Risk Management.docx

RISK MANAGEMENT DEFINING NEEDS Decisions are required to be taken in day to day life No single task in our life can be done without decision making For every assignment we undertake there has to be a process of making choices Whenever we are faced with choices there is an inevitable need of selecting one particular course of action Any task can be done in various ways but doing it simultaneously through all possible alternatives is virtually impossible This necessitates making a reasonable choice from all the options available An example can be taken for a person who wants to go to Islamabad He can look at following options Use any of the local bus service available Go by train Travel by air As you can see the decision to be made in this situation is faced with the availability of a set of combination of alternatives Every decision we take in daily life requires some sort of information about the alternatives available For instance in the above example certain factors need to be considered before taking a decision How urgent it is to reach to Islamabad How much time is available to accommodate travelling since each mode of travelling will take different time to reach at the same destination Whether bookings are available for the desired day and time Is there any possibility of cancellation of booking or flight or bus service Which bus service or airline to chose from since various airlines and bus services are having travelling facilities to Islamabad Without the availability of relevant information we may take a decision which is wrong or not to our benefit For instance if the person does not have complete knowledge of facts he might not be able to take the right decision Similar is the case with business Businesses are run by organizations which are in-fact a group of people As individuals have choices to choose from organizations also face various alternatives in day to day operations Decisions are made by individuals from the management Need for information Information is required in day to day decision making Without the availability of right quantity of information at the right time the process of decision making is highly affected For this reason various sources of information are used to extract information Some of these are Newspapers Internet Marketing Brochures Friends Relatives Sources of Information Sources of information are generally categorized as primary secondary or tertiary depending on their originality and their proximity to the source or origin For example initially findings might be communicated informally by email and then presented at meetings before being formally published as a primary source Once published they will then be indexed in a bibliographic database and repackaged and commented upon by others in secondary sources The designations of primary secondary and tertiary differ between disciplines or subjects particularly between what can generally be defined as the sciences and the humanities For example The historian s primary sources are the poems stories and films of the era under study The research scientist's primary sources are the results of laboratory tests and the medical records of patients treated with the drug Written information can be divided into several types Primary Sources Secondary Sources Tertiary Sources Primary Sources Some definitions of primary sources Primary sources are original materials on which other research is based They are usually the first formal appearance of results in the print or electronic literature for example the first publication of the results of scientific investigations is a primary source They present information in its original form neither interpreted nor condensed nor evaluated by other writers They are from the time period for example something written close to when the event actually occurred Primary sources present original thinking and report on discoveries or share new information Some examples of primary sources Scientific journal articles reporting experimental research results Proceedings of Meetings Conferences Technical reports Dissertations or theses may also be secondary Patents Sets of data such as census statistics Works of literature such as poems and fiction Diaries Autobiographies Interviews surveys and fieldwork Letters and correspondence Speeches Newspaper articles may also be secondary Government documents Photographs and works of art Original documents such as birth certificate or trial transcripts Internet communications on email and newsgroups Secondary Sources Secondary sources are less easily defined than primary sources What some define as a secondary source others define as a tertiary source Nor is it always easy to distinguish primary from secondary sources For example A newspaper article is a primary source if it reports events but a secondary source if it analyses and comments on those events In science secondary sources are those which simplify the process of finding and evaluating the primary literature They tend to be works which repackage reorganize reinterpret summarize index or otherwise add value to the new information reported in the primary literature Some examples of secondary sources bibliographies may also be tertiary biographical works commentaries dictionaries and encyclopaedias may also be tertiary dissertations or theses more usually primary handbooks and data compilations may also be tertiary history indexing and abstracting tools used to locate primary secondary sources may also be tertiary journal articles particularly in disciplines other than science may also be primary newspaper and popular magazine articles may also be primary review articles and literature reviews textbooks may also be tertiary Tertiary Sources This is the most problematic category of all Some Definitions of Tertiary Sources Works which list primary and secondary resources in a specific subject area Materials in which the information from secondary sources has been digested - reformatted and condensed to put it into a convenient easy-to-read form Sources which are once removed in time from secondary sources Some examples of tertiary sources Almanacs and fact books Bibliographies may also be secondary Chronologies Dictionaries and encyclopaedias may also be secondary Directories Guidebooks manuals etc Handbooks and data compilations may also be secondary Indexing and abstracting tools used to locate primary secondary sources may also be secondary Textbooks may also be secondary Changing Needs When needs change requirements for information change Information needs of users are changing as a result of changes in the availability of information content in electronic form Changing needs of the users determine the nature of the physical form in which information content is currently being made available for users access and use in electronic information environments Information needs Each user has a different type of information need depending on what he's trying to find and why he's trying to find it If we can determine the most common information needs a site's users have we can select the few best architectural components to address those information needs For example if a user is designing a staff directory we can assume that most users are searching for items they already have information about The user already knows exactly what he is looking for he has the terms necessary to articulate that need and he knows that the staff directory exists and that it's the right place to look This type of information need would be best served by employing a search system Therefore resources should be invested in developing and maintaining a comprehensive search system Another example the site's users are often new or infrequent visitors In addition perhaps the site's content scope is changing frequently Therefore the information architecture probably should be very good at supporting orientation If that is the case invest in a table of contents or some other IA component that is effective at orienting users and communicating what content is contained in the site ORGANIZATION Basically an organization is group of people organized to accomplish an overall goal Organizations can range in size from two people to hundreds of thousands -- some people might argue that organizations are even larger Organizations have an overall goal or mission which is usually subdivided into various other goals often called strategic goals that in total will achieve the overall goal of the organization It is a structure through which individuals cooperate systematically to conduct business It is a collection of people working under predefined rules and regulations to obtain a set of objectives It is a stable formal social structure It takes resources from the environment and processes them to produce outputs Organization is understood as planned coordinated and purposeful action of human beings in order to construct or compile a common tangible or intangible product or service This action is usually framed by formal membership and form institutional rules Organization is a permanent arrangement of elements These elements and their actions are determined by rules so that a certain task can be fulfilled through a system of coordinated division of labour An organization is defined by the elements that are part of it who belongs to the organization and who does not its communication which elements communicate and how do they communicate and its rules of action compared to outside events what causes an organization to act as a collective actor By coordinated and planned cooperation of the elements the organization is able to solve tasks that lie beyond the abilities of the single elements The price paid by the elements is the limitation of the degrees of freedom of the elements Need for Organization As the volume of business expands the need for disciplined approach to managing operations is required This results in formulation of organizational structures The organizational structures are formulated in order to efficiently manage the business operations This makes the structures a relative term to explain and define Organizations have the freedom to chose evolve the structures which best fits the management needs An organization s primary aim is to achieve the objective that it lays down for itself and in pursuance of which various actions are undertaken Such objective could be to generate profits or specific socioeconomic cultural objectives What ever the objectives are these activities interrelate and their occurrence generate a series of events which helps organization achieve its goal The regular and timely recording of information is critical to the proper management of business operations Data vs Information Data represents facts of any kind In the process of recording important particulars of any event it is the discretion of the management what should be recorded and how it should be presented However when this data is processed or reformatted it becomes information Information is a subset of data which adds to the knowledge Information should be relevant so that it is valuable for the recipient Although the processed form of information is more valuable than the raw form of data still all information is not of value for every one Distributing common information to every one may result in waste of time and confusion Irrelevant information has no value Information Quality Checklist The information can also be ranked in accordance with the qualities it has in it The experts have devised certain criteria to evaluate the quality of information These are stated below Is it clear who has written the information Who is the author Is it an organization or an individual person Is there a way to contact them Are the aims of the information clear What are the aims of the information What is it for Who is it for Does the information achieve its aims Does the information do what it says it will Is the information relevant to me Organization Information Requirements Organizations have various attributes which distinguish them from each other No two organizations are similar in all respects There have to have certain distinctive lines keeping them unique from each other Information requirements keep varying in accordance with Size of organization Its structure The Culture it follows Decision Making Structures Interested parties both internal and external An organization should consider the above mentioned requirements while devising a system which tailors for specific information needs ORGANIZATION INFORMATION REQUIREMENTS Organizations have various attributes which distinguish them from each other No two organizations are similar in all respects There have to have certain distinctive lines keeping them unique from each other Information requirements keep varying in accordance with Size of organization Its structure The Culture it follows Decision Making Structures Interested parties both internal and external An organization should consider the above mentioned requirements while devising a system which tailors for specific information needs Size of the Organization and Information Requirements Small Organizations Small organizations usually have simple management structure The need invariably grows from the limited scope and operations of management Since tasks to be handled are usually limited and manageable hence need for introducing more levels is not required Since operations can be managed at the top level by one or two members of the senior management officers from the lower level of management are not usually involved in decision making Hence the final decisions are centrally taken Information flows and formats are easy to define and change Since information requirements are not extensive number of documents prepared and generated will also be few in number Mostly the interested party itself is running the business hence the management is centralised to few people Examples of Information requirements of Small Organizations Day to day transactions Daily Sale Cash management Receivables and Payables Medium Sized Organizations Medium Sized organizations are normally a family ownership run by brothers father-son There are many organizations existing these days which are being run by the family members The prime concern may be the trust already fostered among the blood relations but this might give rise to informal relationship among them Since all critical managerial positions are usually controlled by the family members information is structured only to the extent of external reporting The level of reporting that could meet the information needs of the clients is best suited for such an organization Medium sized organizations are run under direct supervision of the family members which rarely extends to segregation of duties and delegation of authority Centralized decision making Above mentioned structure rarely changes with complexity and dynamism of environments Information Requirements of Medium Sized Organizations As size of the organization increases the importance of planning for information also increases The planning on long-term basis also helps in monitoring of information against planning Large Organizations Usually such organizations are characterized by large scale of operations Various criteria can be used for this purpose Number of employees Amount of turnover Number of branches Profit size Value of assets Number of businesses the organization is working in With such large size of organizations management structure needs to be multi- tiered for efficient and strong control This leads to formulation of many departments management levels designations promotional opportunities and salary increments Example Public companies Information Requirements of Large Organizations With such a large structure it is inevitable that the detailed planning should be made for proper management control for both short term and long term Performance measurement against plans targets Nature of the Business and Information Requirements As the size of organization and scale of operations change information requirements need to be adjusted for better monitoring to keeping things in control Manufacturing Sector Service Sector Trading Sector Manufacturing Sector Manufacturing process involves more than one