BACHELOR OF BUSINESS ADMINISTRATION

BBA-IInd SEM. GDIB-JN-206 STUDY MATERIAL ON MANAGEMENT INFORMATION SYSTEM & ENTERPRISE RESOURCE MANAGEMENT

Ms. Poonam Malik

Management Information System & ERP

CONTENTS:

Unit 1 Introduction: Definition, Purpose, Objectives and Role of MIS in Business Organization with particular reference to Management Levels, Location of MIS in the Organization – concept and design. Information Concepts: Data and Information – meaning and importance, Relevance of Information in Decision Making, Sources and Types of Information, Assessing Information needs of the Organization. Unit 2

System Development: Concept of System, Types of Systems – Open, Closed, Deterministic, Probabilistic, etc. Relevance of choice of System in MIS, Integration of Organization Systems and Information Systems, System Development Life Cycle, System Analysis, Design and Implementation, MIS Applications in Business. Unit 3

Types of information systems: definition, basic features and components of Transaction Processing System, Decision Support System, Executive Information System, Expert System Unit 4

Introduction To ERP: Evolution of ERP, Reasons for the growth of ERP, Advantages and limitations of ERP. Basic Modules of ERP:- Personnel Management, Training and Development, Material Planning and Control, Manufacturing, Production Planning, Production Control, Sales and Distribution Unit 5 ERP and Related Technologies: Business Process Reengineering (BPR), Management Information System (MIS), Executive Information System (EIS), Decision support System (DSS), Supply Chain Management (SCM), OLAP (Online Analysis and Processing)

UNIT 1 ______________________________________________

Introduction to MIS & Information Concepts Learning Objectives: After studying this unit, you will learn:

Definition, Purpose, Objectives of MIS Role of MIS in Business Organization with particular reference to Management Levels Location of MIS in the Organization – concept and design. Data and Information – meaning and importance Relevance of Information in Decision Making Sources and Types of Information Assessing Information needs of the Organization __________________________________________________________________________________

1.1 Introduction: Management Information Systems (MIS), referred to as Information Management and Systems, is the discipline covering the application of people, technologies, and procedures collectively called information systems, to solving business problems. “'MIS' is a planned system of collecting, storing and disseminating data in the form of information needed to carry out the functions of management.” Academically, the term is commonly used to refer to the group of information management methods tied to the automation or support of human decision making, e.g. Decision Support Systems, Expert Systems, and Executive Information Systems. Management : Management is art of getting things done through and with the people informally organized groups. The basic functions performed by a manager in an organization are: Planning, controlling, staffing, organizing, and directing. Information : Information is considered as valuable component of an organization. Information is data that is processed and is presented in a form which assists decision maker. System : A system is defined as a set of elements which are joined together to achieve a common objective. The elements are interrelated and interdependent. Thus every system is said to be composed of subsystems. A system has one or multiple inputs, these inputs are processed through a transformation process to convert these input( s) to output.

MIS DEFINITION: The Management Information System (MIS) is a concept of the last decade or two. It has been understood and described in a number ways. It is also known as the Information System, the

Information and Decision System, the Computer- based information System. The MIS has more than one definition, some of which are give below. 1. The MIS is defined as a system which provides information support for decision making in the organization. 2. The MIS is defined as an integrated system of man and machine for providing the information to support the operations, the management and the decision making function in the organization. 3. The MIS is defined as a system based on the database of the organization evolved for the purpose of providing information to the people in the organization. 4. The MIS is defined as a Computer based Information System. Thought there are a number of definitions, all of them converge on one single point, i.e., the MIS is a system to support the decision making function in the organization. The difference lies in defining the elements of the MIS. However, in today.s world MIS a computerized .business processing system generating information for the people in the organization to meet the information needs decision making to achieve the corporate objective of the organization. In any organization, small or big, a major portion of the time goes in data collection, processing, documenting it to the people. Hence, a major portion of the overheads goes into this kind of unproductive work in the organization. Every individual in an organization is continuously looking for some information which is needed to perform his/her task. Hence, the information is people-oriented and it varies with the nature of the people in the organization. The difficulty in handling this multiple requirement of the people is due to a couple of reasons. The information is a processed product to fulfill an imprecise need of the people. It takes time to search the data and may require a difficult processing path. It has a time value and unless processed on time and communicated, it has no value. The scope and the quantum of information is individual dependent and it is difficult to conceive the information as a well-defined product for the entire organization. Since the people are instrumental in any business transaction, a human error is possible in conducting the same. Since a human error is difficult to control, the difficulty arises in ensuring a hundred per cent quality assurance of information in terms of completeness, accuracy, validity, timeliness and meeting the decision making needs. In order to get a better grip on the activity of information processing, it is necessary to have a formal system which should take care of the following points: Handling of a voluminous data. Confirmation of the validity of data and transaction. Complex processing of data and multidimensional analysis. Quick search and retrieval. Mass storage. Communication of the information system to the user on time. Fulfilling the changing needs of the information. The management information system uses computers and communication technology to deal with these points of supreme importance.

1.2 Objectives of MIS : 1. Data Capturing : MIS capture data from various internal and external sources of organization. Data capturing may be manual or through computer terminals. 2. Processing of Data : The captured data is processed to convert into required information. Processing of data is done by such activities as calculating, sorting, classifying, and summarizing. 3. Storage of Information : MIS stores the processed or unprocessed data for future use. If any information is not immediately required, it is saved as an organization record, for later use. 4. Retrieval of Information : MIS retrieves information from its stores as and when required by various users. 5. Dissemination of Information : Information, which is a finished product of MIS, is disseminated to the users in the organization. It is periodic or online through computer terminal.

1.3 Characteristics of MIS : 1. Systems Approach : The information system follows a systems approach. Systems approach means taking a comprehensive view or a complete look at the interlocking sub-systems that operate within an organization. 2. Management Oriented : Management oriented characteristic of MIS implies that the management actively directs the system development efforts. For planning of MIS, top-down approach should be followed. Top down approach suggests that the system development starts from the determination of management‘s needs and overall business objective. To ensure that the implementation of system‘s polices meet the specification of the system, continued review and participation of the manager is necessary. 3. Need Based : MIS design should be as per the information needs of managers at different levels. 4. Exception Based : MIS should be developed on the exception based also, which means that in an abnormal situation, there should be immediate reporting about the exceptional situation to the decision –makers at the required level. 5. Future Oriented : MIS should not merely provide past of historical information; rather it should provide information, on the basis of future projections on the actions to be initiated. 6. Integrated : Integration is significant because of its ability to produce more meaningful information. Integration means taking a comprehensive view or looking at the complete picture of the interlocking subsystems that operate within the company. 7. Common Data Flow : Common data flow includes avoiding duplication, combining similar functions and simplifying operations wherever possible. The development of common data flow is an economically sound and logical concept, but it must be viewed from a practical angle. 8. Long Term Planning : MIS is developed over relatively long periods. A heavy element of planning should be involved. 9. Sub System Concept : The MIS should be viewed as a single entity, but it must be broken down into digestible sub-systems which are more meaningful. 10.Central database : In the MIS there should be common data base for whole system

1.4 ROLE OF THE MANAGEMENT INFORMATION SYSTEM: The role of the MIS in an organization can be compared to the role of heart in the body. The information is the blood and MIS is the heart. In the body the heart plays the role of supplying pure blood to all the elements of the body including the brain. The heart works faster and supplies more blood when needed. It regulates and controls the incoming impure blood, processes it and sends it to the destination in the quantity needed. It fulfills the needs of blood supply to human body in normal course and also in crisis. The MIS plays exactly the same role in the organization. (1) The system ensures that an appropriate data is collected from the various sources, processed, and sent further to all the needy destinations. The system is expected to fulfill the information needs of an individual, a group of individuals, the management functionaries: the managers and the top management. (2) The MIS satisfies the diverse needs through a variety of systems such as Query Systems, Analysis Systems, Modeling Systems and Decision Support Systems the MIS helps in Strategic Planning, Management Control, Operational Control and Transaction Processing. (3) The MIS helps the clerical personnel in the transaction processing and answers their queries on the data pertaining to the transaction, the status of a particular record and references on a variety of documents. The MIS helps the junior management personnel by providing the operational data for planning, scheduling and control, and helps them further in decision making at the operations level to correct an out of control situation. (4) The MIS helps the middle management in short them planning, target setting and controlling the business functions. It is supported by the use of the management tools of planning and control. The MIS helps the top management in goal setting, strategic planning and evolving the business plans and their implementation. (5) The MIS plays the role of information generation, communication, problem identification and helps in the process of decision making. The MIS, therefore, plays a vita role in the management, administration and operations of an organization.

1.5 Organizational Need for MIS in a Company To facilitate the management decision making at all levels of company, the MIS must be integrated. MIS units are company wide. MIS is available for the Top management. The top management of company should play an active role in designing, modifying and maintenance of the total organization wide management information system. Information system and Information technology have become a vital component of any successful business and are regarded as major functional areas just like any other functional area of a business organization like marketing, finance, production and HR. Thus it is important to understand the area of information system just like any other functional area in the business. MIS is important because all businesses have a need for information about the tasks which are to be performed. Information and technology is used as a tool for solving problems and providing opportunities for increasing productivity and quality. Information has always been important but it has never been so available, so current and so overwhelming. Efforts have been made for collection and retrieval of information, However, challenges still remain in the selection analysis and interpretation of the information that will further improve decision making and productivity.

MIS for a Business Organization : 1. Support the Business Process : Treats inputs as a request from the customer and outputs as services to customer. Supports current operations and use the system to influence further way of working. 2. Support Operation of a Business Organization : MIS supports operations of a business organization by giving timely information, maintenance and enhancement which provides flexibility in the operation of an organizations. 3. To Support Decision Making : MIS supports the decision making by employee in their daily operations. MIS also supports managers in decision making to meet the goals and objectives of the organization. Different mathematical models and IT tools are used for the purpose evolving strategies to meet competitive needs. 4. Strategies for an Organization : Today each business is running in a competitive market. MIS supports the organization to evolve appropriate strategies for the business to assented in a competitive environment.

1.6 Prerequisites of an Effective MIS Essential Requirement of an Effective MIS : (i) Qualified System and Management Staff : The prerequisite of an effective MIS is that it should be managed by qualified officers. These officers should have a mutual understanding about the roles and responsibilities of each other. be understand clearly the view of their fellow officers. For this, each organization should have two categories of officers : (a) System and Computer Experts who in addition to their expertise in their subject area , they should also be capable of understanding management concepts to facilitate the understanding of problems asked by concern. They should also be clear about the process of decision making and information requirements for planning. (b) Management experts who should also understand quite-clearly the concepts and operations of a computer. This basic knowledge of computer will be useful will place them in a comfortable position, while working with systems, technicians in designing or other wise, of the information system. (ii) Futuristic Perspective : An effective MIS should be capable of meeting the future requirements of its executives as well. This capability can be achieved by regular monitoring and updating the MIS. (iii) Support of Top Management : For a management information system to be effective, it must receive the full support of top management. The Reasons for this are : (a) Subordinate managers are usually lethargic about activities which do not receive the support of their superiors. (b) The resources involved in computer based information system are larger and are growing larger and larger in view of importance gained by management information system. (iv) Common Database : It is an integrated collection of data and information which is utilized by several information subsystems of an organization. A common database may be defined as a super file which consolidates and integrates data records formerly stored in a separate data file. Such a database can be organized as an integrated collection of data records into a single super file or it can be organized as an integrated collection of several data file. (v) Control and maintenance of MIS : Control of the MIS means the operation of the system as it

was designed to operate. Some times, users develop their own procedures or short cut methods to use the system which reduces its effectiveness.

1.7 Various type of Information System A business has several information systems : (A) Formal Information System (B) Informal Information System (C) Computer Based Information System (a) Formal Information System : It is based on organizational chart represented by the organization. (b) Informal Information System : It is an employee based system designed to meet personal and vocational needs and to help in the solution of work-related problems. It also funnels information upward through indirect channels. It works within the framework of the business and its stated policies. (c) Computer Based Information System (CBIS) : This category of information system depends mainly on the computer for handling business application. System analysis develops different types of information system to meet variety of business needs. There is class of system known as collectively as computer based information system. They are categorized in the following 6 classes: i) Transaction Processing System (TPS) ii) Management Information System (MIS) iii)Decision Support System (DSS) iv)Executive Support System (ESS) v)Office Automation Systems (OASs), and vi)Business Expert Systems (BESs) The organization has executive support systems (ESS) at the strategic level; management information systems (MIS) and decision-support systems (DSS) at the management level; knowledge work systems (KWS) and office systems at the knowledge level; and transaction processing systems (TPS) at the operational level. Systems at each level in turn are specialized to serve each of the major functional areas. Thus, the typical systems found in organizations are designed to assist workers or managers at each level and in the functionsof sales and marketing, manufacturing, finance, accounting, and human resources. 1. Transaction Processing System: TPS processes transaction and produces reports. It represents the automation of the fundamental, routine processing used to support business operations.It does not provide any information to the user to his/her decision-making. TPS uses data and produces data .Previously, TPS was known as Management Information System. Prior to computers, data processing was performed manually or with simple machines. The domain of TPS is at the lowest level of the management hierarchy of an organization. 2. Management Information System (MIS) MIS is an information system, which processes data and converts it into information.A management

information system uses TPS for its data inputs. The information generated by the information system may be used for control of operations, strategic and long-range planning. Short-range planning, management control, and other managerial problem solving. It encompasses processing in support of a wide range of organizational functions & management processes. MIS is capable of providing analysis, planning & decision making support. The functional areas of a business may be marketing, production, human resource, finance and accounting. 3. Decision Support System (DSS) A decision support system (DSS) is an information system application that assists decision-making. DSS tends to be used in planning, analyzing alternatives, and trial and error search for solution. The elements of the decision support system include a database, model base & software. The main application areas of DSS are Production, finance and marketing. DSS can be differentiated from MIS on the basis of processing the information. MIS processes data to convert it into information. DSS processes information to support the decision making process of a manager. 4. Executive Support System (ESS) Executive Support System (ESS) is an extension of the management information system, which is a special kind of DSS; An ESS is specially tailored for the use of chief executive of an organization to support his decision-making. It includes various types of decision-making but it is more specific and person oriented. 5. Office Automation Systems (OAS) Office automation refers to the application of computes and communication technology to office functions.

Office automation systems are meant to improve the productivity of managers at

various levels of management of providing secretarial assistance and better communication facilities. Office activities may be grouped under two classes, namely i)Activities performed by clerical personnel (clerks, secretaries, typist, etc.,) and ii)Activities performed by the executives (managers, engineers or other professionals like economist, researches etc.) In the first category, the following is a list of activities. a) Typing b)Mailing c)Scheduling of meetings and conferences, d) Calendar keeping, and e)Retrieving documents The following is a list of activities in the second category (managerial category) a)Conferencing. b)Production of information (messages, memos, reports, etc.) and controlling performance. 6. Business Expert Systems:These systems are one of the main types of knowledge-based information systems. These systems are based on artificial intelligence, and are advanced information systems. A business expert system is a knowledge based information system that uses its knowledge about a specific, complex application area to act as an expert. The main components of an expert system are:

a. Knowledge Base b. Interface Engine c. User Interface

1.8 Information Concepts The word .information. is used commonly in our day to day working. In MIS, information has a precise meaning and it is different from data. The information has a value in decision making while data does not have. Information brings clarity and creates an intelligent human response in the mind. In MIS a clear distinction is made between data and information. Data is like raw materials while the information is equivalent to the finished goods produced after processing the raw material. Information has certain characteristics. These are: Information Improves representation of an entity Updates the level of knowledge. Has a surprise value. Reduces uncertainty. Aids in decision making. The quality of information could be called good or bad depending on the mix of these characteristics. Devis and Olson defines information as a data that has been processed into a form that is meaningful to the recipient and is of real or perceived value in the current or the prospective actions or decisions of the recipient. Data is defined as groups of non-random symbols in the form of text, images or voice representing quantities, actions and objects. Whether an entity is a data or information, it must be transferred through communication from the Source. to the Destination without loss of content. The general model for such communication is given in Fig. The above model of communication is used in the MIS. The MIS is equivalent to the transmitter which provides information and sends through reports (channel) to the various receivers, which is decoded or interpreted by the receiver at the destination. The poor quality of information due to various factors would create confusion and misunderstanding, which is equivalent to a Noise and a Destortion in the communication model. A good MIS communicates the information without a noise and a distortion to the user.

1.9 Information Presentation Presentation of the information is an art. The data may be collected in the best possible manner and processed analytically, bringing lot of value in the information; however, if it is not presented properly, it may fail to communicate anything of value to the receiver. The degree of communication is affected by the methods of transmission, the manner of information handling and the limitations and constraints of a receiver as the information processor and the organization as the information user. The methods used for improving communication are summarization and message routing. The concept of summarization is used to provide information which is needed in the form and content. The information can be summarized in a number of ways as shown in Table .

The principle behind summarization is that too much information causes noises and distortions, i.e., confusion, misunderstanding and missing the purpose. The summarization suppresses the noise and the distortions. Another method of improving the degree of communication is through message routing. The principle here is to distribute information to all those who are accountable for the subsequent actions or decisions in any manner. That is if the information is generated with a certain purpose for a primary user, then such information may have secondary purposes to some other users in the organization. This is achieved by sending the copies of the reports or documents to all the concerned people or users. The principle of the message routing achieves the spread of information to the appropriate quarters. Knowledge is a power and an intelligent person in the organization can misuse this power to achieve personal goals undermining the functional and organizational goals. This tendency should be curbed. Further, the decision maker may call for the information on the grounds that, just in case required, he should readily have it. Apart from the misuse of information, it has an impact on the cost of information processing. In order to curb the misuse of information, a control is exercised on the content of information and its distribution.

1.10 Bias in information While choosing the appropriate method of communicating information a care has to be taken to see that is not biased. For example, while using the techniques of classification or filtering the information, it should not happen that certain information gets eliminated or does not get classified. That is, a deliberate bias in covering certain information is to be avoided. This bias enters because people try to block sensitive information which affects them. To overcome this problem, a formal structure of organization should be adopted and the type of information and its receiver should be decided by the top management. Many a times the data and the information are suppressed but the inferences are informed, with no or little possibility of verification or rethinking. In this case one who draws inferences may have a bias in the process of collection, processing and presentation of data and information. Though the deliberate enforcement of the inference on the receiver avoids a possibility of the multiple inferences, but in this case processor.s bias is forced on the receiver. For example, organizations have departments like Corporate Planning, Market Research, R and D, HRD and so on, which collect the data and analyze it for the company and communicate the inferences. In all these cases personal bias, organizational bias and management bias may be reflected in the entire process of collection processing, and communication inference. The presentation of the information will generate a bias and may influence the user. For example, if the information is presented in an alphabetical order and if it is lengthy, the first few information entities will get more attention. If the information is presented with a criteria of exception, the choice of exception and deviation from the exception creates a bias by design itself. For a quick grasp, the information is presented in a graphical form. The choice of scale, the graphic size and the colour introduced a bias in the reader.s mind. The base, which may creep in inadvertently because of the information system design, can be tackled by making the design flexible, so far as reporting is concerned. Allow the manager or the decision maker to choose his classification or filtering criteria, the scope of

information, the method of analysis and the presentation of inference. However, somewhere balance needs to be maintained between the flexibility of the design and the cost, and its benefits to the managers. Disregarding the bias in information, it must have certain attributes to increase its utility as shown in Table. Redundancy is the repetition of the parts or messages in order to circumvent the distortions or the transmission errors. The redundancy, therefore, sometimes is considered as an essential feature to ensure that the information is received and digested. In MIS the redundancy of data and information, therefore, is inevitable on a limited scale. Its use is to be made carefully so that the reports are not crowded with information.

1.11 Characteristics of Information: The parameters of a good quality are difficult to determine, however, the information can be termed as of a good quality if it meets the norms of impartiality, validity, reliability, consistency and age. The quality of information has another dimension of utility from the user.s point of view. The users being many, this is difficult to control. Therefore, if one can develop information with due regards to these parameters, one can easily control the outgoing quality of the information with the probable exception of the satisfaction at the users end. Following are the essential characteristic features : (i) Timeliness : Timeliness means that information must reach the recipients within the prescribed timeframes. For effective decision-making, information must reach the decision-maker at the right time, i.e. recipients must get information when they need it. Delays destroys the value of information. The characteristic of timeliness, to be effective, should also include up-to-date, i.e. current information. (ii) Accuracy : Information should be accurate. It means that information should be free from mistakes, errors &, clear Accuracy also means that the information is free from bias. Wrong information given to management would result in wrong decisions. As managers decisions are based on the information supplied in MIS reports, all managers need accurate information. (iii) Relevance : Information is said to be relevant if it answers especially for the recipient what, why, where, when, who and why? In other words, the MIS should serve reports to managers which is useful and the information helps them to make decisions.. (iv) Adequacy : Adequacy means information must be sufficient in quantity, i.e. MIS must provide reports containing information which is required in the deciding processes of decision-making. The report should not give inadequate or for that matter, more than adequate information, which may create a difficult situation for the decision-maker. Whereas inadequacy of information leads to crises, information overload results in chaos. (v) Completeness : The information which is given to a manager must be complete and should meet all his needs. Incomplete information may result in wrong decisions and thus may prove costly to the organization. (vi) Explicitness : A report is said to be of good quality if it does not require further analysis by the recipients for decision making. (Vii) Impartiality: Impartial information contains no bias and has been collected without any distorted view of the situation. The partiality creeps in, if the data is collected with a preconceived view, a prejudice, and a pre-determined objective or a certain motive. (viii)Validity: The validity of the information relates to the purpose of the information. In other

words, it is the answer to the question-dose the information meet the purpose of decision making for which it is being collected? The validity also depends on how the information is used. Since the information and the purpose need not have one to one correspondence, the tendency to use it in a particular situation may make the information invalid. For example, if the quality of the manufactured product is deteriorating and it is decided to select the causes of poor quality, then one must collect all the possible causes which may affect the quality. Quality is a function of the raw material, the process of manufacture, the tools applied, the measures of the quality assessment, the attitude of the people towards the control of quality. However, if the information collected talks only about raw materials and the process of manufacture, then this information is not sufficient and hence it is not valid for all the decisions which are required to control the quality. (ix) Reliability: It is connected to the representation and the accuracy of what is being described. For example, if the organization collects the information on the product acceptance in the selected market segment, the size of the sample and the method of selection of the sample will decide the reliability. If the sample is small, the information may not give the correct and a complete picture and hence it is not reliable. The reliability is also affected from the right source. (x)Consistency:The information is termed as inconsistent if it is derived form a data which dose not have a consistent pattern of period. Somewhere, the information must relate to a consistent base or a pattern. For example, you have collected the information on the quantity of production for the last twelve months to fix the production norms. If in this twelve months period, the factory has worked with variable shift production, the production statistics of the twelve months for comparison is inconsistent due to per shift production. The consistency can be brought in by rationalizing the data to per shift production per month. The regularity in providing the information also helps in assessing the consistency in the information. (xi)Age: If the information is old, it is not useful today. The currency of the information makes all the difference to the users. If the information is old then it does not meet any characteristics of the information viz., the update of knowledge, the element of surprise and the reduction of uncertainty, and the representation. Maintaining these parameters at a high degree always poses a number of problems. These problems are in the management of the operations, the sources, the data processing and the systems in the organization. A failure to maintain the parameters to a high degree affects the value of the information to the decision maker.

1.12 Different types of Information Classification of Information : The information can be classified in a number of ways provide to better understanding. Jhon Dearden of Harvard University classifies information in the following manner : (1) Action Verses No-Action Information : The information which induces action is called action information. ‗No stock‗report calling a purchase action is an action information. The information which communicates only the status is No-Action Information. The stock balance is no-action information. (2) Recurring Verses No-Recurring Information : The information generated at regular intervals is recurring information. The monthly sales reports, the stock statement, the trial balance, etc are recurring information. The financial analysis or the report on the market research study is norecurring information. (3) Internal and external information : The information generated through the internal sources of

the organization is termed as Internal Information, while the information generated through the govt. reports, the industry survey etc., termed as External Information, as the sources of the data are outside the organization. The information can also be classified, in terms of its application : (i) Planning Information : Certain standard norms and specifications are used in planning of any activity. Hence such information is called the Planning Information. e. g. Time standard, design standard. (ii) Control Information : Reporting the status of an activity through a feedback mechanism is called the Controlling Information. When such information shows a deviation from the goal or the objective, it will induce a decision or an action leading to control. (iii) Knowledge Information : A collection of information through the library records and the research studies to build up a knowledge base as an information is known as Knowledge Information. (iv)Organization Information : When the information is used by everybody in the organization, it is called Organization Information. Employee and payroll Information is used by a number of people in an organization. (v) Functional/ Operational Information : When the information is used in the operation of a business it is called Functional/Operational Information. (vi) Database Information : When the information has multiple use and application, it is called as database information. Material specification or supplier information is stored for multiple users.

1.13 Difference between Data Processing and Information Processing Data Processing : Data Processing is a process that converts data into information or knowledge. The processing is usually assumed to be automated and running on a computer. Because data are most useful when well-presented and actually informative, data-processing systems are often referred to as information systems to emphasize their practicality. Nevertheless, both terms are roughly synonymous, performing similar conversions; data-processing systems typically manipulate raw data into information, and likewise information systems typically take raw data as input to produce information as output. Data processing is that a business has collected numerous data concerning an aspect of its operations and that this multitude of data must be presented in meaningful, easy-to-access presentations for the managers who must then use that information to increase revenue or to decrease cost. That conversion and presentation of data as information is typically performed by a data-processing application. Information Processing : Information processing is the change or processing of information in any manner detectable by an observer. Information processing may more specifically be defined in terms by Claude E. Shannon as the conversion of latent information into manifest information. Latent and manifest information is defined through the terms of equivocation, remaining uncertainty, what value the sender has actually chosen, dissipation uncertainty of the sender what the receiver has actually received and transformation saved effort of questioning - equivocation minus dissipation. Practical Information Processing can be described as a cycle, where data which may have no inherent meaning to the observer is converted into information, which does have

meaning to the observer.

