management information system designer must have the future objectives and needs of the company firmly in mind. the designer must avoid the possibility of system obsolescence before the system planning is an essential ingredient to successful management information system the management information system provides meaningful direction towards which one strives.

6. Sub-system concept - In tackling a project as broad and complex in scope as a management information system, one just avoid losing sight both the forest and the trees. Even though the system is viewed as a single entity, it must be broken down into digestible sub-system that can be implemented one at a time. The breakdown of management information system into meaningful subsystems set the stage for prioritized implementation. The subsystem analysis is essential for applying boundaries to the problem, thus enabling the designer to focus on manageable entities that can be assigned and computerized by selected system and programming team.

7. Flexibility and ease of use - Despite a careful analysis of the future management information needs it is impossible to predict what is desire their to five year hence. This is true in most industries and especially in industries with rapid change patterns, it is naïve to think that if anyone possesses the omniscience to predict the future with this aa a premise, the next best thing an management information system developer can do is to built in the flexibility to incorporate as many manufacture nuances as possible.

8. Data base - The data is the mortar that holds the functional system together each system requires access to a master file or data covering inventory, personnel, vendors, customers, general ledger, work in progress and so on. If the data is stored efficiently and with common usages in mind one master file can provide the data needed by any of the functional system. It seems logical to gather data once, properly validate it and place it on a central storage medium that can be accessed by any system. However it is not unusual to find a company with multiple data files, one serving one functional system and another serving another system.

9. Distributed data processing - The majority of the companies implementing management information system have a geographic network of sale office, distribution channel, manufacturing plants,divison,subdivision and so on some of these entities are operated in a completely independent fashion and therefore may not be part of the integrated management information system more often than not, the remote site to have the connection with each other and with a host of operation in order to create a effective management information system with geographical boundaries some from of distributed data processing is necessary. Distributed data processing can be thought of as the delivery system, placing information in the hands of those who need it when they need it.

10. Information as a resource - Providing the entire organization must be a concept that information is a valuable resource particularly in the management control and strategic planning areas must be properly managed. This is a subtle but important change in thinking. It was a common in the past to view the data processing.

Models/ Types of Management Information Systems

1. Accounting management information systems - All levels of accounting managers share all accounting reports. 2. Financial management information systems - It provide financial information to all financial managers within an organization include the chief financial officer. The chief financial officer. The chief financial officer analyzes historical and current financial activity.

3. Manufacturing management information systems - More than any functional area great advance in technology have impacted operations, as a result manufacturing operations have changed. For instance, inventories are provided just in time so that great amounts of money are not spent for warehousing huge inventories in some instance raw material are even proceeds on rail load cars waiting to be sent directly to the factory thus there is no need for warehousing.

4. Marketing management information system - A marketing management information system support managerial activity in the area of product development, distribution, pricing decision, promotional effectiveness and sales forecasting more than any other functional area.

5. Human resource management information system - It concern with activity related workers, managers and other individual employed by an organization because the personnel function relates to all other areas in business the human resource management information system playa a valuable role in ensuring organization system include work-force analysis and planning, hiring, training, and job assignment.

6. Structure of management information system - The management information system has been described in terms of support for decision making management activity and organization functions.

7. Conceptual structure - The conceptual structure of a management information system is defined as a federation of functional subsystem each of which is divided into four major information processing components transaction processing, operational control information system support, managerial control information system, managerial control information system and strategic planning information system which has some unique data files which are used by only that sub system.

8. Physical structure - The physical structure of an management information system would be identical to the conceptual structure of all applications consisting of completely separate programs used by only one function but this is frequently not the case substantial information can be achieved from

1 - Integrated processing
2 - Use of common modules

Integrated processing is achieved by designing several related applications as a single system in order to simplify the interconnection and reduce the duplication of input. A good example is an order entry system. The recording of an order initiates a sequence of processing. Each step using new data but also most of the data from prior processing. In other words, an integrated order entry system crosses functional boundaries.

Management Information System Planning, Controlling and Limitations

Planning - The top level management is mainly concerned with strategic planning for example the strategic planning activities of top management involve future interaction between the organization and its external environment.

Computational support for planning:

1. An analysis of historical data to obtain relationship useful for projection.

2. Various projection and forecasting techniques to estimate future value.

4. Computations internal to the plan and computation required for outputs.

5. Output of the results in a meaningful planning format.

Historical data analysis techniques
Historical data analyzed to discover pattern or relation that will be useful in projecting the future value of significance variables. Even when the quantitative relations are not sufficiently stable to use in forecasting data analysis is useful for input into the judgmental forecast.

Historical extrapolation techniques
Historical data describes the past planning that involve the future estimating is generally based on analysis of past history combined with various technique to generate data for planning purposes.

Financial planning computation
Models that involve financial plan need to provide for various computation and analyses commonly required for measuring or evaluating profitability example are depreciation computation rate of return analysis and break even analysis. Depreciation is a significant computation in most financial planning it affect profit computation because it is an expense and it effect cash flow because of its impact on taxes. There are several methods for computing deprecation all of which should be available to the planner. These methods are straight line double declining balance sum of the year digits and production or use basis.

Controlling - At the middle level management, information is management control. Middle level managers such as departmental heads are concerned with the current and future performance of their units. Therefore they need aggregate information on the sales, profit etc.of their units such information is available from both within the organization as well as outside the organization, for example, financial data for budgets and ratio analysis are available from the company’s records. However market data can be collected through special surveys and reports from outside the organization. Top level managers also require management control information. But these information must be more detailed narrower in scope and more accurate than information required for strategic planning. It should also generate at more frequent because the time horizon of decision is shorter.

At the supervisory level of management operational control is exercised production scheduling, cost and credit control, etc. are examples of operational control. Therefore a detailed report on a daily and weekly basis is required, inventory report, operating cost, production rate, etc are examples of such information. Such information available from with in the organization.

The control feedback loop is basic to system design. The computer can improve the control process in several ways:

1. The standard can be complex. Computational simplifications are not necessary.

2. The computation of deviation and identification of cause can be more sophisticated.

3. Reporting with computers can use irregular time interval which is very difficult with manual processing and can be done more frequently.

Limitation

1. Aggression - The people may hit back at the system and may even sabotage it by using equipment incorrectly by putting incomplete information into the system or buy actual destruction of hardware or software.

2. Projection - It is a psychological mechanism of blaming difficulties on someone or something else. When employees blame the management information system for problems caused by human error or other factors unrelated to the system, projection is taking place.

3. Avoidance - It occurs when individuals defend themselves by withdrawing from or avoiding a frustrating situation. Managers may avoid the system by ignoring its output, in favour of their own information sources.

Management Information System Planning - Management information system general business planning initiates from the following concepts :

1. Mission of the corporate.

2. Objectives and goals for the corporate in all key performance areas. These are in line with the mission of the corporate.

3. Strategic planning for general approach on how to achieve long term objectives.

4. Operational planning for specific guideline on how to transverse short term milestones