sub-processes detailed information is required before transferring materials for warehousing manufacturing and sale to final consumer Information Requirements of Manufacturing Sector Management is concerned with the day to day costs production targets quality of the product delivery schedules etc Service Sector Final product is intangible so information is critical at various steps e g preparation delivery and customer satisfaction Quality maintenance is an issue that requires structured reporting Information requirements of Service Sector Quality of service provided Mode of delivery Customer Satisfaction Time Scheduling Resource Management Trading Sector Monitoring requires information for each product e g Customer profiles Customer Comments Volume of sales Profitability Stock movements Manufacturing Procurement Cycle Market needs UNIQUE ATTRIBUTES OF ORGANIZATION Organizations can be distinguished on the basis of various criteria These are as follows Organizational structure Culture of the Organizations Management Style Decision Making Style Organizational Structure Pyramid Tall Hierarchical Hierarchical organization A hierarchical organization is organization structured in a way such that every entity in the organization except one is subordinate to a single other entity This is the dominant mode of organization among large organizations most corporations and governments are hierarchical organizations Low number of subordinates per supervisor Long chain of command Greater number of levels Organizational Structure Flat Flat organization refers to an organizational structure with few or no levels of intervening management between staff and managers The idea is that well-trained workers will be more productive when they are more directly involved in the decision making process rather than closely supervised by many layers of management This structure is generally possible only in smaller organizations or individual units within larger organizations When they reach a critical size organizations can retain a streamlined structure but cannot keep a completely flat manager-to-staff relationship without impacting productivity Certain financial responsibilities may also require a more traditional structure Some theorize that flat organizations become more traditionally hierarchical when they begin to be geared towards productivity Following are the characteristics of a flat organization High number of subordinates per supervisor Short of chain of command Less number of levels Eliminates middle level managers Decentralizes authority to low level managers Culture of the Organization Organizational culture is the specific collection of values and norms that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization Organizational values are beliefs and ideas about what kinds of goals members of an organization should pursue and ideas about the appropriate kinds or standards of behaviour organizational members should use to achieve these goals From organizational values develop organizational norms guidelines or expectations that prescribe appropriate kinds of behaviour by employees in particular situations and control the behaviour of organizational members towards one another Culture is set of Fundamental Assumptions that exist and grow with the organization It s not publicly announced but spoken about within the organization It is a combination of implicit values that keep the organization together It is essential that the employees understand the culture-What drives the organization Management Styles Authoritative Participative Mixed Authoritative An Autocratic or authoritarian manager makes all the decisions keeping the information and Decision making among the senior management Objectives and tasks are set and the workforce is expected to do exactly as required The communication involved with this method is mainly downward from the leader to the sub-ordinate critics such as Elton Mayo have argued that this method can lead to a decrease in motivation from the employee's point of view The main advantage of this style is that the direction of the business will remain constant and the decisions will all be similar this in turn can project an image of a confident well managed business On the other hand subordinates may become highly dependent upon the leaders and supervision may be needed Decisions are taken centrally by the senior management themselves and are enforced at all levels Participative In a Democratic style the manager allows the employees to take part in decision-making therefore everything is agreed by the majority The communication is extensive in both directions from subordinates to leaders and vice-versa This style can be particularly useful when complex decisions need to be made that require a range of specialist skills for example when a new computerized system needs to be put in place and the upper management of the business is computer-illiterate From the overall business's point of view job satisfaction and quality of work will improve However the decision-making process is severely slowed down and the need of a consensus may avoid taking the 'best' decision for the business Mixed The approach is a combination of both authoritative and participative style Input from employees is taken and respected final decision is taken by the senior management keeping in view the views given by the employees Decision Making Approach Structured Procedures are predefined for solving routine repetitive problems Non-structured When problems require individual judgment evaluation and insight varying on case-to-case basis Sources of information in Organizations There can be sources of information both internal and external to the organization Following is a list of important sources Internal External Staff meetings Formal reporting systems Project proposals Research result Employee Surveys Persuasive interviews Purchasing agreements Advertisement Distribution Contracts Direction of Information Flow Ideal Information Network in an Organization Periodically updated continuously updated the information should be updated so that whenever accessed the user should be fully informed Efficient Processing data should not be kept unprocessed for long Timely processing helps in effective decision making Value driven the information kept in a computerised system should add value to the user s knowledge Audience Centred every one should receive that part of information that is relevant to the user Conclusion Availability of timely and accurate information helps in proper decision making and meeting the organizational goals Information should be tailored in accordance with the organization s culture and structure EFFECT OF CHANGES IN ENVIRONMENT Business Environment is defined as all elements that exist outside the boundary of the business Organization and have the potential to affect all or part of the organization Elements of Environment It is a collective reference made to the following factors Legal Ethics Economic Social Technological Legal Rules and Policies and Legal Laws established by government effect the Business Environment Change in tariff rate may increase or decrease operation of the business Laws imposed to regulate business Companies Ordinance It is the Law under which a company performs its business activities Import Export regulations Government announces Import Export Policy at the time of annual budget Goods which are manufactured in the country is encouraged by levying high duties on imported goods and encouraged export International trade agreements e g European Union EU A number of regional agreements have been signed by the EC World Trade Organization WTO The World Trade Organization WTO is an International multilateral organization which was created as a result of the Uruguay round of discussion in to harmonic world trade Various agreements between member countries has resulted in lowering import tariffs bringing down protective trade barriers setting up anti dumping procedures and settlement methods However it has failed to achieve any headway in getting member countries to eliminate subsidies provided t other agriculture sector by nearly all member states As a result the WTO is currently faced with the threat of failure The WTO trade and services arrangements effectively replaced the general Agreement on Trade Tariffs GATT South Asia Free Trade Agreement SAFTA The South Asia Free Trade Agreement SAFTA was agreed to among the seven South Asia countries that form the South Asian Association for Regional Cooperation SAARC Bangladesh Bhutan India Maldives Nepal Pakistan and Sri Lanka SAFTA came into effect on January with the aim of reducing tariffs for intraregional trade among the seven SAARC members Pakistan and India are to complete implementation by Sri Lanka by and Bangladesh Bhutan Maldives and Nepal by Economic To make a profit without raising prices the company turned to making simpler furniture Designs and increasing its technological efficiency Developments within the economy which May affect the business environment Inflation rates Inflation rate is an indicator of economic growth of a country Bank Interest Rate Availability of capital in the capital in the capital money markets Capital Money market is access able for an Entrepreneur who starts business with his savings and with equity from capital money markets on favourable interest rate Foreign Exchange rates between two currencies specifies how much one currency is worth in terms of the other For example an exchange rate of Kenyan Shilling to the Dollar means that Ksh is worth the same as An exchange rate is also known as a foreign exchange rate or FX rate Consumer spending Patterns of spending give a good picture of consumer behaviour showing various social economic and marketplace trends at the household level Consumer behaviour is also revealed by decisions not to spend For example if enough people are involved boycotting a company or a product or even the threat of it can be an effective way for consumers to make their opinions felt Boycotting has brought about a number of changes in companies' social and business behaviour such as the development of certain voluntary codes In fact any consumer decision to stop buying a product can ultimately and substantially influence corporate strategies New trends in the fast food industry's offerings are one example of the marketplace's responsiveness to consumers' willingness to walk away Employment opportunities Information Technology offers a variety of jobs In the present era information technology is used in every field like Banking Medicine Laboratories Textiles Scientific research etc Social Changing demographic and social needs are impacting the business world Corporations must address the issues pertaining to the changing needs and requirements to retain and enhance market positions The internationalization of business brings greater pressure as variety of cultures customs and practices need to be taken into account whilst conducting business The employees are today more aware of their social needs whether these related to the work environment behaviour children education health compensation or work hours National interests and culture have to be considered while offering a particular product or service or exploiting the natural resources of a particular country This includes Demographic changes leading to changes in needs Age Composition Gender Occupations Social norms Changing attitudes and perceptions Lifestyle Prosperity Availability of foreign brands products Technological The most overwhelming change in the technology sector is rapid expansion of the internet as a place for doing business The World Wide Web and other advances in information technology have changed the whole face of business To produce desired products it is necessary for a business to stay in market to produce the goods according to the desire of the consumers Due to the change in technology day by day innovations has been taken place Competitors by using the technology reducing the cost and improving the quality To solve a problem There are varieties of problems facing a business in the contemporary world Information technology is being used to overcome the business issues like Marketing Brand of the product Quality of the product Cost control Organizational internal and external issues etc To fulfil a need Information system must fulfil the needs of the business An organization needs information of its customers product market trend employee information payroll manufacturing cost etc In time information helps the organization launch its product in time to maximize profit The way products are developed and offered to the customers keeps changing thus affecting the business environment in which the organization works Corporate social responsibility Corporate social responsibility CSR is an expression used to describe what some see as a company s obligation to be sensitive to the needs of not only all of the stakeholders in its business operations but more importantly the community at large It has been defined as The continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society as large Businesses are now seen as partners of the communities in which they may be located rather than simply as a profit making set up serving the needs of their stake holders Corporate social responsibility incorporates the principle of sustainable development along with triple bottom line reporting reflecting not only financial results but also social and environmental impact of the business The CSR may be looked after by an independent department reporting directly to the board or may be a part of the business development or human resource department Ethics Corporate or business ethics have attained vital importance in today s world The issue not only addresses matters such as how those charged with governance and managing businesses take decisions but importantly the employee conduct and behaviour the corporations responsibility in terms of its image product branding trade business practices and compliance with not only national and regional but also international laws The huge number of financial and corporate scandals has moved the regulators to take suitable action In Kenya all listed companies particularly are required to follow the code of corporate governance Pressures Challenges The changes in business environment pose challenges on the organizations which need to be responded to Following are the pressures Competition for cheaper factors of production Cheaper factor of production is a challenge for the survival of a company in competitive market Factors of production are basic elements of reducing manufacturing cost Cheap and skilled labour Availability of raw material infrastructure Changing workforces Lack of availability of skilled and experience force in market is a challenge for an organization Continue change in work force is harmful for an organization Enhanced customer quality For the enhancement customer quality consistently provide innovative products with outstanding customer service and help their customers achieve operational excellence An Organization ability to provide outstanding product quality service support and their ability to enhance product quality achieve shorter delivery times reduce scrap rework and reduced life cycle costs Technological Obsolescence Technological obsolescence is the result of the evolution of technology as newer technologies appear older ones cease to be used For example new media for storing digital information rapidly replace older media and reading devices for these older media become no longer available Newer versions of software constantly render older versions obsolete and the hardware required by this software also changes over Time Consequently information which relies on obsolete technologies becomes inaccessible Currently it seems that the lifetime of digital storage media generally exceeds the life of the technology that supports it Information overload In recent decades technology has so enhanced our ability to gather data that the sheer volume of data now outstrips our capacity to deal with it Informatics is taking this seemingly unmanageable flood of data and transforming it into information that helps solve key problems in fields