1.14 Methods of Data and Information Collection: Several methods are available for the collection of data. The choice of method will have an impact on the quality of information. Similarly the design of data collection method also decides the quality of data and information. The methods of data collection and processing become a part of the MIS. The various methods of data collection are explained in Table . An awareness of these methods is essential to the manager. Further, he should also nunderstand the potential problems of bias, currency, and the fact versus the opinion in the various types of methods. The observation, the experiment, the survey and the subjective estimation are the methods chosen for data collection and information about a specific problem, while the remaining methods are chosen to collect data on a routine basis without any particular problem whatsoever. Following are the methods of data collection : i. Observation ii. Experiment iii. Survey iv. Subjective Estimation v. Transaction Processing vi. Purchase from Outside vii. Publication viii. Government Agencies Methods of Data and Information Collection : The specific methods analysts use for collecting data about requirements are called fact – finding techniques. These include the interview, questionnaire, record inspections (on – site review) and observation. Analysts usually employ more that one of these techniques to help ensure an accurate and comprehensive investigation. 1 )Interview Analysts use interviews to collect information from individuals or from groups. The respondents are generally current users of the existing system or potential users of the proposed system. In some instances, the respondents may be managers or employees who provide data for the proposed system or who will be affected by it. Although some analysts prefer the interview to other fact – finding techniques, it is not always the best source of application data. Because of the time required for interviewing, other methods must also be used to gather the information needed to conduct an investigation. It is important to remember that respondents and analysts converse during an interview – the respondents are not being interrogated. Interviews provide analysts with opportunities for gathering information form respondents who have been chosen for their knowledge of the system under study. This method is frequently the best source of qualitative information (opinions, policies, and subjective descriptions of activities and problems). Other fact finding methods are likely to be more useful for collecting quantitative data (numbers, frequencies, and quantities). This method of fact – finding can be especially helpful for gathering information from individuals who do not communicate effectively in writing or who may not have the time to complete questionnaires. Interviews allow analysts to discover areas of misunderstanding, unrealistic

expectations, and even indications of resistance to the proposed system. Interviews can be either structured or unstructured: Unstructured interviews, using a question – and – answer format, are appropriate when analysts want to acquire general information about a system. This format encourages respondents to share their feelings, ideas, and beliefs. Structured interviews use standardized questions in either an open response or closed – response format. The former allows respondents to answer in their own words; the latter uses a set of prescribed answers. Each approach has advantages and disadvantages. The success of an interview depends on the skill or the interviewer and on his or her preparation for the interview. Analysts also need to be sensitive to the kinds of difficulties that some respondents create during interviews and know how to deal with potential problems. They need to consider not only the information that is acquired during an interview, but also its significance. It is important to have adequate verification of data through other data collection methods. 2 ) Questionnaire The use of questionnaires allows analysts to collect information about various aspects of a system from a large number of persons. The use of standardized question formats can yield more reliable data than other fact – finding techniques, and the wide distribution ensures greater anonymity for respondents, which can lead to more honest responses. However, this method does not allow analysts to observe the expressions or reactions or respondents. In addition, response may be limited, since completing questionnaires may not have high priority among the respondents. Analysts often use open – ended questionnaires to learn about feeling, opinions, and general experiences or to explore a process or problem. Closed questionnaires control the frame of reference by presenting respondents with specific responses form which to choose. This format is appropriate for electing factual information. The high cost of developing and distributing questionnaires demands that analysts carefully consider the objective of the questionnaire and determine what structure will be most useful to the study and most easily understood by the respondents. Questionnaires should also be tested and, if necessary, modified before being printed and distributed. As with interviewees, recipients, of questionnaires would be selected for the information they can provide. The analysts should ensure that the respondents, background and experiences qualify them to answer the questions. 3 )Record Review Many kinds of records and reports can provide analysts with valuable information about organizations and operations. In record reviews, analysts examine information that has been recorded about the system and user. Record inspection can be performed at the beginning of the study, as an introduction, or later in the study, as a basis for comparing, actual operations with the records indicate should be happening. Records include written policy manuals, regulations and standard operating procedures used by most organizations and a guide for managers and employees. They do not show what activities are actually occurring, where the decision – making power lies, or how tasks are performed. However, they can help analysts understand the system by familiarizing them with what operations must be supported and with formal relations within the organization. 4 ) Observation Observation allows analysts to gain information they cannot obtain by any other fact – finding method. Through observation, analysts can obtain firsthand information about how activities are

carried out. This method is most useful when analysts need to actually observe how documents are handled, how processes are carried out, observers know what to look for and how to assess the significance of what they observe.

1.15 level of business activity with reference to information required While developing an information management strategy within an organization, it is useful to consider informations need at on three levels : (i) Corporate (Top Level ) (ii)Team, Division, Business Unit (Middle Level) (iii)Individual (Low Level ) The needs of each of these three levels must be met if a coordinated and effective solution is to be maintained in the long-term. Failure to address any one of the levels will lead to areas of the business or individuals finding their own solution, which may not fit well within the strategic goals of the organization. (i) Corporate (Top Level Information) : At the top level corporate information that is useful for the whole organization. This 'global' information is generally well addressed by the corporate intranet. Examples of corporate information include policies and procedures, HR information, online forms, phone directory, etc. Interestingly, there may be a limited amount of truly global information, and it may not deliver the greatest (measurable) business benefits. (ii) Team, division, business unit (Middle level) : The middle level is perhaps the most important, as it covers all the information shared within teams, divisions, business units, etc. This information may be critical to the day-to-day activities of the group, but of little interest to the rest of the organization. Examples include project documentation, business unit specific content, meeting minutes, etc. This level is generally poorly-served within organizations, although collaboration tools are increasingly being used to address team information needs. It is also being recognized that it is this 'local' information that may be the most valuable, in terms of driving the day-to-day activity of the organization. (iii) Individual (Low Level) : At the lowest level the personal information need of staff exists throughout the organization. Examples include correspondence, reports and spreadsheets. In most organizations, staff must struggle with using email to meet their information management needs. While staff generally recognizes the inadequacy of e-mail, they have few other approaches or technologies at their disposal. Managing the Levels : While managing the information at each of the three levels, consider aspects need consideration: (a) An information management solution must be provided for staff at each of the three levels. If corporate solutions aren't provided, then staff will find their own solutions. This is the source of poor-quality intranet sub-sites, and other undesirable approaches. (b) A clear policy must be developed, outlining when and how it will apply at all the three levels and how information should be managed at each level. (c) Processes must be put in place to 'bubble up' or 'promote' information from lower levels to higher levels. For example, some team-generated information will be critical for the whole organization. (d) As much as possible, a seamless information management environment should be delivered that covers all the three levels.

1.16 Categories of Information • Strategic Information- relates to ling range planning policies that are direct interest to upper management and for long range goals. For example- population growth, trends in financial investment, human resources. • This information is achieved with the aid of DSS. • Managerial Information- It is of direct use to middle management and department heads for implementation and control. For example- sales analysis, cash flow projections, and annual financial statements. • This information is of use in short and intermediate range planning- i.e. months rather than years. • It is maintained with the help of MIS. • Operational Information- It is short term, daily information used to operate departments and to enforce the day to day rules and regulations of the business. For example- daily employee absence sheets, overdue purchase orders, current stock. This information is achieved with the aid of TPS. • It is established by data processing systems. Informal Information Systems • It is an employee based system designed to meet personnel and vocational needs and to help solve, work related problems. • It relies on computer for handling business applications.

1.17 TYPES OF INFORMATION SYSTEMS An information system is a collection of hardware, software, data, people and procedures that are designed to generate information that supports the day-to-day, short-range, and long-range activities of users in an organization. Information systems generally are classified into five categories: office information systems, transaction processing systems, management information systems, decision support systems, and expert systems. The following sections present each of these information systems. 1. Office Information Systems An office information system, or OIS (pronounced oh-eye-ess), is an information system that uses hardware, software and networks to enhance work flow and facilitate communications among employees. Win an office information system, also described as office automation; employees perform tasks electronically using computers and other electronic devices, instead of manually. With an office information system, for example, a registration department might post the class schedule on the Internet and e-mail students when the schedule is updated. In a manual system, the registration department would photocopy the schedule and mail it to each student‘s house. An office information system supports a range of business office activities such as creating and distributing graphics and/or documents, sending messages, scheduling, and accounting. All levels of users from executive management to nonmanagement employees utilize and benefit from the features of an OIS. The software an office information system uses to support these activities include word processing, spreadsheets, databases, presentation graphics, e-mail, Web browsers, Web page authoring,

personal information management, and groupware. Office information systems use communications technology such as voice mail, facsimile (fax), videoconferencing, and electronic data interchange (EDI) for the electronic exchange of text, graphics, audio, and video. An office information system also uses a variety of hardware, including computers equipped with modems, video cameras, speakers, and microphones; scanners; and fax machines. 2. Transaction Processing Systems A transaction processing system (TPS) is an information system that captures and processes data generated during an organization‘s day-to-day transactions. A transaction is a business activity such as a deposit, payment, order or reservation. Clerical staff typically perform the activities associated with transaction processing, which include the following: 1. Recording a business activity such as a student‘s registration, a customer‘s order, an employee‘s timecard or a client‘s payment. 2. Confirming an action or triggering a response, such as printing a student‘s schedule, sending a thank-you note to a customer, generating an employee‘s paycheck or issuing a receipt to a client. 3. Maintaining data, which involves adding new data, changing existing data, or removing unwanted data. Transaction processing systems were among the first computerized systems developed to process business data – a function originally called data processing. Usually, the TPS computerized an existing manual system to allow for faster processing, reduced clerical costs and improved customer service. The first transaction processing systems usually used batch processing. With batch processing, transaction data is collected over a period of time and all transactions are processed later, as a group. As computers became more powerful, system developers built online transaction processing systems. With online transaction processing (OLTP) the computer processes transactions as they are entered. When you register for classes, your school probably uses OLTP. The registration administrative assistant enters your desired schedule and the computer immediately prints your statement of classes. The invoices, however, often are printed using batch processing, meaning all student invoices are printed and mailed at a later date. Today, most transaction processing systems use online transaction processing. Some routine processing tasks such as calculating paychecks or printing invoices, however, are performed more effectively on a batch basis. For these activities, many organizations still use batch processing techniques. 3. Management Information Systems While computers were ideal for routine transaction processing, managers soon realized that the computers‘ capability of performing rapid calculations and data comparisons could produce meaningful information for management. Management information systems thus evolved out of transaction processing systems. A management information system, or MIS (pronounced emeye-ess), is an information system that generates accurate, timely and organized information so

managers and other users can make decisions, solve problems, supervise activities, and track progress. Because it generates reports on a regular basis, a management information system sometimes is called a management reporting system (MRS). Management information systems often are integrated with transaction processing systems. To process a sales order, for example, the transaction processing system records the sale, updates the customer‘s account balance, and makes a deduction from inventory. Using this information, the related management information system can produce reports that recap daily sales activities; list customers with past due account balances; graph slow or fast selling products; and highlight inventory items that need reordering. A management information system focuses on generating information that management and other users need to perform their jobs. An MIS generates three basic types of information: detailed, summary and exception. Detailed information typically confirms transaction processing activities. A Detailed Order Report is an example of a detail report. Summary information consolidates data into a format that an individual can review quickly and easily. To help synopsize information, a summary report typically contains totals, tables, or graphs. An Inventory Summary Report is an example of a summary report. Exception information filters data to report information that is outside of a normal condition. These conditions, called the exception criteria, define the range of what is considered normal activity or status. An example of an exception report is an Inventory Exception Report is an Inventory Exception Report that notifies the purchasing department of items it needs to reorder. Exception reports help managers save time because they do not have to search through a detailed report for exceptions. Instead, an exception report brings exceptions to the manager‘s attention in an easily identifiable form. Exception reports thus help them focus on situations that require immediate decisions or actions. 4. Decision Support Systems Transaction processing and management information systems provide information on a regular basis. Frequently, however, users need information not provided in these reports to help them make decisions. A sales manager, for example, might need to determine how high to set yearly sales quotas based on increased sales and lowered product costs. Decision support systems help provide information to support such decisions. A decision support system (DSS) is an information system designed to help users reach a decision when a decision-making situation arises. A variety of DSSs exist to help with a range of decisions. A decision support system uses data from internal and/or external sources. Internal sources of data might include sales, manufacturing, inventory, or financial data from an organization‘s database. Data from external sources could include interest rates, population trends, and costs of new housing construction or raw material pricing. Users of a DSS, often managers, can manipulate the data used in the DSS to help with decisions. Some decision support systems include query language, statistical analysis capabilities, spreadsheets, and graphics that help you extract data and evaluate the results. Some decision support systems also include capabilities that allow you to create a model of the factors affecting a

decision. A simple model for determining the best product price, for example, would include factors for the expected sales volume at each price level. With the model, you can ask what-if questions by changing one or more of the factors and viewing the projected results. Many people use application software packages to perform DSS functions. Using spreadsheet software, for example, you can complete simple modeling tasks or what-if scenarios. A special type of DSS, called an executive information system (EIS), is designed to support the information needs of executive management. Information in an EIS is presented in charts and tables that show trends, ratios, and other managerial statistics. Because executives usually focus on strategic issues, EISs rely on external data sources such as the Dow Jones News/Retrieval service or the Internet. These external data sources can provide current information on interest rates, commodity prices, and other leading economic indicators. To store all the necessary decision-making data, DSSs or EISs often use extremely large databases, called data warehouses. A data warehouse stores and manages the data required to analyze historical and current business circumstances. 5. Expert Systems An expert system is an information system that captures and stores the knowledge of human experts and then imitates human reasoning and decision-making processes for those who have less expertise. Expert systems are composed of two main components: a knowledge base and inference rules. A knowledge base is the combined subject knowledge and experiences of the human experts. The inference rules are a set of logical judgments applied to the knowledge base each time a user describes a situation to the expert system. Although expert systems can help decision-making at any level in an organization, nonmanagement employees are the primary users who utilize them to help with job-related decisions. Expert systems also successfully have resolved such diverse problems as diagnosing illnesses, searching for oil and making soup. Expert systems are one part of an exciting branch of computer science called artificial intelligence. Artificial intelligence (AI) is the application of human intelligence to computers. AI technology can sense your actions and, based on logical assumptions and prior experience, will take the appropriate action to complete the task. AI has a variety of capabilities, including speech recognition, logical reasoning, and creative responses. Experts predict that AI eventually will be incorporated into most computer systems and many individual software applications. Many word processing programs already include speech recognition. Integrated Information Systems With today‘s sophisticated hardware, software and communications technologies, it often is difficult to classify a system as belonging uniquely to one of the five information system types discussed. Much of today‘s application software supports transaction processing and generates management information. Other applications provide transaction processing, management information, and decision support. Although expert systems still operate primarily as separate

systems, organizations increasingly are consolidating their information needs into a single, integrated information system. , there are a variety of requirements for information. Senior managers need information to help with their business planning. Middle management need more detailed information to help them monitor and control business activities. Employees with operational roles need information to help them carry out their duties. As a result, businesses tend to have several "information systems" operating at the same time. This revision note highlights the main categories of information system and provides some examples to help you distinguish between them.

1.18 Nolan's Six-stage Model for Growth of MIS One of the stages of growth model, helping in the understanding of the role of information systems, in an organization's strategy and its maturity. Earlier, in a similar model called the four-stage growth model the maturity of an organization was captured in terms of use of information systems. The stages are, 1.

Initiation-in which the primary focus is cost reduction and only specialized applications are run with a specialized staff. Management in not very keen on monitoring the information system. 2. Expansion-in which application increase rapidly. Specialization of staff and applications is the order of the day. Management begins to take note of the new way of doing things. 3. Formalization-in which emphasis is laid on control and specialization, is built around control. Management controls information systems. 4. Maturity-in which database oriented applications proliferate. Information is used as a resource. Nolan's Stages of Growth Model I

II

III

INITIATIONS CONTAGION CONTROL • Users are • Proliferation "hands off" in of applications approach • Little • Extensive management IT/IS planning control

• IT/IS is considered as an important function

• Centralized controls are • Cost • Huge applied for reduction allocation of IT/IS primary focus financial resources • No • Functional reduction in application is in • Rapid growth IT/IS use focus of fundamental use of IT • • MIS dept/IS

IV

V

INTEGRATION DATA ADMIN • Greater use of database • Data in administration • Greater IT/IS budget • Applications are in sync • IT/IS dept now with the works on a organization professional utility model • Shift from IT/IS booking • Formal after DP to planning and holistic control within information IT/IS dept management

VI MATURITY • IT/IS dept becomes partners of users in data management • Applications reflect real information needs • Strategic planning of IT/IS

dept is not under strict management control

• IS/IT performance below importation and several crisis occur

Applications • Steering are often committees are incompatible widely used for • Unhappy application development. users • Use of database but with unsatisfactory outcome

becomes important • Managers of IT/IS dept considered at par with other dept

Nolan (1979) indicated that there are six stages in the information system evolutionary process. It is an improvement over the four-stage model. The stages are: 1. Initiation- in which the organization has an operational focus and tries to get operational efficiency and thereby limited value from the information systems. 2. Contagion-in which the organization moves towards online systems after having tasted success in the initiation stage. More users are added. 3. Control-in which the management exercises control and makes a cost-benefit type of assessment. 4. Integration-in which the organization moves away from an ad hoc isolated solutions based on information system to a service based information system. This is the stage when the organization transitions from a data processing outlook about information systems to more holistic information-based decision-making approach towards information systems. A more comprehensive approach towards information systems results in changes in the organization's behavior towards information systems and initiates a new appreciation for data and information. 5. Data administration-in which the organization begins to appreciate the value of information and makes efforts to centralize the data management to take advantage of the benefits of information based decision-making. 6. Maturity-in which the organization creates synergies in its corporate objectives and information systems planning so that the two can work in a synchronized manner. These are the stages as Nolan has described in this research. However, no empirical proof exists of this stage growth model of information system maturity.

1.19 ROLE OF MIS IN IMPROVING DECISION MAKING: Decision making is an essential part of any business. This is because a majority of operations in an organization turn around decisions made by the management. In order to make decisions more effectively, it is very important to have a good management information system since decisions are based on information available. The effectiveness of every business information is dependent on the timing and content of the business information presented and management actions. The need for management information system is felt when the managers have to make proper business decisions, the manger will have to rely on his judgment but he must have information on the basis which he arrives at business decisions. If an organization have a significant management information system, it is easy for an organization to take decision on the basis of available information. Good MIS ensures good decision making just in the same way bad MIS drive the making of bad decisions.MIS plays a crucial role in decision making through its systematic tools, timely information and adequate managerial policies and regulations. The quality of managerial decision-making depends upon the qualitative information and the managers should therefore develop an environment that encourages the growth and quality information. Management information systems give managers fast component to information. It includes interaction with other decision support systems, information examination, cross referencing of external information and possible data removal techniques. These systems provide information and strategic technique with practical decisions. Finally, Management Information systems play the crucial role of providing a wide range of alternatives from which decision makers are able to make their preferred decision. This is important for companies in the modern day generation where any minor fall in decision making can lead to very infinite losses.

1.20 IMPACT OF THE MANAGEMENT INFORMATION SYSTEM Since the MIS plays a very important role in the organization, it creates an impact on the organization.s functions, performance and productivity. The impact of MIS on the functions is in its management. With a good support, the management of marking, finance, production and personnel become more efficient. The tracking and monitoring of the functional targets becomes easy. The functional, managers are informed about the progress, achievements and shortfalls in the probable trends in the various aspects of business. This helps in forecasting and long- term perspective planning. The manager.s attention is brought to a situation which is exceptional in nature, inducing him to take an action or a decision in the matter. A disciplined information reporting system creates a structured data and a knowledge base for all the people in the organization. The information is available in such a form that it can be used straight away or by blending analysis, saving the manager.s valuable time. The MIS creates another impact in the organization which relates to the understanding of the business itself. The MIS begins with the definition of a data entity and its attributes. It uses a dictionary if data, entity and attributes, respectively, designed for information generation in the organization. Since all the information system use the dictionary, there is common understanding of terms and terminology in the organization brining clarity in the communication and a similar understanding an even of the organization. The MIS calls for a systemization of the business operation for an affective system design. A well designed system with a focus on the manger makes an impact on the managerial efficiency. The fund of information motivates an enlightened manger to use a variety of tools of the management. It helps him to resort to such exercises as experimentation and modeling. The use of computers enables him to use the tools techniques which are impossible to use manually. The ready-made packages make this task simpler. The impact is on the managerial ability to perform. It improves the decision making ability considerably. Since the MIS works on the basic systems such as transaction processing and databases, the drudgery of the clerical work is transferred to the computerized

system, relieving the human mind for better work. It will be observed that a lot of manpower is engaged in this activity in the organization. It you study the individual.s time utilization and its application; you will find that seventy per cent of the time is spent in recording, searching, processing and communication. This is a large overhead in the organization. The MIS has a direct impact on this overhead. It creates a information- based work culture in the organization.

1.21 MIS : ORGANISATION Management information systems (MIS) should be designed, viewing the organization as discussed earlier. MIS design should give due weight age to the human side of the organization and its culture. The task and technology are the physical aspects of the organization which can be ascertained very easily. But culture and people are very difficult to assess from the design point of view. The structure of the five sub-systems should be considered while designing the MIS. MIS design should give reports in line with the organization structure. This means that the main decision makers and the power centers must be recognized in the MIS. Let us discuss these aspects of the organization structure and their implications. In a tall hierarchy with a high degree of centralization, the MIS should give control information to the higher management where decision making in concentrated. If the system is structured on the functional basis where the functional head is a key decision maker and all the functions have equally important role to play, then the MIS will have a functional design with the information support to the functional head. Further, in such a set-up, an integrated MIS would be necessary, reporting the corporate status of the business to the top management. If the organization works on a standardized system where rules, policies, systems and procedures have been laid down, then these become part of the MIS. The processing routines in the MIS incorporate these features as an integral part. This is safe as it has already been approved by the management of the organization. Along with the information, if the decision making responsibilities are also clearly defied and allocated, then the MIS can produce information reports by processing the data and summarizing the results in line with the decision maker.s position in the structure. If the basic model of the organization is modified as a product or a project organizationnsystem, then the MIS should focus on the management of planning and control of the multiple functions. Besides these functions, he has to know the trouble spots and shows the interconnection with the other functions. It must summaries all information relating to the span of control of product or project manger. The MIS should be able to cater to the view of the product or the project manager and also of the top management. In the organization culture provides sufficient incentive for efficiency and results, the MIS should support this culture by providing such information which will aid the promotion of efficiency. If the culture encourages delegation of power and authority, then the MIS should incorporate the decision making rules in the system. The organization system is an open system and MIS should be so designed that it highlights the critical business, operational, technological and environmental changes to the concerned level in the organization, so that the action can be taken to correct the situation. The principle of the feed forward control should be extensively used as a design feature to provide a prior warning to the decision maker. Since the organization system has a dynamic role to play to meet the changing needs of a business, the MIS becomes a common support system for playing the dynamic role. When an organization is moving through the business phases of introduction, growth, maturity and decline, MIS should provide an information support, relevant to that phase of the business cycle. This means the designer of MIS should foresee such requirements and make the design flexible enough to support such requirements. The organizational learning helps to tone up the behavior of the organization. The MIS should support the learning mechanism by identifying the cause and effect in a given situation. It should keep the records of action and provide help to analyze the best action in a given situation. It should be help to build various decision models for use by the managers. The information support should

be such that the group of enterprising manager should be able to improve their capabilities to perform batter. The design of the MIS, in isolation from organizational factors, is destined to fall as it just does not fit into the structure. Since organization systems in the same business differ for various reasons such as the leadership style, the management style, culture and group of people as a body and so on, it is difficult to evolve a standard model of the MIS for a business and/or an industry. MIS plays a very important role in creating organization behavior which in turn sets the goals for achievement. Technology and people decide the organization structure and style of the management.

