Management Information System (MIS) Syllabus Overview

MIS Unit 1-2 Simplified Notes

Management Information

System

BCA

Sem

UNIT

What is MISand Why MI S?

MIS

An acronym of

anagement

nformation

ystem

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Sh ehas t o :

Takequickdecisions

Processalargevoluminousinformation

What is Mana gement?

Management is to get the work done through and with the

he lp of people, by performing basic functions of

management.

In fact, Management is a process of achievi ng an

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use of available resources like men, materials, machines,

money, methods etc.

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Koont z,1972

KeyAspects of Mana gement

Management is a process

Managers achieve goals using resources

N

Managers play many roles and engage in organizing,

making decisions, leading, and controlling

Basic Functions of Ma nagement

Basic functions of managements are Planning, Organizing, Staffing, Directing, and Controlling :

lanning

rganizing

taffing

irect ing

ontroll ing

Basic Functions of Ma nagement

Basic functions of managements are Planning, Organizing, Staffing, Directing, and Controlling :
P

lanning

Theprocess of deciding in advance, thecourse of action tobe

followed, whenand also, how toundertake thoseactions. We can

say t heplanning as t hedecision m aking for t hepath for

"From

whe re

to whe rewe have t oreach".

Theplanning function

should answe r somebasic q uest ions,such as :

What todo?

Whe nto do?

Whois itto do?

Howis it tobedone?

Whe reisit t obedone?

Whyis itto b edone?

Basic Functions of Ma nagement

Basic functio ns of management sare Planning, Organizing, Staffing, Directing, and Controlling:
O

rganizing

The grouping of people and activities in order to facilitate the

achievement of the organizational objective. The managers organize

tas ks by dividing activities, as signing duties and delegating authority for

effective operation and achievement of goals.

taffing

The process of putting right people, at right job, at the right time. The

activities like defining the requirements, selecting suitable executives are

done in this function.

N o t e:

Staf fin gan dOrgan izing aremos tof tencon fu se d .Organ izingin volves

fou ss in g

on

st ruc tu reformationan dproces s ofallocationw he reas ,st af fin grelates toth ese lection of

people forth atpartic ularjoban dis ex ecu tiveorien ted .

Basic Functions of Ma nagement

Basic functions of managements are Planning, Organizing, Staffing, Directing, and Controlling :

irect ing

Theprocess of activating theplans, structure and groupefforts in

thedesired direct ion. Itis ne eded for im plem ent ation of plans by

providing thedesired l eadership,motivation and proper

comm unication.

ontroll ing

Themode of ch eckingtheprogres sof plans and also, correct ing

any deviations that may occur along theway.

Mana gementas a Control System

Planning, Organizing, Staffing, Directing, and Controlling steps prior to a control are necessary nut not

necessarily self assuring the results unles s it is followed

by a strong control mechanism

Control, is the process through which managers assure

that actual activities conform to the planned activities,

leading to the achiev ement of the stated common goals.

The control process measures a progress towards those

goals, and enabl es the manager to detect, the deviations

from the original plan in time to take corrective actions

before it is too late.

Mana gementas a Control System

Mana gementas a Control System

N

A reliabl e and effective control system has the following

features:

E ar l yw ar n i ngm e cha nism

Thisisa me chanismof predicting thepossibilityof achie ving t he

goals and standards be foreitis t oolate and allowing t hemanager

totake correct iveactions.

Pe rfo rm an ces t an d ard

Theperformance standard must b eme asurable and acceptable t o

all theorganizations. Thesystemshould have me aningful

standards rel ating t othework areas,res ponsibil ity,managerial

functions and so on.

Mana gementas a Control System

A reliabl e and effective control system has the following

features:

S t rate gicc o n t ro ls

In e very b usines s,the rearestrate gicareas of control known as the

critical s uccess factors. Thesyste mshould recog nizethe mand

have controls ins titute d on t he m.

F e edba ck

Thecontrol s ystemwould beeffect ive, if itcontinuousl y monitors

theperformance and sends theinformation tothecontrolcenter

for action. Itshould not onl y hig hlig httheprogres sbut als o t he

deviations.

Mana gementas a Control System

A reliabl e and effective control system has the following

features:

A c c u ratean dt i me ly

Thefee dback should b eaccurate in te rmsof res ultsand should be

comm unicate d in tim efor correct iveaction.

Re al istic

Thesyste mshould b erealist icso t hatthecostof controlis far

le ssthan t hebe nefits. Thestandards are realist icand arebe lie ved

as achievable . Sufficient incentive and rewards are tobeprovided

tomotivate t hepeople.

Mana gementas a Control System

A reliable and effective control system has the following

features:

I n fo rm atio nf l o w

Thesystemshould have theinformation flow aligned with the

organization s tructure and thedecision makersshould e nsure t hat

therightpeoplegettherightinformation for action and decision

making.

E x c e ptio np ri n c ip le

Thesyste mshould s el ect ivel yapprove somesig nificant deviations

from theperformance standards on theprinciple of manageme nt

byexception.

Levels of Ma nagement

Levels of Ma nagement

To pL e v el

S trategicP l a nn ing

This leveldevelo psthe strategy for deciding the ob jectivesof

the organizatio n,plannin gresourcesto be used in orderto

att ain those objectives,for mulatingpoliciesto govern,use and

disposit ion of the resources

M i ddleL e v el

M a nagementC o nt rol

It is requiredby managersof various departmentsto measure

perfor mance,decide on cont rolactions, for mulatenew decision

rulesand alsoallo cateresources

N
L o wer /S ho pfl oo rL e v e l

O p erationalC o nt rol

It is the processof ensuringthat

operation alactivities

are

carr iedout to achieveopt imumuse of resources.It makes use

of pre

estab lishedprocedures

and decisio n ru les .

Levels of Ma nagement

The interaction between three level sof management, as

summarized by Jerome

Kanter

(1996)

Mana gementas a Control System

Essence of Management is:

W hateve r a manager does, he /s hedoes it through Decision

Mak ing

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Peter Drucker
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Hitesh Gupta

INFORM ATION

Information is a vital resource in devel opment activities of

any busin ess. All the economic and social progress

depends very significantly in the transfer of commercial,

scientific and technical informatio n. Managers in different

situations require information on a subje ct in different

forms and with different emphasis.

PROP ERTIESAND SCOP EOF INFORM ATION

Information has following general properties:

Information is not consume d in use . Thisis an extrem el y

important property of information.

Information can beshared b ymany and can beused

sim ultaneousl y withoutany loss of any one.

The scope of information may vary. It can be in detail or

in summary form. It can eith er be a complete set of data

or only specific exceptions. The information scope

depends on the managerial lev el.Information could be

hard

objective,relying

heavily on facts.

INFORM ATIONECONOMIC S

Information is an available resource in any organization.

However the preparation of formal information is not free;

it costs money. How much sh ould an organization spend

for information ? Some type of cost

effective analysis

sh ould be undertaken.

Difficulties occur in measuring the cost of providing the

information and measuring the value of information .

Information is the oretical in nature and possibl y has,

hardly any tangibl e characteristi cs except symbolic

represen tatio ns.

Main aspects of information economics are cost and

value.

COSTOF INFORM ATION

An information systemis a keyplace for information generation,

storageand use. Withtheadvances in information te chnolog ythe y

are increasing ly use d in day

to

day applications. Sothecostof

operation of information syste mis:

H ardw areC o st:

Thisisnormall y a fixed orone t imecost over a rel evant range. In

case of com pute r b ased information syste m,withthedevel opment in

te chnolog y,hardware costsare com ingdown drastically.

Sys te mA n al ys is,D e signan di m p le mentatio nc o s t :

Thisisalso a one tim ecost. Thisfunction includes formulating a

met hodologyfor overall el ectronicdata processingprocedure. This

should incl ude thecost for preparation of programsand purchase

of s oftware.

COSTOF INFORM ATION

Co s to f S p a cea n dE n v i ro nm ent alCo n t ro lF a ct o rs:

This cost may vary from time to time. Examples of this cost

are floor space, air

conditionin g, power control units,

generator, security.

N
O p e rat ionCo s t s :

This is basically a variable cost and includes costs of

personnel, systems maintenance, supplies and support

facilities.

TYPES OF INFORM ATION

E n v i ron me nta lIn fo rm at io n

Environmental information requirement can be furthe r

classified and described as follows:(

Governme ntpolicies

Information about Governme ntpoliciesor

financial and tax affairs, political stabil ity,et c. isreq uiredand

may have a sig nificant effecton future planning decisions.(

Tech nologicalenvironme nt

Theinformation on t ech nological

changes oradvancem ent s is ne ces sary for forecastingsuch

changes in t hefirm and the irprobableeffect s on t hesame . Itis

also desirable toassesstheeffectof technical changeson new

products and processe s.

TYPES OF INFORM ATION

N

E n v i ron me nta lIn fo rm at io n

Economic t rends

It incl udes information about

(a)Economicindicatorslikeemployment,productiv ity,capitalinvestment;

(b)Pricesandwagelevels whichaffectall, regardlessofproductor

services;

(c )GN Plevel, trendandconsumerdisp osableincome.

Factors of production

Theseinclude information about the

source,cost, l ocation, availability, accessibil ityand productivity

of t hemajor factors

ofproduction

such as

labour

, m ate rials and

spare parts as wel las capital.

TYPES OF INFORM ATION

N
Co mp e t i tiveIn fo rm at io n

Competitive information requirement can be classified

and described as follows:

Industry demand

Thisrefe rsto t hedemand forecastof the

industry for t heproduct manufactured orabout thearea in whic h

thefirm is operating .

Firm dem and

Thisimplie sasses sm entof t hefirm'scapabilitie s,

activities and potentialitie stome etdemand rel ativeto t he

capabilitie s and actions of thecompetingfirms.

TYPES OF INFORM ATION

C o mpetit iveI n formatio n

Com petit ion

This includes infor matio nabo utcompet ingfirms

for forecasting own productdemand and making decision s

and plans to achieve the forecast.Suchinfor mationfalls into

threecatego ries:
W

(a ) Pas t performance

It encompas ses information concerning

profita bility, return on investment, market share

etc

, which helps to

provide a yardstick for setting performance objectives for future.

(b) Present activity

Here comes the information concerning

competitor's price strategies, advertisi ng campai gns, product mix,

changes in distribution channels, etc. which help to evaluate one's own

weak nesses or strengths.