like medicine genetics chemistry Internet security and engineering SYSTEMS VS PROCEDURES Procedure is a defined set of instructions aimed at describing how to proceed in achieving a pre-defined milestone target Systems have collection of predefined procedures related to each other in a sequenced logical manner in order to collectively achieve the desired results The system procedures in all kinds of environment are subject to internal controls and checks that are necessary to ensure the effectiveness of the same Purpose of Systems Procedures The basic purpose behind setting up systems and procedures is to make available information when required But when procedures are organized in a logical manner to form systems the value of information as an output of a system enhances When technology is added to the system scope of a system changes to include hardware software and designs linked together in accordance with the procedures contained in that system to give a purposeful architecture Data Information Before defining what information systems are I would like to once again differentiate between data and information Data represents facts of any kind Information is the processed form of data being verified and substantiated from various sources Example is a figure which by itself does not add to the knowledge But When we say sales orders it does add to our knowledge hence is information Data Information Generation of relevant information is the objective of every information system Now we would move forward with the definition necessity of information systems Information Systems Interrelated components working together to collect process and store and disseminate information to support decision making coordination control analysis and visualization in an organization Manual Vs Computerised Information Systems As advancement was made in every field of life manual information systems were converted to computerized systems In manual environment the concept of transformation was difficult to apply since input of data into records was by itself the output which also included simple computations Concept of control mechanism grew stronger as computerized information systems emerged Now the concept of Information system exists with the usage and benefits of Computers as an inevitable part Computer based Information System CBIS CBIS is an Information System that uses computer telecommunications technology to perform its intended tasks In CBIS Information technology IT becomes a subset of the Information system The terms Information System IS and Computer Based Information System CBIS with the extensive use of computers in almost every field renders it inevitable to think of an IS as CBIS Importance of Information Systems In modern age there has been felt a growing need for the use of information systems Let s take a look at what factors increased the importance of efficient information systems Emerging Global Economies High level of foreign trade has resulted in imports and exports which require inter linkage for smooth coordination Core business functions manufacturing finance and customer support have been distributed in different countries Coordination Transforming Industrial Economies Industrial economies have started merging as knowledge-and-information-based economies Manufacturing activities being shifted to low wage countries More opportunities are available in education health care banks insurance firms and law firms More knowledge and information intense products are being created Higher commitment expected from customer e g overnight package delivery world wide reservation systems Transformed Business Enterprise The structure of business enterprise have also changed initially the organizations used to be Hierarchical Centralized Structured following a Fixed Set of SOP s However now the organizations are moving towards more Flatter Decentralized and Flexible structures Information Technology makes it convenient and efficient to promote this new culture Emerging Digital Firms Firms where all significant business process and relationships with customers and suppliers and employees are digitally enabled and key corporate assets are managed through digital firms This results in rapid response with more flexibility to survive and getting more global TYPES OF SYSTEMS Systems A system is a group of elements that are integrated with the common purpose of achieving an objective Example Purchase Sales System Components of a system Following are the important components of the system Input elements Raw Data input to the computer system Process Computation analysis application of any model Output elements Results of computation or analysis Control mechanism Comparison of actual with expected Feedback system Corrective action Objectives Expected Ideal output Types of Systems The objectives of having systems include To subject a predefined amount of input tangible intangible to predefined set of instructions in order to achieve an expected quality and amount of output Effective and efficient utilization of resources Open-Loop System The determinant factor is in an open loop system is that the information from the system not used for control purpose This is done by using the output to generate feed back for control purposes The output is not coupled to the input for measurement Hence the components of open loop system do not include control and feedback mechanism due to non-existence of internally defined objectives That is Input Process Output Example An information system that automatically generates report on regular basis and are not used to monitor input or activities Closed Loop System Is a system where part of the output is fed back to the system to initiate control to change either the activities of the system or input of the system It has the ability to control the output due to existence of Control Mechanism Feedback System Objectives Example Budgetary control system in a company by which The results are communicated through feedback system Results are compared with the objectives budget through controls mechanism Open Systems A system that is connected to its environment by means of resource flows is called an open system The environment exerts influence on the system and the system also influences the environment Example Business is a system where management decisions are influenced by or have an influence on suppliers customers society as a whole Computerized system of a manufacturing entity that takes influence from the society Closed Systems Its A system that is not connected with its environment Neither environment exerts any influence on the system nor does system influence the environment Examples An information system designed to control data in a research laboratory is a closed system An information system designed to record highly sensitive information is a closed system so as To accept no input for amendment To give no output for disclosure Level of Planning There are three levels Strategic Planning Is the formulation evaluation and selection of strategies for the purpose of preparing a long term plan of action to attain objectives Tactical Functional Planning Is the process by which managers assure the resources are obtained and used effectively and efficiently in the accomplishment of the organization s objectives Operational Planning It is the process of assuring that the specific tasks are being carried out efficiently and effectively Functional Strategic Planning Commitment by Firm s executives requires strategic planning for the following functional areas Manufacturing resources Financial resources Human resources Marketing Resources Information Resources Strategic Planning for Information Resources SPIR When a firm embraces SPIR the strategic plans for information services and the firm are developed concurrently Business strategy and IT related strategy should go hand in hand The IT related strategy should be driven by business strategy and the former should support the achievement what s being mentioned in the latter Any inconsistencies or deviations between the two should be removed and avoided The investment in IT is costly and inflexible Such investment is also monitored and controlled by the IT strategy Hence any investment not supporting the business strategy would be futile Example Business strategy Modify inventory system to fulfil orders quickly through relocating system to warehouse and efficient shelf picking IS strategy To identify information resources needed for the successful implementation of business strategy Information Value Chain Raw information is transformed at various points and value is added before passing onwards Every step of processing should make the information stored more valuable Example When customer order received data punched into computerized system which updates order list customer records and store room records When order has been served customer orders are filed into records SYSTEMS A system is a group of elements that are integrated with the common purpose of achieving an objective Organization having common goal for the achievement are functionally interactive units All systems have inputs outputs and feedback and maintain a basic level of equilibrium For example in the human body the heart functions to support the circulatory system which is vital to the survival of the entire body Example Purchase System A simple example can be given of a purchase and sales system In a typical purchase system information related to purchase of materials is kept for instance Orders for the purchase of various materials Status of deliveries received against specific orders Changes in the order quantity time day or other information Quality inspection reports and whether they need to be communicated to the supplier Updated status report of stock Issues made out of the stock All and more of information is required to be linked and provided in an organized way Components of a system Every system comprises of basic components which in a coordination formulate a system These are as follows Input elements The information entered into a system For instance raw data input to the computer system Process Any specific treatment defined in the system to be performed on the data entered into the system for instance computation analysis application of any model Output elements The results given by the system after the process has been performed on the data being input to the system Control mechanism Every system is expected to generate some sort of standardized output Hence actual output needs to be compared with what it is supposed to generate This comparison of actual with expected output is done with the help of control mechanism Feedback system Once the control mechanism has been devised it needs to a reporting mechanism which should respond with a corrective action if required Objectives We just mentioned that a control mechanism should compare actual output with expected Ideal output But before this is being done there needs to be a list of specific objectives which define expected output Systems Every system that is constructed is expected to generate some sort of output based upon the information fed into it The output is expected to be used to evaluate system performance whether the output complies with stated objectives of the system and generate instruction to change input to improve change output In this manner the system helps in establishing re-defining Objectives-What needs to be achieved Control Mechanism Output Vs Expected Feed back Corrective Action Types of System The first issue therefore is to define the environment where the systems are required to be operated and the second issue is to describe the system itself Let us look at some examples Book Store Open system any and everyone is allowed to view and purchase the books available School Library Closed system entry to the library is restricted to the students only Thus in an open system we refer to the connection it has to its environment by means of inflows and outflows of resources between the environment and organization When we refer to a closed system we talk of a system that is dependant on internal resources and data for decision making rather than external environment Example THE BOOK STORE may have An Open loop if customer feedback is not taken for the purchase of books for the store OR A Closed loop if Customer feedback interest is taken into account when selecting the books to be purchased and displayed in the store The SCHOOL LIBRARY may have An Open loop if students feedback is not taken for the kind of books to be stocked in the library A Closed loop if students interest is the determinant criteria for the kind of books that are to be carried out in the library For many years the computer profession and business have formed a partnership which operated under what can be termed as open-loop architecture Advances in data warehouse technology and the Internet have enabled what can be termed as closed-loop architecture for the comprehensive usage in business of computers Open Loop System In open-loop architecture business decisions made by management have an impact in the marketplace and the impact of that decision is measured only indirectly by the company's computer systems For example if a bank decides to raise interest rates the results of the decision impact the lenders the present and future borrowers The results are measured indirectly as loan applications increase or decrease Another example can be given of an insurance company which decides to offer a new kind of insurance The market expresses its approval or disapproval by buying or not buying the new insurance offering By measuring the response within the open-loop architecture the marketplace response is quantified In every case of an open-loop business computer architecture the impact of the corporate decision is felt indirectly through the reactions of the marketplace and is measured indirectly by the computer systems that are used by the company Such interactions between the decision process and the measurement of the effectiveness of the decisions made can be called an open-loop decision environment In an open-loop decision environment there is no direct relationship between a corporate decision and a consequence although there certainly is an indirect relationship A big challenge in an open-loop business computer architecture is that of measuring the consequences of the decisions made by the company This is due to the fact is that there is a time lag between the time the corporate decision has been made and the time when the marketplace gives its verdict on the decision Another difficulty is that in an open-loop environment there may be factors other than the decision made by corporate management affecting the results achieved in the marketplace Trying to measure precisely the effect of management's decisions is an imprecise science at best Trying to quantify the impact of management's decisions in an open-loop environment is difficult in every case For Example take the case of a soft-drinks company It has no idea of the identity of its ultimate consumer They deal through distributors who for them is the final customer and not the man on the street who actually buys the soft drink from the retailer The feedback on the product pricing or any other matter related to the product would be provided by the distributor and not the final consumer Open-loop decision making is for mass marketing companies Companies that really don't know who their customers are employ open-loop decision making Closed Loop System Feedback is an integral part of the closed loop system The corrective action as a response to the output requires two other components Control Mechanism Variance Analysis Objectives Predefined expected output from the system Closed loop system is a system where part of the output is fed back to the system to initiate control to change either the activities of the system or input of the system In a closed-loop decision environment the impact of decisions can be measured very precisely In a closed-loop decision environment management makes a decision the computer system singles out exactly to whom the decision applies and a direct action is taken as a result of the decision The response to the action can