1.22 MIS AND THE INFORMATION CONCEPT The goal of the MIS should be to provide the information which has a surprise value and which reduces the uncertainty. It should simultaneously build the knowledge base in the organization by processing the data obtained from different sources in different ways. The designer of the MIS should take care of the data problems knowing that it may contain bias and error by introduction of high level validations, checking and controlling the procedures in the manual and computerized systems. While designing the MIS, due regard should be given to the communication theory of transmitting the information from the source to the destination. A special care should be taken to handle a noise and a distortion on the way to destination. The presentation of information plays a significant role in controlling the noise and distortion which might interrupt, while communicating information to the various destinations. The principles of summarization and classification should be carefully applied giving regard to the levels of management. Care should be taken in the process that no information is suppressed or overemphasized. The utility of information increases if the MIS ensures that the information possesses the necessary attributes. The redundancy of the data and the information is inevitable ob a limited scale. MIS should use the redundancy as a measure to control the error in communication. The information is a quality product for the organization. The quality of information as an outgoing product can be measured on four dimensions, viz., the utility, the satisfaction, the error and the bias. The MIS should provide specific attention to these quality parameters. A failure to do so would result in a wasteful expenditure in the development of the MIS and poor usage of investment in the hardware and software. The quality can be ensured if the inputs to the MIS are controlled on the factors of impartiality, validity, reliability, consistency and age. MIS should make a distinction between the different kinds of information for the purpose of communication. An action, a decision-oriented information should be distinguished from a no-action/knowledge-oriented information. The information could be of recurring type or an ad hoc type. The MIS also needs to give regard to the information used for planning, performance control, and knowledge database. A distinction between these factors will help make the decisions of communications, storage and also the frequency of reporting. Since the decision maker is a human, it requires recognizing some aspects of human capabilities in the MIS design. These human capabilities differ from manager to manager and the designer has to skillfully deal with them. The differences in the capabilities arise on account of the perception in assessing the locus of the management control, the faith and the confidence in the information versus knowledge, the risk propensity, the tolerance for ambiguity, the manipulative intelligence, the experience in decision making and the management style. The MIS design should be such that it meets the needs of the total organization. For design considerations and for the operational convenience, the organization is divided into four levels, viz., the top, the middle, the supervisory and the operational. The top management uses the MIS for goal-setting and strategic planning, deals with key information of a higher degree of accuracy where the perceived value of the information is very high. As against this, the lowest level management and the operational management uses the MIS to know the status by calling information of the

current period in detail where the perceived value of information is the lowest and it usually insists on getting the information in a fixed format. The MIS design, therefore, should ensure the input data quality by controlling the data for the factors, viz. impartiality, validity, reliability, consistency and age. The data processing and the decision making routines should be developed in such a manner that the data is processed after thorough validation and checking, and the analysis thereof is further reported to the various levels and individuals with due regard to the differences in the individual management style and human capabilities. Recognizing that the information may be misused if it falls into wrong hands, the MIS design should have the features of filtering, blocking, suppressions and delayed delivery. Since, the MIS satisfies the information needs of the people in a particular organization, the design of the MIS cannot be common or universal for all the organizations. The principles of design and the use of the information concepts in design does not change but when it comes to the applications, the design has to give a regard to the organization structure, the culture, the attitudes and the beliefs of the people and the strengths and the weaknesses of the organization.

1.23 Step by step installations of MIS in an organization After informally analyzing your data needs and procedures, if a manager feels uncomfortable about his or her ability to establish an MIS for the organization, he or she should engage the services of an MIS consultant to assist in creating the system. Together, the manager and the consultant will follow a series of steps to get an overview of the existing MIS, the way it currently functions, and what is needed to improve it. The consultant will assist in assessing, and responding to, organizational needs. The consultant may also help a manager decide whether computerization, or a good manual MIS, is preferable. Whether or not a consultant is engaged, managers should review some of the problems that may make an MIS less effective. The following table provides a systematic way of reviewing how a well-designed MIS functions at every level. The table can serve as a checklist for managers and consultants in creating, institutionalizing, or revising an MIS.

UNIT 2 ________________________________________________ System Development ________________________________________________________________________________

Learning Objectives: After studying this unit, you will learn:

Concept of System Types of Systems – Open, Closed, Deterministic, Probabilistic, etc. Relevance of choice of System in MIS Integration of Organization Systems and Information Systems System Development Life Cycle System Analysis, Design and Implementation MIS Applications in Business

2.1 DEFINING A SYSTEM A collection of components that work together to realize some objectives forms a system. Basically there are three major components in every system, namely input, processing and output. In a system the different components are connected with each other and they are interdependent. For example, human body represents a complete natural system. We are also bound by many national systems such as political system, economic system, educational system and so forth. The objective of the system demands that some output is produced as a result of processing the suitable inputs. A well-designed system also includes an additional element referred to as „control‟ that

provides a feedback to achieve desired objectives of the system. Term system is derived from the Greek word „Systema‟ which means an organized relationship among functioning units or components. Definition of System : "A system is an orderly grouping of interdependent components linked together according to a plan to achieve a specific objective".

2.2 Characteristics of a System: • Organization • Interaction • Interdependence • Integration • Central Objective i) Organization-It implies structure and order. ii) Interaction-It refers to manner in which each component functions with other components of the system. iii)Interdependence-Units/parts are dependent on each other. iv)Integration-The parts of a system work together within the system even though each part performs a unique function. v)Central Objective-Objective may be real or stated. All the components work together to achieve that particular objective.

2.3 Elements of a System In most cases, systems analysts operate in a dynamic environment where change is a way of life. The environment may be a business firm, a business application, or a computer system. To reconstruct a system, the following key elements must be considered: 1. Outputs and inputs. 2. Processor(s). 3. Control. 4. Feedback. 5. Environment. 6. Boundaries and interface. 1 ) Outputs and Inputs : A major objective of a system is to produce an output that has value to its user. Whatever the nature of the output (goods, services, or information), it must be in line with the expectations of the intended user. Inputs are the elements (material, human resources, and information) that enter the system for processing. Output is the outcome of processing. A system feeds on input to produce output in much the same way that a business brings in human, financial, and material resources to produce goods and services. It is important to point out here that determining the output is a first step in specifying the nature, amount, and regularity of the input needed to operate a system. For example, in systems analysis, the first concern is to determine the user‟s requirements of a proposed computer system – that is, specification of the output that the computer is expected to provide for meeting user requirements.

2) Processor(s) : The processor is the element of a system that involves the actual transformation of input into output. It is the operational component of a system. Processors may modify the input totally or partially, depending on the specifications of the output. This means that as the output specifications change so does the processing. In some cases, input is also modified to enable the processor to handle the transformation. 3) Control : The control element guides the system. It is the decision – making subsystem that controls the pattern of activities governing input, processing, and output. In an organizational context, management as a decision – making body controls the inflow, handling and outflow of activities that affect the welfare of the business. In a computer system, the operating system and accompanying software influence the behaviour of the system. Output specifications determine what and how much input is needed to keep the system in balance. In systems analysis, knowing the attitudes of the individual who controls the area for which a computer is being considered can make a difference between the success and failure of the installation. Management support is required for securing control and supporting the objective of the proposed change. 4 )Feedback: Control in a dynamic system is achieved by feedback. Feedback measures output against a standard in some form of cybernetic procedure that includes communication and control. Output information is fed back to the input and / or to management (Controller) for deliberation. After the output is compared against performance standards, changes can result in the input or processing and consequently, the output. Feedback may be positive or negative, routing or informational. Positive feedback reinforces the performance of the system. It is routine in nature. Negative feedback generally provides the controller with information for action. In systems analysis, feedback is important in different ways. During analysis, the user may be told that the problems in a given application verify the initial concerns and justify the need for change. Another form of feedback comes after the system is implemented. The user informs the analyst about the performance of the new installation. This feedback often results in enhancements to meet the user‟s requirements. 5) Environment The environment is the “suprasystem” within which an organization operates. It is the source of external elements that impinge on the system. In fact, it often determines how a system must function. For example, the organization‟s environment, consisting of vendors, competitors, and others, may provide constraints and, consequently, influence the actual performance of the business. 6 ) Boundaries and interface A system should be defined by its boundaries – the limits that identify its components, processes and interrelationship when it interfaces with another system. For example, a teller system in a commercial bank is restricted to the deposits, withdrawals and related activities of customers checking and savings accounts. It may exclude mortgage foreclosures, trust activities, and the like. Each system has boundaries that determine its sphere of influence and control. For example, in an integrated banking – wide computer system design, a customer who has a mortgage and a checking account with the same bank may write a check through the “teller system” to pay the premium that is later processed by the “mortgage loan system.” Recently, system design has been successful in allowing the automatic transfer of funds form a bank account to pay bills and other obligations to creditors, regardless of distance or location. This means that in systems analysis, knowledge of the boundaries of a givensystem is crucial in determining the nature of its interface with other systems for successful design.

2.4 Types of systems The frame of reference within which one views a system is related to the use of the systems approach for analysis. Systems have been classified in different ways. Common classifications are: (1) physical or abstract, (2) open or closed, and (3) “man – made” information systems. 1 Physical or abstract systems Physical System– These are tangible entities that may be static or dynamic in operation. For example- parts of a computer center are the desks, chairs etc. that facilitate operation of the computer. They are static and a programmed computer is dynamic. Physical systems are tangible entities that may be static or dynamic in operation. For example, the physical parts of the computer center are the officers, desks, and chairs that facilitate operation of the computer. They can be seen and counted; they are static. In contrast, a programmed computer is a dynamic system. Data, programs, output, and applications change as the user‟s demands or the priority of the information requested changes. Abstract System – These are conceptual or non physical entities. For example- the abstract conceptualization of physical situations. A model is a representation of a real or planned system. A model is used to visualize relationships. Abstract systems are conceptual or non-physical entities. They may be as straightforward as formulas of relationships among sets of variables or models – the abstract conceptualization of physical situations. A model is a representation of a real or a planned system. The use of models makes it easier for the analyst to visualize relationships in the system under study. The objective is to point out the significant elements and the key interrelationships of a complex system. 2 Open or Closed Systems Another classification of systems is based on their degree of independence. An open system has many interfaces with its environment. It permits interaction across its boundary; it receives inputs from and delivers outputs to the outside. An information system falls into this category, since it must adapt to the changing demands of the user. A closed system is isolated from environmental influences. In reality, a completely closed system is rare. In systems analysis, organizations, applications and computers are invariably open, dynamic systems influenced by their environment. Characteristics of Open Systems • Input from outside- Open systems are self adjusting and self regulating. When functioning properly open system reaches a steady state or equilibrium. • Entropy- Dynamic systems run down over time resulting in loss of energy or entropy. Open systems resist entropy by seeking new input or modifying the processes to return to a steady state. • Process, output and cycles- Open system produce useful output and operate in cycles, following a continuous flow path. • Differentiation- They have a tendency toward an increasing specialization of functions and a greater differentiation of their components. For example the role of machines and people tendtoward greater specialization and greater interaction.

• Equifinality- Goals are achieved through differing courses of action and a variety of paths. 3.Deterministic or Probabilistic System Deterministic System – It operates in a predictable manner and the interaction between parts is known with certainty. For example: Two molecules of hydrogen and one molecule of oxygen makes water. Probabilistic System – It shows probable behavior. The exact output is not known. For example: weather forecasting, mail delivery. 4.Social, Human Machine, Machine System • Social System- It is made up of people. For example: social clubs, societies • Human Machine System- When both human and machines are involved to perform a particular a particular task to achieve a target. For example:- Computer. • Machine System- Where human interference is neglected. All the tasks are performed by the machine. 5.Natural and Manufactured Natural System- The system which is natural. For example- Solar system, Seasonal System. Manufactured System- System made by man is called manufactured system. For exampleRockets, Dams, Trains. 6. Permanent or Temporary System Permanent System- Which persists for long time. For example- policies of business. Temporary System- Made for specified time and after that they are dissolved. For examplesetting up DJ system. 7.Adaptive and Non Adaptive System Adaptive System- respond to change in the environment in such a way to improve their performance and to survive. For example- Human beings, animals. Non Adaptive System-The system which doesn‟t respond to the environment. For exampleMachines 8.Man Made Information Systems • Information System may be defined as a set of devices, procedures, and operating systems designed around user based criteria to produce information and communicate it to the user for planning, control and performance. 9.Formal Information Systems • It is based on the organization represented by organization chart. • The chart is a map of positions and their authority relationships, indicated by boxes connected by straight lines.

2.5

SYSTEM LIFE CYCLE:

and

System life cycle is an organizational process of developing and maintaining systems. It helps in establishing a system project plan, because it gives overall list of processes and sub-processes required for developing a system. System development life cycle means combination of various activities. In other words we can say that various activities put together are referred as system development life cycle. In the System Analysis and Design terminology, the system development life cycle also means software development life cycle. Following are the different phases of system development life cycle: 1. Preliminary study 2. Feasibility study 3. Detailed system study 4. System analysis 5. System design 6. Coding 7. Testing 8. Implementation 9. Maintenance The different phases of system development life cycle is shown in Fig.below. PHASES OF SYSTEM DEVELOPMENT LIFE CYCLE (1) Preliminary System Study: Preliminary system study is the first stage of system development life cycle. This is a brief investigation of the system under consideration and gives a clear picture of what actually the physical system is? In practice, the initial system study involves the preparation of a „System Proposal‟ which lists the Problem Definition, Objectives of the Study, Terms of reference for Study, Constraints, Expected benefits of the new system, etc. in the light of the user requirements. The system proposal is prepared by the System Analyst (who studies the system) and places it before the user management. The management may accept the proposal and the cycle proceeds to the next stage. The management may also reject the proposal or request some modifications in the proposal. In summary, we would say that system study phase passes through the following steps: • problem identification and project initiation • background analysis • inference or findings (system proposal) (2) Feasibility Study: In case the system proposal is acceptable to the management, thenext phase is to examine the feasibility of the system. The feasibilitystudy is basically the test of the proposed system in the light of itsworkability, meeting user‟s requirements, effective use of resourceand of course, the cost effectiveness. These are categorized as technical,operational, economic and schedule feasibility. The main goalof feasibility study is not to solve the problem but to achieve thescope. In the process of feasibility study, the cost and benefits are estimated with greater accuracy to find the Return on Investment(ROI). This also defines the resources needed to complete the detailed investigation. The result is a feasibility report submitted tothe management. This may be accepted or accepted with

modificationsor rejected. The system cycle proceeds only if the managementaccepts it. (3) Detailed System Study: The detailed investigation of the system is carried out in accordancewith the objectives of the proposed system. This involves detailedstudy of various operations performed by a system and their relationshipswithin and outside the system. During this process, dataare collected on the available files, decision points and transactionshandled by the present system. Interviews, on-site observation andquestionnaire are the tools used for detailed system study. Usingthe following steps it becomes easy to draw the exact boundary of the new system under consideration: • Keeping in view the problems and new requirements • Workout the pros and cons including new areas of the system All the data and the findings must be documented in the form of detailed data flow diagrams (DFDs), data dictionary, logical data structures and miniature specification. The main points to be discussed in this stage are: • Specification of what the new system is to accomplish based on the user requirements. • Functional hierarchy showing the functions to be performed by the new system and their relationship with each other. • Functional network, which are similar to function hierarchy but they highlight the functions which are common to more than one procedure. • List of attributes of the entities – these are the data items which need to be held about each entity (record) (4) System Analysis: Systems analysis is a process of collecting factual data, understand the processes involved, identifying problems and recommending feasible suggestions for improving the system functioning. This involves studying the business processes, gathering operational data, understand the information flow, finding out bottlenecks and evolving solutions for overcoming the weaknesses of the system so as to achieve the organizational goals. System Analysis also includes subdividing of complex process involving the entire system, identification of data store and manual processes. The major objectives of systems analysis are to find answers for each business process: What is being done, How is it being done, Who is doing it, When is he doing it, Why is it being done and How can it be improved? It is more of a thinking process and involves the creative skills of the System Analyst. It attempts to give birth to a new efficient system that satisfies the current needs of the user and has scope for future growth within the organizational constraints. The result of this process is a logical system design. Systems analysis is an iterative process that continues until a preferred and acceptable solution emerges. (5) System Design: Based on the user requirements and the detailed analysis of the existing system, the new system must be designed. This is the phase of system designing. It is the most crucial phase in the developments of a system. The logical system design arrived at as a result of systems analysis is converted into physical system design. Normally, the design proceeds in two stages: • Preliminary or General Design • Structured or Detailed Design Preliminary or General Design: In the preliminary or general design, the features of the new system are specified. The costs of implementing these features and the benefits to be derived are

estimated. If the project is still considered to be feasible, we move to the detailed design stage. Structured or Detailed Design: In the detailed design stage, computer oriented work begins in earnest. At this stage, the design of the system becomes more structured. Structure design is a blue print of a computer system solution to a given problem having the same components and interrelationships among the same components as the original problem. Input, output, databases, forms, codification schemes and processing specifications are drawn up in detail. In the design stage, the programming language and the hardware and software platform in which the new system will run are also decided. There are several tools and techniques used for describing the system design of the system. These tools and techniques are: • Flowchart • Data flow diagram (DFD) • Data dictionary • Structured English • Decision table • Decision tree Each of the above tools for designing will be discussed in detailed in the next lesson. The system design involves: i. Defining precisely the required system output ii. Determining the data requirement for producing the output iii. Determining the medium and format of files and databases iv. Devising processing methods and use of software to produce output v. Determine the methods of data capture and data input vi. Designing Input forms vii. Designing Codification Schemes viii. Detailed manual procedures 5. Documenting the Design (6) Coding: The system design needs to be implemented to make it a workable system. This demands the coding of design into computer understandable language, i.e., programming language. This is also called the programming phase in which the programmer converts the program specifications into computer instructions, which we refer to as programs. It is an important stage where the defined procedures are transformed into control specifications by the help of a computer language. The programs coordinate the data movements and control the entire process in a system. It is generally felt that the programs must be modular in nature. This helps in fast development, maintenance and future changes, if required. (7) Testing: Before actually implementing the new system into operation, a test run of the system is done for removing the bugs, if any. It is an important phase of a successful system. After codifying the whole programs of the system, a test plan should be developed and run on a given set of test data. The output of the test run should match the expected results. Sometimes, system testing is considered a part of implementation process. Using the test data following test run are carried out: • Program test • System test

Program test: When the programs have been coded, compiled and brought to working conditions, they must be individually tested with the prepared test data. Any undesirable happening must be noted and debugged (error corrections) System Test: After carrying out the program test for each of the programs of the system and errors removed, then system test is done. At this stage the test is done on actual data. The complete system is executed on the actual data. At each stage of the execution, the results or output of the system is analysed. During the result analysis, it may be found that the outputs are not matching the expected output of the system. In such case, the errors in the particular programs are identified and are fixed and further tested for the expected output. When it is ensured that the system is running error-free, the users are called with their own actual data so that the system could be shown running as per their requirements. (8) Implementation: After having the user acceptance of the new system developed, the implementation phase begins. Implementation is the stage of a project during which theory is turned into practice. The major steps involved in this phase are: • Acquisition and Installation of Hardware and Software • Conversion • User Training • Documentation The hardware and the relevant software required for running the system must be made fully operational before implementation. The conversion is also one of the most critical and expensive activities in the system development life cycle. The data from the old system needs to be converted to operate in the new format of the new system. The database needs to be setup with security and recovery procedures fully defined. During this phase, all the programs of the system are loaded onto the user‟s computer. After loading the system, training of the user starts. Main topics of such type of training are: • How to execute the package • How to enter the data • How to process the data (processing details) • How to take out the reports After the users are trained about the computerized system, working has to shift from manual to computerized working. The process is called „Changeover‟. The following strategies are followed for changeover of the system. (i) Direct Changeover: This is the complete replacement of the old system by the new system. It is a risky approach and requires comprehensive system testing and training. (ii) Parallel run: In parallel run both the systems, i.e., computerized and manual, are executed simultaneously for certain defined period. The same data is processed by both the systems. This strategy is less risky but more expensive because of the following: • Manual results can be compared with the results of the computerized system. • The operational work is doubled. • Failure of the computerized system at the early stage does not affect the working of the organization, because the manual system continues to work, as it used to do. (iii) Pilot run: In this type of run, the new system is run with the data from one or more of the

previous periods for the whole or part of the system. The results are compared with the old system results. It is less expensive and risky than parallel run approach. This strategy builds the confidence and the errors are traced easily without affecting the operations. The documentation of the system is also one of the most important activity in the system development life cycle. This ensures the continuity of the system. There are generally two types of documentation prepared for any system. These are: • User or Operator Documentation • System Documentation The user documentation is a complete description of the system from the users point of view detailing how to use or operate the system. It also includes the major error messages likely to be encountered by the users. The system documentation contains the details of system design, programs, their coding, system flow, data dictionary, process description, etc. This helps to understand the system and permit changes to be made in the existing system to satisfy new user needs. (9) Maintenance: Maintenance is necessary to eliminate errors in the system during its working life and to tune the system to any variations in its working environments. It has been seen that there are always some errors found in the systems that must be noted and corrected. It also means the review of the system from time to time. The review of the system is done for: • knowing the full capabilities of the system • knowing the required changes or the additional requirements • studying the performance. If a major change to a system is needed, a new project may have to be set up to carry out the change. The new project will then proceed through all the above life cycle phases.

2.6 Roles of System Analyst The system analyst is the person (or persons) who guides through the development of an information system. In performing these tasks the analyst must always match the information system objectives with the goals of the organization. Roles of System Analyst: The primary objective of any system analyst is to identify the need of the organization by acquiring information by various means and methods. Information acquired by the analyst can be either computer based or manual. Collection of information is the vital step as indirectly all the major decisions taken in the organizations are influenced. The system analyst has to coordinate with the system users, computer programmers, manager and number of people who are related with the use of system. Following are the tasks performed by the system analyst: 1. Defining Requirement: The basic step for any system analyst is to understand the requirements of the users. This is achieved by various fact finding techniques like interviewing, observation, questionnaire etc. The information should be collected in such a way that it will be useful to develop such a system which can provide additional features to the users apart from the desired. 2. Prioritizing Requirements: Number of users uses the system in the organization. Each one has a different requirement and retrieves different information. Due to certain limitations in computing capacity it may not be possible to satisfy the needs of all the users. Even if the computer capacity is good enough is it necessary to take some tasks and update the tasks as per the changing requirements. Hence it is important to create list of priorities according to users requirements. The

best way to overcome the above limitations is to have a common formal or informal discussion with the users of the system. This helps the system analyst to arrive at a better conclusion. 3. Gathering Facts, data and opinions of Users: After determining the necessary needs and collecting useful information the analyst starts the development of the system with active cooperation from the users of the system. Time to time, the users update the analyst with the necessary information for developing the system. The analyst while developing the system continuously consults the users and acquires their views and opinions. 4. Evaluation and Analysis: As the analyst maintains continuous he constantly changes and modifies the system to make it better and more user friendly for the users. 5. Solving Problems: The analyst must provide alternate solutions to the management and should a in dept study of the system to avoid future problems. The analyst should provide with some flexible alternatives to the management which will help the manager to pick the system which provides the best solution. 6. Drawing Specifications: The analyst must draw certain specifications which will be useful for the manager. The analyst should lay the specification which can be easily understood by the manager and they should be purely non-technical. The specifications must be in detailed and in well presented form. Some more roles of System Analyst: Role of System Analyst differs from organization to organization. Most common responsibilities of System Analyst are following : 1) System analysis It includes system's study in order to get facts about business activity. It is about getting information and determining requirements. Here the responsibility includes only requirement determination, not the design of the system. 2) System analysis and design: Here apart from the analysis work, Analyst is also responsible for the designing of the new system/application. 3) Systems analysis, design, and programming: Here Analyst is also required to perform as a programmer, where he actually writes the code to implement the design of the proposed application

2.7 The Systems View of an organization This idea of looking outward, of looking beyond the walls of the company office building is not new. What is relatively new to many executives, is the idea of looking at the world as a collection of systems that create a whole and examining the relationships between those systems to determine how they affect the whole. Systems Theory, as applied to organizational management, puts forth the premise that all organizations are systems, and all systems are part of larger systems. How a subsystem fits the needs of the larger system ultimately determines if that subsystem prospers or is left to wither on the vine. It‘s this concept that the adept leader can use to get a more ―holistic‖ view of his organization. Understanding how the company relates to the larger system in which it exists and operates, and then how the company‘s internal systems contribute or detract from that larger relationship can provide a more relevant analysis. It really isn‘t as esoteric as it may sound. Once you grasp the concept it will be easy to see how it applies to your organization. Let‘s spend a moment on a definition and then we can address application. In Systems Theory, a system is defined in two ways:

Externally, by its purpose. Each system has a role that it plays in the higher-level system in which it exists. Using the auto company example we can say that the auto company is a system whose role is to provide cars to the next higher-level system, the auto market. The auto market in turn has its multiple roles that it plays in the next higher-level systems of transportation and national economy and so on. Internally, by its subsystems and internal functions. Each system is made up of components and sub-systems that interrelate and contribute to the overall purpose of the parent system. In the auto company those components might consist of engineering, production, marketing, finance, human resources and sales all of which should be supporting the system‘s purpose of providing cars to the higher system, the auto market.

Systems Theory in Managing Organizations Defining the Higher-Level System and the Organization’s Role in It

So for a leader, the first step in developing a holistic view of the organization is to define the higher-level system in which it exists/operates, and its role/purpose in that higher-level system. Where does it fit? What kind of role does it play and what value does it bring to the purpose of the higher-level system? If a company does not have a role to play in the higher-level system, then it does not belong in that system; and if it cannot find a role in any higher-level system, it is in

effect redundant and will ultimately die. Additionally, and sadly more common, if a company cannot accurately define what its role is in the higher-level system, even if it has something relevant to offer, it will be treated as if it had no role at all.

If a higher-level system cannot perceive value by including a particular sub-system, it will ignore that sub-system. This typically means the end of that sub-level system‘s participation in the higherlevel system. That‘s the reason nobody makes buggy whips or vinyl music records anymore. Designing the Internal Functions and Subsystems of the Organization

Once you have defined the higher-level system in which your company operates, and established your company‘s purpose within it, then it‘s time to look at the components or subsystems of your organization. These subsystems and components, knowingly or unknowingly, all interact and play a part in achieving or detracting from the company‘s purpose. Ideally of course, these subsystems and their interrelationships should be designed and organized in a way that collectively promotes the organization‘s purpose, and achieve zero or sustainable negative entropy for the organization. While there is much to discuss about entropy and organizations, a simple macro explanation is that entropy occurs when a system‘s resources are depleted over time and its subsystems descend into chaos. Zero entropy is thus a state where resources do not deplete over time, and negative entropy where resources increase over time; in both cases with the subsystems maintaining current relevance and focus on the system purpose.