(c) Future plans Information concerning new products, R&D efforts,

availability of raw materials, etc. which help to decide future plans,

comes under this head.

TYPES OF INFORM ATION

I n t ernalI n formatio n

It is the by

pro ducto f the no rm alo perati o nso f a b usin ess.

Generally,it is histor icalorstatic in nature.Int ern al

infor mationis aimed at identification of the firm's strengths

and weaknesses. It includesthe fol lo wing:

Policies

Long

term bas ic policies on product range, marketing,

finance and about personnel do not permit flexibility in developing

alternative courses of action in the short run.

Financial plan

Information on financial or budget plan is important

because it represents a quantitative and time bound commitment

about the allocation of total resources like employees, plant, materials,

overheads, administrative expenses of the firm. It provides information

about a number of sub

plans of the organization and it acts as an

important link between all activities of the firm.

TYPES OF INFORM ATION

I n t ernalI n formatio n

N
It is the by

pro ducto f the no rm alo perati o nso f a b usin ess.

Generally,it is histor icalorstatic in nature.Int ern al

infor mationis aimed at identification of the firm's strengths

and weaknesses. It includesthe fol lo wing:

Salesforecast

Sinc eallot herint ern alplans of the firm are

guided by the sales plan, it is con sideredas the domin ant

planningpremise internalto the firm.

Supplyfactor s

Infor matio ncon cern ingavailabilityand

limitatio nsof cert ainsupply factor ssuch as

labo ur

,capital,

plant and equipment is impor tantas these factor splay a vital

rolein developingthe financial and subsidiary plans for

achieving, organizatio n' sob jectives.

INFORM ATIO NCLASSIFICATIO N

and used in somecontext is called action inform ation.

known as nonaction inform ation.

docum ent f orm ,i.e., either in some writt en for m or on m icrofilm s, magnetic

tapes, floppy disks et c.is

calleddocumentary

infor mat ion.

are categorized as non documentary (or oral) inform ation.

INFORMATIONCLASSIFICATION

intervals oftimeis called recurring (or repetitive) informat ion.

arrived atthrough some special kind ofstudyand which helps in

management decisions is called anon

recurr ing (or non

repetitive)

infor mat ion.

within the organization is ter med as internal infor mat ion.

outside the organization is ter med as exter nal infor mat ion.

CHARACTERISTICS OF

INFORMATION
whi c h an i nf or ma ti on mu s t

possessare:

) Rel ev an c e

BASIC FOUR PRINCIPLES OF INFORMATION

WHAT IS SYSTEM ?

sy st ema

which mean s an org ani ze d rel ati ons hip amon g

fun ct io ni ng un its or c omp on en ts .

co mpo ne nts lin ke d t og eth er ac co rd in g t o a p la n t o

ac hi ev e a s pe ci fic ob je ct iv e.

CHARACTERISTICS OF SYSTEM
CHARACTERISTICS OFSYSTEM

Or ganization implies str uctureand order. It is the ar rangement

of

components thathelps toachieve objectives.

In thedesign of a business system ,for example, a computer syst emis

designed around an input device, a central processing unit, an output

device, and one or more st orageunits. W hen linked together they work as a

whole system forproducing infor mat ion.

Likewise, the hierarchical relationships star tingwith the president on top and

leading downward to theblue

collar worker s rep res ent s th e organizat ion

str ucture. Such an arr angement portr aysa syst em

subsystemrelationship,

defines theauthority str ucture,specifies the form alflow of communication,

and for malizes t he chain of comm and.

CHARACTERISTICS OFSYSTEM

Int eraction ref ersto them anner in which each component f unctions with
other components of the system .

Inan organization, for example, purchasing mustinteract with production,

advert ising with sales, and payroll with personnel.

Ina computersystem,thecentr al processing unit mustinteract with t he

input device to solve aproblem. In turn,the main m emor yholds program s

and datathat thearithmet ic unit uses for computat ion.

CHARACTERISTICS OF SYSTEM

Inte rde pen den ce means tha t par ts of the org ani za tio n o r co mputer syst em

dep end on one an oth er.The y are co ord in ate d a nd li nk ed tog eth er ac co rdi ng to

a p la n.

One su bs ystem dep end s on the in put of ano the r su bs ystem for pro per

fun ct io ni ng; tha t i s, the out put of one s ubs ystem is the req ui red in put for

anoth er sub system.

Note: No s ystem ca n fu nc tio n i n i so la tio nbec aus eit is dep end ent on the dat a

(in put s) it rece ives from oth er su bs ystems to p erfo rm its req ui red tas ks .

For

e xa mpl e,

dec is ion

to

c omp ut er iz e

an

app li ca tio n

is

ini tia ted

by

the

us er,

ana lyze d

and

des ig ned

by

the

ana lyst,

pr ogr a m med

and

tes ted

by

the

pro gra mmer,

and

run

by

the

co mputer

ope rato r

CHARACTERISTICS OFSYSTEM

Int egration refer sto theholism of systems. Synthesis follows analysis to

achieve the central object ive of theorganization.

Int egration is concerned with how a syst emis tied together. It is mor ethan

sharing a physical part or a location. It means t hatparts of thesystem work

together within the systemeven though each part perf orms a unique

function.

Successful integrat ion will typically produce asynergistic effect and gr eater

totalimpact t han ifeach component works separately.

CHARACTERISTICS OFSYSTEM

The last characteristic of a syst emis its centr al objective.

Obj ectives may be r eal or stated.

Although astat ed objective may be thereal objective, itis not uncommon

for an organization tostateone objective and operate to achieve another.

The import ant point is t hatusers m ustknow the central objective of a

computer application early in t he analysis fora successful design and

conversion.

ELEMENTS OF SYS TEM

O u t p u tsa n di n p u ts .

Processor( s)

Control

Feedb ack

N
Environment

Boundaries and interface.

ELEMENTS OF SYS TEM

O u t p u tsa n dIn p u t s

Themajor objective of a s ystemisto produce an output

thathas

value

to it suser. Whate ver t henature of t heoutput (goods,

services,or information), it must bein linewith theexpectations

of t heinte nded user. Inputs are t heel em ent s(m ate rial,human

res ources ,information) that e nte rthesyste mfor processingthe

inputs, theoutcome of processing .

Output is t heres ult of processing . A s ystemfee ds on input to

produce output in t hemuchsame way thata busine ssbringsin

human, financial, and mate rial res ourcestoproduce goods and

services. Input and outputs of a business areshown in theFigure

1.7 .

ELEMENTS OF SYS TEM

P ro ce s s or( s)
W

Theprocessor istheel em entof a s ystemthatinvolves theactual

transformation of input into output. It istheoperational

component of a system. Processorsmay modify theinput totally

or partially, depending on t hespecifications of t heoutput. This

me ans t hat as t heoutput specifications change, s o doesthe

processing . In s omecases, input is als o m odified t o e nablethe

processortohandle thetransformation.

ELEMENTS OF SYS TEM

C o nt rol :

The control element guides the sy stem, It is the decision

mak ing

subsys tem that controls the pattern of activities governing input,

processing, and output. In an organizational context, management as

a decision

mak ing body controls the inflow, handling, and outflow of

activities that affect the welfare of the business . In a computer sy stem,

the operating sy stem and accompa nying sof twa re influence the

behavior of the sys tem.

Output sp ecifications determine what and how much input is needed

to keep the sy stem in balance. In sy stems analys is, know ing the
attitudes of the individual who controls the area for which a computer

is being considered can make a difference between the successand

failure of the installation Management support is required for securing

control and supporting the objective of the propos ed change.

ELEMENTS OF SYS TEM

F e e d bac k

Controlin a dynamic syste misachieved byfee dback. Fe edback

me asuresoutput against a standard in someform of cybe rnetic

procedure that includes communication and control. Theoutput

information is fe d b ack totheinput and/or tomanagem ent

(controll er)for del ibe ration.

Afte rtheoutput iscompared against performance standards,

changes can resultin theinput or processingand, consequently,

theoutput. Fe edback m ay b epositive orneg ative, routine or

informational.

Positivefee dback reinforcestileperformance of t hesyste m. Itis

routine in nature.

Ne gativefee dback gene rally provides t hecontroll erwith

information for action.

ELEMENTS OF SYS TEM

N

F e edback

In systems analysis, feedbackis impor tantin different ways.

Duringanalysis, the user may beto ld that the prob lemsin a

given applicatio nverify his/herinitial con cern sand justify the

need for change.Anot herfor mof feedbackcomesafter the

system is implement ed.The userinfor ms the analyst abo ut

the perfor manceof the new installation .This feedbackoften

result sin enhancement sto meetthe user' s requirement s.

When feedbackand con trol areatt achedto the system, they

makethe system self

regulatingand self

monit or ing.Then

the systems are kn ownas open systems or cyber net ic

systems. As shownin the Figure1.8.

ELEMENTS OF SYS TEM

E n v i ron me nt

Theenvironme nt isthe"

suprasyste m

" with in whic han

organization operate s. Itdete rmineshowa syste mshould work.

A systemcannon existin isolation. Thesystemis covered bythe

environme nt witha boundary in b et wee nthetwo.

ELEMENTS OF SYS TEM

B o u n d a rie sa n dIn t e rf ace

A s ystemshould bedefined byits b oundaries

th e limit s that

identify itscomponents, processe s,and inte rrel ationshipswhe nit

interfaces withanother system .Each systemhas boundaries

that det ermineits s phereof infl uence and control. Thiscan be

se enin t heFig ure1.9 .

INFORM ATIONSYS TEM

An Information System (or IS) can be seen as the organized

combination of people, hardware, software,

communicati on networks, data resources, policies and

procedures , that stores, retrieves, transforms and

disseminates information in an organization

Various types of physical devices (hardware), information

processing instructions in the form of flow charts and

structed

languages (software), communicat io n channel s

(networks) and stored data or information are used by

people or machin es to communicati on and gathe r

information , knowle dge and wisdom in this digital age.

CLASS IFICATONOF INFORM ATIONSYS TEM

Operations Support Systems

Management Support Systems

CLASS IFICATONOF INFORM ATIONSYS TEM

Operations Support Systems

Information syste mshave always be ennee ded t oprocess data

gene rate d b y,and used in, busine ssoperations. Such

Operations support systemsproduce a variety of information

products for int ernal and exte rnal use ;howeve r,the ydo not

em phasizethespecific information products thatcan be stbe

used b y m anagers.

