Management Information System

Decision Making and Information system

Functional Aspects of the MIS

Most organizations are structured along functional lines or areas MIS can be divided along functional lines to produce reports tailored to individual functions

Functional areas of MIS

Financial / Accounting MIS Manufacturing / Production MIS Marketing MIS Human recourse MIS

Functional Aspects of the MIS (continued)

An Organizations MIS

Financial Management Information Systems

Financial MIS: provides financial information to executives and others Accounting MIS: provides aggregate information on accounts payable, accounts receivable, payroll, and many other applications Some financial MIS subsystems and outputs
Profit/loss and cost systems: profit and revenue centers Auditing: internal and external Uses and management of funds

Financial Management Information Systems (continued)

Overview of a Financial MIS

The Role of Accounting

Transaction Data Purchases, Sales, Loans, and Investments Inventory Control Process and Controls
Double-Entry Systems Separation of Duties Audit Trails

Accounting Software
General Ledger
Sample chart of accounts Automatic posting Automatic entry of vendors Fiscal years Keep past data books open Post to prior years Allocate department expenses Automatic early discounts Interest on late payments Multiple shipping addresses Sales tax Automatic reminder notices Automatic monthly fees Keep monthly details

Accounts payable
Check reconciliation Automatic recurring entries Monitor payment discounts Select bills from screen Pay by item, not just total bill Printer support Use of preprinted forms Custom reports Custom queries Security controls Technical support costs

General Features

Accounts Receivable

Banks and Creditors

Management Loans & Notes Cash Management, Investments, Foreign Exchange Management Reports Capital Acct

Accounting
Planning Reports Strategic & Tactical Planning Planning Data Shareholders Shareholder Reports Produce Shareholder Reports Governments

Departments & Employees

Expenses

Payroll & Employee Benefits

Payroll

Produce Management Accounting Reports Inventory & Assets

Equity Tax data Tax Filing & Planning Sales Tax Sales & Accounts Receivable

Tax Filings

Receivables Orders & Accounts Payable Purchases & Payables Suppliers

Payables

Inventory Management, & Fixed Asset & Cost Acct.

Sales & Receivables Customers

Inventory Changes Supply & In-process Inventory

Inventory Changes Product Inventory

Manufacturing Management Information Systems

Manufacturing MIS subsystems and outputs monitor and control the flow of materials, products, and services through the organization Design and engineering: CAD systems Master production scheduling and inventory control
Methods: EOQ, MRP, JIT

Process control
Techniques: CAM, CIM, FMS

Quality control and testing

Manufacturing Management Information Systems (continued)

Overview of a Manufacturing MIS

Marketing Management Information Systems

Marketing MIS: supports managerial activities in product development, distribution, pricing decisions, and promotional effectiveness Subsystems
Marketing research Product development Promotion and advertising Product pricing Sales analysis

Marketing Management Information Systems (continued)

Overview of a Marketing MIS

Marketing Management Information Systems (continued)

Reports Generated to Help Marketing Managers Make Good Decisions

Human Resource Management Information Systems

Human resource MIS: concerned with activities related to employees and potential employees Subsystems
Human resource planning Personnel selection and recruiting Training and skills inventory Scheduling and job placement Wage and salary administration Outplacement
Principles of Information Systems, Eighth Edition 16

Human Resource Management Information Systems (continued)

Figure 10.11: Overview of a Human Resource MIS

Principles of Information Systems, Eighth Edition 17

HRM
Managers Evaluations Compile Merit Evaluations & Salary Changes

Management

Management Reports

Merit
Produce Management Employee Reports Employee Summaries EEO Data Government Produce Government Reports

Salary

Merit & Salary

Government Reports

Process Payroll Benefits Vacation Employee Data Employees

Employee Data

Employee Data Files Job & Applicant Data

Screen Jobs & Applications

Applicant Data

Sales Data & Commission Customers

Job Applicants

Information systems in the Company

Marketing
sales marketing promotion price setting new products orders

Production
production planning purchasing distribution engineering operations stock management quality control

Finances
budgetting general ledger billing analytical bookkeeping financial operations A/C payable A/C receivable

Personel
human resources payroll cost estimations applications contracts training

Decision Levels
Unstructured
Strategic Mgt.

