Chapter 3 :Types and Characteristics of

Information Systems

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 Objectives
What are the major types of systems in a business? What role do they play?
How do information systems support the major business functions: sales and
marketing, manufacturing and production, finance and accounting, and human
resources?
What are enterprise applications? What role do they play? What benefits do
they provide?
What types of information systems are used by companies that operate
internationally?

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 Main Categories of Information Systems
There are three main categories of information systems
Operational-level systems
Management-level systems
Strategic-level systems

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 Operation Level Systems
Operational-level systems support operational managers by keeping track of
the elementary activities and transactions of the organization, such as sales,
receipts, cash deposits, payroll, credit decisions, and the flow of materials in a
factory.
The principal purpose of systems at this level is to answer routine questions
and to track the flow of transactions through the organization. How many parts
are in inventory? What happened to Mr. Williams’s payment? To answer these
kinds of questions, information generally must be easily available, current, and
accurate.
 Examples of operational-level systems include a system to record bank
deposits from automatic teller machines or one that tracks the number of hours
worked each day by employees on a factory floor.

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 Management Level Systems
Management-level systems serve the monitoring, controlling, decision-
making, and administrative activities of middle managers
The principal question addressed by such systems is this: Are things working
well? Management-level systems typically provide periodic reports rather than
instant information on operations.
 An example is a relocation control system that reports on the total moving,
house-hunting, and home financing costs for employees in all company
divisions, noting wherever actual costs exceed budgets

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 Strategic Level Systems
 Strategic-level systems help senior management tackle and address strategic
issues and long-term trends, both in the firm and in the external environment.
Their principal concern is matching changes in the external environment with
existing organizational capability. What will employment levels be in five
years? What are the long-term industry cost trends, and where does our firm
fit in? What products should we be making in five years.

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 I.S Operational Categories

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 Types of Information Systems
There are 4 main types of Information Systems which are normally found in
organizations. These are

 Transaction Processing Systems (TPS)

 Management Information Systems (MIS)
 Decision-Support Systems (DSS)
 Executive-Support Systems (ESS)

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 Types of Information Systems

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 Transaction Processing Systems (TPS)
Transaction Processing Systems are the basic operational level systems such as
order processing, payroll, stock control.
A transaction processing system is a computerized system that performs and
records the daily routine transactions necessary to conduct business, such as sales
order entry, hotel reservations, payroll, employee record keeping, and shipping
System Overview and Setup :
 Input: Transactions, events
 Processing: Sorting, listing, merging, updating
 Output: Detailed reports, lists, summaries
 Users: Operations personnel, supervisors

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 Transaction Processing Systems (TPS)

A symbolic representation for a payroll TPS

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 Transaction Processing Systems (TPS)

TPS Application Areas in a Business Setup

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 Management Information Systems (MIS)
MIS provide middle managers with reports on the organization’s current
performance. This information is used to monitor and control the business and
predict future performance.
MIS summarize and report on the company’s basic operations using data supplied by
transaction processing systems. The basic transaction data from TPS are compressed
and usually presented in reports that are produced on a regular schedule.
System Overview and Setup :
 Input: Summary transaction data, high-volume data, simple
models
 Processing: Routine reports, simple models, low-level analysis
 Output: Summary and exception reports
 Users: Middle Managers
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 Management Information Systems (MIS)

How management information systems obtain their data from the organization’s TPS

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 Decision Support Systems (DSS)
Decision-support systems (DSS) support more non-routine decision making. They focus
on problems that are unique and rapidly changing, for which the procedure for arriving at
a solution may not be fully predefined in advance
Serve management level with data analysis for making decisions
They try to answer questions such as these:
 What would be the impact on production schedules if we were to double sales in the month of December?
 What would happen to our return on investment if a factory schedule were delayed for six months
System Overview and Setup :
 Input: Low-volume data or massive databases, analytic models, and
data analysis tools
Processing: Interactives, simulations, analysis
Output: Special reports, decision analyses, responses to queries
 Users: Professionals, Staff Managers
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 Decision Support Systems (DSS)

Voyage-Estimating Decision Support System

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 Executive Support Systems (ESS)
ESS provide communications and computing environment that serves the organization’s
strategic level
They address non-routine decisions requiring judgment, evaluation, and insight because
there is no agreed-on procedure for arriving at a solution.
ESS present graphs and data from many sources through an interface that is easy for
senior managers to use. Often the information is delivered to senior executives through
a portal, which uses a Web interface to present integrated personalized business content
System Overview and Setup :
 Input: External and internal aggregate data
Processing: Graphics, simulations, interactives
Output: Projections, responses to queries
Users: Senior Managers

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 Executive Support Systems (DSS)

Data Visualization’s digital dashboard delivers comprehensive and accurate

information for decision making.
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 Interrelationships among systems

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