Furtherprocessingby manageme ntinformation systemsis

usuall y req uired. Th eroleof a b usines s organization's

operations support s ystem sisto processbusine ss t ransactions,

control industrial processe s,support ent erprisecomm unications

and collaborations, and update corporate databases efficiently.

Transaction processing s ystem sare im portant e xample s of

operations support s ystem s

CLASS IFICATONOF INFORM ATIONSYS TEM

Management Support Systems

Wh en informatio n system applications focus on providing

information and support for effective decision making by

managers, the y are called management support systems.

Providing informatio n and support for decision making by

all types of managers and business profession als is a

complex task.

CLASS IFICATONOF INFORM ATIONSYS TEM

Management Support Systems

Conceptually, sev eral major types of information systems

support a variety of decision

making responsibilities:

(1)managem ent information syste ms

W
(2)decision support syste ms

(3)executive information systems

MISDEFINITI ON

MIS can be defined as a system that:

(a) provides information to support managerial functions

like planning, organizing, staffing, directing and

controlling.

(b) collects informatio n in a systematic and a routine

manner which is in accordance with a well defined set of

rules.

(c) includes files, hardware, software and operations

research models of processing. storing, retrieving and

transmitting information to the users.

MISDEFINITI ON

We can also say that, Management Information System is

a set of interrelated components which :

Coll ect ,ret rieve,process, s toreand distributeinformation To

support decision making Of managers

:

In an organization.

SCOP EOF MI S

MISOBJECTIVES

An effective MIS has the fol lo wingob jectives:

Facilit atethe decision s

makin gprocessby furnishing

infor matio nin the propertime frame.This helpsthe decision

makerto selectthe bestcourseof action.

Suppo rtdecision

makin gin bo thstr uctu redand unst ruct ured

prob lemenviron ment s.

Providerequisite infor mationat each levelof managementto

carryout their functio ns.

Providea system of people,compu ter s,procedures,

int eractivequery facilities, docu ment sfor coll ectin g,sto ring,

retrievingand transmittinginfor mationto the users.

N

Helpin highlightingthe crit icalfactor sto be closel ymon ito red

for successful functio ning of the organizatio n.

CHARACTERIS TICSOF MI S

Management oriented

Management directed

Integrated

Common data flows

Flexibility and ease of use

Heavy planning element

CHARACTERIS TICSOF MI S

Management oriented

The system is design ed from the top to work downwards.

It does not mean that the system is designed to provide

information directly to the top management. Other lev els

of management are also provided with relev ant

information.
CHARACTERIS TICSOF MI S

Management directed

Because of management orientation of MIS, it is

necessary that management should actively direct the

system devel opment efforts. In order to ensure the

effectivene ss of system design ed, management sh ould

continuously make reviews.

CHARACTERIS TICSOF MI S

Integrated

The word 'integration' means that the system has to cover

all the functional areas of an organization so as to

produce more meaningful management information , with

a view to achieve the objectives of the organization. It has

to consider various sub

systems, their objectives,

information needs, and recognize the interdependen ce,

that the se subs ystems hav e amongst the mselve s, so that

common areas of information are identified and

processed without repetition and overlapping.

CHARACTERIS TICSOF MI S

Common data flows

Because of the integration concept of MIS, common data

flow concept avoids repetition and overlapping in data

collection and storage, combini ng similar functions, and

simplifying operations whereve r possibl e.

CHARACTERIS TICSOF MI S

Flexibi lity and ease of use

Wh ile building an MIS system all types of possibl e means

which may occur in future are added to make it flexible. A

feature that often goes with flexibility is the ease of use.

The MIS sh ould be able to incorporate allthose features

that make it readily accessible to a wide range of users

with easy usabili ty.

CHARACTERIS TICSOF MI S

Heavy planning element

A management information system cannot be establ ish ed

overnight. It takes almost 2 to 4 years to establish it

successfully in an organization. Hence, long

-

term

planning is required for MIS devel opment in order to

fulfill

the future needs and objectives of the organization.

The

design er of an information system sh ould the refore

ensure that it will not become obsolete before it actually

gets into operation

ROLE OF MI S

Therol eof MIS in an organizatio ncan becomparedto the rol e

of the heart in the bo dy.Theinfor matio nis the blo odand MIS

is the heart .In the bo dy, the heart plays the rol eof supplying

pure blo odto allthe elementsof the body includingthe brain.

Theheart work sfaster and supplies morebl oo dwhen needed.

It fulfils the needs of bl oo dsupply to human bo dyin no rmal

courseand alsoin crisis

MIS plays exactly the same rol ein the organizatio n.TheMIS

system ensures that an inappropr iatedata is col lectedfrom

varioussources, processedand sent further,to allthe needy

destinatio ns. Thesystem is expectedto

fulfill

the infor matio n

needs of an individual, groupof individuals, managersetc.

ROLE OF MI S

MIS satisfies diverse needs througha variety of systems such

as query systems, analysis systems, modellingsystems,

decision suppor tsystems. MIS alsohelps in strategicplannin g,

managementcont rol,operation alcont roland transaction

processin g.

MIS also helps top management in goal setting, strategic planning and

also evolving the businessplans in addition to their implementation.

MIS helps junior management by providing operational data for

planning, scheduling, controlling and also helps them further, in

decision mak ing at the operational level to correct an out of control

situation.

MIS helps middle management in short term planning, target setting

and controlling the business functions, MIS in fact plays the role of

information generation, communication, problem identification and

helps in the process of decision mak ing.

IMPACTOF MI S

MIS 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 MIS support,

the management of marketi ng, finance, production and

personnel becomes more sufficient.

The tracking and monitoring of the functional targets

become easy. The functional managers are informed

about the progress, achieve ments and sh ortfalls in the

activity & targets. The manager is kept alert by providing

certain information indicating the probable trends in the

various aspects of busin ess.

IMPACTOF MI S

This he lps 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 action or a decision in the matter

A disciplined information reporting system creates a

structured database 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 and analysing. Thus, saving the manager's,

valuable time..

APPLICATION OF MI S

Strategic Support
N

Management by Objective s

Data Processing

APPLICATION OF MI S

St rategicSuppo rt

Computers cannot create business strategies by themselves. They

canas sis t

management in understa nding the effects of their strategies,

and help enable effective decision

mak ing.

MIS provides a valuable function; they can collate into coherent

reports unmanageable volumes of data that would otherwise be

broadly useless to decision mak ers. B y studying these reports

decision

mak ers can identify patterns and trends that would have

remained unseen if the raw data were consulted manually.

MIS can be used to transform data into information useful for decision

mak ing. Computers can provide financial statements and performance

reports to as sis t in the planning, monitoring and implementation of

strategy.

These Decisi on Support Sys tems (DSS ) enable more informed decision

making within an enterprise than would be poss ible without MIS

sy stems.

APPLICATION OF MI S

Managementby Objectives

MIS is extremely useful in generating statistica l reports and data

analys is they can also be of use as a Management by Objectives

(MB O)tool. MBO is a management process by which managers and

subordinates agree upon a series of objectives for the subordinate to

attempt to achieve within a set time frame.

Objectives are set using the

S M A RT

ratio, that is, objectives should be

S p e cific,M e a su rable,A g re ed,Re a l istic

and

Time

S pecific.

The success of any MB Oobjective depends upon the continuous

track ing of progress . In track ing this performance it can be extremely

useful to mak e use of the MIS . S ince all SM ART objectives are by

definition measurable they can be tracked through the generation of

management reports to be

analyzed

by decision

mak ers.

APPLICATION OF MI S

Data Processing

Notonly do MISallow for t hecollation of vast amounts of

busine ssdata

, but t he yalso provide a valuable tim esaving

benefittotheworkforce.

Whe rein t hepast b usines s information had tobemanuall y

processe dfor filing and analysis itcan now b eent eredquickl y

and easilyonto a computerby a data processor,allowing for

faste r decision m aking and quicke r refl exesfor t heent erpriseas

a whol e.

BENEFITS OF MI S

Aid in Decision Maki ng

N
Better Plannin g and Control

Core Competenci es

Quick Reflexes

Enhance Supply Chain Management

BENEFITS OF MI S

Aid in Decision Maki ng

MIS can gene ratesynthes izedand processe d information from

computerized/automate d and certain m anual syste ms .

Information distribution to all l evel sof corporate managers,

professionals and keyexecutives b ecom equitese amle sswith

streaml ined MI S.

Managers areable tomake quick, tim el yand informed decisions.

Topmanagem ent and board m em be rscan take s trate gic

decisions, plan future g rowthand busine ss e xpansion activities

based on t hedata and information gene rate d b y MI S.

BENEFITS OF MI S

Better Plannin g and Control

W
MIS isdesig ned and managed in such a way thatit agg reg ate s

information, monitorsthecompany's activities and operations

and enhances communication and collaboration among

em ployees.

Thisens uresbe tte rplanning for all activities and be tte rways to

measureperformance, manage resourcesand facilitate

compliance withindustry and governme ntreg ulations. Control

he lpsin forecasting . preparing accurate budget sand providing

thetools and vital information to e mployee s,top m anagem ent

and businesspartners.

BENEFITS OF MI S

Core Competenc ies

MIS provide t hetoolsnece ssary t ogain a be tte runderstanding

of t hemarketas we ll as a b et te runderstanding of t heent erprise

itsel f.

Every m arket l eading e nte rprisewill have at l east onecore

compete ncy t hatis, "a function the yperform b et te rthan t he ir

competition".

By b uilding an exceptional managem ent information syste minto

theent erpriseitis possibl etopush out ahe ad of t he

competition.
BENEFITS OF MI S

Quick Reflexes

As a coroll ary t oimproved supply chain managem ent com esan

improved abilitytoreact t ochanges in t hemarket. Be tte rMIS

enablesan enterprisetoreact morequickly to the irenvironment,

enabl ing t he mtopush out ahe ad of thecompetitionand

produce a b et te rse rviceand a l argerpiece of t hepie.

BENEFITS OF MI S

Enh ance Supply Chain Management

Im proved reportingof busine ssprocesse sle ads ine vitably t o a

morestreaml inedproduction process. Withbe tte rinformation on

theproduction process,comestheabilityto improvethe

managem ent of t hesupply chain, incl uding eve rythingfromthe

sourcing of m ate rials t othemanufacturing and distribution of

thefinishe d product.,

SU CCESSAND FAILURE OF MI S

Many organization s use MIS more successfully than other

organizations. Through hardware, software and available

technology is the latest and the best, its use is more for
the collection and storage of data and its elementary

processing.