Semi Structured

Tactical

Management

Structured

Business Operations

Choose a Stock
Stock Price
130 125 120 115 110 105 100 95 90 1 2 3 4 5 6 7 8 9 10 11 12 Month CompanyA CompanyB

Company As share price increased by 2% per month. Company Bs share price was flat for 5 months and then increased by 3% per month. Which company would you invest in?

DSS: Decision Support Systems

Sales and Revenue 1994
300

Model
sales 154 163 161 173 143 181 revenue profit 204.5 45.32 217.8 53.24 220.4 57.17 268.3 61.93 195.2 32.38 294.7 83.19 prior 35.72 37.23 32.78 47.68 41.25 67.52

250

Legend
200 150 100 50 0 Jan Sales Revenue Profit Prior

Feb

Mar

Apr

May

Jun

Output

Database

An Overview of Decision Support Systems

DSS: organized collection of people, procedures, software, databases, and devices used to help make decisions that solve problems Focus of a DSS is on decision-making effectiveness regarding unstructured or semistructured business problems Used by managers at all levels

Characteristics of a Decision Support System

Provide rapid access to information Handle large amounts of data from different sources Provide report and presentation flexibility Offer both textual and graphical orientation Support drill-down analysis

Characteristics of a Decision Support System (continued)

Perform complex, sophisticated analysis and comparisons using advanced software packages Support optimization. What-if analysis: making hypothetical changes to problem data and observing impact on results Goal-seeking analysis: determining problem data required for a given result Simulation: ability of the DSS to duplicate features of a real system

Characteristics of a Decision Support System (continued)

With a spreadsheet program, a manager can enter a goal, and the spreadsheet will determine the input needed to achieve the goal.

Capabilities of a Decision Support System

Support problem-solving phases Support different decision frequencies
Ad hoc DSS Institutional DSS

Support different problem structures

Highly structured problems Semistructured or unstructured problems

Support various decision-making levels

Components of a Decision Support System

Database Model base Dialogue manager: user interface that allows decision makers to:
Easily access and manipulate the DSS Use common business terms and phrases

Access to the Internet, networks, and other computer-based systems

Components of a Decision Support System (continued)

Conceptual Model of a DSS

The Database
Database management system
Allows managers and decision makers to perform qualitative analysis on data stored in companys databases, data warehouses, and data marts Can also be used to connect to external databases

Data-driven DSS: primarily performs qualitative analysis based on the companys databases

The Model Base

Model base: provides decision makers with access to a variety of models and assists them in decision making
Allows them to perform quantitative analysis on both internal and external data

Model-driven DSS: primarily performs mathematical or quantitative analysis Model management software (MMS): software that coordinates the use of models in a DSS

The User Interface or Dialogue Manager

Allows users to interact with the DSS to obtain information Assists with all aspects of communications between user and hardware and software that constitute the DSS

A Comparison of DSS and MIS

Comparison of DSSs and MISs

A Comparison of DSS and MIS (continued)

Comparison of DSSs and MISs (continued)

Group Support Systems

Group support system (GSS)
Consists of most elements in a DSS, plus software to provide effective support in group decision making Also called group decision support system or computerized collaborative work system

Group Support Systems (continued)

Configuration of a GSS

Characteristics of a GSS That Enhance Decision Making

Special design Ease of use Flexibility Decision-making support
Delphi approach Brainstorming Group consensus approach Nominal group technique

Characteristics of a GSS That Enhance Decision Making (continued)

Anonymous input Reduction of negative group behavior Parallel communication Automated record keeping

GSS Software
Often called groupware or workgroup software Helps with joint work group scheduling, communication, and management Examples
Virtual Office from Groove Networks Lotus Notes Office Communicator IBMs Workplace Microsofts NetMeeting

GSS Software (continued)

Examples of groupware products available on the Web
WebEx, Genesys Meeting Center, GoToMeeting Corporate

GSS software incorporated into existing software packages

GSS Alternatives
Decision room
Decision makers are located in the same building or geographic area Decision makers are occasional users of the GSS approach