In the auto company example, it needs to define its market, the range of products and services for that market, and how to produce and deliver those products and services in an exchange with the auto market, in a way that its resources do not get depleted. When it achieves that, the auto company will have reached a state of business sustainability. Of course all companies would like to grow, and not just maintain the business; however we all know that growth needs to be kept sustainable or the result could be detrimental. For example, if the auto company increases its market share so rapidly, that it is unable to match that pace with getting the people and systems it needs in place to ensure good quality control, then it could get into problems. In Systems Theory, when we talk about negative entropy in successful systems, it is always about sustainable negative entropy. It can be argued that assuming the organization knows its true purpose, then how that organization‘s subsystems are organized will determine the success or failure of the organization. Subsystems, functions, and their inter-relationships are thus optimized to achieve the organization‘s purpose; this is distinct from optimization of subsystems for their own purposes. Consequently, if a subsystem does not have a role in the organization‘s purpose, then it does not belong in the organization system. It kind of sounds like we are back to the traditional response of auditing departments doesn‘t it? But did you note the difference? This time we defined a purpose first. We identified what our role is in the higher-level system. We know what we must do to succeed in that higher-level system. It‘s only after we have that firmly established that we use it to determine the organization and effectiveness of our subsystems.

UNIT 3 ________________________________________________ Information systems (TPS, DSS, EIS, ES) Learning Objectives: After studying this unit, you will learn:

Types of information systems: TPS,DSS,EIS,ES Definition, Basic features and Components of Transaction Processing System (TPS) Definition, Basic features and Components Decision Support System (DSS) Definition, Basic features and Components Executive Information System (EIS) Definition, Basic features and Components, Expert System (ES) ___________________________________________________________________________________

TRANSACTION PROCESSING SYSTEMS (TPS) 3.1 TRANSACTION PROCESSING SYSTEMS An efficient transaction processing system is a pre-requisite for developing efficient management information systems. A transaction may be defined as an activity, such as making a purchase or a sale, manufacturinf a product,promoting an employee and so on. Thus the concept of a transaction as used in Information systems is wider as compared to its usage in accounting systems where a transaction involves transfer of money or money's worth (goods or services) from one entity to another. Performance of a transaction requires records to: 1. Direct a transaction to take place. 2. Report,confirm, or explain its performance 3. Communicate the transaction to those needing a record for background information or reference. To ensure the performance of transactions involved in organizational activities, transaction processing system is required.TPS is mostly used by lower level management to make operational decisions.

DEFINITION OF TPS: TPS Process day–to–day transactions of operations.According to Laudon and Laudon:

an organisation to

carry on its

business

―TPS are computerised systems that perform and record the daily routine transactions necessary to conduct the business.‖ TPS provide base for developing other information systems. Transaction processing systems were among the earliest computerized systems. Their primary purpose is to record, process, validate, and store transactions that take place in the various functional areas/of a business for future retrieval and use. A transaction processing system (TPS) is an information system that records company transactions (a transaction is defined as an exchange between two or more business entities). Transaction processing systems (TPS) are cross-functional information systems that process data resulting from the occurrence of business transactions. Transactions are events that occur as part of doing business, such as sales, purchases, deposits, withdrawals, refunds, and payments. Transaction processing activities are needed to capture and process data, or the operations of a business would grind to a halt. Let us look at a simple example of a business transaction. 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 Note that the 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. • Internal Transactions: Those transactions, which are internal to the company and are related with the internal working of any organization. For example Recruitment Policy, Promotion Policy, Production policy etc • External Transactions: Those transactions, which are external to the organization and are related with the external sources, are regarded as External Transaction. For example sales, purchase etc.

3.2 Characteristics of Transaction Processing Systems 1. A TPS records internal and external transactions for a company. It is a repository of data that is frequently accessed by other systems 2. A TPS performs routine, repetitive tasks. It is mostly used by lower-level managers to make operational decisions 3. Transactions can be recorded in batch mode or online. In batch mode, the files are updated periodically; in online mode, each transaction is recorded as it occurs. 4. There are six steps in processing a transaction. They are data entry, data validation, data processing and revalidation, storage - output generation, and query support.

3.3 FEATURES OF TRANSACTION PROCESSING SYSTEMS There are certain features of TPS which distinguish these from other information systems of an organisation: 1. In many cases organizations are required to process transactions in a way that is required by its external stakeholders.e. a large business organisation is required to maintain its financial transactions as prescribed by Incomr Tax Act. 2. TPS are major procedure of information for other types of systems.e.g. purchase processing systems supply data to the organization‘s general ledger systems which are responsible for maintaining records of the organization for producing reports,such as trail balance,profit and loss account,and balance sheet. 3. TPS handel detail of data and these data shows the result of various activities usually on historical basis.TPS reflect what has already happened rather than projecting what is likelt to happen in future. 4. TPS span the boundary of the organization and connect the elements of its environment.TPS connects the organization with its customers and suppliers.This connectivity ensures faster transaction processing which results into increased operational efficiency. 5. TPS serve the basic need of operational level of the organization.At the operational level, objectives. tasks. and resources are pre-defined and are highly structured. Therefore. the decisions are made on the basis of predefined criteria. For example. a decision' regarding granting credit to a customer can be made by the superior concerned as the criteria for allowing credit are pre-defined by higher:level managers. 6. TPS are relevent to all the four functional areas of a business organization-production ,marketing,finance,and human resource-because each functional area needs some kind of transaction processing. 7. A TPS supports different tasks by imposing a set of rules and guidelines that specify how to record, process, and store a given transaction. There are many uses of transaction processing systems in our everyday lives, such as when we make a purchase at retail store, deposit or withdraw money at a bank, or register for classes at a university. Almost all organizations, regardless of the industry in which they operate, have a manual or automated TPS 8. A TPS is the data life-line for a company because it is the source of data for other information systems, such as MIS and DSS (Decision Support Systems). Hence, if the TPS shuts down, the consequences can be serious for the organization 9. A TPS is also the main link between the organization and external entities, such as customers suppliers, distributors, and regulatory agencies 10. TPS exist for the various functional areas in an organization, such as finance, accounting, manufacturing, production, human resources, marketing quality control, engineering, and research and development. Until a few years ago, many companies viewed the TPS for each business function as separate entity with little or no connection to other systems in the company. Today, however, many companies are trying to build cross-functional TPS to promote the free exchange of information among different business units. This is a desirable goal, but is still very difficult to achieve

3.4 COMPONENTS OF TRANSACTION PROCESSING SYSTEMS A computer-based transaction processing system has the following sixcomponents: 1. 2. 3. 4. 5. 6.

Input. Data capture Data validation ProcessIng and revalidation Storage and Output generation Query support

1. Input :- Various Inputs of a TPS are in the form of source documents such as customer orders,purchase orders, invoices, employee time cards, etc.These documents serve the following purposes in a TPS: capturing of data. Facilitating operations by communicating data and authorising another operation in the process. Statidardising operations by indicating what data are required for recording and what actions need to be taken. Providing a permanent file for future use if documents are retained. Methods for Data Entry: • Keyboard/video display terminals • Optical character recognition (OCR) devices, such as optical scanning wands and grocery check-out scanners. • Magnetic ink character recognition (MICR) devices, such as MICR reader/sorters used in banking for check • Other technologies, including electronic mice, light pens, magnetic stripe cards, voice input, and tactile. Input also be used as input device depending upon the application requirement 2. Data Capture We could capture transaction data as close as possible to the source that generates the data. Salespersons capture data that rarely changes by prerecording it on machine-readable media, or by storing it on the computer system. Ways of Data Capturing • Capture data by using machine-readable media initially (bar-coded and magnetic stripe credit cards), instead of preparing written source documents • Captures data directly without the use of data media by optical scanning of bar codes printed on product packaging. It ensures the accuracy and reliability of data by comparing 3. Data Validation

There are two steps in validation: error detection and error correction, Error detection is performed by one set of control mechanisms, error correction is performed by another Some commonly used error detection procedures are checking the data for appropriate font (text, numbers, etc), checking for aberrations (values that are too low or too high), and checking for missing data, invalid data, and inconsistent data. Missing data refers to fields that are missing a mandated data value. For example, if the number of hours worked by a part-time employee is missing on a payroll form; that is a missing-data error. Invalid data is data that is outside the range .For example, if the number of hours worked by a parttime employee is 72 hours per week instead of the 1120 hours, then we have invalid data Inconsistent data means that the same data item assumes different values in different places without a valid reason. For example, if payroll records show that an employee worked 25 hours per day. 4. Processing:- Processing involves the use of journals (books of primary entry) and, registers to provide a chronological record of inputs. Journals are used record financial accounting transactions, and registers are used to record other types of data not directly related to accounting. Some of the more common journals that are kept are as follows: Sales journal-used to keep records of sales. Purchase journal-to keep records of purchases. Cash book-to keep records of cash received and disbursed. Accounts receivable book-to keep records of debtors. Accounts payable book-to keep records of creditors. All the above books are often used in conjunction with a separate general ledger to proVide a complete book keeping system. Special columns can b{' used in these books of original entry to facilitate recording transc4:tions and their classification. 5. Storage:- The computer stores various records in files.There are several type of files which are classified as transaction file and master file. A transaction file is a collection transaction input data.Transaction files usually contain data that are of temporary nature. A master file contains data that are of a more permanent nature or of continuing interest. For exarnple,credit sales file is a chronologicro record osf sales on account.There may be several on account sales made to a single customer during a period. However. the total amount standing due in the name of the customer cannot be ascertained unless these transactions are processed.The process of posting sales to the accounts receivable ledger summarises credit sales to the customer. Output:- Variety of outputs can be generated from a TPS which can be used for various purposes. These outputs are in the form of documents.Some of these outputs can be used as inputs for further processing. For example. a customer invoice is an output of the order-entry application system but the same invoice can be used as input for processing customer account. Some common outputs of a TPS are trial balance, profit and loss account, balance sheet,etc. Besides various reports can be prepared for plannIng and control at operational level .

6. Query Support The last step in processing a transaction is querying (asking questions of) the system. Query facilities allow users to process data and information that may otherwise not be readily available. For example, a sales manager may query the system about the number of damaged items in a given store Many transaction processing systems allow you to use the Internet, intranets, extranets, and web browsers or database management query languages to make inquiries and receive responses concerning the results of transaction processing activity. Typically, responses are displayed in a variety of pre-specified formats or screens. Examples of queries include: • Checking on the status of a sales order • Checking on the balance in an account • Checking on the amount of stock in inventory

3.5 METHODS FOR PROCESSING TRANSACTIONS There are three different methods commonly used for processing transactions and updating master files: 1. On-line entry with immediate processing 2. On-line entry with subsequent processing 3. Batch processing 1. On-line entry with immediate processing:- In this processing transactions are entered online,validated, and if found valid valid, are processed imediately.A response with the result of processing or confirmation of completion or processing is generally provided to user at the input terminal. There are many situations in which on-line entry with immediate processing is required, for example ,railway/airline reservation,share trading etc.The main advantage of this approach of processing is that of the transaction is known immediately.Beside the master files are kept up to date every time. 2. On-line Entry with Subsequent Processing:- In on-line entry with subsequent processing method,data are entered on-line and validated, but their their processing is done on periodic batch basis.In on-line entry with immediate processing. transactions are validated a processed at the time of entry while in subsequent processing method transactions are processed after certain time gap.The main advantage of this type of processing is that computer capacity is used for on-line entries and after this process is over, the computet capacity can be used for imput processing. In super markets and similar situations on-line entry with subsequent processing method is followed. 3. Batch processing:- In batch processing which is the most conventional method of transacton processing, transactions are accumulated over a period of time.when sufficient number of transactions are accumulated, these are processed in batches.the process of batches can be daily,weekly, or even monthly,depending on the volume of transactions and other considerations.other considerations may be in the form of reporting cycle, action initiating etc. for example transaction involving inventory control may be processed on daily

or weekly basis,depending on the volume of transactions.the major disadvantage of batch processing is the delay in detecting and correcting errors. Out of three methods of transaction processing. which method should be adopted depends on a number of factors. specially the computer capacity and nature of transactions. When computers were first introduced for transaction processing. batch processing method was in use because of the capacity limitations of computers. However. with increas~d capacity of computers. on-line processing is becoming more common. Besides the computer capacity. nature of transactions should also be taken into account. If the processing is transaction-oriented with immediate completion of transaction processing being desirable. on-line processing is preferable. If the processing is periodic (for example. payroll). batch processing is more suitable.

Decision Support Systems (DSS) 3.6 Decision Support Systems (DSS) A decision support system can be defined as a system that provides information for making semistructured and unstructured decision. Keen and Scoff Morton have defined DSS as follows: "Decision support systems (DSS) represent a different approach to information system support for semi-structured and unstructured decisions. They support a variety of unstructured decision processes. According Laudon and Laudon :―A decision support system is a computer system at the management level of an organization that combines data, sophisticated analytical tools, and user-friendly software to support semi-structured and unstructured decision making.‖ Decision Support Systems (DSS) help executives make better decisions by using historical and current data from internal Information Systems and external sources. By combining massive amounts of data with sophisticated analytical models and tools, and by making the system easy to use, they provide a much better source of information to use in the decision-making process. Decision Support Systems (DSS) are a class of computerized information systems that support decision-making activities. DSS are interactive computer-based systems and subsystems intended to help decision makers use communications technologies, data, documents, knowledge and/or models to successfully complete decision process tasks.

3.7 Features of Decision Support Systems There are several features of decision support systems that distinguish them from other information systems of an organization. These features are as follows: 1. The philosophy of decision support systems is to give users the tools necessary to analyze important blocks of data, using easily controlled sophisticated models in flexible manner‘s are designed to deliver capabilities, not simply to respond to information needs. 2. DSS are tightly focused on a specific decision or set of decisions, such as routing, queuing, and evaluating and so on. Thus they are not used for general purpose. 3. DSS are aimed at higher-middle and top management with emphasis on change, flexibility and quick response. A greater emphasis is placed on models, graphics, and assumptions. 4. The design of DSS applies a different set of skills than the design of structured, operational systems. DSS designers must not only be technically competent but also be able to observe, understand and identify with the decision makers' world. 5. The technology required DSS is based on the need for flexible access. Reliable communication networks, availability of computer terminals, and even stand-alone microcomputers are more important than large-scale data processing systems. 6. DSS are through evolutionary process- that requires extensive participation by the end users. More emphasis is placed on prototyping and end-user system development rather than using system development life cycle approach.

3.8 COMPONETS (OR) ARCHITECTURE OF DSS There are three components of a typical DSS though a DSS cannot altogether be isolated from other information systems of an organization because all of them use a common database. DSS has three major component:-database, model base, and DSS software. 1. Database: - Database is a pre-requisite for developing any type of information system. Database is a collection of current and historical data from a number of groups or application and these data are organized for easy access by a range of applications. A DSS doesn‘t create or update data as this is not its function; rather it uses live organizational data so that individuals and groups are able to make decisions based on actual conditions. While controlling and processing data from the database the DSS protects the integrity of data. Some large organizations do not provide direct access to a central database to DSS because of two reasons. First organization wants to protect data from accidental or inappropriate changes in database. Second it is a slow and expensive process for the DSS to search through large database. The process affects not only the performance of the DSS but also all the other systems using the database. Therefore such organizations create separate DSS database extracting relevant data from both internal and external sources. 2. Model Base: - A model base is a collection of mathematical and analytical models that can be made made accessible to the DSS users. A model is an abstract representation that illustrates the various components or relationships of a phenomenon. Model may be of different types:-physical model (model of machine), mathematical model (equation, formula), and verbal model (description of a procedure for doing a work. Each DSS is built for a specific set of purposes. Most common models available in a model base are optimization models, Forecasting models and sensitivity analysis models. i) Optimization models provide guidelines for action by generating optimal solution consistent with a series of constraints. An optimal solution is one that optimizes returns to the organization as whole either in the form of maximization of revenues or minimization of cost or both. ii) Forecasting models are used to forecast an organization‘s business prospects particularly in terms of sales. Forecasting model use historical data and extrapolate the likely behavior of these data in future. Organizations often use forecasting software to predict the likely actions of competitors. iii) Sensitivity analysis models study the impact of discrete changes in parameters of optimal solution. a discrete change is one that happens on irregular basis .sensitivity analysis, working forward from known or assumed conditions, allows the users to vary

certain values to test results in order to better predicts outcomes if changes occur in those values. 3. DSS Software:- The third component of a DSS is DSS software system‘s software system permits easy interaction between the users and database and model base. DSS software system manages the creation, storage and retrieval of models from the model base and integrates them with data in the database. DSS software system also provides gkkhlo8y96yokjb graphic, easy to use flexible user interface that supports interaction between the user and DSS. Since DSS are meant for higher level managers who are not experts in computer handling, the. User-DSS interface must be easy so that relevant information is extracted without much pain. Since each manager may have his own unique working style, the DSS software system must offer this flexibility. Desktop spreadsheet software, such as Lotus 1-2-3 or MS Excel provides such facilities.

Architecture of DSS

3.9 Types of decisions 1. Programmed Decisions (Structured Decisions):- It involves situations that have occurred often enough to enable decision rules to be developed and applied in the future. These decisions are

those that have been made persistently in the earlier period that managers have developed rules or guideline to be applied when certain situations are expected to happen. Programmed decision making is used when an inventory manager of mc Donald‘s decides to order beef patty stocks because the stocks are three-quarters empty. Programmed decisions making are a routine that you make every time so that the organization run smooth. Managers can develop rules and guidelines to regulate all routine organizational activities. Most decisions are related to daily activities. In programmed decision making there will be no error in the decisions because it is a routine and managers usually have the information they need to create rules and guidelines to be followed by others. But sometimes it can cause error but not of big kind. Programmed decision making are always used in daily routine to keep the organization running smooth. That is why they have rules and guidelines to make a decision.

2. Non Programmed Decisions (unstructured Decisions):-Non-programmed decisions are made in response to situations that are unique, are poorly defined and largely unstructured. Nonprogrammed decision making is used when mc Donald‘s are deciding to invest in new deep fryers. It is a non-routine decision making. This means it is made for big decisions that will affect an organization for a long time. This type of decision making does not need rules or guidelines to be followed because the situation is unexpected or uncertain. For example if mc Donald‘s plans to launch a new line of menu, they will have to make decision base on their intuition and reasoned judgments. Non-programmed decision has more chance of errors and difficult for managers to handle as it is inherently challenging. Managers must rely on their intuition to quickly respond to a urgent concern. Also these errors are of dangerous kind, they affect organization badly. For example if mc Donald‘s decided to invest in a new menu. Their customers did not like the new menu and they do not consume mc Donald‘s anymore. This will affect mc Donald‘s revenue and profit. Nonprogrammed decision making are not always used but it will give impact to an organization‘s effectiveness. This decision is made on reasonable judgment and the circumstances if we proceed with the decision.

Difference between DSS & MIS

Some more differnces are as follow: 1. MIS functions to produce routine reports,DSS employ sophisticated data modelling & analysis tools for the purpose of resolving structured problems. 2. MIS is used by a limited group (staff managers & professionals), DSS are used by groups,individuals & managers at various levels. 3. DSS is charachterized by an adaptability which contrasted with the semi-inflexible nature of MIS. 4. DSS data sources are much more varied comprising inventory, accounting & production sources & not just internal business ones & its analytical tools are more sophisticated(simulation,atatistical analysis). 5. - MIS focus on operational efficiency ( comfort organization "do things right" ) - DSS focus on making effective decision ( help collective "do the right thing" ) 6. DSS: Focus on finding making, unstructured and available on request, immediate, friendly MIS: Plan report on variety of subject, reports are standard, structured, routine, constraint by organizational system. 7. The terms MIS and DSS stand for Management Information Systems and Decision Support Systems respectively. There has been greatly of talk regarding these two, whether they are actually impossible to tell apart thing or if there are any significant differences between the two. 8. MIS is basically a compassionate of link to facilitate communcation between managers across different areas in a business association. MIS plays a pivotal role in enabling communications across the floor of an organization, between multiple entities therein. DSS, many consider, is an advancement from the original MIS. However,this is not the sole difference between the two. While there may not be too much separating the two, the difference is still within,as is apparent when we say DSS is an advancement over MIS. 9. The essential difference between the two is in focus. DSS, as the permanent status indicates, is about leadership and senior management surrounded by an organization providing good, reliable judgment as ably as vision. MIS, on the other hand, is about focusing on the actual flow of information itself. Thus, MIS & DSS are differentiated in terms of components, dynamics , analytical tools & general properties

3.10 Concept of Group Decision Support System (GDSS) A GDSS can be defined as a computer based system that supports a group of decision makers engaged in a common task and that provides interface to a shared environment. ―A group decision support system is an interactive computer-based system to facilitate the solution of unstructured problems by a set of decision rankers working together as a group.‖

Features of GDSS There are a number of features of a GDSS because of which it can be differentiate from a DSS. These features are as follows: 1. There is high level of interaction among decision makers who work collectively on a problem. In this attendees from various organizational levels free freedom to contribute appositely to solve the problem. 2. Emphasis is put on creating an atmosphere where an idea will be evaluated on its merits rather than on the basis of the source idea. 3. Priorities are set and decisions are made which require finding ways to encompass the thinking of all the members in making these decisions. 4. Each member of the decision-making group has access to relevant internal and external information which allows the members to emphasis their own views, appreciate the views of others, and settle their differences in order to arrive at an acceptable decision with in given in frame of time. 5. Information about the problem on which a group is working is stored so that those who fail to attend meeting can work on the problem.

COMPONENTS OF GDSS Components of a GDSS consist of the following: 1. Decision maker 2. Database and model base 3. Groupware

3.11 Difference between GDSS and DSS GDSS is a computer based information system that focuses on the group while DSS focuses on an individual for instance, the manager or the supervisor. GDSS and DSS may have similar components in terms of hardware and software structures however, GDSS has a networking technology that is best suited for group discussions or communication. DSS on the other hand, have technologies that are focused for a single user. GDSS maintenance involves a better system reliability and incomprehensible multi-user access compared to DSS because system failures in GDSS will involve a lot of individual. Through these programs or computer based information system, company or individual decision making capacities will be enhanced and hasten. This allows not only good communication system but also a positive outcome within a department, group, or company. Some decisions are very structured while others are very unstructured. You may wake up in the morning and make the structured, routine decision to get out of bed. Then you have to make the unstructured decision of what clothes to wear that day (for some of us this may be a very routine decision!). Structured decisions involve definite procedures and are not necessarily very complex. The more unstructured a decision becomes, the more complex it becomes.

3.12 Concept of Decision Making Everybody makes decisions. It's a natural part of life, and most of the time we don't even think about the process. In an organization, decisions are made at every level. The level at which the decision is made can also determine the complexity of the decision in relation to the input of data and output of information.

Decision Making and MIS Decision-making means making a choice among the given choices by a manager or a decisionmaker. The decision-making process lets a manager come to a conclusion about a given situation. Therefore, decision-making may be defined as a process of selecting an optimum and best alternative from a couple of given alternatives to accomplish a particular task. Decision-making process is the core of managerial accomplish a particular task. Decision-making process is the core of managerial functions in MIS. It is said that the decision-making process considers two or more alternatives from which a final decision could be made. But if only one alternative is available, then no decision could be made. A decision-making process involves the entire process of establishing goals ,defining activities ,searching for alternatives and finally the development of plans. In addition, the decision-making process includes all the activities of problem-solving, co-ordinating , information processing and evaluating of alternatives that usually precede a decision. A decision is an end or the final product of the decision-making process that represents a behaviour selected from a number of possible alternatives.

Levels of Decision Making in an Organization In the previous units, we discussed the various types of Information Systems and how they relate to the levels of an organization. We can also relate those Information Systems to the types of decisions managers make. • Strategic Decision Making. These decisions are usually concerned with the major objectives of the organization, such as "Do we need to change the core business we are in?" They also concern policies of the organization, such as "Do we want to support affirmative action?" • Management Control. These decisions affect the use of resources, such as "Do we need to find a different supplier of packaging materials?" Management-level decisions also determine the performance of the operational units, such as "How much is the bottleneck in Production affecting the overall profit and loss of the organization, and what can we do about it?" • Knowledge-Level Decision Making. These decisions determine new ideas or improvements to current products or services. A decision made at this level could be "Do we need to find a new chocolate recipe that results in a radically different taste for our candy bar?" • Operational control. These decisions determine specific tasks that support decisions made at the strategic or managerial levels. An example is "How many candy bars do we produce today?" Types of Decisions and Types of Systems

3.13 The role of the DSS in the process of decision making Previously it was mentioned that the MIS is best suited in identifying problems and helping managers understanding them to make suitable and correct decisions, but the main weakness of MIS is that it is not aimed at the specific need of the individual and group decision makers. Very often the MIS does not provide exactly the information that is needed to solve problems for individual and group decision making. DSS is tailored to the specific need of the individual and group managers. Therefore, the DSS can extend this support through the remaining steps (in objective and criteria setting, alternative search, alternative evaluation, making the decision and decision review) of the decision making. Finally DSS has more roles in decision-making and problem solving than MIS (Raymond, 1998). The other researches such as the following confirm this idea: Uma (2009) has stated that a Decision Support System is an integrated set of computer tools allowing a decision maker to interact directly with computer to retrieve information useful in making semi structured and unstructured decisions. Example of this decisions include such things as merger and acquisition decisions, plant expansion, new product decisions portfolio management and marketing decisions. Nokhbatolfoghahaayee et al (2010) have introduced a fuzzy decision support system (FDSS) with a new decision making structure, which can be applied to manage the crisis conditions in any large scale systems with many parameters. After receiving both functional variables of the system and fault signals, the FDSS makes proper decisions to make up and repair the distorted situation and the affected elements of the network according to its data base established through experience gathered from expert managers and decision models properly developed. These decisions are expressed in the form of some scenarios with different desirability degrees, which are determined by some properly developed fuzzy multi-criteria decision making methods, helping the manager choose the best one according to his discretion.