There are some factors, which make MIS, a success while

the re are some factors, which make it a failure.

SU CCESSOF MI S

TheSucce ss F actors for a Managem ent I nformation Systemare:

MIS iseasy t ooperate and the refore,thedesig n of MI S has s uch

good fe atures whic hmakeup a userfriendly desig n.

MIS isorient ed, define d and desig ned in t ermsof t heusers

req uirem ent sand its operational viabilit y is e nsured.

MIS isinte grate d int o t hemanagem ent function. Itse tscle ar

objectivesto ensurethat MISfocuses on themajor issuesof the

busine ss. A ls o adequate devel opment res ourcesare provided and

human & organizational barriersto progres sare rem oved.

MIS isan appropriate information processingte chnolog yreq uiredto

mee tthedata processing and analysis needs of theusers of MISis

se le cte d.

SU CCESSOF MI S

N
MIS focu ses on result s and goals, and highlights the facto rs

and reason sfor no n achievement s.

MIS is no t allowedto end up int o an infor matio ngeneratio n

millavoiding the noise in the infor mationand the

comm unicationsystem.

MIS con cent rateson developin gthe infor matio nsuppor tto

managecrit icalsuccess facto rs. It con cent rateson the

mission criticalapplication sservingthe needs of the to p

management .

MIS recogn izesthat the different infor matio nneeds for

different ob jectivesmust bemet with. Theglo balizationof

infor mationin isolationfromthe different ob jectivesleads to

to omuch infor matio nand its no n use.

SU CCESSOF MI S

MIS recognizes that the information needs become

obsolete and new needs emerge. The MIS design ,

therefore, has a potential capability to quickly meet newer

andnewer

ne eds of information .

MIS is kept under continuous surveill ance, so that its open

system is modified according to the changing information

needs.

MIS recognizes that a manager is a human bein g and

therefore, the systems must consider all the human

beh avioral

aspe cts in th e process of managemen t.

FAILURE OF MI S

A bel ief that the computerize d MIS can solve allthe

management problems of planning and control of the

busin ess.

MIS is devel oped without streamlining the transaction

processing systems in the organizations. MIS is conceived

as a data processing and not as an information system.

MIS does not give perfect information to all the users in

the organization. Any attempt towards such a goal will be

unsuccess ful because eve ry user has a human ingenuity,

bias and certain assumptions not known to the designer.

MIS cannot make up the se by providing perfect

information.

FAILURE OF MI S

Unde restimating
the complexity

in the busine ss systems

and not recognizing it in the MIS design leads to problems

in the successful implementation.

Adequate attention is not give n to the quality control

aspects of the inputs, the process and the outputs

leading to insufficien t checks and controls in MIS.

Lack of administrative discipline in following the

standardized systems and procedures, wrong coding and

deviating from the system specificati ons result in

incomplete and incorrect information.

FAILURE OF MI S

MIS

does not meet certain critical and key factors of its

users, such as a response to the query on the database,

an inabil ity to get the processing done in a particular

manner, lack of user friendly system and the dependence

on the system personnel.

Lack of training and appreciation that the users of the

information and the generators of the data are different,

and the y hav e to play an important role in the MIS.

N
MIS does not provide that information which is needed by

managers but it tends to provide the information generally

the function calls for. MIS the n becomes an impersonal

function.

STR ATEGICMIS

St rategicMISis the set of systems which are con sidered

crit icalto the currentorfuture busin ess compet itiveness,and

hence the survivalof an organizatio n.St rategicMISalso

supplies an organizationwith business intelligence.In ot her

words, if an infor matio nsystem is used in creativeways to

achieve goalsand fulfil set organizatio nalmission s, it can be

con sideredto bea strategicMIS.

St rategicMIScan be externalor internalsystems. Extern al

strategicMISare used mainly by extern alquantit ies in the

busin ess environ ment ,such as custo mers,suppliers,

distr ibut or setc and have a value added compo nentthat gives

developerssometime to reap the benefits of the system

inno vatio n.

STR ATEGICMIS

In general, Strategic MIS can be divided into 3 categories

System sthat focus on innovation for com petitiveedge.

W

System sthat use information as a we apon.

System sthat increaseproductivity and lowe rthecostsof g oods

and se rvices

STR ATEGICMIS

Fiv e types of competitive strategy:

COST LEADERSHIP STRATEGY

Becominga l ow

cost producer of products and servicesin the

industry or finding ways tohe lp s uppliers or custom ersreduce

the ircosts

orincrease

thecosts of com petitors.

DIFFERENTIATION STRATEGY

De vel opingways todifferent iate a firm'sproducts and se rvices

from it scompetitors'or reduce t hedifferent iation advantages of

competitors.Thisstrate gymay all ow a firm t o focus itsproducts

or se rvicestogive itan advantage in particular seg mentsor

niche sof a market.

STR ATEGICMIS

INNOVATION STRATEGY

Finding new ways of doing busine ss. T hisstrate gymay involve

devel oping unique products and se rvicesor e nte ringunique

marketsor marketniches. Itmay also involve making radical

changes t othebusine ss processe sfor producing or distributing

products and se rvicesthat areso different from t heway a

busine sshas b ee nconducte d that t he yalter t hefundament al

structure of an industry.

GROWTH STRATEGY

Sig nificantl y expanding a company's capacity to produce goods

and se rvices,expanding into g lobalmarkets,diversifying into

new products and services,or integ ratinginto rel ated products

and se rvices.

STR ATEGICMIS

ALLIANCE STRATEGY

Establish ingnew b usines s l inkages and alliances with custom ers,

supplie rs, com petitors,consultants, and othe rcompanies . The se

linkages may include mergers,acquisitions, joint ventures,

forming of "virtual companies ," orothe rmarketing ,

manufacturing, ordistribution agree me ntsbe twe ena busine ss

and itstrading partners.

THE VALUE CHAIN AND STR ATEGICIS

The value chain concept was devel oped by Mich ael Porter

and is illust rated in Figure ahead (The value chain of a

firm. Note the examples of the variety of strategic

information systems that can be applied to a firm's basic

busin ess processes for competitive advantage).

It views a firm as a series, chain, or network of basic

activities that add value to its products and services and

thus add a margin of value to both the firm and its

customers.

THE VALUE CHAIN AND STR ATEGICIS

In thevalue chain conceptual framework, somebusiness activities

are primary processe s;othe rsaresupport processe s. Primary

processe sarethosebusine ss activities t hatare direct lyrel ate d t o

themanufacturing of products or t hedelive ry of s ervicestothe

customer.

In contrast, support processe sare t hosebusine ssactivities t hat

he lpsupport theday
-

to

day running of t hebusine ssand that

indirect ly contributeto t heproducts or s ervicesof t heorganization.

Thisframework can highl ightwherecompetitivestrateg iescan best

beapplied in a business.

That is ,managers and busine ss professionals s hould t ry t odevel op

a variet y of s trate gicusesof theInte rnetand othe rte chnolog iesfor

thosebasic processesthatadd themostvalue toa company's

products or se rvicesand thusto theoverall businessvalue of the

company.

THE VALUE CHAIN AND STR ATEGICIS

TYPES OF MI S

Transaction Processing System

Management Information System

Decision Support System

Executive Support System

TRANS ACTION PROC ESS INGSYS TEM

N

Operatio nalmanagersneed systems that keeptrackof the

element aryactivities and transactio nsof the organizatio n,

such as sales, receipts, cash deposit s, payrol l,credit

decisions, and the flow of materialsin a factor y.

Transactio nprocessin gsystems (TPS)providethis kin d of

infor matio n.A transactio nprocessin gsystem is a

compu ter izedsystem that perfor msand recordsthe daily

rout inetransactionsnecessary to conductbusiness, such as

sales orderent ry, hotelreservatio ns,payrol l,emplo yeerecord

keepin g, and shipping.

Theprincipalpurposeof systems at this levelis to answer

rout inequestion s and to trackthe flowof transactio ns

throughthe organizatio n.

TRANS ACTION PROC ESS INGSYS TEM

A payroll system kee ps track of money paid to

employees. An employee time card with the employee's

name, Security number and number of hours worked per

week represen ts a singl e transaction for this system.

Once this transaction is input into the system, it updates

the system's file/database; that permanently maintains

employee information for the organization.

The data in the system are combine d in different ways to

create reports of interest to management and government

agencies and to send payche cks to employees.

MANAGEMENT INFORM ATIONSYS TEM

Middle managementneeds systems to helpin mon ito ring,

con trolling,decision

makin gand administrative activities. The

principalquestion addressed by these systems is: Are things

work ingwell?Theter mManagementInfor matio nSystem(MIS),

alsodesignate a specific categor yof infor mationsystems

serving middlemanagement .

MIS providemiddlemanagerswith repor tson the

organizatio n' scurrentperfor mance. Thisinfor matio nis used

to monito rand cont rol thebusiness and predictfuture

perfor mance.MIS summarizeand repor ton the compan y's

basicoperatio nsusing data supplied by transactio n

processin gsystems. The basictransactio ndata fromTPSare

compressedand usually presentedin report sthat are

producedon a regularschedule.
MANAGEMENT INFORM ATIONSYS TEM

How a typical MIS transforms transaction

le ve l data from

inve ntory, production , and accounting into MIS files that

are used to provide managers with reports.

MIS serve managers primarily interested in weekl y,

monthly, and yearly results , although some MIS enabl e

managers to drill down to see daily or hourly data, if

required.

MIS generally provide answers to routine ques tions that

have been specified in advance and havea predefined

procedure for answering the m.

DECISI ONSU PPORTSYS TEM

Decision

suppor tsystems (DSS)suppor tno n

ro ut inedecisio n

makin gfor middle management .Theyfocu s on prob lemsthat

are unique and rapidlychanging, for which the procedurefor

arrivingat a solutio nmay not be fully predefined in advance.

N

They try to answer question s such as these: What wouldbe

the impact on productio nschedulesif we were to doub lesales

in the monthof January? What wouldhappen to ourreturnon

investmen t if a factor y schedulewas delayed for ten mon ths?

AlthoughDSSuse inter nalinfor matio nfromTPSand MIS,they

often bringin infor mationfrom externalsources,such as

currentsto ckprices orproductpricesof compet ito rs.

DECISI ONSU PPORTSYS TEM

Thes e systems use a variety of models to analyze data,

or the y condense large amounts of data into a form in

which decision makers can analyze them.

