Meaning of Management Information System:

A management information system is a system that is designed to provide information to

various organizational levels, to assist them in decision-making.

“A management information system is a system of people, equipment, procedures, documents

and communications that collects, validates, operates, transforms, stores, retrieves, and
presents data for use in planning, budgeting, accounting, controlling and other management
process” — SCHWARTZ

COMPONENTS OF AN INFORMATION SYSTEM

1. PEOPLE: Every information system requires a set of human resources to operate. People
in an information system can be grouped into two.

a) End users: These are the people inside and outside the organization who use information
system for decision making and problem solving.

b) Information - System specialists: These are the people who develop the information
system and maintain the system. They are usually technologists in computer science. E.g.:
Software Programmers, System analysts, Graphic designers, Hardware engineers etc.

2. Hardware:

Hardware includes all the peripherals and physical accessories required to operate an
information system. It includes machinery such as computer, scanner, printer, mouse, and
media devices such as devices for data storage, hardware components for network facilities
etc.

3. Software:

Software requirement of an information system can be grouped as two: System software and
application software. The chief system software is the operating system. OS manages the data
and program files and provide user interface to the user. E.g: Windows 10, Ubuntu, , Mac etc.
Application software is a specially designed program to manage specific purposes. For
example, Adobe Photoshop is specially designed software for photo editing purposes.
Microsoft Word is special software designed for document preparations.

4. Procedure:
Procedures are the guidelines, instructions and rules for handling, operating and maintaining
an information system, usually done as a part of documentation. For instance, procedures
required to be established to run a payroll program, including who will run it, who will
authorize it, who will use the output, who will be able to access the database etc.

5. Network:

Network components in an information system consist of Network technology, Type of

topology (LAN/WAN/MAN), Network devices, supporting browser, Communication media
etc.

6. Data: Data resources in an organisation consist of data required for an organisation,

databases and data warehouses. Data base is the location in which the collected data is stored,
it can be retrieved when required by querying.

Objectives of Management Information System :

1. To provide information for planning, organizing and controlling purposes.

2. To store and manage data efficiently from all the functional areas of the business.

3. To process the collected data and derive information out of them.

4. To provide information quickly as and when required.

5. To reduce the risk and uncertainties in the managerial decision-making.

6. To collect and store the data for the purpose of internal research.

7. To assist in identifying the managerial problems and their solution.

8. To provide information regarding work force planning.

9. To provide the information regarding the financial health of the business organization.

10. To provide information regarding production and inventory.

11. To provide information regarding sales and other marketing aspects i.e. product, price,
promotion, market, physical distribution, payment collection, market segmentation etc.
12. To speed up the execution of the results with the reliable data available.

13. To smooth up the flow of data through various levels of the organization.

14. To provide information regarding work force planning.

15. To provide the information regarding the financial health of the business organization.

16. To speed up the execution of the results with the reliable data available.

17. To smooth up the flow of data through various level of the organization.

Importance of Management Information System :

1. It helps in minimising risk in decision-making.

2. It processes the data and derives information from it.

3. It provides information about the various aspects of business.

4. It helps the executives to gain information regarding the functional areas quickly.

5. The database helps in conducting research. The data stored is used as secondary data.

6. It provides sound information regarding the financial matters of a business organization.

7. It helps in preparing a corporate report.

8. It helps the HRD manager in finding out the requirements of the human resource, their
wages and salary, performance appraisal, training, promotion, absenteeism and employees’
turnover, which is useful in drafting sound HRD polices.

9. The data regarding production helps the production manager in deciding about capacity
utilisation, number of rejections per batch, frequency of breakdown, status of shipment of
processed order and product, and region-wise.

10. It provides information regarding inventory position and minimize the chances of
inventory being out of stock.
11. It provides information regarding product, price, promotion, segmentation, demand, sales,
etc., to the marketing manager instantly and ensures the smooth functioning of that
department.

SCOPE OF MIS

1. To provide a variety of reports and displays to management

2. To provide managerial end users with information products that support many of the
day-to-day decision-making needs

3. To provide information on the contents of the information products specified in

advance by managers

4. To obtain data about the business environment from external sources to process them
to serve the managers in a better way

Data versus Information

Data

Data is a raw and unorganised fact that requires processing to make it meaningful. Data can
be simple at the same time unorganised unless it is organised. Generally, data comprises facts,
observations, perceptions, numbers, characters, symbols, images, etc.