Alonso et al (2010) have presented an implemented web based consensus support system that is able to help, or even replace, the moderator in a consensus process where experts are allowed to provide their preferences using one of many types (fuzzy, linguistic and multi-granular linguistic) of incomplete preference relations. These studies show the important and role of MIS during managers' decision making process.

3.14 Simon’s Model of Decision Making In organisations, the decision-making process is considered as a rational process. It means the decision-making process is based on the following three phases as given by Herbert A. Simon in his model of decision making: 1. Intelligence phase 2. Design phase 3. Choice phase 1.)Intelligence phase : A decision-making studies the environment and identifies the problem or opportunity. The scanning of environment may be continuous or intermittent. For example, Reviewing of daily scrap report by a production manager to check the problems related to quality control. This is an example for continuous scanning. Periodic visiting of a sales executive to the key customers to review possible problems and to identify new customer needs. This s an example for intermittent scanning. The intelligence phase of the decision-making process involves : Problem searching refers to the differences between the expected and real result obtained after making a decision, which is given by the following formula: (Desired/Expected ) – (Actual/Reality) = Difference/Problem For example, a sales manager sets a sales target of certain amount say five lakhs in a particular month as his expected target, which is expected but he could achieve only four lakhs worth of sales for that particular month, which is a reality. Therefore, the difference between the expected and reality value of the target, that is , one lakh is the problem. This difference worries the sales manager. In actual practice, the reality or actual value is compared to some standard desired model. Then the differences are measured and are evaluated to determine the problem or difference. Various types of models that are used to compare reality are: 1.)

Historical models based on estimated information

2.)

Planning model

3.) Extra organisational models in which expectations are derived from customers, consultants and competition 4.)

Models used by employees in an organisation Problem formulation refers to the proper identification of the problem to avoid the risk of solving the wrong problem. To avoid such a risk, it is very important to understand the problem well and state it clearly. Sometimes, the process of clearly defining the problem is sufficient ;but in other cases , we have to simplify the problem by determining its boundaries. Boundaries are simplified by breaking the problem into smaller manageable sub-problems. In problem formulation, establishing relations with some problems that are solved earlier prove quite useful.

2.) Design phase includes inventing or developing various alternatives in order to get the best possible alternative . Developing alternatives is a time-consuming and crucial activity, as the decision-maker has to explore all the possible alternatives. Decision-maker should not take risk of missing any given alternatives since the missed-out alternative might be the best one from the given alternatives. Developing alternatives is a creative activity, which can be enhanced by various aids such as brainstorming , checklists and analogies. 3.) Choice phase refers to the selection of an alternative developed in the design phase as the decision-maker. A decision-maker makes a detailed analysis of each and every alternative for performing this selection. After making a decision, the decision is implemented . However, at any phase, the decision-maker may return to the previous phase. For example, the decision-maker in the choice phase may reject all alternatives and return to the design phase for developing more alternatives.

Information Systems help improve the decision-making process by

providing more information about the problem presenting a greater variety of possible alternatives showing consequences and effects of choices measuring the outcome of different possible solutions providing feedback on the decision that is made Different types of decisions require different types of systems. All decisions follow the same pattern although some may be more complex and require several iterations of the decision-making stages.

Executive Information Systems (EIS) 3 .15 Introduction to Executive Information Systems Executive Information Systems (EIS) supplies the necessary tools to senior management. This system provides relevant information to top management for strategic planning and control. The decisions at this level of the company are usually never structured and could be described as "educated guesses." Executives rely as much, if not more so, on external data than they do on data internal to their organization. Decisions must be made in the context of the world outside the organization. The problems and situations senior executives face are very fluid, always changing, so the system must be flexible and easy to manipulate. An EIS can supply the summarized information executives need and yet provide the opportunity to drill down to more detail if necessary. As technology advances, EIS are able to link data from various sources both internal and external to provide the amount and kind of information executives find useful. As common software programs include more options and executives gain experience using these programs, they're turning to them as an easy way to manipulate information. Many executives are also turning to the Web to provide the flexibility they need. According to Laudon and Laudon ―An executive support system is an information system at the strategic level of an organization designed to address unstructured decision making through advanced graphics and communication.‖

3.16. Features of Executive Information Systems 1. EIS are relevant for top management of an organization. The level at which strategic decisions affecting the organization as a whole or its major parts are made. 2. These systems may derive data from different functional areas but the decisions that are made by integrating these data are not meant for any specific functional area but for the organization as a whole. 3. The information generated through EIS are in t he form of summary reports and graphics. Through these reports executives draw conclusion quickly without waste in their time.

4. Executives are helped by EIS coaches and chauffeurs. An EIS coach is a member of the executive's staff, information services, or an outside consultant who provides help in settil1g up the EIS. An EIS chauffeur is a member of the executive's staff who operates the equipment for the executive. 5. EIS combines both internal and external information for the top management.

3.17 Developing EIS As with DSS, executive support systems are developed using the prototyping method. Prototyping allows iterative, quick changes to the system. Executives are busy people who don't want to spend a lot of time in the development process. They know what they want, they want it quickly, and they want it to work the first time. That's a tough goal for developers. EIS must support many of the executive's informational requirements or she will find other ways to supplement her decision-making tasks. If the system doesn't provide the flexibility to scout out problems, new opportunities, or keep an eye on the competition, executives will ignore the system and seek other ways of getting the information they need--mainly other people. An EIS is a computer-based system that serves the information needs to top executives. It provides rapid access to timely information and direct access to management reports. EIS is very user-friendly, supported by graphics, and provides exceptions reporting and" drill-down" capabilities. It is easily connected with online information services and electronic mail. Some factors that contributed to the development of EIS are as follows. These are also the factors that tell us why to use ESS for higher management.

3.18. COMPONENTS OF EXECUTIVE INFORMATION SYSTEMS Major components of EIS are as follows:1. Executive's staff 2. Database Data warehouse Data mart 3. EIS software Personal productivity software

4.

Prewritten EIS software Customized EIS software EIS Output

1. Executive:-An executive is the end-user of output derived from EIS.Though executives may retrieve desired information on their own specially when database contains tailored information, most of the executives prefer to get this job done by their staff either because they are busy in their work or they do not prefer to work on computers. Thus executive‘s staff personnel work as intermediaries between executives and EIS.These personnel do the job of retrieving information, making analysis, and interpreting results to the executives. Thus executives do not require to know how their staff personnel use the EIS to get the desired information. 2. Database:-Database for EIS is both comprehensive as well as specific. It is comprehensive in the sense that EIS require data about the functioning of the entire organization besides data about environmental-factors-customers, suppliers, competitors, government polices towards business and technological development. Database for EIS is specific because relevant data for EIS must be stored in concise form for easy retrieval and them authorized access because a significant portion of data may be sensitive and needs confidentiality. Database for EIS may be categorized as data warehouse and data mart. Data warehouse: - it is a collection of current and historical operational data stored for use in EIS. The data in the data warehouse may be updated daily, weekly or monthly depending on the need of data users. Through data warehousing in large organizations, data are spread at various points in different forms because of this it ids difficult to locate and retrieve data at a time when these are needed. Growing demands of executives for easy and quick access to relevant data for planning and control have generated the need for storing data in a manner that serves the needs of executives and other decision makers. In most of the organizations information systems are developed as evolutionary process with application-specific databases. With the result an organization may have a number of databases consisting of files, hierarchical databases and relational databases. This system results into difficulty in data location and retrieval. Data warehousing overcomes this difficulty. Datamart:-It is usually a customized database as per the requirements of a specific type of users. They are created from data warehouses .for creating a datamart relevant data are extracted from data warehouses and are earmarked for specific users. EIS datamarts contains those data which are relevant for executives for strategic management that involves strategic planning and strategic control, Data are kept in precise form and whenever details of any issue are required, these are mined from data warehouses. . Data mining:-It is an activity which involves finding relevant data from data warehouse. It discovers various patterns which are followed by available data automatically. 3. EIS software:-EIS software is in dedicated from that is used for data manipulation fro database.

Personal productivity software:-it is general purpose software that any one can use to develop hi own application. EIS use them to provide status information about organizational performance. Prewritten EIS Software:- It is designed to meet the information needs of executives Some prewritten EIS software contains external information in the form of industry trend, competition analysis, proposed legislation changes etc. Customized EIS Software: - If an organization does not want to use prewritten software, it can develop EIS software on its own according to its specific requirements. 4. EIS output:-This may be in the form of report and graphics. These may be either through hard copy or screen display. The report remains brief because executives require so many reports in a single day and if these reports are not brief these ay not be handled effectively by the executives. These reports are called summary reports.

3.19 Characteristics of EIS An EIS has many distinct characteristics that differentiate it from other applications software. A list of these features is presented in table below. A successful executive information system minimizes hard copy reports while keeping high-level executives up dated. With an EIS, qualitative information is obtained without producing volumes of paper. Advanced internal control and communication are typical focuses of an ESS. The ability to view exception reporting on the computer screen is an example of an EIS-facilitated management control technique. Most Executive Support Systems highlight the areas of the business that are going astray. Color codes are used to display data that are in an acceptable or unacceptable range as defined by the executive. This technique allows the computer to track important project assignments within a company using the executive information system. An EIS allows access to external as well as company internal information.

Advantages • Simple for high-level executives to use Operations do not require extensive computer experience • Provides timely delivery of company summary information • Provides better understanding of information

• Filters data for better time management • Provides system for improvement in information tracking Disadvantages • Computer skills required to obtain results • Requires preparation and analysis time to get desired information • Detail oriented Provides detailed analysis of a situation • Difficult to quantify benefits of DSS How do you quantify a better decision? • Difficult to maintain database integrity • Provides only moderate support of external data and graphics capabilities

Examples of EIS The examples of EIS provided in the lesson offer interesting contrasts of how each organization uses its system to aid in the decision-making process. The organization uses mostly external data, including information from the Internet, in its EIS. It organizes the information in order to help executives make decisions based on trends in the marketplace. The information includes data on competitors and information from market research. Organization uses its system output to determine sales forecasts, marketing campaigns, and investment plans. Managers in an organization are able to choose their own criteria to drill down and navigate data through easy-to-use interfaces. They don't have to accept data in formats chosen by someone else who may not understand individual manager's needs. Data analysis is more timely because the information is quicker to obtain and more convenient than before.

Expert Systems (ES) 3.20 Introduction to Expert Systems Expert systems are a common form of artificial intelligence. They are used to assist humans in the decision-making process, but they don't replace humans. Many of the decision we make are based on past experience, but we have the added benefit of reasoning and intuition. Expert systems ask questions, then give you advice and reasons why you should take a certain course of action based on hard data, not on hunches. Again, they don't make the final decision. Most of the problems an expert system helps resolve can in fact be solved by a human. But since the computer is faster or safer, businesses choose to use them instead.

How Expert Systems Work Expert systems rely on a knowledge base built by humans based on their experiences and knowledge. The base requires rules and knowledge frames in which it can process data. When you

think about it, humans work the same way. You look out the window to see if it's raining. If it is, then you grab your umbrella. If it's not raining, then you don't. There you have it: a rule base. Knowledge frames "represent knowledge by organizing information into chunks of interrelated characteristics." Your knowledge frame would be comprised of the fact that when it rains, you get wet; therefore you need to prevent that from happening. Yes, we used a very simplified example. Most expert systems require thousands of rules and frames in which to operate. The knowledge must be specific. In the example above, you wouldn't take any action if the only information you had was "It rains 350 days a year in the Amazon rain forest." Neither would an expert system. The AI shell (the programming environment of an expert system) uses rules, frames, and an inference engine to accomplish its tasks. The inference engine uses forward chaining or backward chaining to move through the rules and the frames. In our example, using a forward chaining inference engine, you would start with the idea that it's raining. You'd move through a series of decisions until you reached a conclusion and acted on it. You would determine that it's raining, then you'd decide how much, then you'd decide how wet you don't want to be, then you'd decide to take an umbrella. As long as the answer continues to be yes, you keep moving forward. In a backward chaining inference engine, you'd start with a hypothesis and work backward until your hypothesis is proved or disproved. You got wet because it was raining; using an umbrella would have prevented that from happening.

3.21 Building an Expert System You build an expert system the same way as you build other Information Systems. However, it's even more important to maintain and update an expert system: You never want to make decisions based on outdated or incorrect information. A knowledge engineer is especially adept at pulling information from various sources, including humans, and making sure it fits into the expert system. You measure the success of an expert system by: • Reduced errors • Reduced cost, reduced training time • Improved decisions • Improved quality and services • Happy users and happy customers Most problems solved by expert systems are mundane situations. "If it's raining then take an umbrella." But what happens if it's cloudy and only looks like it will rain? That's the exception to the rule about which the human being should make the final decision. The expert system might

advise taking the umbrella along or leaving it home based on the input. The human makes the final decision to take or leave the umbrella.

Problems with Expert Systems If you understand that expert systems can only do so much, you'll be just fine. If you understand that they aren't people with the powers of reasoning and intuition and therefore they can't make every decision, you'll know when to override the system and when to go with its output. Remember that everything in an Expert System is based on IF this, THEN that. But we know not everything is black and white, and there are many gray areas. Expert systems should not replace managers. They can aid managers in the decision-making process, but managers have to make the final call. For instance, you suggest to your boss that you should receive a pay raise. You have many subjective reasons why you should receive the raise; you arrive early and stay late, your work is always (well almost always) turned in on time, you filled in for Sam while he was on vacation. What happens if your boss feeds that into an expert system that uses only facts? You may or may not get the raise. Your boss still needs to use intuition, reasoning, and gut reaction to make the final decision.

3.22 Relationships of Systems to One Another: Integration

The key element for all these systems is integration. The Cybernuts candy bar wouldn't be near the success it is if all systems didn't work together and help each other. If the information from the Transaction Processing System didn't feed into the Management Information System which incorporated information from the Knowledge Work System which fed into the Office Automation System which helped the Decision Support System which then worked with the Executive Support System, then the Cybernuts candy bar would just be another junk food.

The main kinds of information systems in business are described briefly below:

Information System

Description

Executive Support Systems

An Executive Support System ("ESS") is designed to help senior management make strategic decisions. It gathers, analyses and summarises the key internal and external information used in the business. A good way to think about an ESS is to imagine the senior management team in an aircraft cockpit - with the instrument panel showing them the status of all the key business activities. ESS typically involve lots of data analysis and modelling tools such as "what-if" analysis to help strategic decision-making.

Management Information Systems

A management information system ("MIS") is mainly concerned with internal sources of information. MIS usually take data from the transaction processing systems (see below) and summarise it into a series of management reports. MIS reports tend to be used by middle management and operational supervisors.

DecisionSupport Systems

Decision-support systems ("DSS") are specifically designed to help management make decisions in situations where there is uncertainty about the possible outcomes of those decisions. DSS comprise tools and techniques to help gather relevant information and analyse the options and alternatives. DSS often involves use of complex spreadsheet and databases to create "what-if" models.

Knowledge Management Systems

Knowledge Management Systems ("KMS") exist to help businesses create and share information. These are typically used in a business where employees create new knowledge and expertise - which can then be shared by other people in the organisation to create further commercial opportunities. Good examples include firms of lawyers, accountants and management consultants. KMS are built around systems which allow efficient categorisation and distribution of knowledge. For example, the knowledge itself might be contained in word processing documents, spreadsheets, PowerPoint presentations. internet pages or whatever. To share the knowledge, a KMS would use group collaboration systems such as an intranet.

Transaction Processing Systems

As the name implies, Transaction Processing Systems ("TPS") are designed to process routine transactions efficiently and accurately. A business will have several (sometimes many) TPS; for example: - Billing systems to send invoices to customers - Systems to calculate the weekly and monthly payroll and tax payments - Production and purchasing systems to calculate raw material requirements - Stock control systems to process all movements into, within and out of the business

Office Automation Systems

Office Automation Systems are systems that try to improve the productivity of employees who need to process data and information. Perhaps the best example is the wide range of software systems that exist to improve the productivity of employees working in an office (e.g. Microsoft Office XP) or systems that allow employees to work from home or whilst on the move.

UNIT IV _____________________________________________ Enterprise Resource Planning (ERP) _____________________________________________________ Learning Objectives: After studying this unit, you will learn: Evolution of ERP, Reasons for the growth of ERP Advantages and limitations of ERP.

Basic Modules of ERP:Personnel Management, Training and Development, Material Planning and Control, Manufacturing, Production Planning, Production Control, Sales and Distribution

_______________________________________________ 4.1 Enterprise Resource Planning Systems Computer, electronics, communication, and audio video technologies have converged closely to produce a new style of operating business. The dynamic business environment of today is full of challenges and opportunities. The dependence on the information, as a driving energy source, is increasing. Every business activity has additional dimensions, viz., speed and time. The business needs of today are beyond the transaction processing. It requires an instant real time response in every case, wherever it occurs. The word enterprise is chosen to convey that it encompasses the larger business community covering all the players and their participation in the business. The system is extended beyond the corporate boundaries. In such a scenario, the system which you are designing is an enterprise wide. It must catch an event, interpret it and trigger the action, and communicate it across to the enterprise. Since, business is information hungry, it must have an ability to sense the situation and act accordingly. When the business requires on-line information to make the informed, knowledgebased decisions and have them executed in the business operations in a coordinated manner, it has to take support of many other systems.

Introduction to Enterprise Resource Planning Systems: The ERP system deals with the planning use of resources used in the business. The resources are finance, materials, manufacturing capacity and human resource. The ERP provides methodology of assessing the resource needs for a given business plan to achieve certain business objectives. It also helps to execute the strategies, plans, decisions, and actions in a time bound manner. The ERP provides a support system in the transaction processing, updating, and reporting across the functions. The ERP is a package encompassing all major functions of the business. The product is generic in nature and is supposed to incorporate the best business practices, generally followed in mist of the companies. The product philosophy is to implement the system as it is with some customization which may be typical to the customer requirement. The system design of the ERP is integrated with the features and functions providing an enterprise wide solution to handle all the process functionalities. For example, it provides capability to process the purchase order from ordering to bill processing and also meets the information needs of purchase, stores, manufacturing, accounts and finance.

4.2 EVOLUTION OF ERP The nineties saw unprecedented global competition, customer focus and shortened product lifecycles. To respond to these demands, corporations had to move towards agile manufacturing of products, continuous improvements of processes and business process re-engineering. This called for integration of manufacturing with other functional areas including accounting, marketing, fi nance and human resource development because activity-based costing would not be possible without the integration of manufacturing and accounting. Mass customization of manufacturing needed integration of marketing and manufacturing. Flexible manufacturing with people empowerment necessitated the integration of manufacturing with HRD function. In a sense, the 1990s truly called for integration of all the functions of management. ERP systems are such integrated information systems that helps to meet the information and decision needs of an enterprise spanning all the functions of management. Nowadays, the advanced ERP systems, which are known as ERP-II or Enterprise Systems, extend beyond the boundaries of an organization, and capture inter-organizational processes such as supply chain management (SCM), customer relationship management (CRM) and so on Such enterprise software focuses on supporting integrated groups of business processes rather than information processing requirements of the respective business function. Whereas, ERP focuses on efficiency of a firm‘s internal production logistics distribution, HR, and Financial Processes, CRM focuses on acquiring and retaining profitable customers through marketing, sales and service processes and SCM focuses on developing the most efficient and effective sourcing and procurement processes with suppliers for the products and services needed by a business. Knowledge Management (KM) applications focus on providing a firm‘s employees with tools that support group collaboration and decision support (Sawhney Mohan, and Jeff Zabin, 2001). Table 1.1 lists the evolution of ERP systems.

ERP systems have evolved from the Materials Requirements Planning (MRP) systems of the 1970s and the Manufacturing Resources Planning (MRP II) systems of the 1980s. Assembly operations involving thousands of parts as in, automobile manufacturing led to large inventories. The need to bring down the large inventory levels associated with these industries led to the early MRP systems that planned the order releases. Such planned order releases ensured proper time phasing and accurate planning of the sub-assembly items, taking into account complex sub-assembly to assembly relationships characterized by the Bill of Materials. A natural evolution from the fi rst generation MRP systems was the Manufacturing Planning systems (MRP II) that addressed the entire manufacturing function and not just a single task within the manufacturing functions. MRP II systems went beyond computation of the materials required to include loading and scheduling. It could determine whether a given schedule of production was feasible, not merely from material

availability but also from the point of view of other resources. Typically, the resources considered by MRP II systems would include production facilities, machine capacities and precedence sequences. Both MRP systems and MRP II systems were fairly successful in the industry. Thanks, to the power of information- system database, algorithms and their integration which helped the organizations in efficiently managing the manufacturing functions in the eighties. For a successful planning and implementation of ERP system in an organization, one needs to know about the business and should have sound knowledge of ERP systems.

4.3 ERP Architecture Any information system has three basic components, viz., the Data Management, the Application Logic, and the Presentation. These components can be built with the client server role definitions. The client is a user and the server provides the service required by the user to run the system. Since, the information needs are dynamically changing, the architecture required is to separate the data and its management from its application. The user requires the choice of using the data as it suits him the most. Hence the application logic has to be separate from the data. There is variability in the manner how the application logic is developed and presented. Since, the ERP is a generic solution for the business operations, in each case of implementation; customization should suit the specifics of the business or customer. The architecture choice is influenced by this requirement. ERP Model and Modules The generic ERP package represents the commonly operated business model of the organization. It is built with the function models like the Finance, Materials, Marketing, Sales and Personnel and their sub-modules. These modules are then integrated to perform, ensuring data and information consistency and concurrency. The seamless integration of the modules allows the user at any level to take a micro and a macro view of the function and process view of the transaction across the function. A typical ERP solution has the following modules: 

Business forecasting, planning and control (Business)



Sales, distribution, invoicing (Sales)



Production planning and control (Production)



Materials management (Materials)



Finance and accounting (Finance)



Personnel management (Personnel)

Basic Features of ERP and its Modules General Features Separation of the programme code and the data areas Command language Screen based flow control Application logic Common service functions such as the currency, date, editing and help Diagnostic functions Transaction flow control Help functions Business System Business forecasting for product, groups, markets Target fixing and allocation by the key parameters Business planning in terms of the resources to execute Strategy formulation and implementation MIS for strategy monitoring and control Business modeling for the strategy development and testing, DSS for resource planning Information base management for management applications Sales Basic data (master) management Order processing Dispatching and invoicing Order analysis, forecasting Sales analysis budgets and control Finished goods stores management Dealer, distributor management system Receivable analysis

Production Basic master data management Bill of materials, classification Process sheet, routing Work order generation, scheduling and control Production Planning: BOM, MRP, MPS and capacity planning Interface of CAD/CAM/CAE systems Materials Purchasing and procurement Goods receipt and issue system Stock management and valuation Inventory analysis Stores ledger, valuation, analysis, disposal Excise/customs interface Finance General accounting functions Ledger, payable and receivables Subsidiary ledgers Cash-flow management Loan management, funds management Working capital management Budgeting, planning and control Balance sheet processing Tax management, status reporting Assets accounting Personnel Personnel data management

Personnel attendance system, time management Payroll Accounting: salary, wages, incentives, bonus, income tax and other deductions, and contributions to various public and provident funds Human Resources Management: Planning, recruitment, training and up graduation Personnel cost, projection and planning Fixed Assets Fixed assets accounting: Inventory, register Depreciation accounting Capital work in progress Fixed assets retirement and disposal Year and processing for balance sheet schedules Maintenance Plant maintenance planning Breakdown, preventive, conditional maintenance Maintenance Management: Initiation, planning, execution, control, and cost accounting Monitoring performances for maintenance actions as all kinds of productive assets Contract management Quality Control System of data gathering to assess quality and measure against standard. Analysis of quality by process, material, work centre location Analysis of quality by reasons and actions taken Building quality assurance data for equipment/process technology selection Monitoring quality across the organization from input to output for operating decisions and business decisions Consolidation of Business Operations Accounting by units and divisions with local focus Consolidation by accounts in corporate functions

Bringing out comprehensive reporting system for business decisions.

4.4 Characteristics of ERP Solution 

Modular structure



Scalable architecture



Seamless integration of modules



RDBMS independent



Independence of hardware platform



Interface capabilities



PC download/upload facility

4.5 Benefits of the ERP Better management of resources reducing the cost of operations. Planning at functional and process level. Simultaneous increase in the productivity of the business possible Customer satisfaction increased due to shorter delivery cycle. Closer contact with the customer. Simultaneous activisation of the decision centers because of instant inducement through triggers or updates. Business operations transparency between business partners cutting down the execution time of critical business operations. Intelligent ERP downloads the decision making at lower level, releasing the burden on the middle management. Due to faster processing technology and SQL, management can see the information in their perspective and take different view of the business. Due to strong interface capabilities, the human resource can be utilized better due to access to information across the database distributed over the organization. Since, the ERP design is proactive; it makes the management alert at a number of points demanding the decision or action. The process becomes faster due to work group technology and application of workflow automation.