DSS are design ed so that users can work with the m

directly; the se systems explicitly include user

friendly

software.

EXECUTI VE SU PPORTSYS TEM

Executive suppor tsystems (ESS )helpsenio rmanagementin

makin gthese decision s.ESSaddress no n

-

rout inedecision s

requiringjudgment , evaluatio n,and insight becausethereis

no agreed

onprocedurefor arrivingat a sol utio n.

ESSpresentgraphs and data frommany sourcesthroughan

int erface that is easy for senior managersto use. Often the

infor matio nis deliveredto seniorexecutives througha por tal,

which uses a Webint erfaceto present integratedperso nalized

business cont ent.

ESSis designed to inco rpo ratedata abo utextern alevents,

such as new tax laws orcompet ito rs,but they alsodraw

summarizedinfor matio nfrom inter nalMIS and DSS .They

filter , compress,and trackcriticaldata, displaying the data of

greatestimpor tanc eto seniormanagers.

EXECUTI VE SU PPORTSYS TEM

For example, the CEO of Tata Steel, has an ESS that

provides on his desk top a minute

to

-
min ute view of the

firm's financial performance as measured by working

capital, accounts receivabl e, accounts payable , cash flow,

and inve ntory.

The information is presented in the form of a digital

dashb oard, which displays on a singl e screen graphs and

charts of key performance indicators for managing an

organization. Digital dashboards are becoming an

increasingl y popular feature of ESS.

SYS TEMTHAT SPAN THE ORGANIZATION

Enterprise System (Enterprise Resource Plannin g) (ERP)

Supply Chain Management (SCM)

Customer Relationship Management (CRM)

ENTERPRI SESYS TEM

A large organization has many different kinds of information sys tems built

around different functions, organizational levels, and business process es

that cannot automatically exchange information. This fragmentation of

data in hundreds of sepa rate sy stems degrades organizational efficiency

and business performance. For instance, sa les personnel might not be

able to tell at the time they place an order whether the ordered items are
in inventory, and manufacturing cannot eas ily use sa les data to plan for

new production.

E n t e rp rises y st ems ,a l s ok n o wna sE n t e r pris eR e s ou rceP l a n n ing( E R P )

Systems, solve this problem by collecting data from various key functional

areas like manufacturing and production, finance and accounting, sa les

and marketing, and human resources and storing the data in a single

central data repos itory. Information that wa s previously fragmented in

different sy stems can be eas ily shared across the firm to help different

parts of the business work more closely together.

ENTERPRI SESYS TEM

Fo rexample,when a custo merplacesan order,the data flow

auto maticallyto ot herparts of the companythat are affected

by them.The ordertransactio ntr iggersthe warehouseto pick

the orderedproductsand scheduleshipment.The warehouse

infor ms the facto ry to replenishwhateverhas depleted.

Theaccoun tin gdepart mentis no tified to send the custo mer

an invoice.Customerservicerepresentativestrackthe

progressof the orderthroughevery step to infor m custo mers

abo utthe status of theirorders.Improvedcoo rdinatio n

bet weenthese different parts of the business lowerscosts

whileincreasing custo mersatisfaction .

SU PPLYCHAIN MANAGEMENT

SupplyChain Management(SCM) Systemhelp organizatio ns

managerelatio nshipswith their suppliers.These systems help

suppliers,purchasing organizatio ns,distr ibut or s,and lo gistics

organization sshare infor mationaboutorders,production,

invent or ylevels,and delivery of productsand services so that

they can makebet terdecision s abo uthow to organizeand

schedulesourcing,productio n,and distr ibut ion .

Theultimateob jectiveis to get the rightamount of their

productsfromtheir sourceto theirpoin t of con sumptio nwith

the least amoun tof time and with the lo westcost . Suppl y

chain managementsystems are on e type of

interorganizational

system becausethey automatethe flowof

infor matio nacrossorganizatio nalbo undaries.

CUS TOM ERRELATIONS HIP MANAGEMENT

Customer Relationsh ip Management (CRM) Systems he lp

organizations in managing the ir relationsh ips with their

customers.

CRM systems provide information to coordinate with all of

the busine ss processes that deal with customers in sales,

marketing, and service to optimize revenue, customer

satisfacti on, and customer retention.

This information he lps organization s identify, attract, and

retain the most profitable customers; provide better

service to existing customers and increase sales.

CUS TOM ERRELATIONS HIP MANAGEMENT

CRM systems consolidate and integrate customer

information from multiple communicati on channel s

telephone, e

mail, wireless devices, retail outlets, or the

Web .

Detailed and accurate knowle dge of customers and the ir

preferences helps organizations increase the

effectivene ss of the ir marketi ng campaigns and provide

hig he r

quality customer service and support.

END OF UNIT 1

Management Information
System

BCA

Sem

UNIT

MISI FUNCTI ONAL AREAS

Accounting Information System

Geographic Information System

Human Resource Information System (HRIS)

Inventory Information System

Manufacturing Information System

Marketing Information System

Quality Information System

R & D Information System

ACCOUNTI NG INFORM ATIONSYS TEM

Allorganizatio nsneed systematic mainten anceof their

recordsthat helpin the preparatio nof the financial statemen ts

such as Profit & Loss accoun tand Balancesheet

. There

are 3

generaltypes of Account ingInfor matio nSystems

1)

F i n ancialAc cou nt ingSys tem

:This system provides

financial statemen ts to investo rs,gover nmen talauthor ities

and ot herint erestedparties in accordancewith their repor tin g

for mats

2)

M a n agementAc cou nt ingSys tem

:It providesrepor tsto

managersbo th,for

strategicand

tact icaldecision s and on

profitab ilityof the organizatio n

3)

C o stAc count ingSy s tem

:It providesreport stomanagers

for cost plannin gand cost con trolof operatio ns.

ACCOUNTI NG INFORM ATIONSYS TEM

Themajortypes of accoun tbo oksare

a)

Vo uch er

.A trans act io nis reco rdedb y debi ti ng and

creditingthe two affected accoun ts,calleda voucher

b)

J o urnal

:It is an accountbo okin which allthe transactions

are recordedin a chron ol ogicalorder.date

wise.
It is

maintain ed on lyin manualsystem by enter inginfor matio n

fromvouchersand is no t requiredin compu terizedsystems

c)

G e nerall e dger

. Allthe accountsarerecordedand

maintain ed individually in a bo okcalledgeneralledgeror

simply ledger. In manualsystem of accoun tin g,the ledgeris

preparedby enter inginfor matio nfromthe journ alby a

processcalledposting while in computerizedsystem, the data

of vouchers(input) is processedto preparea ledger(out put).

ACCOUNTI NG INFORM ATIONSYS TEM

(d)

Pu rch aseb oo k:

Thepurchaseof goo dson credit basis is

recordedin ano therspecialledgercalledpurchasebo ok

e)

S a lesb oo k:

Thecredit sales of goo dsare recordedin a

specialledgercalledsales boo k

f)

C a s hb o ok:

Cash bo okis a specialtype of ledgerin which

on lycash transactio nsarerecordedand maintain ed

g)

B a n kb o ok:

Bank boo kis anot hertype of ledgerin which

onl ybanktransactionsare recordedand maintained

h)

C reditor' s

l e dger:

The transactio n(credit purchases)of all

the creditor sarerecordedand maintain ed in creditor 'sledger

f)
D e bt or's

l e dger:

The transactions(credit sales) of allthe

debto rsare recordedand maintain ed in debto r' sledger.

ACCOUNTI NG INFORM ATIONSYS TEM

After preparatio nof allthe abo veaccoun ts,the final

statemen ts of accoun ts aregeneratedperio dically(mont hly or

yearly). Themajorfinancial statemen tsare as fol lo ws

a)

Tr i alb a l ance

:It is a list orfinancial statemen tprepared

mon thly,quarter lyorannuall yto find out the balanc eof each

accoun t. In a tr ialbalan ce,alldebto rsare shown on on eside,

whileallcreditor sareshown on the ot her.Theto talof debit

balan cemust matchthe to talof the creditbalan ce

b)

Tradinga c count

:It is a financial statemen tpreparedyearly

to find out the

grossprofit

or grossloss of the organization .

ACCOUNTI NG INFORM ATIONSYS TEM

(c)

P rof ita n dl o ssa c count

:After preparatio nof trading

accoun ts,a financial statemen t calledProfit & Loss accoun tis

generatedto find out the net profit ornet lo ssof the

organizatio n

d)

B a l a nces he et

:The balanc esheet is the mostimpor tant

financial statemen t of the compan ythat shows its posit ion of

assets and liabilit ieson a particu lardate (generallyat the end

of the accoun tin gyear

).

e)

Ac cou nt sreceivables t atemen t

:This statemen t lists the

name of the debto rsand, the amoun ts to bereceivedby the

compan y

f)

Ac countp a y a bles t atement:

This statementlists the name

of the creditor sand, the amoun tsto bepaid by the compan y.

GEOGRAPHIC INFORM ATIONSYS TEM

A geographical infor matio nsystem (GIs) is a compu terbased

system that sto resand manipulatesdata that is viewed from a

geographical pointof reference

.This

system has four main

capabilit ies

D ATAI NP UT

D ATAS T ORAGEAN DRE T RI EVAL

D ATAM AN IPUL ATIONAN DAN AL YSIS

D ATAO U T PUT

N
Geography

play s an impo rt antro lein man y b usin ess

decision s, since 85% of cor poratedata invol vea numb erof

business decisions, such as storelocation s,sales territ ories,

sales promo tionsand regulato rycompl iance,relyheavily on

geographical data.

GEOGRAPHIC INFORM ATIONSYS TEM

Fo rexample,a GIS allowsa ban kto comparedeposits with

lo anapprovalsin a given area and show that loanapprovals

meet regulato rystandards in areas with deposits. In essence,

GIS is an excellentdecision makingto olthat integrates

geographical datawith ot herbusin ess data. F ororganizatio ns

with a custo merfocu s, a GISprovides clearprofilesof

customersand their needs; hence these to olscan be

int egratedwith any of the functio nalareas of the busin ess

alreadydiscussed.

The

ability to integratedifferent data,

analyse

theirimpact on

the custo mer,and int egratethe findings in organizatio nal

decision makingis on e of the key facto rs of GIS .

HUMAN RESOU RCEINFORM ATIONSYS TEM

(HRIS)

Human resource information system is a system that

supports planning, control, coordinati on , administrati on

and management of human resources of organization s.

