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Information system and decision making

Information system and decision making. Session 3. Information technology enhances business processes in two main ways:. Increasing efficiency of existing processes Automating steps that were manual Enabling entirely new processes that are capable of transforming the businesses

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Information system and decision making

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  1. Information system and decision making Session 3

  2. Information technology enhances business processes in two main ways: • Increasing efficiency of existing processes • Automating steps that were manual • Enabling entirely new processes that are capable of transforming the businesses • Change flow of information • Replace sequential steps with parallel steps • Eliminate delays in decision making Example…. ?

  3. Organizational Functions and Functional Levels

  4. Accounting • Purpose is to track every financial transaction • Make sure company is pulling a profit • Accounts payable and receivable track who owes who what • Balance sheet: picture of financial situation • Includes profit-and loss report

  5. Accounting (continued) • Accounting information system pulls information from transaction processing system • Automatically routes purchases to accounts payable • Generates reports on demand or on schedule • Cost-accounting systems accumulate data about costs involved in producing specific products

  6. Accounting (continued) Accounting Information system include features that reflect up-to-date performance of the organization in financial terms.

  7. Finance • Firm’s health is measured by its finances • Information systems improve financial management • Financial managers try to manage money as efficiently as possible

  8. Finance (continued) • Financial managers have any goals • Collect payables as soon as possible • Making payments at the latest time allowed by contract or law • Ensuring that sufficient funds are available for day-to-day operations • Taking advantage of opportunities to accrue highest yield on funds possible

  9. Finance (continued) Financial Information system help managing cash and investment portfolio

  10. Human Resource Management • Employee record management • Promotion and recruitment • Training • Evaluation • Compensation and benefits management

  11. Human Resource Management (continued) F Human resource Information system help managers to optimize promotion and recruitment, training evaluation and other activity.

  12. Organizational Decision-Making Levels:Operational Level

  13. Types of Business Information Systems used in operational level • Transaction processing systems • Perform and record daily routine transactions necessary to conduct business • Examples: sales order entry, payroll, shipping • Allow managers to monitor status of operations and relations with external environment • Serve operational levels • Serve predefined, structured goals and decision making Example…

  14. Transaction processing systems • Most widely used type of system • Records data collected at point where organization interacts with other parties • Encompasses cash registers, ATMs and purchase order systems

  15. A Payroll TPS A TPS for payroll processing captures employee payment transaction data (such as a time card). System outputs include online and hard-copy reports for management and employee paychecks.

  16. Organizational Decision-Making Levels:Managerial/Tactical Level

  17. Management information systems • Serve middle management • Provide reports on firm’s current performance, based on data from TPS • Provide answers to routine questions with predefined procedure for answering them • Typically have little analytic capability Example…

  18. Sample MIS Report Anything above 1.00 represents more sales than planned and anything less represents a disappointing result of fewer sales than planned.

  19. Management Information Systems (MIS): • Typically produce fixed, regularly scheduled reports based on data from TPS • E.g. exception reports: Highlighting exceptional conditions, such as sales quotas below anticipated level • E.g. California Pizza Kitchen MIS • For each restaurant, compares amount of ingredients used per ordered menu item to predefined portion measurements and identifies restaurants with out-of-line portions

  20. How Management Information Systems Obtain Their Data from the Organization’s TPS In the system illustrated by this diagram, three TPS supply summarized transaction data to the MIS reporting system at the end of the time period. Managers gain access to the organizational data through the MIS, which provides them with the appropriate reports.

  21. Decision support systems • Serve middle management • Support non-routine decision making • Example: What is impact on production schedule if December sales doubled? • Often use external information as well from TPS and MIS • Model driven DSS ( Based on model- statistical, financial) • Future Value, IRR, What-IF • Data driven DSS (used to query a database or data warehouse to seek specific answers for specific purposes) • Pivot Analysis Examples of non-routine decisions Mangers could make

  22. Decision Support System This DSS operates on a powerful PC. It is used daily by managers who must develop bids on shipping contracts. Example…

  23. Decision Support Systems • Involves interactive analytical modeling for exploring possible alternatives • Different types of analysis: • What-If Analysis • impact of change on input variables on outcomes • Sensitivity Analysis • special case of what-if; change one variable at a time to see the effect on the outcome • Goal-Seeking Analysis • reverse of what-if; change input variables to reach a target outcome • Optimization Analysis • complex goal-seeking; finding the optimal value for a target outcome

  24. Sensitivity Analysis This table displays the results of a sensitivity analysis of the effect of changing the sales price of a necktie and the cost per unit on the product’s break-even point. It answers the question, “What happens to the break-even point if the sales price and the cost to make each unit increase or decrease?” At a variable cost of $2/unit, how is the break-even point affected by a change in sales price from $14 to $18? At a sales price of $15/unit, how is the break-even point affected by a change in variable cost from $4 to $5/unit?

  25. Organizational Decision-Making Levels:Executive/Strategic Level

  26. Executive support systems • Support senior management • Address non-routine decisions requiring judgment, evaluation, and insight • Incorporate data about external events (e.g. new tax laws or competitors) as well as summarized information from internal MIS and DSS • Example: ESS that provides minute-to-minute view of firm’s financial performance as measured by working capital, accounts receivable, accounts payable, cash flow, and inventory Other Example…

  27. Model of an Executive Support System This system pools data from diverse internal and external sources and makes them available to executives in easy-to-use form.

  28. Relationship of systems to one another

  29. Relationship of systems to one another • TPS: Major source of data for other systems • ESS: Recipient of data from lower-level systems • Data may be exchanged between systems • In reality, most businesses’ systems only loosely integrated

  30. Next Enterprise System, Business Intelligence

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