Local area decision network

Group members are located in the same building or geographic area Group decision making is frequent

GSS Alternatives (continued)

Teleconferencing
Decision frequency is low Location of group members is distant

Wide area decision network

Decision frequency is high Location of group members is distant

GSS Alternatives (continued)

The GSS Decision Room

Executive Support Systems

Executive support system (ESS):
Specialized DSS Includes hardware, software, data, procedures, and people used to assist senior-level executives Also called an executive information system (EIS)

Executive Support Systems (continued)

The Layers of Executive Decision Making

Executive Support Systems in Perspective

Tailored to individual executives Easy to use Drill-down capabilities Support need for external data

Executive Support Systems in Perspective (continued)

Can help with situations that have a high degree of uncertainty Future-oriented Linked to value-added business processes

Capabilities of Executive Support Systems

Support for defining overall vision Support for strategic planning
Determining long-term objectives through analysis of current organization and prediction of future trends

Support for strategic organizing and staffing Support for strategic control Support for crisis management

Executives

Sales Production Costs Distribution Costs Fixed Costs

Executive IS
Production Costs South North Overseas
5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 1993 1994 1995 1996

South North Overseas

Central Management

Production: North Data Data Sales Data Distribution Data

Item# 1995 1994

1234 2938 7319

542.1 631.3 753.1 Production

442.3 153.5 623.8

Knowledge Management Systems

Knowledge Management Systems

Data: raw facts Information: collection of facts organized so that they have additional value beyond the value of the facts themselves Knowledge: awareness and understanding of a set of information and the ways that information can be made useful to support a specific task or reach a decision

Knowledge Management Systems (continued)

Knowledge management system (KMS):
Organized collection of people, procedures, software, databases, and devices Used to create, store, share, and use the organizations knowledge and experience

Knowledge Management Systems (continued)

The Differences Among Data, Information, and Knowledge

Knowledge Management
A collection of a documents and data
Created by experts Searchable With links to related topics Highly organized groupware

Emphasizing context Examplebusiness decisions

Store problem, all notes, decision factors, comments Future problems, managers can search the database and find similar problems Better and more efficient decisions if you know the original problems, discussions, and contingency plans

Main problemconvincing everyone to enter and update the documents

Overview of Knowledge Management Systems

KMSs attempt to help organizations achieve their goals
Firms use KMSs to increase profits or reduce costs

A KMS can involve different types of knowledge

Explicit knowledge: objective; can be measured and documented in reports, papers, and rules Tacit knowledge: hard to measure and document; typically not objective or formalized

Data and Knowledge Management Workers and Communities of Practice

Data workers: data-entry personnel
Secretaries, administrative assistants, bookkeepers, etc.

Knowledge workers: create, use, and disseminate knowledge

Professionals in science, engineering, or business; writers; researchers; educators; corporate designers; etc.

Data and Knowledge Management Workers and Communities of Practice (continued)

Chief knowledge officer (CKO): top-level executive who helps the organization use a KMS to create, store, and use knowledge to achieve organizational goals Communities of practice (COP): group of people dedicated to a common discipline or practice
May be used to create, store, and share knowledge

Obtaining, Storing, Sharing, and Using Knowledge

Knowledge Management System

Obtaining, Storing, Sharing, and Using Knowledge (continued)

Creating or obtaining knowledge
Knowledge workers often work in teams

Storing knowledge
Knowledge repository: includes documents, reports, files, and databases

Obtaining, Storing, Sharing, and Using Knowledge (continued)

Sharing knowledge
Collaborative work software and group support systems Nontechnical approaches

Using knowledge
Begins with locating organizations knowledge
Knowledge map or directory

Technology to Support Knowledge Management

An effective KMS is based on learning new knowledge and changing procedures and approaches as a result
Organizational learning Organizational change

Data mining and business intelligence are important in capturing and using knowledge Enterprise resource planning tools include knowledge management features

Technology to Support Knowledge Management (continued)

Groupware can help capture, store, and use knowledge Hardware, software, databases, telecommunications, and the Internet are needed to support most knowledge management systems Examples of knowledge management products and services
IBMs Lotus Notes and Domino Microsofts Digital Dashboard, Web Store Technology, and Access Workflow Designer