HRIS also includes a large number of subs ystems that

address the informatio n needs of various human resource

functions.

They

provide managers with information, policies, and

procedures concerning recruiting, layoffs, employee

evaluation, promotion, termination, transfer, salary equity

monitoring, job descriptions and responsib ilities , training

etc.

HUMAN RESOU RCEINFORM ATIONSYS TEM

(HRIS)

HUMAN RESOU RCEINFORM ATIONSYS TEM

(HRIS)

Since HRIS also facilitate vital information on matters

such as payroll, central and state taxes, he althben efits,

child care, grievance procedures, and other personal

information that affects the employee's personal and

profession al liv es, it is imperative that the se systems be

hig hl y responsiv e to employee needs. The HRIS is derived

from the strategic business plan, the strategic human

resources plan, and the strategic informatio n plan

INVENTOR Y INFORM ATIONSYS TEM

Inventory refers to the stock of raw materials and finished goods

available in the organization for production and sa le. All organizations

need an efficient sy stem to maintain and control the optimum level of

investment in all types of inventories. An inventory control sy stem

ensures that proper stock levels of each item are maintained. The

improper stock levels (low or high) cause the following problems

Low

i n v ento ryo f ra wm at e r ial s

leads to idle time

in a

productio n proces s

and hence, causes wa sta ge of resources like labour, pow er,

equipments

etc., needed for production. It may also lead to decreas e in sa les due to

out

of

-
stock especially during periods of peak demands

Low

i n v ento ryo f f i n ishedg o o d s

leads to back order, lost sa le and loss in

goodwill of the company due to out

of

stock pos itions

H i g hi n v ento r yo fra wm at e r ial s

and

finished goods leads to unnecess ary

investments and hence, causes a financial burden on the organization.

INVENTOR Y INFORM ATIONSYS TEM

The

major

o b j e c tiv es

for implementing a computerized

inve ntory control in an organization are

N
Maintaining

an optimum levelof raw materials and

finish ed goods inve ntory

Preparation

of purchase orders and inve ntory status

reports accurately and on time

Preparation

of various analysis reports

Generation

of MIS reports that helpmanagement for

making effective and timely decisions

INVENTOR Y INFORM ATIONSYS TEM

The

various

i n p uts

to the sys tem are

N
Data

of vendors and buyers including code, name, address and other

details of each one

Data

of raw materials and finished goods including code, name, category,

size, price and other details of each item along with their quantity

Goods

received note (GRN) indicates the quantity received of various

items along with their details

Materials

requisition slips indicate the quantity iss ued of various items to

production departments or vendors along with their details

Delivery

challan indicate the quantity sold of various items to buyers

along with other

details.

Materials

rejection note indicates the quantity of items rejected to

vendors / suppliers along with the reas ons of

rejection

INVENTOR Y INFORM ATIONSYS TEM

A typical Inventory Control System generates the following

o ut p ut s

Purchase

order (P O) includes PO number, PO date, supplier name,

address , item code/name, category, quantity ordered, price, amount

along with the terms

and conditions.

Purchase

book includes the quantity and other details of items received

Inventory

status reports (detailed and summary), includes the quantity

and other details of items sold, received, iss ued and rejected along with

their closing balance

Materials
return report indicates the quantity of items rejected along with

other details

Materials

transfer report indicates the quantity of items iss ued to other

branches/ departments along with other details

Purchase

analys is reports (s upplier and item wis e) indicates the quantity

and other details of items purchased during a period from various

suppliers.

MANUFACTU RINGINFORM ATIONSYS TEM

Manufacturin ginfor matio nsystem is a system that suppor ts

the manufacturin gfunctio ns of purchasing,receiving,quality

con trol,invent or y management ,mater ialrequirement s

planning, capacity planning,productionscheduling,and plant

design. I t applies to bo thmanufactur ingand service

environ ment s.Hence, the termmanufactur ingshouldbe

consideredin termsof deliveringbo thgoods and services

Agile

manufactur ingrefers to manufacturin genviron ment s

that are dynamic and flexibleeno ugh to instan taneo usly

producecustomizedgoodsand services in varying quantit ies

and to effor tlessl yswitch the manufacturin gprocessfromon e

productto anot her.

MANUFACTU RINGINFORM ATIONSYS TEM

Ag i l e

ma n u fa ct urin gh a sfo u rma i nch a ra cte ris tic s

The

ability to thrive on constant change

Recognition

by the organization that people are its main

asset

Incorporati on

of the virtual company idea through the use

of

telecommunic ati on s

focus on creating products and services with real added

value.

MANUFACTU RINGINFORM ATIONSYS TEM

S o urc eso fM a n uf a ctur ingI n for m atio n

P ro d uctio n

d at a

:B y using terminals around the production floor, data on

production process es can be quickly gathered and process ed. These

data are used for billing and in almost every as pect of production

control

I n v ento r y

d at a

:Inventory data include inventories of raw materials,

goods

in

process , and finished goods. Accurate raw material data are

especia lly important in a manufacturing situation because running out of

certain items at critical times can shut down production lines, leaving

workers idle

.
N

Ve n do r

d at a :

Vendor data s how s ources a nd pri ces for raw materia ls.

Often, vendor data is maintained by the purchasing department, although

sometimes the manufacturing area will personally buy certain items. In

any case, manufacturing personnel must be constantly awa re of the

origination of their raw materials, what new types of products are offered

by vendors, and current prices.

MANUFACTU RINGINFORM ATIONSYS TEM

Pe rsonneldat a:

Perso nneldata show variousstatist ics on

currentmanufactur ingperso nneloften , in the cour seof

productio n,peopleswitch assignment s, so perso nnelskill s

must be reviewedto fit the right personfor the right job

U n i on

dat a:

Many types of labo ur to dayare unio nized

productio nshops usually have strict regulatio nsregarding

such items as pay scales, hiring and firing, promo tio nand

workingconditions

N
L a b our

data:

Raw mater ialsand peopleare at the coreof

manufactur inga product. Whilevendors arethe sourceof raw

materials,the labo ur marketis the sourceof people.Data

must be keptregardingwhere new person nelmay be ob tained,

as labo urshort agesoccu rin the organizatio n.

MANUFACTU RINGINFORM ATIONSYS TEM

E xt er n ale n v i ronm entdat a:

Tothemanagers in manufacturing

departme nt, m ostpres singinformation,

nee ded

in t hearea of

exte rnal e nvironme nt data is t heoutlook for raw mate rial prices

and labour availability.

E n g ineer ing

s p e cif icatio n s

:Engineeringspecifications data indicate

whe the rsome thingcan bebuiltand how. Engine ering

specifications contain such facts as

stres s

of s crewswhe the ra

certain drill bitissuitable for wood, m et al, ormasonry, howto b uild

a sub
-

assembl yof a certain type;and so on.

I n t ern al

m ar k et ingd at a

:Market ing e nds whe remanufacturing

be gun,

so m arket ingoutput ismanufacturing input. Market ing

specifiesthenumbe r of units of g oods t hat m ustbeproduced in

each tim eperiod in orderto me etconsumer demand. Marketing

data isalso useful to production personnel as part of the

eng inee ringdesig n process.

MARK ETINGINFORM ATIONSYS TEM

Marketing strategies consist of a mixture of ingredients

that has bee n named, the marketing mix:

p ro d u c t ,

p ro mo t i on ,p l a cea n dp ri ce .

Collectively they are known

as the

fou rPs .

Ph ilip Kotler has identified three types of marketi ng

information

W
Marketing

intel ligence:information that flows into the

organization from t he

environme nt

Inte rnal

m arket ing inform ation: inform ation colle cte dwithin t he

organization

Marketing

communications: information that flows from the

organization outward totheenvironme nt.

MARK ETINGINFORM ATIONSYS TEM

In p u t so f ma rk eti ngi n fo rm atio ns y s t e m

External

env ironment data

Marketing

rese arch data

Marketing

int el ligen ce data

N
Strategic

plan

Transaction

processing data

MARK ETINGINFORM ATIONSYS TEM

O u t p u to f ma rk eti ngi n fo rm atio ns y s t e m

Product

planning

Place

planning

Promotion

Price

Budget

allocation

Sales

forecast
MARK ETINGINFORM ATIONSYS TEM

T hedatab as ec reatedfo ri n p uta n do u tputm a rketing

i n form ations y s tems ho u ldp rovidea n s werst ot hefo l lo win g

What

is the optimal wa y to capture data at the point

of

sa le

How

can one ensure that marketing operations are run smoothly and

efficiently

What

are the goods and services that customers wa nt

How

do customers define customer service

What
ki nds of services are important to customers

Are

customers interested in and willing to use information technology

How

much are customers willing to pa y for higher quality service

What

impact would higher quality customer service have on the profits

of the organization

How

can customers be attracted and retained?

QUALITY INFORM ATIONSYS TEM

Quality information systems are standalone systems or

embedded systems that he lp an organization to achieve

its quality goals.

The

quality plan is derived from the strategic information

plan

. The

Fi gure 4.2sh ows, h ow th e strateg ic qu alit y plan

is derived from the strategic information plan.

In

some cases, a firm has no separate quality plan, but

instead makes quality a component of other plans, such

as marketing, manufacturin g, and so on.

QUALITY INFORM ATIONSYS TEM

QUALITY INFORM ATIONSYS TEM

The information systems (IS) department plays a major

role in ensuring the success of TQM efforts in an

organisation.

An

information system can promote quality and provide

tools and techniq ues to he lp the firm achieve its quality

goals. Information systems also he lp firms achieve quality

certificati on.

There

are many institutions and agencies that certify the

quality efforts of an organisation and provide guidelin es

to firms that plan to

instill

qual ity in all aspects of th eir

operations.

R& D INFORM ATIONSYS TEM

Advances in information technology hav e spawned

specialized information systems in many other busin ess

areas. The significant area receiving considerable

attention is R&D.

&D has long bee n recognized as an information

intensive activity that is usually, responsible for evolving a

stream of new products and production process

innovations for the organisation. R&D is responsib le for

creating and developing new products or services in order

to capitalize on recognized opportunities .

R& D INFORM ATIONSYS TEM

R& D INFORM ATIONSYS TEM

R&D may also berespon siblefor overcomingrecogn ized

weaknesses in currentorganizatio nalproductio nand

operatio nprocessesin orderto makethem moreefficient ,

cost

effective, and competitive.