then be measured on a case-by-case basis The results of the management decision can be measured quickly and directly As an example of a closed- loop decision environment suppose a department store can use its data warehouse to determine who has made purchases of more than Rs in the past year Once that information is collected those customers can be offered a personalized credit card In such a manner management can measure the effect of the decision quickly and very accurately Another example can be given where management selects all customers who have shown an interest in James Bond movies The data about such an interest is stored in a database If those customers are offered a new James Bond t-shirt at a discount price the results of the promotion can be accurately and quickly calculated With a closed-loop decision environment there is the possibility of having very quick and very accurate feedback on the decision process The ability to make this assessment is very valuable Let us illustrate the usage of the systems through an every day example Take any international sports event Olympics soccer cricket tennis every event is commercialised To catch the interest of every individual highly integrated information systems are used For instance To sell tickets To advertise Sports accessories To set up a system for commentators to extract information for instant analysis for viewers Comparative Scores Projected Scores Team Performances Match Performances All of the above requirements are not possible without the availability of an information system which serves the information requirements of all the interested in a timely fashion The system has to be intelligent system capable of performing necessary tasks and providing the requisite output Attributes of an IS CBIS The attributes an Information System should have to be worthy of being used by an organization for meeting its information requirements Although information requirements may vary from organization to organization however common premise is quite the same for many Efficient Processing including query time Large Storage Capacity Reduced information Load Cross-functional boundaries Competitive Tool Electronic Document Management Paper Free environment Efficient Processing Every transaction affects our records in a number of ways CBIS helps in updating every change being triggered in less time and with less effort Large Storage Capacity Instant Access Efficient and effective decision making requires two aspects Availability of processed corporate data occurrence of every event relating to a company affects policy making and implementation thus recording and processing of every data results in huge amount of information Instant access to right chunk of information presented in comprehensible format both the above requirements are easy to handle when a well structured information system is in place Reduced Information Load With such huge amounts of information available managers can feel overloaded hence taking more time in decision making CBIS IS help to tailor loads of information w r t every manager s requirements The way information is presented can also save time for decision making Hence report formats can be tailored in accordance with the nature of problem being faced Cross-Functional Coordination There are various functions in an organization that need to be managed Manufacturing Purchasing Warehousing Marketing Accounts Finance Human Resource In every transaction every department has its own share of responsibility Thus uncoordinated effort by every department won t help in achieving the successful completion of transaction and meeting commitments CBIS help in keeping an updated record for easy access by every department in an organization Example A customer order is received by Sales Marketing department Record for customer profitability and recovery pattern are also kept by sales dept Manufacturing requires Customer order in quantitative terms Raw material availability for production Time available for delivery Procurement schedule Accounts require an intimation the delivery is made along with the sales invoice Customer wants the status of its his her order Competitive Tool Businesses invest to earn profits or for other non-profit based objectives There seems no point in pouring in Co s hard earned money on IS if they don t add to the quality and value of information Hence CBIS IS can and should work to enhance the competitive advantage for the organization Paper Free Environment Information overload enhances paper work Maintenance of records in hard form has always proven to be a cumbersome task An IS CBIS should be efficient enough to properly manage of documents electronically Customer orders met through Virtual Private Networks and intranets to be discussed later Payments made through Electronic payment system Report generation and record analysis gets convenient and easy Conclusion Hence an Information System Computer Based information system should help an organization in achieving the above mentioned goals If put differently an organization should not proceed with the implementation of an IS unless it helps in achieving the above goals INFRASTRUCTURE Infrastructure generally is the set of interconnected structural elements that provide the framework for supporting the entire structure It usually applies only to structures that are artificial The term is used differently in a variety of fields perhaps the single most well-known usage is in economics where it refers to physical infrastructure such as buildings and roads The notion that a structure has an internal framework is popular especially in business organizations where a dependency on interconnected information technology systems has become as prevalent as a city's dependency on interconnected conveyance systems for power people and things Information infrastructure consists of the physical facilities services and management that support all computing resources in an organization There are five major components of infrastructure Computer hardware General purpose software Networks communication facilities Databases Information management personnel Each of these components is designed in such manner to collectively meet the needs and objectives of the organization The infrastructure will include The detailed configuration of the hardware Design of the operating system Documentation of the operational and application software and Documentation on how to technically manage and operate the entire system Infrastructure also includes the integration operation documentation maintenance and management the components as defined in infrastructure It is guideline to how specific computing resources are arranged operated and managed Architecture Architecture more specifically is related to defining the information needs and how these will be obtained through the various application software modules Architecture is the Blueprint that provides the conceptual foundation for building information infrastructure and specific applications It is a way of mapping information requirements and resources Architecture covers following components The business needs of the information Existing planned information infrastructure and applications in the organizations Information Architecture In context of web design Information Or design for related media Information Architecture is defined by the Information Architecture Institute as The structural design of shared information environments The art and science of organizing and labelling web sites intranets online communities and software to support usability An emerging community of practice focused on bringing principles of design and architecture to the digital landscape An alternate definition of Information Architecture exists within the context of information system design in which information architecture refers to data modelling and the analysis and design of the information in the system concentrating on entities and their interdependencies Data modelling depends on abstraction the relationship between the pieces of data is of more interest than the particulars of individual records though cataloguing possible values is a common technique The usability of human facing systems and standards compliance of internal ones is paramount The term information architecture describes a specialized skill set which relates to the management of information and employment of informational tools It has a significant degree of association with the library sciences Many library schools now teach information architecture Components Sub-Systems of CBIS Following are the components subsystems of CBIS Transaction Processing System Management Information System Support Systems Office Automation System Decision Support System Knowledge System Executive Support System Let s consider them one by one Transaction Processing System This system is used to record transactions of routine and repetitive nature For Instance Defining the transaction recording structure Placing customer orders Billing customers Other basic business transactions Features It is a repetitive number crunching system Today the transaction processing systems are more sophisticated and complex but spirit is same that is to record routine business transactions irrespective of their complexity so as to help in analysis and report generation at a higher level Help to cater needs for operational level management Rapid Response Fast performance with a rapid response time is critical Businesses cannot afford to have customers waiting for a TPS to respond the turnaround time from the input of the transaction to the production for the output must be a few seconds or less Reliability Many organizations rely heavily on their TPS a breakdown will disrupt operations or even stop the business For a TPS to be effective its failure rate must be very low If a TPS does fail then quick and accurate recovery must be possible This makes well designed backup and recovery procedures essential Inflexibility A TPS wants every transaction to be processed in the same way regardless of the user the customer or the time for day If a TPS were flexible there would be too many opportunities for non-standard operations for example a commercial airline needs to consistently accept airline reservations from a range of travel agents accepting different transactions data from different travel agents would be a problem Controlled processing The processing in a TPS must support an organization's operations For example if an organisation allocates roles and responsibilities to particular employees then the TPS should enforce and maintain this requirement Data Processing Tasks Major data processing tasks which a TPS is expected to perform are Data identification and Gathering keying in the data or obtaining it directly from machines by providing suitable interface Data manipulation Analysis refers to transformation of data into information Classifying Sorting Calculating Summarizing Data storage data is kept somewhere in a sequenced manner until when needed Document Preparation output for managers as reports or as input to other systems Goals a TPS is supposed to achieve are predefined and highly structured for instance Checking a customer s credit limit every time an order is received Checking inventory level before accepting an order Payroll generation on monthly basis Management Information System MIRS makes information available to relevant users by producing pre-determined and pre-designed reports required by the management Management information system helps middle level management planning controlling and decision making The data stored can be used or manipulated to produce differently defined reports from pre-defined reports It can be presented graphically or pictorially The reports generated by the MIS are used for analytical decision making by the management The application software can construct projections build scenarios do what if analysis to enable better decision making For Example MIS will use the TPS data to generate monthly and weekly summaries as per requirement product customer and salesperson Major purpose is report generation We would discuss major types of reports Periodic reports daily weekly monthly annually format is predefined and structured for convenience Special Management by Exception reports only when a special event occurs which needs to be monitored For instance Report sequence to highlight- fast moving slow moving Group the exceptions together Aged accounts receivable Show variance from the norm Sales analysis report SUPPORT SYSTEMS Seeing the benefits of MIS for middle level managers Computerised systems have been devised for other employees in the organization to help them complete their work efficiently and effectively Classification of Support systems Office automation systems Decision support systems Office Automation Systems Office automation system includes formal and informal electronic systems primarily concerned with the communication of information to and from persons both inside and outside the firm It supports data workers in an organization For Instance Word processing Desktop publishing Imaging Web publishing Electronic calendars manager s appt calendars Email Audio video conferencing establishing communication between geographically dispersed persons Decision Support Systems Before moving forward with the concept of decision support system we would take a look at the definition of MIS An integrated man-machine system for providing information to support the operations management and decision making functions in an organization Prof Gordon Davis University of Minnesota Four Criteria for designing models and systems to support management decisions making were laid down by J D C Little These were Robustness Ease of Control Simplicity Completeness of relevant detail Decision Support Systems was defined by Bill Inmon father of data warehouse as a system used to support managerial decisions Usually DSS involves the analysis of many units of data in a heuristic fashion As a rule DSS processing does not involve the update of data Heuristic simply means a particular technique of directing one s attention in learning discovery or problem solving It assists in non-routine decision making process due to powerful analytical abilities For Instance For any scenario all the related factors with their ranges of variability are entered into DSS which helps guide managers for any new scenario that emerges DSS can stimulate innovation in decision making by helping managers to existing decision making procedures An example of Decision Support System An outfit store maintains ready made garments and stitched clothes for various classes of society Due to fluctuating changes in fashion trends pre-seasonal planning becomes critical A Planning and forecasting software can be used by management to Measure customer reactions to re-pricing When to initiate clearance sales for old stock Deciding about discount percentages When to order new stock for the season Functionalities of MIS and DSS Sr No MIS DSS Helps in non routine decision making Helps in non routine decision making Fixed and regular reports are generated from data kept in TPS Users are not linked with the structured Information flows Report formats are predefined Greater emphasis on models display Graphics ad hoc queries User is part of the system DSS is a small part of users actions Directly used by middle level managers Directly used by middle level managers Types of DSS DSS may either be Model Driven DSS Data Driven DSS Model Driven DSS Model driven DSS uses following techniques What-If analysis Attempt to check the impact of a change in the assumptions input data on the Proposed solution e g what will happen to the market share if the advertising budget increases by or Goal Seek Analysis Attempt to find the value of the inputs necessary to achieve a desired level of output It uses backward solution approach e g a DSS solution yielded a profit of M What will be the necessary sales volume to generate a profit of M These are primarily stand alone systems isolated from major organizational information systems finance manufacturing HR etc They are developed by end users and are not reliant on central information systems control These