Types of Information systems Transaction processing systems and Management information systems

Types of Information systems
Transaction processing systems and
Management information systems
Different Kinds of Systems
Four main types of IS serve four different
organizational levels:
1. Operational-level systems
2. Management-level systems
3. Strategic-level systems
Operational level systems
•
To answer routine questions and track the flow
of transactions through the organization.
Therefore, information generally must be easily
available, current, and accurate.
•
Supporting operational managers by keeping
track of the elementary activities and
transactions of the organization, such as sales,
receipts, cash deposits, payroll, credit decisions,
and the flow of materials in a factory
Management-level Systems
• To serve the monitoring, controlling,
decision-making, and administrative
activities of middle managers
• Typically providing periodic reports rather
than instant information on operations
– Including control systems for annual budgeting
and inventory, and management systems for
sales and human resources
Strategic-level systems
• To match changes in the external
environment with existing organizational
capability
• Helping senior management deal with and
address strategic issues and long-term
trends, both in the firm and in the external
environment
– Including a system to forecast sales trends over a
five-year period or systems for profit planning
and personnel planning
Major Types of systems
• Executive Support Systems (ESS)
• Decision Support Systems (DSS)
• Management Information Systems (MIS)
• Transaction Processing Systems (TPS)
Transaction processing systems
• Definition: A Transaction Processing System (TPS) is a type
of information system that collects, stores, modifies and
retrieves the data transactions of an enterprise.
• – E.g. sales order entry, payroll, shipping
• – For example McDonald's, which sells a large number
of hamburgers every day, orders raw materials
from its suppliers. Each time the company places an order
with a supplier, a transaction occurs and a transaction
system records relevant information, such as the supplier's
name, address, and credit rating, the kind and quantity
of items purchased, and the invoice amount.
Types of transactions
• Transactions can be internal or external.
• When a department orders office supplies
from the purchasing department, an internal
transaction occurs
• When a customer places an order for a
product, an external transaction occurs.
Transaction processing systems are the
data lifeline of the company
• If a company fails to capture a transaction it
may lead not only to customer dissatisfaction
and lost profit but also to serious penalties
and lawsuits.
• TPS s become the source of data for other
systems in the organization. If analyzed and
integrated it will give business key information
about new company plans. A better plan how
to meet customer needs and preferences.
• TPS is a link between the organization and
external entities, such as suppliers, customers
& distributors.
Batch processing
• Transactions are accumulated over time and
processed identically.
• Batch processing may be done on a daily,
weekly, or monthly basis or any other time
period appropriate to the application.
– For example, a company may process the travel
expenses of its employees on a monthly basis
Real time processing
• The immediate processing of data with the
database updated as the transaction is
being carried out.
– An example may be the Bank ATM and POS
terminal, both of which have user input which
requires immediate feedback.
Characteristics of a transaction
processing system
• Records internal and external transactions that take
place in a company
• Is used mostly by lower-level managers to make
operational decisions
• Stores data that are frequently accessed by other
systems
• Is ideal for routine, repetitive tasks
• Records transactions in batch mode or on-line
• Requires six steps to process a transaction—data
entry, validation, data processing, storage, output
generation, and query support
TPS payroll system
Management Information Systems
– Serve middle management
– Provide reports on firm’s current performance,
based on data from TPS
– Provide answers to routine questions with
predefined procedure for answering them
– Typically have little analytic capability
Management Information Systems
• An MIS provides managers with information and
support for effective decision making, and
provides feedback on daily operations.
• MIS provides information to the users in the form
of reports
• Output, or reports, are usually generated through
accumulation of transaction processing data.
– Example: Annual budgeting
Management Information Systems
Transaction Processing
Systems (TPS)
– Support operation
– Management and
control
– Routine, normal
operations
– Structured decisions
Management Information
Systems (MIS)
– Provide decision-making
support for routine,
structured decisions
– Closely linked to and fed
by TPS
– Structured and Semistructured decisions
Structured decisions
• Structured decisions are those which are
made according to specified procedures of
rules or structured decisions are those that
are easily made from a given set of inputs.
• Deciding to send a reminder notice to a
customer for an overdue balance is
considered to be structured decision
Semi-structured decisions
• Semi-structured decisions are those for which
information obtained from a computer system
or information system is only a portion of the
total knowledge needed to make decision.
• Advertise a new product or how much to
spend on MIS.
Unstructured decisions
• Unstructured decisions are novel, and insignificant.
• There is no cut and dried method for handling the
problem because it hasn't arisen before or because it's
precise nature and structure are mysterious or
complex, or because it so important' that it deserves a
custom tailored treatment.
• These, types of decisions often , involve a high degree
of freedom.
• They may require a lot of creativity and intuitions from
the decision maker to tell what factors will come into
play in an unstructured play.
MIS systems obtain data from TPS
systems
MIS report
MIS report types
•
•
•
•
•
Scheduled reports
Key-indicator reports
Exception reports
Ad hoc (demand) reports
Drill-down reports
Scheduled reports
• Produced periodically,
or on a schedule (daily,
weekly, monthly
Key-Indicator report
• Summarizes the
previous day’s critical
activities and typically
available at the
beginning of each
day.
Demand and exception reports
• Gives certain
information at
a manager’s
request.
• Automatically
produced when a
situation is
unusual or
requires
management
action
Drill Down Reports
• Provide
detailed data
about a
situation.
Management
•
•
•
•
Management is decision making
The manager is a decision maker
Organizations are filled with decision makers at different level.
Management is considered as art: a talent acquired over years by
trial-and-error.
• However decision making today is becoming more complicated:
– Technology / Information/Computers : increasing More
alternative to choose
– Structural Complexity / Competition : increasing larger cost of
error
– International markets / Consumerism : increasing more
uncertainty about future
– Changes, Fluctuations : increasing need for quick decision
Management problems
•
•
Most management problems for which decisions are sought can be
represented by three standard elements – objectives, decision variables, and
constraints. These problems can be structured, semi-structured and
unstructured in nature:
Objective
– Maximize profit
– Provide earliest entry into market
– Minimize employee discomfort/turnover
•
Decision variables
– Determine what price to use
– Determine length of time tests should be run on a new product/service
– Determine the responsibilities to assign to each worker
•
Constraints
– Can’t charge below cost
– Test enough to meet minimum safety regulations
– Ensure responsibilities are at most shared by two workers
Information Systems to support
decisions
Management
Information
Systems
Decision Support
Systems
Decision
support
provided
Provide information about
the performance of the
organization
Provide information and
techniques to analyze
specific problems
Information
form and
frequency
Periodic, exception,
demand, and push reports
and responses
Interactive inquiries and
responses
Information
format
Prespecified, fixed format
Ad hoc, flexible, and
adaptable format
Information
processing
methodology
Information produced by
Information produced by
extraction and manipulation analytical modeling of
of business data
business data
Decision support systems
• A Decision Support System (DSS) is an interactive
computer-based system or subsystem intended
to help decision makers use communications
technologies, data, documents, knowledge
and/or models to identify and solve problems,
complete decision process tasks, and make
decisions.
• Decision Support System is a general term for any
computer application that enhances a person or
group’s ability to make decisions; can be as
simple as an excel spread sheet to a complicated
system involving large databases, statictical
modelling techniques and applying A.I. to dervive
information.
Question
• Explain the difference between a structured,
semi-structured and unstructured decision.
• (6 marks)
• Describe, using suitable examples the parts
played by both a transaction processing system
(T.P.S.) and an Management information system
(M.I.S. in the generation of information required
for strategic level decision making
• (24 marks)