Data is always interpreted by a human or machine to derive meaning. So, data is meaningless.
Data contains numbers, statements, and characters in a raw form.

Information

Information is a set of data that is processed in a meaningful way according to the given
requirement. Information is processed, structured, or presented in a given context to make it
meaningful and useful.
Information assigns meaning and improves the reliability of the data. It helps to ensure
undesirability and reduces uncertainty. When the data is transformed into information, it
never has any useless meaning.

Data Vs. Information

Parameters Data Information

Qualitative Or QuantitativeVariables
It is a group of data which carries
Description which helps to develop ideas or
news and meaning.
conclusions.

Information word has old French and

Data comes from a Latin word,
middle English origins. It has referred
datum, which means "To give
Origin to the "act of informing.". It is mostly
something." Over a time "data" has
used for education or other known
become the plural of datum.
communication.

Data is in the form of numbers,

Format Ideas and inferences
letters, or a set of characters.

It can be structured, tabular data, Language, ideas, andthoughts based

Represented in
graph, data tree, etc. on the given data.

Data does not have any specific It carries meaning that has been
Meaning
purpose. assigned by interpreting data.

Interrelation Information that is collected Information that is processed.

Information is the product and group

Data is a single unit and is raw. It
Feature of data which jointly carry a logical
alone doesn't have any meaning.
meaning.

Dependence It never depends on Information It depended on Data.

Measured in meaningful units like

Measuring unit Measured in bits and bytes.
time, quantity, etc.
Parameters Data Information

Support for
Decision It can't be used for decision making It is widely used for decision making.
making

Contains Unprocessed raw factors Processed in a meaningful way

Knowledge level It is low-level knowledge. It is the second level of knowledge.

Data is the property of an

Information is available for sale to the
Characteristic organization and is not available for
public.
sale to the public.

Data depends upon the sources for

Dependency Information depends upon data.
collecting data.

Sales report by region and venue. It

Example Ticket sales on a band on tour. provides information on which venue
is profitable for that business.

Significance Data alone has no significance. Information is significant by itself.

Data is based on records and Information is considered more

observations, which are stored in reliable than data. It helps the
Meaning
computers or remembered by a researcher to conduct a proper
person. analysis.

Information is useful and valuable as

The data collected by the researcher
Usefulness it is readily available to the researcher
may or may not be useful.
for use.

Information is always specific to the

requirements and expectations
Data is never designed to the
Dependency because all the irrelevant facts and
specific need of the user.
figures are removed, during the
transformation process.
Subsystems of MIS

Management Information Systems (MIS) are generally categorized into subsystems based on
either

1. Organisational functions (the departments they support) or

2. Managerial activities (the nature of the data and decision-making level).

Functional subsystems

These Management Information System (MIS) are specialised information structures

designed to support the specific needs of various business departments. Each subsystem
collects, processes, and stores data relevant to its functional area while feeding into a central
database for organizational integration.

1. Marketing Subsystem

This subsystem provides information for planning and controlling the movement of goods
from producers to consumers.

 Key Functions: Sales forecasting, market research, pricing analysis, and promotional
effectiveness.

 Outputs: Sales reports by region/product, customer behavior profiles, and advertising

performance metrics.

2. Manufacturing & Production Subsystem

This subsystem manages the physical transformation of raw materials into finished products.

 Key Functions: Production scheduling, quality control, engineering design, and

facilities planning.

 Operational Aspect: Uses sensors and Process Control Systems (PCS) to monitor
industrial equipment and output.
  Outputs: Production logs, inventory status reports, and equipment maintenance
schedules.

3. Finance and Accounting Subsystem

Often the most critical subsystem, it manages the flow of funds and ensures financial
stability.

 Key Functions: Capital budgeting, cash flow management, credit management, and
financial statement preparation.

 Compliance: Generates statutory reports for external auditors, shareholders, and

government tax entities.

 Outputs: Balance sheets, profit and loss statements, and budget variance reports.

4. Human Resource (HRM) Subsystem

This subsystem focuses on the recruitment, development, and retention of the organization's
workforce.

 Key Functions: Payroll processing, employee performance evaluation, benefits

administration, and skills inventory tracking.