systems combine Use of a strong model and Good user interface to maximise model utility They are not usually data intensive hat is very large data bases are usually not need for model-driven DSS They use data and parameters usually provided by decision makers to aid in analyzing a situation Data Driven DSS As opposed to model driven DSS these systems use large pools of data found in major organizational systems They help to extract information from the large quantities of data stored These systems rely on Data Warehouses created from Transaction Processing systems They use following techniques for data analysis Online analytical processing and Data mining Components of DSS There are two major components DSS data base is a collection of current and historical data from internal external sources It can be a massive data warehouse Decision Support Software system is the set of software tools used for data analysis For instance Online analytical processing OLAP tools Data mining tools Models Data Warehouse A data warehouse is a logical collection of information It is gathered from many different operational databases used to create business intelligence that supports business analysis activities and decision-making tasks It is primarily a record of an enterprise's past transactional and operational information stored in a database designed to favour efficient data analysis and reporting The term data warehouse generally refers to the combination of many different databases across an entire enterprise Data warehouses contain a wide variety of data that present a coherent picture of business conditions at a single point in time Data warehouses are generally batch updated at the end of the day week or some period Its contents are typically historical and static and may also contain numerous summaries DATA MART Data warehouses can become enormous with hundreds of gigabytes of transactions As a result subsets known as data marts are often created for just one department or product line Data Warehouse combines databases across an entire enterprise However Data Marts are usually smaller and focus on a particular subject or department or product line Following are the common techniques through which a data warehouse can be used Online Analytical Processing OLAP Decision support software that allows the user to quickly analyze information that has been summarized into multidimensional views and hierarchies The term online refers to the interactive querying facility provided to the user to minimize response time It enables users to drill down into large volume of data in order to provide desired information such as isolating the products that are more volatile from sales data OLAP summarizes transactions into multidimensional user defined views Data Mining Data mining is also known as Knowledge-Discovery in Databases KDD Put simply it is the processing of the data warehouse It is a process of automatically searching large volumes of data for patterns The purpose is to uncover patterns and relationships contained within the business activity and history and predict future behaviour Data mining has become an important part of customer relationship management CRM The data mining procedure involves following steps Exploration includes data preparation which may involve filtering data and data transformations selecting subsets of records Model building and validation involves the use of various models for predictive performance i e explaining the variability in question and producing stable results across samples Each model contains various patterns of queries used to discover new patterns and relations in the data Deployment That final stage involves using the model selected as best in the previous stage and applying it to new data in order to generate predictions or estimates of the expected outcome Example of Data Mining Consider a retail sales department Data mining system may infer from routine transactions that customers take interests in buying trousers of a particular kind in a particular season Hence it can make a correlation between the customer and his buying habits by using the frequency of his her purchases The marketing department will look at this information and may forecast a possible clientele for matching shirts The sales department may start a departmental campaign to sell the shirts to buyers of trousers through direct mail electronic or otherwise In this case the data mining system generated predictions or estimates about the customer that was previously unknown to the company Concept of Models Used in Decision Support System DSS A model is an abstract representation that illustrates the components or relationships of a phenomenon Models are prepared so as to formulate ideas about the problem solutions that is allowing the managers to evaluate alternative solutions available for a problem in hand Types of Models Used in DSS Physical Models Narrative Models Graphic Models Mathematical Model Physical Models Physical models are three dimensional representation of an entity Object Process Physical models used in the business world include scale models of shopping centres and prototypes of new automobiles The physical model serves a purpose that cannot be fulfilled by the real thing e g it is much less Expensive for shopping centre investors and automakers to make changes in the designs of their physical models than to the final product themselves Narrative Models The spoken and written description of an entity as Narrative model is used daily by managers and surprisingly these are seldom recognized as models For instance all business communications are narrative models Graphic Models These models represent the entity in the form of graphs or pictorial presentations It represents its entity with an abstraction of lines symbols or shapes Graphic models are used in business to communicate information Many company s annual reports to their stockholders contain colourful graphs to convey the financial condition of the firm For Instance Bar graphs of frequently asked questions with number of times they are asked Mathematical Models They represent Equations Formulae representing relationship between two or more factors related to each other in a defined manner Mathematical models can further be classified as follows based on Influence of time whether the event is time dependant or related Degree of certainty the probabilities of occurrence of an event Level of optimization the perfection in solution the model will achieve Hence use of right model in decision support software is critical to the proper functionality of the system Group DSS When people responsible for decision making are geographically dispersed or are not available at a place at the same time GDSS is used for quick and efficient decision making GDSS is characterized by being used by a group of people at the same time to support decision making People use a common computer or network and collaborate simultaneously An electronic meeting system EMS is a type of computer software that facilitates group decision-making within an organization The concept of EMS is quite similar to chat rooms where both restricted and unrestricted access can be provided to a user member DSS vs GDSS DSS can be extended to become a GDSS through The addition of communication capabilities the ability to vote rank rate etc Greater system reliability Knowledge Intelligent Systems Before we proceed with defining these systems first we should have clear concept of Knowledge Management The set of processes developed in an organization to create gather store maintain and apply the firm s knowledge is called Knowledge Management Hence the systems that aid in the creation and integration of new knowledge in the organization are called knowledge systems There are two questions Who are they built for This refers to defining the knowledge workers for whom the knowledge system is being built The term refers to people who design products and services and create knowledge for an organization For instance Engineers Architects Scientists Knowledge systems are specially designed in assisting these professionals in managing the knowledge in an organization What are they built for Every knowledge system is built to maintain a specific form of knowledge Hence it needs to be defined in the start what the system would maintain There are major types of knowledge Explicit knowledge Structured internal knowledge e g product manuals research reports etc External knowledge of competitors products and markets Tacit knowledge informal internal knowledge which resides in the minds of the employees but has not been documented in structured form Knowledge systems promote organizational learning by identifying capturing and distributing these forms of knowledge Knowledge Support Systems KSS Intelligent Systems These systems are used to automate the decision making process due to its high-level-problem-solving support KSS also has the ability to explain the line of reasoning in reaching a particular solution which DSS does not have Intelligent Systems Knowledge systems are also called intelligent systems The reason is that once knowledge system is up and running it can also enable non experts to perform tasks previously done by experts This amounts to automation of decision making process i e system runs independently of the person making decisions Artificial Intelligence Artificial intelligence is the ability of a machine to replicate the human thought processes The way humans proceed to analyze a problem and find appropriate solutions similarly computers are geared up to follow human logic to solve problems These knowledge-based applications of artificial intelligence have enhanced productivity in business science engineering and the military With advances in the last decade today's expert systems clients can choose from dozens of commercial software packages with easy-to-use interfaces The most popular type of intelligent systems is the Expert System Expert System An expert system is a computer program that attempts to represent the knowledge of human experts in the form of Heuristics It simulates the judgment and behaviour of a human or an organization that has expert knowledge and experience in a particular field Examples are Medical diagnosis Equipment repair Investment analysis Financial estate and insurance planning Vehicle routing Contract bidding Heuristics Heuristic is the art and science of discovery and invention The word comes from the same Greek root as eureka which means I have found it A heuristic is a way of directing your attention fruitfully It relates to using a problem-solving technique in which the most appropriate solution is found by alternative methods This solution is selected at successive stages of a program for use in the next step of the program Components of an Expert System There are four main components of Expert systems User Interface to enable the manager to enter instructions and information into an expert system to receive information from it Knowledge Base it is the database of the expert system It contains rules to express the logic of the problem Inference engine it is the database management system of the expert system It performs reasoning by using the contents of the knowledge base Development engine it is used to create an expert system Neural Network It is hardware or software that attempts to emulate the processing patterns of the biological brain It is a device modelled after the human brain in which several interconnected elements process information simultaneously adapting and learning from past patterns Neural Network vs Expert System Expert systems seek to model a human expert s way of solving problems They are highly specific to seeking solutions Neural networks do not model human intelligence They seek to put intelligence into the hardware in the form of generalized capability to learn Fuzzy Logic The word Fuzzy literally means vague blurred hazy and not clear Real life problems may not be solved by an optimized solution Hence allowance needs to be made for any imperfections which may be faced while finding a solution to a problem Fuzzy logic is a form of algebra employing a range of values from true to false that is used in decision-making with imprecise data as in artificial intelligence systems It is a rule based technology that tolerates imprecision by using non specific terms imprecise concepts like slightly quite and very To solve problems it is based on the Possibility theory which is a mathematical theory for dealing with certain types of uncertainty and is an alternative to probability theory Executive Support Systems ESS This Computer Based Information System CBIS is used by senior managers for strategic decision making The decisions at this level are non-routine and require judgment and evaluation They draw summarized information from internal MIS and Decision Support Systems These systems deal with external influences on an organization as well New Tax laws Competitors Acquisitions take-overs spin offs etc They filter compress and track critical data so as to reduce time and effort required to obtain information useful for executives They are not designed to solve specific problems They are generalized to be capable of dealing with changing problems Since executives have little contact with all levels of the organization ESS uses more graphical interface for quick decision making ESS vs DSS ESS implies more of a war room style graphical interface that overlooks the entire enterprise A decision support system DSS typically provides a spreadsheet style what if analysis capability often for only one department or one product at time CBIS FROM FUNCTIONAL VIEW POINT CBIS can be divided into subsystems based on how the users are grouped in the organization This grouping of users is in terms of related tasks that are performed These conceptual systems are mirror images of physical systems that are present These systems are collectively called Organizational Information systems OIS Organizational Information Systems OIS The term OIS views organization as a combination of process oriented groups whose information needs are related but independent All functional systems should work together for problem solving since each system specialises in specific domain of information Organizational Information Systems Marketing Information System Organization Marketing Department Function Manufacturing Information System Manufacturing Department Function Financial Information System Human Resource Information System Information Resource Information System Financial Department Function HR Department Function IR IT Department Function Organizational Information Systems Marketing Information System Organization Marketing Department Function Manufacturing Information System Manufacturing Department Function Financial Information System Human Resource Information System Information Resource Information System Financial Department Function HR Department Function IR IT Department Function Marketing Information Systems MKIS MKIS is a type of Information System that helps the firm to achieve following objectives Identification of customers for firm s products and services Development of those products and services to meet customers needs Promotion of the products and services and Provision of after sale customer support Types of Marketing Information Every information system is designed to capture some sort of information Information requirements need to be defined before the systems are made While designing marketing information system following types of information should be designed Marketing Intelligence information flowing from environment into the environment Internal Information gathered within the firm Marketing Communication Info flowing from firm to external environment An MKIS help in proper management and dissemination of all three kinds of information Benefits of Marketing IS MKIS helps organizations in efficient channel management Following can be identified as some of the benefits of MKIS Customer profiles need to be maintained focusing on their habits and spending patterns MKIS helps in maintaining these profiles Information on what competitors have been up to is also a critical marketing information This should not be taken