4.6 Advantages of ERP system: ERP system provide a number of benefits, which include

Reduced inventory Reduced carrying cost of inventory Reduced workforce Reduced cycle time Reduced data transfer time Reduced errors Reduced quality costs Improved information accuracy Improved decision making capability Improved customer satisfaction, etc In view of the need and the benefits from such a system, a large number of organizations have already acquired and implemented these systems and many more are in the process of acquiring such a system. However, ERP systems to prove beneficial, must be planned well, selected carefully, implemented judiciously and used efficiently. The ERP systems which are poorly conceived and/or poorly implemented are bound to fail and would not be able to yield the desired result and sometimes may even prove to be fatal for an organization. Business integration: conventional company information system were aimed at the optimization of independent business functions in business units, almost all were weak in terms of the communication and integration of information that transcended the different business functions. Flexibility: Different languages, currencies, accounting standards etc. can be covered in one system, and functions that comprehensively manage multiple locations of a company can be packaged and implemented automatically. Better analysis and planning capabilities: ERP allows management to manage operations not just monitor them. The ERP systems already has all the data, allowing the manager to focus on improving processes. Use of latest technology: utilization of the latest developments in information technology. e.g. open architecture, client/server technology, internet, e-commerce etc.

4.7 ERP Selection Since, the market offers a number of ERP packages; the buyer has a choice to make. Each product has its own USP and differs in a number of ways in content, scope, an ease of implementation, etc. The selection can be made on three dimensions, viz., the vendor, the technology, the solution scope, and architecture.

Vendor Evaluation Business strength of the vendor. Product share in total business of the vendor. R & D investment in the product. Business philosophy of the vendor. Future plans of the vendor. Market reach and resource strength of the vendor. Technology Evaluation Client server architecture and its implementation – two tier or three tier. Object orientation in development and methodology. Handling or server and client based data and application logic. Application and use of standards in all the phases of development and in the product. Front end tools and back end data based management system tools for the data, process presentation management. ERP Solution Evaluation ERP fit for the business of the organization in terms of the functions, features and processes, business scope versus application scope and so on. The degree of deviation from the standard ERP product. Ease of use: Easy to learn, implement and train. The ability to migrate to the ERP environment from present status. Flexible design

4.8 MODULES OF ERP All ERP packages contain many modules. The common modules which are available in almost all ERP software packages are as following: A. B. C. D. E.

Finance Module Manufacturing & Production Planning Module Sales & Distribution Module Plant Maintenance Module Quality Management Module

F. Material Management Module

A. FINANCE MODULE 1. A set of processes are required so that they can provide the financial information in the form that is required by the user, such financial solution is provided by the ERP package. 2. The financial application component of the ERP provides us with the information of financial functionality across the different business area. 3. The finance business of ERP also provides analysis support to the business. 4. The finance module of the most ERP system will have the following subsystems: a. Financial Accounting (General Ledgers, Accounts Receivable / Payable, Fixed Asset Accounting) b. Investment Management (Investment Planning / Budgeting / Controlling) c. Controlling (Cash Management, Treasury Management) d. Enterprise Controlling (EIS, Business Planning and Budgeting) 1. FINANCIAL ACCOUNTING The financial accounting system objective is to provide company-wide control and integration of financial information which is required for strategic decision making. The Financial Accounting Module of an ERP system, gives you the ability to centrally track financial accounting data within an international framework of multiple currencies, companies and languages. Eg: When raw material moves from inventory into manufacturing, the system reduces quantity values in inventory and subtracts value for inventory account in the balance sheet. I.

GENERAL LEDGER a. The general ledger is essential to both financial accounting system and to strategic decision making. b. The general ledger supports all the functions which are required in financial accounting system. It contains of sub-ledgers. c. The GL provides document parking, posting, reporting, and an integrated financial calendar for automating periodic activities. d. It provides the summary information from the other components at the user defined level of detail. e. According to the company requirements, the general ledger is structured in a number of accounts, according to the requirement. f. The output generated by the general ledger is the data summary that can be used in planning, distribution and reporting. g. In the general ledger we can also create our own database table and non standard fields as per the requirement of the business organization.

PURCHASING

SALES

(QUANTITY AND VALUE)

(ORDER AND BILL)

VENDOR (PAYABLE)

CUSTOMER (RECEIVABLE)

EMPLOYEES

FIXED ASSETS

(SALARY AND WAGES)

GENERAL LEDGER

TYPICAL GENERAL LEDGER II.

ACCOUNTS RECEIVABLE / PAYABLE a. ERP system provides us a financial overview of business partner relationships by maintaining accounts payable & receivable. b. These accounts are integrated with general ledger and it is associated in sales and distribution & material management. c. They are performed automatically when related processes take place in other modules. d. It uses the standard business rules for the data entry and reporting to processing payments and bank transactions. e. The accounts receivable and payable functions include: i. Internet Integration ii. Document Management iii. EDI processing iv. Automatic Integration with Cash Management f. The module also provides, enterprise wide credit management with workflow integration, payment automation with EFT and check processing etc.

III.

ASSET ACCOUNTING a. This module manages the company‘s fixed asset. It provides the detailed information on asset related transactions. b. The functions performed by this module are: i. Provides with depreciation charge. ii. Support throughout the complete lifecycle of the asset. iii. Management of capital assets.

iv.

Integration with Plant Maintenance for management of machinery and equipment. c. Fixed Assets: It does not change. Eg: Land & Building d. Current Assets: It keeps on changing. Eg: Cash IV.

LEGAL CONSOLIDATION a. All the financial statements should be integrated effectively with the operational data. b. The legal consolidation helps in the direct data transfer from individual statements into the consolidated report. c. The legal consolidation helps to create multiple views of consolidated data and thus we can generate separate reports for the different functions of an organization.

2. CONTROLLING: a) This module gathers the functions required for effective internal cost accounting. b) It offers a versatile information system, with standard reports and helps in analysis. I. OVERHEAD COST CONTROLLING:a) Many organizations experience a significant increase in the percentage of indirect costs, which cannot be directly assigned to either the products manufactured or to the services rendered. b) While cost monitoring and optimization may be quite advanced in production areas; transparency is often lacking in overhead cost areas. c) The over head cost controlling system focuses on monitoring and the allocation of overheads. II. COST CENTER ACCOUNTING: a) It analyses where the overheads have occurred in the organization. b) The cost is allocated to various sub areas of the organization and the techniques are followed so that we can come to know where the expenses have been incurred. III. OVERHEAD ORDERS: a) This system collects and analyses costs and also checks and monitors the budget that has been assigned. IV. ACTIVITY BASED COSTING: a) This module gives a response to the growing need for monitoring and controlling crossdepartmental business processes. b) This system automatically determines the utilization of business processes by products, customers and other cost objects based on the cost drivers taken from the integrated accounting environment.

V. PRODUCT COST CONTROLLING: a) It determines the cost arising from manufacturing a product or providing a service. VI. COST OBJECT CONTROLLING: a) This module helps in monitoring the manufacturing orders. b) Integration with the logistics component results in a logistical quantity flow, that provides instant information on actual cost object costs, allowing ongoing costing calculations at any time. c) Follow up calculations determine and analyse the variances between actual manufacturing cost, and the plan cost resulting from product cost planning. VII. PROFITABILITY ANALYSIS: a) Profitability analysis subsystem examines the sources of returns. b) Information from profitability analysis, frames important decisions in areas such as determining prices, selecting customers, developing conditions and choosing distribution channels. 3. INVESTMENT MANAGEMENT: a) Investment management process starts from the planning of an organization till the settlement of an organization. b) The investment programs are carried out in each and every department and it also tells us the up to date information about funds, plant cost and actual cost from external and internal activities. c)

The investment program allows to distribute budgets which help us to monitor the budget and avoid over run.

d) It also helps us to manage and plan capital projects. e) The investment measures that need to be monitored are done from time to time according to the internal order. 4. TREASURY MODULE a) The organization can gain a significant competitive advantage by efficiently managing the short term, medium term and long term payment flows and managing the risk. b) All these operating divisions are linked so that the financial transactions can be planned and these positions in treasury have a significant impact on the organizations success. c) It also helps in management and control of cash flow. d) Manages the risk among all the division of organization. e) The treasury component provides us with the following sub components: 1. Cash Management 2. Treasury Management 3. Market Risk Management

4. Funds Management I.CASH MANAGEMENT a. It allows us to analyze financial transaction for a given period of time. b. It provides the information on the sources and the uses of funds to secure liquidity so that the payment obligation can be met on time. c. It also monitors and controls the incoming and outgoing payment flow and provides the data for managing short term money market investment. II.TREASURY MANAGEMENT a. The treasurer takes the result of current liquidity, currency and the risk position on the money and the capital market before taking decision in the form of financial instruments in treasury management. b. The treasury management component offers functions for managing financial deal and position. c. It also supports flexible reporting and evaluation structure for analyzing position. III. MARKET RISK MANAGEMENT a. This plays a vital role within the Treasury, in ensuring your company‘s competitiveness. b. This module provides us with the feedback which consists of data collection risk measurement, analysis and active planning process for the financial instruments. c. This process deals with the treasury and corporate functions. d. Market risk management acts as an integrated, central risk control station with monitoring and management functions. IV.FUNDS MANAGEMENT This module supports the subsystems of fund management process from budgeting all the way through payment including monitoring expenditures, activities, resources and revenues. 5. ENTERPRISE CONTROLLING a. Enterprise controlling comprises of those functions that will optimize share-holder value, while meeting internal objectives for growth and investment. b. This module includes: i. Executive Information Systems ii. Business Planning and Budgeting. iii. Profit Centre Accounting.

I. EXECUTIVE INFORMATION SYSTEMS (EIS) a) It provides an overview of the critical information necessary to manage the organization. b) It integrates data from other ERP components and non- ERP data sources both inside and outside the enterprise. c) Drill- down reporting and report portfolio are available to evaluate and present the data.

II.BUSINESS PLANNING AND BUDGETING a) Business Planning and Budgeting supports the management team of business units and groups in the calculation of business targets such as return on investment. b) It also supports central investment planning, budget release and tracking. c) It automatically transfers data about investment requirements from transaction applications and provides extensive analysis functions for budget monitoring.

III.PROFIT CENTRE ACCOUNTING a) It analyses the profitability of internal responsibility centres. b) All business transactions in financial accounting, material management, asset management and sales and distribution which affects profit are automatically reflected in profit center accounting.

B. SALES AND DISTRIBUTION MODULE With today‘s business environment characterized by growing competition shrinking cycle times and the accelerating pace of technological innovation companies are increasingly being forced to streamline business processes. Here, increased efficiency in sales and distribution is a key factor to insure that companies retain a competitive edge and improve both profit margins and customer service. The following are the sales related business transactions: Sales queries, such as inquiries and quotations Sales orders Outline agreements, such as contracts and scheduling agreements Delivery/Shipment Invoicing/Billing After sales support During sales order processing, the following basic functions are carried out: Inquiry handling Quotation preparation and processing Contracts and contract management(order management) Monitoring the sales transactions Checking for availability Transferring requirements to material planning(MRP)Scheduling the delivery Calculating pricing and taxes Checking credit limits

Invoicing/Billing Creating printed or electronically transmitted documents(confirmations and so on) The sales and distribution module very actively interacts with the material management and financial accounting modules for delivery and billing. Typically, a sales and distribution module will contain the following sub systems: Master data management Order management Warehouse management Shipping Billing Pricing Sales support Transportation Foreign trade MASTER DATA MANAGEMENT 1. 2.

Every company will have products, customers and will require raw materials and will have suppliers. The task of the Master data management module is to keep information about all these entities, so that these can be made available to the decision makers and also for the automatic generation of reports, contracts, invoices and so on. Inquiry

Quotation Sales Contracts

Order

Shipping

Billing

Delivery

Invoice

FINANCIAL ACCOUNTING

MATERIALS MANAGEMEN T

3. 4.

Automatic sales processing, using ERP system, requires that the master data has been stored in the system. In addition to sales and distribution, other departments of the company, such as accounting or materials management access the master data.

ORDER MANAGEMENT This module usually includes sales order management and purchase order management and supports the entire sales and purchase processes from start to finish. i. Sales order management. 1. Applications in sales order management represents a company‘s most important point of contact with the customer. 2. These applications allow a company to manage sales operations quickly and efficiently and provide comprehensive solutions for the management of quotes, orders, contracts, prices, and customer discounts. Credit checking

Inventory availability

Pricing and distribution

Checking

Discounting Margin Analysis

Inventory commitment Materials Management Production Planning Warehouse Management

Sales

Quotations/Contracts EDI/Internet

Order

Invoicing

Entry Change order Management

Order history

Delivery Status

Statistics

Monitoring

Returns handling

SALES ORDER MANAGEMENT. ii. Purchase order management 1. Purchase order management is increasingly essential in today‘s even more competitive business environment because it enables a company to make the correct purchase decisions

about quality and price, where quality refers to supply lead-time as well as to the (to be purchased) product itself. 2. Purchase order management includes online requisitioning, centralized contract management, just in time schedules and vendor management.

Requisitions

Schedule

Planning/Sales/Shop Floor

Definitions

Sourcing Information

Request for quotation

Purchase

Purchase

Order

Schedule PURCHASE CONTRACTS

Warehouse Orders

PURCHASE FLOW Purchase order Analysis enables historical as well as statistical data to be used to assist in the analysis of purchase activities. iii. WAREHOUSE MANAGEMENT This module provides real time information about inventory levels across the enterprise and tools to manage the daily operational needs of single-site or multiple-site four wall warehouses. Components of a good warehouse management application include the following:

  

Inventory Planning: Comprises of planned inventory movements, so that customers receive right order in the right quantity at the right time. Inventory handling: Allows for monitoring of all warehouse order scenarios such as the receipt, issue and transfer of inventory. Intelligent location assignment: Used to create intelligent storage put away lists.

   

Inventory reporting: This function permits full visibility of inventory at single or multiple sites. Inventory analysis: This module enables the analysis of information that result from warehousing activities and the use of feedback in process optimization. Lot control: This facility offers lot tracking and tracing, so that a company can trace all the raw materials and the finished goods that its products require. Distribution data collection: This is an essential element in paperless warehousing that provides the communication link between storage and shipping systems and warehousing equipment like bar coding scanners.

SHIPPING The shipping module supports the following functions: Monitoring dates of orders due for delivery Creating and processing deliveries Planning and monitoring work lists for shipping activities Monitoring material availability and processing outstanding orders Picking(can be linked to the warehouse management system) Packing deliveries Information support for transportation planning. Support for foreign trade requirements Printing and sending shipping output Data update in goods issue. BILLING A business transaction is completed for sales and distribution once it has been billed. The ERP systems support billing functions like issue of invoices on the basic of goods and services, issuing f debit and credit memos. PRICING 1. The term pricing is used broadly to describe the calculation of prices (for external use by customers or vendors) and costs (for internal purposes such as cost accounting). 2.

3.

The pricing module keeps the information about the prices of the various items, the details about the quantity discounts, the discounts to the different customer categories and so on and enables the organization to generate documents like quotations, delivery notes, invoices and so on. Also, since this information is available to all the sales people, they can make better decisions thus improving the sales performance.

SALES SUPPORT

1. The sales support component helps the sales and marketing department to support your existing customers and, at the same time, to develop new business. 2. Sales support provides an environment where all sales personnel-both the field sales people and the staff in the sales office-can contribute to and access valuable information about customers, sales prospects, competitors and their products and contact people. 3. The sales support component functions, both as a source of information for all other areas of sales and distribution and as an initiating force for acquiring business.

TRANSPORTATION 1. 2. 3. 4. 5.

Transportation is an essential element of the logistics chain. It effects both inward and outward movement of goods. Effective transportation planning is required to ensure that shipments are dispatched without delay and that they arrive on schedule. Transportation costs play a considerable role in determining the price of a product. It is important that these transportation costs are kept to a minimum in order to keep the price of the product competitive.

FOREIGN TRADE

1.

The entire logistics chain, from the import of raw materials, finished and unfinished goods, to the sale of goods and the transfer of data to materials management and financial accounts, is significantly influenced by foreign trade activities.

2.

These main tasks in foreign trade processing can be carried out using the foreign trade system.

C. HUMAN RESOURCE MODULE Human resource management is an essential factor of any successful business. The various subsystems under HR module are:

    

Personnel management: (HR master data, Personnel administration, information systems, recruitment, travel management, benefits administration, salary administration) Organizational management: (Organizational structure, staffing, schedules, job descriptions, planning scenarios, personnel cost planning) Payroll Accounting: (Gross/net accounting, history function dialogue capability, multi currency capability, international solutions) Time management: (Shift planning, work schedules, time recording, absence determination) Personnel development: Career and succession planning, profile comparisons, qualifications assessments, additional training determination. Training and event management.)

PERSONNEL MANAGEMENT

Personnel management includes numerous software components, which allow you to deal with human resources tasks more quickly, accurately and efficiently. You can use these components not only as part of the company wide ERP solution but also as stand alone systems. i. Personnel Administration Information is no longer owned by specific departments, but is shared by multiple entities across an organization. This eliminates duplicate entries reduces the chance for error and improves data accuracy. ii.Employee master data

1.

Human resource module has a centralized database with integration to multiple components for processing employee information.

2. 3. 4. 5.

The system provides tools to save time and help you tailor the system to fit your needs.

6.

The system can produce charts and reports-both standard and customer defined.

The HR module contains features for storing any desired information about your employees. Most systems have the facility to scan the original documents for optical Storage. The HR Information system displays graphical information such as organization charts or employee data.

iii.Recruitment management

1. 2.

This function helps in hiring the right people with the right skills.

3.

These requirements are fulfilled only through effective automation of the entire recruitment process.

4. 5.

The recruitment component is designed to help meet every facet of this challenge.

Reducing the cost of recruiting and hiring new employees is a challenge for the HR professional, who is responsible for placing people in the right job, at the right time, and with the right skills and education.

This component includes processes for managing open positions/requisitions, applicant screening, selection and hiring, correspondence, reporting and cost analysis.

iv.Travel Management

1.

This module helps you in processing the travel expenses effortlessly, in several currencies and formants.

2.

HR Travel management allows you to process a business trip from start to finish-from the initial travel request right through to posting in financial accounting and controlling.

3. 4. 5. 6.

This includes any subsequent corrections and all retroactive accounting requirements. Travel management automatically calculates the tax. It automatically processes credit card transactions for a particular trip. You reimburse costs incurred during a trip through a payroll accounting, accounts payable accounting or by data medium exchange.

7. 8.

In addition, Travel management provides multiple report formats. You can enter receipts in any currency and then print reports in your native currency.

Benefits Administration

1.

Using the benefits administration component, you can define eligibility groups and rules based on a wide range of factors.

2.

You can determine the variables, rules and costs formulas for each benefits plan.

Salary Administration

1. 2. 3.

This function helps you in simplifying the process of rewarding your employees.

4.

The salary administration module assists you in the salary review process by taking into account standard salary changes within the company as well as individual competition exceptions.

Administration of salaries is an ongoing process within your human resource department. It is particularly important during the review processes, when your goal is to justify reward good performance.

ORGANIZATIONAL MANAGEMENT This module will assist you in maintaining an accurate picture of your organizations structure, no matter how fast it changes. In many cases, graphical environments make it easy to review any moves, additions, or changes in employee positions. PAYROLL ACCOUNTING

1.

The payroll accounting system can fulfill the payroll requirements and provide you with the flexibility to respond to your changing needs.

2. 3.

Payroll accounting should address payroll functions from a global point of view.

4.

Most payroll accounting systems give you the options and capabilities to establish business rules without modifying the existing payroll.

5. 6.

Many systems have the features to remind you when transactions are due for processing.

7.

With country specific versions of payroll accounting, you can fulfill language, currency and regulatory requirements.

You should be able to centralize your payroll processing, or decentralize the data based on country or legal entities.

With payroll accounting, you have the ability to tailor the system to your organization requirement.

TIME MANAGEMENT

1.

It is a flexible tool designed to handle complicated evaluation rules to fulfill regulatory requirements and determine overtime and other time related data.

2.

The time evaluation component stores your organizations business rules and automatically validates hours worked and wage types.

i. Shift Planning

1.

Shift planning module helps you to plan your workforce requirements quickly and accurately.

2.

You can plan your shifts according to your requirements taking into consideration all criteria, including absences due to leave or sickness, and employee requests for time off.

3. 4.

Shift planning keeps you informed at all times of any staff excess or deficit. Another advantage of shift planning is that it enables you to temporarily assign an employee or employees to another organizational unit where they are needed, allowing for a temporary change of cost centre.

PERSONNEL DEVELOPMENT Effective personnel development planning ensures that the goals of the organization and the goals of the employee are in harmony. The benefits of such planning include improvements in employee performance, employee potential, staff quality, working climate and employee morale. i. Training and Event Management

1. 2. 3.

A good HR system will have scheduled seminars, training courses and business events. On completion of a training course, appraisal forms can be automatically issued. Appraisals can be carried out for instructors, attendees, business events and training courses.

D. PLANT MAINTAINENCE MODULE 1.

The achievement of world class performance demands delivery of quality products expeditiously and economically.

2. 3.

Organizations simply cannot achieve excellence with unreliable equipment.

4.

Today when a machine breaks down, it can shut down the production line and the customer's entire plant.

5.

The Preventive Maintenance module provides an integrated solution for supporting the operational needs of an enterprise wide system.

Machine breakdown and idle time for repair was once an accepted practice. Times have changed.

6.

The Plant maintenance module includes an entire family of product covering all aspects of plant/ equipment maintenance and becomes, integral to the achievement of process improvement.

7.

The major subsystems of a maintenance module are : 1. Preventive Maintenance Control. 2. Equipment Tracking. 3. Component Tracking. 4. Plant Maintenance Calibration Tracking. 5. Plant Maintenance Warranty Claims Tracking.

PREVENTIVE MAINTENANCE CONTROL

1.

Preventive Maintenance Control provides planning, scheduling and control of facilities and equipment.

2.

Preventive Maintenance Control enables organizations to lower repair costs by avoiding downtime, machine breakage and process variability.

3.

Companies achieve higher machine utilisation and improved machine reliability and tolerance control, along with higher production yields.

EQUIPMENT TRACKING

1. 2.

Equipment is an asset that needs to be monitored and protected.

3. 4.

All facets of plant location history and utilization history are described and tracked.

5. 6.

Each piece of equipment is defined by a model and a serial number.

In many situations, equipment maintenance costs constitute the single largest controllable expenditure of an organization. This history includes acquisition and disposition information and associations between different pieces of equipment to pinpoint operational dependencies. All of this information can be used to create equipment specifications, which provide detailed information for technical specialists working in equipment operations, maintenance and transportation control.

COMPONENT TRACKING

1.

Components are typically subsets of larger equipment and deserve the same amount of cost controlling scrunity.

2.

Component tracking enables equipments managers to identify components with chronic repair problems.

3. 4.

They can determine whether a repair or replacement should be covered by warranty. Planning component replacements, rather then waiting for components failures to occur, reduces unscheduled equipment downtime.

5.

Component tracking includes repair/exchange history and component service life.

PLANT MAINTENANCE CALIBRATION TRACKING Plant Maintenance Calibration Tracking allows organization to leverage their investment in the Plant maintenance module by providing for the tracking of equipment calibration in support of ISO9001 requirements. PLANT MAINTENANCE WARRANTY CLAIMS TRACKING

1.

Plant Maintenance Warranty Claims Tracking is an administrative system, designed to provide control of all items covered by manufacturer and vendor warranties.

2.

It enables plant management to recover all of the warranty; reimbursements to which they are entitled but have not been able to recover in the past.

3.

Features include the ability to, establish the type-and length of warranty, for example, elapsed day, months: mileage stipulation, or operating units.

4.

A complete history is performed fur each item covered by the warranty, and information regarding the warranty service provider is generated.

E. QUALITY MANAGEMENT MODULE 1. The quality management module supports the essential elements of a system. 2. It penetrates all processes within an organization. 3. The task priorities, according to the quality loop, shift from production (implementation phase) to production planning and product development (planning phase), to procurement and sales and distribution, as well as through the entire usage phase. 4. It handles the traditional tasks of quality planning, quality inspection and quality control. 5. The quality management module‘s internal functions do not directly interact with the data or processes of other modules. QUALITY MANAGEMENT MODULE – FUNCTIONS: The quality management module fulfills the following functions: 1. QUALITY PLANNING: Management of basic data for quality planning and inspection planning, material specifications, etc. 2. QUALITY INSPECTION : Trigger inspections, inspection processing with inspection plan selection and sample calculation etc. 3. QUALITY CONTROL.: Dynamic sample determination on the basis of the quality level history, quality management information system for inspections and inspection results and quality notifications, etc.

COMPUTER INTEGRATED QUALITY MANAGEMENT (CIQ) 1. The integration of Quality management in the ERP system provides considerable advantages because only an integrated system can support all the elements of quality mgmt system. 2. This integration allows the quality mgmt to influence all processes within a company, thereby affecting all phases of a products life-cycle. 3. The quality management module is integrated with the master data and processes of the following applications: i. MATERIAL MANAGEMENT: Purchasing, Inventory mgmt, Warehouse mgmt, Material Requirement Planning. ii. PRODUCTION: Work scheduling, shop floor control. iii. SALES AND DISTRIBUTION: Delivery, creation of quality certificates. 4. The quality management module supports the exchange of data with the other applications in order to prevent related data from being recorded and stored redundantly. 5. For example, the information provided by a goods receipt posting relating to the material, vendor and lot size is automatically transferred to the inspection lot data record when an inspection is triggered.