Because

of this mandate and the pot ent ialof R&D to provide

the organisatio nwith compet itiveadvantage, many

researcherssuggest that R&D infor matio nsystems shouldbe

consideredto bestrategicinfor mationsystems.

Like

many ot herorganizatio nal systems,R&D is an open

system that has impor tantinfor matio nand commu nications

exchangeswith the externalenvironmentand ot her

organizatio nalsubu nit s.

DATA WAREHOUS ING

A new powerfultechnique makingit possib leto extract

archivedoperatio naldata and overcomeinco nsisten cies

bet weendifferent legacydata for mats. As wellas int egratin g

data througho utan enter prise,regardlessof lo catio n,for mat,

orcommunicationrequirementsit is possibleto incorpo rate

additionalor expertinfor matio n.

Data warehousingis a con cept. It is no ta productthat can be

purchasedoff the shelf. It is a set of hardwareand software

compon entsthat can be used to bett eranalyze the massive

amoun tsof data that organizatio nsare accumulatin gto make

bet terorganizatio naldecision s. Thedata warehouseprovides

data that is alreadytransfor medand summarized,therefore

makingit an appropriateenvironmentfor moreefficient DSS

and EISapplicatio ns.

CHARACTERIS TICSDATA WAREHOUS ING

Integrated

Subject

oriente d

Non

volatile

Time

variant

CHARACTERIS TICSDATA WAREHOUS ING

Integrated

W
Whe ndata res idesin m any se parate applications in t he

operational environme nt, e ncoding of data isoften inconsist ent .

For instance, in oneapplication, gendermightbecoded as 0 and

1and in anotherby"m" and "f".

Whe ndata are m oved from t heoperational environme nt int o t he

data warehouse,theyassume a consistentcoding convention

e.g . gender data istransforme d to"m" and "f".

CHARACTERIS TICSDATA WAREHOUS ING

Subject

oriente d

Data are organized according tosubject ins te ad of application

e.g . an insurance company using a data wareh ousewould

organizetheirdata bycustomer,premium, and claim, inste ad of

bydifferent products (auto, l ife, e tc.).

Thedata organized b ysubject contain only t heinformation

necessary for decision support processing.

CHARACTERIS TICSDATA WAREHOUS ING

Non

-
volatile

Data are not update d or ch anged in any way oncethe yent erthe

data wareh ouse,butare onl y l oaded and accesse d.

Time

variant

Tim e

variant

Thedata wareh ousecontains a place for s toring

data thatare five t o 1 0yearsold, orolder; t o b eused for

comparisons, trends and forecasting. Thesedata are not

update d

BENEFITS OF DATA WAREHOUS ING

Us ed to understand busin ess trends and make bette r

forecasting decisions.

Bring better products to market in a timely manner.

Analyze daily sales information and make quick decisions

that can signi ficantly affect the organization's

performance.

General recognition of the untapped value in large

databases.

Consolidation of database records tending towards a

singl e customer view.

BENEFITS OF DATA WAREHOUS ING

Consolidatio n of databases, including the concept of a

data wareh ouse.

Reduction in the cost of data storage and processing,

which facilitates collection and accumulation of detailed

data.

Intense competition for customer attention in an

increasingl y saturated marketpl ace.

Move ment towards the de

massi fi catio n

of busin ess

practices.

CRIT ERIAOF DATA WAREHOUS ING

N

Loud Perfor mance

Load Processin g

Data Quality Management

Query Perfor mance

TerabyteScalab ility

Mass User Scalability

Network edData Warehouse

Advanced Query Fun ctio nalit y

WarehouseAdministration

Int egratedDimensio nalAnalysis

CRIT ERIAOF DATA WAREHOUS ING

Loud Performance

Data wareh ousesreq uireincrem ent al l oading of ne w data on a

periodic b asis with in narrow tim ewindows; performance of the

load processshould bemeasured in hundreds of mil lions of rows

and gig abyte sperhour and mustnot artificiall y, constrain the

volume of data req uiredbythebusine ss.

Load Processing

Many ste ps m ustbetaken t o l oad new orupdate d data intothe

data wareh ouseincluding data conversions. filte ring,

reformatting,integritychecks,physical storage,indexing, and

me tadata update . The seste ps m ustbeexecute d as a s ingl e,

se amle ssunit of work.

CRIT ERIAOF DATA WAREHOUS ING

Data Quality Management

The shift to fact

bas ed management demands the highest data

quality. The wa rehouse must ensure local consis tency, global

consis tency, and referential integrity despite "dirty" sources and

massive database size. While loading and preparation are necessary

steps , they are not sufficient. Query throughput is the measure of

successfor a data wa rehouse ap plication. As more questio ns are

answ ered, analys ts are catalys ed to as k more creative and insightful

questions.

N
Query Perfor mance

Fact

bas ed management and ad

hoc analys is must not be slowed or

inhibited by the performance of the data wa rehouse RDB MS ; large,

complex queries for key businessoperations must complete in

seconds not days .

CRIT ERIAOF DATA WAREHOUS ING

Terabyte Scalability

Itmust s upport continued availability in t heeve ntof a point

failure, and must provide a fundame ntall y different me chanism

for recovery. Itmust support near

line mass storagedevices

such as optical disk and Hie rarchical S torageManagem ent

devices. Lastl y, q uery performance m ust not b edependent on

thesizeof t hedatabase, but rathe ron t hecomple xity of t he

query.

Mass Us er Scalability

W
Acce ssto wareh ousedata mustno longerbelim ite dtotheel ite

few. TheRDBMS s ervermust s upport hundreds, eve n t housands,

of concurrent userswhilemaintaining acceptable query

performance.

CRIT ERIAOF DATA WAREHOUS ING

Networked Data Wareh ouse

Use rsmustbeable t olookat and work withmult iple wareh ouses

from a s ingl eclie nt workstation. Wareh ousemanagers have t o

manage and administer a network of warehousesfroma single

physical l ocation.

Advanced Query Functionality

End usersrequireadvanced analytic calculations, seq uential and

comparative analysis, and consiste ntaccess t odetaile d and

summ arized data. UsingSQ Lin a cl ient /s erverpoint

and

click

toolenvironme nt m ay some tim esbeimpractical or e ven

impossibl e. TheRDBMS m ustprovide a com plet ese tof

analytical operations including coreseq uential and statistical

operations.
CRIT ERIAOF DATA WAREHOUS ING

Wareh ouse Administratio n

TheRDBMS m ust provide controlsfor im plem ent ingres ource

lim its,chargeb ackaccounting to all ocate costs b ack t ousers,

and queryprioritization to address theneeds of different user

classe s and activities. TheRDBMSmust als o provide data for

work l oad tracking and tuning sothat s ystemres ourcesmay b e

optimized for m aximum performance and throughput.

Integrated Dimensional Analysis

TheRDBMS m ust s upport fast, e asy cit ation of pre

computed

summ aries com monin largedata wareh ouses. I t als o s hould

provide themainte nance tools t oautomate t hecreation of t he se

pre

computed aggregates. Dynamic calculation of aggregates

should b econsiste nt withtheinte ractive performance ne eds.

THE WAREHOUS EMODEL

Data wareh ousing is the process of extracting and

transforming operational data into informational data and

loading it into a central data store or warehouse. Once

the data is loaded it is accessib le via desktop query and

analysis tools by the decision makers. The data

wareh ouse system is illust rated in the Figure 6.1.The data

within the actual warehouse itself has a distinct structure

with the emphasis on different lev els of summarizati on.

THE WAREHOUS EMODEL

A typical Data Wareh ouse System

THE WAREHOUS EMODEL

Thestructure of D ata ins ide theData W areh ouse

THE WAREHOUS EMODEL

The current detail data is central in importance as it:

refl ect sthemostrece nthappenings , whichare usuall y themost

inte res ting ;

itis volum inous as itis s toredat thelowe stle velof granularity;

itis always (almost )storedon disk storagewhichis fast t o

access b ut e xpens ive and comple x t o m anage.

THE WAREHOUS EMODEL

Older detail data is stored on some form of mass storage,

it is infreque ntly accesse d and stored at older lev eldetail

consistent with current detailed data.

Lightly summarized data is data distill ed from the low

lev elof detail found at the current detailed lev eland

generally is stored on disk storage. Wh en building the

data wareh ouse you hav e to consider what unit of time is

summarizati on done over and also the contents or what

attributes the summarized data will contain. Highly

summarized data is compact and easily accessib le and

can eve n be found outside the wareh ouse.

THE WAREHOUS EMODEL

Metadata is the final component of the data wareh ouse

and is really of a different dimension in that it is not the

same as data drawn from the operational environment but

is used as:

a direct ory t ohe lptheDS Sanalyst tolocate t hecontent s of t he

data wareh ouse,

a guide to themapping of data as thedata istransformed from

theoperational environme nt t othedata wareh ouse

environme nt,

a guide to thealgorithmsused for summarization betwe enthe

current det ailed data and thelig htl ysumm arized data and also

thehig hlysumm arized data et c.

DATA MIN ING MODEL

Two types of Data Mini ng Models or modes of operation

are prevalen t, which may be used to unearth informatio n

of interest to the user.

VERIFICATION MODEL

DISCOVERY MODEL

VERIFICATION MODEL

Theverification modeltakes an hypothesisfromtheuser and test s

thevalidity of it against t hedata. Theem phasisis withtheuser

who isres ponsibl efor formulating thehypothe sisand issuing t he

que ryon thedata toaffirm or ne gatethehypothe sis.

In a marketingdivision, for example , with a l imited budgetfor a

mailing campaign to l aunch a new product itis im portant t o identify

these ction of t hepopulation mostlike lytobuy t henew product.

Theuser formulate s a hypothe sistoidentify potential custom ers

and thecharacteristics the yshare.

Hist oricaldata about custom erpurchase and demog raphic

information can the nbeque ried t oreve al com parable purchases

and thecharacteristics s hared b ythosepurchasers whic h in t urn

can beused totargeta mailing campaign. Thewholeof ration can

berefined by'drill ing down' sothat thehypothesisreducesthe'se t'

ret urned e ach t imeuntil thereq uiredlim itis reache d.

VERIFICATION MODEL

The problem with this model is the fact that no new

information is created in the retrieval process but rathe r

the queries will always return records to verify or negate

the hypothesis.

The search process he re is iterative in that the output is

revie wed, a new set of ques tions or hypoth esis formulated

to refine the search and the whole process repeated.

The user discovers the facts about the data using a

variety of techniq ues such as queries, multidimensional

analysis and visualization to guide the exploration of the

data bein g inspected.