as espionage on competitors Forecasts of demand are also a critical part of marketing analysis MKIS helps in achieving this as well Field sales can also be monitored where sales agents are used to market products Customers can be quickly updated based on their information kept in MKIS Dealers involved in sale of product can also be monitored to help enhance revenue s Management Levels in MKIS MKIS should cater for information requirements at each level for instance Strategic Level Formulation of new sales products and identifying new sales opportunities Planning support for new products and services Monitoring competitors Knowledge Level Market analysis based on demographics and customer behaviour Management level Sales performance analysis is required to monitor how to enhance sales and address related issues Sales staff analysis is important to see how much of the sales portion has been contributed by each of the employees Operational Level Taking comments from customers for measuring satisfaction is a responsibility of the managerial level Tracking sales processing orders and customer support New Dimensions in MKIS Through extensive use of computers in marketing field newer concepts are emerging in marketing field which are revolutionising the way customers were dealt with Customer Relationship management CRM Sales Force Automation SFA Call Centres Customer Relationship Management Businesses increasingly talk about fostering relationships with their customers This is important because some modern businesses have literally millions of customers Hence keeping personal touch with every individual customer is getting difficult to achieve Companies are clearly eager to nurture relationships with their customers Businesses need to understand the extent to which consumers want to engage with their brands For some businesses there is Either a strong natural need banks Or an emotional attachment Fashion retailer car manufacturer CRM is a business strategy that goes beyond increasing transaction volume Its objectives are to increase profitability revenue and customer satisfaction To achieve CRM a company wide set of tools technologies and procedures promote the relationship with the customer to increase sales Thus CRM is primarily a strategic business and process issue rather than a technical issue Benefits of CRM Maintains and enhances customer base Encourages customer loyalty Gaining more customers wallet-share The more effective a company's customer retention and defection management strategy the less they need to plug the gap with new customers who are expensive to recruit CRM help in establishing communication to encourage customers to share information about their Habits Tastes and preferences Interests in Co s brand extension initiatives Reasons for adopting CRM Customers now prefer to execute transaction in an electronic environment through online-trading Also the establishment of customer services centres has also removed the inconvenience to access vendor s physical locations Due to absence of physical contact companies are curious to keep a soft touch in an efficient manner This requires keeping a customer-wise online track of past correspondence and transactions CRM reduces cost of sales and distribution by Targeting advertising to customers to increase the probability that an offer is accepted Using web applications to decrease the number of direct sales people and distribution channels needed Managing customer relationships rather than manage products a change in marketing CRM minimize customer support costs by Making information available to customer service representatives so they can answer any query Automating the call centre so that representatives have direct access to customer history and preferences and therefore can cross-sell Key CRM Tasks Customer Identification -- Identifying customer through Marketing channels Transactions Interactions overtime Customer Differentiation Segregating customers with respect to Their lifestyles Attitudes Perception about Co s products Customer Interaction Efforts made to retain customers for long-term profitability and relationship Customization Personalization - Treat each customer uniquely is the motto of the entire CRM process Through the personalization process the company can increase customer loyalty CRM Issues Customer Privacy Customer privacy is an important issue in CRM CRM deals with large amounts of customer data through various touch points and communication channels The individual firm is thus caught in an ethical dilemma collecting as much information as possible but still respecting limits for personal privacy Software issues There is little standardized technologies and protocols for CRM implementation in the market Vendors publish new versions of CRM software as frequently as they can thus adding to client s expenses CRM software requires highly integrated environment for high productivity which is rarely available Sales Force Automation It automates some of the company's critical sales and sales force management functions for example Customer account management Forecasting sales Sales administration Keeping track of customer preferences Sales staff performance SFA empowers the sales force to close deals at the customer s office and to configure marketing strategies at home SFA is providing tools for very highly evolved sales organizations organizations that are basically marketing machines Call Centre Due to its direct contact with customers call centres is widely gaining popularity It refers to a department within a company or a third-party organization that handles telephone sales and or service Call centres use automatic call distributors ACD s to route calls to the appropriate agent In addition to a call centre collective handling of letters faxes and e-mails at one location is known as a contact centre As computers gain more and more involvement in marketing field presence of a highly efficient and integrated call centres has become inevitable Call centres should have direct access to every customer s track record so as to help them handle queries in an efficient manner Modern day call centres record the telephonic conversation with the customers extract a summary of it and display it every time the customer calls so as to help attendant review entire record Call Centre Challenges Call centre agents are challenged daily to navigate disparate non-integrated applications as they attempt to resolve customer service requests The call centre should offer an integrative solution so that customers can be responded efficiently Call canter should help cut long processing times which add to customer frustration and dissatisfaction with the company Manufacturing Information Systems It is an information system which deals with the Planning development and maintenance of production facilities Establishment of Production goals Availability of production materials Scheduling Management Levels in Manufacturing Information System Strategic level Locating new plant which can save cost Investment in new manufacturing technology Knowledge Level Distribute knowledge to drive the production process Innovating new forms of manufacturing processes Management level Monitoring production costs and resources Operational Level Status of production tasks ORGANIZATIONAL STRUCTURE Departments are structured based on the set of related responsibilities The set of responsibilities being discharged set the tone and structure of that department The complexity and diversity of these responsibilities also affect how departments are set in an organization Existence of Functional departments in every organization vary with the nature of industry and the nature of products services being offered Certain departments may not exist in an organization for instance financial sector banking leasing companies and travel agencies do not incorporate the concept of manufacturing as they belong to the services sector Let s take a look at different departments in different industry segments in order to better understand the concept Financial Sector The departmental structures are different in banking and financial sector This in turn becomes the basis of design and development of functional information systems Banks commonly have following departments Treasury Advances Trade Finance Corporate Finance Consumer Banking Deposits Customer Services Lease Credit Card Debit card Operations Requirements of Information Systems and procedures of financial analysts investment houses brokerage houses leasing companies will depend on their differing functions and needs Air Line Industry Various departments may be Flight Operations department Flight scheduling department Cockpit crew department Cabin Crew department Engineering department engine maintenance Ground Support air craft handling department Catering Internal audit Accounts Finance Sales ticketing E-ticketing agents Marketing Store engines maintenance and repair accessories These departments and their needs determine the design of information systems they require As shown in the above two examples the constitution of departments in both banking institutions and air travel industry vary to a large extent Manufacturing Information System The information needs were and are always there Information systems used to exist when computerised environments were not available Automation has enhanced the availability of information Every industry has its own departmental structure which gives rise to a different set of sub-systems as part of the information system Here we would consider the sub-systems of a manufacturing system only Following are the sub-systems of an information system Raw Material Procurement Sub-System This is the commencement of the manufacturing process Some might think of procurement as a simple purchasing process like any other commodity but the spirit of having an all-embracing raw material procurement sub-system is simply more than that Parameters of Raw-material Procurement Like with every system there has to be a list of minimum specifications which every system or subsystem has to cover Purchasing logistics of an entity critically affect time to market and other quality related issues Issues like selection of suppliers choice between local purchase or import and delivery time taken by the supplier All these concerns are met and dealt with in the purchase subsystem The complexity of the purchase subsystem should depend on types of raw materials required number of suppliers to deal with and complexity of the terms of purchase agreements for long term With higher customer expectations every organization wants to efficiently manage its suppliers and other internal processes Supply chain management spans all movement and storage of raw materials work-in-process inventory and finished goods from point-of -origin to point-of-consumption A procurement system should help in improving the supply chain of the organization Inventory Sub System Inventory subsystem focuses on maintaining records and movements on inventory levels and usage This control of inventory is critical to the organization since money lock-in of raw materials purchase represents substantial investment Timely production of finished goods require availability of right quantity of material maintenance of right stock levels determination of lead times and flex times and exchange of information with supplier at the right time An inventory subsystem helps us to address these issues Inventory subsystems are critical where the organization is following Just in Time approach a philosophy which encourages zero tolerance for stock levels and placing orders exactly when they are needed for manufacturing Proper logistic management is important for the timely and quality production Various factors which can play critical role are Who to purchase from supplier selection When to purchase time of delivery or raw materials How much to purchase Ideal stock levels An efficient inventory subsystem helps us to deal with these issues in a time saving manner Production Sub System It can be seen as the most critical part of the entire manufacturing sub system Basically it tracks the flow of the job through the entire production process It also records change in form of goods or transfer of goods from one place to the other Maintenance Scheduling Sub System For efficient production the machines should be timely available Many a times the machine is under repair and is not available to be used for production Without this subsystem there is a possibility of customer s orders not being met on time Certain issues that can be very important are- Deciding delivery time in accordance with availability of machines Any foreseen machine-down-time Any major overhauling tuning replacement expected may result in unavailability of machine An overhauling schedule should be kept so that the production of finished goods is not halted Avoiding duplication of jobs for the same machine Quality Sub system This subsystem ensures the production made and end product being delivered to the customer are conforming the quality standards set by the company Quality covers aspects for the organization like better quality raw materials and what is being purchased is according to organization s standards and improved finished goods in accordance with the customer specification The question now arises is why do we need a quality sub-system It is defined and demanded by customer it has to be achieved by management it is a firm wide responsibility and these subsystems provide the firm s managers with information that reveals the extent to which the firm s products are achieving the quality goals Total Quality Management TQM TQM is a set of management and control activities which focus on quality assurance The quality of the products and services is enhanced and then offered to consumers An organizational undertaking to improve the quality of manufacturing and service it focuses on obtaining continuous feedback for making improvements and refining existing processes over the long term There are certain Graphical tools used to implement and promote TQM For instance Histogram Pareto Analysis Cause Effect Diagram Costing Sub System Costs are incurred more frequently in a manufacturing entity Monitoring these costs on regular basis requires instituting a formal cost subsystem Cost sub systems are responsible for generation of cost reports which represent cost break ups on various bases for instance Machine usage basis Product basis Department wise Order Processing Sub System This subsystem deals with following issues Status of orders placed with suppliers Status of departmental requisitions Quality of materials received Any other issues related to suppliers Order processing subsystem gives a snapshot of statuses of various orders placed at any given time Management Levels in Manufacturing Information Systems Manufacturing Information System should cater for information requirements at each level for instance Strategic level Locating new plant which can save cost Investment in new manufacturing technology Knowledge Level Distribute knowledge to drive the production process Innovating new forms of manufacturing processes Management level Monitoring production costs and resources Operational Level Status of production tasks Planning Productions Operations This function in many firms is supported by IT The major areas of planning and their computerised support are as follows Materials Requirement Planning MRP Manufacturing Resource Planning MRP II Automated Software Computer Aided Design CAD Computer Aided Manufacturing CAM Computer Integrated Manufacturing CIM Materials Requirement Planning MRP Material procurement needs to be planned in compliance with the production Schedule Initially companies used to do plan it manually through a document termed as Material Requirement Plan Material Requirements Planning MRP is software based production planning and inventory control system for material procurement and scheduling It helps meeting three objectives Ensure materials and products are available for production and delivery to customers o Maintain the lowest possible level of inventory Plan manufacturing activities delivery schedules and purchasing activities MRP helps in getting the right material and