Expert System

Expert Systems
An Expert System (ES)
A knowledge-based information system Contain knowledge about a specific, complex application area Acts as an expert consultant to end users

10-70

Expert System

Expert
Knowledge Base

Symbolic & Numeric Knowledge Rules

Expert decisions made by non-experts

If income > 20,000

or expenses < 3000 and good credit history or . . . Then 10% chance of default

ES Example: bank loan

Welcome to the Loan Evaluation System. What is the purpose of the loan? car How much money will be loaned? 10,000 For how many years? 5 The current interest rate is 10%. The payment will be $212.47 per month. Forward Chaining

What is the annual income? 24,000

What is the total monthly payments of other loans? Why? Because the payment is more than 10% of the monthly income. What is the total monthly payments of other loans? 50.00 The loan should be approved, there is only a 2% chance of default.

Decision Tree (bank loan)

Payments < 10% monthly income?

No
Other loans total < 30% monthly income?

Yes
Yes
Credit History

Good So-so
Job Stability

Bad

No

Approve the loan

Good

Poor

Deny the loan

An Overview of Expert Systems

Behave similarly to a human expert in a particular field Explore new business possibilities Increase overall profitability Reduce costs Provide superior service to customers and clients

When to Use Expert Systems

Provide a high potential payoff or significantly reduce downside risk Capture and preserve irreplaceable human expertise Solve a problem that is not easily solved using traditional programming techniques Develop a system more consistent than human experts

When to Use Expert Systems (continued)

Provide expertise needed at a number of locations at the same time or in a hostile environment that is dangerous to human health Provide expertise that is expensive or rare Develop a solution faster than human experts can Provide expertise needed for training and development to share the wisdom and experience of human experts with many people

Components of an Expert System

10-78

Components of an Expert System

Knowledge Base
Facts about a specific subject area Heuristics that express the reasoning procedures of an expert (rules of thumb)

Software Resources
An inference engine processes the knowledge and recommends a course of action User interface programs communicate with the end user Explanation programs explain the reasoning process to the end user
10-79

Components of Expert Systems

Components of an Expert System

Components of Expert Systems (continued)

Knowledge base
Stores all relevant information, data, rules, cases, and relationships used by expert system Create a knowledge base by :
Assembling human experts Using fuzzy logic Using rules, such as IF-THEN statements Using cases

Components of Expert Systems (continued)

The Relationships Among Data, Information, and Knowledge

Components of Expert Systems (continued)

Rules for a Credit Application

The Inference Engine

Inference engine
Seeks information and relationships from knowledge base Provides answers, predictions, and suggestions, like a human expert

Backward chaining: starts with conclusions and works backward to supporting facts Forward chaining: starts with facts and works forward to conclusions

The Explanation Facility

Allows a user or decision maker to understand how the expert system arrived at certain conclusions or results Example: a doctor can find out the logic or rationale of diagnosis made by a medical expert system

The Knowledge Acquisition Facility

Provides convenient and efficient means of capturing and storing all components of knowledge base Acts as an interface between experts and knowledge base

The Knowledge Acquisition Facility (continued)

Knowledge Acquisition Facility

The User Interface

Specialized user interface software is employed for designing, creating, updating, and using expert systems Main purpose of user interface: makes development and use of an expert system easier for users and decision makers

Expert System Application Categories

Decision Management
Loan portfolio analysis Employee performance evaluation Insurance underwriting

Diagnostic/Troubleshooting

10-89

Equipment calibration Help desk operations Medical diagnosis Software debugging

Expert System Application Categories

Design/Configuration
Computer option installation Manufacturability studies Communications networks

Selection/Classification
Material selection Delinquent account identification Information classification Suspect identification

Process Monitoring/Control
10-90

Expert System Application Categories

Process Monitoring/Control
Machine control (including robotics) Inventory control Production monitoring Chemical testing