DIS COVERYMODEL
N

Thediscover y modeldiffers in its emphasis in that it is the

system auto maticallydiscover ingimpor tantinfor matio n

hidden in the data. The data is sifted in searchof frequentl y

occurr ingpatt erns, trends and generalizationsaboutthe data

without inter ventio nor guidance fromthe user.

Thediscover y ordata mining to ol saim to reveala large

numb erof facts abo utthe data in as shorta time as possib le.

An exampleof such a modelis a bankdatabasewhich is

mined to discoverthe many groupsof custo mersto targetfor

a mailingcampaign.

Thedata is searched with no hypothesis in mind otherthan for

the system to groupthe custo mersaccordingto the commo n

character isticsfoun d.

DIS COVERY, RELATIONS HIPSAND PATTERN OF

DATA MIN ING

D I SCOVERY

Discover ydeliberatelygoesout with no predeterminedidea of

what the searchwillfind. Thereis no inter ventio nin the

processby the end user: the data mining discoveryprocess

wades throughthe sourcedata loo kin gfor similaritiesand

occu rrencesof data, which allowsgroupin gand patt ern

identificatio n.

In the electron icdata warehouseenviron ment ,this process

must be ableto do its thing in a relativelyshort timeperio d.

Rapid deliveryof result sis crucialtothe adopt ionof a data

mining product.Somuch data is captured in some

operatio nal systems;the con ten ts of seeminglyunimpo rt ant

data element scan easily beco melo stin the bigpicture.

DIS COVERY, RELATIONS HIPSAND PATTERN OF

DATA MIN ING

D I SCOVERY

Suppose t hecustome raddres s tracking com ponent of a s ystem

insiste d t heZIP code b eent eredwhe nnew custome rinformation is

recorded. Thisis delibe rate. Until theinformation emb edded in this

code b ecom esuseful totheanalyst, theZIP code hide sitse lfin a

net work of oth ercustome r

rel ate ddata, such as contact name,

credit l imit ,and payment me thod.

Every tim ean invoice is generated, theZIP code tagsalong and

appears on thehe aderof thebill ,as wel las on t headdres s on t he

enve lope. Thecomple teaddres s recordfor e ach custom ercan

yield invaluable geog raphicalinformation of whe recustome rsare

located. Knowing street s,citiesand building numbersis useful, but

theZIP code all ows thepinpointing of se gm ent sof largeareas

within he avily populate d urban areas.

DIS COVERY, RELATIONS HIPSAND PATTERN OF

DATA MIN ING

DI S CO V E R Y

In this way, the substance of data becomes important and

data element values can provide enormous payoff when

absorbed by a data mining initiative.

DIS COVERY, RELATIONS HIPSAND PATTERN OF

DATA MIN ING

R E LAT IO NSHI P S

Mini ng corporate data can throw ligh t on a wide

assortment of previously unknown relationships. How

many times do you look at two or more sets of data that,

on the surface at least, seem to hav e little resembl ance to

one another? Discovery of relationships can best be

illust rated by looking at an eve ryday occurren ce, such as

our buying hab its at the corner store.

DIS COVERY, RELATIONS HIPSAND PATTERN OF

DATA MIN ING

RE L ATIONSHIPS

Suppos e it's early evening and you have just gone to the corner store to

pick up bread and some milk. As you grab the bread, a brightly

colored

bag of Uncle chips catches your eye. You think why not? At the dairy

section, while you choose the milk, your wandering eyes see the red foil

wrap ping on a box of bite

sized

cheeslings

. Guess what? These products

have been deliberately placed in close proxi mity to one another.

This chain of stores has gone about a data mining effort to study

previously unknown relationships between purchases by X and Y

consumer. Discovering relationships is key to successful marketing.

In a retail store, the pa rallel movement of products can be uncovered by

looking for relationships between customer purchasing habits. Ever

wonder why the red chocolate box is placed beside the cas h register?

Investigation determined a direct relationship could be inferred between

the amount of money sp ent (or wa sted?) on junk food at the cas h register

and non

-
junk food products purchased by the sa me customer.

DIS COVERY, RELATIONS HIPSAND PATTERN OF

DATA MIN ING

R E LAT IO NSHI P S

In operational or data wareh ouse systems, the data

architect and design personnel have meticulously defined

entities and relationsh ips. In this context, an entity is a

set of information containing facts about a related set of

data. The discovery process in a data mining exercise

sh eds ligh ton relationsh ips hidden deep down in many

layers of corporate data.

DIS COVERY, RELATIONS HIPSAND PATTERN OF

DATA MIN ING

PAT T ERNS

Theben efits of patt ern discover yto a busin ess add realvalue

to a data mining exercise.No on e can accuratelypredictthat

personX is going to perfor mactivity in closeproximitywith

activity Z.

Using data mining techniquesand systematic analysis on

warehousedata, however,this predictioncan bebackedup by

the detect ion of patt ern s in behaviour . Atempo ralcompo nent

exists in patt erndiscover y.

Parallelbehaviourovera two weekperiodcan uncovera

patt ernthat cou ldbeco methe reason s for the implement ation

of a new mark etin gendeavour.

DIS COVERY, RELATIONS HIPSAND PATTERN OF

DATA MIN ING

PAT T E RNS

On the other hand, detection of this

beh avior

over a

longer six

month period adds more credib ili ty to th e

suggestion that a pattern has bee n detected. Patterns are

closely related to hab it.

In other words, the likelih ood of an activity being

performed in close proximity to another activity is

discovered in the midst of identifying a pattern.

ELEMENTS OF DATA MIN ING

N
Data mining consists of five major elements:

Extract, transform and load transactional data onto the

data warehouse system.

Store and manage the data in multidimensional database

system.

Provide data access to business analysts and information

technology profession als.

Analyse the data by application software.

Present the data in a useful format, such as a graph or

table.

BENEFITS OF DATA MIN ING

FRAUD DETECTION

RETURN ON INVESTMENT

FRAUD DETECTION

All too often, busin esse s are so caught up in the ir daily

operations, the y hav e no time or personnel to dedicate to

uncover something out of the ordinary busin ess

occurren ces that require intervention.

Thes e eve nts include fraud, employee the ft and illeg al

redirection of company goods and services toward the

employees trusted with their management.

Many companies use sophis ticated surveill ance

equipment to ensure the ir workers are doing the ir jobs

and nothing but their jobs. Examine the following types of

fraud whose evide nce could be easily uncovered by a

system of data mining:

FRAUD DETECTION

A group of clerks in a retail chain is sy stematically short

shipp ing

orders and hiding the discrepancy between the requisi tion for goods

and the freight bill going out with the delivery. This could be

uncovered by analysing the makeup of Bonafede orders, and what is

found to be a premature depletion of correspo nding stock .

A retail clothing giant notices an unusual number of credit vouchers

going out on one shift every Saturday morning in their sp ortsw ear and

sport shoes departments. By analysing the volume and amounts of

credit voucher transa ctions, management would be able to detect

times when volume is repeatedly higher than the normal

W

After auditing pa yroll at a factory, a company notices an excess ive

amount of overtime over a six

weekperiod for a handful of employees.

Through a data mining effort, they uncover a deliberate altering of time

sheets after management signature has been obtained.

FRAUD DETECTION

Usingdata mining , a b anking instit ution could

analyze

hist orical

data and devel op an understanding of "normal" b usines s

operations debits ,credits,transfers, e tc. W he n a freq uency is

tacked ontoeach activity as wel las sizeof transactions, source,

and recipientinformation, theinstit ution can goabout t hesame

analysis against current t ransactions. If b eh aviour out of t he

norms isdete cte d, t he yeng agethese rvicesof int ernal, and

perhaps external, auditors to resolvetheproblem .

Fraud dete ction isse enprimarily as out

of

the

-
bluedata mining .

Fraud dete ction isusuall y an exploratory e xercise :a data mine r

will dive head first into a data repositoryand sift throughvast

amounts of data withlit tl eorno predisposition as t owhat will b e

found.

RETUR NON INVES TMENT

A signi ficant segment of the companies looking at, or

already adopting, data wareh ouse technology spend large

amounts of money on new business initiatives. The

research and devel opment costs are gigantic. Mini ng

his torical data from within the company and any

government or other external data available to the

organization could help answer the big tickle question:

¹Ë ÎÎÖÊÇÑÔÖ ÒÃÛ ÑÈÈ¡R

Everyone has struggled with time as with so little time and

so much to be accomplish ed.

PROB LEMSAND ISS UEOF DATA MIN ING

LIMITED INFORMATION

NOISE AND MISSING VALUES

UNCERTAINTY
N

SIZE, UPDATES, AND IRRELEVANT FIELDS

PROB LEMSAND ISS UEOF DATA MIN ING

LI M IT E DIN F O R M AT ION

Inconclusiv e data causes problems because if some

attributes essential for the knowledge about the

application domain are not presen t in the data it may be

impossible to discover signi ficant knowle dge about a

given domain. For example, one cannot diagnose malaria

from a patient database if that database does not contain

the patients red blood cell count.

PROB LEMSAND ISS UEOF DATA MIN ING

NO IS EAN D M IS S IN GVAL U E S

Errorsin eit he rthevalue s of attribute sor cl ass information are

known as noise .

Obviously wherepossible ,itis desirableto el iminatenoise from

theclassification information as thisaffects t heoverall accuracy

of t hegene rate drules.

Missing data can betreate d b ydiscovery syste msin a numbe rof

ways such as:

Simplydisregardmissingvalues

Omitthecorrespondingrecords

Infer missingvalues fromknownvalues

Treatmissingdataasaspecialvaluetobeincludedaddit ionallyinthe

att ributedomain

oraverageoverthemissingvaluesusingBayesiantechniques.

PROB LEMSAND ISS UEOF DATA MIN ING

U NC E RTAI NTY

Uncertainty refers to the sev erity of the error and the

degree of noise in the data. Data precision is an

important considerati on in a discovery system.

PROB LEMSAND ISS UEOF DATA MIN ING

S IZ E ,U P DAT ES,AN D IR R E LE VANTF IE LD S

Databases tend to be large and dynamic as the ir contents

are ever
-

changing as information is added, modified or

removed. The problem with this from the data mining

perspective is how to ensure that the rules are up

to

date

and consistent with the most current information. Also

the learning system has to be time

sens itive as some data

values vary over time and the discovery system is

affected by the 'timeliness' of the data.

END OF

UNIT