physical resources together at the right place and at the right time to meet the customer s requirements This helps in achieving on time delivery High Quality at the best price Manufacturing Resource Planning MRP II An expanded version of MRP that integrates finance accounting accounts payable and other business processes into the MRP system It also includes production scheduling function and inventory control functions It is an integrated computer system that connects the regular MRP to other functional area especially finance and human resources It is made up of a variety of functions each linked together Business planning Sales and operations planning Production planning Master scheduling Material requirements planning Capacity requirements planning Benefits of MRP II MRP II involves the entire company Management business rules for strategic planning can be set and enforced by MRP II Sales and Marketing can incorporate sales goals that fit material and capacity constraints Relationships can be developed with vendors to improve purchasing just in time Inventory shortages can be seen before they happen with communications to customers to get approval of substitutions that will get a part that does the same thing on schedule Accounting and finance departments get accurate costs and predict cash flow Automated Tools IT has been used successfully in cutting the time required for the design of products services or processes Some of these applications are Computer Aided Design CAD Computer Aided Manufacturing CAM Computer Integrated Manufacturing CIM Computer Aided Design CAD It is a system that enables drawings to be constructed on a computer screen and subsequently stored manipulated and updated electronically The ability to rotate or create movement in the design allows testing for clearances and frequently reduces the cost of prototyping the products The technology is used for a wide variety of products in such fields as architecture electronics and aerospace naval and automotive engineering Although CAD systems originally merely automated drafting they now usually include three-dimensional modelling and computer-simulated operation of the model Rather than having to build prototypes and change components to determine the effects of tolerance ranges engineers can use computers to simulate operation to determine loads and stresses For example an automobile manufacturer might use CAD to calculate the wind drag on several new car-body designs without having to build physical models of each one In microelectronics as devices have become smaller and more complex CAD has become an especially important technology Among the benefits of such systems are lower product-development costs and a greatly shortened design cycle While less expensive CAD systems running on personal computers have become available for do-it-yourself home remodelling and simple drafting state- of-the-art CAD systems running on workstations and mainframe computers are increasingly integrated with computer-aided manufacturing systems Computer Aided Manufacturing CAM Computer-aided manufacturing CAM is a form of automation where computers communicate work instructions directly to the manufacturing machinery The technology evolved from the numerically controlled machines of the s which were directed by a set of coded instructions contained in a punched paper tape Today a single computer can control banks of robotic milling machines lathes welding machines and other tools moving the product from machine to machine as each step in the manufacturing process is completed Such systems allow easy fast reprogramming from the computer permitting quick implementation of design changes The most advanced systems which are often integrated with computer-aided design systems can also manage such tasks as parts ordering scheduling and tool replacement It is a system that uses computer aided techniques to control production facility Some of these techniques are Computer-aided process planning Use of computer to control activities and functions to prepare a detailed set of plans and instructions to produce a machine or part -- Machines Computerised Numerical control CNC refers specifically to the computer control of machine tools for the purpose of repeatedly manufacturing complex parts in metal as well as other materials e g drills wood routers use this technology Robotics programming The science or study of the technology associated with the design fabrication theory and application of robots Automobile industry Computer Integrated Manufacturing CIM Integrated computerized manufacturing system combining all the elements of computer aided design cad and computer-aided manufacturing cam This is an interactive computer system usually installed on a local area network linking several related departmental functions such as design engineering production and marketing The concept of CIM insures rapid high-quality product development and manufacturing through real-time coordination of all related functions See also computer aided design cad Computer-integrated manufacturing CIM It is the total integration of Computer Aided Design Manufacturing and also other business operations and databases It is concept philosophy about the implementation of various integrated computer systems in factory automation Computer Integrated Manufacturing CIM Goals CIM has three basic goals Simplification of all manufacturing technologies and techniques Automation of as many of the manufacturing processes as possible by integration of many information technologies like Flexible Manufacturing Systems a form of flexible automation in which several machine tools are linked together by a material-handling system controlled by a central computer It is distinguished from an automated production line by its ability to process more than one product style simultaneously Computer aided Engineering CAE -- the application of computer software in engineering to analyze the robustness and performance of components assemblies products and manufacturing tools Just in time JIT A Japanese idea that inventory is manufactured or acquired only as the need for it arises or in time to be sold or used A major goal is to cut down on inventory investment Integration and coordination of all the manufacturing aspects through computer hardware and software MARKETING No information system can exist in an organization without being linked with other functional information systems This linkage is important for the over all smooth functionality of the information system since it allows easy transformation and usage of information Marketing Production subsystem needs to be linked with the marketing system so as to produce right amount of product Human resource system Most of the human resource is involved in the manufacturing process Since factory premises have to be working continuously availability of relevant labour is critical Accounts and Finance Accounts should have a control over various recording points in the entire process from procurement to finished good store room This would help both in recording transactions for financial statements and approving and arranging for cash payments Accounting information system AIS is linked to all the information systems in an organization This is important because the data required for proper book keeping and generation of transactional reports is extracted from all over the organization For instance sales information can be sought only from marketing information system and stock information is available in manufacturing information system Here we would consider an example to see how AIS records internal data describing manufacturing operations this requires use of data collection terminals at the manufacturing facility It also records external data describing firms transactions with its suppliers The figure shows twelve data collection terminals located at the factory area Raw materials are received from suppliers and receipt data is entered into the terminal Quality control inspection is conducted and results are recorded at terminal two Acceptance into and release from the raw materials room is logged in to the terminal three Terminals four to ten are used by production employees to record start and completion of each step of production Terminal eleven records the entry into the finished goods store room Shipping to customers is recorded at terminal Accounting Financial Information Systems Accounting and financial information systems cater for the needs of Accounts Finance Department These are responsible for managing financial assets in order to maximise return like Cash Stocks Bonds Other investments Financial liabilities Capitalization of the firm through acquisition of new financial assets It also produces the periodic and annual financial statements Importance of Accounting financial Information Systems Every transaction that an organization undertakes has a financial impact to be recorded and reported by the accounts finance department Hence there is a share of interest for every department in reports and information produced by this system Financial Information Systems like other information systems should cater for information requirements at each level for instance Strategic level Investment goals long range forecasts for firm s financial performance Acquisition of financial resources and goals Knowledge Level Analytical tools to design the right mix for investment Portfolio updates Market information analysis Management level Control over firm s financial resources Investment management Budget management Tax management Profitability Performance Evaluation Operational Level Cash flow statements through various transactions Inventory and debtors management Creditors Management Human Resource Information Systems An information system combines many human resources functions including benefits administration payroll recruiting and training and performance analysis and review into one package It helps in Building database of employees Keeping track for new positions or vacancies Keeping master records for each employees Performance evaluations and training assessments IT Department Information by itself is proving to be the most critical resource for organizations Such is the criticality that other resources of the organization cannot be managed without it This has lead to the evolution of information systems to efficiently manage the information resource of the organization This system is usually employed by the Information Services department which is the major functional area of the organization Evolution of the IT Department IS department function has been evolving based on the needs of user departments Traditional Computing -- Initially User was not directly linked with using the computing facilities and the IT workforce was involved in assisting user to achieve his computer related goals End User Computing As the computer users become more literate much of the work was done by users themselves and IT department took over as a support function DECISION MAKING There are some of the critical decisions that top managers face every day How to decide whether to sell or spin off a business Should the supplier relationships be renegotiated What can be done to improve decision-making competency throughout your organization To capture maximum value executives not only must make the right decisions but also must negotiate skilfully Since most business decisions involve other parties it is essential for managers to understand their individual role as it relates to other decision makers as well as how to use this knowledge to create the strongest possible negotiating position Hence keeping in mind the importance of decision making for managers information systems are also designed in a way to help them out to control operations and perform their managerial responsibilities more effectively Decision making is the cognitive process of selecting a course of action from among multiple alternatives Cognitive process is the mental process of knowing including aspects such as awareness perception reasoning and judgment Every decision-making process produces a final choice It can be an action or an opinion It begins when we need to do something but we do not know what A decision-making is a reasoning process which can be rational or irrational and can be based on explicit assumptions or tacit assumptions Types of Problems Nature of problem determines the approach to decision making to be followed to solve it There are three broad categories Structured Well-structured problems are constrained problems with convergent solutions that engage the application of a limited number of rules and principles within well-defined parameters Unstructured Problems possess multiple solutions solution paths fewer parameters which are less manipulate able and contain uncertainty about which concepts rules and principles are necessary for the solution or how they are organized and which solution is best Semi-structured a gray area lies between the structured and unstructured range Here part of the decision can be specified allowing for certain factors out of control A newly formed organization may be taken as an unstructured organization due to lack of defined organizational structure operating procedures The question that a problem is structured or unstructured is not dependant on the organization being structured or unstructured Even a highly structured organization can face novel and unprecedented problems Example-Daily Life Unstructured Mr A thinks that he has to wake up at any time in the morning Structured Mr A is a soldier and he has to wake at in the morning when army bugle is played blown This procedure will be followed no matter what Semi Structured Waking up is subject to a clock alarm procedure but it can be turned off as waking up at that time is also subject to some sort of individual judgment Example Business Bank has a policy that two persons Mr A B would open the bank min before bank timings and so that bank should be open for public dealing at a m No other situation has been forecast in the policy Structured Staff shall be in the bank by a m to ensure opening for public dealing at a m This procedure will be followed no matter what Semi Structured Branch Manager is informed a day earlier that Mr A will be unable to make it the next day Rest is left at the discretion of branch manager s judgment to decide who else is to be made responsible to open the branch in the morning Unstructured Employees start reaching before a m but branch is not open The decision taken by employees there and then would be totally unstructured due to the novelty of the situation arose Type of Decisions All problems require decision making however the nature of problem determines how it should be approached The decision making process There are three types of decisions Structured Non-structured Semi Structured Structured decisions Where problem is recurring and repetitive the common factors can be identified in order to identify a particular course of action Due to which defined set of procedure can be devised for their solution Hence Procedures for obtaining the best solution are standardized Objectives are clearly defined Clearly specified inputs and outputs Un-structured decisions When problems are non routine critical and novel in nature they require individual judgment evaluation and insight varying on case-to-case basis There is no well understood or agreed upon procedure for handling these problems For such situations predefined policy cannot be devised However once the problem has been figured out a policy may be devised to handle the problem in future This can make the problem look like as structured one giving regard to the role of individual judgment Semi-structured Decisions The term is used to refer to the grey area of decisions which lie between the two extremes Some but not all structured phases and often solved using standardized solution procedures and human judgment In small organizations decisions are usually transferred from form top to bottom In large organizations the decision are usually taken based on meeting of all departmental heads The fact is that whether decisions are taken by single person or all in a formal meeting is not the sole determinant of a