10-91

Expert Systems Development

Steps in the Expert System Development Process

Participants in Developing and Using Expert Systems

Domain expert: individual or group who has the expertise or knowledge one is trying to capture in the expert system Knowledge engineer: individual who has training or experience in design, development, implementation, and maintenance of an expert system Knowledge user: individual or group who uses and benefits from the expert system

Participants in Developing and Using Expert Systems (continued)

Figure 11.13: Participants in Expert Systems Development and Use

Principles of Information Systems, Eighth Edition 94

Expert Systems Development Tools and Techniques

Traditional programming languages Special programming languages for AI applications
LISP, PROLOG

Expert system shells

Collections of software packages and tools used to design, develop, implement, and maintain expert systems
Principles of Information Systems, Eighth Edition 95

Expert Systems Development Tools and Techniques (continued)

Figure 11.14: Expert Systems Development

Principles of Information Systems, Eighth Edition 96

Applications of Expert Systems and Artificial Intelligence

Credit granting and loan analysis Stock picking Catching cheats and terrorists Budgeting Games

Principles of Information Systems, Eighth Edition

97

Applications of Expert System and Artificial Intelligence (continued)

Information management and retrieval AI and expert systems embedded in products Plant layout and manufacturing Hospitals and medical facilities

Principles of Information Systems, Eighth Edition

98

Applications of Expert System and Artificial Intelligence (continued)

Help desks and assistance Employee performance evaluation Virus detection Repair and maintenance

Principles of Information Systems, Eighth Edition

99

Applications of Expert System and Artificial Intelligence (continued)

Shipping Marketing Warehouse optimization

Principles of Information Systems, Eighth Edition

100

DSS and ES
DSS ES provide expert advice asks questions, applies rules, explains narrow domain

goal method type of problems

help user make decision data - model - presentation general, limited by user models

ES Examples
United Airlines GADS: Gate Assignment American Express Authorizer's Assistant Stanford Mycin: Medicine DEC Order Analysis + more Oil exploration Geological survey analysis IRS Audit selection Auto/Machine repair (GM:Charley) Diagnostic

ES Problem Suitability
Narrow, well-defined domain Solutions require an expert Complex logical processing Handle missing, ill-structured data Need a cooperative expert Repeatable decision

 ES Shells
Guru Exsys

ES Development
Rules and decision trees entered by designer Forward and backward chaining by ES shell

Custom Programming
LISP PROLOG

Maintained by expert system shell

Expert

Knowledge database (for (k 0 (+ 1 k) ) exit when ( ?> k cluster-size) do (for (j 0 (+ 1 j )) exit when (= j k) do (connect unit cluster k output o -A to unit cluster j input i - A )) ... )

ES screens seen by user

Knowledge engineer
Programmer

Custom program in LISP

Some Expert System Shells

CLIPS

Originally developed at NASA Written in C Available free or at low cost http://www.ghg.net/clips/CLIPS.html

Written in Java Good for Web applications Available free or at low cost http://herzberg.ca.sandia.gov/jess/

Jess

ExSys
Commercial system with many features www.exsys.com

Limitations of ES
Fragile systems
Small environmental. changes can force revision. of all of the rules.

Conflicting experts
With multiple opinions, who is right? Can diverse methods be combined?

Mistakes
Who is responsible?
Expert? Multiple experts? Knowledge engineer? Company that uses it?

Unforeseen events
Events outside of domain can lead to nonsense decisions. Human experts adapt. Will human novice recognize a nonsense result?

Vague rules
Rules can be hard to define.

DSS, ES, and AI: Bank Example

Decision Support System Loan Officer
Income

Expert System ES Rules

What is the monthly income? 3,000 What are the total monthly payments on other loans? 450 How long have they had the current job? 5 years ...

Artificial Intelligence Determine Rules Data/Training Cases

loan 1 data: paid loan 2 data: 5 late loan 3 data: lost loan 4 data: 1 late

Data

Existing loans Credit report Lend in all but worst cases Monitor for late and missing payments.
Name Brown Jones Smith ... Loan #Late Amount 25,000 5 1,250 62,000 1 135 83,000 3 2,435

Model

Output

Neural Network Weights

Should grant the loan since there is only a 5% chance of default.

Evaluate new data, make recommendation.