F. MATERIAL MANAGEMENT MODULE: The material management module optimizes all purchasing processes with workflow-driven processing functions, enables automated supplier evaluation, lowers procurement and warehousing costs with accurate inventory and warehouse management and integrates invoice verification. The main module of material management are as follows: i. Pre- Purchasing Activity. ii. Purchasing. iii. Vendor Evaluation. iv. Inventory management. v. Invoice verification and material inspection. I. PRE-PURCHASING ACTIVITIES: 1. This system supports the complete cycle of bid invitation, award of contract and acceptance of services and also include maintaining a service master database, in which the descriptions of all services that are to be procured can be stored. 2. The system also keeps separate sets of service specifications that can be created for each concrete procurement project or proposed procurement in the purchasing documents. 3. Set of service specifications may include both items with services and items with materials. 4. The steps that are followed in the pre-purchasing activity are shown in the diagram that follows:

REQUIREMENTS CALCULATION

REQUSISTION FOR QUOTATIONS

VENDOR RATINGS

QUOTATION EVALUATION

VENDOR SELECTION

CONTRACTS

THE PRE-PURCHASING ACTIVITIES MODULE

II. PURCHASING: 1. Purchasing is a very important component of the material management module. 2. It supports all the phases of material management, material planning and control, purchasing, goods receiving, inventory management and invoice verification. 3. Good communication between all parties in the procurement process is necessary for purchasing to function smoothly. 4. Purchasing communicates with other modules in the system to ensure a constant flow of information. 5. For example it works side-by-side with the following modules : Cost Accounting System ,Financial Accounting, Sales and distribution

PURCHASING

COST ACCOUNTING SYSTEM

FINANACIAL ACCOUNTING

SALES AND DISTRIBUTION

III. VENDOR EVALUATION: 1. The vendor evaluation system supports the optimization of the procurement process in the case of both material and service. 2. By evaluating vendors, you can improve your enterprises competitive-ness. 3. Most of the vendor evaluation systems offer you a point-based evaluation system, based on certain selection criteria. Most systems have their own pre-defined set of criteria, but will allow the user-defined set of criteria also. 4. Using these criteria, the performance of the vendors is measured and points are given. 5. The main criteria that are usually used are price, quality, delivery, service and support, replacement of returns, lead time and so on. 6. The vendor evaluation system ensures that evaluation of vendors is objective, since all vendors are assessed according to uniform criteria and the scores are computed automatically.

IV. INVENTORY MANAGEMENT: 1. Inventory management systems allow you to manage your stocks on a quantity and value basis, plan, enter and check any goods movements and carry out physical inventory. 2. In the inventory management system the physical stocks reflect all transactions resulting in a change in stock and thus in updated inventory levels. 3. The user can easily obtain an overview of the current stocks of any given material. 4. For each material not only are the stocks in the warehouse shown , but also the stocks ordered but not yet delivered, reserved for production or for customer, and the stocks in quality inspection can be monitored. 5. Special stocks from the vendor or from the customer are managed separately from the company‘s own stock. 6. Most inventory management systems support inventory methods like periodic inventory, continuous inventory, inventory sampling and cycle counting.

V. INVOICE VERIFICATION AND MATERIAL INSPECTION. The invoice verification component is part of the material management system. It provides the link between materials management components and the financial accounting, controlling and asset accounting components.

Invoice verification material management serves the following purposes: i.

It completes the materials procurement process- which starts with the purchase requisition, continues with purchasing and goods receipt and ends with the invoice receipt. ii. It allows invoices that do not originate in materials procurement (services, expenses, etc) to be processed. iii. It allows credit memos to be processed, either as invoice cancellations or discounts. Invoice verification does not handle the payment or the analysis of invoices. The information required for these processes is passed on to other departments.

G. MANUFACTURING MODULE: 1. A good manufacturing system should provide for multi mode manufacturing applications that encompass full integration of resource management. 2. These manufacturing applications should allow an easier exchange of information throughout the entire global enterprise, or at a single site within a company. 3. The manufacturing module should enable an enterprise to marry technology with business processes to create an integrated solution. 4. It must provide the information base upon which the entire operation should be run. 5. It should contain the necessary business rules to manage the entire supply chain process whether within a facility, btwn facilities or across the entire supply chain.

HOW DOES MANUFACTURING RESPOND TO THE CUSTOMER? 1. The manufactures must respond quickly and effectively to customer demands. 2. While agility is desirable, agility without an effective enterprise manufacturing system results in speed without purpose. 3. Effective execution provides short cycle tem, quality assurance, continuous improvement &quick response to process variability. 4. All three elements contribute to a management decision to install an enterprise-wide manufacturing management system. 5. Some of the major subsystem of the manufacturing module is: I. Materials and capacity planning II. Shop floor control III. Quality management IV. JIT/repetitive manufacturing V. Cost management VI. Engineering change control VII. Engineering data management VIII. Configuration management IX. Tooling X. Serialization/lot control

MATERIAL AND CAPACITY PLANNING

1. The planning systems of ERP packages are designed to provide the responsiveness your company needs to meet those customer requirements. 2. With these systems, planners can stimulate alternative plans; gaining the information they need to determine which parts and assemblies to make, which to buy and when to manufacture or purchase. 3. Material plans can be developed from a wide variety of sources that include the master schedule, sales forecasts and dependant and independent demand. 4. The company can customize planning processes because input is described by system parameters that are easily changed. 5. To reduce effort and accelerate communication across the supply chain, planned orders can be confirmed and converted automatically (or manually) into production and purchase orders. 6. Graphical reporting makes potential material and capacity problems easy to identify. 7. Depending on the requirements of the company‘s product and processes, production can be scheduled using work orders or repetitive build schedules. 8. Using the shop floor control facility, the company has the visibility necessary for managing lead-times and for carefully controlling the amount of work-in-process and the timely release of production orders.

SHOP FLOOR CONTROL 1. Process reengineering efforts and the elimination of waste have necessitated greater reliance upon powerful, user friendly, flexible shop floor planning and control systems. 2. Management needs timely, accurate information and the ability to manage the shop floor by exception. 3. A shop order can be reprinted at any time with user selection of weather to relocate material 4. This reprinting gives a shop foreman flexibility to print a duplicate copy when an order is split between operators. 5. This feature also gives the shop scheduler, the ability to reprint the shop packet and to reflect new material allocations that correct previous shortages. 6. Every shop order can be maintained throughout its life. 7. All systems provide a full function shop order maintenance capability, allowing the user to evaluate and adjust operation steps and components. 8. Orders can be re scheduled either backward or forward.

QUALITY MANAGEMENT 1. All manufacturing modules track quality control activities. These systems allow a wide variety of characteristics and parameters to be specified in a test and inspection operations and maintain an extensive history to improve product quality and identify recurring problems. 2. The quality management systems usually support the bench marking on optimal product design, process engineering and quality assurance data by all functional departments within the manufacturing enterprise thereby facilitating definitions of repeatable processes, route cause analysis and a continuous improvement of manufacturing methods.

3. This documentation supports the job functions of quality assurance and production managers in validating the manufacturer‘s conformance to ISO 9000, good manufacturing practices GMP world wide, MIL-Q-9858 in the United States and a variety specific industry standards of quality assurance. 4. Many systems not only provide high volumes repetitive manufacturing functionality, but also provide for the transition to rate based production by allowing the use of repetitive scheduling, even for the products are not rate based. 5. This allows a production facility to transition products from the discreet manufacture into a JIT/repetitive focus. For eg. When the demand pattern for an item begins to stabilize and shown a repeatable/ predictable pattern, then a productive schedule can be initiative even though the item may not be designated as rate based. 6. Overtime, as the items demand pattern grows, the item can be switched to full rate based production scheduling. 7. This transition capability enables production facility to adopt process reengineering, set up production, single minute exchange of die(SMED)programs employee empowerment work teams etc. with the confidence of knowing that the planning and control system will effectively support the efforts. 8. GIT/repetitive includes strong analytic capabilities.

COST MANAGEMENT 1. ERP packages provide extensive cost information at several levels that have businesses identify drivers and reduce product cost. You can choose the costing method that best reflects your company‘s business. 2. FILO (Last in First out) FIFO (First in first out), moving average unit or lot costing methods can be assigned by items. 3. Many vendors all support ACTIVITY BASED COSTING (ABC) with activities visibility by cost object as well as cost for user defined groupings such as departments. 4. Manufacturing system provides extensive information about production costs at several levels, which gives you the visibility that you need to identify costs drives and reduce product costs.

ENGINEERING DATA MANAGEMENT 1. The 1st step to shorter product development activities. Engineering Data Management is designed to help your company trim data transfer time, reduce errors & increase design productivity an automated link bwtn engineering and production information. 2. Most packages allow a smooth integration, with popular CAD packages, to simplify the exchange of information abt drawings, items BOMs and routings.

ENGINEERING CHANGE CONTROL 1. By using Engineering Change control, business can give effective control over engineering change orders.

2. Your company can define the authorization steps for improving and implementing an engineering Change Orders. 3. When these steps are completed, the system automatically the change in the production database.

CONFIGURATION MANAGEMENT 1. The Configuration management dramatically reduce order cycle time by eliminating the lengthy engineering review, typically associated with determining feasibility and the costs associated with the configured end item. 2. This reduction is achieved by creating a flexible user-defined knowledge base that is accessed by a powerful analytic engine. SERIALIZATION / LOT CONTROL 1. The lot control system provides for the pre-allocation of lot numbers. 2. This Feature is available throughout the product offerings and includes MRP, shop floor control, order processing and JIT. TOOLING 1. For many manufacturers, ensuring that proper tooling is available is just as critical to production schedules as the availability of material. 2. The ERP system extends capacity and inventory management to include these valuable resources. 3. These systems help to ensure that tools and materials arrive together at scheduled operations by storing tools in inventory and planning and allocating the required tools as part of the production order.

4.9 ERP Implementation The ERP implementation, generally, follows the waterfall model approach. Once a firm order is received, the implementation begins with the kick-off meeting between the vendor and the organization. In such meetings the organizational issues are taken care of. Since it is a long term activity a preliminary planning is done to start the implementation. Requirement Definition and Description - RDD Though, initially, the study has been carried out by the vendor, more in-depth study is taken up jointly by the vendor and the project in-charge of the organization. In this phase of study the users are contacted for their requirement specifications. These requirements may be of the data, information, function, features, processes or reports. It is necessary to understand them to evaluate the ability of the ERP solution to satisfy these requirements.

Since, the ERP is designed as a standard package, it often requires changes and modifications to suite the requirements of the business. All the ERP packages provide standard features, functions lists of the package used. These lists are examined vis-à-vis the requirements and new document is prepared called as the deviation RDD. The implementation steps are given as follows: 

A user meeting is arranged to explain the ERP and process of implementation.



The RDD and the DRDD is explained for understanding and approval.



The resource to carry out the changes in the system, generally, known as customization is provided. This could be business specific and customer specific.



The DERP (Deviation ERP) solution is tested.



The solution on the recommend platform is loaded.



The solutions are tested on a sample data of substantial nature.



The solution is then demonstrated to the users for their understanding and confirmation.



The users are trained to run the solution and resolve the difficulties in operations of the system solution.

The change over from the manual system to the ERP solution are meticulously planned, taking care of the cut off dates, the opening balances, the data transfer etc. A logbook of the system usage is kept to note down the problems, solutions and modifications carried out to make the solutions more efficient and effective.

4.10 ERP and MIS There is a qualitative change in the MIS design due to the complexity of the business operations and the risk involved in handling the business. The management focus is shifting form the function to the process, i.e., the management requires the information support in the process management and not in the functions management. The process definition now goes beyond the organization boundary. It connects the organization to other agencies. The emphasis is on the automation of processes with a strong Information Technology implementation. The MIS is now required to maximize the process productivity and performance. The decision making support is required for the process optimization. The decision models are built across the business management functions. Besides the normal MIS reports required for the top management, the Top Management also needs a set of the additional reports, where the critical business processes and the critical success factors are a focus area.

The ERP solution caters to this requirement very early. The ERP solution is an integrated solution. The solution operation is seamless, disregarding the hardware or the software platform. The ERP solution takes care of data integrity and consistency across the organization, which may have multiple locations. The ERP design provides transparency to the users of information giving them an access to the sensitive information to locate, define and resolve the problems. The ERP enables the work group management efficiently and effectively. The effect uses of the variety of tools, like the data replication, the work flow automation, the EDI/E-mail, the data warehousing, the EIS, the bar coding, and the paging systems are built in ERP. The effective use of these variety of tools also speeds up processing, cuts down the operation cycle time and raises the ability of the management to take decisions. Once the ERP is built in the organization, it takes care of the data, the information and its storage and, therefore, provides the capability to modify the Management Information System from time to time as per the changing information needs.

4.11 SIGNIFICANCE OF INFORMATION SYSTEMS IN ERP Over the past four decades, Information systems have evolved from simple Electronic Data Processing (EDP) to today‘s highly integrated Enterprise Resource Planning Systems. Thus, ERP systems can be viewed as a logical extension of EDP, management information systems (MIS), decision support systems (DSS) and knowledge based systems (KBS). EDP systems concentrate on the efficiency aspect to get routine things like payroll calculation, inventory reports or census reports faster and more accurately. The MIS systems addressed operational information need through effectiveness measures like exception reporting, insights into processes and so on. DSS used extensive modeling tools such as optimization, simulation and statistical analysis to reveal patterns in the information generated by MIS systems to genuinely support tactical and even strategic decisions. KBS systems went beyond data, information and models to capture the knowledge of the decision-maker and to use the captured knowledge to propose superior solutions. Fortunately, this permitted an evolution of ideas and maturity of computer applications in management. A related development categorized the applications through the tasks addressed offi ce automation system (OAS), online transaction processing (OLTP), and Decision Support System (DSS). Unfortunately, these approaches missed out the key issue of integration. The EDP, MIS, DSS and KBS based classification assumes a compartmentalization across the layers of management (Sadagopan S.,1999). The OAS, OLTP, DSS classification assumes that the tasks are independent. Both assumptions are invalid in the real-world scenario.ERP systems capture the essence of the business processes. It is driven by bbusiness needs and not IT needs. An IT driven solution often attempts to formulate a way of using a technique to solve a known business problem. The emphasis is on the usage of a technique or a technology. ERP systems take a business driven view and solve the business problem using a combination of tools and implement the best practices using contemporary technology. ERP systems are often called a software package because many vendors like SAP-AG, Oracle Corporation, Infor, Epicor and so on developed these systems on the basis of the best industry practices and implemented these in an organization after some customization either in the ERP package or in the business processes.

Information technology, System Design, ERP & MIS The increasing importance and role of IT in business planning and operations needs hardly be stated. Companies have begun adopting IT and systems in practically every aspect of their operations. A major area with respect to teh use of IT is in Enterprise Resource Planning (ERP) systems. ERP, the enterprise-wide system that had gone out of vogue in the 90s, is now back with a bang. Though the benefits of an ERP – a companywide transaction-based approach to systems (for eg procurement to payment and order to billing), the dissolution of functional boundaries in the handling of transactions, an integrated database and the reliability, accuracy and speed of data across functions for decision making – were known then, as they are now, the earlier attempts at ERP suffered in the implementation. Companies, consultants and software vendors were a little overambitious and tried to get in very expensive, gargantuan ERP systems that took several years in the making with very little clear visible outcomes. There was also no clear realisation that implementing an ERP is a major business transformation exercise, necessitating the close involvement of the senior management over an extended period of time in the implementation and the re-examination of the current business policies and practices, which was a necessary precondition to get the best out of an ERP roll out. All that has now changed. ERP systems are available to suit varying budgets and in modular forms across the vendor spectrum – SAP / Oracle / Microsoft and a number of small- and medium-sized software companies in addition to open source. SAAS is emerging as a major delivery option. There is an increasing involvement of the top management as they realise the extent of business transformation necessary to reap the full benefits of ERP, including the benefits of adopting best business practices driven by the ERP software, data integration and single-point data capture. Enterprises, across the industrial spectrum have now gone further than just a pure vanilla transaction-based ERP. Having made the data capture and transaction integrity secure, the next logical step is to look at MIS, reporting and ready information for decision-making and the power of exception reporting. A manager, by definition, is required to act when things are not going the way they should be, that is under exceptional conditions. Business intelligence systems, using metadata such as Cognos are now becoming more and more common. KenTree has a team of domain experts who are skilled in systems design and analysis, and work with IT partners across all platforms to provide vendor-independent ERP and MIS turnkey solutions. KenTree offers the following services in IT, Systems Design, ERP & MIS: Determination of the hardware and infrastructure required to host the ERP and MIS Identification of a suitable ERP and MIS system that fits the needs and budget of the enterprise Supervision of software development / modifications as required Negotiations and finalisation of the hardware and software required with vendors Coordinating with the ERP steering committee and the staff in the organisation in the milestone-based ERP implementation

Systems study, including identification of policy, business process and methods, and procedure changes required to arrive at the optimal SRS framework Training staff on ERP and associated IT systems

Review Questions: 1. Do you think ERP systems are important for any type of the organization? Discuss. 2. How is the role of ERP System different from traditional information systems? Can an ERP System support all levels of management? Discuss. 3. Discuss the evolution of ERP systems. Do you think ERP systems overcome the limitations of traditional information systems? How? 4. Briefly discuss the concept of ERP systems. How are they different from ERP-II? 5. Discuss the various modules of ERP system. Take suitable example. 6. Illustrate the role of ERP systems in business. Do you also think that ERP systems act as a backbone for the organizations? Justify your answer. 7. Do you think Business Process Re-engineering is a pre requisite for the implementation of an ERP System? Why? 8. What are the main challenges for implementing an ERP System in an organization? Discuss.

UNIT 5 ________________________________________________ BRP, SCM, OLAP ____________________________________________________________________

Learning Objectives: After studying this unit, you will learn:

ERP and Related Technologies: Business Process Reengineering (BPR), Supply Chain Management (SCM), OLAP (Online Analysis and Processing) ___________________________________________________________________________________

5.1 Business Process Reengineering Business Process Reengineering is the analysis and design of workflows and processes within an organization. A business process is a set of logically related tasks performed to achieve a defined business outcome. Re-engineering is the basis for many recent developments in management.

The cross-functional team, for example, has become popular because of the desire to re-engineer separate functional tasks into complete cross-functional processes.[citation needed] Also, many recent management information systems developments aim to integrate a wide number of business functions. Enterprise resource planning, supply chain management, knowledge management systems, groupware and collaborative systems, Human Resource Management Systems and customer relationship management. Business Process Reengineering is also known as Business Process Redesign, Business Transformation, or Business Process Change Management What is BPR – Business Process Re-engineering ? Similar terms for Business Process Reengineering (BPR) are ―Business Process Redesign, Business Transformation or Business Process Change Management―. BPR seeks for factors that can be re-organized, re-designed in order to make the business processes effective to the customers as well as efficient to the workers and profitable for the company or the business organization. It basically provides the answers for following questions. Is it required to redefine the mission of the company ? Are our strategic goals aligned with our mission ? What is the mission of a company ? It‘s necessary to understand what is meant by ―mission‖ ? Mission describes what the reason of the company for existing. In other words, it reflects the purpose of the company. It‘s just like a target by which some sort of service or some kind of product is offered to the society. A company‘s mission statement circumferences the business strategies used by the company. BPR addresses the methods of improving the quality of the product or service within the predefined and fair time frame, the ways of reducing cycle time (the whole time taken for producing a deliverable) and finally making the business dramatically profitable. Business Process Reengineering allows the business to dramatically improve in many perspectives such as productivity, standardization and so on.

5.2 BPR plays a critical role in ERP implementation Processes, organization, structure and information technologies are the key components of BPR, which automates business processes across the enterprise and provides an organization with a welldesigned and well-managed information system. While implementing ERP, the organizations have two options to consider. Either the organization must reengineer business processes before implementing ERP or directly implement ERP and avoid reengineering. In the first option of reengineering business processes, before implementing ERP, the organization needs to analyze current processes, identify non-value adding activities and redesign the process to create value for the customer, and then develop in-house applications or modify an ERP system package to suit the organizations requirements. In this case, employees will develop a good sense of process orientation and ownership.

This would also be a customized solution keeping with line of the organization's structure, culture, existing IT resources, employee needs and disruption to routine work during the change programmer likely to be the least. It could have a high probability of implementation. The drawback of this option is that the reengineered process may not be the best in the class, as the organization may not have access to world-class release and best practices. Moreover, this may be the only chance to radically improve in the near future and most attention should be paid while choosing the right ERP. Also, developing an in-house application or implementing a modified ERP is not advisable. The second option of implementing ERP package is to adopt ERP with minimum deviation from the standard settings. All the processes in a company should conform to the ERP model and the organization has to change its current work practices and switch over to what the ERP system offers. This approach of implementation offers a world-class efficient and effective process with built-in measures and controls, and is likely to be quickly installed. But if the employees do not have good understanding of their internal customer needs or current processes, or if these processes are not well defined and documented, then it is quite possible that while selecting the standard process from the ERP package, employees may not be able to perceive the difficulties likely to be encountered during the implementation stage. Employees would lack process ownership and orientation. Other than technical issues, issues like organization structure, culture, lack of involvement of people etc. can lead to major implementation difficulties, and full benefits of standard ERP package may not be achieved. It may lead to a situation where the organization may have to again reengineer its processes. This could be a very costly mistake. There is also a third option of reengineering business process during implementation of ERP. But it does not considered to be a practical option and is likely to cause maximum disruption to existing work. It should not be forgotten that during BPR and ERP initiatives, routine work is still to be carried out and customers need to be served.

5.3 Connection between ERP and BPR Enterprise resource planning (ERP) is a software platform that helps business owners determine how to best use their available resources. Business process re-engineering (BPR) involves observing and analyzing how the business works to determine changes that may streamline operation at the business. ERP and BPR can go hand-in-hand. An organization's management might use BPR as a means of looking at the current operations of a business to determine how to best proceed when designing or choosing a new ERP. The goal of business process re-engineering is to determine what changes can be made in the way the business operates to improve aspects of a business. Often, BPR will focus on a specific part of the business, like costs, customer service or marketing and advertising. Using BPR does not necessarily lead to ERP. Though ERP and BPR are related, a well-conducted BPR may find that there is no need for an ERP platform in the business. A business conducting BPR may determine to drop an ERP method for reasons including cost, effectiveness, or maintenance.

As an integrated type of software that performs in multiple departments of business, an ERP platform handles a number of tasks. Generally, ERP programs help business owners manage their finances, keep employee records and schedule the use of their assets, whether the assets include buildings, machinery, work, or money. Because an ERP addresses not only one business task, but a number of business tasks, ERP and BPR are most often used together to improve operations in a business with a fundamental problem in organizing its processes and resources. Implementing business process analysis usually starts with examining how well the company is meeting the goals set out in its mission statement. Effective BPR usually involves subdividing existing business tasks into smaller units and improving processes within the subdivided task units. Generally, goals during BPR include improving process effectiveness and efficiency, improving adherence to regulations or specifications set for the product or service, and improving control over variables in each process. Just like ERP and BPR can be used together to improve an existing ERP platform, a business executive can benefit from using an existing ERP to enhance the effectiveness of BPR. One of the advantages to an ERP is that it stores integrated data from all parts of the program, allowing an executive to access and examine data to plan the most effective business process changes. An executive can use company information like resource and financial data to make the best decisions for change within the company. ERP and BPR can also be used together to facilitate change management. Once BPR is completed and the course of change has been determined, ERP can be used to facilitate communication and information exchange for staff members affected by the readjustment process. BPR can also be used to help establish the most effective way of implementing ERP use for an existing workforce.

5.4 Customer Relationship Management (CRM) In an organization, if a product is manufactured using raw materials from various suppliers and if these products are sold to customers, a supply chain is created. Depending on the size of the organization and the number of products that are manufactured, a supply chain may be complex or simple. Supply Chain Management refers to the management of an interconnected network of businesses involved in the ultimate delivery of goods and services to customers. It entails the storage and transport of raw materials, the process of inventory and the storage and transportation of the final goods from the point of manufacture to the point of consumption. Customer Relationship Management, or CRM, is an essential part of modern business management. This CRM article is provided by Ellen Gifford, who specializes in helping organizations develop excellence in CRM, and this contribution is gratefully acknowledged. What is Customer Relationship Management, or CRM? Customer Relationship Management concerns the relationship between the organization and its customers. Customers are the lifeblood of any organization be it a global corporation with thousands of employees and a multi-billion

turnover, or a sole trader with a handful of regular customers. Customer Relationship Management is the same in principle for these two examples - it is the scope of CRM which can vary drastically. The organization and the customers both have sets of conditions to consider when building the relationship, such as wants and needs of both parties; organizations need to make a profit to survive and grow customers want good service, a quality product and an acceptable price Good CRM can influence both sets of conditions.

5.5 why does the organization need CRM The ultimate purpose of CRM, like any organizational initiative, is to increase profit. In the case of CRM this is achieved mainly by providing a better service to your customers than your competitors. CRM not only improves the service to customers though; a good CRM capability will also reduce costs, wastage, and complaints (although you may see some increase initially, simply because you hear about things that without CRM would have stayed hidden). Effective CRM also reduces staff stress, because attrition - a major cause of stress - reduces as services and relationships improve. CRM enables instant market research as well: opening the lines of communications with your customers gives you direct constant market reaction to your products, services and performance, far better than any market survey. Good CRM also helps you grow your business: customers stay with you longer; customer churn rates reduce; referrals to new customers increase from increasing numbers of satisfied customers; demand reduces on fire-fighting and trouble-shooting staff, and overall the organization's service flows and teams work more efficiently and more happily.