decision being structured or unstructured Rather it simply shows the complexity of the problem Decision-making process Intelligence searching for conditions in the environment that call for decisions Design inventing developing and analyzing possible courses of action Choice selecting a course of action from those available Implementation implementing the selected course of action Monitoring checking the consequences of the decision made after implementation Phases for Decision Making Example Any deviation from the norm should be reported as an exception for managers attention As it is the case with Debtors Aging Analysis Debtors Aging analysis is the stratification of trade receivables in accordance of period of time since they have been due Intelligence Identifying the problems occurring in an organization MIS is the primary source for the managers to be aware of red-alerts Design Once the debtors have been analysed on the basis of pattern of collection options can be generated to improve collection rates For example Offering early payment discounts Devising various collection strategies for various classes of customer based on Collection period Discounts rates Strengthening sales department for collecting revenue through negotiation and settlement Choice Now a selection has to be made which single strategy or combination of strategies should be implemented Here a DSS system can be used to simulate the consequences of each alternative generated The diversity and complexity of the alternatives generated would determine how extensive the DSS system should be Implementation Now the stage comes of communicating the policy approved to the interested and relevant for example Conducting training sessions of sales department or issuing an office memorandum Communicating and convincing customers of the new credit terms so as to avoid confusion Once again MIS will be used to record and report the results effects of the policy Monitoring Once the decision has been implemented the effects and responses should be monitored The quality of decisions can be judged only once after they have been implemented Monitoring helps in evaluating the quality of decisions that have been made This may include the following Quantifying the speed in the process of recovery Discount costs being born by the organization Customer response in accepting the entire policy Once again MIS will be used to record and report the results effects of the policy Phases Example Intelligence Debtor s aging report Design Devise a discount or training policy Choice Select a discount training policy Implementation Implement the discount training policy Monitoring Evaluate recovery patterns relevant costs involved PHASES OF DECISION-MAKING There are five phases of the decision making process the details of these phases have already been discussed in detail These five phases will be elaborated in the form of an example for better understanding Phases of decision-making process are Intelligence searching for conditions in the environment that call for decisions Design inventing developing and analyzing possible courses of action Choice selecting a course of action from those available Implementation implementing the selected course of action Monitoring checking the consequences of the decision made after implementation Phases Example Assume that a multinational company is considering opening a branch in Pakistan Identify typical activities that would be performed in each phase intelligence design choice and implementation of the decision to open or not to open a branch The Intelligence Phase Scan the environment to identify problem situations or opportunities Conditions that call for decisions are identified Typical Activities include Country Risk based on following Country credit rating Transparency Corruption Facilities for one window operation levels of bureaucracy SRO Culture Govt Policy Law Order Exchange rates For instance international banks while entering into country make assessment of exposure and thus limit the maximum number of transactions the bank can undertake What are the possible advantages disadvantages and risks How much resources will be diverted from other activities When should we start And so forth The Design Phase Possible courses of actions are invented developed and analyzed Typical Activities include Select criteria for assessing the alternatives e g ROI market share etc Create alternatives invest now invest later do not invest Analyze levels and timing of investment Information flow for decision making Prepare a feasibility study How will the choice be made by whom and when The Choice Phase A course of action is selected out of the available alternatives as devised in the design phase Typical Activities include Get information Final evaluation Sensitivity analysis The Implementation Phase Implement the selected course of action Typical Activities include Follow the implementation plan Deal with resistance to change and necessary approvals and authorizations Conduct training Transfer resources Rational Individual Models of Decision Making Since individuals in total make up organization hence it is reasonable to build information systems which facilitate the individual decision making These are Rational Man Comprehensive Model Bounded rationality Muddling Successive Comparison Psychological Cognitive Types The basic assumption of all these models is the human beings are rational An individual has goals and objectives Alternative course of actions can be followed to achieve these goals Every alternative has a utility and payoffs which helps him to rank the alternatives There is an impact or consequence for every alternative being followed Rational Man Model In a rigorous rational model it is presumed that the individual is rational enough to accurately rank all the alternatives However in the real world of humans specifying all of the alternatives and consequences is impossible Information systems based on this model need to be based on availability of perfect and complete information on all alternatives so as to ensure certainty Real life situations need to be given room for chances which this model does not provide for Rational Man Model Example In a pharmaceutical drug company the preparation and testing of life saving drug is a critical phase and choice of a perfect alternative is inevitable Hence the information system devised to support it should be such that it can record and monitor even the slightest variations In an ammunitions factory the testing and quality control of various bullet shells missiles bombs etc is a sensitive issue Since chances of error are quite high the system from selecting and discarding should be with high sensitivity level Bounded Rationality Keeping in view the high level of perfection and completeness required by the rigorous rational model certain adjustments were made in this model The purpose was to seek a sufficing instead of an optimizing outcome Bounded rationality focuses on the fact that Individuals prefer to avoid new uncertain alternatives and rely on tried and-true rules SOP s According to this model individuals bound the rational behaviour of choosing the best alternative by choosing a sufficing alternative That is why it is termed as bounded rationality Information systems based on this model are close to reality in terms of considering alternatives which are most commonly available Quick decision making can be encouraged through this model Bounded Rationality -- Example Cost benefit analysis is a must in choosing an alternative in a decision making model Where an alternative being given is difficult to implement in terms of costs involved the management might chose a less than perfect alternative hence sufficing instead of optimising Muddling Through This model is closer to reality as compared to the above two goals This model has introduced the concept of incremental decision making which decisions are taken by choosing policies most likely the previous ones For this purpose the information systems need to be intelligent and include knowledge based systems to help accumulate and use knowledge Psychological Cognitive Types This refers to the underlying personality dispositions toward the treatment of information the selection of alternatives and evaluation of consequences The model proposes that human beings are value maximizes and in that sense are rational But humans differ in how they maximize the value There are two types of cognitive type of decision making Systematic problem is approached in a structured way in terms of some formal method Intuitive problem is approached with multiple methods using trial and error to find a solution Of both the above methods one should be selected based on the problem at hand Information systems should follow a systematic and intuitive pattern based on the problems or cases it is supposed to deal with MIS and DSS can be seen as having a systematic approach towards problem solution The concept of heuristics fuzzy logic etc is devised to follow the intuitive patterns Organizational Models in Decision Making Organizations are thought to have singular goals controlled by senior level decision makers who are completely informed How organization makes decisions as a whole following are certain models Bureaucratic Political Garbage Can Bureaucratic model Whatever organizations decide is a result of Standard Operating Procedures evolved over time In general organizations do not chose or decide in a rational sense instead they chose a specific set of SOP s Radical policy changing is discouraged at all costs Empire Building Empire building is a business term that refers to a common problem in larger organizations in which managers attempt to gather more administrative and financial power Power can only be shared in an organization with key employees in terms of their responsibilities functions Such employees are the key players in the decision making process Hence decisions taken in an organization are a result of collective efforts of the leaders involved This model is also termed as Political Model Garbage Can Model This model states that organizations are not rational Decisions made are largely on accidental basis Hence wrong solutions may be applied to wrong problems in an organization and critical mistakes may occur Information systems should be designed to support and assist in relevant decision making instead of making unrelated and wrong decisions System Design Decision Making The purpose of elaborating the concept of decision making in the context of IS was to make you realize the importance of the fact that Information system must support the managers for timely and effective decision making While designing the information system output in terms of suitable reports is essential to analyze highlight and bring to attention situations that may require decision making The top manager looks for value addition to his her knowledge of business operation UNAUTHORIZED INTRUSION ANTIVIRUS SOFTWARE AND CONTROL TYPES Intrusion can be both either physical or logical In physical intrusion the intruder physically could enter an organization to steal information system assets or carry out sabotage For example the Intruder might try to remove hard disks In case of logical intrusion the intruder might be trying to have an unauthorized access to the system The purpose could be damaging or stealing data installation of bug or wire tapping -- Spying on communication within the organization Unauthorized Intrusion Physical Access Vs Logical access In computer security being able to physically touch and interact with the computers and network devices amounts to physical access It lets someone insert a boot disk in the machine and bypass normal operating system controls Physical access enables people to install unauthorized snooping equipment such as keystroke loggers However interact with data through access control procedures such as identification authentication and authorization Logical Threat This refers to damage caused to the software and data without any physical damage to the computers Consequently there can be a situation where the damage of data or software may render the hardware itself unusable For example the virus or bug being installed to corrupt data or software might create BAD SECTORS on the hard drive leading to its preferable removal from the computer Examples of logical Threat Payroll data or details of draft corporate budget may be perceived as highly sensitive and unauthorized access to it may be considered as a logical threat A person tapping the communication line to have a sniff-around on the organization s communications being transferred through the communication line Viruses It is Software used to infect a computer After the virus code is written it is buried within an existing program Once that program is executed the virus code is activated and attaches copies of itself to other programs in the system Infected programs copy the virus to other programs It may be benign gentle or have a negative effect such as causing a program to operate incorrectly or corrupting a computer's memory The term virus is a generic term applied to a variety of malicious computer programs that send out requests to the operating system of the host system under attack to append the virus to other programs Attacking Targets Generally viruses attack four parts of the computer Executable program files The file-directory system which tracks the location of all the computers files Boot and system areas which are needed to start the computer Data files Viruses vs Worms A Worm is a program which spreads over network connections This is unlike a virus and does not physically attach itself to another program Worm typically exploits security weaknesses in operating systems configurations to propagate itself to the host systems Virus vs Bug Bug is an internal malfunction of the software It is an unintentional fault in a program It is an incorrect functioning of a particular procedure in a program This is caused by improper application of programming logic For example free trial versions of soft wares are available on line these beta versions are not tested fully and often contain bugs that can disrupt the system Incorrect definition of a formula or linkage can give incorrect results Virtually all complex programs contain virus Incorrect unvalidated uneditted data entry is not a programming fault or a bug The process of removing bugs from a software is termed as debugging Virus is the external threat which is not a malfunction of the software However a bug in the software can create a virus Sources of Transmissions Virus or worms are transmitted easily from the internet by downloading files to computers web browsers Other methods of infection occur from files received though online services computer bulletin board systems local area networks Viruses can be placed in various programs for instance Free Software software downloaded from the net Pirated software cheaper than original versions Games software wide appeal and high chances Email attachments quick to spread Portable hard and flash drives employees take disks home and may work on their own personal PC which have not been cleaned or have suitable anti-viruses installed on them Types of Viruses Although viruses are of many types however broad categories have been identified in accordance with the damage they cause Some of these categories have been stated below Boot sector Virus The boot sector is part of computer which helps it to start up If the boot sector is infected the virus can be transferred to the operating system and application software Overwriting Viruses As the name implies it overwrites every program software file it infects with itself Hence the infected file no longer functions Dropper A dropper is a program not a virus It installs a virus on the PC while performing another function Trojan horse A Trojan horse is a malicious program that is disguised as or embedded within legitimate software They may look useful or interesting or at the very least harmless to an unsuspecting user but are actually harmful when executed Examples are Logic bomb Trojan horses are triggered on certain event e g when disc clean up reaches a certain level of percentage Time bomb Trojan horse is