 Personnel Management: Maintains electronic records for training, absence, and

pension entitlements.

 Outputs: Payroll summaries, employee turnover analysis, and vacancy status reports.

5. Logistics Subsystem

Logistics manages the acquisition and distribution of materials and products.

 Key Functions: Purchasing, receiving, warehouse management, and transportation.

 Supply Chain Integration: Coordinates with external suppliers to optimize the flow of
resources.
  Outputs: Purchase orders, shipping notices, and vendor performance reports.

6. Information Processing Subsystem

An internal-facing subsystem that ensures the smooth functioning of the entire MIS
infrastructure.

 Focus: Data security, database management, network maintenance, and user technical
support.

2. Activity/Managerial Subsystems

Activity subsystems of a Management Information System (MIS) are categorized based on

the specific managerial activities and decision-making levels they support. These
subsystems provide the necessary structure for handling data at various stages of an
organization's workflow.

1. Transaction Processing Subsystem (TPS)

TPS is the fundamental level that captures and records the daily, routine activities essential to
conducting business. Transaction Processing System's primary purpose is to record, process,
validate, and store transactions that take place in the various functional areas of a business for
future retrieval and use. Transaction processing systems are cross-functional information
systems that process data resulting from the occurrence of business transactions.

Purpose: To handle high-volume, repetitive data processing efficiently and reliably.

Typical Activities: Processing sales orders, shipments, receipts, payroll, and general ledger
entries.

Users: Primarily operational staff and lower-level managers.

 A TPS records internal and external transactions for a company.

 A TPS performs routine and repetitive tasks. It is mostly used by lower-level
managers to make operational decisions.
 Transactions can be recorded in batch mode or online. In batch mode files are updated
periodically; and in online mode, each transaction is recorded as it occurs.
  TPS is a six-step process - Data entry, Data capture, Data validation, Processing and
re-validation, Storage, Output generation, and Query support.

2. Operational Control Subsystem

This subsystem focuses on the short-term, day-to-day management of activities to ensure they
align with established plans.

 Purpose: To monitor specific tasks and ensure resources are used effectively at the
ground level.

 Typical Activities: Scheduling of activities, generating daily performance reports,

and managing user inquiries.

3. Management Control Subsystem

Also known as the Management Reporting System (MRS), this level supports middle
management in monitoring and controlling departmental performance.

 Purpose: To provide summarized information that allows for comparison between

actual results and planned targets (budgets).

 Typical Activities: Formulation of budgets, resource allocation, and exception

reporting for significant variances.

 Users: Middle-level managers.

 MRSs are usually developed by information system professionals, rather than by end-
users.
 MRSs are oriented towards reporting on the past and the present, rather than
projecting the future.
 MRSs largely report on internal company operations.
 MRSs generally have limited analytical capabilities.
 MRSs do not directly support the decision-making process
  MRSs provide Scheduled or Periodic Reports, Exception Reports, and Demand or
Ad-hoc Report.

4. Strategic Planning Subsystem

This subsystem supports top-level management in making long-term, unstructured decisions.

 Purpose: To assist in defining the organization's broad objectives and the policies
needed to achieve them.

 Typical Activities: Formulating long-term strategies, resource planning, and

analyzing external market trends.

 Users: Senior executives and top management.

5. Specialized Support Subsystems

Beyond the hierarchical levels, several subsystems support specific types of activity:

 Decision Support Subsystem (DSS): Assists managers with semi-structured or

complex problems using analytical models.

 Office Automation Subsystem (OAS): Enhances internal communication and

document workflow through tools like email and electronic filing.

 Knowledge-Based/Expert Subsystems: Uses artificial intelligence to provide expert

advice in specialized domains.

LIMITATIONS OF MIS

It takes time to setup an information system.

Huge financial investment is necessary for implement MIS in an organization.

MIS won’t be implemented successfully unless the employees are digitally literate.
Due to the increasing cyber crimes and threats, security of the information needs to be
ensured.

The quality of the results provided by MIS fully depends on the quality of inputs and
processes.

STRUCTURE OF A MANAGEMENT INFORMATION SYSTEM

Information system can be classified in terms of the following. 1. Operating elements 2.

Decision support 3. Management activity 4. Organizational function