How CRM improves the efficiency of organization. Customers are the foundation of every organization, the beginning and the end of any business, any product, and any service. In the new age of information customers are becoming more relevant in many entrepreneurial decision-making and strategy-defining processes. Nevertheless, many marketing strategies implemented in organizations lack the means of delivering it in a consistent way, thus losing its value when executed. It is because of this, including strong competition and difficulty in building customer loyalty, that organizations are focusing their attention on finding new ways to manage, in a more efficient manner, the relationship and opportunities that can be established with their current customers and/or prospects. An adequate management of an organization's customer base, along with their corresponding marketing processes, could represent the key to success. The aggregation of the tools and processes geared toward this effective management is known as customer relationship management (CRM). The potential provided by CRM systems allow organizations to expand their customer base, increase customer satisfaction, and optimize their sales cycles. Some of the functionalities provided by CRM systems are: Organized Information - The use of multiple systems to gather information relative to customers, such as spreadsheets, email, and others, add difficulty to the work of the

organization. CRM systems centralizes and simplify how customer related information is organized, including the customer's profile information, sales opportunities, and even information from sales agents. With a centralized system, sales team can be more productive, minimizing administrative tasks and focusing on maintaining and expanding their customer base. Sales - CRM systems help organizations accelerate their sales cycle and reduce setbacks, therefore increasing productivity. Sales agents will be able to followup on customers, opportunities and contracts, as well as work on projections and monitor their progress. Marketing - CRM systems correlate in a clever way the marketing processes to sales efforts, allowing the opportunity to create, execute, and monitor the performance of sales campaigns. Customer Care - Getting new customers is much more expensive than maintaining existing ones vc, thus, it is imperative to offer suitable customer support to existing customers. CRM systems provide functionality to manage incidents reported by customers, track the workflow of the incident until closed, and measure statistics such as frequency and time-tocompletion among others. Reports - With the reports provided, it is possible to determine the different customer profiles, as well as reports to elaborate on the performance of the organization, its corresponding departments, or even a contracted marketing agency for instance; all with the purpose of analyzing information for improving proactively the overall performance. A suitable integration of the CRM system with a Business Intelligence suite will provide a more advance set of tools for achieving this. Collaboration - CRM systems provide tools for scheduling phone calls, meetings, and even emails from within the application. Also, it is possible to assign and control projects and workflows, simplifying team work, insuring up-to-date information being handled by multiple personnel. Collaboration within these systems allow extending the scope of collaboration beyond the organization's personnel, to include other organizations that add value to the services provided to the customers. How CRM Software Can Increase Productivity and Profits Naturally, small businesses tend to have their sights set on one thing and one thing only: generating revenue. But often this comes at the cost of letting other areas of their business slide—namely, organization. Organization is the key to running a successful business, and by taking some time out of every day to do some simple administrative tasks, planning and arrangement, you‘d be surprised at how quickly your company‘s efficiency, productivity, and—most importantly— profits, could increase. But the question is: How do businesses go about improving their organization skills? The answer is simple, but it may not be the first thing that springs to mind. Most people think of Client Relationship Management (CRM) software as a way of improving sales, but what

they may not know is that it could prove to be an invaluable tool to boost your company‘s productivity, sales tracking and internal collaboration, by streamlining all your communications into one database. Still not sold? Well, if you‘re not ready to upgrade that trusty spreadsheet just yet, here are five benefits that CRM software can offer your business that may just change your mind. 1. Better customer relations Using a CRM often leads to greater customer satisfaction. All communications—whether they‘re from marketing, sales or accounts departments—can be handled in a systematic manner. You‘ll also gain a better understanding of your customers‘ wants, needs and preferences, which in turn will help increase customer loyalty and decrease customer dissatisfaction. And what‘s more is that as a byproduct, you‘ll find that your buyers will share their positive stories about your company with their friends and family members—and as any business will know, word-of-mouth is the most powerful form of advertising for any business. 2. Increased revenues So we know that putting a CRM system in place improves customer relationships, but did you know that it could also lead to an increase in revenue? Using the data you collect, you will be able to target certain products to your customers more strategically, meaning your efforts will be more effective. With the help of customer relation management software, you can create targeted promotions to specific segments within your client base, thus encouraging more sales, and in turn, an uptick in profits. Which leads us to our third benefit…marketing. 3. Easier marketing CRM can help you understand who‘s purchased what and how much they spent when they purchased it—essential data when it comes to launching an effective marketing campaign as it allows you to pinpoint the right potential buyers. Without CRM, this is a near-impossible task— your marketing department would have to go back over old invoices and PO‘s to manually track this information and pull their target buyers‘ contact details. With CRM, you can segment your customer database by a number of criterion to help you refine your marketing message and ensure it reaches the right people. 4. Efficient upselling and cross-selling Often businesses spend a great deal of time and money trying to acquire brand new customers— so much so that they neglect to pay proper attention to their best source of revenue: their existing customer base. A CRM system not only facilitates up selling, but it also allows easy cross-selling— the practice of suggesting related products or services to a customer based on their previous purchases. In order to do this, salespeople need a good idea of their customers‘ requirements and buying patterns, and CRM software provides just this. Any details about your clients are stored in a central database accessible by all members of your organization, meaning that when an opportunity arises, staff can cross-promote products to customers, and as a consequence, maximize sales. 5. Improved in-house communication

A central database of all your company‘s valuable customer information doesn‘t just help with external communication—it improves internal communication, too. Sharing important customer data between various divisions of your company encourages teamwork—which is a much better strategy for business than operating as a lone-ranger. Not only will it enable a higher standard of service, but it‘ll also increase your company‘s profitability. Before you implement a CRM system (and ideally, before you even select one), be sure to do plenty of research and preparation. Begin by thinking strategically about your company‘s mission and goals, and how you will measure your progress. Then start to think strategically about your customer segments and what you are doing with each of these constituents—this will help you define what information needs to be stored in your CRM system, what types of functionalities it will need to have, and what sort of processes people within your organization will need to carry out when using the system. Remember: CRM is a dynamic application than can be used by more or less everyone in your company, and when used to its full effect, can hold vast amounts of data to create a pool of valuable information that can be used to prospect new business, identify leads, define customer segments, and much more. So, now are you ready to ditch that old spreadsheet?

5.6 Introduction of SCM A SUPPLY CHAIN is a network of supplier, manufacturing, assembly, distribution, and logistics facilities that perform the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these products to customers. Supply chains arise in both manufacturing and service organizations. SUPPLY CHAIN MANAGEMENT (SCM) is a systems approach to managing the entire flow of information, materials, and services from raw materials suppliers through factories and warehouses to the end customer. SCM is different from SUPPLY MANAGEMENT which emphasizes only the buyer-supplier relationship. Supply chain management has emerged as the new key to productivity and competitiveness of manufacturing and service enterprises. The importance of this area is shown by a significant spurt in research in the last five years and also proliferation of supply chain solutions and supply chain companies (e.g. i2, Manugistics, etc.). All major ERP companies are now offering supply chain solutions as a major extended feature of their ERP packages. Supply chain management (SCM) is concerned with the flow of products and information between supply chain members' organizations. Recent development in technologies enables the organization to avail information easily in their premises. These technologies are helpful to coordinates the activities to manage the supply chain. The cost of information is decreased due to the increasing rate of technologies. In the integrated supply chain model (Fig.1) bi-directional arrow reflect the accommodation of reverse materials and information feedback flows. Manager needs to understand that information technology is more than just computers. Except computer data recognition equipment, communication technologies, factory automation and other hardware and services are included.

Integrated supply chain model Bi-directional arrow reflects the accommodation of reverse materials and information feedback flows. Managers need to understand that information technology is more than just computers. Except computer, data recognition equipment, communication technologies, factory automation and other hardware and services are included.

5.7 Importance of Supply Chain Management Managers these days recognize that getting products to customers faster than the competition will improve a company's competitive position. To remain competitive, companies must seek new solutions to important Supply Chain Management issues such as modal analysis, supply chain management, load planning, route planning and distribution network design. Companies must face corporate challenges that impact Supply Chain Management such as reengineering globalization and outsourcing. Why is it so important for companies to get products to their customers quickly? Faster product availability is key to increasing sales, says R. Michael Donovan of Natick, Mass., a management consultant specializing in manufacturing and information systems. "There's a substantial profit advantage for the extra time that you are in the market and your competitor is not," he says. "If you can be there first, you are likely to get more orders and more market share." The ability to deliver a product faster also can make or break a sale. "If two alternative [products] appear to be equal and one is immediately available and the other will be available in a week, which would you choose? Clearly, "Supply Chain Management has an important role to play in moving goods more quickly to their destination. "

5.8 Different Links in the Supply Chain Customer: The start of the supply chain is the customer. The customer decides to purchase a product and in turn contacts the sales department of a company. A sales order is completed with the date of delivery and the quantity of the product requested. It may also include a

segment for the production facility depending on whether the product is available in stock or not. Planning: Once the customer has made his/her sales order, the planning department will create a production plan to produce the product adhering to the needs of the customer. At this stage, the planning department will be aware of raw materials needed. Purchasing: If raw materials are required, the purchasing department will be notified and they in turn send purchasing orders to the suppliers asking for the deliverance of a specific quantity of raw materials on the required date. Inventory: Once the raw materials have been delivered, they are checked for quality and accuracy and then stored in a warehouse till they are required by the production department. Production: Raw materials are moved to the production site, according to the specifics laid out in the production plan. The products required by the customer are now manufactured using the raw materials supplied by the suppliers. The completed products are then tested and moved back to the warehouse depending on the date of delivery required by the customer. Transportation: When the finished product is moved into storage, the shipping department or the transportation department determines when the product leaves the warehouse to reach the customer on time.

5.9 Levels of Activities in the Supply Chain In order to make sure that the above supply chain is running smoothly and also to ensure maximum customer satisfaction at the lowest possible cost, organizations adopt supply chain management processes and various technologies to assist in these processes. There are three levels of activities Supply Chain Management in that different departments of an organization focus on to achieve the smooth running of the supply chain. They are: Strategic: At this level, senior management is involved in the supply chain process and makes decisions that concern the entire organization. Decisions made at this level include the size and site of the production area, the collaborations with suppliers, and the type of that product that is going to be manufactured and so forth. Tactical: Tactical level of activity focuses on achieving lowest costs for running the supply chain. Some of the ways this is done is by creating a purchasing plan with a preferred suppliers and working with transportation companies for cost effective transport. Operational: At the operational level, activity decisions are made on a day-to-day basis and these decisions affect how the product shifts along the supply chain. Some of the decisions taken at this level include taking customer orders and the movement of goods from the warehouse to the point of consumption.

5.10 Information and Technology: Application of SCM

It is clear as day that IT has contributed a great deal toward improving SCM practices. However, the scenario is not picture-perfect yet. Not many firms have been able to develop company-wide unified information systems. Many a time, glitches arise during the installation of information systems such as ERP. If not properly handled, these glitches might spill over into factory orders and cost firms big bucks, as footwear giant Nike learned much to its discomfiture. The fiasco with its demand-planning engine, i2, is clearly something Nike would like to forget. The demand planning software had some glitches, and hence the system ignored some orders and duplicated others. The demand planner had also deleted ordering data six to eight weeks after it was entered, making it impossible for planners to recall what they had asked each factory to produce. However, Nike soon learned from its failure, and subsequently rebounded. Though things could go grievously wrong at times, at others, IT can still be a life-saver for a firm. There have been instances when IT has pulled a firm back from the brink of disaster. One very good example would be that of the Dallas based Aviall Inc. which was saved from financial catastrophe by a controversial multi-million dollar IT project which included developing the firm‘s website (www.aviall.com). That one investment was instrumental in turning Aviall from a catalog business into a full-scale logistics business. But the going was not that easy. When the firm invested 30-40 million dollars on building the infrastructure, both competitors and investors came down as a ton of bricks on it. But Joseph Lacik, VP of Information Systems at Aviall Services, paid no heed to the criticisms pouring in and went ahead with the project. The website developed provided big benefits. It brought down the order-taking costs, and also freed the company‘s sales force from routine tasks, thus allowing them to spend more time developing relationships with customers. IT infrastructure even helped a firm gain a key competitive advantage and emerge as the best supply chain operator of all time. The firm in question is none other than Wal-Mart. By investing early and heavily in cutting-edge technology to identify and track sales on the individual item level, the retail giant made its IT infrastructure a key competitive advantage that has since been studied and copied by companies throughout the world. Wal-Mart saw the value of sharing data with its suppliers and moved relevant information online on its retail link website. While its competition guarded sales information closely, Wal-Mart approached its suppliers as if they were partners, not adversaries. By implementing a collaborative planning, forecasting and replenishment (CPFR) program, it began a just-in-time inventory program, which reduced carrying costs for both the retailer and its suppliers. In the development and maintenance of Supply chain's information systems both software and hardware must be addressed. Hardware includes computer's input/output devices and storage media. Software includes the entire system and application programme used for processing transactions management control, decision-making and strategic planning. Electronic Commerce: It is the term used to describe the wide range of tools and techniques utilized to conduct business in a paperless environment. Electronic commerce therefore includes electronic data interchange, email, electronic fund transfers, electronic publishing, image processing, electronic bulletin boards, shared databases and magnetic/optical data capture. Companies are able to automate the process of moving documents electronically between suppliers and customers. Electronic Data Interchange:

Electronic Data Interchange (EDI) refers to computer-to-computer exchange of business documents in a standard format. EDI describe both the capability and practice of communicating information between two organizations electronically instead of traditional form of mail, courier, & fax. The benefits of EDI are: 1. Quick process to information. 2. Better customer service. 3. Reduced paper work. 4. Increased productivity. 5. Improved tracing and expediting. 6. Cost efficiency. 7. Competitive advantage. 8. Improved billing. Though the use of EDI supply chain partners can overcome the distortions and exaggeration in supply and demand information by improving technologies to facilitate real time sharing of actual demand and supply information. Bar coding and Scanner: Bar code scanners are most visible in the checkout counter of super market. This code specifies name of product and its manufacturer. Other applications are tracking the moving items such as components in PC assembly operations, automobiles in assembly plants. Data warehouse: Data warehouse is a consolidated database maintained separately from an organization's production system database. Many organizations have multiple databases. A data warehouse is organized around informational subjects rather than specific business processes. Data held in data warehouses are time dependent, historical data may also be aggregated. Recent development in Supply chain management software is: 1. Base Rate, Carrier select & match pay (version 2.0) developed by Distribution Sciences Inc. which is useful for computing freight costs, compares transportation mode rates, analyze cost and service effectiveness of carrier. 2. A new software programme developed by Ross systems Inc. called Supply Chain planning which is used for demand forecasting, replenishment & manufacturing tools for accurate planning and scheduling of activities. 3. P&G distributing company and Saber decision Technologies resulted in a software system called Transportation Network optimization for streamlining the bidding and award process. 4. Logitility planning solution was recently introduced to provide a programme capable managing the entire supply chain.

World is shrinking day by day with advancement of technology. Customers' expectations are also increasing and companies are prone to more and more uncertain environment. Companies will find that their conventional supply chain integration will have to be expanded beyond their peripheries. The strategic and technological innovations in supply chain will impact on how organizations buy and sell in the future. However clear vision, strong planning and technical insight into the Internet's capabilities would be necessary to ensure that companies maximize the Internet's potential for better supply chain management and ultimately improved competitiveness. Internet technology, World Wide Web, electronic commerce etc. will change the way a company is required to do business. These companies must realize that they must harness the power of technology to collaborate with their business partners. That means using a new breed of SCM application, the Internet and other networking links to observe past performance and historical trends to determine how much product should be made as well as the best and cost effective method for warehousing it or shipping it to retailer.

5.11 On-Line Analytical Processing (OLAP) A successful company today has many decisions to make. The better those decisions are made, the more successful, and profitable, the company is. To many chief decision makers, the ability to analyze faster and better than the competition means better decisions, higher profitability, and more success. The optimization of the relational database (RDB) has enabled companies to efficiently collect data about transactions, giving decision makers more information to use. However, there is an upper limit to the amount of data that one can have in an RDB and still perform an efficient analysis on. On-Line Analytical Processing (OLAP) allows users to perform quick and effective analysis on large amounts of data. The data are stored in a multi-dimensional fashion that more closely models real business data. OLAP also allows users to access summary data faster and easier. They can then drill down into the summary figures to get more detailed data, if need be. Online Analytical Processing is used to answer the complex queries posted on data warehouse. In order to solve the queries of nature 'who?' and 'what?' we can use the simple tools but to answer the advanced queries like 'what if?' and 'why?', we require special tool that can support online analytical processing (OLAP). Online analytical processing (OLAP) is defined as "The dynamic synthesis, analysis, and consolidation large volumes of multi-dimensional data." OLAP is a term that describes a technology that uses a multi-dimensional view of aggregate data to provide quick access to strategic information for the purposes of advanced analysis. OLAP enables users to gain a deeper understanding and knowledge about various aspects of their corporate data through fast, consistent, interactive access to a wide variety of possible views of the data. OLAP enables decision-making about future actions. Atypical OLAP calculation can be more complex than simply aggregating data, for example, 'What would be the effect on property sales in the different regions of Punjab if legal costs went up by 3.5% and Government taxes went down by 1.5% for properties over Rs 1OO,OOO?'.

Analytical Queries per Minute (AQM) is used as a standard benchmark for comparison of performances of different OLAP tools. OLAP systems should as much possible hide users from the syntax of complex queries and provide consistent response times for all queries no matter how complex. In computing, online analytical processing, or OLAP is an approach to answering multidimensional analytical (MDA) queries swiftly. OLAP is part of the broader category of business intelligence, which also encompasses relational database, report writing and data mining. Typical applications of OLAP include business reporting for sales, marketing, management reporting, business process management (BPM), budgeting and forecasting, financial reporting and similar areas, with new applications coming up, such as agriculture. The term OLAP was created as a slight modification of the traditional database term OLTP (Online Transaction Processing). OLAP tools enable users to analyze multidimensional data interactively from multiple perspectives. OLAP consists of three basic analytical operations: consolidation (roll-up), drill-down, and slicing and dicing.[6] Consolidation involves the aggregation of data that can be accumulated and computed in one or more dimensions. For example, all sales offices are rolled up to the sales department or sales division to anticipate sales trends. By contrast, the drill-down is a technique that allows users to navigate through the details. For instance, users can view the sales by individual products that make up a region‘s sales. Slicing and dicing is a feature whereby users can take out (slicing) a specific set of data of the OLAP cube and view (dicing) the slices from different viewpoints. Databases configured for OLAP use a multidimensional data model, allowing for complex analytical and ad hoc queries with a rapid execution time. [7] They borrow aspects of navigational databases, hierarchical databases and relational databases. The core of any OLAP system is an OLAP cube (also called a 'multidimensional cube' or a hypercube). It consists of numeric facts called measures which are categorized by dimensions. The measures are placed at the intersections of the hypercube, which is spanned by the dimensions as a Vector space. The usual interface to manipulate an OLAP cube is a matrix interface like Pivot tables in a spreadsheet program, which performs projection operations along the dimensions, such as aggregation or averaging. The cube metadata is typically created from a star schema or snowflake schema or fact constellation of tables in a relational database. Measures are derived from the records in the fact table and dimensions are derived from the dimension tables. Each measure can be thought of as having a set of labels, or meta-data associated with it. A dimension is what describes these labels; it provides information about the measure. A simple example would be a cube that contains a store's sales as a measure, and Date/Time as a dimension. Each Sale has a Date/Time label that describes more about that sale. Any number of dimensions can be added to the structure such as Store, Cashier, or Customer by adding a foreign key column to the fact table. This allows an analyst to view the measures along any combination of the dimensions. For example: Sales Fact Table

+-------------+----------+ | sale_amount | time_id | +-------------+----------+ Time Dimension | 2008.10| 1234 |---+ +---------+-------------------+ +-------------+----------+ | | time_id | timestamp | | +---------+-------------------+ +---->| 1234 | 20080902 12:35:43 | +---------+-------------------+

5.12 Features of OLAP There are the following key features of OLAP: • Multi-dimensional views of data; • Support for complex calculations; • Time intelligence Multi-dimensional views of data A multi-dimensional view of data provides the basis for analytical processing through flexible access to corporate data. It enables users to analyze data across any dimension at any level of aggregation with equal functionality and ease. Support for complex calculations OLAP software must provide a range of powerful computational methods such as that required by sales forecasting such as moving averages and percentage growth. Time intelligence Time intelligence is used to judge the performance of almost any analytical application over time. For example, this month versus last month or this month versus the same month last year or a user may require to view, the sales of the month of Mayor the sales for the first five months of 2007. Concepts such as year-to-date and period-over-period comparisons should be easily defined in an OLAP system. Information systems cannot deliver value from the first day in an organization. The organization needs time and maturity to be able to leverage the information system. Various organizations are at different levels of maturity in dealing with information systems. Nolan has provided a model for such information systems using maturity in organizations. However, empirical evidence is not available in favour of such models but intuitively, it seems correct. To leverage the benefits of information, an organization has to first appreciate the usefulness of information. This requires a change in the mindset and way of working. Organization culture needs to change to accommodate this kind of information-based working. Changing organizations takes time and hence, organizations pass through stages of maturity in dealing with information systems.

5.13 Types of OLAP OLAP systems have been traditionally categorized using the following taxonomy.

1. Multidimensional OLAP (MOLAP) MOLAP is a "multi-dimensional online analytical processing". 'MOLAP' is the 'classic' form of OLAP and is sometimes referred to as just OLAP. MOLAP stores this data in an optimized multidimensional array storage, rather than in a relational database. Therefore it requires the precomputation and storage of information in the cube - the operation known as processing. MOLAP tools generally utilize a pre-calculated data set referred to as a data cube. The data cube contains all the possible answers to a given range of questions. MOLAP tools have a very fast response time and the ability to quickly write back data into the data set. Advantages of MOLAP Fast query performance due to optimized storage, multidimensional indexing and caching. Smaller on-disk size of data compared to data stored in relational database due to compression techniques. Automated computation of higher level aggregates of the data. It is very compact for low dimension data sets. Array models provide natural indexing. Effective data extraction achieved through the pre-structuring of aggregated data. Disadvantages of MOLAP Within some MOLAP Solutions the processing step (data load) can be quite lengthy, especially on large data volumes. This is usually remedied by doing only incremental processing, i.e., processing only the data which have changed (usually new data) instead of reprocessing the entire data set. MOLAP tools traditionally have difficulty querying models with dimensions with very high cardinality (i.e., millions of members). Some MOLAP products have difficulty updating and querying models with more than ten dimensions. This limit differs depending on the complexity and cardinality of the dimensions in question. It also depends on the number of facts or measures stored. Other MOLAP products can handle hundreds of dimensions. Some MOLAP methodologies introduce data redundancy.

2. Relational OLAP (ROLAP) ROLAP works directly with relational databases. The base data and the dimension tables are stored as relational tables and new tables are created to hold the aggregated information. Depends on a

specialized schema design. This methodology relies on manipulating the data stored in the relational database to give the appearance of traditional OLAP's slicing and dicing functionality. In essence, each action of slicing and dicing is equivalent to adding a "WHERE" clause in the SQL statement. ROLAP tools do not use pre-calculated data cubes but instead pose the query to the standard relational database and its tables in order to bring back the data required to answer the question. ROLAP tools feature the ability to ask any question because the methodology does not limit to the contents of a cube. ROLAP also has the ability to drill down to the lowest level of detail in the database.

3. Hybrid OLAP (HOLAP) There is no clear agreement across the industry as to what constitutes "Hybrid OLAP", except that a database will divide data between relational and specialized storage. For example, for some vendors, a HOLAP database will use relational tables to hold the larger quantities of detailed data, and use specialized storage for at least some aspects of the smaller quantities of more-aggregate or less-detailed data. HOLAP addresses the shortcomings of MOLAP and ROLAP by combining the capabilities of both approaches. HOLAP tools can utilize both pre-calculated cubes and relational data sources.

5.14 Comparison between MOLAP, ROLAP Each type has certain benefits, although there is disagreement about the specifics of the benefits between providers. Some MOLAP implementations are prone to database explosion, a phenomenon causing vast amounts of storage space to be used by MOLAP databases when certain common conditions are met: high number of dimensions, pre-calculated results and sparse multidimensional data. MOLAP generally delivers better performance due to specialized indexing and storage optimizations. MOLAP also needs less storage space compared to ROLAP because the specialized storage typically includes compression techniques. ROLAP is generally more scalable. However, large volume pre-processing is difficult to implement efficiently so it is frequently skipped. ROLAP query performance can therefore suffer tremendously. Since ROLAP relies more on the database to perform calculations, it has more limitations in the specialized functions it can use. HOLAP encompasses a range of solutions that attempt to mix the best of ROLAP and MOLAP. It can generally pre-process swiftly, scale well, and offer good function support.

5.15 MAJOR FEATURES AND FUNCTIONS of OLAP OLAP is much more than an information delivery system for data warehouse. OLAP focus is on the end-users analytical requirements. Goal of OLAP is to support ad-hoc querying for the business analyst. OLAP features generally include Calculations and modeling across dimensions, trend analysis, slicing subsets, drilldown, drill-through and rotation. OLAP includes three basic analytical operations/functions: 1. Slicing and dicing: users can take out a specific set of data of the OLAP cube (slicing) or view some sub-cube (dicing) from different viewpoints. 2. Drill-down: allows users to retrieve the detail underlying particular values. For instance, users can view the sales by individual products that make up a region‘s sales. 3. Roll up (Consolidation): involves the aggregation of data that can be accumulated and computed in one or more dimensions. For example, all sales offices are rolled up to the sales department or sales division to anticipate sales trends. 4. A fourth process is referred to as Pivoting, i.e. rotating the cube in space to see a different ‗face‘.

Functional requirements for an OLAP tool: a) Fast Access and Calculations b) Powerful Analytical Capabilities c) Flexibility d) Multi-End-User Support

Role of distribution in SCM u u u u

Distribution: the steps taken to move and store a product from the supplier stage to the customer stage in a supply chain Distribution directly affects cost and the customer experience and therefore drives profitability Choice of distribution network can achieve supply chain objectives from low cost to high responsiveness Examples: Wal-Mart, Dell, Proctor & Gamble, Grainger